U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[ ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended____________________
[X] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from July 1, 2000 to September 30, 2000
----------------------- ----------------------
Commission File Number: 0-27295
---------------
PLANET EARTH RECYCLING, INC.
(Exact name of small business issuer as specified in its charter)
NEVADA 98-0208988
------ ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
435 MARTIN STREET
BLAINE, WA 98230
(Address of principal executive offices)
(360) 332-1350
(Issuer's telephone number, including area code)
Check whether the issuer (1) filed all reports 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. [X] Yes [ ] No
State the number of shares outstanding of each of the issuer's classes of
common equity as of the latest practicable date: As of November 10, 2000,
20,315,000 shares of common stock, par value $0.001 were issued and outstanding.
Transitional Small Business Disclosure Format (Check One): [X] Yes [ ] No
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PLANET EARTH RECYLCING INC.
(Formerly Adventure Minerals Inc.)
TABLE OF CONTENTS
Page
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PART I - FINANCIAL INFORMATION. . . . . . . . . . . . . . . . . . . . . 3
Item 1. Financial Statements . . . . . . . . . . . . . . . . . . . 3
Balance Sheet as of September 30, 2000 (unaudited). . . . . . 3
Income Statement for the three months ended
September 30, 2000 (unaudited). . . . . . . . . . . . . . . . 4
Statements of Cash Flows for the three months ended
September 30, 2000 (unaudited). . . . . . . . . . . . . . . . 5
Notes to the Financial Statements (unaudited) . . . . . . . . 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations. . . . . . . . . . . . . . . . . 10
PART II - OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . 17
Item 1. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . 17
Item 2. Changes in Securities. . . . . . . . . . . . . . . . . . . 17
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . 17
SIGNATURES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
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PLANET EARTH RECYLCING INC.
(Formerly Adventure Minerals Inc.)
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
-----------------------------------
CONSOLIDATED BALANCE SHEET
As at SEPTEMBER 30, 2000 (Unaudited)
ASSETS SEPT. 30, 2000 JUNE 30, 2000
------ --------------- ----------------
<S> <C> <C>
CURRENT ASSETS
Cash in Bank $ 2,099,628 $ 1,877,144
Accounts Receivable - Trade 744,815 488,830
Accounts Receivable - Other 45,883 25,757
Prepaid expenses 148,986 71,741
--------------- ----------------
$ 3,039,312 $ 2,463,472
CAPITAL ASSETS (Notes 2 (d) and 3) 20,084 20,881
LICENSE (Note 2 (e) and 8 (b)) 950,000 975,000
PROJECT DEPOSIT 17,170 -
MINERAL PROPERTY - 1,681
EXPLORATION ADVANCE - 8,299
--------------- ----------------
TOTAL ASSETS $ 4,026,566 $ 3,469,333
=============== ================
LIABILITIES & SHAREHOLDER'S EQUITY
----------------------------------
CURRENT LIABILITIES
Accounts Payable (Note 9) $ 248,191 $ 149,677
Deferred Revenue (Notes 2 (c) and 4) 786,112 1,392,573
Note Payable (Note 5) 1,000,000 1,000,000
--------------- ----------------
2,034,303 2,542,250
--------------- ----------------
SHAREHOLDER'S EQUITY
--------------------
CAPITAL STOCK (Note 1) 2,034 2,034
ADDITIONAL CONTRIBUTED CAPITAL 52,217 52,217
RETAINED EARNINGS 1,938,012 872,832
--------------- ----------------
1,992,263 927,083
--------------- ----------------
$ 4,026,566 $ 3,469,333
=============== ================
See accompanying notes to financial statements.
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PLANET EARTH RECYLCING INC.
(Formerly Adventure Minerals Inc.)
CONSOLIDATED STATEMENT OF INCOME AND RETAINED EARNINGS
For the 3 month period ended SEPTEMBER 30, 2000 (Unaudited)
SEPT 30, 00 JUNE 30, 00
------------- ------------
<S> <C> <C>
REVENUE $ 1,809,706 $1,095,814
------------- ------------
EXPENSES
Advertising and promotion 776 2,881
Automotive expenses 2,363 350
Depreciation and amortization 26,175 25,532
Donation - 5,103
(Gain) Loss US$exchange 48,951 39,267
Interest Expense 17,644 18,027
Management consultants 358,954 24,138
Office and general 124,960 10,968
Professional fees 50,817 1,802
Rent 46,835 17,323
Telephone 13,017 1,565
Travel 12,543 3,036
Utilities 5,481 -
Wages and benefits 44,891 25,967
Write-off of Exploration Advance 8,299 -
Write-off of Mineral Property 1,681 -
------------- ------------
763,387 175,959
------------- ------------
INCOME BEFORE INTEREST INCOME 1,046,319 919,855
INTEREST INCOME 18,861 4,606
------------- ------------
NET INCOME AND RETAINED EARNINGS $ 1,065,180 $ 924,461
DEFICIT FROM AFFILIATE COMPANY - (51,629)
RETAINED EARNINGS, BEGINNING OF PERIOD 872,832 -
------------- ------------
RETAINED EARNINGS, END OF PERIOD $ 1,938,012 $ 872,832
------------- ------------
------------- ------------
Adjusted Earnings per Share - 20,315,000 SHARES OUTSTANDING $ 0.05 $ 0.05
------------- ------------
See accompanying notes to financial statements.
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<CAPTION>
PLANET EARTH RECYLCING INC.
(Formerly Adventure Minerals Inc.)
CONSOLIDATED STATEMENT OF CASH FLOW
For the 3 month period ended SEPTEMBER 30, 2000 (Unaudited)
SEPT 30, 00 JUNE 30, 00
------------- --------------
<S> <C> <C>
CASH RESOURCES PROVIDED BY (USED IN)
OPERATING ACTIVITES
Net Income $ 1,065,180 $ 924,461
Items not involving funds
Amortization 26,175 25,532
Deferred revenue realized (606,461) (596,817)
Cash generated from (used for) operating working capital
Accounts receivable - trade (255,985) (488,830)
Accounts receivable - other (20,126) (25,757)
Prepaid expenses (77,245) (71,741)
Accounts payable and accrued liabilities 98,513 140,489
------------- --------------
230,051 (92,663)
------------- --------------
CASH RESOURCES PROVIDED BY (USED IN)
FINANCING ACTIVITIES
Share capital - 1
Note Payable - 1,000,000
Fund received from contract advance - 1,989,390
------------- --------------
- 2,989,391
------------- --------------
CASH RESOURCES PROVIDED BY (USED IN)
INVESTING ACTIVITIES
Acquisition of license - (1,000,000)
Purchase of capital assets (377) (21,413)
Project Deposit (17,170)
Write-off of Mineral Property 1,681
Write-off of Exploration Advance 8,299 (21,413)
------------- --------------
(7,567) (1,021,413)
------------- --------------
INCREASE IN CASH 222,484 1,875,315
CASH AND TERM DEPOSITS, beginning of year 1,877,144 -
------------- --------------
CASH AND TERM DEPOSITS, end of year $ 2,099,628 $ 1,875,315
============= ==============
See accompanying notes to financial statements.
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PLANET EARTH RECYLCING INC.
(Formerly Adventure Minerals Inc.)
NOTES TO FINANCIAL STATEMENTS
For the 3 month period ended SEPTEMBER 30, 2000 (Unaudited)
1. NATURE OF BUSINESS AND STATUS OF ACTIVITIES
Planet Earth Recycling Inc. (formerly Adventure Minerals, Inc.) (the
"Company") was incorporated in Nevada, USA on February 17, 1999. The
Company is public and has been trading on the over the counter bulletin
board on the NASDAQ since June, 2000. On September 15, 2000, a merger was
completed with a private company (known at the time as Planet Earth
Recycling Inc.), in which shares were exchanged one for one. The Company's
name was formally changed to Planet Earth Recycling, Inc. on November 2,
2000 whereas a Special Shareholders' Meeting was held in Seattle,
Washington. All future business will be conducted under the name Planet
Earth Recycling Inc. and traded on the over the Counter bulletin board on
the NASDAQ.
Planet Earth Recycling Inc. is an integrated, multi-faceted recycling and
waste management business ready to address a broad range of recyclable
material including glass, plastic, paper, cardboard, metals and
particularly organic wastes. The Company holds contractual rights to build,
support, and supply Thermo Master(TM) Plants which employs a patent
protected process to convert organic waste materials to valuable feed and
fertilizer products.
The Company has investment in one subsidiary, Planet Earth Operating
Systems Inc., which in turn has investments in four subsidiaries, which are
consolidated and summarized as follows:
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<CAPTION>
COMPANY NATURE OF BUSINESS
<S> <C>
Planet Earth Operating Services Inc. (100% owned) Operating Company
(a) Earth Alliance Systems Inc. (100% owned) Total Recycling
(b) Planet Earth Bio Conversion Inc. (100% owned) Licensor of technology
(c) Planet Earth Design Build Inc. (100% owned) Engineering and Construction
(d) Planet Earth Management Inc. (100% owned) Commissioning and Operating
</TABLE>
<TABLE>
<CAPTION>
<C> <S>
2. SIGNIFICANT ACCOUNTING POLICIES
(A) PRINCIPLES OF ACCOUNTING These consolidated financial statements have been
prepared in accordance with accounting principles
generally accepted in Canada applicable to a going
concern, which assumes that the Company will
continue operation for a reasonable period of time
and will be able to realize its assets and
discharge its liabilities and commitments in the
normal course of operations.
These principles can differ in certain material
respects from those accounting principles generally
accepted in the United States but no material
differences exist in these statements.
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PLANET EARTH RECYLCING INC.
(Formerly Adventure Minerals Inc.)
NOTES TO FINANCIAL STATEMENTS
For the 3 month period ended SEPTEMBER 30, 2000 (Unaudited)
(B) BASIS OF CONSOLIDATION These financial statements have been prepared using
the purchase method of consolidation. The assets
and liabilities of acquired companies are initially
recorded at their cost. The results of operations
of the acquired companies are included from the
dates of acquisition. All significant intercompany
transactions and balances have been eliminated on
consolidation.
(C) REVENUE RECOGNITION Revenue is recognized when services are performed.
(D) CAPITAL ASSETS Plant and equipment is recorded at cost.
Amortization is recorded on active and idle assets,
Computed using the 20% straight-line method to
amortize the cost of the assets over their
estimated useful lives.
(E) LICENSES License rights are recorded at cost and are
amortized on a straight-line basis over the license
period (10 years) which is the Company's estimated
period of benefit for these costs.
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3. CAPITAL ASSETS
Cost Acc. Amort. Net Book Value
Office Equipment $21,413 $1,329 $20,084
Amortization for the period amounted to $1,329.
The estimated useful life of the office equipment is five years.
4. DEFERRED REVENUE
The Company entered into a consulting contract on April 1, 2000, to provide
consulting and administrative services at a fixed monthly fee of
$300,000.00 CDN ($198,939 US) plus all costs charged at 15%. On April 28,
2000 the first ten months were paid in advance ($3,000,000 CDN; $1,989,390
US). As at September 30, 2000 $786,112 US of that advance remained
unearned.
5. NOTE PAYABLE
The Company, in connection with its acquisition of the license agreement
(Note 9 (b)) is indebted by way of a $1,000,000 US note payable, due on
demand at seven percent (7%) rate of interest payable both before and after
maturity. Interest of $17,644 US has been accrued but unpaid to September
30, 2000.
-7-
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PLANET EARTH RECYLCING INC.
(Formerly Adventure Minerals Inc.)
NOTES TO FINANCIAL STATEMENTS
For the 3 month period ended SEPTEMBER 30, 2000 (Unaudited)
6. SHARE CAPITAL
The Company has authorized share capital of 25,000,000 common shares par
value of $0.001US. Prior to the merger, there were 10,165,000 shares
outstanding. On September 15, 2000 a share exchange in which 10,000,000
shares of the Company were issued for all the outstanding shares of planet
earth recycling Inc. (private company) one for one. Prior to the Merger,
150,000 shares were issued for the settlement of a certain obligation.
Total outstanding shares as of September 30, 2000 is 20,315,000.
Price Number of Shares Total Outstanding
----- ------------------ ------------------
Cash Issue $.005 1,200,000 1,200,000
Cash Issue $.05 800,000 2,000,000
Cash Issue $.25 33,000 2,033,000
5 for 1 Split 8,132,000 10,165,000
Debt Settlement $0.001 150,000 10,315,000
Share Exchange 10,000,000 20,315,000
7. COMMITMENTS
The Company rents its head office and administrative offices under
operating leases. Rental payments during the period amounted to $17,323
U.S$. Aggregate minimum rental payments are $672,341 U.S.$ and approximate
future rent payments for the next five years relative to signed lease
agreements are as follows:
$ U.S.
---------
2001 $182,805
2002 $167,841
2003 $167,841
2004 $153,854
8. SIGNIFICANT AGREEMENTS
The Company has entered into several significant agreements during the
operating period as follows:
a) Master Service Agreement. The Company has a Master Service Agreement
with a corporation that allows it to have the right to construct,
commission, maintain, operate, supply and broker the end product of
all Thermo Master(TM) Plants built for any licensee in the world.
These services are provided at a cost plus 15% rate.
-8-
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PLANET EARTH RECYLCING INC.
(Formerly Adventure Minerals Inc.)
NOTES TO FINANCIAL STATEMENTS
For the 3 month period ended SEPTEMBER 30, 2000 (Unaudited)
b) License Agreement. The Company entered into a License Agreement on
March 28, 2000 to utilize the Thermo Master(TM) technology in Canada,
Washington, Oregon, Nevada, Idaho, California and Hawaii. The Company
has an exclusive right to build a Thermo Master(TM) Plant in any of
its territories. The License is $1,000,000 US and was satisfied by
with of a Note payable (Note 5). Amortization of $25,000 has been
recorded during the period (Note 2 (e)). The License Agreement also
calls for an additional payment of $1,000,000 US for every plant
constructed by or on behalf of the Licensee.
c) Consulting Agreement. The Company has entered into a ten month
Consulting Agreement for monthly consulting and administrative
services (see Note 4). This contract is renewable in October 2000 for
the full rate or a reduced rate for a further nine-month period. The
Company has continued this contract at full value.
Currently the Company derives all its Revenue from these contracts, which
are with one Corporation.
9. RELATED PARTY TRANSACTIONS
Included in accounts payable as at September 30, 2000 was $45,857 owed to
the Company's new President.
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PLANET EARTH RECYLCING INC.
(Formerly Adventure Minerals Inc.)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
--------------------------------------------------------------------------------
OF OPERATIONS
--------------
This Form 10-QSB contains forward-looking statements. The words "anticipate",
"believe", "expect", "plan", "intend", "estimate", "project", "could", "may",
"foresee", and similar expressions identify forward-looking statements that
involve risks and uncertainties. You should not place undue reliance on forward-
looking statements in this Form 10-QSB because of their inherent uncertainty.
The following discussion and analysis should be read in conjunction with the
Financial Statements and Notes thereto and other financial information included
in this Form 10-QSB that involve risks and uncertainties. Actual results could
differ materially from the results discussed in the forward-looking statements.
BUSINESS
The Company is an integrated, multi-faceted recycling and waste management
business, ready to address a broad range of recyclable materials, including
glass, plastic, paper, cardboard, metals and particularly organic wastes. The
Company, through one of its subsidiaries, holds contractual rights to build,
support and supply Thermo Master(TM) Plants which employ a patent protected
process to convert organic waste materials to valuable feed and fertilizer
products and holds an exclusive master license to own and sub-license Thermo
Master(TM) Plants in Canada, California, Washington, Oregon, Nevada, Hawaii and
Iowa. The Company's presence in a community means local employment, effective
waste recycling opportunities and environmental improvements.
The Company offers a full range of waste recycling and management services to
waste generators and communities. The Company is structured as an integrated
business with several subsidiaries dedicated to delivering distinct aspects of
the Company's overall mandate. The following shows how the Company is organized
to serve its clients and shareholders:
PLANET EARTH RECYCLING, INC.
---------------------------
|
PLANET EARTH OPERATING SERVICES INC.
------------------------------------
|
1. EARTH ALLIANCE SYSTEMS INC. (Waste acquisition -
-----------------------------
Satellite centers - Tote services Transfer stations -
De-packaging - Commodity broker glass, metals,
plastics, paper, organics - Waste audits)
2. PLANET EARTH DESIGN BUILD INC. (Engineering -
-----------------------------------
Permitting - Construction services - Equipment
procurement - Turnkey recycling systems - Transfer
stations - New technology development)
3. PLANET EARTH BIO CONVERSION INC. (Licenses for Thermo
--------------------------------
Master(TM) Plants - Exclusive and non-exclusive
territory)
4. PLANET EARTH MANAGEMENT INC. (Commissioning - Training
-----------------------------
- Operating services - Support services - Complete
recycling systems)
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PLANET EARTH RECYLCING INC.
(Formerly Adventure Minerals Inc.)
Two of the Company's subsidiary companies produce steady cash flow by supplying
construction and support services to build, operate and maintain Thermo
Master(TM) Plants, Earth Alliance Satellite Centers, transfer stations, water
treatment facilities and other such physical plants. These companies may
provide services directly, but will more likely oversee the programs and
services that are delivered at the local level by local sub-contractors having
the required skills.
The other subsidiaries, Earth Alliance Systems Inc. and Planet Earth Bio
Conversion Inc. capitalize on the unlimited potential of waste and recycling
markets throughout the world. These two companies are structured to own and
operate waste acquisition, recycling, organic waste conversion and commodity
brokering businesses to cover the full gamut of recycling opportunities in the
marketplace. The two subsidiaries will hold equity positions in the Company's
growing family of plants and businesses as well as create and capture major
revenues and profits.
The Company is also involved in commodity businesses, whether that be the end
product from Thermo Master(TM) businesses (feed or fertilizer products) or the
recyclable plastics, paper, glass, metals and other recoverable materials. At
present, this function is within Earth Alliance, but may be launched in the
future as a free-standing subsidiary.
All subsidiary businesses are structured to operate profitably in their own
right. The subsidiaries have been structured as distinct entities to ensure
that the Company's management can track each subsidiary's performance.
The parent company, Planet Earth Recycling, Inc., is primarily focused on the
acquisition and management of corporate financing. Planet Earth Operating
Services Inc. ("PEOSI") delivers all aspects of the operational side of the
business through its several subsidiary companies. The Company has assembled a
team of core consultants with over 300 years of combined experience in the
critical sectors of its business. PEOSI is built from a company with a history
of 45 years of successfully providing systems, equipment and services in the
agricultural and environmental industries. It continues to deliver those
services to a broad industry sector and to expand even further. Its waste
management and recycling team brings experience with every major waste
management firm known in North America. Within the group of key consultants
resides knowledge and experience in engineering, research and development,
construction, mechanical operations, public relations and marketing, waste
acquisition, recycling and financing needed to conduct PEOSI's business.
For more information on the business of the Company, see the report on Form 8-K
dated September 15, 2000 and filed under the name Adventure Minerals Inc. on
September 29, 2000.
STATUS OF OPERATIONS
The Company's current operations include the following activities from signed
contracts.
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PLANET EARTH RECYLCING INC.
(Formerly Adventure Minerals Inc.)
On April 6, 2000, POESI signed a 20 year Master(TM) Service Agreement with
Thermo Tech(TM) Technologies Inc. and Thermo Tech(TM) Bio Conversion Inc. The
Master(TM) Service Agreement provides the exclusive rights to PEOSI to provide
turnkey construction, commissioning and training, maintenance services,
technical services, Waste supply and End Product Purchasing for all licensees of
the Thermo Master(TM) Mark III technology. This contract will provide the
expertise and know-how to ensure all new licensees are delivered an operating
Thermo Master(TM) Mark III Plant. Through this Master(TM) Service Agreement,
the Company has signed the following contacts:
1. The Company's subsidiary Planet Earth Design Build Inc. has a
Turnkey Construction Agreement with Hamilton Bio Conversion Inc. to complete the
upgrade of the current facility to a Thermo Master(TM) Mark III facility. This
agreement was executed on October 2, 2000. The value of this project is
$10,000,000 and the project will be completed during the third quarter of the
Company's year. Planet Earth Design Build Inc. is well underway on this project
which is billed on a cost plus 15% basis.
2. Planet Earth Design Build Inc. also has a Turnkey Construction
Agreement with Richmond Bio Conversion Inc. to complete the rebuild of the
current facility. This agreement was executed on October 2, 2000. Work on this
project has begun. The minimum value of the project is $13,333,333.
3. Planet Earth Management Inc. has six current cost plus contracts.
They currently have three signed contracts with Hamilton Bio Conversion Inc. and
three with Richmond Bio Conversion, including a commissioning and training
agreement, maintenance service agreement and a technical service agreement.
Planet Earth Management Inc. has the people and organization working to optimize
the facilities performance.
a. The commissioning and training agreement will ensure when the
new facility is built all equipment and machinery is properly commissioned
and working according to specification and all personal are properly
trained to operate the facility and it equipment. These services are billed
on a cost plus basis and ensure that the facility is operating at peek
performance within the first three months.
b. A five-year maintenance contact has been signed by each
facility to keep the operations running at peek performance and ensure that
all aspects of the operation are quickly and efficiently dealt with. These
services are charged on a cost plus basis.
c. A five-year technical services agreement has also been
signed by each facility for a monthly fee of $6,667 and additional services
changed at cost plus. This agreement will ensure the significant know-how
of Planet Earth Management Inc. concerning the design, construction,
operation and maintenance of industrial process plants that utilize the
Thermophilic aerobic digestion process will be available to each plant.
4. Earth Alliance Systems Inc. has entered into a 12-year Waste Supply
Agreement with Hamilton Bio Conversion Inc. to ensure the facility receives
adequate raw waste for processing. This agreement was executed on October 2,
2000. Earth Alliance Systems Inc. has the collection system in place and
further acquisitions will only strengthen its current Ontario market position.
-12-
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PLANET EARTH RECYLCING INC.
(Formerly Adventure Minerals Inc.)
5. On October 2, 2000, PEOSI signed a 12 year End Product Purchase
Agreement with Hamilton Bio Conversion Inc. This agreement enables the Company
to broker the valuable end product commodity to the world.
6. PEOSI is also currently performing Accounting, Operating and General
Administrative Services under a Consulting agreement with Thermo Tech(TM)
Technologies Inc. The Agreement provides for a $200,000 monthly fee and all
costs charged at cost plus. This agreement has been operating since April 1,
2000 when a $2,000,000 payment was made for these services. The Agreement has
been renewed for a further nine month period beginning January 1, 2001.
7. Planet Earth Design Build Inc. is currently preparing 12 feasibility
studies for new projects, to assess what is required in each area. These new
projects can generate 12 new sites for total recycling for the Company. These
current contacts enable the Company to provide its value added services to it
clients and ensure room for future expansion with new facilities and new
opportunities.
PLAN OF OPERATIONS
The Company is in the early stages of operations and is focused on implementing
and developing its business plan to meet its growth objectives. The majority of
the current resources of the Company are focused on this growth. However, in
addition to the current operations, the Company is pursuing several new
acquisitions.
The first potential acquisition is in Ontario, Canada. The target is in the raw
waste collection and depackaging business. The Company will be able to
restructure the operations to fit into its business operations. This may become
a show case satellite center for the Ontario market, enabling the Company to
expand into the United States. Negotiations are currently underway but no
definitive agreement has been reached with the Company.
The second current acquisition is in New York. The business has an interest in
a proprietary technology business and a current waste recycling facility, which
the Company believes will be of benefit to its operations both financially and
technologically. Negotiations are currently in the final stages, but no
definitive agreement has been reached with the New York company.
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Three Months Ended September 30, 2000 Compared to the Seven Months Ended June
30, 2000
This information has been derived from unaudited interim financial statements
for the period ended September 30, 2000 and audited financial statements for the
seven-month period ended June 30, 2000. Results of operations for any interim
period are not necessarily indicative of results to be expected from the full
fiscal year.
-13-
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PLANET EARTH RECYLCING INC.
(Formerly Adventure Minerals Inc.)
The Company's operations, going forward, are the operations of the merged
private company, Planet Earth Recycling Inc., as this is the continuing
business. For comparison purposes this quarter, the period ended June 30, 2000
will be used. As no useful operating figures exist for the same period last
year, July 1, 1999 to September 30, 1999, those figures will not be presented.
Net Income
-----------
For the three months ended September 30, 2000, the Company had net income of
$1,065,180. This is an increase of $140,719 over the comparison period's
operations, which produced net income of $924,461. This increase in net income
is based on growing the operations of the Company. Strong growth will continue
in the next quarters as the business continues to develop based on the business
plan of the Company.
Operating Revenue
------------------
Total revenue for the three months ended September 30, 2000 was $1,809,706. The
Company increased revenue by $713,892 or 65% over total revenues for the seven
months ended June 30, 2000, which were $1,095,814. The increase in revenues
resulted from work on the Hamilton Bio Conversion project, Richmond Bio
Conversion project, several new projects and continued business growth in each
subsidiary. The Company's projects are all charged out on a cost plus basis to
facilitate revenue growth.
Operating Costs and Expenses
-------------------------------
The Company had an increase in expenses of $587,428 during the period to
$763,387 as compared to the previous period with total operating expenses of
$175,959. The increased expenses reflect the growth in operations, including
increases in the number of consultants and employee's to implement the Company's
business plan. Other areas of increases included professional fees related to
the merger and increased general and administration fees. The Company is
currently charging out at cost plus 15%. The Company also wrote off the cost of
the exploration advance and mineral property as it turns its focus to its new
business.
LIQUIDITY AND CAPITAL RESOURCES
The Company had cash of $2,099,628 and a working capital of $1,006,009 as of
September 30, 2000. This is compared to cash of $1,877,144 and a working
capital deficit of $78,778 as at June 30, 2000. The increase is a direct result
of the net income during the period of $1,065,180.
Management estimates the monthly cash "burn rate" to be approximately $400,000
per month. The Company believes it has sufficient cash resources to operate its
business over the next twelve months. Depending on market acceptance of the
Company's current business model, the Company may raise additional funds, either
debt or equity, to augment future growth of the business.
-14-
<PAGE>
PLANET EARTH RECYLCING INC.
(Formerly Adventure Minerals Inc.)
Management believes that current cash balances and cash flows from operations,
if any, will be sufficient to meet present growth strategies and related working
capital and capital expenditure requirements. The current business plan
proposes significant increases in spending when compared to historical
expenditures. Management may decide to raise additional capital through the
issuance of additional debt or equity securities.
The Company plans to utilize a combination of internally generated funds from
operations, potential debt and / or equity financings to fund its longer-term
growth over a period of two to five years. The availability of future
financings will depend on market conditions. A portion of the funds will be
needed to grow the business through acquisitions of other businesses.
The forecast of the period of time through which the Company's financial
resources will be adequate to support operations is a forward-looking statement
that involves risks and uncertainties. The actual funding requirements may
differ materially from this as a result of a number of factors including plans
to acquire other businesses and rapidly expand its operations.
EFFECT OF FLUCTUATIONS IN FOREIGN EXCHANGE RATES
The Company's current operations are located outside the United States. The
functional currency for this foreign operation is the local currency. The
carrying value of the Company's investments in Canada is subject to the risk of
foreign currency fluctuations. Any revenues received from the Company's
international operations will be subject to foreign exchange risk.
RISK FACTORS
THE COMPANY MAY REQUIRE ADDITIONAL EQUITY FINANCING, WHICH MAY NOT BE
AVAILABLE AND MAY DILUTE THE OWNERSHIP INTERESTS OF INVESTORS.
The Company's ultimate success will depend on its ability to raise additional
capital. No commitments to provide additional funds have been made by
management or other shareholders. The Company has not investigated the
availability, source or terms that might govern the acquisition of additional
financing. When additional capital is needed, there is no assurance that funds
will be available from any source or, if available, that they can be obtained on
terms acceptable to the Company. If not available, the Company's operations
could be severely limited, and it may not be able to implement its business
plan. If equity financing is used to raise additional working capital, the
ownership interests of existing shareholders may be diluted.
THE COMPANY'S OPERATING RESULTS ARE LIKELY TO FLUCTUATE SIGNIFICANTLY.
As a result of the Company's limited operating history and the rapid expansion
of its business operations, the Company's quarterly and annual revenues and
operating results are likely to fluctuate from period to period. For this
reason, you should not rely on period-to-period comparisons of the Company's
financial results as indications of future results. The Company's future
operating results could fall below the expectations of public market analysts or
investors and significantly reduce the market price of its common stock.
Fluctuations in the Company's operating results will likely increase the
volatility of its stock price.
-15-
<PAGE>
PLANET EARTH RECYLCING INC.
(Formerly Adventure Minerals Inc.)
THE COMPANY DEPENDS ON THE RELIABILITY AND CONTINUITY OF ITS SERVICES AS
PROVIDED BY ITS SUBSIDIARIES.
As a service provider, the Company is dependent upon the continued reliability
of its individual subsidiaries to provide high quality services. Although the
Company has reliable systems in place, and has not had any problems providing
quality service, there is no guarantee that the Company will be able to continue
to provide reliable services.
THE COMPANY'S DEPENDENCE ON RELATIONSHIPS WITH BUSINESSES AND GOVERNMENTS
OUTSIDE OF THE UNITED STATES INVOLVES RISKS.
The Company depends on its ability to establish and maintain successful
relationships with businesses and governments located outside of the United
States. If the Company is unable to establish and maintain such relationships,
it will not be able to implement the business plan in its current configuration,
which will affect both its revenue stream and profit potential. In addition,
the Company faces political sovereign risks of conducting international
business, including risks of changing economic conditions, which may have a
material adverse effect on its ability to expand its operations globally.
POTENTIAL BUSINESS COMBINATIONS COULD BE DIFFICULT TO INTEGRATE AND DISRUPT
BUSINESS OPERATIONS.
Any acquisition of or business combination with another company could disrupt
the Company's ongoing business, distract management and employees and increase
the Company's expenses. If another company acquires the Company, it could face
difficulties in assimilating with that company's personnel and operations.
Acquisitions also involve the need for integration into existing administration,
services, marketing, and support efforts.
THE COMPANY DOES NOT ANTICIPATE PAYING DIVIDENDS TO COMMON SHAREHOLDERS IN
THE FORESEEABLE FUTURE, WHICH MAKES INVESTMENT IN THE COMPANY SPECULATIVE
OR RISKY.
The Company has not paid dividends on its common stock and does not anticipate
paying dividends on its common stock in the foreseeable future. The Board of
Directors has sole authority to declare dividends payable to the Company's
shareholders. The fact that the Company has not and does not plan to pay
dividends indicates that the Company must use all of its funds generated by
operations for reinvestment in its operating activities and also emphasizes that
the Company may not continue as a going concern. Investors also must evaluate
an investment in the Company solely on the basis of anticipated capital gains.
-16-
<PAGE>
PLANET EARTH RECYLCING INC.
(Formerly Adventure Minerals Inc.)
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
-----------------------------
None
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
---------------------------------------------------------
On September 14, 2000, the Company issued 150,000 shares to 717108 Alberta Ltd.
in settlement of a debt in the amount of $150. 717108 Alberta Ltd. is not a
U.S. company. The offering of the shares of common stock of Adventure Minerals
was conducted pursuant to an exemption from registration, namely Rule 506 of
Regulation D and / or Regulation S of the Securities Act of 1933, as amended
(the "Act"). As a result, the shares held by 717108 Alberta Ltd. are
"restricted securities" subject to Rule 144 of the Act.
As disclosed in a report on Form 8-K dated September 15, 2000 and filed on
September 29, 2000 under the name Adventure Minerals Inc., an Agreement and Plan
of Reorganization was entered into between Adventure Minerals, Inc. and Planet
Earth Recycling Inc. Pursuant to that agreement, Adventure Minerals Inc. issued
10,000,000 shares to the shareholders of Planet Earth Recycling Inc. in exchange
for 10,000,000 shares of Planet Earth Recycling Inc. All 19 of the Planet Earth
Recycling shareholders were not U.S. persons. The offering of the shares of
Adventure Minerals to the Company shareholders was conducted pursuant to an
exemption from registration, namely Rule 506 of Regulation D and / or Regulation
S of the Securities Act of 1933, as amended (the "Act"). As a result, the
shares held by the former shareholders of Planet Earth Recycling Inc. are
"restricted securities" subject to Rule 144 of the Act.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
------------------------------------------------
(A) EXHIBITS. The following exhibits accompany this Form 10-QSB:
EXHIBIT NO. DESCRIPTION
----------- -----------
10.1 License Agreement dated March 28, 2000
10.2 Consulting Agreement dated April 1, 2000
10.3 Master(TM) Service Agreement dated April 6, 2000
10.4 Turnkey Construction Agreement with Hamilton Bio Conversion, Inc.
dated October 2, 2000
10.5 Commissioning and Training Agreement with Hamilton Bio
Conversion, Inc. dated October 2, 2000
-17-
<PAGE>
PLANET EARTH RECYLCING INC.
(Formerly Adventure Minerals Inc.)
10.6 Maintenance Services Agreement with Hamilton Bio Conversion, Inc.
dated October 2, 2000
10.7 Technical Services Agreement with Hamilton Bio Conversion, Inc.
dated October 2, 2000
10.8 Waste Supply Agreement with Hamilton Bio Conversion, Inc. dated
October 2, 2000
10.9 End Product Purchase Agreement with Hamilton Bio Conversion Inc.
dated October 2, 2000
10.10 Turnkey Construction agreement with Richmond Bio Conversion Inc.
dated October 2, 2000
10.11 Commissioning and Training Agreement with Richmond Bio
Conversion Inc. dated October 2, 2000
10.12 Maintenance Services Agreement with Richmond Bio Conversion Inc.
dated October 2, 2000
10.13 Technical Services Agreement with Richmond Bio Conversion Inc.
dated October 2, 2000
27.1 Financial Data Schedule
(b) REPORTS ON FORM 8-K. The following reports on Form 8-K were filed during
the period covered by this Form 10-QSB:
Adventure Minerals Inc. Form 8-K, dated September 15, 2000, and filed with the
--------------------------------------------------------------------------------
Securities and Exchange Commission on September 29, 2000.
-----------------------------------------------------------------
This report included an Item 1 disclosure regarding a change in control of the
registrant whereby Adventure Minerals Inc. entered into an Agreement and Plan of
Reorganization with Planet Earth Recycling Inc. Item 1 disclosed that the first
step of the reorganization consisted of merging Planet Earth Recycling Inc. with
and into AMVL Sub One, a wholly owned subsidiary of Adventure Minerals in
exchange for common stock of Adventure Minerals. The Form 8-K also included an
Item 2 disclosure regarding the acquisition or disposition of assets pursuant to
the merger, where each issued and outstanding share of common stock of Planet
Earth Recycling Inc. was exchanged for one share of common stock of Adventure
Minerals. In addition, Item 2 contained a disclosure describing the second step
in the Agreement and Plan of Reorganization, whereby AMVL Sub One merged with
and into Adventure Minerals. Item 2 also contained an extensive description of
the businesses of Adventure Minerals and Planet Earth Recycling Inc. The Form
8-K contained an Item 8 disclosure regarding a change in the fiscal year end
from April 30 to June 30 and an Item 7 disclosure containing the following
Planet Earth Recycling Inc. financial statements:
-18-
<PAGE>
PLANET EARTH RECYLCING INC.
(Formerly Adventure Minerals Inc.)
Independent Auditors' Report, dated September 6, 2000;
Consolidated Balance Sheet as at June 30, 2000 (audited);
Consolidated Statement of Income and Retained Earnings for the seven months
ended June 30, 2000;
Consolidated Statements of Changes in Financial Position for the seven
months ended June 30, 2000 (audited); and
Notes to Financial Statements for the seven months ended June 30, 2000
(audited).
The Form 8-K also contained the following pro forma information for the combined
businesses:
Pro Forma Balance Sheet as at April 30, 2000 (unaudited)
Pro Forma Statement of Operations for the year ended April 30, 2000
(unaudited)
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
PLANET EARTH RECYCLING, INC.
/s/ Rowland Wallenius 11/14/00
----------------------------------------- ------------------------
Rowland Wallenius, President Date
-19-
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
----------- -----------
10.1 License Agreement dated March 28, 2000
10.2 Consulting Agreement dated April 1, 2000
10.3 Master(TM) Service Agreement dated April 6, 2000
10.4 Turnkey Construction Agreement with Hamilton Bio Conversion, Inc.
dated October 2, 2000
10.5 Commissioning and Training Agreement with Hamilton Bio
Conversion, Inc. dated October 2, 2000
10.6 Maintenance Services Agreement with Hamilton Bio Conversion, Inc.
dated October 2, 2000
10.7 Technical Services Agreement with Hamilton Bio Conversion, Inc.
dated October 2, 2000
10.8 Waste Supply Agreement with Hamilton Bio Conversion, Inc. dated
October 2, 2000
10.9 End Product Purchase Agreement with Hamilton Bio Conversion Inc.
dated October 2, 2000
10.10 Turnkey Construction agreement with Richmond Bio Conversion Inc.
dated October 2, 2000
10.11 Commissioning and Training Agreement with Richmond Bio
Conversion Inc. dated October 2, 2000
10.12 Maintenance Services Agreement with Richmond Bio Conversion Inc.
dated October 2, 2000
10.13 Technical Services Agreement with Richmond Bio Conversion Inc.
dated October 2, 2000
27.1 Financial Data Schedule
-20-
<PAGE>
