SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED: September 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM N/A TO __________
---------
Commission File Number 1-15497
RecycleNet Corporation
(Exact name of small business issuer in its charter)
Utah
87-0301924
(State or other jurisdiction of (IRS Employer
Identification No.)
incorporation or organization)
7 Darren Place, Guelph, ON N1H 6J2, CANADA
(Address of principal executive offices, including Zip Code)
519-767-2913
(Registrant's telephone number,)
Check whether the issuer (1) filed all reports required to be
filed by Sections 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 [ ]
The number of common shares outstanding at September 30, 2000:
39,505,043
The number of class N shares outstanding at September 30, 2000:
66,591,781
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
RECYCLENET CORPORATION AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
Page
Condensed Consolidated Balance Sheets - September 30, 2000 and
December 31, 1999 (Unaudited) F-2
Condensed Consolidated Statements of Operations for the Three
and Nine Months Ended September 30, 2000 and 1999 (Unaudited) F-3
Condensed Consolidated Statements of Cash Flows for the Nine
Months Ended September 30, 2000 and 1999 (Unaudited) F-4
Notes to Condensed Consolidated Financial Statements F-5
F-1
<PAGE>
RECYCLENET CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
September 30, December 31,
2000 1999
----------- -----------
ASSETS
Current Assets
Cash $ 122,322 $ 61,167
Trade accounts receivable, net of $5,617
and $2,168 allowance for doubtful accounts,
respectively 64,664 30,289
Note receivable 17,500 15,000
----------- -----------
Total Current Assets 204,486 106,456
----------- -----------
Computer Equipment 21,372 13,693
Less accumulated depreciation (8,774) (3,520)
----------- -----------
Net Equipment 12,598 10,173
----------- -----------
Total Assets $ 217,084 $ 116,629
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Trade accounts payable $ 21,395 $ 18,023
Accrued liabilities 6,000 2,650
Deferred revenue 61,106 43,328
----------- -----------
Total Current Liabilities 88,501 64,001
----------- -----------
Stockholders' Equity
Class N common shares (and Class X shares
of Amalco) - $0.01 par value; 70,896,789
shares authorized; 66,591,781 shares and
68,130,269 shares outstanding, respectively 665,918 681,303
Common shares - $0.01 par value; 79,103,211
shares authorized; 39,505,043 shares and
10,643,947 shares issued and outstanding,
respectively 395,050 106,439
Additional paid-in capital 196,745 447,926
Accumulated deficit (1,129,130) (1,183,040)
----------- -----------
Total Stockholders' Equity 128,583 52,628
----------- -----------
Total Liabilities and Stockholders' Equity $ 217,084 $ 116,629
=========== ===========
See the accompanying notes to condensed consolidated financial statements.
F-2
<PAGE>
RECYCLENET CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
---------------------- ------------------------
2000 1999 2000 1999
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Sales $ 783,475 $ 198,826 $ 1,685,814 $ 316,280
Cost of Sales 645,021 157,587 1,291,356 178,595
---------- ---------- ----------- ----------
Gross Profit 138,454 41,239 394,458 137,685
---------- ---------- ----------- ----------
Operating Expenses
General and administrative expenses 108,333 69,782 342,517 181,201
Exchange gain (218) - (1,969) (4,628)
Marketing expense (paid with stock) - - - 116,100
Professional fees (paid with stock) - - - 423,917
Merger and acquisition expensed
(paid with stock) - 400,000 - 400,000
---------- ---------- ----------- ----------
Total Operating Expenses 108,115 469,782 340,548 1,116,590
---------- ---------- ----------- ----------
Net Income (Loss) $ 30,339 $ (428,543) $ 53,910 $ (978,905)
========== ========== =========== ==========
Basic Income (Loss) Per
Common Share $ 0.00 $ (0.04) $ 0.00 $ (0.05)
========== ========== =========== ==========
Diluted Income (Loss) Per
Common Share $ 0.00 $ (0.04) $ 0.00 $ (0.05)
========== ========== =========== ==========
</TABLE>
See the accompanying notes to condensed consolidated financial statements.
F-3
<PAGE>
RECYCLENET CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Nine Months
Ended September 30,
----------------------
2000 1999
---------- ----------
Cash Flows From Operating Activities
Net income (loss) $ 53,910 $ (978,905)
Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation 5,254 2,318
Marketing expense paid with common stock - 116,100
Common stock issued for services - 823,932
Exchange gain (1,969) (4,628)
Changes in assets and liabilities:
Accounts receivable (34,375) (24,513)
Receivable from supplier (2,500) (15,000)
Accounts payable 3,372 (1,239)
Accrued liabilities 3,350 -
Deferred revenue 17,778 10,451
---------- ----------
Net Cash Provided by (Used in) Operating Activities 44,820 (71,484)
---------- ----------
Cash Flows From Investing Activities
Purchase of equipment (7,679) (8,342)
Cash from acquisition of metalworld.com, Inc. 22,045 -
---------- ----------
Net Cash Provided by (Used in) Investing Activities 14,366 (8,342)
---------- ----------
Cash Flows From Financing Activities
Proceeds of issuance of common shares - 109,475
---------- ----------
Net Cash Provided by Financing Activities - 109,475
---------- ----------
Effect of Exchange Rate Changes on Cash 1,969 8,914
---------- ----------
Increase (Decrease) in Cash 61,155 38,563
Cash at Beginning of Period 61,167 55,257
---------- ----------
Cash at End of Period $ 122,322 $ 93,820
========== ==========
Non Cash Investing and Financing Activities - During March
1999, the Company issued 833,717 common shares as compensation
for services valued at $423,917. Also during March 1999, the
Company issued 386,900 shares to acquire Andela Products
Limited and 7,877,421 shares to acquire Garbalizer Machinery
Corporation.
On July 14, 2000, the Company purchased all of the common stock
of metalworld.com, Inc. by issuing 27,322,608 shares of common
stock. The sole asset of metalworld.com, Inc. was $22,045 in
cash.
See the accompanying notes to condensed consolidated financial statements.
F-4
<PAGE>
RECYCLENET CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1-ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The accompanying condensed financial statements have been
prepared by RecycleNet Corporation and are unaudited. In the
opinion of management, the accompanying unaudited financial
statements contain all adjustments (consisting of only normal
recurring adjustments) necessary for fair presentation in
accordance with generally accepted accounting principles in the
United States.
The accompanying unaudited interim financial statements have
been condensed pursuant to the rules and regulations of the
Securities and Exchange Commission; therefore, certain
information and disclosures generally included in financial
statements have been condensed or omitted. These financial
statements should be read in conjunction with the Company's
annual financial statements included in the Company's annual
report on Form 10-KSB as of December 31, 1999. The financial
position and results of operations of the interim periods
presented are not necessarily indicative of the results to be
expected for the year ending December 31, 2000.
Basis of Presentation - RecycleNet Corporation (RecycleNet) was
incorporated on December 22, 1997 under the laws of the
Province of Ontario, Canada. On March 19, 1999, RecycleNet was
reorganized into Amalco, a newly-formed, wholly-owned Ontario
subsidiary of Garbalizer Machinery Corporation (Garbalizer), a
Utah corporation, under the terms of a stock exchange agreement
dated February 25, 1999 (the Agreement). Under the terms of the
Agreement, the shareholders of RecycleNet exchanged each
outstanding common share of RecycleNet for 3.869 Class X shares
(equity participating and non-voting) of Amalco and 3.869 Class
N (voting non-equity participating) shares of Garbalizer. The
RecycleNet shareholders were issued 70,896,789 Class N and
Class X shares. The Class N and Class X shares are convertible
into common shares on the basis of one Class N share and one
Class X share for each common share. Prior to closing the
Agreement, the Garbalizer shareholders held 7,877,427 common
shares, after a 2-for-3 reverse stock split, which remained
outstanding after the reorganization. The RecycleNet
shareholders held the equivalent of 90% of the common shares
after the reorganization.
For financial reporting purposes, RecycleNet was considered the
accounting acquirer. These financial statements have been
restated for all periods presented for the effects of the
3.869-for-1 stock split and for the conversion of the
RecycleNet common shares into Class N and Class X shares. In
connection with the Agreement, Garbalizer transferred all of
its existing assets and operations to a corporation under the
control of its principal shareholder in exchange for the
assumption by that corporation of all of the liabilities of
Garbalizer. Garbalizer thereby became a shell corporation with
no operations and no assets prior to the transaction. The
common shares of Garbalizer which remained outstanding were
accounted for as having been issued in the transaction and were
valued at zero which was the fair value of the net assets of
Garbalizer. The acquisition of Garbalizer was accounted for
under the purchase method of accounting.
Consolidation - On March 19, 1999, Garbalizer changed its name
to RecycleNet Corporation. The accompanying consolidated
financial statements include the accounts of RecycleNet
Corporation (the Utah corporation) from the date of its
acquisition, the accounts of RecycleNet (the Ontario
corporation renamed Amalco), the accounts of Andela Products
Limited from the date of its acquisition, and the accounts of
Metalworld.com, Inc. from the date of its acquisition. The
consolidated entity is referred to hereafter as the Company.
Inter-company accounts and transactions have been eliminated in
consolidation.
Operations - The Company is in the business of designing
Internet sites, Internet advertising and Internet trading of
consumable recyclable goods. Its primary operations are
conducted from Ontario. However, the U.S. dollar is the
functional currency for the Company's consolidated operations.
All gains and losses from currency translations are included in
the results of operations.
Note Receivable - At September 30, 2000, the Company had loaned
a total of $17,500 to Andela Tool & Machine. Repayment of the
loan is expected by December 31, 2000. The loan is unsecured,
non-interest bearing and payment terms have not been
established.
NOTE 2-BASIC AND DILUTED INCOME (LOSS) PER COMMON SHARE
Basic income (loss) per common share was calculated by
dividing through the date of the agreement with Garbalizer, net
income (loss) by the weighted-average number of common shares
outstanding. The weighted-average number of common shares
outstanding included the common shares converted into Class N
(and Class X) shares. Thereafter, it includes only common
shares actually outstanding. Diluted income (loss) per common
share was calculated to give effect to potentially issuable
common shares except during loss periods when those potentially
issuable shares were anti-dilutive. For the three and nine
months ended September 30, 1999, 68,432,291 and 60,262,253
Class No (and Class X) shares were excluded from the
calculation of diluted loss per share.
The following data shows the amounts used in computing earnings
per share for the three months and nine months ended September
30, 2000 and 1999 and the effect on income and weighted average
number of shares of dilutive potential common stock:
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
-------------------------- --------------------------
2000 1999 2000 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net income (loss ) $ 30,339 $ (428,543) $ 53,910 $ (978,905)
============ ============ ============ ============
Weighted-average number of common
shares used in basic income (loss) per
common share calculation 35,184,349 10,341,925 18,920,084 18,511,963
Incremental potentially issuable common
shares from assumed conversion of Class
N common shares 66,754,687 - 67,632,101 -
------------ ------------ ------------ ------------
Weighted-average number of common
shares and dilutive potential common
shares used in diluted income (loss)
per common share calculation 101,939,036 10,341,925 86,552,185 18,511,963
============ ============ ============ ============
</TABLE>
F-6
<PAGE>
NOTE 3-ACQUISITION OF METALWORLD.COM, INC.
The Company acquired all of the outstanding common stock of
metalworld.com, Inc. ("metalworld") by issuing 27,322,608
shares of common stock primarily to Inter-Continental
Recycling, Inc. and Paul Roszel on July 14, 2000. Inter-
Continental Recycling, Inc. is beneficially owned by Paul
Roszel, who is the President and majority shareholder of the
Company. Due to the fact that the Company and metalworld are
entities under common ownership, the purchase of metalworld has
been accounted for under the purchase method of accounting at
historical cost in a method similar to a pooling of interests.
The only asset held by metalworld at the date of acquisition
was $22,045 in cash and metalworld had no liabilities. The
operations of metalworld have been included in the accompanying
consolidated financial statements from July 14, 2000.
NOTE 4-STOCKHOLDERS' EQUITY
During the nine months ended September 30, 2000, 1,538,488
Class N common shares (and Class X shares of Amalco) were
converted into 1,538,488 common shares.
F-7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION
Results of Operations
Cautionary Statement Regarding Forward-Looking Statements
Certain statements contained in this Section and elsewhere in
this Form 10-QSB regarding matters that are not historical
facts are forward-looking statements (as such term is defined
in the Private Securities Litigation Reform Act of 1995).
Because such forward-looking statements include risks and
uncertainties, actual results may differ materially from those
expressed or implied by such forward-looking statements. All
statements that address operating performance, events or
developments that management expects or anticipates to
incur in the future, including statements relating to sales and
earnings growth or statements expressing general optimism
about future operating results, are forward-looking
statements. The forward-looking statements are based on
management's current views and assumptions regarding future
events and operating performance. Many factors could cause
actual results to differ materially from estimates contained in
management's forward-looking statements. The differences may
be caused by a variety of factors, including but not limited to
adverse economic conditions, competitive pressures,
inadequate capital, unexpected costs, lower revenues, net
income and forecasts, the possibility of fluctuation and
volatility of our operating results and financial condition,
inability to carry out marketing and sales plans and loss of
key executives, among other things.
General
RecycleNet Corporation (an Ontario Private Corporation) was
incorporated on December 22, 1997 and purchased the ongoing
business proprietorship of Mr. Paul Roszel. The Company
operated its business activities and continued to expand its
operations throughout the following period.
On March 19, 1999, RecycleNet Corporation (an Ontario Private
Corporation) completed a reverse share acquisition with the
Garbalizer Machinery Corporation, A Utah Corporation.
RecycleNet Corporation (Ontario) since its inception, has
provided Internet services and has received all of its sales
revenue from these activities. All of the previous business
activities of Garbalizer Machinery Corporation have not
continued on in the new parent. Consequently, all of the
following financial data being discussed will not compare any
Garbalizer Machinery Corporation figures with its relevant
comparisons.
Throughout the reporting periods shown hereafter, common stock
was issued for various items (ie. business & start-up costs;
merger costs; professional fees and marketing expenses). United
States generally accepted accounting principles requires that
we value these shares at reasonable current values when issued.
Consequently, the paid-in-capital of the Company recorded as
received a substantial paid-in capital and the Accumulated
Deficit recorded a correspondingly large deficit.
Sales Revenues 3 Months Ended 9 Months Ended
September 30 September 30
---------------------- ----------------------
2000 1999 2000 1999
---------- ---------- ---------- ----------
Sales Revenues USD $ 783,500 $ 198,800 $1,685,800 $ 316,300
Sales revenues recorded for the 3rd quarter ended September 30,
2000 of $783,500 were $584,700 or 294% over the similar quarter
in 1999. Correspondingly, year to date revenues of $1,685,800
in the year 2000 were $1,369,500 or 433% over the similar
period in 1999. Revenues derived from our portal business of
$143,000 in 2000 were 159% over the same 3 month period ended
September 30, 1999 and 9 month revenues in 2000 of $399,000
were 163% over the similar period in 1999.
Sales generated from Andela Products Limited have been strong
this year with three month revenues ended September 30, 2000 of
$640,500 compared to $143,700 in the same period of 1999, a
346% increase. Similarly, year to date sales to Sept 30, 2000
of $1,286,800 were $1,122,100 over the results recorded in
1999.
Our Internet Marketing Program at Andela Products Limited has
resulted in increased sales activities throughout this year.
Since we have no history of strong sales over more than one
year, we are not sure that these sales levels will continue
into 2001 at the current rate or whether we are experiencing a
bubble of sales activity this year.
Since our gross profit is being generated from our portal
business, management is concentrating on increasing these
revenues on a continuing basis.
Our first full time sales person was added in January of 1999
and three additional sales people were added later in 1999.
Progress in adding sales personnel in 1999 has resulted in
substantially increasing sales revenues and as we add
additional personnel in the future, we look forward to
continued sales revenue increases.
Gross Profit 3 Months Ended 9 Months Ended
September 30 September 30
---------------------- ----------------------
2000 1999 2000 1999
---------- ---------- ---------- ----------
Gross Profit $ 138,500 $ 41,200 $ 394,500 $ 137,700
Gross Profit generated in the 3 months ended September 30, 2000
of $138,500 increased $97,300 or 236% over the similar period
in 1999. Correspondingly, Gross Profit of $394,500 for the 9
months this year was $256,800 or 186% over the similar period
ended September 30, 1999.
This Gross Profit is being generated essentially by our portal
business as discussed above in our Sales Revenues section.
Management continues to emphasize increased revenues in this
section of our business and we expect revenues to further
increase both with present staff levels and also with
additional personnel.
Operating Expenses 3 Months Ended 9 Months Ended
September 30 September 30
---------------------- ----------------------
2000 1999 2000 1999
---------- ---------- ---------- ----------
General and Administration
Expenses $ 108,300 $ 69,800 $ 342,500 $ 181,200
General & Administration Expenses of $108,300 for the 3 months
ended September 30, 2000 were $38,500 over the similar period
in 1999, while year to date expenses of $342,500 in 2000 were
$161,300 over the same period of 1999.
Salaries and related benefits comprise the largest portion of
the expenses and account for $73,200 of the $108,300 expenses
for the last three months ended September 30, 2000 and $232,400
of the year to date numbers.
Salaries and related benefits increased by $110,800 for the
nine months ended September 30, 2000 over the nine months ended
September 30, 1999. This increase reflects the additional
personnel that were added to our staff throughout 1999 at
various times, but who have been employed throughout the year
2000. Our legal and accounting fees have been $5,700 higher in
the 9 month period of 2000 over 1999 primarily to reflect our
continuing efforts to maintain current quarterly filings and to
respond to our Securities and Exchange Commission requirements.
Management is monitoring close control on all other expenses in
order to improve operations.
Net Profit (Loss) 3 Months Ended 9 Months Ended
September 30 September 30
---------------------- ----------------------
2000 1999 2000 1999
---------- ---------- ---------- ----------
Net Profit (Loss) USD) $ 30,300 $ (428,500) $ 53,900 $ (978,900)
The Net Profit results for this quarter ended September 30,
2000 of $30,300 is the 3rd consecutive quarter that RecycleNet
Corporation has achieved a Profit. In the 1st quarter ended
March 31, 2000, Net Profit was $6,400 while the 2nd quarter
ended June 30, 2000 the Profit of $17,200 was recorded, a 169%
increase over the first quarter. Now we have a 76% increase in
Net Profit or $13,100 over the 2nd quarter. Sales Revenues of
RecycleNet are continuing to surpass our expense levels
resulting in Profits and positive cash flow. Management will
continue to encourage revenue growth from our sales personnel
while maintaining tight cost controls on our operations.
The year 1999 to September 30 recorded substantial losses, most
of this attributed to the issuance of stock for services
rendered. Included in the loss of $978,900 in 1999 was
$940,030 for professional fees, marketing expenses and merger
and acquisition costs. Please note that these expenses did not
affect our cash flow, nor did it weaken our current financial
condition.
Liquidity and Capital Resources
The Company's cash position of $122,300 is at its highest level
since inception, and represents an increase of $61,200 from the
December 31, 1999 balance of $61,200 and also a similar
increase of $62,300 from the June 30,2000 position.
Accounts Receivable have increased $10,600 from the June 30,
2000 balance of $54,100 and reflects directly the increase in
our monthly sales activities. The note receivable from our
supplier, Andela Tool and Machinery, was reduced by a $5,000
payment during this quarter.
During the quarter, $7,700 was expended to purchased another
laptop computer and a projector that can transmit data from our
laptop computer screen for presentation purposes.
Conversely, trade accounts payable have increased $16,500 from
the June 30, 2000 balance and represents only current payables.
Deferred Revenue
Deferred Revenue also continued to increase to $61,100 from
June 30, 2000 balance of $49,900 and the December 31, 1999
balance of $43,300. This is directly attributable to our
increased sales activity with more services being sold at
higher values and also these services being paid by the
customer in advance. These revenues will be taken into income
proportionately each month in the future as we deliver these
services to our customers.
Miscellaneous Comments
Management's effort during the 9 months to September 30, 2000
has produced Net Profits of $53,900 during the period. Our
current cash balance of $122,300 compared to our opening
January 1, 2000 balance of $61,200 is a marked improvement of
our financial position.
With no current bank loan obligations and no long-term debt
securities, and only small amounts of current liabilities, our
positive cash flow continues to increase our already strong
financial position. Management will reinvest this positive
cash flow into our business to improve our business activities
while improving shareholder value.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
Competition for Internet products and services, advertising and
e-commerce is intense. The Company expects that competition
will continue to intensify. Barriers to entry are minimal, and
competitors can launch new Web sites at a relatively low cost.
It competes for a share of a customer's advertising/promotional
budget with online services and traditional off-line media,
such as print and trade associations.
Competitors may develop Internet products or services that are
superior to or have greater market acceptance than the
Company's solutions. If it is unable to compete successfully
against its competitors, business condition, financial
condition, and operating results will be adversely affected.
Many of the Company's competitors have much greater brand
recognition and greater financial, marketing and other
resources. This may place it at a disadvantage in responding to
its competitors' pricing strategies, technological advances,
advertising campaigns, strategic partnerships and other
initiatives.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A report on form 8-K was filed on August 14, 2000. The Company
reported Item2: The acquisition of metalworld.com, Inc.
SIGNATURES
Pursuant to the requirements of the Exchange Act of 1934, the
registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
RECYCLENET CORPORATION
November 14, 2000
BY: /s/ Paul Roszel
-------------------------------------
Paul Roszel, Chairman of the Board
of Directors
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.
November 14, 2000
BY: /s/ Paul Roszel
-------------------------------------
Paul Roszel, Chairman of the Board
of Directors
November 14, 2000
BY: /s/ Richard Ivanovick
-------------------------------------
Richard Ivanovick, C.A., CFO
November 14, 2000
BY: /s/ Keith A. Deck
-------------------------------------
Keith A. Deck, Director
