U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(MARK ONE)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE TRANSITION PERIOD FROM ______________ TO ______________
COMMISSION FILE NUMBER:
ENVIROKARE TECH, INC.
(Exact name of small business issuer as specified in its charter)
NEVADA 88-0412549
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Classification Identification No.)
incorporation or Code Number)
organization)
2470 Chandler, Suite 5, Las Vegas, Nevada 89120
(Address of principal executive offices) (Zip Code)
(702) 262-1999
(Issuer's Telephone Number, including Area Code)
Thomas E. Stepp, Jr.
Stepp & Beauchamp LLP
1301 Dove Street, Suite 460
Newport Beach, California 92660
Telephone: 949.660.9700
Facsimile: 949.660.9010
(Name, Address and Telephone Number of Agent for Service)
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. [ ] Yes [ ]
No
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practical date. As of September 30, 1999, there were
5,141,070 shares of the issuer's $.001 par value common stock issued and
outstanding.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
ENVIROKARE TECH, INC.
(A Development Stage Company)
STATEMENTS OF FINANCIAL POSITION
September 30, 1999
<TABLE>
<CAPTION>
December 31, September 30,
1998 1999
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 2,388 $ 203,872
Retainers -- 14,031
Travel advance -- 9,108
Prepaid expenses 730 --
--------- ---------
TOTAL CURRENT ASSETS 3,118 227,011
--------- ---------
PROPERTY AND EQUIPMENT
Furniture and fixtures 1,014 1,014
Office equipment 2,645 7,238
Less accumulated depreciation (149) (638)
--------- ---------
TOTAL PROPERTY AND EQUIPMENT 3,510 7,614
--------- ---------
OTHER ASSETS
Patent costs acquired from related party 33,330 33,330
--------- ---------
TOTAL OTHER ASSETS 33,330 33,330
--------- ---------
TOTAL ASSETS $ 39,958 $ 267,955
========= =========
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ -- $ 1,959
Reimbursement due 1,847 1,847
Consulting fees payable, related party -- 17,000
Consulting fees payable -- 1,300
Accrued interest, related party 573 5,213
Accrued interest -- 462
Notes payable -- 17,500
Notes payable, related party - short term 61,965 61,965
--------- ---------
TOTAL CURRENT LIABILITIES 64,385 107,246
--------- ---------
COMMITMENTS AND CONTINGENCIES -- --
--------- ---------
STOCKHOLDERS' EQUITY
Common stock, 200,000,000 shares authorized, $0.001 par value;
5,000,000 and 5,141,070 shares issued and outstanding
at December 31, 1998 and September 30, 1999, respectively 5,000 5,142
Additional paid-in capital 5,000 107,658
Subscriptions received -- 250,000
Accumulated deficit during developmental stage (34,427) (202,091)
--------- ---------
TOTAL STOCKHOLDERS' EQUITY (24,427) 160,709
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 39,958 $ 267,955
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements
<PAGE>
ENVIROKARE TECH, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
For the Period from inception on June 15,
1998 to September 30, 1999
<TABLE>
<CAPTION>
Period from
Period from Nine months June 15, 1998
June 15, 1998 Ended (Inception) to
(Inception) to September 30 September 30
December 31 1999 1999
1998 (Unaudited) (Unaudited)
<S> <C> <C> <C>
REVENUES $ -- $ -- $ --
----------- ----------- -----------
EXPENSES
Research and development -- 7,350 7,350
Consulting fees, related party 10,000 38,208 48,208
Other consulting fees 6,700 27,695 34,395
Rent 2,920 8,607 11,527
General and administrative 4,085 36,630 40,715
Transfer agent fees 1,353 -- 1,353
Depreciation and amortization 149 489 638
Interest - notes payable 573 5,144 5,717
Listing expenses and filing fees 8,647 15,936 24,583
Legal and accounting -- 27,605 27,605
----------- ----------- -----------
TOTAL EXPENSES 34,427 167,664 202,091
NET LOSS FROM OPERATIONS (34,427) (167,664) (202,091)
ACCUMULATED DEFICIT, BEGINNING BALANCE -- (34,427) --
----------- ----------- -----------
ACCUMULATED DEFICIT, ENDING BALANCE $ (34,427) $ (202,091) $ (202,091)
=========== =========== ===========
NET LOSS PER COMMON SHARE $ (0.01) $ (0.03) $ (0.04)
=========== =========== ===========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 5,000,000 5,066,034 5,038,342
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements
<PAGE>
ENVIROKARE TECH, INC.
(A Development Stage Company)
STATEMENTS OF CASHFLOWS
For the Period from inception on June 15, 1998 to September 30, 1999
<TABLE>
<CAPTION>
Period from Period from
June 15, 1998 Nine months June 15, 1998
(Inception) to Ended (Inception) to
December 31 September 30 September 30
1998 1999 1999
(Unaudited) (Unaudited)
<S> <C> <C> <C>
Cash flows from operating activities
Net loss $ (34,427) $(167,664) $(202,091)
Adjustments to reconcile net loss
to net cash used by operating activities:
Depreciation and amortization 149 489 638
increase in retainer, travel advance, prepaid expenses (730) (22,409) (23,139)
increase in accounts payable -- 1,959 1,959
increase in accrued interest, to related party 573 4,640 5,213
Expenses paid by note payable to related party 2,870 -- 2,870
Increase in accrued expenses -- 1,762 1,762
Increase in accrued expenses to related party -- 17,000 17,000
--------- --------- ---------
Net cash used by operating activities (31,565) (164,223) (195,788)
--------- --------- ---------
Cash flows from investing activities:
Equipment (1,047) (4,593) (5,640)
--------- --------- ---------
Net cash used in investing activities (1,047) (4,593) (5,640)
--------- --------- ---------
Cash flows from financing activities:
Proceeds from sales and subscriptions of common stock 10,000 102,800 112,800
Proceeds from sales and subscriptions of preferred stock -- 250,000 250,000
Proceeds from issuance of notes payable to related party 25,000 -- 25,000
Proceeds from issuance of notes payable -- 17,500 17,500
--------- --------- ---------
Net cash provided by financing activities 35,000 370,300 405,300
--------- --------- ---------
Increase in cash 2,388 201,484 203,872
--------- --------- ---------
Cash, beginning of period -- 2,388 --
--------- --------- ---------
Cash, end of period $ 2,388 $ 203,872 $ 203,872
========= ========= =========
Interest paid $ -- $ 42 $ 42
========= ========= =========
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
<PAGE>
ENVIROKARE TECH, INC.
(A Development Stage Company)
STATEMENTS OF STOCKHOLDERS' EQUITY
For the Period from inception on June 15, 1998 to September 30, 1999
<TABLE>
<CAPTION>
Common Stock
------------------------
Additional Total
Number Paid-in Subscriptions Accumulated Stockholders'
of Shares Amount 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)
Nine Months Ended September 30, 1999 - Unaudited
Issuance of common stock in March, 1999:
For cash at $.50 per share 76,540 77 38,193 38,270
Issuance of common stock in August, 1999:
For cash at $1.00 per share 64,530 65 64,465 64,530
Subscriptions for preferred stock received
in September, 1999:
For cash at $.50 per share 250,000 250,000
Loss for period ending, September 30, 1999 (167,664) (167,664)
---------- ---------- ---------- ---------- ---------- ----------
Balance
September 30, 1999 5,141,070 $ 5,142 $ 107,658 $ 250,000 $ (202,091) $ 160,709
========== ========== ========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements
<PAGE>
ENVIROKARE TECH, INC.
(A Development Stage Company)
Notes to the Financial Statements
September 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 September 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 $167,664 for the first nine months of
1999. At December 31, 1998, current liabilities exceeded current assets by
$61,267 and at September 30, 1999, current assets exceeded current liabilities
by $119,765. 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.
<PAGE>
ENVIROKARE TECH, INC.
(A Development Stage Company)
Notes to the Financial Statements
September 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 September 30, 1999, the Company had net operating
losses of approximately $34,427 and $167,664, 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 September Accumulated
31, 1998 Depreciation through 30, 1999 Depreciation through
Cost December 31, 1998 Cost September 30, 1999
<S> <C> <C> <C> <C>
Furniture and Fixtures $1,014 $ 50 $1,014 $ 170
Office Equipment 2,645 99 7,238 468
----------------------------------------------------------------------
$3,659 $ 149 $8,252 $ 638
======================================================================
</TABLE>
<PAGE>
ENVIROKARE TECH, INC.
(A Development Stage Company)
Notes to the Financial Statements
September 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.
Short-term notes payable at September 30, 1999 of $79,465 consist of unsecured
notes bearing 10% for Real Morel, 5% for Robert Davidson, and 5% for Red Dawn.
(See Notes 4 and 7).
Interest as of
Date Description Principal September 30, 1999
- ---- ----------- --------- ------------------
8/18/98 Demand promissory note $ 3,635 $ 406
Payable to Real Morel
9/24/98 Demand promissory note 5,000 508
Payable to Real Morel
11/16/98 Demand promissory note 10,000 871
Payable to Real Morel
12/15/98 Demand promissory note 33,330 2,639
Payable to Real Morel
12/16/98 Demand promissory note 10,000 789
Payable to Real Morel
1/19/99 Note payable to 12,500 442
Red Dawn
9/2/99 Note payable to 5,000 20
------- ------
Robert Davidson
Totals at September 30, 1999 $79,465 $5,675
======= ======
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).
Interest as of
Date Description Principal December 31, 1998
- ---- ----------- --------- -----------------
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
<PAGE>
ENVIROKARE TECH, INC.
(A Development Stage Company)
Notes to the Financial Statements
September 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 September 30, 1999, 5,141,070, shares of common stock were issued and
outstanding and 500,000 preferred shares were to be issued (See Note 9).
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 $13,000 (with $17,000
more accrued) as of September 30, 1999 (as described in Note 7) is the wife of
the president of the Company, Charles W. Thomas. Jeannie Runnalls, Vice
President of Administration and company director, received $8,208 in consulting
fees for the nine months ended September 30, 1999.
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
<PAGE>
ENVIROKARE TECH, INC.
(A Development Stage Company)
Notes to the Financial Statements
September 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. The Company has
formed an Advisory Board comprised of industry professionals to determine the
market, pricing, and feasibility of its product. Patent Lawyers has been
retained to research, perfect, and file appropriate patent applications.
The Company filed a Certificate of Amendment of its Articles on October 12, 1999
designating 10,000,000 of its shares to Series A convertible preferred stock
with a par value of $0.001. Each preferred stock shall be converted at the
option of the holder into ten common shares within two years of the date of
purchase.
<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operation
Envirokare Tech, Inc., ("Registrant") was incorporated under the laws of the
State of Nevada on June 15, 1998. The executive offices of the Registrant are
located at 2470 Chandler, Suite 5, Las Vegas, Nevada 89120. The Registrant's
telephone number in Nevada is 702.262.1999.
The Registrant was originally incorporated for the purposes of researching and
developing techniques for effective environmental waste management. Although
remaining interested in the waste management field, the Registrant has
nonetheless directed its attention and assets to acquiring existing technology
to allow the Registrant to enter into the pallet manufacturing business.
On or about December 15, 1998, the Registrant purchased certain assets,
including, but not limited to, all of the equipment, rubber molds technology and
the rights to a pending patent for the development of a pallet made of recycled
materials from Real Morel, a businessman operating International Pallet Control
Systems Inc., a private Canadian company ("International Pallet") and The Pallet
Company, a private Canadian company ("Pallet Company"). Mr. Morel accepted a
position with the Registrant as a consultant to provide knowledge and expertise
for the development of the Registrant's anticipated pallet manufacturing
activities.
In or about 1996, the Pallet Company began researching and testing the materials
necessary to manufacture a rubber pallet ("Pallet"). After more than two years
of research, the Pallet Company developed molded rubber technology that creates
a molded pallet by mixing granulated rubber from recycled tires (commonly,
referred to as "crumb rubber") with recycled plastics. The Registrant believes
that the finished product will meet the requirements of most pallet users. The
Pallet Company has enlisted the services of a press and mold manufacturer to
supply the appropriate facilities to manufacture the Pallet.
The Registrant believes that the rubber Pallet has advantages over traditional
wood pallets. The Pallet is designed to resist damage, has a non-slip surface,
convenient hand-holds and is designed to handle large loads when evenly loaded.
Moreover, the Registrant anticipates that it will be able to produce, and sell,
the Pallet at a lower price than plastic or metal pallets. The Pallet is
designed to have a standard 48-inch by 40-inch surface, similar in shape and
size to the conventional wood and plastic pallets. The main advantage of the
Pallet is that it is constructed in part from used tires, a resource that was,
until recently, considered merely another pollution problem. Moreover, when a
Pallet finally wears out, it can be recycled into a new Pallet.
The Registrant is currently involved in extensive testing of the Pallet. In the
interests of safety, structural integrity, reliability and cost-effective
production, the Registrant is currently conducting an in-depth analysis of
compound variables and strengths, extrusion methods and equipment modifications.
The Registrant plans to conduct further tests to determine the longevity of the
Pallet in comparison to pallets made of other materials. The Registrant believes
that initial tests indicate that the standard 48" x 40" Pallet will enjoy
greater longevity than the typical hardwood pallet.
The Registrant believes that the extensive testing has minimized any concerns as
to the Pallet's design or ability to perform. The Registrant 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 Registrant is negotiating with an international press and mold manufacturer
to supply the appropriate mold for the Registrant's production facility. The
Registrant 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 Registrant believes that there is an increasing demand for alternate
material pallets.
2
<PAGE>
The Registrant anticipates that its manufacturing processes will utilize
significant amounts of crumb rubber, differing in grade and price per pound. The
major producers of crumb rubber in the United States are Baker Rubber,
EnviroTire, Rouse Rubber and Recovery Technologies. The Registrant 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, road fill, landfill, filler in new tires,
engineering applications and agricultural applications. The Registrant
anticipates that new and innovative uses for the world's excess of discarded
tires will continue to be developed.
The Registrant recognizes that there are certain risks beyond its control that
may have a material effect on the Registrant'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 Registrant's system obsolete;
and (v) many more tire recycling companies entering the market lowering the
price of crumb rubber and eliminating tipping fees.
The Registrant has proceeded as planned in the ongoing development of the
Pallet. The Registrant'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 Registrant'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, extrusion 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 Registrant 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 Registrant. 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 Registrant 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 Registrant anticipates it will produce 400 new
prototypes for on-site testing for prospective customers. The Registrant
believes that after a final engineering analysis report is completed, production
should proceed within 6-8 weeks. Although the Registrant's decision to further
test the Pallet has set back the production dates, the Registrant is now
satisfied that the Pallet will stand on its own integrity upon production, and
that the Registrant has minimized or eliminated any concerns as to the Pallet's
design and ability to perform. The Registrant, in order to meet its requisite
budget, is currently holding negotiations with various investors. With proper
investment, the Registrant now believes that it is at the point where it can
move forward with its production and marketing plans.
The Registrant, being a developmental stage enterprise, is currently putting
technology in place which will, if successful, mitigate the net loss experienced
by the Registrant. The Registrant 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, extrusion methods, and equipment
modifications have been studied and refined, as have initial prototypes of the
Pallet. The Registrant 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 Registrant hopes that these negotiations will
result in significant investment income for the Registrant. To achieve and
maintain the competitiveness of its products and to conduct costly and
time-consuming production and development, the Registrant may be required to
raise substantial funds in addition to the funds already raised through the
issuance of the Registrant's shares. The Registrant'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 Registrant
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 Registrant
may be required to curtail operations significantly or to obtain funds through
entering
3
<PAGE>
into arrangements with collaborative partners or others that may require the
Registrant to relinquish rights to certain products that the Registrant would
not otherwise relinquish. However, the Registrant believes that it is poised to
maintain its long-term liquidity. Management of the Registrant believes that its
plans described above will enable it to meet its obligations for a period of at
least the next twelve (12) month period. The Registrant 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 Registrant, the Registrant believes it can significantly improve its
long-term liquidity.
Impact of the Year 2000. The Registrant anticipates that the Year 2000 ("Y2K")
could impact the business of the Registrant. 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. At this time, none of Registrant's production processes or
technology systems are computer controlled. However, there is no guarantee that
the systems of other companies on which the Registrant's systems rely will be
timely converted and will not have a material adverse effect on the Registrant's
systems.
Liquidity. The Registrant has been in the development stage since June 15, 1998
(inception). As of September 30, 1999, Registrant has not realized any revenues
from its planned operations. The unaudited Consolidated Statement of Cash Flows
for the nine month period ended September 30, 1999 indicate a net loss of
$167,664, compared to a net loss of $34,427 for the period from June 15, 1998
(inception) to December 31, 1998. The Registrant anticipates that it will
realize positive revenue sometime during the second quarter of 2000 when it
believes it will commence commercial operations. At September 30, 1999, the
Registrant had current assets of $227,011. The majority of which is represented
by $203,872 in cash; $14,031 in retainers; and travel advances of $9,108. The
Registrant's cash resources increased primarily due to the sale of Registrant's
preferred stock (more particularly described in Item 2). At September 30, 1999,
the Registrant had current liabilities of $107,246. At September 30, 1999,
current assets exceeded current liabilities by $119,765. The Registrant is not
aware of any trends, demands, commitments or uncertainties that will result in
the Registrant's liquidity decreasing or increasing in a material way within the
next 12-months.
Currently, the Registrant's only source of liquidity is through the sale of its
common stock and through loans. However, as discussed above, the Registrant
believes it will begin realizing revenue from its operations in or around the
second quarter of 2000. The Registrant believes that such revenue stream will
enable it to maintain and improve its short-term liquidity. Moreover, the
Registrant believes it has the technology, equipment and personnel in place to
maintain its long-term liquidity.
The Registrant believes that its current cash resources are sufficient to
complete the Registrant's start-up operations. However, should the Registrant's
current cash resources prove to be insufficient, it may be required to raise
additional funds or arrange for additional financing over the next 12 months to
adhere to its development schedule. Such additional capital may be received from
additional public or private financings, as well as borrowings and other
resources. If adequate cash is not available, the Registrant may be required to
curtail its operations significantly or to obtain funds by entering into
arrangements with collaborative partners or others that may require the
Registrant to relinquish rights that the Registrant would not otherwise
relinquish. No assurance can be given, however, that the Registrant will have
access to additional cash in the future, or that funds will be available on
acceptable terms to satisfy the cash requirements of the Registrant.
4
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Change in Securities
In or around September, 1999, the Registrant amended its Articles of
Incorporation to authorize 10,000,000 shares of Series A Convertible Preferred
Stock, par value $.001.
In or about August, 1999, the Registrant sold 25,000 shares of its $.001 par
value common stock for $1.00 per share. The shares were issued in reliance upon
the exemption from the registration requirements of the Securities Act of 1933
("Act") specified by the provisions of Section 4(2) of the Act and Rule 506 of
Regulation D promulgated by the Securities and Exchange Commission pursuant to
that Section 4(2). The offering price for the shares was arbitrarily established
by the Registrant and had no relationship to assets, book value, revenues or
other established criteria of value. The Registrant realized proceeds of
$25,000. The proceeds of the offering were used to pay for operating costs and
provide working capital. There were no commissions paid on this transaction.
In or about August, 1999, the Registrant sold 39,350 shares of its $.001 par
value common stock for $1.00 per share. The shares were issued in reliance upon
the exemption from the registration requirements of the Securities Act of 1933
("Act") specified by the provisions of Regulation S promulgated by the
Securities and Exchange Commission. Specifically, the offer and sale was made to
"non-U.S. persons outside the United States of America" as that term is defined
under applicable federal and state securities laws. The offering price for the
shares was arbitrarily established by the Registrant and had no relationship to
assets, book value, revenues or other established criteria of value. The
Registrant realized proceeds of $39,350. The proceeds of the offering were used
to pay for operating costs and provide working capital. There were no
commissions paid on this transaction.
In or about September, 1999, the Registrant sold 500,000 shares of its $.001
Series A Convertible Preferred Stock for $0.50 per share. The shares were issued
in reliance upon the exemption from the registration requirements of the
Securities Act of 1933 ("Act") specified by the provisions of Regulation S
promulgated by the Securities and Exchange Commission. Specifically, the offer
and sale was made to "non-U.S. persons outside the United States of America" as
that term is defined under applicable federal and state securities laws. The
offering price for the shares was arbitrarily established by the Registrant and
had no relationship to assets, book value, revenues or other established
criteria of value. The Registrant realized proceeds of $250,000. The proceeds of
the offering were used to pay for operating costs and provide working capital.
There were no commissions paid on this transaction.
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to Vote of Security Holders
In or around September, 1999, a majority of Registrant's stockholders holding
issued and outstanding shares of Registrant's stock entitled to vote gave their
written consent to amend Registrant's Articles of Incorporation to authorize
10,000,000 shares of Series A Convertible Preferred Stock, par value $.001. Each
preferred share is convertible at the option of the holder thereof, into 10
shares of Registrant's $.001 par value common stock. Each preferred share holds
a 10:1 rating power.
Item 5. Other Information
None
5
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
None
6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: November 12, 1999 ENVIROKARE TECH, INC.,
a Nevada corporation
By: /s/ Charles W. Thomas
---------------------
Charles W. Thomas
Its: President
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 203,872
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 227,011
<PP&E> 8,252
<DEPRECIATION> (638)
<TOTAL-ASSETS> 267,955
<CURRENT-LIABILITIES> 107,246
<BONDS> 0
0
0
<COMMON> 5,142
<OTHER-SE> 155,567
<TOTAL-LIABILITY-AND-EQUITY> 267,955
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 162,520
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,144
<INCOME-PRETAX> (167,664)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (167,664)
<EPS-BASIC> (0.033)
<EPS-DILUTED> (0.033)
</TABLE>
