U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 3
TO
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS
Under Section 12(b) or 12(g) of
The Securities Exchange Act of 1934
ENVIROKARE TECH, INC.,
a Nevada corporation
(Exact name of registrant as specified in its charter)
NEVADA 880412549
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2470 Chandler, Suite 5, Las Vegas, Nevada 89120
(Address of registrant's principal executive offices) (Zip Code)
702.262.1999
(Registrant's Telephone Number, Including Area Code)
Securities to be registered under Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on which
to be so Registered: Each Class is to be Registered:
- -------------------- -------------------------------
None None
Securities to be registered under Section 12(g) of the Act:
Common Stock, Par Value $.001
- -----------------------------
(Title of Class)
Copies to:
Thomas E. Stepp, Jr.
Stepp & Beauchamp, LLP
1301 Dove Street, Suite 460
Newport Beach, California 92660
949.660.9700
Facsimile: 949.660.9010
Page 1 of 7
<PAGE>
Envirokare Tech, Inc.,
a Nevada corporation
Index to Amendment Number Three to Form 10-SB Registration Statement
Item Number and Caption Page
- ----------------------- ----
2. Plan of Operations 3
13. Financial Statements 6
15. Financial Statements and Exhibits 6
15(a) Index to Financial Statements 6
Financial Statements F-1 through F-10
15(b) Index to Exhibits E-1 through E-4
Signatures 7
2
<PAGE>
Item 2. Plan of Operations
Pallets are base components for most packaging which allows goods to be
transported or warehoused economically by providing a foundation which enables
the use of forklifts and vertical storage. Most commonly associated with a
four-foot square wood platform, pallets are also engineered from other materials
and in varying dimensions. Pallets are key factors in worldwide retail and
industrial distribution. The pallet industry is considered part of the overall
transportation packaging industry and is critical to global commerce. Almost
every item manufactured or processed is shipped or stored on pallets as it is
packaged for distribution. The pallet industry in North America has grown into a
billion dollar business. The industry is characterized by many small, localized,
and/or specialized companies that usually have an operational radius of less
than 100 miles, none of which individually has any appreciable market impact.
The primary industry users of pallets are those that deal in (i) food and
beverages; (ii) paper and fiber; (iii) steel and metal; (iv) automotive; (v)
chemicals and fluid; and (vi) printing.
The Company is currently involved in extensive testing of the Pallet. In the
interests of safety, structural integrity, reliability and cost-effective
production, the Company is currently conducting an in-depth analysis of compound
variables and strengths, extrusion methods and equipment modifications. The
Company plans to conduct further tests to determine the longevity of the Pallet
in comparison to pallets made of other materials. The Company believes that
initial tests indicate that the standard 48" x 40" Pallet will enjoy greater
longevity than the typical hardwood pallet.
The Company believes that the extensive testing has minimized any concerns as to
the Pallet's design or ability to perform. The Company anticipates that within
the next 2 to 3 months it will produce, or cause to be produced, 400 new
prototypes of the Pallet for testing by prospective customers.
The Company is negotiating with an international press and mold manufacturer to
supply the appropriate mold for the Company's production facility. The Company
anticipates that its new molded-rubber technology may capture a small but
significant portion of the North American pallet market during the next few
years. The Company believes that there is an increasing demand for alternate
material pallets.
The storage of used tires has become an ever-growing problem. Some governments
have instituted programs to encourage the use of used tire rubber. One such
jurisdiction is the province of British Columbia, Canada which offers grants to
companies that find uses for used tires. Millions of scrap tires are being
recycled annually in Canada. Only two Canadian provinces, Ontario and
Newfoundland, do not have stewardship programs for scrap tires. Various
jurisdictions are also enacting laws aimed at addressing the problem of waste
tire storage. California has fines anywhere from $500 to $10,000 per day for
each violation of its tire storage laws, including imprisonment in some
circumstances. California, as other jurisdictions, supplements the cost of
storing used tires by charging consumers a $.25 per tire fee. Moreover, Arizona
passed a bill in early 1998 that provides incentives for tire recycling.
Oklahoma and Colorado have also passed similar laws. In total, 48 states have
laws regarding scrap tire management. The Company believes that the environment
is appropriate for profitable rubber recycling.
The Company anticipates that its manufacturing processes will produce
significant amounts of crumb rubber, differing in grade and price per pound. The
Company anticipates that the crumb rubber not used to manufacture the Pallet
will be sold as crumb rubber. The major producers of crumb rubber in the United
States are Baker Rubber, EnviroTire, Rouse Rubber and Recovery Technologies. The
Company anticipates that with the cost of rubber increasing during the past five
years, the demand for crumb rubber will increase. Crumb rubber is currently used
for the construction of athletic fields, roadfill, landfill, filler in new
tires, engineering applications and agricultural applications. The Company
anticipates that new and innovative uses for the world's excess of discarded
tires will continue to be developed.
The Company recognizes that there are certain risks beyond its control that may
have a material effect on the Company's business. Some of the possible risks are
(i) the price of natural and synthetic rubber will decline to crumb rubber
levels, thereby eliminating the need for crumb rubber; (ii) government
legislation prohibiting the use of crumb rubber in all products; (iii) market
resistance to recycled materials; (iv) introduction of new, more sophisticated,
methods of tire recycling equipment rendering the Company's system obsolete; and
(v) many more tire recycling companies entering the market lowering the price of
crumb rubber and eliminating tipping fees.
3
<PAGE>
The Company has proceeded as plan in the ongoing development of the Pallet. The
Company's focus has been to ensure that the Pallet meets or exceeds current
market standards and that the Pallet will be superior in performance and cost
effective. The Company's focus on the safety, structural integrity, reliability,
and cost effectiveness of the Pallet has led to in depth analysis of compound
variables and strengths, excrusion methods and equipment modifications.
Management believes that after extensive studies and refinement, it has
minimized or completely eliminated any concerns as to the Pallet's design and
ability to perform. The Company plans to conduct further testing which it
believes will provide information as to the longevity of the Pallet compared to
other materials and provide marketing strategies for the Company. Analysis to
date indicate that the standard 48" x 40" pallet will surpass current hardware
pallet abilities and will be a strong competitor in the pallet industry
worldwide. The Company believes that final testing reports will clearly define
product reliability over time.
Initial prototypes distributed by the original Pallet Company have been changed
and refined; therefore, the Company anticipates it will produce 400 new
prototypes for on-site testing for prospective customers. The Company believes
that after a final engineering analysis report is completed, production should
proceed within 6-8 weeks. Although the Company's decision to further test the
Pallet has set back the production dates, the Company is now satisfied that the
Pallet will stand on its own integrity upon production, and that the Company has
minimized or eliminated any concerns as to the Pallet's design and ability to
perform. The Company, in order to meet its requisite budget, is currently
holding negotiations with various investors. With proper investment, the Company
now believes that it is at the point where it can move forward with its
production and marketing plans.
The Company has been in the development stage since its inception on June 15,
1998. Although the Company holds significant assets, realization of those assets
is dependent upon the Company's ability to meet future financing requirements,
and the success of future manufacturing operations. For the fiscal year ending
December 31, 1998, the Company had total assets of $39,958, including cash of
$2,388. For the six months ended June 30, 1999, the Company had total assets of
$48,579, including cash of $4,835. The Company's net loss for the period ending
December 1998 was $34,427. The Company's net loss for the six months ending June
30, 1999 was a total of $99,248, which occurred primarily as a result of an
increase in general and administrative expenses, listing expenses, filing fees,
and legal and accounting fees. The Company remains in the development stage and
as of June 30, 1999, has not realized any significant revenues from its planned
operations. At December 31, 1998, current liabilities exceeded current assets by
$61,267. At June 30, 1999, current liabilities exceeded current assets by
$98,232. From June 15, 1998 (inception) through June 30, 1999, the Company has
raised approximately $115,000 as a result of the sale of its common stock and
loans made to the Company, a significant portion of which has been paid out as
operating expenses.
The Company, being a developmental stage enterprise, is currently putting
technology in place which will, if successful, mitigate the net loss experienced
by the Company. The Company is reviewing its options to raise substantial equity
capital. Management has proceeded as planned in the ongoing development of the
Pallet. In depth analysis of compounds, excrusion methods, and equipment
modifications have been studied and refined, as have initial prototypes of the
Pallet. The Company anticipates production of commercial quantities of the
Pallet will proceed within 6-8 weeks after the final engineering report. In
order to meet its requisite budget, management has held and continues to conduct
negotiations with investors. The Company hopes that these negotiations will
result in significant investment income for the Company. To achieve and maintain
the competitiveness of its products and to conduct costly and time-consuming
production and development, the Company may be required to raise substantial
funds in addition to the funds already raised through the issuance of the
Company's shares. The Company's forecast for the period of time through which
its financial resources will be adequate to support its operations is a
forward-looking statement that involves risks and uncertainties, and actual
results could fail as a result of a number of factors. The Company anticipates
that it will need to raise additional capital in order to develop, promote,
produce and distribute its products. Such additional capital may be raised
through additional public or private financings, as well as borrowings and other
resources.
There can be no assurance that additional funding will be available under
favorable terms, if at all. If adequate funds are not available, the Company may
be required to curtail operations significantly or to obtain funds through
entering into arrangements with collaborative partners or others that may
require the Company to relinquish rights to certain products that the Company
would not otherwise relinquish. However, the Company believes that it is poised
to
4
<PAGE>
maintain its long-term liquidity. Management of the Company believes that its
plans described above will enable it to meet its obligations for a period of at
least twelve (12) months from June 30, 1999. The Company believes that within a
short period of time, it can begin manufacturing and marketing commercial
quantities of the Pallet. Coupled with the further issuance of common stock of
the Company, the Company believes it can significantly improve its long-term
liquidity.
Impact of the Year 2000. The Company anticipates that the Year 2000 ("Y2K")
could impact the business of the Company. Many business software programs use
only the last two digits to indicate the applicable year. Unless these programs
are modified, computers running time-sensitive software may be unable to
distinguish between the year 1900 and the year 2000, resulting in system
failures or miscalculations and disruptions of operations, including, among
other things, a temporary inability to process transactions or engage in other
normal business activities. Many Y2K problems might not be readily apparent when
they first occur, but instead could imperceptibly degrade technology systems and
corrupt information stored in computerized databases, in some cases before
January 1, 2000.
In order to improve operating performance and meet Y2K compliance, the Company
anticipates it will undertake a number of significant computer systems
initiatives. The Company has determined that the incremental cost of ensuring
that its computer systems are Y2K compliant is not expected to have a material
adverse impact on the Company. The Company anticipates completing a preliminary
assessment of each of its operations and their Y2K readiness and feels that the
appropriate actions will be taken. The Company has determined that, with
modifications to existing software and conversions to new computer systems, the
Y2K issue will not pose significant operational problems for its computer
systems. The Company recognizes, however, that if such modifications are not
completed, the Y2K issue could have a material impact on the operations of the
Company. The Company has determined that, at this time, none of the Company's
production processes or technology systems are computer controlled. However, the
Company does recognize that its manufacturing processes will eventually be,
either partially or completely, controlled by computers. The Company anticipates
that the computer processes it utilizes will be Y2K compliant. The Company
anticipates the initiation of formal communications with a number of its
prospective suppliers to determine the extent to which the Company's computer
systems are vulnerable to those third parties' failure to remedy their own Y2K
issues, and anticipates it will initiate similar communications with prospective
customers in 1999. There is no guarantee that the systems of other companies on
which the Company's computer systems rely will be timely converted and will not
have an adverse effect on the Company's computer systems.
Currency and Cash. As a point of clarification, as used in this Registration
Statement the word "Dollars" and the symbol "$" means and refers to the currency
of the United States of America, unless otherwise stated. As used in this
Registration Statement the term "CDN$" means and refers to the currency of
Canada, in Canadian dollars. At December 31, 1998, the Company had cash on hand
of $2,388. For the six months ended June 30, 1999, the Company had cash on hand
of $4,835.
Manufacturing and Marketing the Company's Products. The Company anticipates that
it will obtain a majority of the resources necessary for the manufacture of the
Pallet from tire dumps. The Company believes that the manufacturing process will
consume four tires per Pallet.
Initially, the Company will focus on establishing a market niche for the Pallet.
Until the demand for the Pallet meets the Company's production of crumb rubber,
the Company anticipates that it will sell the excess crumb rubber to various
manufacturers in need of such a product. The Company hopes that within 4 years
it will be producing 1.25 million pallets a year, with an initial focus on
distribution in western North America, eventually expanding into the central and
eastern regions.
The Company anticipates that it will initially target industries which
traditionally use pallets to transport their products, such as (i) brick; (ii)
stone; (iii) beverage; (iv) automotive; and (v) construction. Initial marketing
efforts will be concentrated in (i) public demonstration samples sent to large
users; (ii) trade shows and testimonials of actual customers; (iii) promotion
with environmental and recycling groups; (iv) press releases; and (v) extensive
research and development for other applications.
Proposed Production Facilities. The majority of the Company's manufacturing
activities will be completed on site by the use of removable prefabricated crumb
rubber and pallet molding plants; thereby conserving the fuel usually expended
moving the resources from one place to another.
5
<PAGE>
Item 13. Financial Statements
Copies of the Company's Unaudited Financial Statements for the six month period
ended June 30, 1999, as required by Item 310(g) of Regulation S-B are filed with
this Amendment Number Three to the Company's Registration Statement Form 10-SB.
Item 15. Financial Statements and Exhibits
(a) Index to Financial Statements. Page
----
Independent Auditor's Report for Fiscal
Year ended December 31, 1998 F-1
Unaudited Statements of Financial Position
as at June 30, 1999 F-2
Unaudited Statements of Operations and Accumulated
Deficit for Period from June 15, 1998 (inception) to F-3
December 31, 1998, for Period from June 15, 1998 (inception)
to June 30, 1999 and for the six-month Period Ended June 30, 1999
Unaudited Statements of Cash Flows for Period from
June 15, 1998 (inception) to June 30, 1999 F-4
Unaudited Statements of Stockholders' Equity For Period
from June 15, 1998 (inception) to June 30, 1999 F-5
Notes to Financial Statements F-6 through F-10
(b) Index to Exhibits
Financial Data Schedule for
Period From June 15, 1998 (inception)
to December 31, 1998 E-1 through E-2
Financial Data Schedule for
Period From January 1, 1999
to June 30, 1999 E-3 through E-4
6
<PAGE>
SIGNATURES
In accordance with the provisions of Section 12 of the Securities Exchange
Act of 1934, the Company has duly caused this Amendment No. 3 to Registration
Statement on Form 10-SB to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Henderson, Nevada, on October 25, 1999.
Envirokare Tech, Inc.,
a Nevada corporation
By: /s/ Charles W. Thomas
------------------------
Charles W. Thomas
Its: President
7
<PAGE>
[LETTERHEAD OF WILLIAMS & WEBSTER, P.S.]
Board of Directors
Envirokare Tech, Inc.
2470 Chandler, Suite 5
Las Vegas, Nevada 89120
Independent Auditor's Report
We have audited the accompanying balance sheet of Envirokare Tech, Inc. (a
development stage company) as of December 31, 1998 and the related statements of
operations and accumulated deficit, stockholders' equity and cash flows for the
period from June 15, 1998 (inception) to December 31, 1998. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Envirokare Tech, Inc. as of
December 31, 1998, and the results of its operations and its cash flows for the
period from June 15, 1993 (inception) to December 31, 1998, in conformity with
generally accepted accounting principles.
As discussed in Note 2, the Company has been in the development stage since its
inception on June 15, 1998. 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. Management's plans regarding those matters
also are described in Note 2. These factors raise substantial doubt about the
Company's ability to continue as a going concern. The financial statements do
not include any adjustments that might result from the outcome of this
uncertainty.
/s/ Williams & Webster, P.S.
Williams & Webster, P.S.
Spokane, Washington
February 26, 1999
F-1
<PAGE>
ENVIROKARE TECH, INC.
(A Development Stage Company)
STATEMENTS OF FINANCIAL POSITION
June 30, 1999
( Unaudited - Prepared By Management )
<TABLE>
<CAPTION>
December 31, June 30,
1998 1999
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 2,388 $ 4,835
Prepaid expenses 730 3,387
--------- ---------
TOTAL CURRENT ASSETS 3,118 8,222
--------- ---------
PROPERTY AND EQUIPMENT
Furniture and fixtures 1,014 1,014
Office equipment 2,645 6,488
Less accumulated depreciation (149) (475)
--------- ---------
TOTAL PROPERTY AND EQUIPMENT 3,510 7,027
--------- ---------
OTHER ASSETS
Patent costs acquired from related party 33,330 33,330
--------- ---------
TOTAL OTHER ASSETS 33,330 33,330
--------- ---------
TOTAL ASSETS $ 39,958 $ 48,579
========= =========
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Reimbursement due $ 1,847 $ 1,847
Consulting fees payable, related party -- 21,000
Consulting fees payable -- 3,165
Accrued interest, related party 573 3,670
Accrued interest -- 307
Notes payable -- 14,500
Notes payable, related party - short term 61,965 61,965
--------- ---------
TOTAL CURRENT LIABILITIES 64,385 106,454
--------- ---------
COMMITMENTS AND CONTINGENCIES -- --
--------- ---------
STOCKHOLDERS' EQUITY
Common stock, 200,000,000 shares authorized, $0.001 par value;
5,000,000 and 5,076,540 shares issued and outstanding
at December 31, 1998 and June 30, 1999, respectively 5,000 5,077
Additional paid-in capital 5,000 43,193
Subscriptions received -- 27,530
Accumulated deficit during developmental stage (34,427) (133,675)
--------- ---------
TOTAL STOCKHOLDERS' EQUITY (24,427) (57,875)
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 39,958 $ 48,579
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-2
<PAGE>
ENVIROKARE TECH, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS AND ACCUMULATED
DEFICIT For the Period from inception on June
15, 1998 to June 30, 1999
( Unaudited - Prepared By Management )
<TABLE>
<CAPTION>
Period from Period from
June 15, 1998 Six months June 15, 1998
(Inception) to Ended (Inception) to
December 31 June 30 June 30
1998 1999 1999
(Unaudited) (Unaudited)
<S> <C> <C> <C>
REVENUES $ -- $ -- $ --
----------- ----------- -----------
EXPENSES
Consulting fees, related party 10,000 30,000 40,000
Other consulting fees 6,700 10,500 17,200
Rent 2,920 5,874 8,794
General and administrative 4,085 14,424 18,509
Transfer agent fees 1,353 -- 1,353
Depreciation and amortization 149 326 475
Interest - notes payable 573 3,404 3,977
Listing expenses and filing fees 8,647 15,936 24,583
Legal and accounting -- 18,784 18,784
----------- ----------- -----------
TOTAL EXPENSES 34,427 99,248 133,675
NET LOSS FROM OPERATIONS (34,427) (99,248) (133,675)
ACCUMULATED DEFICIT, BEGINNING BALANCE -- (34,427) --
----------- ----------- -----------
ACCUMULATED DEFICIT, ENDING BALANCE $ (34,427) $ (133,675) $ (133,675)
=========== =========== ===========
NET LOSS PER COMMON SHARE $ (0) $ (0) $ (0)
=========== =========== ===========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 5,000,000 5,044,648 5,021,431
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
ENVIROKARE TECH, INC.
(A Development Stage Company)
STATEMENTS OF CASHFLOWS For
the Period from inception on June 15, 1998 to June 30, 1999
( Unaudited - Prepared By Management )
<TABLE>
<CAPTION>
Period from Period from
June 15, 1998 Six months June 15, 1998
(Inception) to Ended (Inception) to
December 31 June 30 June 30
1998 1999 1999
(Unaudited) (Unaudited)
<S> <C> <C> <C>
Cash flows from operating activities
Net loss $ (34,427) $ (99,248) $ (133,675)
Adjustments to reconcile net loss
to net cash used by operating activities:
Depreciation and amortization 149 326 475
Increase in prepaid expenses (730) (2,657) (3,387)
increase in accrued interest, to related party 573 3,097 3,670
Expenses paid by note payable to related party 2,870 -- 2,870
Increase in accrued expenses -- 3,472 3,472
Increase in accrued expenses to related party -- 21,000 21,000
------------- ------------- -------------
Net cash used by operating activities (31,565) (74,010) (105,575)
------------- ------------- -------------
Cash flows from investing activities:
Equipment (1,047) (3,843) (4,890)
------------- ------------- -------------
Net cash used in investing activities (1,047) (3,843) (4,890)
------------- ------------- -------------
Cash flows from financing activities:
Proceeds from sales and subscriptions of common stock 10,000 65,800 75,800
Proceeds from issuance of notes payable to related party 25,000 -- 25,000
Proceeds from issuance of notes payable -- 14,500 14,500
------------- ------------- -------------
Net cash provided by financing activities 35,000 80,300 115,300
------------- ------------- -------------
Increase in cash 2,388 2,447 4,835
------------- ------------- -------------
Cash, beginning of period -- 2,388 --
------------- ------------- -------------
Cash, end of period $ 2,388 $ 4,835 $ 4,835
============= ============= =============
Interest paid -- -- --
============= ============= =============
Income taxes paid -- -- --
============= ============= =============
NON-CASH TRANSACTIONS
Note issued for purchase of equipment and operating expenses
to related party $ 3,635 $ -- $ 3,635
Note issued for pending patent to related party $ 33,330 $ -- $ 33,330
Reimbursement due for purchase of equipment $ 1,847 $ -- $ 1,847
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
ENVIROKARE TECH, INC.
(A Development Stage Company)
STATEMENTS OF STOCKHOLDERS' EQUITY
For the Period from inception on June 15, 1998 to June 30, 1999
( Unaudited - Prepared By Management )
<TABLE>
<CAPTION>
Common Stock
-------------------------- Total
Number Additional Subscriptions Accumulated Stockholders'
of Shares Amount Paid-in Capital Received Deficit Equity
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Issuance of common stock in June, 1998:
For cash at $.002 per share 5,000,000 $ 5,000 $ 5,000 $ -- $ -- $ 10,000
Loss for period ending, December 31, 1998 (34,427) (34,427)
---------- ---------- ---------- ---------- ---------- ----------
Balance
December 31, 1998 5,000,000 5,000 5,000 -- (34,427) (24,427)
Issuance of common stock in March, 1999:
For cash at $.50 per share 76,540 77 38,193 38,270
Subscriptions received in May, 1999:
For cash at $1.00 per share 27,530 27,530
Loss for period ending, June 30, 1999 (99,248) (99,248)
---------- ---------- ---------- ---------- ---------- ----------
Balance
June 30, 1999 (Unaudited) 5,076,540 $ 5,077 $ 43,193 $ 27,530 $ (133,675) $ (57,875)
========== ========== ========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
ENVIROKARE TECH, INC.
(A Development Stage Company)
Notes to the Financial Statements
June 30, 1999
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
Envirokare Tech, Inc., (hereinafter "the Company", was incorporated in June 1998
under the laws of the State of Nevada. In December 1998, the Company acquired
the property, assets and undertakings of a business manufacturing and developing
a rubber mold technology and rights to a pending patent for the development of a
pallet made of recycled materials. The Company is currently developing marketing
and manufacturing plans for the products acquired. The Company maintains an
office in Las Vegas, Nevada.
The Company is in development stage, and as of June 30, 1999 had not realized
any significant revenues from its planned operations.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
These policies conform to generally accepted accounting principles and have been
consistently applied in the preparation of the financial statements.
Development Stage Activities
The Company has been in the development stage since its formation in June 1998.
It is primarily engaged in the refinement of manufacturing processes for the
development of pallets made of recycled materials.
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 incurred a net
loss of $34,427 for 1998 and a net loss of $99,248 for the first half of 1999.
At December 31, 1998, current liabilities exceeded current assets by $61,267 and
at June 30, 1999, current liabilities exceeded current assets by $98,232. The
Company, being a development stage enterprise, is currently putting technology
in place which will, if successful, mitigate these factors which raise
substantial doubt about the Company's ability to continue as a going concern.
The Company is currently reviewing its options to raise substantial equity
capital. Management has proceeded as planned in the ongoing development of the
recycled rubber pallet. In depth testing and analysis of compounds, extrusion
method and equipment modifications have been studied and refined. In order to
meet its requisite budge, management has held and continues to hold very strong
negotiations with serious investors, which is expected to close pending test
results.
Accounting Method
The Company's financial statements are prepared using the accrual method of
accounting.
Loss Per Share
Loss per share was computed by dividing the net loss by the weighted average
number of shares outstanding during the period. The weighted average number of
shares was calculated by taking the number of shares outstanding and weighing
them by the amount of time that they were outstanding.
F-6
<PAGE>
ENVIROKARE TECH, INC.
(A Development Stage Company)
Notes to the Financial Statements
June 30, 1999
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Cash and Cash Equivalents
For purposes of the Statement of Cash Flows, the Company considers all
short-term debt securities purchased with a maturity of three months or less to
be cash equivalents.
Provision for Taxes
At December 31, 1998 and June 30, 1999, the Company had net operating losses of
approximately $34,427 and $97,708, respectively. No provision for taxes or tax
benefit has been reported in the financial statements, as there is not a
measurable means of assessing future profits of losses.
Use of Estimates
The process of preparing financial statements in conformity with generally
accepted accounting principles 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 estimates.
Year 2000 Issues
Like other companies, Envirokare Tech, Inc. could be adversely affected if the
computer systems the Company, its suppliers or customers use do not properly
process and calculate date-related information and data from the period
surrounding and including January 1, 2000. This is commonly known as the "Year
2000" issue. Additionally, this issue could impact non-computer systems and
devices such as production equipment and elevators, etc. At this time, because
of the complexities involved in the issue, management cannot provide assurance
that the Year 2000 issue will not have an impact on the Company's operations.
Reverse Stock Split
During 1999, the Board of Directors authorized a reverse stock split. All
references in the accompanying financial statements to the number of common
shares and per-share amounts for 1998 have been restated to reflect the reverse
stock split.
NOTE 3 - PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is provided using the
straight line method over the estimated useful lives of the assets. The useful
lives of property, plant and equipment for purposes of computing depreciation
are five and seven years.
The following is a summary of property, equipment and accumulated depreciation.
<TABLE>
<CAPTION>
December Accumulated June Accumulated
31, 1998 Depreciation through 30, 1999 Depreciation through
Cost December 31, 1998 Cost June 30, 1999
<S> <C> <C> <C> <C>
Furniture and Fixtures $1,014 $ 50 $1,014 $130
Office Equipment 2,645 99 6,488 345
-------------------------------------------------------------------------------
$3,659 $149 $7,502 $475
===============================================================================
</TABLE>
F-7
<PAGE>
ENVIROKARE TECH, INC.
(A Development Stage Company)
Notes to the Financial Statements
June 30, 1999
NOTE 4 - INTANGIBLE ASSETS
The amortization of patent costs will begin when final patents are granted. If
the Company does not obtain the patent, these costs of acquiring the patent
rights from its originator will be charged to operations.
NOTE 5 - DETAILS OF SHORT-TERM DEBT
Reimbursement due, in the amount of $ 1,847, are monies owing to Timothy Zuch
for gift certificates provided to the Company, which were deducted from the
purchase price of computer equipment. This amount was not invoiced, and
therefore was not included in the Note Payable for $ 33,330, dated December 15,
1998 payable to Real Morel.
Short-term notes payable at June 30, 1999 of $76,465 consist of unsecured notes
bearing 10% for Real Morel, 5% for Robert Davidson, and 5% for Red Dawn. On
September 2, 1999 the note payable to Robert Davidson was repaid in full
including accrued interest (See Notes 4 and 7).
<TABLE>
<CAPTION>
Interest as of
Date Description Principal June 30, 1999
- --------- -------------------------- ------------------ -------------
<S> <C> <C> <C>
8/18/98 Demand promissory note $ 3,635 $ 316
Payable to Real Morel
9/24/98 Demand promissory note 5,000 384
Payable to Real Morel
11/16/98 Demand promissory note 10,000 622
Payable to Real Morel
12/15/98 Demand promissory note 33,330 1,808
Payable to Real Morel
12/16/98 Demand promissory note 10,000 540
Payable to Real Morel
1/19/99 Note payable to 12,500 279
Red Dawn
3/19/99 Note payable to 2,000 28
-------- ------
Robert Davidson
Totals as of June 30, 1999 $ 76,465 $3,977
======== ======
</TABLE>
Short-term notes payable at December 31, 1998 of $61,965 consist of unsecured
notes bearing 10% interest from a related party (See Notes 4 and 7).
<TABLE>
<CAPTION>
Interest as of
Date Description Principal December 31, 1998
- --------- -------------------------- ------------------ -----------------
<S> <C> <C> <C>
8/18/98 Demand promissory note $ 3,635 $ 140
Payable to Real Morel
9/24/98 Demand promissory note 5,000 132
Payable to Real Morel
11/16/98 Demand promissory note 10,000 123
Payable to Real Morel
12/15/98 Demand promissory note 33,330 137
Payable to Real Morel
</TABLE>
F-8
<PAGE>
ENVIROKARE TECH, INC.
(A Development Stage Company)
Notes to the Financial Statements
June 30, 1999
NOTE 5 - DETAILS OF SHORT-TERM DEBT (CONTINUED)
12/16/98 Demand promissory note 10,000 41
------- -------
Payable to Real Morel
Totals as of June 30, 1999 $61,965 $ 573
======= =======
NOTE 6 - COMMON STOCK
Upon incorporation, 5,000,000 shares of common stock were sold at $.002 per
share, under Regulation D, Rule 504. At year's end, the stock was held by 30
shareholders, none of whom held in excess of ten percent of the stock.
As of June 30, 1999, 5,076,540, shares of common stock were issued and
outstanding and 27,530 common shares were to be issued.
On February 22, 1999, the Board of Directors authorized a 2-for-1 reverse stock
split of the Company's $.001 par value common stock. As a result of the reverse
split, 5,000,000 shares were cancelled and additional paid-in capital was
increased by $5,000. The financial statements have been adjusted to reflect the
reverse stock split as 5,000,000 shares issued at $.002. All references in the
accompanying financial statements to the number of common shares and per-share
amounts for 1998 have been restated to reflect the reverse stock split.
NOTE 7 - RELATED PARTIES
Madelyn Thomas, who received $10,000 in consulting fees under the terms of an
ongoing contract as of December 31, 1998 and an additional $9,000 (with $21,000
more accrued) as of June 30, 1999 (as described in Note 7) is the wife of the
president of the Company, Charles W. Thomas.
NOTE 8 - COMMITMENTS AND CONTINGENCIES
The Company entered into consulting contracts with Susan Westfall and Madelyn
Thomas on November 1, 1998 for the purpose of establishing corporate offices on
behalf of the Company. The terms of Ms. Westfall's contract specify that she
will receive $2,500 per month for the term of the contract, which commences
November 1, 1998 and terminates April 30, 1999. The terms of Mrs. Thomas's
contract specify that she will receive $5,000 per month for the term of the
contract, which commences November 1, 1998 and terminates October 31, 1999. Both
contracts provide indemnification against any and all liability and provide for
reimbursement of expenses up to a specified amount. The may be terminated upon
thirty days written notice by either party. On June 1, 1999, Madelyn Thomas,
served the Company 30 days notice, to terminate her consulting contract, to be
effective at month's end.
The Company entered into a lease for office space for the period of thirty-six
months beginning October 1, 1998. Future annual minimum lease payments for the
term of the lease are as follows for the years ending December 31:
1999 $ 8,862
2000 $ 9,276
2001 $ 7,200
F-9
<PAGE>
ENVIROKARE TECH, INC.
(A Development Stage Company)
Notes to the Financial Statements
June 30, 1999
NOTE 9 - SUBSEQUENT EVENTS
On April 1, 1999, the Company entered into a lease for office space for the
period of twelve months beginning April 1, 1999. As of July 31, 1999, the
Company and the landlord mutually agreed to cancel the lease without penalty.
The Company has retained Akron Rubber Development Laboratory of Akron, Ohio to
test the composite for creep factor and life expectancy. The Company expects
test results to greatly exceed minimum industry standards. A first production
run of 400 to 500 pallets is expected over the next few months to be integrated
into various potential customers for on site testing purposes.
F-10
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JUN-15-1998
<PERIOD-END> DEC-31-1998
<CASH> 2,398
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,118
<PP&E> 3,659
<DEPRECIATION> (149)
<TOTAL-ASSETS> 39,958
<CURRENT-LIABILITIES> 64,385
<BONDS> 0
0
0
<COMMON> 5,000
<OTHER-SE> (29,427)
<TOTAL-LIABILITY-AND-EQUITY> 39,958
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 33,854
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 573
<INCOME-PRETAX> (34,427)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (34,427)
<EPS-BASIC> (0.007)
<EPS-DILUTED> (0.007)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 4,835
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 8,222
<PP&E> 7,502
<DEPRECIATION> (475)
<TOTAL-ASSETS> 48,579
<CURRENT-LIABILITIES> 106,454
<BONDS> 0
0
0
<COMMON> 5,077
<OTHER-SE> (62,952)
<TOTAL-LIABILITY-AND-EQUITY> 48,579
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 95,844
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,404
<INCOME-PRETAX> (99,248)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (99,248)
<EPS-BASIC> (0.20)
<EPS-DILUTED> (0.20)
</TABLE>
