UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[X] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the fiscal year ended December 31, 1999
or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from _____ to _____
Commission File Number 000-26095
ENVIROKARE TECH, INC.
(Exact Name of Small Business Issuer as Specified in its Charter)
Nevada 88-0412549
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2470 Chandler Avenue, Suite 5, Las Vegas, Nevada 89120
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (702) 262-1999
Securities registered pursuant to Section 12(b) of the Exchange Act:
Title of each class Name of each exchange on which registered
None Not Applicable
Securities registered pursuant to Section 12(g) of the Exchange Act:
Common Stock, Par Value $.001
(Title of Class)
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Check whether the issuer (1) 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 [X] NO [_]
Check if disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ ]
State issuer's revenues for its most recent fiscal year: The issuer is a
development stage company and has no revenues to report at this time.
The aggregate market value of the voting and non-voting common equity held
by non-affiliates computed by reference to the price at which the common equity
was sold, or the average bid and asked price of such common equity, as of March
8, 2000 was $20,132,372.
(ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS)
Check whether the issuer has filed all documents and reports required to be
filed by Sections 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. YES [ ] NO [ ]
NOT APPLICABLE
APPLICABLE ONLY TO CORPORATE REGISTRANTS
The number of shares outstanding of the issuer's Common Stock, $.001 par
value, as of March 7, 2000, was 11,089,478.
DOCUMENTS INCORPORATED BY REFERENCE
NOT APPLICABLE
Transitional Small Business Disclosure Format (check one):
YES [ ] NO [X]
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TABLE OF CONTENTS
Part I
Item 1. Description of Business
Item 2. Description of Property
Item 3. Legal Proceedings
Item 4. Submission of Matters to a Vote of Security Holders
Part II
Item 5. Market for Common Equity and Related Stockholder Matters
Item 6. Plan of Operation
Item 7. Financial Statements
Item 8. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure
Part III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act
Item 10. Executive Compensation
Item 11. Security Ownership of Certain Beneficial Owners and Management
Item 12. Certain Relationships and Related Transactions
Item 13. Exhibits and Reports on Form 8-K
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PART I
Item 1. Description of Business
This Form 10-KSB contains some statements that the Company believes are
"forward-looking statements." Forward-looking statements include statements
about the future of the pallet industry, statements about future business plans
and strategies, and most other statements that are not historical in nature.
Because forward-looking statements involve risks and uncertainties, there are
factors, including those discussed below, that could cause actual results to be
materially different from any future results, performance or achievements
expressed or implied. The Company has attempted to identify the major factors
that could cause differences between actual and planned or expected results, but
there can be no assurance that the Company has identified all of those factors.
Accordingly, readers should not place undue reliance on forward-looking
statements. Also, the Company has no obligation to publicly update
forward-looking statements it makes in this Form 10-KSB.
Development and Business of the Company
Envirokare Tech, Inc., (the "Company") was incorporated under the laws of
the State of Nevada on June 15, 1998. The executive offices of the Company are
located at 2470 Chandler, Suite 5, Las Vegas, Nevada 89120. The Company's
telephone number is (702) 262-1999.
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 and improving upon existing
technology to allow the Company to enter into the pallet manufacturing business.
A pallet is a portable platform for handling, storing, or moving materials and
packages as used in, for example, warehouses, factories and vehicles.
The Company entered the pallet manufacturing business in December 1998.
Pursuant to an asset purchase agreement and an assignment agreement, each dated
December 15, 1998, the Company purchased certain assets, including all of the
equipment, early-stage rubber mold technology and patent rights potentially
applicable to future development of rubber mold technology for creating a pallet
made of recycled materials, from Real Morel, a businessman operating
International Pallet Control Systems Inc. ("International Pallet") and The
Pallet Company, both private Canadian companies. The Company substantially
improved upon the purchased early-stage rubber mold technology and developed,
after more than a year of research and working with specialists in the field, a
molded pallet (the "Pallet") created 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. The Company has enlisted the services of a press and mold
manufacturer to supply the appropriate equipment to manufacture the Pallet.
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Products; Product Development
The Company's Pallet product will be manufactured in one main design, which
is a one-piece pallet produced in a standard pallet size of 48 inches by 40
inches. All Pallets will be molded from strong, elastic heated plastic and crumb
rubber. The Pallet is produced using primarily recycled materials. The
manufacture of the Pallet begins with the procurement of recycled plastics and
crumb rubber that is derived from the removal of tires from landfills. Both of
these key substrate components are commodities that are currently readily
available in the open market. The Pallet is also recyclable which allows for the
eventual recycling of used Pallets, significantly reducing the need to send old
Pallets to landfills.
The Company's Pallet design presents what the Company believes is a
preferable alternative to pallets made from wood and from non-wood materials.
Pallets had traditionally been made of wood but, due to escalating commodity
lumber prices and associated higher costs of wood pallets, pallet manufacturers
have in recent years been developing ways to manufacture pallets from non-wood
materials, in particular, metal, wood derivatives and plastic. However, each of
these materials has its disadvantages. Metal pallets, while they are strong,
hard to damage, and repairable, are expensive and not practical for general use.
Pallets made from pressed wood fiber and corrugated fiber board are light and
recyclable. However, most pallets manufactured from this type of substrate are
not able to carry standard load weights, are susceptible to damage, and cannot
be repaired. The most prevalent non-wood pallet material, plastic, is more
cost-effective than wood but is nonetheless expensive. Also, plastic pallets can
be damaged by forklift tines, or by being dropped, twisted or overloaded. They
can also splinter, causing injuries to workers. The Company believes that the
recent rapid increase in market share for plastic pallets indicates that pallet
buyers understand the benefits of utilizing substitutes for wood pallets. This
presents a market opportunity for the Company.
The Company believes that the plastic/rubber Pallet has advantages over
traditional pallets. While the Pallet is designed to have a standard 48-inch by
40-inch surface, similar in shape and size to conventional wood and plastic
pallets, the Company's Pallet is designed to perform better than traditional
pallets. The Pallet has been designed to resist damage caused from use and 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. Another significant potential advantage of the Pallet is that its
manufacturing process can benefit the environment. This is because the Pallet
itself is made from recycled plastics and used tires. Used tires are a resource
that was, until recently, considered merely another pollution problem. Moreover,
when a Pallet finally wears out, it in turn can be recycled into a new Pallet.
The Company has been actively involved in extensive testing and development
of the Pallet. The Company contracted with substrate component testing engineers
in the Akron, Ohio area who performed the primary series of component testing.
The Company's development focus is to ensure that the Pallet meets or exceeds
current market standards and that the Pallet will be superior in performance and
will be cost effective to produce and sell. In particular, the Company's
development focuses on the safety, structural integrity, reliability, and cost
effectiveness of the Pallet, involving in-depth analysis of compound
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variables and strengths, extrusion methods and equipment modifications. The
Company believes that after extensive studies and refinement, it has minimized
or 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 indicates that
the Company's standard 48-inch by 40-inch Pallet will surpass current hardwood
and plastic pallet performance and will be a strong competitor in the pallet
industry worldwide.
On November 16, 1999, the Company and Thermoplastic Composite Designs, Inc.
("TCD"), entered into a product/technology development contract in connection
with TCD's assisting the Company in modifying earlier versions of the Pallet
design. TCD is a composite systems engineering and design corporation. The
contract required TCD to deliver a Pallet that would meet design specifications
including: 48-inch by 40-inch dimension; a maximum weight requirement; and a
target substrate composition. The contract also provided that TCD would supply
the appropriate engineered mold for the Company's first production facility.
This first generation mold was available to produce finished product in early
April 2000. The Company's payments under this contract totaled $50,800 in 1999,
and $70,000 in 2000 to date, with another $13,000 remaining to be paid upon
completion of the contract. The Company is in the completion stage on this
contract. Finished Pallet product was scheduled for distribution to potential
customers for in-use evaluation during the second quarter of 2000.
The Company believes that its new molded-plastic/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 because, as discussed above, traditional
wood pallets are expensive, and currently used alternative materials such as
metal, wood derivatives and plastic, are expensive, present operating problems,
or both. The Company will continue to evaluate opportunities that hold a
reasonable prospect of improving both the Pallet substrate components and
design.
Anticipated Revenue Sources; Marketing and Distribution
The Company plans to generate revenues from national and international
licensing agreements and royalty agreements based on units of production. As
opportunities present themselves, the Company will also consider developing and
operating its own manufacturing facilities. In December 1999, the Company
announced that it had received a letter of intent from Cultech International
Corporation to manufacture and market the Pallet in Asia. Cultech intends to
obtain exclusive manufacturing and marketing rights to the Pallet for all of
Asia. The terms of the letter of intent provide that the Company will deliver to
Cultech a manufacturing system that will enable Cultech to produce one million
Pallets per year. The parties have also agreed in principle that, once
engineering studies are satisfactorily completed, the parties will enter into an
agreement whereby Cultech will make payments to the Company including licensing
fees and royalty payments based on units of Pallet production.
In March 2000, the Company announced that it had received a production and
marketing letter of intent from Bryan Container Company, located in Bryan,
Texas. Bryan
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intends to become the first U.S.-based licensee to market the Company's Pallet.
Bryan, which manufactures large container lids among other container products,
plans to modify its production site to accommodate the necessary changes to
incorporate the Pallet manufacturing system, using the Company's custom Pallet
molds. Also in March 2000, the Company announced that it had received a
production and marketing letter of intent from International Pallets of
California. The letter of intent provides for the parties to enter into a formal
agreement that will allow International Pallets to produce, market and sell the
Pallet in California and Nevada. The formal agreement would include provisions
providing for International Pallets to pay a license fee and royalty payments to
the Company.
Raw Materials
The Company anticipates that its manufacturing processes will utilize
significant amounts of crumb rubber and plastic, 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. Licensees, with the
Company's source of supply assistance, will be responsible for establishing
purchasing commitments and cycles with raw material suppliers. The Company
anticipates that with the cost of rubber increasing during the past few 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 Company anticipates
that new and innovative uses for the world's excess of discarded tires will
continue to be developed. Current indications are that there is adequate raw
material supply to meet currently projected domestic finished product Pallet
program requirements.
The Company recognizes that there are certain risks beyond its control, in
connection with its licensees', or its own, proposed raw material procurement
and use. These risks may have a material effect on the Company's business. Some
of the possible risks relating to raw materials are (i) the price of natural and
synthetic rubber will decline to crumb rubber levels, thereby eliminating the
need for creation of 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 so-called "tipping" fees, which are fees imposed by various
government jurisdictions on persons and entities disposing of tires. The
significance of this latter risk is that tipping fees are used to provide
government grant money for crumb rubber producers. If this money is no longer
available, some crumb rubber producers could go out of business because their
financial viability would be impaired. Fewer crumb rubber producers, in turn,
would mean that less crumb rubber would be produced and the price of crumb
rubber would rise.
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
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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. Chep Pallets, PalEx, IFCO and Pallet
Management Systems are large suppliers of pallets in North America. These
companies mainly supply pallets manufactured from wood. The domestic wood pallet
market is estimated to be between $5-6 billion annually. There are as many as
thirty-five producers of plastic pallets in the U.S. The combined market for
these companies is estimated at close to $500 million annually (National Wood
Pallet and Container Association, June 1998; Modern Materials Handling
Association, July 1998). 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, which in turn could adversely affect the Company's
business and results of operations.
The Company's growth strategy 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, in contrast with the Company, have the advantage
of marketing existing established 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 Company's growth strategy 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 in order to develop and
manufacture products for such market expansion. 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 might 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 increased costs.
Compliance with Environmental Laws; Other Regulatory Compliance
The Company has not been materially impacted by existing government
environmental 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. The Company
believes that it is presently in compliance with all applicable
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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. While the Company anticipates taking all necessary 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 cannot estimate the potential costs
of complying with local, state, and federal environmental laws.
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. However, 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.
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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 four full-time employees. Management of the
Company anticipates using consultants for business, accounting and engineering
services on an as-needed basis.
Patents
Jeannie Runnalls and Greg Andrascik recently applied for patent protection
in the United States and have been issued a Patent Pending status on the Pallet
design which includes the combination of substrate components that comprise the
Composite Pallet. "Composite" is defined as the basic Pallet materials or
constituents that are combined to form the finished product. Substrate
components contained in the Composite Pallet include recycled crumb rubber
derived from discarded tires, and recycled plastics. The patent was filed on
March 15, 2000. Ms. Runnalls and Mr. Andrascik intend to assign the patent
rights to the Company during the second quarter of 2000.
The Company's success will depend in part on its ability to obtain patent
protection for its products, both in the United States and abroad. There can be
no assurance that any particular patent will be granted or that patents issued
to the Company will provide the protection contemplated. Patents can be
challenged, invalidated or circumvented. It is also possible that competitors
will develop similar products simultaneously.
Reports to Securityholders
The Company files annual, quarterly and special reports and other
information with the SEC. 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 maintains its own website, with
the address of www.envirokare.com.
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Item 2. Description of Property
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 and is insured under public liability insurance. The Company entered into a
36-month lease whose term began October 1, 1998, at an initial monthly rental of
$700. The Company's total lease payments for the fiscal year ended December 31,
1999 were $8,062. The Company's total lease payments for the fiscal years ending
December 31, 2000 and 2001 will be $9,276 and $7,200, respectively.
On April 1, 1999, the Company entered into a 12-month lease agreement for
office space located in British Columbia, at a monthly rental of $800. 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 3. Legal Proceedings
None.
Item 4. Submission of Matters to a Vote of Security Holders
In September 1999, by written consent in lieu of a meeting in accordance
with Section 78.320 of the General Corporation Law of the State of Nevada, the
shareholders approved the amendment of the Company'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 the Company's common stock. Each preferred share
carries ten votes. (Following the Company's 2-for-1 stock split payable March 6,
2000, each preferred share is now convertible into 20 shares of the Company's
common stock, and each preferred share now carries twenty votes.) Of the
5,119,070 outstanding shares of common stock held by persons entitled to vote on
the amendment of the Articles of Incorporation, 3,459,950 shares or 67.6% of the
shares were voted in favor of the amendment, 0 shares or 0% were voted against
the amendment, and 1,659,120 shares or 32.4% abstained from voting.
PART II
Item 5. Market for Common Equity and Related Stockholder Matters
The Company's common shares trade from time to time, under the symbol ENVK,
on the OTC Bulletin Board Electronic Quotation System maintained by the National
Association of Securities Dealers, Inc. The Company's common shares commenced
trading on the OTC Bulletin Board on December 1, 1999. From December 1, 1999, to
December 31, 1999, the high closing price was $3.125 and the low closing price
was $1.50. During the quarter commencing January 1, 2000, through March 8, 2000,
the high closing price was $3.88 and the low closing price was $1.75. The quoted
prices do not reflect the Company's
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2-for-1 stock split payable March 6, 2000 as discussed below. These OTC
quotations reflect inter-dealer quotations, without retail mark-up, mark-down or
commission, and may not necessarily represent actual transactions.
On February 22, 1999, the Company effected a reverse 2-for-1 stock split,
reducing the Company's outstanding stock from 10,000,000 to 5,000,000 shares. On
March 6, 2000, the Company effected a 2-for-1 stock split, in the form of a 100%
stock dividend, payable to shareholders of record as of the close of business on
March 1, 2000. This increased the number of common shares outstanding as of
March 7, 2000, from 5,544,739 shares to 11,089,478 shares. At that date, there
were 97 holders of record of the common shares.
There have been no cash dividends declared on the Company's common stock in
the last two fiscal years. Dividends are declared at the sole discretion of the
Company's Board of Directors.
Unregistered Sales of Securities during the Last Three Fiscal Years
There have been no sales of unregistered securities within the last three
fiscal years which would be required to be disclosed pursuant to Item 701 of
Regulation S-B, except for the following:
On or about June 16, 1998, the Company sold 10,000,000 shares of its $.001
par value common stock for $0.001 per share. The shares were issued in reliance
upon the exemption from the registration requirements of the Securities Act of
1933 (the "Act") specified by the provisions of Section 3(b) of the Act and Rule
504 of Regulation D promulgated thereunder. The offering price for the shares
was arbitrarily established by the Company and had no relationship to assets,
book value, revenues or other established criteria of value. The Company
realized proceeds of $10,000. The proceeds of the offering were used to pay for
organizational fees and provide working capital.
On or about March 15, 1999, the Company sold 76,540 shares of its $.001 par
value common stock for $.50 per share. The shares were issued in reliance upon
the exemption from the registration requirements of the Act specified by the
provisions of Section 3(b) of the Act and Rule 504 of Regulation D promulgated
thereunder. The offering price for the shares was arbitrarily established by the
Company and had no relationship to assets, book value, revenues or other
established criteria of value. The Company realized proceeds of $38,270. The
proceeds of the offering were used to pay for organizational fees and provide
working capital.
In or about August 1999, the Company 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 Act specified by the
provisions of Section 4(2) of the Act and Rule 506 of Regulation D promulgated
thereunder. The offering price for the shares was arbitrarily established by the
Company and had no relationship to assets, book value, revenues or other
established criteria of value. The Company 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.
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In or about August 1999 the Company 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 Act specified by the
provisions of Regulation S promulgated thereunder. Specifically, the offer and
sale was made to "non-U.S. persons outside the United States of America" as set
forth in Regulation S. The offering price for the shares was arbitrarily
established by the Company and had no relationship to assets, book value,
revenues or other established criteria of value. The Company 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.
On or about October 14, 1999, the Company sold 500,000 shares of its $.001
par value 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 Act specified by the provisions of Regulation S promulgated thereunder.
Specifically, the offer and sale was made to "non-U.S. persons outside the
United States of America" as set forth in Regulation S. The offering price for
the shares was arbitrarily established by the Company and had no relationship to
assets, book value, revenues or other established criteria of value. The Company
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.
In or about December 1999 the Company sold 232,000 shares of its $.001 par
value common stock for $1.00 per share. These shares were sold to accredited
investors in reliance on Section 4(2) of the Act. The shares were issued in a
private placement and are therefore restricted securities that cannot be resold
unless they are registered or unless a further exemption from registration is
available for their resale. The offering price for the shares was arbitrarily
established by the Company and had no relationship to assets, book value,
revenues or other established criteria of value. The Company realized proceeds
of $232,000. The proceeds of the offering were used to pay for operating costs
and provide working capital. There were no commissions paid on this transaction.
On or about February 18, 2000, the Company sold 154,669 shares of its $.001
par value common stock for $1.50 per share. The shares were issued in reliance
upon the exemption from the registration requirements of the Act specified by
the provisions of Regulation S promulgated thereunder. Specifically, the offer
and sale was made to "non-U.S. persons outside the United States of America" as
set forth in Regulation S. The offering price for the shares was arbitrarily
established by the Company and had no relationship to assets, book value,
revenues or other established criteria of value. The Company realized proceeds
of $232,000. The proceeds of the offering were used to pay for operating costs
and provide working capital. There were no commissions paid on this transaction.
On or about February 18, 2000, the Company sold 17,000 shares of its $.001
par value common stock for $1.50 per share. These shares were sold to accredited
investors in reliance on Section 4(2) of the Act. The shares were issued in a
private placement and are therefore restricted securities that cannot be resold
unless they are registered or unless a further exemption from registration is
available for their resale. The offering price for the shares was arbitrarily
established by the Company and had no relationship to assets, book
10
<PAGE>
value, revenues or other established criteria of value. The Company realized
proceeds of $25,500. 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 6. Plan of Operation
The Company is currently in the development stage and has not yet generated
any operating revenues. Since its inception in June 1998, the Company has
developed a single piece Pallet manufactured primarily from recycled plastic and
crumb rubber derived from discarded tires. The Company is currently in the final
stages of testing this product, and expects to begin generating licensing
revenues during the third quarter of 2000, as the Company's licensees begin
production of the Pallet.
The Company had originally planned to have its licensees begin producing
the Pallet in June 2000 but decided to conduct additional tests, which has
delayed the previously planned start date by approximately four months.
Significantly improved substrate technology caused the Company to rethink their
initial production start-up dates. Consequently, additional product testing was
required that would be specific to the improved substrate composition, prior to
initiating the launch of production operations for licensees. Although the
Company's decision to further test the Pallet has set back production dates, the
Company believes that this additional testing has substantially minimized or
eliminated any concerns as to the Pallet's design and ability to perform. The
Company's testing program has included in-depth analysis of substrate compounds,
extrusion methods and equipment modifications. Initial prototypes of the Pallet
have been developed and refined. The Company expects to have potential customers
evaluate the Pallet through in-use testing beginning in the second quarter of
2000. The Company believes that after a final engineering analysis report is
completed, Company licensees will commence production of the Pallet during the
third quarter of 2000.
To date, the Company has raised capital through private placements of
common stock and convertible preferred stock. See "Item 5. Market for Common
Equity and Related Stockholder Matters -- Unregistered Sales of Securities
during the Last Three Fiscal Years" for a discussion of the Company's securities
issuances. The Company has budgeted expenditures in 2000 of $582,000, and plans
to raise $250,000 in the next several months to cover its proposed expenditures.
These funds may be raised through additional equity financings, as well as
borrowings and other resources. The Company is currently holding discussions
with potential investors. With the capital it has raised to date, and the
additional $250,000 it plans to raise in the next several months, the Company
now believes that it is at the point where it can move forward with its
production and marketing plans, which in the short term include the start-up of
Pallet manufacturing operations by Company licensees, and in the longer term
include adding additional licensees and expanding the product line mix.
Management of the Company believes that its financing plans described above will
enable it to meet its obligations for at least the next twelve months.
To achieve and maintain competitiveness of its products and to conduct
further production and development, the Company may be required to raise
substantial funds in addition to funds already raised through the issuance of
the Company's shares. There can
11
<PAGE>
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. For example, the Company's longer-term plans
include setting up its own production operations, in addition to its
shorter-term focus of having licensees produce the Pallet. If the Company cannot
raise enough funds, it may not be able to carry out its plan to set up its own
operations. The Company might also have to obtain funds through entering into
arrangements with collaborative partners or others. That could require the
Company to relinquish rights to certain products, which could impair future
sources of revenues for the Company.
Liquidity
The Company is not yet generating revenues. For the year ended December 31,
1999, the Company had a net loss of $894,375, compared to a net loss of $ 34,427
for the period from June 15, 1998 (inception) to December 31, 1998. The Company
anticipates that it will begin to generate revenue during the third quarter of
2000 upon the planned start of production of the Pallet by the Company's
licensees. At December 31, 1999 the Company had current assets of $224,337,
consisting of $148,046 in cash and $76,291 in prepaid expenses. During 1999, the
Company's cash resources increased primarily due to issuances of the Company's
preferred stock and common stock. See "Item 5. Market for Common Equity and
Related Stockholder Matters -- Unregistered Sales of Securities during the Last
Three Fiscal Years" for a discussion of the Company's securities issuances. At
December 31, 1999 the Company had current liabilities of $169,090. At December
31, 1999 current assets exceeded current liabilities by $55,247. Other than as
discussed above, the Company is not aware of any trends, demands, commitments or
uncertainties, other than those affecting business and the economy in general,
that could result in the Company's liquidity decreasing or increasing in a
material way within the next 12 months.
12
<PAGE>
Item 7. Financial Statements
ENVIROKARE TECH, INC.
Financial Statements
December 31, 1999 and 1998
WILLIAMS & WEBSTER PS
Certified Public Accountants
Seafirst Financial Center
W 601 Riverside, Suite 1940
Spokane, WA 99201
(509) 838-5111
13
<PAGE>
Index to Consolidated Financial Statements
INDEPENDENT AUDITORS' REPORT 15
FINANCIAL STATEMENTS
Statements of Financial Position 16
Statements of Operations and Comprehensive Loss 17
Statement of Stockholders' Equity 18
Statements of Cash Flows 19
NOTES TO FINANCIAL STATEMENTS 20
14
<PAGE>
Board of Directors
Envirokare Tech, Inc.
2470 Chandler, Suite 5
Las Vegas, Nevada 89120
Independent Auditor's Report
We have audited the accompanying statements of financial position of Envirokare
Tech, Inc. (a development stage company) as of December 31, 1999 and 1998, and
the related statements of operations and comprehensive loss, cash flows, and
stockholders' equity for the year then ended and for the period from June 15,
1998 (inception) to December 31, 1999. 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 audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Envirokare Tech, Inc. as of
December 31, 1999 and 1998, and the results of its operations and its cash flows
for the year then ended and from June 15, 1998 to December 31, 1999, in
conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2, the Company is
in the development stage and has sustained losses since its inception on June
15, 1998. Realization of a major portion of its assets is dependent upon the
Company's ability to meet its future financing requirements, and the success of
future operations. These factors raise substantial doubt about the Company's
ability to continue as a going concern. Management's plans regarding those
matters also are described in Note 2. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
/s/ Williams & Webster, P.S.
Williams & Webster, P.S.
Spokane, Washington
March 31, 2000
15
<PAGE>
ENVIROKARE TECH, INC.
(A Development Stage Company)
STATEMENTS OF FINANCIAL POSITION
<TABLE>
December 31, December 31,
1999 1998
----------- ------------
ASSETS
CURRENT ASSETS
<S> <C> <C>
Cash $ 148046 $ 2,388
Prepaid expenses 76,291 730
--------- ---------
TOTAL CURRENT ASSETS 224,337 3,118
--------- ---------
PROPERTY AND EQUIPMENT
Furniture and fixtures 1,593 1,014
Office equipment 6,661 2,645
Less accumulated depreciation (1,385) (149)
--------- ---------
TOTAL PROPERTY AND EQUIPMENT 6,869 3,510
--------- ---------
OTHER ASSETS
Deposits and retainers 18,789 --
Patent costs 33,939 33,330
--------- ---------
TOTAL OTHER ASSETS 52,728 33,330
--------- ---------
TOTAL ASSETS $ 283,934 $ 39,958
========= =========
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 88,155 $ --
Notes payable 61,965 61,965
Accrued interest 6,770 573
Reimbursement due 12,200 1,847
--------- ---------
TOTAL CURRENT LIABILITIES 169,090 64,385
--------- ---------
COMMITMENTS AND CONTINGENCIES -- --
--------- ---------
STOCKHOLDERS' EQUITY
Preferred stock, 10,000,000 shares authorized,
$.001 par value; 500,000 and no shares issued and
outstanding, respectively 500 --
Common stock, 200,000,000 shares authorized,
$.001 par value; 5,373,070 and 5,000,000 shares issued
and outstanding, respectively 5,373 5,000
Stock subscriptions receivable (105,000) --
Additional paid-in-capital 590,773 5,000
Stock options 552,000 --
Accumulated deficit during developmental stage (927,600) (34,427)
Other comprehensive loss (1,202) --
--------- ---------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) 114,844 (24,427)
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 283,934 $ 39,958
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
16
<PAGE>
ENVIROKARE TECH, INC.
(A Development Stage Company)
STATEMENT OF OPERATIONS AND COMPREHENSIVE LOSS
<TABLE>
Period from Period from
June 15, 1998 June 15, 1998
Year Ended (Inception) to (Inception) to
December 31, December 31, December 31,
1999 1998 1999
----------- ---------- ----------
<S> <C> <C> <C>
REVENUES $ -- $ -- $ --
----------- ---------- ----------
EXPENSES
Consulting fees: related parties 282,716 10,000 292,716
Other consulting fees 378,350 6,700 385,050
Rent 10,899 2,920 13,819
General and administrative 96,621 4,085 100,706
Transfer agent fees -- 1,353 1,353
Depreciation 1,235 149 1,384
Interest on notes payable 6,239 573 6,812
Listing expenses and filing fees -- 8,647 8,647
Legal and accounting 45,963 -- 45,963
Research and development 71,150 -- 71,150
----------- ---------- ----------
TOTAL EXPENSES 893,173 34,427 927,600
----------- ---------- ----------
LOSS FROM OPERATIONS (893,173) (34,427) (927,600)
INCOME TAX -- -- --
----------- ---------- ----------
NET LOSS (893,173) (34,427) (927,600)
OTHER COMPREHENSIVE LOSS
Foreign currency translation loss (1,202) -- (1,202)
----------- ---------- ----------
COMPREHENSIVE LOSS (894,375) (34,427) (928,802)
=========== ========== ==========
BASIC AND DILUTED NET LOSS PER COMMON SHARE $ (0.17) $ nil $ (0.18)
=========== ========== ==========
WEIGHTED AVERAGE NUMBER OF BASIC AND DILUTED
COMMON STOCK SHARES OUTSTANDING 5,112,832 5,000,000 5,071,144
=========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
17
<PAGE>
ENVIROKARE TECH, INC.
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
December 31, 1999
<TABLE>
Preferred Stock Common Stock Additional
Number Number Paid-In Stock Subscriptions
of Shares Amount of Shares Amount Capital Options Receivable
--------- ------ --------- ------ ------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Issuance of common stock in June, 1998:
For cash at $.001 per share -- $-- 10,000,000 $5,000 $ 5,000 $ -- $ --
Net loss for period ended December 31, 1998 -- -- -- -- -- -- --
------- ---- ---------- ------ -------- -------- ---------
Balance
December 31, 1998 -- -- 10,000,000 5,000 5,000 -- --
Issuance of common stock at $.50 - -- -- 373,070 373 334,426 -- (105,000)
$1.00 per share for cash
Issuance of preferred stock at $.50 per share 500,000 500 -- -- 249,500 -- --
for cash
Issuance of stock options -- -- -- -- -- 552,000 --
Forgiveness of debt -- -- -- -- 1,847 -- --
Net loss for year ended December 31, 1999 -- -- -- -- -- -- --
Foreign currency translation loss -- -- -- -- -- -- --
------- ---- ---------- ------ -------- -------- ---------
Balance, December 31, 1999 500,000 $500 10,373,070 $5,373 $590,773 $552,000 $(105,000)
======= ==== ========== ====== ======== ======== =========
<CAPTION>
Other Total
Accumulated Comprehensive Stockholders'
Deficit Loss Equity
----------- -------------- ---------
<S> <C> <C> <C>
Issuance of common stock in June, 1998: $ -- $ -- $ 10,000
For cash at $.001 per share
(34,427) -- (34,427)
Net loss for period ended December 31, 1998 --------- ------- ---------
Balance (34,427) -- (24,427)
December 31, 1998
-- -- 229,799
Issuance of common stock at $.50 - $1.00 per share
for cash
-- -- 250,000
Issuance of preferred stock at $.50 per share
for cash
-- -- 552,000
Issuance of stock options
-- -- 1,847
Forgiveness of debt
(893,173) -- (893,173)
Net loss for year ended December 31, 1999
-- (1,202) (1,202)
Net loss for period ended December 31, 1998 --------- ------- ---------
$(927,600) $(1,202) $ 114,844
Balance, December 31, 1999 ========= ======= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
18
<PAGE>
ENVIROKARE TECH, INC.
(A Development Stage Company)
STATEMENT OF CASH FLOWS
<TABLE>
Period from Period from
Year June 15, 1998 June 15, 1998
Ended (Inception) to (Inception) to
December 31, December 31, December 31,
1999 1998 1999
----------------- ---------------- ---------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $(893,173) $(34,427) $(927,600)
Adjustments to reconcile net loss
to net cash used by operating activities:
Depreciation 1,235 149 1,384
Stock options issued for consulting fees 552,000 -- 552,000
Increase in prepaid expenses (94,350) (730) (95,080)
Increase in accounts payable 100,356 -- 100,356
Increase in accrued interest 6,197 573 6,770
Expenses paid by note payable -- 2,870 2,870
--------- -------- ---------
Net cash used by operating activities (327,735) (31,565) (359,300)
--------- -------- ---------
Cash flows from investing activities:
Patent costs (609) -- (609)
Equipment (4,595) (1,047) (5,642)
--------- -------- ---------
Net cash used in investing activities (5,204) (1,047) (6,251)
--------- -------- ---------
Cash flows from financing activities:
Proceeds from sale of preferred stock 250,000 -- 250,000
Proceeds from sale of common stock 229,799 10,000 239,799
Proceeds from issuance of notes payable -- 25,000 25,000
--------- -------- ---------
Net cash provided by financing activities 479,799 35,000 514,799
--------- -------- ---------
Increase in cash 146,860 2,388 149,248
Adjustment for foreign currency (1,202) -- (1,202)
Cash, beginning of period 2,388 -- --
--------- -------- ---------
Cash, end of period $ 148,046 $ 2,388 148,046
========= ======== =========
SUPPLEMENTAL INFORMATION:
Interest paid $ -- $ -- $ --
========= ======== =========
Income taxes paid $ -- $ -- $ --
========= ======== =========
NON-CASH TRANSACTIONS:
Note issued for purchase of property, equipment and
operating expenses $ -- $ 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
Stock options issued for consulting fees $ 552,000 $ -- $ 552,000
Stockholder's contribution for equipment $ 1,847 $ -- $ 1,847
</TABLE>
The accompanying notes are an integral part of these financial statements.
19
<PAGE>
ENVIROKARE TECH, INC.
(A Development Stage Company)
Notes to the Financial Statements
For the Years ended December 31, 1999 and 1998
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 patent rights potentially applicable to
future development of a pallet made of recycled materials. The Company is
currently developing marketing and manufacturing plans for the products under
development. The Company maintains an office in Las Vegas, Nevada.
The Company is in the development stage, and as of December 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 has incurred an
accumulated deficit of $927,600 which includes a net loss of $893,173 for the
year ending December 31, 1999, and has a working capital deficit. 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.
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.
20
<PAGE>
ENVIROKARE TECH, INC.
(A Development Stage Company)
Notes to the Financial Statements
For the Years ended December 31, 1999 and 1998
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Going Concern (continued)
The Company has raised equity capital through the sale of common and preferred
stock. Management has proceeded as planned in the ongoing development of a
recycled plastic and rubber composite pallet. In-depth analysis of compounds,
extrusion method and equipment modifications have been studied and refined, as
have initial prototypes. During the year ending December 31, 1999, the Company
has contracted with Thermoplastic Composite Designs Inc. and Thermoplastic
Flowforming Technologies Corp. for professional and technical services. Finished
product should be available for distribution to potential customers for in-use
evaluation during the second quarter of year 2000.
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. Basic and diluted shares
outstanding are the same, as the inclusion of common stock equivalents would be
anti-dilutive.
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, 1999 and 1998, the Company had net operating losses of
approximately $893,000 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.
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.
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.
21
<PAGE>
ENVIROKARE TECH, INC.
(A Development Stage Company)
Notes to the Financial Statements
For the Years ended December 31, 1999 and 1998
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Impaired Asset Policy
In March 1995, the Financial Accounting Standards Board issued a statement
titled "Accounting for Impairment of Long-lived Assets." In complying with this
standard, the Company will review its long-lived assets quarterly to determine
if any events or changes in circumstances have transpired which indicate that
the carrying value of its assets may not be recoverable. The Company does not
believe any adjustments are needed to the carrying value of its assets at
December 31, 1999.
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, the
Company does not have any evidence of problems associated with the year 2000
issue.
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.
For The Years Ended
December 31,
---------------------------------
1999 1998
------------ ------------
Furniture and Fixtures $1,593 $1,014
Less Accumulated Depreciation 269 50
------------ ------------
Net Furniture & Fixtures $1,324 $964
============ ============
Office Equipment $6,661 $2,645
Less Accumulated Depreciation 1,116 99
------------ ------------
Net Office Equipment $5,545 $2,546
============ ============
22
<PAGE>
ENVIROKARE TECH, INC.
(A Development Stage Company)
Notes to the Financial Statements
For the Years ended December 31, 1999 and 1998
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. During the year ended December 31, 1999, attorney fees of $609 were
added to patent cost. 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 in fiscal year ending December 31,
1998, which were deducted from the purchase price of computer equipment. This
debt was forgiven during the year ending December 31, 1999 and applied to
additional paid in capital.
Refunds of $12,200 were due to potential investors from the stock subscription
offering. The potential investors did not meet the accredited investor criteria
that was a prerequisite for inclusion in the offering. The refunds were paid in
February 2000.
Short-term notes payable at December 31, 1999 and 1998 consist of unsecured
notes bearing 10% interest and are dated between August 18, 1998 and December
16, 1998. The short-term notes are payable to Real Morel and are due on demand.
The principal amount on the notes is $63,965. Interest expense recorded on the
notes payable at December 31, 1999 and 1998 was $6,239 and $573, respectively.
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.
During the year ending December 31, 1999, common stock shares of 373,070 were
issued for cash. At December 31, 1999 the balance of stock subscriptions was
$105,000. Stock subscriptions were paid, and stock issued February 16, 2000, for
these common stock shares.
23
<PAGE>
ENVIROKARE TECH, INC.
(A Development Stage Company)
Notes to the Financial Statements
For the Years ended December 31, 1999 and 1998
NOTE 7 - PREFERRED STOCK
During the year ending December 31, 1999, preferred stock shares of 500,000 were
issued for $250,000 cash. The preferred stock has no rights for dividends, but
is convertible to common stock at the rate of ten shares of common for each
preferred share. This conversion feature was modified to twenty to one by the
subsequent stock split effective March 1, 2000.
NOTE 8 - STOCK OPTIONS
In September 1999, the Company adopted the 1999 Stock Plan, a non-qualified
plan. The plan was registered with the Securities Exchange Commission. The 1999
Stock Plan authorizes 2,000,000 stock options. The purposes of the 1999 Stock
Plan are to attract, retain and motivate employees, directors and consultants of
the Company. In accordance with Statement on Financial Accounting Standard No.
123, the fair value of the options granted were estimated using the
Black-Scholes Option Price Calculation. The following assumptions were made to
value the stock options: risk-free interest rate at 5%, expected life at 10
years, and management's expected volatility at 30%. For the year ended December
31, 1999, the company recorded $552,000 ($.48 per option) in consulting fees for
the value of the options based upon these Black Scholes assumptions. These stock
options will expire September 29, 2009. (See Note 9).
Fixed Plan
-----------------------------------
Number of Weighted Average
Shares Exercise Price
---------------- ----------------
Outstanding at December 31, 1998 0 0
Granted 1,150,000 $1.15
--------- -----
Outstanding at December 31, 1999 1,150,000 $1.15
========= =====
Options Exercisable December 31, 1999 287,500 $1.15
========= =====
Common stock when issued for the above options will have certain contractual
restrictions upon subsequent sale. All holders cannot sell more than 25% of
their granted amounts per year held, nor exceed total annual sales of $100,000
per year.
24
<PAGE>
ENVIROKARE TECH, INC.
(A Development Stage Company)
Notes to the Financial Statements
For the Years ended December 31, 1999 and 1998
NOTE 9 - RELATED PARTIES
Jeannie M. Runnalls, who serves as a director, received cash in consulting fees
during the year ending December 31, 1999 of $22,715.
Stock options of 1,150,000 were issued for common stock shares during the year
ending December 31, 1999. Of these stock options, 500,000 were issued to related
parties. (See Note 8).
Madelyn Thomas, who received $10,000 in consulting fees under the terms of an
ongoing contract as of December 31, 1998 and an additional $20,000 as of
December 31, 1999, is the wife of the president of the Company, Charles W.
Thomas. (See Note 11). On June 1, 1999, Madelyn Thomas served the company
thirty-day notice to terminate her consulting contract to be effective at
month's end.
NOTE 10 - 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 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 commenced November 1, 1998 and terminated June 30, 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.
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(CDN) per month, not
including utilities. This lease was cancelled as of July 31, 1999 without
penalty.
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:
2000 $9,276
2001 $7,200
25
<PAGE>
ENVIROKARE TECH, INC.
(A Development Stage Company)
Notes to the Financial Statements
For the Years ended December 31, 1999 and 1998
NOTE 11 - SUBSEQUENT EVENTS
In November 1999 the Company entered into a contract with Thermoplastic
Composite Designs (TCD), Inc. and Thermoplastic Flowforming Technologies Corp.
(TPF) for professional and technical services. These services included the
design and material specs, mold fabrication, prototype and demo units. The total
contract amount is $133,800. During the year ended December 31, 1999, the amount
paid was $50,800 leaving a balance owing of $83,000. On January 24, 2000 a
payment of $35,000 was made. An additional payment of $35,000 was made on March
15, 2000. The Company recorded $70,000 of these research and development costs
to prepaid expenses as of December 31, 1999. This amount represents the value of
the molds derived from this contract, which may become depreciable property if
no further development is necessary. Upon execution of a TPF Technology
Licensing Agreement, the Company will receive a credit of $61,600; representing
46% of the payments made to TCD under the development contract, toward the
license fee payable to TPF Technologies.
Charles W. Thomas, president of the Company, tendered his resignation effective
February 1, 2000 due to poor health.
On February 7, 2000 the directors of the Company voted to offer to sell up to
300,000 shares of common stock at a price of $1.50 per share in a private
offering.
On February 10, 2000, a 2 for 1 stock split was announced. The Company
accomplished this by issuing a 100% stock dividend to shareholders of record at
the close of business on March 1, 2000.
26
<PAGE>
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance
with Section 16(a) of the Exchange Act
The directors and principal executive officers of the Company as of
December 31, 1999, are as specified on the following table:
Name Age Position
---- --- --------
Charles W. Thomas 66 President, Secretary,
Treasurer and Director
(resigned 1/24/00)
Jeannie M. Runnalls 50 Vice President and Director
Timothy M. Zuch 44 Chief Financial Officer
and Director (resigned 2/29/00)
Henry David Still, IV 59 Director
At December 31, 1999, Charles W. Thomas was President, Secretary, Treasurer
and a director of the Company, having served in those positions since December
28, 1998. He resigned from those positions effective January 24, 2000. Mr.
Thomas has been providing administration services to public companies for over
ten years. He served as President of Exec-U-Forms from 1984 to 1986 and Vice
President of that company from May 1986 to December 1994. Mr. Thomas was the
owner and operator of Thomas Service from 1961 through 1983 and the President
and Administrator of E.U.F. Investments from 1989 through 1994.
At December 31, 1999, Jeannie M. Runnalls was Vice President of
Administration and a director of the Company. Effective January 24, 1999, she
replaced Mr. Thomas as President and Secretary of the Company. She has been a
director of the Company since March 10, 1999 and served as Vice President of
Administration of the Company from March 1999 until becoming President in
January 2000. She served as General Manager and owner of Taumus Enterprises,
Cave Supper Club Ltd., and International Artists from October 1977 through
November 1993. From November 1993 to August 1997, she served as General Manager
of operations at the Pallet Factory. From August 1997 through March
27
<PAGE>
1999, she was owner and operator of Pallet Control Systems. In 1967, Ms.
Runnalls studied business at the Vancouver Vocational Institute.
Timothy M. Zuch served as Chief Financial Officer and a director of the
Company from August 1999 and, effective January 24, 2000, had also been
appointed Treasurer of the Company, replacing Mr. Thomas in that capacity. Mr.
Zuch resigned from those positions effective February 29, 2000. Mr. Zuch was
employed with the Internal Revenue Service for seventeen years, in the capacity
of agent and District Director's Representative.
Henry David Still, IV, has served as a director of the Company since August
1999. Mr. Still possesses an accounting background and has held the position as
general manager for construction companies including HDS Company, Inc. and
Palmetto Properties, Inc. for sixteen years. Mr. Still is a director of Say Yes
Foods, Inc.
Effective January 24, 2000, James Scammell was appointed director to
replace Mr. Thomas in that capacity. Mr. Scammell has a background in financial
operations, and he is currently assisting the Company in establishing funding
plans relating to the overall business plan and strategy of the Company. Mr.
Scammell also assists with raising required capital for the Company. Mr.
Scammell was the owner of a British Columbia Lottery Corporation sales outlet
for five years and also managed and operated Scammell Farms, Inc., a British
Columbia Thoroughbred racing and breeding operation for twelve years. Mr.
Scammell handled all managerial aspects of these firms, including all oversight
aspects of financial activities.
None of the persons specified above share any familial relationship. Other
than the persons specified above, there are currently no significant employees
expected by the Company to make a significant contribution to the business of
the Company. All directors of the Company serve until the next annual meeting of
stockholders. The Company's executive officers are appointed by the Company's
Board of Directors and serve at the discretion of the Board of Directors.
Section 16(a) Beneficial Ownership Reporting Compliance
On February 14, 2000, Forms 3 were filed late for Charles W. Thomas, then
President and director; Jeannie M. Runnalls, then Vice President (currently
President) and director; Henry David Still, IV, director; Timothy M. Zuch, then
Chief Financial Officer, Treasurer and director; James Scammell, director; and
Arcade Investments Limited, which beneficially owns more than 10% of the
outstanding common stock of the Company. These persons (except for Mr. Scammell,
who became a Director only in January 2000), reported their ownership of the
Company's common stock in their respective year-end reports on Form 5, which
were timely filed. Since Mr. Scammell became a Director only after December 31,
1999, the Form 5 filing requirement did not apply to him for 1999. An amended
Form 5 was filed for Ms. Runnalls on February 17, 2000. Amended Forms 3 and 5
were filed for Arcade Investments Limited on March 10, 2000.
Richard Dalon, formerly Chief Financial Officer and director of the
Company, resigned from those positions on or about August 26, 1999. To the
Company's knowledge, up to the time of Mr. Dalon's resignation, he had not filed
a Form 3 or Form 5 report.
28
<PAGE>
Since Mr. Dalon is no longer affiliated with the Company, the Company has no
knowledge of whether Mr. Dalon has filed a Form 3 or a Form 5 report after his
resignation from the Company. The Company has received no copies of Form 3 or
Form 5 reports at any time before or since Mr. Dalon's resignation. Mr. Dalon is
no longer subject to Section 16(a) beneficial ownership reporting compliance
requirements with respect to his ownership of the Company's common stock.
Item 10. Executive Compensation
The Company is required to set out particulars of compensation paid to the
following persons:
(a) The Company's chief executive officer during the most recently
completed fiscal year;
(b) Each of the Company's four most highly compensated executive officers
who were serving as executive officers at the end of the most recently completed
fiscal year and whose total salary and bonus exceeds $100,000 per year; and
(c) Any additional individuals for whom disclosure would have been provided
under (b) except that the individual was not serving as an executive officer of
the Company at the end of the most recently completed fiscal year
During the fiscal year ended December 31, 1999, the Company employed only
one person meeting any of those requirements; namely, Charles Thomas, then
President, Secretary, Treasurer and a director of the Company. Accordingly, the
only person treated in the following charts is Mr. Thomas. Mr. Thomas resigned
as President, Secretary, Treasurer and a director of the Company effective
January 24, 2000.
Fiscal Year Ended December 31, 1998
The Company was incorporated in June 1998. During its fiscal year ended
December 31, 1998, none of the executive officers or directors of the Company,
including the chief executive officer, earned either compensation or
remuneration from the Company for services provided in their official
capacities.
29
<PAGE>
Fiscal Year Ended December 31, 1999
Summary of Compensation
During the fiscal year ended December 31, 1999, the only compensation
received by Mr. Thomas was in the form of non-qualified stock options (subject
to shareholder approval, as discussed below), as follows:
<TABLE>
<CAPTION>
===================================================================================================================
Annual Compensation Long Term Compensation
------------------------------- ------------------------------------
Awards Payouts
-------------------------- ---------
Securities Restricted
Other Under Shares or
Name and Annual Options/ Restricted LTIP All Other
Principal Salary Bonus Compensation SARs Share Payouts Compensation
Position Year ($) ($) ($) Granted (#) Units ($) ($) ($)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Charles W. 1999 0 0 0 150,000 0 0 0
Thomas
President and
Director
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
Options and Stock Appreciation Rights Granted During the Most Recently
Completed Fiscal Year
================================================================================
Securities % of Total
Under Options/SARs
Options/SARs Granted to Exercise or
Granted Employees in Base Price Expiration
Name (#) Fiscal Year ($/Security) Date
- --------------------------------------------------------------------------------
Charles W. 150,000 13.0% $1.15 Sept. 29,
Thomas 2009
================================================================================
These amounts have not been adjusted to reflect the Company's 2-for-1 stock
split, effected in the form of a 100% stock dividend, payable on March 6, 2000,
to shareholders of record on March 1, 2000. All of the Company's stock option
grants made in 1999 are subject to shareholder approval of the Company's 1999
Stock Plan. See " -- Compensation of Directors and Remuneration of Senior
Officers," below.
30
<PAGE>
Long-Term Incentive Plans -- Awards in Most Recently Completed Fiscal Year
The Company has no long-term incentive plan in place. A "Long-Term
Incentive Plan" is a plan under which awards are made based on performance over
a period longer than one fiscal year. It is different from a plan for options,
stock appreciation rights, or restricted share compensation.
Options Exercised During the Most Recently Completed Fiscal Year and Fiscal
Year End Option Values
The following table sets out stock options exercised by Mr. Thomas during
the last fiscal year, as well as the fiscal year end value of stock options held
by him. All of the Company's stock option grants made in 1999 are subject to
shareholder approval of the Company's 1999 Stock Plan. See " -- Compensation of
Directors and Remuneration of Senior Officers," below. During this period, Mr.
Thomas held no stock appreciation rights.
<TABLE>
<CAPTION>
===============================================================================================================
Unexercised Options/SARs at Value of Unexercised in the
Securities Aggregate Dec. 31, 1999 (#) Money Options/SARs at
Acquired on Value Realized Dec. 31, 1999 ($)
Name Exercise ($) Exercisable/Unexercisable Exercisable/Unexercisable (1)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Charles W. 0 0 150,000/0 N/A
Thomas
===============================================================================================================
</TABLE>
(1) In-the-money options are those where the market value of the underlying
securities on a given date exceeds the option exercise price at that date.
The closing market price of the Company's shares on December 31, 1999, was
$2.38.
Compensation of Directors and Remuneration of Senior Officers
Mr. Thomas's compensation was disclosed above. The Company did not pay any
cash compensation to any other director for services as a director during the
fiscal year ended December 31, 1999.
The Company has no standard arrangement to compensate directors for their
services in their capacity as directors except for the granting from time to
time of stock options in accordance with the Company's 1999 Stock Plan. Such
grants are subject to approval of the Company's 1999 Stock Option Plan by the
Company's shareholders. The Company plans to request shareholder approval of the
Plan at its annual meeting of shareholders to be held in May 2000. During the
last fiscal year, the Company granted its directors, other than Mr. Thomas,
non-qualified stock options to purchase a total of 300,000 Envirokare common
shares. It granted 50,000 to Mr. Still, 100,000 to Mr. Zuch and 150,000 to Ms.
Runnalls. These amounts have not been adjusted to reflect the Company's 2-for-1
stock split, effected in the form of a 100% stock dividend, payable on March 6,
2000, to shareholders of record on March 1, 2000. These options are exercisable
up to the close of business on September 29, 2009.
31
<PAGE>
All of the existing stock options are non-transferable and terminate on the
earlier of the expiration date or the end of the six-month period after the date
on which the director, officer or employee, as the case may be, terminates his
or her position at the Company.
The outstanding options will be adjusted if the Company consolidates,
subdivides or similarly changes its share capital.
There has been no arrangement pursuant to which Directors were compensated
by the Company in their capacity as Directors or for services rendered as
consultants or experts during the Company's fiscal year ended December 31, 1999.
During the fiscal year ended December 31, 1999, the Company paid a total of
$20,000 to Madelyn Thomas for consulting fees. Ms. Thomas is the wife of Charles
Thomas, who was President, Secretary, Treasurer and a director of the Company
during the fiscal year ended December 31, 1999.
Employment Contracts and Termination of Employment and Change-in-Control
Arrangements
The Company anticipates entering into contracts with Ms. Runnalls and other
Company executives during the second quarter of 2000.
Item 11. Security Ownership of Certain Beneficial Owners and Management
To the knowledge of the Company's management, as of March 7, 2000, no
person beneficially owned more than five percent of any class of the Company's
voting securities other than as set forth below. The following table sets forth
the total amount of any class of the Company's voting securities owned by each
of its executive officers and directors and by its executive officers and
directors, as a group, as of March 7, 2000. Beneficial ownership numbers reflect
the Company's 2-for-1 stock split, effected as a 100% stock dividend, payable
March 6, 2000 to shareholders of record March 1, 2000.
Amount and Nature of Percentage
Name and Address (1) Beneficial Ownership(2) of Class
- -------------------- ----------------------- ---------
Arcade Investments Limited 10,650,000(3) 50.5%
Jeannie M. Runnalls 510,000(4) 4.5%
Henry David Still, IV 100,000(5) 0.9%
James D. Scammell 100,000(5) 0.9%
All executive officers and directors 710,000(2) 6.1%(2)
as a group (3 persons)
32
<PAGE>
(1) The address of Arcade Investments Limited is 21 East Drive, Garston,
Watford, England WD2 6AH. The address for each of the other persons listed is
2470 Chandler Avenue, Suite 5, Las Vegas, Nevada 89120.
(2) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. In computing the number of shares owned by a
person and the percentage ownership of that person, shares of common stock
subject to options and warrants held by that person that are currently
exercisable or exercisable within 60 days of March 7, 2000, are deemed
outstanding. Such shares, however, are not deemed outstanding for the purposes
of computing the percentage ownership of any other person.
(3) Includes 500,000 shares of convertible preferred stock, each of which is
currently convertible into twenty shares of common stock of the Company, or an
aggregate of 10,000,000 shares of common stock.
(4) Includes options exercisable within 60 days of March 7, 2000, to purchase an
aggregate of 300,000 shares of common stock. These option grants are subject to
shareholder approval of the Company's 1999 Stock Plan. See "Item 10. Executive
Compensation -- Fiscal Year Ended December 31, 1999 -- Compensation of Directors
and Remuneration of Senior Officers."
(5) Includes options exercisable within 60 days of March 7, 2000, to purchase
100,000 shares of common stock. Neither Mr. Still nor Mr. Scammell owns any
shares of the Company's common stock. These option grants are subject to
shareholder approval of the Company's 1999 Stock Plan. See "Item 10. Executive
Compensation -- Fiscal Year Ended December 31, 1999 -- Compensation of Directors
and Remuneration of Senior Officers."
The Company's management is not aware of any arrangements which may result
in "changes in control" as that term is defined by the provisions of Item 403(c)
of Regulation S-B.
Item 12. Certain Relationships and Related Transactions
On November 1, 1998, the Company entered into a management services
agreement with Madelyn Thomas, the wife of Charles W. Thomas, then President,
Secretary, Treasurer and a director of the Company. According to the terms of
the agreement, Mrs. Thomas was to receive $5,000 per month for the term of the
agreement, which was to end on October 31, 1999. The agreement provided for
indemnification against any and all liability and for reimbursement of expenses
up to a specified amount. Mrs. Thomas' duties under the agreement included
researching possible locations for the Company's corporate office, lease
negotiations, purchasing necessary equipment and supplies, hiring necessary
support staff, initial office management and research of the pallet industry in
the United States. The agreement provided for termination upon thirty days'
written notice by either party. As of December 31, 1998, Mrs. Thomas had
received $10,000 in consulting fees under the agreement. On June 1, 1999, Mrs.
Thomas gave the Company 30 days' notice to terminate the agreement, effective
June 30, 1999. As of December 31, 1999, Mrs. Thomas had been paid a total of
$20,000 under the agreement, with the additional accrued unpaid amount being
forgiven by Mrs. Thomas.
33
<PAGE>
In December 1998, the Company purchased certain assets, including all of
the equipment, early-stage rubber mold technology and patent rights potentially
applicable to future development of rubber mold technology for creating a pallet
made of recycled materials, from Real Morel of International Pallet and The
Pallet Company. See "Item 1. Description of Business -- Development and Business
of the Company." The Company's purchase price payment obligation was evidenced
by a series of unsecured notes payable in favor of Real Morel totaling Cdn.$
61,965, with interest accruing at 10% per annum. At the time of the transaction,
Mr. Morel operated both International Pallet and the Pallet Company. At the time
of the transaction, Jeannie Runnalls, current President and a director of the
Company, was the office manager of International Pallet.
Item 13. Exhibits, Financial Data Schedules and Reports on Form 8-K
(a) Exhibits
3.1 Company's Articles of Incorporation, as amended October 12, 1999.
3.2 Company's By-laws (incorporated herein by reference to Exhibit 3 to
Company's Registration Statement on Form 10-SB, dated May 14, 1999,
Registration No. 000-26095 ("Company's Form 10-SB").
10.1 General Assignment of Assets of the Rubber Mold Technology, dated as
of December 15, 1998, between Real Morel, as Assignor, and the
Company, as Assignee (incorporated herein by reference to Exhibit 4 to
Company's Form 10-SB).
10.2 Promissory Notes Executed by the Company in Favor of Real Morel, dated
as of December 15, 1998, December 15, 1998, August 18, 1998, September
24, 1998 and November 16, 1998 (incorporated herein by reference to
Exhibit 5 to Company's Form 10-SB).
10.3 Management Services Agreement, dated as of November 1, 1998, between
Susan Westfall, as Contractor, and the Company (incorporated herein by
reference to Exhibit 6 to Company's Form 10-SB).
10.4 Management Services Agreement, dated as of November 1, 1998, between
Madelyn Thomas, as Contractor, and the Company (incorporated herein by
reference to Exhibit 7 to Company's Form 10-SB).
Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company during the three months ended
December 31, 1999.
34
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant
has caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Henderson, Nevada, on April 6, 2000.
ENVIROKARE TECH, INC.
Registrant
By: /s/ JEANNIE M. RUNNALLS
---------------------------
Name: Jeannie M. Runnalls
Title: President
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the Registrant and in the capacities and on
the dates indicated.
Signature Title Date
--------- ----- ----
/s/ JEANNIE M. RUNNALLS President and Director April 6, 2000
------------------------
Jeannie M. Runnalls (Principal Executive Officer
and Principal Financial and
Accounting Officer)
/s/ HENRY DAVID STILL, IV Director April 6, 2000
- -------------------------
Henry David Still, IV
/s/ JAMES D. SCAMMELL Director April 6, 2000
-----------------------
James D. Scammell
35
<PAGE>
Exhibit
Number Description of Document
- -------- -----------------------
3.1 Company's Articles of Incorporation, as amended October 12, 1999.
3.2 Company's By-laws (incorporated herein by reference to Exhibit 3
to Company's Registration Statement on Form 10-SB, dated May 14,
1999, Registration No. 000-26095 ("Company's Form 10-SB").
10.1 General Assignment of Assets of the Rubber Mold Technology, dated
as of December 15, 1998, between Real Morel, as Assignor, and the
Company, as Assignee (incorporated herein by reference to Exhibit
4 to Company's Form 10-SB).
10.2 Promissory Notes Executed by the Company in Favor of Real Morel,
dated as of December 15, 1998, December 15, 1998, August 18, 1998,
September 24, 1998 and November 16, 1998 (incorporated herein by
reference to Exhibit 5 to Company's Form 10-SB).
10.3 Management Services Agreement, dated as of November 1, 1998,
between Susan Westfall, as Contractor, and the Company
(incorporated herein by reference to Exhibit 6 to Company's Form
10-SB).
10.4 Management Services Agreement, dated as of November 1, 1998,
between Madelyn Thomas, as Contractor, and the Company
(incorporated herein by reference to Exhibit 7 to Company's Form
10-SB).
27.0 Financial Data Schedule
36
SECRETARY OF STATE
[SEAL]
CORPORATE CHARTER
I, DEAN HELLER, the duly elected and qualified Nevada Secretary of State, do
hereby certify that ENVIROKARE TECH, INC. did on JUNE 15, 1998, file in this
office the original Articles of Incorporation; that said Articles are now on
file and of record in the office of the Secretary of State of the State of
Nevada, and further, that said Articles contain all the provisions required by
the law of said State of Nevada.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the Great
Seal of State, at my office, in Las Vegas, Nevada, on JUNE 15, 1998.
/s/ Dean Heller
Secretary of State
By /s/ [ILLEGIBLE]
Certification Clerk
[SEAL]
<PAGE>
[SEAL]
ARTICLES OF INCORPORATION
OF
ENVIROKARE TECH, INC.
KNOW ALL MEN BY THESE PRESENTS:
That we the undersigned, have this day voluntarily associated ourselves
together for the purposes of forming a corporation under the laws of the State
of Nevada and we do hereby certify;
I.
The name of this corporation is ENVIROKARE TECH, INC.
II.
The resident agent of said corporation shall be Pacific Corporate Services,
Inc, 7631 Bermuda Road, Las Vegas NV 89123 and such other offices as may be
determined by the By-Laws in and outside of the State of Nevada.
III.
The objects to be transacted, business and pursuit and nature of the
business, promoted or carried on by this corporation are and shall continue to
be engaged in any lawful activity except banking or insurance.
IV.
The members of the governing board shall be styled Directors and the first
Board of Directors shall consist of one (1). The number of stockholders of said
corporation shall consist of one (1). The number of directors and stockholders
of this corporation may, from time to time, be increased or decreased by an
amendment to the By-Laws of this Corporation in that regard, and without the
necessity of amending these Articles of Incorporation. The names and addresses
of the first Board of Directors and of the incorporators signing these Articles
are as follows:
Kathy Whyte 16688-102 Avenue
Surrey BC CANADA V4N 4X2
V.
The Corporation is to have perpetual existence.
<PAGE>
VI.
The total authorized capitalization of this Corporation shall be and is the
sum of 200,000,000 shares of Common Stock at $.00l par value, said stock to
carry full voting power and the said shares shall be issued fully paid at such
time as the Board of Directors may designate, in exchange for cash, property, or
services, the stock of other corporations or other values, rights or things, and
the judgment of the Board of Directors as to the value thereof shall be
conclusive.
VII.
The capital stock shall be and remain non-assessable. The private
property of the stockholders shall not be liable for the debts or liabilities of
the Corporation.
IN WITNESS WHEREOF, 1 have set my hand this 12 day of June, 1998.
/s/ Kathy Whyte
------------------------
Kathy Whyte
COUNTY OF )
)
PROVINCE OF BRITISH COLUMBIA )
On this 12 day of June, 1998, before me a notary public in and for said
county and state, personally appeared Kathy Whyte, known to me to be the person
whose name is subscribed to the foregoing instrument, and she duly acknowledged
to me that she executed the same for the purpose therein mentioned.
IN WITNESS WHEREOF, I have set my hand and offered by official seal in said
County and State the day and year in this Certificate first above written.
/s/ Jeffrey P. Andrews
-----------------------------
Notary Public
JEFFREY P. ANDREWS
Barrister & Solicitor
10325- 150th Street
Surrey, B.C. V3R 481
Telephone: 588-6844
<PAGE>
------------------------------
STATE OF NEVADA
Secretary of State
I hereby certify that this is
a true and complete copy of
the document as filed in this
office
JUN 15 `98
DEAN HELLER
Secretary of State
BY /s/ DEAN HELLER
------------------------------
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
STATE OF NEVADA Telephone 702.687.5203
Secretary of State OFFICE OF THE SECRETARY OF STATE Fax 702.687.3471
101 N. CARSON ST., STE. 3 Web site http://sos.state.nv.us
CARSON CITY, NEVADA 89701-4786 Filing Fee:
</TABLE>
FILED # C14064-98
Certificate of Amendment to Articles of Incorporation
For Profit Nevada Corporations
(Pursuant to NRS 78.385 and 78.390 - After Issuance of Stock)
- Remit in Duplicate -
OCT 12 1999
IN THE OFFICE OF
/s/ Dean Heller
DEAN HELLER SECRETARY OF STATE
1. Name of corporation: ENVIROKARE TECH, INC.
2. The articles have been amended as follows (provide article numbers, if
available):
PLEASE SEE ATTACHED NOTARIZED "CERTIFICATE OF AMENDMENT TO THE ARTICLES OF
INCORPORATION OF ENVIROKARE TECH, INC., a Nevada Corporation" for amendment
copy and applicable article numbers.
3. The vote by which the stockholders holding shares in the corporation
entitling them to exercise at least a majority of the voting power, or such
greater proportion of the voting power as may be required in the case of a vote
by classes or series, or as may be required by the provisions of the articles of
incorporation have voted in favor of the amendment is: 3,459,950.
4. Signatures:
/s/ Charles W. Thomas /s/ Charles W. Thomas
- --------------------------- -----------------------------------
President or Vice President Secretary or Asst. Secretary
(acknowledgement required) (acknowledgement not required)
State of: Nevada
County of: Clark
This instrument was acknowledged before me on
Oct. 12 , 1999, by
- --------------------------- ----
Charles W. Thomas (Name of Person)
- ---------------------------
as PRES-SEC. [NOTARY SEAL]
-----------------------------------------------
as designated to sign this certificate
of_______________________________________________
(name on behalf of whom instrument was executed)
/s/ Joanne Williams
- ------------------------------------------------
Notary Public Signature
*If any proposed amendment would alter or change any preference or any relative
or other right given to any class or series of outstanding shares, then the
amendment must be approved by the vote, in addition to the affirmative vote
otherwise required, of the holders of shares representing a majority of the
voting power of each class or series affected by the amendment regardless of
limitations or restrictions on the voting power thereof.
IMPORTANT: Failure to include any of the above information and remit the proper
fees may cause this filing to be rejected.
<PAGE>
CERTIFICATE OF AMENDMENT
TO THE ARTICLES OF INCORPORATION
OF ENVIROKARE TECH, INC.,
a Nevada corporation
Pursuant to the provisions of the Nevada Revised Statutes, Envirokare Tech,
Inc., a Nevada corporation, adopts the following amendment to its Articles of
Incorporation.
1. The undersigned hereby certifies that on the 30th day of September,
1999, a Special Meeting of the Board of Directors was duly held and convened at
which there was present a quorum of the Board of Directors acting throughout all
proceedings, and at which time the following resolution was duly adopted by the
Board of Directors:
BE IT RESOLVED, that the Secretary of the corporation is hereby ordered and
directed to obtain at least a majority of the voting power of the
outstanding stock of the corporation for the following purpose:
To amend Article VI to provide that the capitalization of the corporation
be increased from 200,000,000 shares of common stock at $.001 par value to
200,000,000 shares of Common Stock, par value $.001 per share and
10,000,000 shares of Series A Convertible Preferred Stock, par value $.001
per share, said preferred shares shall be subject to those designations,
preferences, and relative rights, qualifications and restrictions as the
Board of Directors of this Corporation may designate from time to time.
2. Pursuant to the provisions of the Nevada Revised Statutes, a majority of
the stockholders holding issued and outstanding shares of the corporation
entitled to vote gave their written consent to the adoption of the Amendment to
Article VI of the Articles of Incorporation as follows:
ARTICLE VI. The authorized capitalization of this Corporation shall include
the sum of 200,000,000 shares of Common Stock at $.001 par value, said
stock to carry full voting power and the said shares shall be issued fully
paid at such time as the Board of Directors may designate, in exchange for
cash, property, services, the stock of other corporations or other values,
rights or things, and the judgment of the Board of Directors as to the
value thereof shall be conclusive. The authorized capitalization of this
Corporation shall also include the sum of 10,000,000 shares of Series A
Convertible Preferred Stock at $.001 par value, said stock to be subject to
those designations, preferences, and relative rights, qualifications and
restrictions as the Board of Directors may designate from time to time.
<PAGE>
IN WITNESS WHEREOF, the undersigned being the President and Secretary of
Envirokare Tech, Inc., a Nevada corporation, hereunto affix their signatures
this 30th day of September, 1999.
Envirokare Tech, Inc.
By: /s/ Charles W. Thomas By: /s/ Charles W. Thomas
-------------------------------- ---------------------------
Its: Secretary Its: President
STATE OF Nevada )
------------------
COUNTY OF Clark )ss
----------------------------------
)
- --------------------------------------------
On this _7_ day of _Oct. _, _1999, before me a notary public in and for said
County and State, personally appeared _Charles Thomas__, known to me to be the
person whose name is subscribed to the foregoing instrument, and he duly
acknowledges to me that he executed the same for the purposes therein mentioned.
IN WITNESS WHEREOF, I have set my hand and offered my official seal in said
County and State the day and year in this Certificate first above written.
/s/ Joanne Wiliams
---------------------------
Notary Public
[NOTARY SEAL]
<PAGE>
CERTIFICATE OF DESIGNATIONS, PREFERENCES,
AND RELATIVE RIGHTS, QUALIFICATIONS AND
RESTRICTIONS OF THE SERIES A CONVERTIBLE
PREFERRED STOCK OF
ENVIROKARE TECH, INC.
----------
FILED # CK1064-98
OCT 12, 1999
IN THE OFFICE OF Pursuant to Section 78.195 of the
General Corporation Law of the State of Nevada
/s/ Dean Heller
DEAN HELLER SECRETARY OF STATE
Envirokare Tech, Inc., a corporation organized and existing pursuant to,
and by virtue of, the provisions of the General Corporation Law of the State of
Nevada ("Corporation"), specifies the designations, preferences, and relative
rights, qualifications and restrictions of its Series A Convertible Preferred
Stock as follows:
The undersigned hereby certifies that:
1. He is the duly elected and acting President and Secretary of the
Corporation.
2. WHEREAS, the Certificate of Incorporation of the Corporation, as
amended, Authorizes the issuance of 10,000,000 shares of Preferred Stock, par
value $.001 per share ("preferred shares"), and, additionally, authorizes the
issuance of shares of Preferred Stock from time to time in one or more series as
may from time to time be determined by the Board of Directors of the
Corporation, each of those series to be distinctly designated, and on such terms
and for such consideration as shall be determined by the Board of Directors of
the Corporation, and, additionally, grants to the Board of Directors of the
Corporation the authority to determine by resolution or resolutions adopted
prior to the issuance of any shares of a particular series of Preferred Stock,
the voting powers, if any, and the designations, privileges, powers, preferences
and rights of the shares of each such series and the qualifications, limitations
and restrictions thereof; and
3. WHEREAS, the Board of Directors of the Corporation, pursuant to action
taken at a special meeting of that Board of Directors held on September 30th,
1999, has duly adopted the following resolutions authorizing the creation of and
issuance of a series of that Preferred Stock to be known as Series A Convertible
Preferred Stock; NOW, THEREFORE, IT IS:
RESOLVED, the Board of Directors of the Corporation hereby determines and
fixes the number, designations, preferences, privileges, rights and limitations
of that series of the Preferred Shares on the terms and with the provisions
herein specified:
<PAGE>
1. Designation. A series of Preferred Stock of the Corporation is hereby
designated "Series A Convertible Preferred Stock" consisting initially of
10,000,000 shares.
2. Priority. Shares of the Series A Convertible Preferred Stock shall rank
prior to the Corporation's Common Stock, $.001 per value share ("Common Stock"),
with respect to the payment of dividends and upon liquidation. Holders of Series
A Convertible Preferred Stock, by vote or written consent of the holders of
sixty-six and two-thirds percent (66 2/3%) or more of the then outstanding
Series A Convertible Preferred Stock, may elect from time to time to allow other
series or classes of Preferred Shares to rank senior to the Series A Convertible
Preferred Stock with respect to dividends, assets or liquidation. The Company
may create additional classes of capital stock, increase the authorized number
of shares of Preferred Stock or issue series of Preferred Stock which rank on a
parity with the Series A Convertible Preferred Stock with respect, in each case,
to the payment of dividends and amounts upon liquidation, dissolution or winding
up of the Corporation ("Parity Stock") without the consent of any holder of
Series A Convertible Preferred Stock.
3. Dividends.
(a) The Corporation does not anticipate paying dividends on either the
Preferred Shares or the Common Stock in the foreseeable future; but, rather, the
Corporation plans to retain earnings, if any, for the operation and expansion of
the business of the Corporation. Any payment of dividends will be at the sole
and absolute discretion of the Corporation's Board of Directors and will depend
upon, among other things, the operating and financial condition of the
Corporation, its capital requirements, earnings, financial condition, amount of
indebtedness, contractual restrictions with respect to payment of dividends, and
other factors. Therefore, there can be no assurance that any dividends on the
Series A Convertible Preferred Stock will be paid in the future. Any such
dividends may be paid in cash, property or shares of the Corporation's Common
Stock.
(b) In the event the Board of Directors of the corporation declares
dividends on the Series A Convertible Preferred Stock, no dividends shall be
payable on any shares of any class of the Corporation's capital stock ranking
junior and subordinate to the Series A Convertible Preferred Stock as to the
payment of dividends, unless all accrued dividends on the Series A Convertible
Preferred Stock to the record date of the proposed dividends on the junior class
and subordainate shall have been paid or have been declared and an amount
sufficient for the payment of those dividends reserved.
(c) Upon any conversion of any shares Series A Convertible Preferred Stock,
as described in Section 6 hereof, the holders thereof shall be entitled to
receive in cash any accumulated, accrued or unpaid dividends in respect of such
shares of the Series A Convertible Preferred Stock.
2
<PAGE>
4. Liquidation Preference.
(a) In the event of any liquidation, dissolution or winding up of the
affairs of the Corporation, whether voluntary or involuntary, after payment or
provision for payment of the debts and other liabilities of the Corporation, the
holders of shares of the Series A Convertible Preferred Stock shall be entitled
to receive, out of the assets of the Corporation, whether such assets are
capital or surplus and whether or not any dividends as such are declared, an
amount equal to all accrued and unpaid dividends thereon to the date fixed for
distribution, and no more, before any distribution shall be made to the holders
of the Common Stock or any other class of shares or series thereof ranking
junior and subordinate to the Series A Convertible Preferred Stock with respect
to the distribution of assets.
(b) For purposes of this Section 4, a merger or consolidation of the
corporation with or into any other corporation or corporations, or the merger of
any other corporation or corporations with or into the Corporation, or the sale
of all or substantially all of the assets of the Corporation, or any other
corporate reorganization, in which consolidation, merger, sale of assets or
reorganization the stockholders of the corporation receive distributions in cash
or securities of another corporation or corporations as a result of such
consolidation, merger, sale of assets or reorganization, shall be treated as a
liquidation, dissolution or winding up of the Corporation, unless the
stockholders of the Corporation holding more than fifty percent (50%) of the
voting equity securities of the successor or surviving corporation immediately
following such consolidation, merger, sale of assets or reorganization, in which
case such consolidation, merger, sale of assets or reorganization shall not be
treated as a liquidation, dissolution, or winding up within the meaning of this
Section 4.
(c) Written notice of any voluntary or involuntary liquidation, dissolution
or winding up of the affairs of the Corporation, specifying a payment date and
the place where the distributive amounts shall be payable, shall be given by
mail, postage prepaid, not less than thirty (30) days prior to the payment date
elected therein, to the holders of record of the Series A Convertible Preferred
Stock at their respective addresses as the same shall appear on the books of the
Corporation.
(d) No payment on account of such liquidation, dissolution or winding up of
the affairs of the Corporation shall be made to the holders of any class or
series of capital stock ranking on a parity with the Series A Convertible
Preferred Stock in respect of the distribution of assets, unless there shall
also be paid at the same time to the holders of the Series A Convertible
Preferred Stock similar proportionate distributive amounts, ratably, in
proportion to the fully distributive amounts to which they and the holders of
such parity stock are respectively entitled with respect to such preferential
distribution.
5. Voting Rights. Except as otherwise provided by the Nevada General
Corporation Law, or as specified in Sections 2 and 8 hereof, the holders of
Series A Convertible Preferred Stock shall have voting powers, of ten (10)
shares of the Corporation's common stock either general or special.
3
<PAGE>
6. Conversion.
6.1 Voluntary Conversion. Each share of Series A Convertible Preferred
Stock shall be convertible, at the option of the holder thereof, into ten (10)
shares of the Common Stock at any time within two (2) years of the date of
purchase of each share of such Series A Convertible Preferred Stock, at which
time the conversion right will terminate.
6.2 Mandatory Conversion. The Corporation shall have the right to compel
conversion of the Series A Convertible Preferred Stock into ten (10) shares of
the Common Stock at any time at the sole discretion of the Corporation.
6.3 Mechanics of Conversion. Before any holder of Series A Convertible
Preferred Stock shall be entitled to convert the same into full shares of Common
Stock and to receive certificates therefor, the holder shall surrender the
certificate or certificates representing and evidencing the Series A Convertible
Preferred Stock, duly endorsed, at the office of the Corporation, or of the
Corporation shall have appointed a transfer agent for the Series A Convertible
Preferred Stock, at the office of such transfer agent, and shall give written
notice to the Corporation at either such office that the holder elects to
convert the same; provided, however, that in the event of any mandatory
conversion pursuant to Section 6.2 above, the outstanding shares of Series A
Convertible Preferred Stock shall be converted automatically without any further
action by the holders of such shares, whether or not the certificates
representing such shares are surrendered to the Corporation or its transfer
agent, if any; and provided, further, however, that the corporation shall not be
obligated to issue certificates evidencing the shares of Common Stock issuable
upon such mandatory conversion unless the certificates evidencing such shares of
Series A Convertible Preferred Stock are either delivered to the Corporation or
its transfer agent, if any, as provided above, or the holder notifies the
Corporation or its transfer agent, if any, that such certificates have been
lost, stolen or destroyed and executes an agreement satisfactory to the
Corporation to indemnify the Corporation from any loss incurred by it in
connection with such certificates. The Corporation shall, as soon as practicable
after such delivery, or such agreement and indemnification in the case of a lost
certificate, issue and deliver at such office to such holder of Series A
Convertible Preferred Stock, a certificate or certificates for the number of
shares of Common Stock to which the holder shall be entitled as specified above.
The person or persons entitled to receive the shares of Common Stock issuable
upon any such conversion shall be treated for all purposes as the record holder
or holders of such shares of Common Stock on such date.
6.4. Adjustments for Subdivisions, Combinations or Consolidations of Common
Stock. If the outstanding shares of Common Stock are subdivided (by stock split,
stock dividend or otherwise), into a greater number of shares of Common Stock,
the number of shares of Common Stock into which each share of Series A
Convertible Preferred Stock may be converted shall, concurrently with the
effectiveness of such subdivision, be proportionately increased. In the event
the outstanding shares of Common Stock shall be combined or consolidated, by
reclassification or otherwise, into a lesser number of shares of Common Stock,
the number of shares of Common Stock which each share of Series A Convertible
Preferred Stock may be converted into shall, concurrently with the effectiveness
of such combination or consolidation, be proportionately decreased.
4
<PAGE>
6.5 Adjustments for Reclassification, Exchange and Substitution. Except as
provided in Section 4 of this Certificate, upon any liquidation, dissolution or
winding up of the Corporation, if the Common Stock issuable upon conversion of
the Series A Convertible Preferred Stock is changed into the same or a different
number of shares of any other class or classes of stock, whether by capital
reorganization, reclassification or otherwise (other than a subdivision or
combination of shares provided for above), the number of shares of Common Stock
into which each share of Series A Convertible Preferred Stock may be converted
shall, concurrently with the effectiveness of such reorganization or
reclassification, be proportionately adjusted such that the Series A Convertible
Preferred Stock shall be convertible into, in lieu of the number of shares of
Common Stock which the holders would otherwise have been entitled to receive, a
number of shares of such other class or classes of stock equivalent to the
number of shares of Common Stock that would have been subject to receipt by the
holders upon conversion of the Series A Convertible Preferred Stock immediately
before the change.
6.6 Reorganization, Mergers, Consolidations or Sales of Assets. If at any
time or from time to time there is a capital reorganization of the Common Stock
(other than a subdivision, combination, consolidation, reclassification,
substitution or exchange of shares provided for elsewhere in this Section 6), or
a merger or consolidation of the Corporation with or into another corporation,
or the sale of all or substantially all of the Corporation's properties and
assets to any other person, then, as part of such reorganization, merger,
consolidation, or sale, provision, shall be made so that the holders of Series A
Convertible Preferred Stock shall thereafter be entitled to receive upon
conversion of the Series A Convertible Preferred Stock, the number of shares of
stock or other securities or property of the Corporation, or of the successor
corporation resulting from such merger or consolidation or sale, to which a
holder of Common Stock deliverable upon conversion would have been entitled on
such capital reorganization, merger, consolidation, or sale. In any such case,
appropriate adjustment shall be made in the application of the provisions of
this Section 6 with respect to the rights of the holders of the Series A
Convertible Preferred Stock after the reorganization, merger, consolidation, or
sale so that the provisions of this Section 6 shall be applicable after that
event as nearly equivalent as may be practicable.
6.7 No Impairment. Except as provided in Section 7 of this Certificate, the
Corporation shall not, by amendment of its Articles of Incorporation or through
any reorganization, transfer of assets, consolidation, merger, dissolution,
issue or sale of securities or any other voluntary action, avoid or seek to
avoid the observance or performance of any of the terms to be observed or
performed hereunder by the Corporation, but will at all times in good faith
assist in the carrying out of all the provisions of this Section 6 and in the
taking of all such action as may be necessary as appropriate in order to protect
the conversion rights of the holders of the Series A Convertible Preferred Stock
against impairment.
7. Status of Converted Stock. If any shares of Series A Convertible
Preferred Stock are converted pursuant to Section 6 of this Certificate, the
shares so converted shall be retired and shall thereafter have the status of
authorized and unissued shares of Preferred Shares which may be reissued by the
Corporation at any time as shares of any series of Preferred Shares.
5
<PAGE>
8. Restrictions and Limitations.
(a) At such time as shares of Series A Convertible Preferred Stock remain
outstanding, the Corporation shall not, without the vote or written consent of
the holders of at least sixty-six and two-thirds percent (66 2/3%) of the then
outstanding shares of Series A Convertible Preferred Stock:
(i) Redeem, purchase or otherwise acquire for value, any share or
shares of Series A Convertible Preferred Stock, otherwise than by
conversion in accordance with Section 6 of this Certificate;
(ii) Authorize or issue, or obligate itself to issue, any other equity
security (including any security convertible into or exercisable for any
equity security) senior to or on a parity with the Series A Convertible
Preferred Stock as to dividend or conversion rights and liquidation
preferences;
(iii) Effect any sale, lease, assignment, transfer, or other
conveyance of all or substantially all of the assets of the Corporation or
any of its subsidiaries, or any consolidation or merger involving the
Corporation or any of its subsidiaries, or any reclassification or other
change of any stock, or any recapitalization of the Corporation; or
(iv) Increase or decrease (other than by conversion) the total numbers
of authorized shares of Series A Convertible Preferred Stock.
(b) The Corporation shall not amend its Articles of Incorporation without
the approval, by vote or written consent, by the holders of 66 2/3% of the
Series A Convertible Preferred Stock, if such amendment would amend, modify,
annul, supersede, or otherwise change any of the rights, preferences, privileges
of, or limitations provided for herein for the benefit of any shares of the
Series A Convertible Preferred Stock. Without limiting the generality of the
preceding sentence, the Corporation will not amend its Articles of Incorporation
without the approval by the holders of sixty-six and two-thirds percent (66
2/3%) of the Series A Convertible Preferred Stock, if such amendment would:
(i) Reduce the amount payable to the holders of the Series A
Convertible Preferred Stock upon the voluntary or involuntary liquidation,
dissolution, or winding up the Corporation, or change the relative
seniority of the liquidation preferences of the holders of the Series A
Convertible Preferred Stock to the rights upon liquidation of the holders
of any other capital stock of the Corporation; or
6
<PAGE>
(ii) Cancel or modify the conversion rights of the Series A Convertible
Preferred Stock provided for in Section 6 of this Certificate.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Designations, Preferences and Relative Rights, Qualifications and Restrictions
of the Series A Convertible Preferred Stock to be duly executed by its President
and attested to by its Secretary and has caused its corporate seal to be affixed
hereto, this 30th day of September, 1999.
(Corporate Seal)
/s/ Charles W. Thomas
---------------------
President
ATTEST: /s/ Charles W. Thomas
---------------------
Secretary
The undersigned, President and Secretary if Envirokare Tech, Inc., a Nevada
corporation, declares under penalty of perjury under the laws of the State of
Nevada that the matters set out in the foregoing Certificate are true of his own
knowledge.
Executed at Las Vegas, Nevada on September 30th, 1999.
Oct. 7, 1999 /s/ Charles W. Thomas
Clark County ---------------------
State Nevada President
Joanne Williams
/s/ Charles W. Thomas
---------------------
Secretary
[NOTARY SEAL]
7
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
STATEMENT OF FINANCIAL CONDITION AT DECEMBER 31, 1999 AND THE STATEMENT OF
INCOME FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1999 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 148,046
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 224,337
<PP&E> 8,254
<DEPRECIATION> (1,385)
<TOTAL-ASSETS> 283,934
<CURRENT-LIABILITIES> 169,090
<BONDS> 0
0
500
<COMMON> 5,373
<OTHER-SE> 108,971
<TOTAL-LIABILITY-AND-EQUITY> 283,934
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 886,934
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,239
<INCOME-PRETAX> (893,173)
<INCOME-TAX> 0
<INCOME-CONTINUING> (893,173)
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<EXTRAORDINARY> 0
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<NET-INCOME> (893,173)
<EPS-BASIC> (.17)
<EPS-DILUTED> (.17)
</TABLE>
