SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
AMENDMENT NO. 1
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.
(Exact name of registrant as specified in its charter)
NEVADA 880412549
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
Unit #9-62, Fawcett Road, Port Coquitlam
British Columbia, Canada V3K 6V5
(Address of registrant's principal executive offices) (Zip Code)
604.944.0705
(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
Attorneys-at-Law
1301 Dove Street, Suite 460
Newport Beach, California 92660
949.660.9700
Facsimile 949.660.9010
Page 1 of __
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Envirokare Tech, Inc.,
a Nevada corporation
Index to Amendment Number One to Form 10-SB Registration Statement
Item Number and Caption Page
- ----------------------- ----
1. Description of Business 3
2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 6
3. Description of Property 10
6. Executive Compensation - Remuneration of Directors and Officers 10
7. Certain Relationships and Related Transactions 10
13. Financial Statements 11
15. Financial Statements and Exhibits
15(a) Index to Financial Statements 11
Financial Statements F-1 through F-21
Signatures 13
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Item 1. Description of Business.
Development of the Company. Envirokare Tech, Inc., ("Company") was
incorporated under the laws of the State of Nevada on June 15, 1998. The
executive offices of the Company are located at Unit #9-62 Fawcett Road, Port
Coquitlam, British Columbia, Canada V3K 6V5. The Pallet recycling plant is
currently located at #4 Kebet Way, Port Coquitlam, British Columbia, Canada. The
Company's telephone number is 604.944.0705.
Business of the Company. The Company 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 Company has nonetheless directed its attention and assets to acquiring
existing technology to allow the Company to enter into the pallet manufacturing
business.
On or about December 15, 1998, the Company 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 has accepted a
position with the Company as a consultant to provide knowledge and expertise for
the development of the Company's anticipated pallet manufacturing activities.
In or about 1996, the Pallet Company began researching and testing the
materials necessary to manufacture a rubber pallet (the "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 Company believes that the finished product will meet the requirements of
most pallet users. Currently, more than forty prototypes of the Pallet are being
field-tested. The Pallet Company has enlisted the services of a press and mold
manufacturer to supply the appropriate facilities to manufacture the Pallet.
The Pallet is produced by using recycled products. The manufacture of the
Pallet begins with the removal of tires from landfills and includes the eventual
recycling of used Pallets, significantly reducing the need to send old Pallets
to landfills. The Pallet is currently manufactured in three main designs: (i)
the "Journeyman", a one piece pallet produced in a standard pallet size of 48
inches by 40 inches; (ii) the "Nomad V", also manufactured in one lightweight
piece; and (iii) the "Roamer", designed to be dissembled after use to promote
the economical use of space. All of the Pallets are molded from strong, elastic
heated crumb rubber. The simplest Pallet is molded as a single piece. The other
models are assembled using U-bolts or bonded rubber plugs from a minimum number
of molded parts. The one-piece versions of the Pallet emphasize durability,
while the multi-piece models are lighter and more versatile.
The Company 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 Company 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 primarily 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.
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In the event any domestic or foreign regulatory agency requires approval
and testing of the Pallet prior to its commercial exploitation, the Company
cannot provide any assurance that testing procedures will be successfully
completed or, if completed, such tests will demonstrate that the Pallet meets
the required guidelines. There can also be no assurance that any required
governmental approvals will be obtained. Accordingly, there can be no assurance
that the Company will be able to market the Pallet in the United States or any
foreign country. The same is true for any other products that the Company may
develop. Any failure by the Company or its collaborators or licensees to obtain
any required regulatory approvals or licenses would adversely affect the ability
of the Company to market its products and would have a significant adverse
affect on the Company's revenues.
Employees. The Company currently has two (2) full-time employees. The
Company has also entered into a consulting agreement with Mr. Morel pursuant to
which Mr. Morel has agreed to provide month to month consulting services to the
Company. Management of the Company anticipates using consultants for business,
accounting and engineering services on an as-needed basis.
Competition. The Company currently faces significant competition with
respect to the Pallet, and this competition may increase as new competitors
enter the market. Competition consists mainly of small, single-location pallet
companies with limited resources; however, there are several large pallet
manufacturing and distribution companies. Many of the current pallet
manufacturers produce either wooden or plastic pallets. Several of these
manufacturers have longer operating histories and greater financial, marketing
and other resources than the Company. With respect to all of the Company's
products, there can be no assurance that the Company will be able to compete
successfully with existing or new entrant companies. In addition, new product
introductions or enhancements by the Company's competitors could cause a decline
in sales or loss of market acceptance of the Company's existing products.
Increased competition could also result in intensified price-based competition
resulting in lower prices and profit margins. Such increased competition could
result in lower prices and profit margins could adversely affect the Company's
business and results of operations.
The strategy of the Company for growth is substantially dependent upon its
ability to market and distribute its products successfully. Other companies,
including those with substantially greater financial, marketing and sales
resources, compete with the Company, and have the advantage of marketing
existing products with existing production and distribution facilities. There
can be no assurance that the Company will be able to market and distribute
products on acceptable terms, or at all. Failure of the Company to market its
products successfully could have a material adverse effect on the Company's
business, financial condition or results of operations.
The strategy of the Company for growth may be substantially dependent upon
its ability to expand into new markets. Accordingly, the ability of the Company
to compete may be dependent upon the ability of the Company to continually
enhance and improve its products and/or manufacturing methods. There can be no
assurance that competitors will not develop technologies or products that render
the products of the Company obsolete or less marketable. The Company may be
required to adapt to technological changes in the industry and develop products
to satisfy evolving industry or customer requirements, any of which could
require the expenditure of significant funds and resources, and the Company does
not have a source or commitment for any such funds and resources. The Company
might be required to refine and improve its products. Continued refinement and
improvement efforts remain subject to the risks inherent in product development,
including unanticipated technical or other problems, which could result in
material delays in product commercialization or significantly increase costs.
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Compliance with Environmental Laws. The Company has not been materially
impacted by existing government regulation, as the Company is not presently
manufacturing any products. The Company recognizes, however, that its products
and business may be significantly influenced by constantly changing
environmental laws and regulations, which require that certain environmental
standards be met and impose liability for the failure to comply with such
standards. While the Company anticipates taking significant steps to comply with
all applicable environmental laws and regulations, there can be no assurance
that the Company's operations or activities, or historical operations by others
at the Company's locations, will not result in civil or criminal enforcement
actions or private actions that could have a materially adverse effect on the
Company. The Company's costs in complying with environmental laws to date have
been negligible.
Manufacturing processes requiring the use of rubber sometimes require the
use of hazardous solvents in those production processes and result in the
disposal of waste products, such as used solvents. Such manufacturing processes
could subject the Company to Canadian laws and United States federal, state and
local laws and regulations governing the generation, handling, storage,
transportation, treatment and disposal of hazardous wastes. Pursuant to such
laws, a lessee or owner of real property may be liable for, among other things,
(i) the costs of removal or remediation of certain hazardous or toxic substances
located on, in or emanating from, such property, as well as related costs of
investigation and property damage and substantial penalties for violations of
such laws, and (ii) environmental contamination at facilities where its waste is
or has been disposed. Such laws often impose such liability without regard to
whether the owner or lessee knows of, or was responsible for, the presence of
such hazardous or toxic substances. While the Company's operations, to the best
of its knowledge, are in full compliance with all existing laws and regulations,
environmental legislation and regulations have changed rapidly in recent years,
and the Company cannot predict what, if any, impact future changes in such
legislation may have on the Company's liability for past actions that were
lawful at the time taken. As in the case with manufacturing companies in
general, if damage to persons or the environment has been caused, or is in the
future caused, by the Company's use of hazardous solvents or by other hazardous
substances located at the Company's facilities, the Company may be fined or held
liable for the cost of remedying such damage. The levying of such fines or the
imposition of liability may have a material adverse effect on the Company's
business, financial condition and results of operations. Further, changes in
environmental regulations in the future may require the Company to make
significant capital expenditures to change methods of disposal of hazardous
solvents or otherwise alter aspects of its operations.
The Company's management believes that no toxic or hazardous materials will
be byproducts of the manufacturing processes of the Pallet; accordingly,
management of the Company believes that the Company will not have material
expenditures related to the cost of compliance with applicable environmental
laws, rules or regulations. The Company believes that it is presently in
compliance with all applicable federal, state and local environmental laws,
rules and regulations. In the future, the Company may be subject to various laws
and regulations governing the use, manufacture, storage, handling, and disposal
of toxic materials and certain waste products. The risk of accidental
contamination or injury from hazardous materials cannot be completely
eliminated. In the event of such an accident, the Company could be held liable
for any damages that result and any such liability could exceed the financial
resources of the Company. In addition, there can be no assurance that in the
future the Company will not be required to incur significant costs to comply
with environmental laws and regulations relating to hazardous materials. The
Company cannot estimate the potential costs of complying with local, state, and
federal environmental laws.
Reports to Security Holders. The Company will become a reporting issuer
with the Securities and Exchange Commission ("SEC") when this Form 10-SB is
effective and will be obligated to provide an annual report to its security
holders, which will include audited financial statements. As a reporting issuer,
the
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Company will also be required to file with the SEC quarterly reports on Form
10-QSB containing unaudited financial statements. The public may read and copy
any materials filed with the SEC at the SEC's Public Reference Room at 450 Fifth
Street N.W., Washington, D.C. 20549. The public may also obtain information on
the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.
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 address of that site is http://www.sec.gov. The Company does
not currently maintain its own Internet address.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
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
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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.
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 quarter ending March 31, 1999, the Company
increased its total assets to $52,447, including cash of $15,040. The increase
in the total assets of the Company was primarily due to a cash influx pursuant
to the issuance of the Company's common stock for cash. For the six months ended
June 30, 1999, the Company had total assets
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of $55,497, including cash of $4,835. The depletion of cash was previously due
to the payment of prepaid expenses and the purchase of office equipment. The
Company's net loss for the period ending December 1998 was $34,427. The
Company's net loss for the period ending March 31, 1999, was $51,694. An
increase which resulted primarily as a result of an increase in accrued expenses
to related parties and an increase in general accrued expenses. The Company's
net loss for the six months ending June 30, 1999 was a total of $98,572, 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 March 31, 1999, has not
realized any significant revenues from its planned operations. At December 31,
1998, current liabilities exceeded current assets by $61,267 and at March 31,
1999, current liabilities exceeded current assets by $75,298. At June 30, 1999,
current liabilities exceeded current assets by $96,692.
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 maintain its long-term liquidity. 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
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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.
Liquidity and Capital Resources. 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 quarter ending March 31, 1999, the Company had
cash on hand of $15,040. For the six months ended June 30, 1999, the Company had
cash on hand of $4,835.
Results of Operations. The Company has not yet realized any revenue from
operations.
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.
Item 3. Description of Property
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Property Held by the Company. As of the date specified in the following
table, the Company held the following property with the following values:
<TABLE>
===================================================================================================================================
<CAPTION>
Property December 31, 1998 March 31, 1999 June 30, 1999
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Furniture & fixtures $1,014 $1,014 $1,014
- -----------------------------------------------------------------------------------------------------------------------------------
Office Equipment $2,645 $2,645 $6,488
- -----------------------------------------------------------------------------------------------------------------------------------
Cash $2,388 $15,040 $4,835
===================================================================================================================================
</TABLE>
Property Leased by the Company. The Company leases corporate office space
located at 2470 Chandler Avenue, Suite 5, Las Vegas, Nevada 89120. The leased
premises consists of 600 square feet which is insured under public liability
insurance. The Company entered into a 36-month lease whose term began October 1,
1998, and involves monthly payments of $700 per month, which includes $40 for
utilities. For the fiscal year ending December 31, 1999, the Company will have
paid $8,062 in lease payments. For the fiscal year ending December 31, 2000, the
Company will have paid lease payments totaling $9,276. For the lease term ending
December 31, 2001, the Company will have paid a total of $7,200.
On April 1, 1999, the Company entered into a lease agreement for office
space located in British Columbia for a period of twelve (12) months beginning
April 1, 1999. Monthly payments for the initial year of the lease term were to
have been $800 per month, not including utilities. On or about July 31, 1999,
the Company and the landlord agreed to mutually rescind the lease agreement.
Neither the Company nor the landlord has any further obligation under the lease.
Item 6. Executive Compensation - Remuneration of Directors and Officers.
<TABLE>
<CAPTION>
===================================================================================================
Name of individual or Identity of Capacities in which Remuneration Aggregate Remuneration
Group was received
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
All Executive Officers None None
===================================================================================================
</TABLE>
None of the executive officers or directors of the Company, including the
Chief Executive Officer, currently earn either compensation or remuneration from
the Company for services provided in their official capacities. However, when
Richard Dalon was appointed Chief Financial Officer, it was with the
understanding that he would, at some point, receive compensation for his
services as Chief Financial Officer of the Company. The Company and Mr. Dalon
have yet to finalize the details of such compensation. While the President of
the Company, Mr. Thomas, does not currently receive compensation for his
services to the Company, his wife Madeline Thomas is compensated by the Company
under a consulting contract as described in Item 7.
Item 7. Certain Relationships and Related Transactions
Transactions with Promoters. There were no transactions with promoters.
Related Party Transactions. As specified above, on or about December 15,
1998, the Company 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 of
International Pallet and The Pallet Company. The Company's obligation to Mr.
Morel is evidenced by a series of unsecured notes payable in favor of Real Morel
totaling CDN$61,965, with interest accruing at 10% per annum. At the time of the
transaction, Mr. Morel was operated both International Pallet and the Pallet
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Company. At the time of the transaction, Jeannie Runnalls, current vice
president and a director of the Company, was the office manager of International
Pallet.
On November 1, 1998, the Company entered into a management services
agreement with Madelyn Thomas. According to the terms of that agreement, Mrs.
Thomas is to receive $5,000 per month for the term of the contract which by its
own terms will terminate on October 31, 1999. Mrs. Thomas' duties under the
agreement include the research of possible locations for the Company's corporate
office, lease negotiations, the purchase of necessary equipment and supplies,
the hiring of necessary support staff, initial office management and research of
the pallet industry in the United States. The consulting agreement also provides
for indemnification against any and all liability for services rendered to the
Company as a consultant, as well as providing for reimbursement of all expenses
incurred on the Company's behalf, with a right of approval by the Company's
Board of Directors for any amount exceeding $5,000. The consulting agreement
states that it may be terminated upon thirty (30) days written notice by either
party. At the time the consulting agreement was entered into, Mrs. Thomas's
husband, Charles W. Thomas, was the president, secretary, treasurer and a
director of the Company. As of December 31, 1998, Mrs. Thomas had received
$10,000 in consulting fees under the agreement. As of June 30, 1999, Mrs. Thomas
had been paid an additional $9,000 under the consulting agreement, with an
additional accrued unpaid amount of $21,000.
IN THE OPINION OF THE SECURITIES AND EXCHANGE COMMISSION, INDEMNIFICATION
FOR LIABILITIES ARISING PURSUANT TO THE SECURITIES ACT OF 1933 IS CONTRARY TO
PUBLIC POLICY AND, THEREFORE, UNENFORCEABLE.
Item 13. Financial Statements
- -------------------------------
Copies of the Company's Unaudited Financial Statements for the quarter
ended March 31, 1999, as required by Item 310(g) of Regulation S-B are filed
with this Amendment Number One to the Company's Registration Statement Form
10-SB.
Item 15. Financial Statements and Exhibits
(a) Index to Financial Statements. Page
- ----------------------------------- ----
Independent Accountant's Report F-1
Independent Auditor's Report F-2
Statements of Financial Position F-3
Statement of Operations and Accumulated Deficit
As of March 31, 1999 F-4
Statement of Stockhholders' Equity
For the Period Ending March 31, 1999 F-5
Statement of Cash Flows For the Period Ending March 31, 1999 F-6
Notes to Financial Statements F-7 through F-13
11
<PAGE>
Unaudited Statements of Financial Position
For the Period Ended June 30, 1999 F-14
Unaudited Statements of Operations and Accumulated
Deficit For Period from June 15, 1998 (inception) to June 30, 1999 F-15
Unaudited Statements of Cash Flows For Period from
June 18, 1998 (inception) to June 30, 1999 F-16
Unaudited Statements of Stockholders' Equity For Period
from June 15, 1998 (inception) to June 30, 1999 F-17
Notes to Financial Statements F-18 through F-21
Financial Data Schedule F-22
12
<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. 1 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 August ___, 1999.
Envirokare Tech, Inc.,
a Nevada corporation
By: /s/ CHARLES W. THOMAS
---------------------
Charles W. Thomas
Its: President
13
<PAGE>
[LOGO] Williams & Webster, P.S.
-----------------------------------------------
Certified Public Accountants
Seafirst Financial Center 601 W. Riverside, Suite 1970 Spokane, WA 99201-0611
Phone: (509) 838-5111 Fax (509) 624-5001
INDEPENDENT ACCOUNTANT'S REPORT
To the Board of Directors of
Envirokare Tech, Inc.
2470 Chandler Suite 5
Las Vegas, Nevada 89120
We have reviewed the accompanying statement of financial position of Envirokare
Tech, Inc. (a development stage company) as of March 31, 1999 and the related
statements of operations and accumulated deficit, stockholders' equity (deficit)
and cash flows for the three months ended March 31, 1999, and for the period
from June 15, 1998 (inception) to March 31, 1999 in accordance with Statements
on Standards for Accounting and Review Services issued by the American Institute
of Certified Public Accountants. All information included in these financial
statements is the representation of the management of Envirokare Tech, Inc.
A review consists principally of inquiries of Company personnel and analytical
procedures applied to financial data. It is substantially less in scope than an
audit in accordance with generally accepted auditing standards, the objective of
which is the expression of an opinion regarding the financial statements taken
as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying financial statements in order for them to be 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 financial requirements,
and the success of future operations. 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, PS
Certified Public Accountants
Spokane, Washington
July 16, 1999
F-1
<PAGE>
[LOGO] Williams & Webster, P.S.
-----------------------------------------------
Certified Public Accountants
Seafirst Financial Center 601 W. Riverside, Suite 1970 Spokane, WA 99201-0611
Phone: (509) 838-5111 Fax (509) 624-5001
INDEPENDENT AUDITOR'S REPORT
Board of Directors
Envirokare Tech, Inc.
2470 Chandler, Suite 5
Las Vegas, Nevada 89120
We have audited the accompanying statement of financial position of Envirokare
Tech, Inc., (a development stage company) as of December 31, 1998 and the
related statements of operations and accumulated deficit, stockholders' equity
(deficit) 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, 1998 (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. 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.
Certified Public Accountants
Spokane, Washington
February 26, 1999
Except for Note 2, as to which the date is July 16, 1999
F-2
<PAGE>
ENVIROKARE TECH, INC
(A Development Stage Company)
STATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
(unaudited)
----------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 15,040 $ 2,388
Prepaid expenses 730 730
-------- --------
TOTAL CURRENT ASSETS 15,770 3,138
-------- --------
PROPERTY AND EQUIPMENT
Furniture and fixtures 1,014 1,014
Office Equipment 2,645 2,645
Less accumulated depreciation (312) (149)
-------- --------
TOTAL PROPERTY AND EQUIPMENT 3,347 3,510
-------- --------
OTHER ASSETS
Patent costs acquired from related party 33,330 33,330
-------- --------
TOTAL OTHER ASSETS 33,330 33,330
-------- --------
TOTAL ASSETS $ 52,447 $ 39,958
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Reimbursement due $ 1,847 $ 1,847
Consulting fees payable, related party 8,000 --
Consulting fees payable 2,500 --
Accrued interest, related party 2,122 573
Accrued interest 134 --
Loans payable 14,500 --
Notes payable, related party - short term 61,965 61,965
-------- --------
TOTAL CURRENT LIABILITIES 91,068 64,385
-------- --------
COMMITMENTS AND CONTINGENCIES -- --
-------- --------
STOCKHOLDERS' EQUITY (DEFECIT)
Common stock, 200,000,000 shares authorized, $0.001 par value;
5,075,000 and 5,000,000 shares issued and outstanding
as of March 31, 1999 and December 31, 1998, respectively 5,075 5,000
Additional paid-in capital 42,425 5,000
Accumulated deficit during developmental stage (86,121) (34,427)
-------- --------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) (38,621) (24,427)
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 52,447 $ 39,958
======== ========
</TABLE>
See accompanying notes and accountant's reports.
F-3
<PAGE>
ENVIROKARE TECH, INC
(A Development Stage Company)
STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
For the Period from inception on June 15, 1998 to March 31, 1999
<TABLE>
<CAPTION>
Period from
Three months Year June 15, 1998
Ended Ended (inception) to
March 31, December 31, March 31,
1999 1998 1999
(unaudited) (unaudited)
----------- -----------
<S> <C> <C> <C>
REVENUES $ -- $ -- $ --
----------- ----------- -----------
EXPENSES
Consulting fees, related party 15,000 10,000 25,000
Other consulting fees 7,500 6,700 14,200
Rent 2,190 2,920 5,110
General and administrative 1,281 4,085 5,366
Transfer agent fees -- 1,353 1,353
Depreciation 163 149 312
Interest - notes payable 1,689 573 2,262
Listing expenses and filing fees 12,371 8,647 21,018
Legal and accounting 11,500 -- 11,500
----------- ----------- -----------
TOTAL EXPENSES 51,694 34,427 86,121
----------- ----------- -----------
NET LOSS FROM OPERATIONS (51,694) (34,427) (86,121)
ACCUMULATED DEFICIT, BEGINNING BALANCE $ (34,427) $ -- $ --
----------- ----------- -----------
ACCUMULATED DEFICIT, ENDING BALANCE $ (86,121) $ (34,427) $ (86,121)
=========== =========== ===========
NET LOSS PER COMMON SHARE 0.0103 0.0069 0.0172
=========== =========== ===========
WEIGHTED AVERAGE NUMBER OF
COMMON STOCK SHARES OUTSTANDING 5,012,500 5,000,000 5,003,947
=========== =========== ===========
</TABLE>
See accompanying notes and accountant's reports.
F-4
<PAGE>
ENVIROKARE TECH, INC
(A Development Stage Company)
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
For the Period from inception on June 15, 1998 to March 31, 1999
<TABLE>
<CAPTION>
Common Stock
------------ Total
Number Additional Accumulated Stockholders'
of Shares Amount Paid-In Capital Deficit Equity
--------- ------ --------------- ------- ------
<S> <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 75,000 75 37,425 37,500
Loss for period ending, March 31, 1999 (51,694) (51,694)
--------- ----- ------ ------- -------
Balance
March 31, 1999 (unaudited) 5,075,000 5,075 42,425 (86,121) (38,621)
========= ===== ====== ======= =======
</TABLE>
See accompanying notes and accountant's reports.
F-5
<PAGE>
ENVIROKARE TECH, INC
STATEMENTS OF CASH FLOWS
For the Period from Inception on June 15, 1998 to March 31, 1999
<TABLE>
<CAPTION>
Period Year From inception
Ended Ended through
March 31, December 31, March 31,
1999 1999 1999
(unaudited) (unaudited)
----------- ------------ -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net Loss $(51,694) $ 34,427 $(86,127)
Adjustments to reconcile net loss
to set cash used by operating activities:
Depreciation 163 149 312
Increase in prepaid expenses -- (730) (736)
Increase in accrued interest to related party 1,549 573 3,122
Expenses paid by notes payable to related party -- 2,870 2,070
Increase in accrued expenses 2,508 -- 2,500
Increase in accrued expenses to released party 8,000 -- 8,000
-------- -------- --------
Net cash used by operating activities (39,482) (31,565) (71,047)
-------- -------- --------
Cash flows from investing activities
Equipment -- (1,047) (1,047)
-------- -------- --------
Net cash used in investing activities -- (1,047) (1,047)
Cash flows from financing activities
Proceeds from sale of common stock 37,500 10,000 47,500
Proceeds from issuance of money payable to related party 10,000 25,000 35,000
Proceeds from issuance of note payable 2,000 -- 2,000
-------- -------- --------
Net cash provided by financing activities 49,500 35,000 84,500
-------- -------- --------
Increase in cash 10,018 2,388 12,406
Cash, beginning of period 2,388 -- --
-------- -------- --------
Cash, end of period $ 12,406 $ 2,388 $ 12,406
======== ======== ========
SUPPLEMENTARY INFORMATION
Interest paid $ -- $ -- $ --
======== ======== ========
Income taxes paid $ -- $ -- $ --
======== ======== ========
NON-CASH TRANSACTIONS
Note issued fro purchase of property, 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 $ -- $ 1,347 $ 1,347
</TABLE>
See accompanying notes and accountant's reports.
F-6
<PAGE>
ENVIROKARE TECH, INC
(A Development Stage Company)
Notes to Financial Statements
March 31, 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 the development stage, and as of March 31, 1999 had not
realized any significant revenues from its planned operations.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies of Envirokare Tech, Inc. is
presented to assist in understanding the Company's 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 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 a manufacturing process which is
based on research findings 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 $51,694 for the first quarter of 1999 and a net loss of $34,427 for
1998. At March 31, 1999, current liabilities exceeded current assets by $75,298,
and at December 31, 1998, current liabilities exceeded current assets by
$61,267. The Company, being a developmental 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.
F-7
<PAGE>
ENVIROKARE TECH, INC
(A Development Stage Company)
Notes to Financial Statements
March 31, 1999
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING PLICIES (CONTINUED)
The financial statements do not include any adjustments relating 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 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 analysis of compounds, extrusion method and
equipment modifications have been studied and refined, as have initial
prototypes. Production should proceed within six to eight weeks of the final
engineering analysis reports. 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 shortly.
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 weighting
them by the amount of time that they were outstanding.
Cash and Cash Equivalents
For purposes of the Statements 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 March 31, 1999 and December 31, 1998, the Company had net operating losses
of approximately $51,000 and $34,000, 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 or losses.
F-8
<PAGE>
ENVIROKARE TECH, INC
(A Development Stage Company)
Notes to Financial Statements
March 31, 1999
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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 estimated amounts.
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.
Reclassification
The reclassification in the financial statements have resulted in certain
changes in presentation which have no effect on the net losses or shareholders'
equity for December 31, 1998, or the period then ended.
Change in Accounting Policies
During 1999, the Company changed its method of accounting for organization costs
to conform with the requirements of Statement on Position 98-5 which requires
start-up and organization costs to be expensed as incurred. The financial
statements for December 31, 1998 have been retroactively restated for the
change, which resulted in an increase in losses for the period from June 15,
1998 (inception) to December 31, 1998 of $7,782 ($0.0016 per share).
F-9
<PAGE>
ENVIROKARE TECH, INC
(A Development Stage Company)
Notes to Financial Statements
March 31, 1999
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 the purposes of computing
depreciation are five and seven years. The following is a summary of property,
equipment and accumulated depreciation.
Cost Accumulated Accumulated
Depreciation Depreciation
Through Through
December 31, 1998 March 31, 1999
---------- ----------------- --------------
Furniture and Fixtures $1,014 $ 50 $ 90
Office Equipment 2,645 99 222
------ ------ ------
$3,659 $ 149 $ 312
====== ====== ======
NOTE 4 - INTANGIBLE ASSETS
In December 1998, the Company acquired technology rights from Real Morel and his
affiliated companies of International Pallet Control Systems Inc. and The Pallet
Company. The Company is currently investigating the patent process on this
technology. The amortization of patent costs will begin when the final patents
are granted. If the Company does not obtain the patent, the 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 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.
F-10
<PAGE>
ENVIROKARE TECH, INC
(A Development Stage Company)
Notes to Financial Statements
March 31, 1999
NOTE 5 - DETAILS OF SHORT-TERM DEBT (CONTINUED)
Date Description Principal Interest as of
3/31/99
- --------- -------------------------------- --------- --------------
8/18/1998 Demand promissory note $ 3,635 $ 231
Payable to Real Morel
9/24/1998 Demand promissory note 5,000 257
Payable to Real Morel
11/16/1998 Demand promissory note 10,000 373
Payable to Real Morel
12/15/1998 Demand promissory note 33,330 970
Payable to Real Morel
12/16/1998 Demand promissory note 10,000 291
Payable to Real Morel
1/19/1999 Note payable to Red Dawn 12,500 130
3/19/1999 Note payable to Robert Davidson 2,000 4
------- -------
Total as of March 31, 1999 $76,465 2,256
======= =======
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).
Date Description Principal Interest as of
12/31/98
- --------- -------------------------------- --------- --------------
8/18/1998 Demand promissory note $ 3,635 $ 140
Payable to Real Morel
9/24/1998 Demand promissory note 5,000 132
Payable to Real Morel
11/16/1998 Demand promissory note 10,000 123
Payable to Real Morel
12/15/1998 Demand promissory note 33,330 137
Payable to Real Morel
12/16/1998 Demand promissory note 10,000 41
------- -------
Payable to Real Morel
Total as of December 31, 1998 $61,965 $ 573
======= =======
F-11
<PAGE>
ENVIROKARE TECH, INC
(A Development Stage Company)
Notes to Financial Statements
March 31, 1999
NOTE 6 - COMMON STOCK
Upon incorporation, 10,000,000 shares of common stock were sold at $.001 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.
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. 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.
As of March 31, 1999, 5,075,000 shares of common stock were issued and
outstanding.
NOTE 7 - RELATED PARTIES
Madelyn Thomas, who received $10,000 in consulting fees under the terms of an
ongoing contract as of December 31, 1999 and an additional $7,000 (with $8,000
more accrued) as of March 31, 1999 (as described in Note 8) is the wife of the
president of the Company, Charles W. Thomas.
Real Morel, a former member of the Board of Directors, is the developer of the
rubber technology currently seeking patent rights (See Note 4) and is the holder
of the notes payable described in Note 5. The company entered into negotiations
with Mr. Morel in regard to a consulting agreement under the terms of which Mr.
Morel would provide his knowledge and expertise for the development of the
Company's anticipated manufacturing activities. Prior to entering into a written
agreement, Mr. Morel resigned from the Company in March 1999 and therefore
negotiations regarding a consulting agreement ceased.
F-12
<PAGE>
ENVIROKARE TECH, INC
(A Development Stage Company)
Notes to Financial Statements
March 31, 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 commenced
November 1, 1998 and terminated Aril 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 commenced November 1, 1998 and terminated October 31, 1999. Both
contracts provide indemnification against any and all liability and provide for
reimbursement of expenses up to a specified amount. They may be terminated upon
thirty days written notice by either party.
The Company entered into a lease for office space in Nevada for the period of
thirty-six months beginning October 1, 1998. Monthly payments for the initial
year of the lease are $730 per month, including $40 for utilities. In compliance
with the terms of the lease, the Company has purchased comprehensive public
liability insurance. 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
NOTE 9 - SUBSEQUENT EVENTS
On April 1, 1999, the Company entered into a lease for office space in British
Columbia for the period of twelve months beginning April 1, 1999. Monthly
payments for the initial year of the lease are $800 per month, not including
utilities. Future annual minimum lease payments for the term of the lease are as
follows for the years ending December 31:
1999 $7,200
2000 $2,400
On June 1, 1999, Madelyn Thomas (See Note 7, Related Parties), served the
Company 30 days notice, to terminate her consulting contract, to be effective at
month's end.
F-13
<PAGE>
ENVIROKARE TECH, INC.
(A Development Stage Company)
STATEMENTS OF FINANCIAL POSITION
June 30, 1999
( Unaudited - Prepared By Management )
<TABLE>
<CAPTION>
Year Six Months
Ended Ended
December 31 June 30
1998 1999
<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
Organizational costs, net of $1,729 amortization 7,782 6,918
Patent costs acquired from related party 33,330 33,330
----------- ----------
TOTAL OTHER ASSETS 41,112 40,248
----------- ----------
TOTAL ASSETS $ 47,740 $ 55,497
=========== ==========
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 2,122
Accrued interest -- 315
Loans payable -- 14,500
Notes payable, related party - short term 61,965 61,965
----------- ----------
TOTAL CURRENT LIABILITIES 64,385 104,914
----------- ----------
COMMITMENTS AND CONTINGENCIES
Shares to be issued -- 27,530
----------- ----------
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
Accumulated deficit during developmental stage (26,645) (125,217)
----------- ----------
TOTAL STOCKHOLDERS' EQUITY (16,645) (76,947)
----------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 47,740 $ 55,497
=========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements
F-14
<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
Year Six months June 15, 1998
Ended Ended (Inception) to
December 31 June 30 June 30
1998 1999 1999
<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 1,014 1,190 2,204
Interest - notes payable 573 1,864 2,437
Listing expenses and filing fees -- 15,936 15,936
Legal and accounting -- 18,784 18,784
----------- ----------- ----------
TOTAL EXPENSES 26,645 98,572 125,217
NET LOSS FROM OPERATIONS (26,645) (98,572) (125,217)
ACCUMULATED DEFICIT, BEGINNING BALANCE -- (26,645) --
----------- ----------- ----------
ACCUMULATED DEFICIT, ENDING BALANCE $ (26,645) $ (125,217) $ (125,217)
=========== =========== ==========
NET LOSS PER COMMON SHARE $ (0.0053) $ (0.0248) $ (0.0248)
=========== =========== ==========
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-15
<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
Year Six months June 15, 1998
Ended Ended (Inception) to
December 31 June 30 June 30
1998 1999 1999
<S> <C> <C> <C>
Cash flows from operating activities
Net loss $ (26,645) $ (98,572) $ (125,217)
Adjustments to reconcile net loss
to net cash used by operating activities:
Depreciation and amortization 1,014 1,190 2,204
Increase in prepaid expenses (730) (2,657) (3,387)
increase in accrued interest, to related party 573 1,549 2,122
Expenses paid by note payable to related party 2,870 -- 2,870
Increase in accrued expenses -- 3,480 3,480
Increase in accrued expenses to related party -- 21,000 21,000
--------- --------- ---------
Net cash used by operating activities (22,918) (74,010) (96,928)
--------- --------- ---------
Cash flows from investing activities:
Equipment (1,047) (3,843) (4,890)
Organizational costs (8,647) -- (8,647)
--------- --------- ---------
Net cash used in investing activities (9,694) (3,843) (13,537)
--------- --------- ---------
Cash flows from financing activities:
Proceeds from sale of Common Stock 10,000 65,800 75,800
Proceeds from issuance of notes payable to related party 25,000 12,500 37,500
Proceeds from issuance of note payable -- 2,000 2,000
--------- --------- ---------
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 $ --
Note issued for pending patent to related party $ 33,330 $ --
Reimbursement due for purchase of equipment $ 1,847 $ --
</TABLE>
The accompanying notes are an integral part of these financial statements
F-16
<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 Accumulated Stockholders'
of Shares Amount Paid-in Capital Deficit Equity
-------- --------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Issuance of common stock in June, 1998:
For cash at $.001 per share 5,000,000 $ 5,000 $ 5,000 $ -- $ 10,000
Loss for period ending, December 31, 1998 (26,645) (26,645)
-------- --------- ------------ ------------ ------------
Balance
December 31, 1998 5,000,000 5,000 5,000 (26,645) (16,645)
Issuance of common stock in March, 1999:
For cash at $.50 per share 76,540 77 38,193 38,270
Loss for period ending, June 30, 1999 (98,572) (98,572)
-------- --------- ------------ ------------ ------------
Balance
June 30, 1999 5,076,540 $ 5,077 $ 43,193 $ (125,217)$ (76,947)
========= ========= ============ ============ ============
</TABLE>
The accompanying notes are an intergral part of these financial statementments
F-17
<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 $26,645 for 1998 and a net loss of $98,572 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 $96,692. 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-18
<PAGE>
ENVIROKARE TECH, INC.
(A Development Stage Company)
Notes to the Financial Statements
June 30, 1999
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 $26,645 and $98,572, 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>
Accumulated Accumulated
Depreciation through Depreciation through
Cost December 31, 1998 June 30, 1999
<S> <C> <C> <C>
Furniture and Fixtures $1,014 $ 50 $130
Office Equipment 6,488 99 345
-------------------------------------------------------------------------------
$7,502 $149 $475
-------------------------------------------------------------------------------
</TABLE>
F-19
<PAGE>
ENVIROKARE TECH, INC.
(A Development Stage Company)
Notes to the Financial Statements
June 30, 1999
NOTE 4 - INTANGIBLE ASSETS
During the period ended December 31, 1998, Envirokare Tech, Inc. incurred
organization costs of $8,647. These organization costs are being amortized over
the useful life of sixty months beginning July 1, 1998. During the periods
ending December 31, 1998 and June 30, 1999, $865 and $1,729 respectively, were
recorded as amortization of organization costs. 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 - COMMON STOCK
Upon incorporation, 10,000,000 shares of common stock were sold at $.001 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 28,300 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. 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 6 - 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 7 - 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. That 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-20
<PAGE>
ENVIROKARE TECH, INC.
(A Development Stage Company)
Notes to the Financial Statements
June 30, 1999
NOTE 8 - 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-21
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ATTACHED
FINANCIAL STATEMENTS FOR THE PERIOD MARCH 31, 1999 AND IS QUALIFED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 15040
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 15770
<PP&E> 3659
<DEPRECIATION> (312)
<TOTAL-ASSETS> 59797
<CURRENT-LIABILITIES> 91068
<BONDS> 0
0
0
<COMMON> 5075
<OTHER-SE> (36346)
<TOTAL-LIABILITY-AND-EQUITY> 59797
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 52126
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (52126)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (52126)
<EPS-BASIC> (.02)
<EPS-DILUTED> (.02)
</TABLE>
