UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-KSB
(X) Annual Report Under Section 13 or 15(d) of the Securities Exchange Act
of 1934. FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001
( ) Transitional Report Under Section 13 or 15(d) of the Securities Exchange
Act of 1934. For the transition period from ___________ to _________
Commission file number: 000-28679
MANAGEMENT OF ENVIRONMENTAL SOLUTIONS & TECHNOLOGY CORP.
(Name of Small Business Issuer in Its Charter)
Delaware Applied For
(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
TNO Environmental Technology Valley
Laan van Westenenk 501
7334 DT Apeldoorn, The Netherlands
(Address of Principal Executive Offices)
011 31 55 534 7040
(Company's Telephone Number, Including Area Code)
Securities registered under Section 12(g) of the Securities and Exchange Act of
1934: NONE
Securities registered under Section 12(g) of the Securities and Exchange Act of
1934:
Title of each class: Name of each Exchange on
Which registered
Common Stock - .0001 par value 7,322,030 issued None
Series A Preferred - .0001 par value 535,985 issued None
Check whether issuer (1) filed all reports required to be filed by Section 13 or
15(d) of the Exchange Act during the past 12 months and (2) has been subject to
such filing requirements for the past 90 days. Yes ( ) No (X)
Check if there is no disclosure of delinquent filers in response to 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form KSB. [ ]
State issuer's revenue for the most recent fiscal year: Zero
State the aggregate market value of the voting and non-voting common equity held
by non-affiliates computed by reference to the price at which the common equity
was sold, or average bid and ask price of such common equity a of the specified
date within the past 60 days: Market Value $0.125.
State the number of shares outstanding of each of the issuers classes of common
equity, as of the latest practicable date: Common Stock - .0001 par value
7,322,030 issued; Series A Preferred - .0001 par value 535,985 issued.
Documents incorporated by reference: None
Transitional small business disclosure format: Yes ( ) No (X)
<page> 1
MANAGEMENT OF ENVIRONMENTAL SOLUTIONS & TECHNOLOGY CORP.
FORM 10-KSB
For the year ended December 31, 2001
TABLE OF CONTENTS
PART I PAGE
ITEM 1. DESCRIPTION OF BUSINESS 3
ITEM 2. DESCRIPTION OF PROPERTY 5
ITEM 3. LEGAL PROCEEDINGS 6
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 6
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS 6
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION 7
ITEM 7. FINANCIAL STATEMENTS 8
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE 31
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT 31
ITEM 10. EXECUTIVE COMPENSATION 33
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT 36
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 37
PART IV
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K 38
SIGNATURES 39
<page> 2
MANAGEMENT OF ENVIRONMENTAL SOLUTIONS & TECHNOLOGY CORP.
FORM 10-KSB
For the year ended December 31, 2001
Part I
--------
Item I - Description of Business
-------------------------------------
FORM AND YEAR OF ORGANIZATION
Management of Environmental Solutions and Technology Corp. (MEST) was formed as
a Delaware corporation on December 18, 1997 with 30,000,000 shares of authorized
common stock at .0001 par value and 5,000,000 shares of preferred stock at .0001
par value. The Company as of December 31, 2001 has issued and outstanding
7,324,055 shares of its common stock and 535,985 Series A Preferred shares. The
Company has not declared bankruptcy, entered into voluntary or involuntary
receivership or any type of similar proceeding. Further, it has made no
material reclassification, consolidation or purchase or sale of significant
amount of assets not in the ordinary course of business during the calendar year
2001.
BUSINESS OF MEST
MEST was organized for purposes of commercializing a unique dewatering
technology developed by The Netherlands Organization for Applied Scientific
Research (TNO). This unique and proprietary process utilizes zeolite compound
to engage and dehydrate manure, sludge, bio-solids, plant, animal and fish
waste.
The Company's initial mission was to raise sufficient capital to finance further
research and development conducted at TNO to determine whether the zeolite
dewatering process had practical application and could be commercialized.
Through a collaborative effort between MEST and TNO, a definitive process has
been designed, engineered and tested which incorporates a zeolite dehydration
system and recuperation system for the zeolite drying compound. The Company
management believes that it is technically feasible to utilize the zeolite
dewatering technology in a commercial format. Collaborative testing between
MEST and TNO has also yielded production costing information sufficient to lead
management to conclude that commercial scale zeolite dewatering devices should
be designed and built. The Company continues to utilize the MEST pilot plant at
the TNO facility in Apeldoorn, The Netherlands to process materials which the
Company considers candidates for commercially feasible dehydration.
MEST's principal objectives during calendar year 2001 were to demonstrate the
functionality of the pilot plant; test various materials and determine whether
the zeolite dewatering process was amendable to such materials; and to provide
reliable estimates for processing costs so that the Company can determine which
dehydratable materials may be most readily commercialized.
Based upon the results of the collaborative TNO research and market product
research by the Company, the Company has determined to enter into the feed and
animal nutrition industry converting organic waste materials into value added
and end products directed at livestock, fish, pet food and fertilizer
industries. Management believes that this market is somewhat stable and that
end products can be sold into the global commodities markets at varying rates of
profitability depending upon the quality of the dewatered product. Management
believes that the zeolite dewatering technology will emphasize quality
dehydration due to its low temperature process. Management further believes
that dehydrated organic waste materials derived through zeolite dewatering will
be particularly marketable based upon these criteria:
<page> 3
MANAGEMENT OF ENVIRONMENTAL SOLUTIONS & TECHNOLOGY CORP.
FORM 10-KSB
For the year ended December 31, 2001
1. Precise and reproducible final moisture content;
2. Pasteurization of the final end product;
3. Reduced loss of functional properties or degradation of final product;
4. Low final product moisture content is needed to increase shelf life;
5. Low atmospheric emissions.
The Company anticipates the commercialization of its products by converting fish
waste to fish meal, yeast or hops waste to livestock feed or rapeseed waste to
livestock feed. The commodities markets for quality dehydrated materials as
described above are readily accessible in the United States and globally. The
Company anticipates its distribution method to be geographically linked with the
location of the zeolite dewatering devices. Distribution will initiate from the
dehydration facility.
There are numerous conventional methods of dehydrating food, waste and manure
products. However, the Company is unaware of any competitor which utilizes the
zeolite dewatering process in applicaations contemplated by the Company.
Consequently, the Company fully intends to utilize its protective status as a
patented technology in order to gain market acceptance and proliferation.
The machinery and equipment required for the zeolite dewatering process involves
conventional prcessing equipment with few exceptions. The Company will be
required to provide and fabricate certain specialized equipment involving the
zeolite to substrate combination and segregation devices. Raw materials for the
process such as zeolite and electricity are abundant and the suppliers will be
selected based upon the location of the MEST equipment, price and service.
The Company derives it proprietary rights to the zeolite dewatering technology
through MSTec B.V. MSTec B.V. is owned 50% by the Company and 50% by TNO.
MSTec applied for a patent "Method and Apparatus for Processing Watery Substance
with Zeolite" in The Netherlands on July 10, 1998. That patent was filed as an
international patent on July 12, 1999 under patent number PCT/NL/99/00443. The
patent is currently pending internationally but has already passed the
international preliminary examinations as of April 18, 2000. Management
believes that it will achieve its international patent status during calendar
year 2002.
With respect to the Company's need for governmental approval of principal
products or services, the Company defers to its discussion of potential
government regulation in its amended disclosure filed 11/15/01 in Item I. The
Company anticipates upon location of its zeolite dewatering devices that the
Company will be required to comply with any local, state or federal waste
processing standards as well as air quality standards for emissions which may
occur as a result of the dehydration or reprocessing of zeolite particles.
Management does not anticipate complex approval processes with any governmental
agency.
The practical affect of governmental regulations on handling of waste products,
packaging of dewatered materials and air emissions are not fully known at this
time. For an expanded discussion regarding potential probable governmental
regulation, please refer to an expanded discussion in the amended Form 10-SB
filed 11/15/01. Remarkably, the Company's byproduct of the dewatering system is
dust or pelletized dehydrated material suitable for sale and commercial feed or
fertilizer markets. The zeolite dewatering process emits only minor quantities
of heat and relatively innocuous gases. The Company anticipates no serious
obstacles by local state or federal regulations. As the Company has already
<page> 4
MANAGEMENT OF ENVIRONMENTAL SOLUTIONS & TECHNOLOGY CORP.
FORM 10-KSB
For the year ended December 31, 2001
designed cleanliness into the dehydration system, cost and effects of
governmental and environmental compliance has already been considered in the
design of the product and therefore should not be incremental cost factor.
During calendar year 2001, the total full time employees of the Company consists
of one, the President of the Company. Other services and support are either
contracted or part time.
REPORTS TO SECURITY HOLDERS
The Company is not required to deliver annual reports to its security holders
but voluntary makes available through e-mail, facsimile or hard copy this Form
10K-SB which includes audited financial statements.
The Company files quarterly and annual reports with the Securities and Exchange
Commission in accordance with Section 13 or 15(d) of the Securities and Exchange
Act of 1934. Quarterly reports consist of disclosures and financial information
required under Form 10-QSB. As the Company is a small business, quarterly
reports are reviewed by its auditors. Annual reports filed by the Company are
filed pursuant to Form 10-KSB and its financial reports are audited.
The public may read and copy any materials which it files with the Securities
and Exchange Commission at the Securities and Exchange Commission's public
reference room at 450 5th Street N.W., Washington D.C. 20549. The public may
attain information on the operation of the public reference room by calling the
SEC at 1-800-SEC-0330. As the Company is an electronic filer, the SEC maintains
an Internet site that contains reports, proxy and information statements and
other information regarding issuers that file electronically with the SEC. The
SEC's Internet address is http://www.sec.gov. Interested shareholders may reach
the Company at the following internet address info@mest-corp or at the Company's
business office as indicated on the front page of this form 10-KSB.
Item II - Description of Property
--------------------------------------
MEST owns through MSTec B.V. rights to the patent method and apparatus for
processing watering substance with zeolite (PCT/NL/99/00443) with the
internationally filing date of July 12, 1999. MEST has been granted the right
to fully commercialize manure, sludge and bio-solids by virtue of the licensing
agreement with its subsidiary MSTec B.V.
The Company owns through MEST BV, the Company’s wholly owned subsidiary, the
pilot plant which is currently located at Laan van Westenenk 501, 7334 DT
Apeldoorn, The Netherlands. The pilot plant consists of materials transportation
devices, conveyers, augers, mixers, the zeolite mixing device, a segregator, a
torbid reactor, pelletizer, mechanical linkage and conveyance systems and
supporting hardware.
MEST owns the technical engineering packet developed by TNO which contains
specifications and parameters for the design of the pilot zeolite dewatering
device and devices of larger capacities.
The Company currently leases an office and processing center at the TNO facility
for the sum of $2,000.00 per month which lease expires in June 2006. The
Company has no desire or expectation to move its facility. There is no current
plan of the Company to revise or develop further the pilot plant except to
perform alterations and adjustments which will enhance the longevity of the
machinery or prepare the machinery for particular applications.
<page> 5
MANAGEMENT OF ENVIRONMENTAL SOLUTIONS & TECHNOLOGY CORP.
FORM 10-KSB
For the year ended December 31, 2001
The Company maintains a general liability insurance in the amount of $1,200,000
which covers the Company's personnel and certain business liabilities. The
Company also maintains property casualty insurance in the amount of
$1,500,000.00. Both policies are with AMEV Schadiverzekering N.V. and are
effective from December 31, 2001 to December 31, 2002.
The Company received a request to inspect records served on MEST Corp. by
shareholder Ingrid Ford through her lawyer, David Moule of Moule and Frank,
259 Fifth Avenue East, Eugene Oregon 97401. The request asked for Articles of
Incorporation, Bylaws, Annual Reports, meetings and minutes, SEC filings, lists
Of all shareholders and list by year of all officers and directors.
Additionally there has been a request to list by year management, personnel and
their employment agreements and compensation. There is also a request for a
list of all persons and companies who have sold stock in and on behalf of MEST,
request includes the location of all corporate offices and bank accounts for
MEST and all accountings prepared by Spicer Jeffreys and Company and by
Aranthals en Partners. The Company plans to honor this request and is preparing
the approximate materials.
Item III - Legal Proceedings
--------------------------------
MEST is not currently a party to any legal proceeding nor is its tangible
personal property or intangible property subject to any known proceeding, claim,
litigation or challenge.
MEST is not currently informed or aware of any pending proceeding or claim by
any governmental authority in the United States or elsewhere.
Item IV - Submission of Matters to Vote of Security Holders
---------------------------------------------------------------------
MEST did not convene a special or regular meeting of its shareholders during the
fourth quarter of the Company's fiscal year which corresponds to calendar year
2001. As there was no annual or special meeting, no change was made to the
directorship of the Company. There were no proxies solicited nor were votes
taken.
Part II
Item V - Market Information
-------------------------------
Principal market where the Company's common equity is traded is the pink sheets.
Management believes that there is no significant trading activity in the stock
and therefore no substantial market for the Company's share exists. However,
the Company's common stock is quoted as a pink sheet stock. The Company is not
listed, applied for nor is the Company a member of a national exchange. The
high and low sales prices of the stock for each quarter during calendar years
2000 and 2001 appear below:
Time Period High Low
------------ ------------ ------------
1st Qtr/00 $4.00 $2.00
2nd Qtr/00 No Trades
3rd Qtr/00 No Trades
4th Qtr/00 $1.00 $0.0625
1st Qtr/01 $1.0468
2nd Qtr/01 No Trades
3rd Qtr/01 No Trades
4th Qtr/01 $0.125 $0.125
<page> 6
MANAGEMENT OF ENVIRONMENTAL SOLUTIONS & TECHNOLOGY CORP.
FORM 10-KSB
For the year ended December 31, 2001
The source of the foregoing information can be obtained on www.pinksheets.com.
Enter MESO in the box requiring the entry of the Company's trading symbol,
locate the historical quote and data information as provided by Pink Sheets LLC.
The quotations reflect inter-dealer prices without retail markup, markdown, or
commission and may not represent actual transactions. While the information
provided by management reflects stock prices for the relevant periods shown,
management believes that the limited number of transactions involving purchases
and sales of the Company's common equity does not constitute an established
public trading market.
During calendar year 2001 which is the period covered by this Form 10-KSB, the
Company has not sold, issued or distributed any equity securities and therefore
does not provide the information required by 17 CFR Sec. 228.701. Within the
past three years however, the Company has issued exempted securities which it
has fully described in Part II, Item IV of the Amended Form 10-SB which was
filed November 15, 2001. That description includes the type of securities
offered on the exempted offerings and the amount of security sold, the proceeds
to the Company and an accounting for all monies utilized by the Company up to
June 30, 2001. No other company stock has been issued after June 30, 2001.
Item VI - Management's Discussion and Analysis or Plan of Operation
-----------------------------------------------------------------------------
The Company provides the information required by 17 CFR 228.303(a) and provides
a discussion regarding the Company's plan of operation for the next 12 months.
SUMMARY OF PRODUCT RESEARCH
The Company recently concluded preliminary testing of the Company's proprietary
dewatering device. Utilizing the Zeolite Dewatering System has provided
meaningful insight into actual production constraints and operations.
Management will concentrate on developing conveyors and airlock valves in the
torbid reactor which do not harm the Zeolite. This additional research is
anticipated to cost less than $20,000.00.
MARKETING PLAN
Management has engaged in the exercise of identifying financially productive
applications for the Company's proprietary dewatering device. The Company has
tested various bio-solids and sludges in the past to determine the ability of
the Company's proprietary dewatering process to handle certain materials. This
kind of research is ongoing and the Company actively solicits different
varieties of bio-waste which may have value added in its dehydrated state. The
Company plans to utilize this information to develop a more precise marketing
plan which will concentrate on processes which offer financial return and which
are amenable to the current status of MEST's dewatering technology.
In that regard, the Company has plans to assemble pilot plants in locations
which provide constant sources of biological waste. In order to address
processing requirements when the Company has finally identified site and product
specific waste stream processing, Management has deemed it necessary to solicit
bids from potential manufacturers in Europe and in the United States. As a
preliminary matter, the Company estimates that a production facility will cost
between $500,000.00 and $700,000.00 U.S.D. to fabricate a dewatering device in
limited quantities. Specific engineering figures will be required in order
for the Company to more accurately develop cost estimates for processing
bio-solids,
<page> 7
MANAGEMENT OF ENVIRONMENTAL SOLUTIONS & TECHNOLOGY CORP.
FORM 10-KSB
For the year ended December 31, 2001
sludges or biological waste materials. The Company has previously engaged TNO
to determine processing costs on the Company's pilot plan. The Company believes
that it has certain useful information regarding the dewatering processing costs
in a test format, more precise information should be developed by the financing
production and employment of functional dewatering plants.
The Company has pursued an opportunity to locate and operate a Zeolite
dewatering facility in Cordova, Alaska for purposes of processing fish waste.
The Company intends to fully explore fish waste processing and make decisions
regarding the Company's initial production application. The issue is whether
the Company should sell dewatering devices to third parties and derive profits
from the sale of equipment and machinery. The Company is entertaining the
prospect of royalty or production based fees. Management has also considered
retaining all vestiges of ownership in the Zeolite dewatering systems and derive
profits from processing bio-solids or biological waste products.
FINANCIAL REQUIREMENTS
In the event the Company does not manufacture or contract for the further
development and production of a Zeolite dewatering device, management estimates
that current Company funding will last until September or October, 2002. As the
Company anticipates continuing operations and the development of up to five
production quality devices, then the Company will need to raise additional
capital to accomplish that purpose. The Company estimates that it will require
approximately $5,000,000.00 to administer the engineering project and to
construct the dewatering devices in accordance with the Company's plans. In
that regard, the Company intends to provide information to the Securities and
Exchange Commission sufficient to clear the comment phase and then to proceed
with a fully registered public offering to raise the $5,000,000.00 required for
the Company's plan of operations.
In order to implement the plans as outlined above, management anticipates hiring
an operations manager close to the location where the dewatering devices will be
manufactured. Prior to the delivery and installation of the dewatering devices
to the operating locations, management will hire a team of no more than three
operators for each dewatering system or it will subcontract the plant operations
to a third party. The Company will budget in its operating expenses sufficient
funding for either subcontracting services or for employee services to maintain
plant operations. The time period between engagement of the subcontractor to
build the devices and delivery is anticipated to be 4 to 6 months. Commencement
of fabrication will depend on the Company's ability to raise additional capital.
Finances of the Company derive from two exempted offerings of MEST common
shares and Preferred Series A. The Company has not earned income by virtue of
sales of goods and services. The payment of employees, expenses,
subcontractors and Company obligations has been made from capital raised by
the sale of equity shares. The Company anticipates the need to raise
additional capital through public or private offerings and does not expect to
earn revenues until late 2003.
Item VII - Financial Statements
-----------------------------------
The Company has provided and filed an audited balance sheet as of December 31,
2001 and an audited statement of income, cash flows and changes in stockholders'
equity for the same time period. For additional historical financial
information, please refer to the annual audits provided in the Company's Amended
Form 10-SB filing November 15, 2001 which includes audits for years ending 1998,
1999 and 2000.
<page> 8
MANAGEMENT OF ENVIRONMENTAL SOLUTIONS & TECHNOLOGY CORP.
FORM 10-KSB
For the year ended December 31, 2001
MANAGEMENT OF ENVIRONMENTAL
SOLUTIONS & TECHNOLOGY CORP.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001
WILLIAMS & WEBSTER PS
CERTIFIED PUBLIC ACCOUNTANTS
BANK OF AMERICA FINANCIAL CENTER
601 W. RIVERSIDE, SUITE 1940
SPOKANE, WA 99201
(509) 838-5111
MANAGEMENT OF ENVIRONMENTAL
SOLUTIONS & TECHNOLOGY CORP.
(A DEVELOPMENT STAGE COMPANY)
TABLE OF CONTENTS
INDEPENDENT AUDITOR'S REPORT 1
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheets 2
Consolidated Statements of Operations and Comprehensive Loss 3
Consolidated Statement of Stockholders' Equity 4
Consolidated Statements of Cash Flows 5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 6
<PAGE> 9
Board of Directors
Management of Environmental Solutions & Technology Corp.
Apeldoorn,
The Netherlands
INDEPENDENT AUDITOR'S REPORT
We have audited the accompanying consolidated balance sheets of Management of
Environmental Solutions & Technology Corp. (a development stage company) as of
December 31, 2001 and 2000 and the related consolidated statements of
operations and comprehensive loss, stockholders' equity, and cash flows for the
years then ended and for the period from December 10, 1997 (inception) to
December 31, 2001. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with accounting standards generally
accepted in the United States of America. Those standards require that we 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. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Management of
Environmental Solutions & Technology Corp. at December 31, 2001 and 2000, and
the results of its operations and comprehensive loss, stockholders' equity and
its cash flows for the years then ended and for the period from December 10,
1997 (inception) to December 31, 2001, in conformity with accounting standards
generally accepted in the United States of America.
As discussed in Note 2, the Company has been in the development stage since its
inception on December 10, 1997 and has had recurring losses and no revenues.
The Company's decision is to perfect its technological application before
entering the market. Realization of a major portion of the assets is dependent
upon the Company's ability to meet its future financing requirements and the
success of future operations. These factors raise substantial doubt about the
Company's ability to continue as a going concern. Management's plans regarding
those matters are described in Note 2. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
/s/ Williams & Webster, P.S.
Williams & Webster, P.S.
Certified Public Accountants
Spokane, Washington
August 29, 2002
<page> 10
MANAGEMENT OF ENVIRONMENTAL SOLUTIONS & TECHNOLOGY CORP.
(A Development Stage Company)
CONSOLIDATED BALANCE SHEET
2001 2000
------------ ------------
ASSETS
CURRENT ASSETS
Cash $ 203,652 $ 666,746
Tax refunds receivable 29,867 44,157
Due from shareholders or related parties - 158,441
Other receivables 5,126 -
Prepaid expenses 2,836 19,274
------------ ------------
Total Current Assets 241,481 888,618
------------ ------------
Property and equipment (net of depreciation) 3,201 7,182
------------ ------------
TOTAL ASSETS $ 244,682 $ 895,800
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 38,979 $ 63,048
Loans, related parties - 109,090
Accrued expenses 6,988 12,738
Bank overdraft 6,708 -
------------ ------------
Total Current Liabilities 52,675 184,876
------------ ------------
COMMITMENTS AND CONTINGENCIES - -
Preferred stock - Series A; $0.0001 par value
5,000,000 shares authorized, 535,985 issued
and outstanding, aggregate liquidation preference
of $2,143,940 53 53
Common stock, $0.0001 par value -
authorized 30,000,000 shares; 7,324,055
and 7,320,055 shares issued and outstanding,
respectively 732 732
Additional paid-in capital 3,221,643 3,149,176
Stock options 3,000,568 2,274,650
Deficit accumulated during the development stage (5,747,917) (4,530,690)
Accumulated other comprehensive income (loss) (283,072) (182,997)
------------ ------------
Total Stockholders’ Equity 192,007 710,924
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 244,682 $ 895,800
============ ============
The accompanying notes are an integral part of these financial statements.
<page> 11
MANAGEMENT OF ENVIRONMENTAL SOLUTIONS & TECHNOLOGY CORP.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATION AND COMPREHENSIVE LOSS
<TABLE>
<CAPTION>
Period from
December 17,
1997
Years Ended (Inception)
December 31, to
------------------------------ December 31,
2001 2000 2001
-------------- -------------- --------------
<S> <C> <C> <C>
REVENUES $ - $ - $ -
OPERATING EXPENSES
General and administrative 1,111,153 1,008,030 4,345,465
Research and development 72,980 63,782 608,357
Depreciation 3,980 4,177 10,691
-------------- -------------- --------------
Total Operating Expenses 1,188,113 1,075,989 4,964,513
-------------- -------------- --------------
LOSS FROM OPERATIONS (1,188,113) (1,075,989) (4,964,513)
OTHER INCOME (EXPENSES)
Interest income 60,746 75,446 170,229
Net loss from joint venture (88,121) (394,772) (951,101)
Interest expense (1,739) - (2,532)
-------------- -------------- --------------
Total Other Income (Expenses) (29,114) (319,326) (783,404)
LOSS BEFORE EXTRAORDINARY ITEM AND INCOME
TAXES (1,217,227) (1,395,315) (5,747,917)
Income taxes - - -
-------------- -------------- --------------
NET LOSS (1,217,227) (1,395,315) (5,747,917)
OTHER COMPREHENSIVE LOSS
Foreign currency translation loss (100,075) (97,293) (283,072)
-------------- -------------- --------------
COMPREHENSIVE (LOSS) $ (1,317,302) $ (1,492,608) $ (6,030,989)
============== ============== ==============
LOSS PER COMMON SHARE, BASIC AND DILUTED $ (0.18) $ (0.20)
============== ==============
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING, BASIC AND DILUTED 7,322,030 7,320,055
============== ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<page> 12
MANAGEMENT OF ENVIRONMENTAL SOLUTIONS & TECHNOLOGY CORP.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
<TABLE>
<CAPTION>
Accumulated Accumulated
Preferred Stock Common Stock Deficit Other
------------------------------ ------------------------------ Additional During Comprehensive Total
Number of Number of Paid-in Stock Development Income Stockholders'
Shares Amount Shares Amount Capital Options Stage (Loss) Equity
-------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
<s> <c> <c> <c> <c> <c> <c> <c> <c> <c>
Inception,
Dec. 10, 1997 - $ - - $ - $ - $ - $ - $ - $ -
Issuance of common
stock for cash on
Dec. 11, 1007 for
$1.00 per share - - 5,000 1 5,009 - - - 5,010
Issuance of common
stock to acquire
STB corp. on Dec.
26, 1997 at $1.00
per share - - 175 - 175 - - - 175
Net loss for year
ended Dec. 31, 1997 - - - - - - (46,869) - (46,869)
-------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
Balance,
Dec. 31, 1997 - - 5,175 1 5,184 - (46,869) - (41,684)
-------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
Issuance of common
stock as follows:
For cash on March
10, 1998 at $.017
per share - - 5,394,880 539 899,911 - - - 900,450
To acquire
subsidiary on
April 9, 1998 at
$0.01 per share - - 1,920,000 192 19,808 - - - 20,000
Issuance of
preferred stock
for cash:
December 1998 at
$3.73 per share 23,900 2 - - 89,246 - - - 89,248
Issuance of stock
options for
compensation on
Aug. 31, 1998 at
$2.62 per option - - - - - 865,938 - - 865,938
Net loss for year
ended Dec. 31, 1998 - - - - - - (1,263,080) 15,284 (1,278,364)
-------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
Balance,
Dec. 31, 1998 23,900 2 7,320,055 732 1,014,149 865,938 (1,325,233) 15,284 570,872
-------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
</table>
See accompanying notes and accountants’ review report.
<page> 13
MANAGEMENT OF ENVIRONMENTAL SOLUTIONS & TECHNOLOGY CORP.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
<TABLE>
<CAPTION>
Accumulated Accumulated
Preferred Stock Common Stock Deficit Other
------------------------------ ------------------------------ Additional During Comprehensive Total
Number of Number of Paid-in Stock Development Income Stockholders'
Shares Amount Shares Amount Capital Options Stage (Loss) Equity
-------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
<s> <c> <c> <c> <c> <c> <c> <c> <c> <c>
Balance carry-forward
Dec. 31, 1998 23,900 2 7,320,055 732 1,014,149 865,938 (1,325,233) 15,284 570,872
-------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
Issuance of
preferred stock
for cash:
Jan. 1999 at
$3.92 per share 23,350 2 - - 91,644 - - - 91,646
Feb. 1999 at
$3.96 per share 48,050 4 - - 190,196 - - - 190,200
Mar. 1999 at
$3.90 per share 10,300 1 - - 40,199 - - - 40,200
April 1999 at
$4.00 per share 11,300 1 - - 45,199 - - - 45,200
May 1999 at
$3.85 per share 12,640 1 - - 48,684 - - - 48,685
June 1999 at
$4.01 per share 82,900 8 - - 332,237 - - - 332,245
July 1999 at
$4.00 per share 88,700 9 - - 354,941 - - - 354,950
Aug. 1999 at
$4.02 per share 25,770 3 - - 103,494 - - - 103,497
Sept. 1999 at
$3.43 per share 26,500 3 - - 90,997 - - - 91,000
Oct. 1999 at
$4.22 per share 6,200 1 - - 26,174 - - - 26,175
Nov. 1999 at
$4.05 per share 40,725 4 - - 165,086 - - - 165,090
Dec. 1999 at
$4.14 per share 27,150 3 - - 112,517 - - - 112,520
-------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
Total preferred
stock issued 1999 403,585 40 - - 1,601,368 - - - 1,601,408
Issuance of stock
options for
compensation on
Aug. 31, 1999 at
$3.59 per share - - - - - 717,900 - - 717,900
Net loss for year
ended Dec. 31, 1999 - - - - - - (1,810,142) (100,988) (1,911,130)
-------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
Balance,
Dec. 31, 1999 427,485 42 7,320,055 732 2,615,517 1,583,838 (3,135,375) (85,704) 979,050
-------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
</table>
See accompanying notes and accountants’ review report.
<page> 14
MANAGEMENT OF ENVIRONMENTAL SOLUTIONS & TECHNOLOGY CORP.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
<TABLE>
<CAPTION>
Accumulated Accumulated
Preferred Stock Common Stock Deficit Other
------------------------------ ------------------------------ Additional During Comprehensive Total
Number of Number of Paid-in Stock Development Income Stockholders'
Shares Amount Shares Amount Capital Options Stage (Loss) Equity
-------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
<s> <c> <c> <c> <c> <c> <c> <c> <c> <c>
Balance carry-forward
Dec. 31, 1999 427,485 42 7,320,055 732 2,615,517 1,583,838 (3,135,375) (85,704) 979,050
-------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
Issuance of
preferred stock
for cash:
Jan. 2000 at
$4.08 per share 8,300 1 - - 33,891 - - - 33,892
Feb. 2000 at
$4.34 per share 23,750 2 - - 103,054 - - - 103,056
Mar. 2000 at
$4.37 per share 4,500 1 - - 19,645 - - - 19,646
April 2000 at
$4.16 per share 61,700 5 - - 256,425 - - - 256,430
May 2000 at
$4.30 per share 5,250 1 - - 22,598 - - - 22,599
June 2000 at
$4.19 per share 5,000 1 - - 20,958 - - - 20,959
-------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
Total preferred
stock issued: 2000 108,500 11 - - 456,571 - - - 456,582
Issuance of stock
options for
compensation on
Aug. 31, 2000 at
$3.84 per share - - - - - 767,900 - - 767,900
Expiration of
stock options on
July 31, 2000 - - - - 77,088 (77,088) - - -
Net loss,
Dec. 31, 2000 - - - - - - (1,395,315) (97,293) (1,492,608)
-------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
Balance,
Dec. 31, 2000 535,985 53 7,320,055 732 3,149,176 2,274,650 (4,530,690) (182,997) 710,924
-------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
</table>
See accompanying notes and accountants’ review report.
<page> 15
MANAGEMENT OF ENVIRONMENTAL SOLUTIONS & TECHNOLOGY CORP.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
<TABLE>
<CAPTION>
Accumulated Accumulated
Preferred Stock Common Stock Deficit Other
------------------------------ ------------------------------ Additional During Comprehensive Total
Number of Number of Paid-in Stock Development Income Stockholders'
Shares Amount Shares Amount Capital Options Stage (Loss) Equity
-------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
<s> <c> <c> <c> <c> <c> <c> <c> <c> <c>
Balance carry-forward
Dec. 31, 2000 535,985 53 7,320,055 732 3,149,176 2,274,650 (4,530,690) (182,997) 710,924
-------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
Forgiveness of
debt by officer - - - - 62,867 - - - 62,867
Issuance of common
stock for cash at
$2.40 per share
on Dec. 6, 2001,
net of $2,400
financing cost - - 4,000 - 9,600 - - - 9,600
Issuance of stock
options for
compensation on
Dec. 31, 2001 at
$3.63 per option - - - - - 725,918 - - 725,918
Net loss for year
ended Dec. 31, 2001 - - - - - - (1,217,227) (100,075) (1,317,302)
-------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
Balance,
Dec. 31, 2001 535,985 $ 53 7,324,055 $ 732 $ 3,221,643 $ 3,000,568 $ (5,747,917) $ (283,072) $ 192,007
============== ============== ============== ============== ============== ============== ============== ============== =============
</table>
See accompanying notes and accountants’ review report.
<page> 16
MANAGEMENT OF ENVIRONMENTAL SOLUTIONS & TECHNOLOGY CORP.
(A Development Stage Company)
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Period from
December 17,
1997
Years Ended (Inception)
December 31, to
------------------------------ December 31,
2001 2000 2001
-------------- -------------- --------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (1,217,227) $ (1,395,315) $ (5,747,917)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation 3,980 4,177 10,691
Options granted as compensation 725,918 767,900 3,077,656
(Increase) decrease in assets:
Tax refunds receivable 14,290 (10,575) (29,867)
Other receivables (5,126) 2,247 (5,126)
Prepaid expenses 16,438 (3,338) (2,836)
Increase (decrease) in liabilities:
Accrued liabilities (5,750) 12,738 6,988
Accounts payable (24,069) (481,123) 33,794
-------------- -------------- --------------
Net cash used in operating activities (491,546) (1,103,289) (2,656,617)
-------------- -------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment - - (13,893)
Loans provided to shareholders - - (933,303)
Payments on loans to shareholders 112,218 774,862 887,080
-------------- -------------- --------------
Net cash provided by (used in) investing
activities 112,218 774,862 (60,116)
-------------- -------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Overdrafts payable 6,708 - 6,708
Proceeds from related party loans 25,921 - 145,391
Payments on related party loans - (10,390) (10,390)
Proceeds from sales of common stock 9,600 - 915,060
Proceeds from sales of preferred stock - 456,582 2,147,238
Cash acquired with subsidiary - - 20,000
-------------- -------------- --------------
Net cash provided by (used in) financing
activities 42,229 446,192 3,224,007
-------------- -------------- --------------
Foreign currency translation (loss) (125,995) (97,108) (308,622)
-------------- -------------- --------------
Net increase (decrease) in cash (463,094) 20,657 198,652
Cash at beginning of year 666,746 646,089 5,000
-------------- -------------- --------------
Cash at end of year $ 203,652 $ 666,746 $ 203,652
============== ============== ==============
</table>
See accompanying notes and accountants’ review report.
<page> 17
MANAGEMENT OF ENVIRONMENTAL SOLUTIONS & TECHNOLOGY CORP.
(A Development Stage Company)
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Period from
December 17,
1997
Years Ended (Inception)
December 31, to
------------------------------ December 31,
2001 2000 2001
-------------- -------------- --------------
<S> <C> <C> <C>
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Interest paid $ 1,544 $ - $ 2,337
Income taxes paid $ - $ - $ -
NON-CASH INVESTING AND FINANCING
TRANSACTIONS:
Stock options granted for compensation $ 725,918 $ 767,900 $ 3,077,656
Stock issued for acquisitions $ - $ - $ 20,175
Notes payable, related party netted
with notes receivable related party $ 46,233 $ - $ 46,233
Forgiveness of debt by officer $ 62,867 $ - $ 62,867
</TABLE>
See accompanying notes and accountants’ review report.
<page> 18
MANAGEMENT OF ENVIRONMENTAL SOLUTIONS & TECHNOLOGY CORP.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001
NOTE 1 - ORGANIZATION AND HISTORY
Management of Environmental Solutions & Technology Corp. was formed to develop
a proprietary technology for drying and treating animal manure and sludge to be
used as fertilizer. The "Company" ("MEST") was incorporated in Colorado on
December 10, 1997, followed by reorganization as a Delaware corporation on
December 18, 1997.
On December 26, 1997, the Company obtained all of the outstanding common stock
of STB Corporation, a shell corporation domiciled in Colorado, by issuing 175
shares of the Company's common stock. Because STB Corporation had no assets or
operations, the Company recorded the transaction at the initial deemed valued
of the stock conveyed ($175), which was consistent with the deemed value of the
Company's stock issued in its immediately precedent initial transaction. In
the year subsequent to the acquisition, STB Corporation was administratively
dissolved.
On April 9, 1998, the Company issued 1,920,000 shares of its common stock to
its president in exchange for all of the issued and outstanding shares of MEST,
B.V., a Netherlands corporation, owned by the Company's president. Although
MEST, B.V. had no recorded assets at the time of the transaction, the Company
recorded the acquisition at a nominal value of $0.01 per share. The aggregate
acquisition cost of $20,000, originally assigned to intangible assets, was
substantially written off by the end of 1998. Currently, MEST, B.V. is used to
conduct the Company's business in the Netherlands. MEST, B.V. was acquired
because it had certain data and technical information that the Company plans to
use in its business.
The Netherlands Organization for Applied Scientific Research ("TNO"), staffed
by 5,000 professionals is one of Europe's leading contract research
organizations. Using proprietary technology developed by TNO, the Company and
TNO formed a corporation known as Manure and Sludge Technology, B.V. ("MSTec")
for the purpose of developing a process for use on a commercial basis that
would economically refine manure and sludge into pellets, which could be sold
as organic fertilizer and other products. MSTec, a Netherlands corporation, is
owned 50 percent by the Company and 50 percent by TNO.
The Company's year-end is December 31.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies is presented to assist in
understanding the financial statements. The financial statements and notes are
representations of the Company's management, which is responsible for their
integrity and objectivity. These accounting policies conform to accounting
principles generally accepted in the United States of America, and have been
consistently applied in the preparation of the financial statements.
<page> 19
MANAGEMENT OF ENVIRONMENTAL SOLUTIONS & TECHNOLOGY CORP.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
ACCOUNTING METHOD
The Company's financial statements are prepared using the accrual basis of
accounting in accordance with accounting principles generally accepted in the
United States of America.
Development Stage Activities
The Company has been in the development stage since its formation in December
of 1997, and has not yet realized any revenues from its planned operations. It
is engaged in the business of manufacturing, distributing, and selling
fertilizer products.
USE OF ESTIMATES
The process of preparing financial statements in conformity with accounting
principles generally accepted in the United States of America, requires the use
of estimates and assumptions regarding certain types of assets, liabilities,
revenues, and expenses. Such estimates primarily relate to unsettled
transactions and events as of the date of the financial statements.
Accordingly, upon settlement, actual results may differ from estimated amounts.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts for cash, accrued expenses and payables, and loans payable
approximate their fair value. MEST's notes payable approximate the fair value
of such instruments based upon management's best estimate of interest rates
that would be available to MEST for a similar financial arrangement at December
31, 2001 and 2000.
RESEARCH AND DEVELOPMENT
Research and development expenses are charged to operations as incurred. The
cost of intellectual property purchased from others that is immediately
marketable or that has an alternative future use is capitalized as intangible
assets. The Company periodically reviews its capitalized patent costs to
assess recoverability based on the projected undiscounted cash flows from
operations. Impairments are recognized in operating results when a permanent
diminution in value occurs.
The Company constructed a testing facility during 1999 in Apeldoorn, The
Netherlands at a cost of approximately $450,000. These costs were expensed as
research and development during the year ended December 31, 1999.
COMPENSATED ABSENCES
Currently, the Company has no employees; therefore, no policy regarding
compensated absences has been established. The Company will establish a policy
to recognize the costs of compensated absences at the point in time that it has
employees.
<page> 20
MANAGEMENT OF ENVIRONMENTAL SOLUTIONS & TECHNOLOGY CORP.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
DERIVATIVE INSTRUMENTS
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments
and Hedging Activities," as amended by SFAS No. 137, "Accounting for Derivative
Instruments and Hedging Activities - Deferral of the Effective Date of FASB No.
133", and SFAS No. 138, "Accounting for Certain Derivative Instruments and
Certain Hedging Activities", which is effective for the Company as of January
1, 2001. This standard establishes accounting and reporting standards for
derivative instruments, including certain derivative instruments embedded in
other contracts, and for hedging activities. It requires that an entity
recognize all derivatives as either assets or liabilities in the consolidated
balance sheets and measure those instruments at fair value.
If certain conditions are met, a derivative may be specifically designated as a
hedge, the objective of which is to match the timing of gain or loss
recognition on the hedging derivative with the recognition of (i) the changes
in the fair value of the hedged asset or liability that are attributable to the
hedged risk or (ii) the earnings effect of the hedged forecasted transaction.
For a derivative not designated as a hedging instrument, the gain or loss is
recognized in income in the period of change.
From November 1, 1999 to February 17, 2000, the Company entered into a small
number of foreign currency purchases for cash management purposes. The results
of these short-term transactions, which generated an aggregate loss of $7,124
in 1999 and an aggregate gain of $4,262 in 2000, are included in Other
Comprehensive Income (Loss) as an element of foreign currency translation
earnings. The Company engaged in no similar foreign currency purchases either
prior to or subsequent to the aforementioned time frame.
ADVERTISING EXPENSES
Advertising expenses consist primarily of costs incurred in the design,
development, and printing of Company literature and marketing materials. The
Company expenses all advertising expenditures as incurred.
LOSS PER SHARE
Basic loss per share was computed by dividing the net loss by the weighted
average number of shares outstanding during the year. The weighted average
number of shares was calculated by taking the number of shares outstanding and
weighting them by the amount of time they were outstanding. Outstanding
options and convertible preferred stock were not included in the computation of
diluted loss per share because the exercise price of the outstanding options is
higher than the market price of the stock, thereby causing the options to be
antidilutive.
<page> 21
MANAGEMENT OF ENVIRONMENTAL SOLUTIONS & TECHNOLOGY CORP.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PROVISION FOR TAXES
Income taxes are provided based upon the liability method of accounting
pursuant to SFAS No. 109 "Accounting for Income Taxes." Under this approach,
deferred income taxes are recorded to reflect the tax consequences on future
years of differences between the tax basis of assets and liabilities and their
financial reporting amounts at each year-end. A valuation allowance is
recorded against deferred tax assets if management does not believe the Company
has met the "more likely than not" standard imposed by SFAS No. 109 to allow
recognition of such an asset.
At December 31, 2001, the Company had net deferred tax assets of approximately
$590,000, principally arising from net operating loss carryforwards for income
tax purposes. As management of the Company cannot determine that it is more
likely than not that the Company will realize the benefit of the net deferred
tax asset, a valuation allowance equal to the net deferred tax asset has been
established at December 31, 2001.
At December 31, 2001, the Company has net operating loss carryforwards of
approximately $2,950,000, which expire in the years 2017 through 2021. The
Company recognized approximately $3,000,000 of losses for the issuance of
common stock options for services, which are not deductible for tax purposes,
and are not included in the above calculation of deferred tax asset.
GOING CONCERN
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern.
As shown in the accompanying financial statements, the Company has no revenues,
has incurred a net loss of $1,217,227 for the year ended December 31, 2001, has
an accumulated deficit of $5,747,917. These factors indicate that the Company
may be unable to continue in existence. The financial statements do not
include any adjustments related to the recoverability and classification of
recorded assets, or the amounts and classification of liabilities that might be
necessary in the event the Company cannot continue in existence. The future of
the Company is dependent upon successful and profitable operations from
manufacturing, distributing, and selling its fertilizer products.
Management has established plans designed to promote the sales of the Company's
product. Management intends to seek additional capital from new equity
securities offerings that will provide funds needed to increase liquidity, fund
internal growth and fully implement its business plan.
<page> 22
MANAGEMENT OF ENVIRONMENTAL SOLUTIONS & TECHNOLOGY CORP.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of MEST and its
wholly owned subsidiary, MEST, B.V. after elimination of intercompany accounts
and transactions. Manure and Sludge Technology, B.V. ("MSTec"), a 50 percent
owned corporation is reflected in the financial statements on the equity method
of accounting, and not included in the financial statements as an entity
subject to consolidation.
Accounting for Stock Options Granted to Employees and Nonemployees
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-
Based Compensation" ("SFAS No. 123"), defines a fair value-based method of
accounting for stock options and other equity instruments. The Company has
adopted this method, which measures compensation costs based on the estimated
fair value of the award and recognizes that cost over the service period.
COMPREHENSIVE INCOME
Effective January 1, 1998, the Company adopted SFAS No. 130, "Reporting
Comprehensive Income" (SFAS 130), which was issued in June 1997. SFAS 130
establishes rules for the reporting and display of comprehensive income and its
components. The effect of the adoption of SFAS 130 is reflected in the
accompanying financial statements and included under the headings "Other
Comprehensive Loss."
IMPAIRED ASSET POLICY
In March 1995, the Financial Accounting Standards Board issued a statement,
SFAS No. 121, titled "Accounting for Impairment of Long-lived Assets," which
has been replaced by SFAS No. 144, "Accounting for Impairment or Disposal of
Long-Lived Assets." In complying with this standard, the Company reviews its
long-lived assets quarterly to determine if any events or changes in
circumstances have transpired which indicate that the carrying value of its
assets may not be recoverable. The Company determines impairment by comparing
the undiscounted future cash flows estimated to be generated by its assets to
their respective carrying amounts.
The Company does not believe any adjustments are needed to the carrying value
of its assets at December 31, 2001.
FOREIGN CURRENCY TRANSLATION GAINS/LOSSES
The Company has adopted Financial Accounting Standard No. 52. Monetary assets
and liabilities denominated in foreign currencies are translated into United
States dollars at rates of exchange in effect at the balance sheet date. Gains
or losses are included in income for the year, except gains or losses related
to long-term debt, which are deferred and amortized over the remaining term of
the debt. Non-monetary assets, liabilities and items recorded in income
arising from transactions denominated in foreign currencies are translated at
rates of exchange in effect at the date of the transaction.
<page> 23
MANAGEMENT OF ENVIRONMENTAL SOLUTIONS & TECHNOLOGY CORP.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation of property and
equipment is calculated using the straight-line method over the estimated
useful lives of the assets, which range from three to ten years. See Note 4.
CONCENTRATION OF CREDIT RISK
The Company maintains its cash in the Netherlands financial institutions.
These financial institutions are considered credit worthy and have not
experienced any losses on deposits at December 31, 2001. The funds are valued
in U.S. dollars and are fully insured.
RECENT ACCOUNTING PRONOUNCEMENTS
In October 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets" (SFAS No. 144). SFAS 144 replaces SFAS 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to Be Disposed Of." This new standard establishes a single accounting model
for long-lived assets to be disposed of by sale, including discontinued
operations. Statement 144 required that these long-lived assets be measured at
the lower of carrying amount or fair value less cost to sell, whether reported
in continuing operations or discontinued operations. This statement is
effective beginning for fiscal years after December 15, 2001, with earlier
application encouraged. The Company adopted SFAS 144 and does not believe that
the adoption will have a material impact on the financial statements of the
Company at December 31, 2001.
In October 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 143, "Accounting for Asset Retirement
Obligations" (SFAS No. 143). SFAS No. 143 establishes guidelines related to
the retirement of tangible long-lived assets of the Company and the associated
retirement costs. This statement required that the fair value of a liability
for an asset retirement obligation be recognized in the period in which it is
incurred if a reasonable estimate of fair value can be made. The associated
asset retirement costs are capitalized as part of the carrying amount of the
long-lived assets. This statement is effective for financial statements issued
for the fiscal years beginning after June 15, 2002 and with earlier application
encouraged. The Company adopted SFAS No. 143 and does not believe that the
adoption will have a material impact on the financial statements of the Company
at December 31, 2001.
<page> 24
MANAGEMENT OF ENVIRONMENTAL SOLUTIONS & TECHNOLOGY CORP.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
RECENT ACCOUNTING PRONOUNCEMENTS (CONTINUED)
In June 2001, the FASB issued SFAS No. 141, "Business Combinations" and SFAS
No. 142, "Goodwill and Other Intangible Assets". SFAS No. 141 provides for the
elimination of the pooling-of-interest method of accounting for business
combinations with an acquisition date of July 1, 2001 or later. SFAS No. 142
prohibits the amortization of goodwill and other intangible assets with
indefinite lives and requires periodic reassessment of the underlying value of
such assets for impairment. SFAS No. 142 is effective for fiscal years
beginning after December 15, 2001. An early adoption provision exists for
companies with fiscal years beginning after March 15, 2001. The Company does
not have assets with indeterminate lives.
In September 2000, the FASB issued SFAS No. 140 "Accounting for Transfers and
Servicing of Financial Assets with Extinguishment of Liabilities." This
statement provides accounting and reporting standard for transfers and
servicing of financial assets and extinguishment of liabilities and also
provides consistent standards for distinguishing transfers of financial assets
that are sales from transfers that are secured borrowings. SFAS No. 140 is
effective for recognition and reclassification of collateral and for
disclosures related to securitization transactions and collateral for fiscal
years ending after December 15, 2000, and is effective for transfers and
servicing of financial assets and extinguishments of liabilities occurring
after March 31, 2001. The Company believes that the adoptions of this standard
will not have a material effect on the Company's results of operations or
financial positions.
NOTE 3 - RELATED PARTY TRANSACTIONS
LOANS FROM RELATED PARTIES
At December 31, 2000, loans from related parties consisted of the following:
2000
--------------
Maurice Schelvis, (a shareholder of the
Company), unsecured, interest at 5%,
due on demand. $ 5,590
Maurice Schelvis, (a shareholder of the
Company), unsecured, interest at 6%,
due on demand. 103,500
--------------
Total $ 109,090
==============
The Company had no outstanding loans from related parties at December 31, 2001.
<page> 25
MANAGEMENT OF ENVIRONMENTAL SOLUTIONS & TECHNOLOGY CORP.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001
NOTE 3 - RELATED PARTY TRANSACTIONS (CONTINUED)
RECEIVABLE FROM RELATED PARTIES
At December 31, 2000 the following amounts were receivable from shareholders or
related parties:
2000
---------------
IJ-Beeher $ 48,917
Jan Luiken, B.V. 109,524
---------------
$ 158,441
===============
The Company had no receivables from related parties at December 31, 2001.
OTHER RELATED PARTY TRANSACTIONS
The president of the Company conveyed all outstanding shares of M.E.S.T., B.V.
to the Company in exchange for 1,920,000 shares of common stock of the Company
during the year ended December 31, 1998.
NOTE 4 - PLANT, PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost. Major additions and improvements
are capitalized. Minor replacements, maintenance and repairs that do not
increase the useful lives of the assets are expensed as incurred. Depreciation
of property and equipment is being calculated using the straight-line method
over the expected useful lives of the assets. Depreciation expense for the
periods ended December 31, 2001 and 2000 was $3,980 and $4,177, respectively.
NOTE 5 - PREFERRED STOCK
The Company is authorized to issue 5,000,000 shares of $0.0001 par value
preferred stock; 535,985 Series A preferred shares were issued and outstanding
at December 31, 2001 and 2000. Each share of Series A preferred stock is
entitled to a dividend at the rate of $0.30 per share if the board of directors
declares a dividend, although no dividends have been declared. Upon
liquidation or dissolution of the Company, each outstanding share of Series A
preferred stock is entitled to a distribution of $4.00 per share prior to any
distribution to common stock shareholders. Series A preferred stock is non-
voting, and each share is convertible into one share of the Company's common
stock at any time after June 1, 1999.
<page> 26
MANAGEMENT OF ENVIRONMENTAL SOLUTIONS & TECHNOLOGY CORP.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001
NOTE 5 - PREFERRED STOCK (CONTINUED)
During the year ended December 31, 1998, the Company sold 23,900 shares of its
preferred stock at an average price of $3.73 per share. During the year ended
December 31, 1999, the Company sold 403,585 shares of its preferred stock at an
average price of $3.93 per share. During the year ended December 31, 2000, the
Company sold 108,500 shares of its preferred stock at an average price of $4.21
per share.
NOTE 6 - COMMON STOCK
The Company is authorized to issue 30,000,000 shares of $0.0001 par value
common stock: 7,324,055 and 7,320,055 shares were issued and outstanding at
December 31, 2001 and 2000, respectively. Each holder of common stock has one,
non-cumulative vote per share on all matters voted upon by the shareholders.
There are no preemptive rights or other rights of subscription.
During the period ended December 31, 1997, the Company issued 5,000 shares of
its common stock for cash at $1.00 per share and 175 shares of its common stock
valued at $1.00 per share to acquire STB Corp. The stock was valued at its
fair market value on the date of issuance.
During the year ended December 31, 1998, the Company sold 5,394,880 shares of
its common stock for cash at $0.17 per share and issued 1,920,000 shares of its
common stock at $0.01 per share to acquire a subsidiary. The stock was valued
at the fair market value on the date of issuance.
During the year ended December 31, 2001, the Company sold 4,000 shares of its
common stock for cash at $3.00 per share.
NOTE 7 - JOINT VENTURE INVESTMENT IN MANURE AND SLUDGE TECHNOLOGY, B.V.
Manure and Sludge Technology, B.V. (hereinafter "MSTec") is a Netherlands
corporation that was formed for the purpose of developing a process for use on
a commercial basis that would economically dry and pasteurize manure and sludge
into pellets that could be sold as organic fertilizer and other products.
Since its inception, MST has refined its technological process for use with
other waste products such as bio-solids, fish and food waste, and paper pulp.
MEST owns 50 percent of the common stock of MSTec, and accounts for MSTec on
the equity method. The other 50 percent of MSTec's common stock is owned by
The Netherlands Organization for Applied Scientific Research ("TNO"), the
largest single research facility in Europe employing over five thousand
professionals.
<page> 27
MANAGEMENT OF ENVIRONMENTAL SOLUTIONS & TECHNOLOGY CORP.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001
NOTE 7 - JOINT VENTURE INVESTMENT IN MANURE AND SLUDGE TECHNOLOGY, B.V.
(CONTINUED)
MEST's investment in the joint venture is recorded as $0 on MEST's balance
sheet because MSTec's debt and losses exceeds MEST's share of investment in the
joint venture. MEST's investment in the joint venture totaled $816,000 at
December 31, 2001 and 2000. In forming the joint venture of MSTec, the Company
committed to an investment in the form of a loan to MSTec of approximately
$800,000, which funds were in fact advanced to MSTec in 1999 and 2000. This
loan is treated as an equity investment under the Company's understanding of
the conditions of the joint venture. The investment is subject to the terms of
the related loan agreement dated January 22, 1999. The Company agreed in the
event of MSTec's bankruptcy or termination, to forego repayment of the funds
advanced until such time as all other creditors are paid in full. At the date
of these financial statements, no funds advanced by the Company to MSTec have
been repaid.
The joint venture’s primary asset, as the result of the aforementioned
investment, is a worldwide licensing agreement for the application of the
aforementioned technological process from TNO.
TNO controls the research and activities of the joint venture while M.E.S.T.
Corp.'s participation is investment with rights to products developed by the
joint venture.
The following is a summary of the financial position and results of operations
of MSTec.
2001 2000
------------- -------------
Current assets $ 117,858 $ 123,809
Property, plant, and equipment - -
Other assets (net) - 50,624
------------- -------------
Total assets $ 117,858 $ 174,433
============= =============
Current liabilities $ 360,019 $ 210,753
Long-term debt - related parties 1,644,041 1,673,640
------------- -------------
Total liabilities 2,004,060 1,984,393
Stockholders' equity (1,886,202) (1,709,960)
------------- -------------
Total liabilities and equity $ 117,858 $ 174,433
============= =============
Net sales $ - $ -
Gross profit $ - $ -
Loss from continuing operations $ (174,242) $ (789,544)
Net loss $ (174,242) $ (789,544)
<page> 28
MANAGEMENT OF ENVIRONMENTAL SOLUTIONS & TECHNOLOGY CORP.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001
NOTE 7 - JOINT VENTURE INVESTMENT IN MANURE AND SLUDGE TECHNOLOGY, B.V.
(CONTINUED)
JOINT VENTURE ROYALTY AGREEMENT
In connection with the formation of the MSTec joint venture, a sub-license
agreement was executed wherein MEST agreed to pay to MSTec "sub-license" fees,
which are effectively royalty fees, for manure conversion factories constructed
by MEST over a period of fifteen years. The fifteen-year period begins when
MEST constructs its first such factory. Royalty fees due to MSTec are computed
on a sliding scale, based upon actual factory construction costs, and range
from 15% to 10%. At the date of these financial statements, no royalty fees
were owed under the aforementioned agreement.
NOTE 8 - COMMITMENTS AND CONTINGENCIES
SUBORDINATED LOAN AGREEMENT
Under the terms of an agreement dated January 22, 1999, the management of MEST
committed the Company to loan approximately $800,000 to MSTec in phases during
the year 1999. Repayment was intended to commence December 31, 1999,
contingent upon MSTec generating an operating profit. Further, in the event of
MSTec's default or bankruptcy, MEST agreed to subordinate its interest in the
loan for the benefit of RABO bank in Apeldoorn, until all other debts of MSTec
were paid. Upon payment of debts and obligations of MSTec, the loan from MEST
would again be eligible for repayment of interest and principle.
OFFICE LEASE
The Company leases office space in Apeldoorn under a written agreement, which
provides for lease payments of approximately $2,000 per month through June
2006. Formerly the Company leased office space in Amsterdam under a written
agreement, which ran from July 1999 through January 2002 and provided for lease
payments of approximately $1,500 per month. In 2001, the lease agreement was
renegotiated and the lease expiration date was changed to July 31, 2001 with
other lease provisions remaining unchanged.
Future minimum rental commitments under the operating lease are as follows at
September 30, 2001:
Year Ending:
December 31, 2001 $ 20,500
December 31, 2002 $ 24,000
December 31, 2003 $ 24,000
December 31, 2004 $ 24,000
December 31, 2005 $ 24,000
NOTE 9 - STOCK OPTIONS
The Company has granted its officers options to purchase a total of 900,000
shares of the Company's common stock at an exercise price of $0.50 per share.
Following is a summary of the status of these performance-based options during
the years ended December 31, 2001 and 2000.
<page> 29
MANAGEMENT OF ENVIRONMENTAL SOLUTIONS & TECHNOLOGY CORP.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001
NOTE 9 - STOCK OPTIONS (CONTINUED)
Number of Weighted Average
Shares Price per Share
-------------- ----------------
Outstanding at December 31, 1999 530,000 $ 0.50
Granted 200,000 0.50
Expired (30,000) 0.50
Exercised or forfeited - -
-------------- ----------------
Outstanding and exercisable at
December 31, 2000 700,000 $ 0.50
============== ================
Weighted average fair value of
options granted during 2000 $ 3.59
================
Outstanding at December 31, 2000 700,000 $ 0.50
Granted 200,000 0.50
Exercised, expired or forfeited - -
Outstanding and exercisable at
December 31, 2001 900,000 $ 0.50
============== ================
Weighted average fair value of
options granted during 2001 $ 3.63
================
The Company estimated the fair value of each stock option at the grant date by
using the Black-Scholes option pricing model with the following weighted-
average assumptions used: Dividend yield of zero percent; strike prices of
$0.50; expected volatility of 24.83%; risk-free interest rate of six percent
and expected lives of five years. The weighted average fair value at date of
grant for options granted to officers in the years ended December 31, 2001 and
2000 was $3.63 and $3.59 per option, respectively.
Compensation cost charged to operations was $725,918 and $767,900 during the
years ended December 31, 2001 and 2000, respectively.
NOTE 10 - SUBSEQUENT EVENTS
In January 2002, the Company loaned $200,000 to an officer. In April 2002,
$150,000 was repaid and the Company also received a mortgage on real estate as
collateral for its loan.
<page> 30
MANAGEMENT OF ENVIRONMENTAL SOLUTIONS & TECHNOLOGY CORP.
FORM 10-KSB
For the year ended December 31, 2001
Item VIII - Changes and Disagreements with Accountants and Accounting and
--------------------------------------------------------------------------------
Financial Disclosure
---------------------
Management of Environmental Solutions and Technology Corp. (MEST or the
"Company") previously engaged Arenthals en Partners Registered Accountants who
are located at Reimersbeek 2, Post Bus 87081, 1080 JB Amsterdam, The Netherlands
in order to do audits for the Company for the fiscal years/calendar years 1997,
1998 and 1999. The financial statements were provided by Arenthals en Partners
to the Securities and Exchange Commission when the Company filed its 10-SB on
December 28, 1999.
Due to the Commission's presumption that a U.S. based corporation would be
audited by a U.S. firm familiar with U.S. generally accepted accounting
principals and generally accepted auditing standards together with the
Securities and Exchange Act rules and regulations, management deemed it in the
best interest of the Company to retain a U.S. based auditing firm and certified
public accountant which could perform auditing functions for and on behalf of
the Company.
Consequently the Company engaged Williams & Webster, certified public
accountants and business consultants who are located at Bank of America
Financial Center, 601 West Riverside, Suite 1940, Spokane, Washington, USA
99201-0611 as its auditor. Williams & Webster P.S. revised the Company's audits
in response to the Commission's comments issued on February 11, 2000. The
Company utilized audits performed by Williams & Webster and submitted this
accounting on October 15, 2001 as its amended 10-SB in response to the
Commission's comments.
Arenthals en Partners which has now become affiliated with Grant Thornton
continues to serve as the Company's accountants in The Netherlands and provides
accounting for the Company's periodic accounting reporting requirements under
10-QSB and 10-KSB. Arenthals accounting is provided to Williams & Webster P.S.
who performs the annual audits and quarterly reviews. The Company cites no
other reason other than the need to retain a U.S. based certified public
accountant qualified to practice before the Securities and Exchange Commission
as a reason for its change of auditor.
Part III
---------
Item IX - Directors, Executive Officers, Promoters and Control Persons
-------------------------------------------------------------------------------
The following sets forth certain information concerning the present management
of the Company:
<table>
Name Age Position with Company
------------------------- —-- ------------------------------------------------
<s> <c> <c>
Marieke Oudejans 30 President, Secretary, Director (12/97 to 4/01)
Greg Schmick 51 President, Secretary, Director (4/01 to present)
Maurice Schelvis 59 Vice President
Eugene M. Larabie 61 Vice President
Robert E. Johnson 65 Chief Financial Officer and Vice
President of Operations
</table>
<page> 31
MANAGEMENT OF ENVIRONMENTAL SOLUTIONS & TECHNOLOGY CORP.
FORM 10-KSB
For the year ended December 31, 2001
Greg Schmick has been president and Secretary the Company since April,
2001. Mr Schmick has been a Director since February of 2000. Mr. Schmick was
formerly President of International Soil Sciences, Inc., an Oregon corporation
engaged in the business of consulting and recycling since 1998. For the past
few years Mr. Schmick has been engaged in the business of consulting for
recycling operations in the Pacific Northwest.
Marieke Oudejans has been was formerly an Officer and Director of the
Company from January 1998 to April 2001. Since June 1997 Ms. Oudejans as been
the President of M.E.S.T., B.V., a corporation which was acquired by the Company
in April 1998 until April 2001. Until June 1997 Ms. Oudejans was an assistant
vice president for ATT-Unisource, a Company engaged in telecommunications.
Maurice Schelvis has been an officer and director of the Company since
July 1998. For the past five years Mr. Schelvis has been an officer and director
of a real estate trading company.
Eugene M. Larabie has been an Officer of the Company since February 1998.
Since 1984 Mr. Larable has been the president of Laroth Engineering Ltd., a
corporation providing consulting services to the mining industry.
Robert E. Johnson has been an Officer of the Company since February 1998.
Mr. Johnson has been retired since 1993. From 1975 to 1993 Mr. Johnson was
manager of customer services for the British Columbia Hydro and Power Authority.
<page> 32
MANAGEMENT OF ENVIRONMENTAL SOLUTIONS & TECHNOLOGY CORP.
FORM 10-KSB
For the year ended December 31, 2001
Item X - Executive Compensation
-----------------------------------
The following table sets forth in summary form the compensation
received by (i) Marieke Oudejans, the Company's Former President, (ii) Maurice
Schelvis, Eugene Larabie and Robert Johnson, the Company's Vice Presidents
and (iii) Greg Schmick, the Company's current President and Secretary and (iv)
by each other executive officer of the Company who received in excess of
$100,000 during the fiscal years ending December 31, 1997, 1998, 1999,
2000 and 2001.
<table>
Other Annual Restricted Options
Name and Fiscal Salary Bonus Compensation Stock Awards Granted
Principal Position Year (1) (2) (3) (4) (5)
-------------------- ------ ------ ----- ------------ ------------ -------
<s> <c> <c> <c> <c> <c> <c>
Marieke Oudejans, 1997 - – – – –
President 1998 - – - – 100,000
1999 - - - - 100,000
2000 $87,602 – - – 100,000
2001 - - - - 100,000
Maurice Schelvis, 1997 - – - – -
Vice President 1998 - – - – 100,000
1999 - – - – 100,000
2000 - – - – 100,000
2001 - - - - 100,000
Greg Schmick, 2000 - – - – –
President/Secretary 2001 $16,000 – - – -
Eugene Larabie, 1997 - – - – –
Vice President 1998 - – - – –
1999 - – - – –
2000 - – - – –
2001 - – - – –
Robert Johnson, 1997 - - - – –
Vice President 1998 - – - – –
1999 - – - – –
2000 - – - – –
2001 - – - – –
</table>
(1) The dollar value of base salary (cash and non-cash) received.
(2) The dollar value of bonus (cash and non-cash) received.
(3) Any other annual compensation not properly categorized as salary or bonus,
including perquisites and other personal benefits, securities or property.
Amounts in the table represents automobile allowances.
(4) Amounts reflect the value of the shares of the Company's common stock issued
as compensation for services.
(5) The shares of Common Stock to be received upon the exercise of all stock
options granted during the year fiscal years shown in the table.
<page> 33
MANAGEMENT OF ENVIRONMENTAL SOLUTIONS & TECHNOLOGY CORP.
FORM 10-KSB
For the year ended December 31, 2001
The table below shows the number of shares of the Company's Common Stock
owned by the officers listed above, and the value of such shares as of June 30,
2001.
Name Shares Value
--------------------- --------- -------------
Marieke Oudejans 2,260,000 Unknown *
Maurice Schelvis 2,010,000 Unknown *
* The Company's common stock did not begin to trade until July 1999.
From July, 1999 until June 2001, there has not been sufficient trading history
or consistent market from which to base an opinion regarding the value of such
shares.
The following shows the amounts which the Company paid to its officers
and technical advisor during the year ending December 31, 2001 and the time
which the Company's executive officers and technical advisor plan to devote to
the Company's business. The Company does not have employment agreements with
any of its officers or technical advisor.
<table>
Proposed Time to be Devoted
Name Compensation To Company's Business
------------------------- ------------------- -----------------------
<s> <c> <c>
Marieke Oudejans (1) 100% (to 4/01)
Greg Schmick 2,000/mo(4) 100% (from 4/01)
Maurice Schelvis -0- (2) 50%
Eugene Larabie -0- (3) none
Robert E. Johnson -0- (3) none
Jan Pranger -0- none
</table>
(1) The Company’s previous plan to issue 1,100,000 shares of its common stock
to Ms. Oudejans for services rendered to April 2001 is still under
consideration. The Board of Directors has made no decision regarding the
proposed issuance. Ms. Oudejans was compensated at the rate of $87,602 per
year beginning in 2000 which terminated with her employment in April 2001 but
did not draw a salary from the incorporation of the Company to January 1, 2001.
(2) The Board of Directors expects to compensate Maurice Schelvis with common
stock for services provided to the Company in an amount not yet determined.
(3) The Company plans to issue shares of its common stock, as well as options,
to this person for services provided to the Company.
(4) Mr. Schmick's stock option package is yet to be determined.
The Company's Board of Directors may increase the compensation paid to the
Company's officers depending upon the results of the Company's future
operations.
<page> 34
MANAGEMENT OF ENVIRONMENTAL SOLUTIONS & TECHNOLOGY CORP.
FORM 10-KSB
For the year ended December 31, 2001
As of December 31, 2001 the Company had granted options for the purchase
of the Company's common stock to the following persons:
<table>
Shares Subject Option Expiration
Name To Option Exercise Price Date
-------------------- ---------------- -------------- ------------------
<s> <c> <c> <c>
Marieke Oudejans 100,000/yr $0.50 five years from
Date of issue
Maurice Schelvis 100,000/yr $0.50 five years from
Date of issue
Frank J. Janssen 50,000 $0.50 July 31, 2003
Afris Holding B.V. 50,000 $0.50 July 31, 2003
</table>
<table>
Value of
Unexercised
Name Shares No. of Securities In-The-Money
Acquired Value Underlying Options/
on Exercise Realized Unexercised options/ SARs at FY-end
SARs and FY-end (dollars)
Exercisable and Exercisable/
Unexercisable Unexercisable
----------------- ------------ -------- -------------------- ---------------
<s> <c> <c> <c> <c>
Marieke Oudejans 0 0 400,000 see footnote 1
Maurice Schelvis 0 0 400,000 see footnote 1
Frank J. Janssen 0 0 50,000/50,000 see footnote 1
Afris Holdings BU 0 0 50,000/50,000 see footnote 1
</table>
The Company is unable to place a value of exercisable or unexercisable
options due to the lack of historical or current market activity. However,
footnote 9 on the Notes to Consolidated Financial Statements represented
compensation costs to operations as follows: 1998 - $865,938; 1999 - $717,900;
2000 - $767,900; 2001 - $725,918.00.
Accounting standards which consider standards for recognition of stock in
stock options for purposes of compensating directors, officers, employees or
advisers, are found in Statement of Financial Accounting Standards number 123
(SFAS 123). In accordance with SFAS 123, the options and/or stock compensation
given to the individuals mentioned in the last table of item 6 follows: Options
granted to Marieke Oudejans and Maurice Schelvis were deemed compensation for
services rendered for founders efforts, forbearance from collecting wages or
salaries and for compensation for loans or monies advanced. Options to Messrs.
Larabie and Johnson were compensation for more limited activities benefitting
the Company. Afris Holdings, Inc. received stock options pursuant to a request
by Richard Van Bremmell who acted as general manager in 1998-1999 as part of a
salary compensation package. Larabie and Johnson were each given options for
15,000 shares as part of a salary compensation package.
<page> 35
MANAGEMENT OF ENVIRONMENTAL SOLUTIONS & TECHNOLOGY CORP.
FORM 10-KSB
For the year ended December 31, 2001
Item XI - Security Ownership of Certain Beneficial Owners and Management
--------------------------------------------------------------------------------
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS.
The following table sets forth the number of and percentage of outstanding
shares of common stock beneficially owned by the Company's shareholders owning
more than 5% of the Company's common stock as of December 31, 2001. The company
has only one class of common shares and one class of Series A Preferred Shares.
<table>
Shares of
Name and Address Common Stock (1) Percent of Class
-------------------------------- ------------------- ----------------------
<s> <c> <c>
Marieke Oudejans 2,260,000 (2) 29.44%
#68 Willem Van Weldamme LAAN
P.C. 1082 KW
Amsterdam, The Netherlands
Maurice Schelvis 2,010,000 (2) 26.19%
Stadhouderskade 142
1074 BA Amsterdam
The Netherlands
Beneficial holders 4,270,000 55.63%
as a Group (2 persons)
</table>
(1) Does not include shares issuable upon the exercise of options held by the
certain officers. See "Management - Transactions with Affiliates".
SECURITY OWNERSHIP OF CURRENT MANAGEMENT.
The following table sets forth the number and percentage of outstanding shares
of common stock beneficially owned by the Company's officers and directors
as of December 31, 2001. The company has only one class of common shares.
<page> 36
MANAGEMENT OF ENVIRONMENTAL SOLUTIONS & TECHNOLOGY CORP.
FORM 10-KSB
For the year ended December 31, 2001
<table>
Shares of
Name and Address Common Stock (1) Percent of Class
----------------------------------- ------------------- ----------------------
<s> <c> <c>
Greg Schmick President, Director -0- 0.00%
TO Environmental Technology Valley
Laan van Westenenk 501
7334 DT Apeldoorn, The Netherlands
Maurice Schelvis 2,010,000 (2) 26.19%
Vice President, Director
Stadhouderskade 142
1074 BA Amsterdam
The Netherlands
Eugene M. Larabie, Director -0- 0.00%
507-595 Howe St.
Vancouver, British Columbia
Canada V6C 2T5
Robert E. Johnson, Director -0- 0.00%
L1901-1600 Beach Avenue
Vancouver, British Columbia
Canada V6G 7Y6
All Officers and Directors 2,010,000 26.19%
as a Group (4 persons)
</table>
(1) Does not include shares issuable upon the exercise of options held by the
certain officers. See "Management - Transactions with Affiliates".
Item XII - Certain Relationships and Related Transactions
----------------------------------------------------------------
The Company has issued shares of its common stock to the persons, in the
amounts, and for the consideration set forth below:
<table>
Number
Name Date of Shares Consideration
--------------------- ----------- ---------------- --------------------------
<s> <c> <c> <c>
Marieke Oudejans 4-9-98 1,920,000 All of the issued
and out-standing
shares of M.E.S.T., B.V.
Marieke Oudejans 4-08-98 2,100,000 $25 and founder’s services
Maurice Schelvis 3-10-98 250,000 $25 and founder’s services
</table>
An accounting of the loans made by the Company's principals, Marieke
Oudejans and Maurice Schelvis, appear in four related party transactions and
Note 10 "Subsequent Events" which are attached to the consolidated financial
statements for years ending December 31, 2001. Please refer to the Amended
Form 10-SB filed November 15, 2001. The loans, forgiveness of debt and
reconciliation occurred May 15, 2001 and explanations have been made as a part
of the audited accounting.
<page> 37
MANAGEMENT OF ENVIRONMENTAL SOLUTIONS & TECHNOLOGY CORP.
FORM 10-KSB
For the year ended December 31, 2001
In March 1999 Marieke Oudejans transferred 1,760,000 of her shares of the
Company's common stock to Maurice Schelvis in a private transaction. See
Securities Ownership of Certain Beneficial Owners, above.
M.E.S.T., B.V., a Dutch company, had issued previously 2,000 shares of
its common stock to Marieke Oudejans which represented all of the issued and
outstanding stock of M.E.S.T., B.V. At the time of the April 9, 1998
transaction, no attempt was made by M.E.S.T., B.V. to obtain an independent
business appraisal or accounting opinion regarding the value of M.E.S.T., B.V.
M.E.S.T., B.V.'s assets consisted of rights and duties it procured by virtue
of the Licensing Agreement between TNO, MSTec, B.V. and M.E.S.T., B.V.
with its attendant rights, duties and liabilities. The value of the
proprietary dewatering system was not the subject of an independent business
valuation or independent audit. Consequently, there were no representations
made to shareholders, officers or directors of the Company in regards to
the sale/acquisition of M.E.S.T., B.V. shares.
Item XIII - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits required by Item 601
(2) Plan of Acquisition, reorganization, arrangement,
liquidation or succession. (2)
(3)(i) Articles of Incorporation (2)
(3)(ii) Bylaws. (2)
(4) Instruments defining the rights of security holders,
including indentures. (2)
(9) Voting trust agreements. (1)
(10) Material contracts. (2)
(11) Statement re: computation of per share earnings. (1)
(13) Annual or quarterly reports, Form 10Q (1)
(16) Letter re: change in certifying accountant. (1)
(18) Letter re: change in accounting principles . (1)
(20) Other documents or statements to security holders. (1)
(21) Subsidiaries of the Registrant. (attached)
(22) Published report regarding matters submitted
to vote of security holders. (1)
(23) Consents of Experts and counsel. (1)
(24) Power of Attorney. (1)
(27) Financial Data Schedule (no longer required) (1)
(99) Additional Exhibits. (1)
(1) These items have either been omitted or are not applicable
(2) Incorporated by reference to previous filing
(b) Reports on Form 8-K:
The company filed no Form(s) 8K during the last quarter of the period covered
by this report.
<page> 38
MANAGEMENT OF ENVIRONMENTAL SOLUTIONS & TECHNOLOGY CORP.
FORM 10-KSB
For the year ended December 31, 2001
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Management of Environmental solutions and Technology, Corp.
-----------------------------------------------------------
(Registrant)
/s/ Greg Schmick
By:-------------------------
Greg Schmick, President
Date: September 11, 2002
------------------
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
/s/ Greg Schmick
By:-------------------------
Greg Schmick, President
Date: September 19, 2002
------------------
This report shall be furnished to security holders after this report has been
filed with the Securities and Exchange Commission on this Form.
<page> 39