SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB/A
AMENDMENT NO. 1
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
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,)
Securities registered pursuant to Section 12(g) of the Exchange Act:
Common Stock, $.010 par value
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [ ] No [X]
Check if there is no disclosure of delinquent filers pursuant to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained,
to the best of registrant's knowledge, in definitive proxy or any amendment
to this Form 10-KSB. ( )
State issuer's revenues for its most recent fiscal year: $ 579,617
State the aggregate market value of the voting stock held by non-affiliates
computed by reference to the price at which the stock was sold, or the average
bid and asked price of such stock, as of a specified date within the past 60
days.
As at February 25, 2000, the aggregate market value of the voting stock held
by non-affiliates of the registrant, based on the average bid and ask prices
of $0.562 and $ 0.500 respectively, namely $.531 x 10,643,941 common
shares outstanding was $5,651,932.
As of December 31, 1999 there were 68,130,269 class N voting non-equity
shares outstanding.
As of December 31, 1999 there were 10,643,941 of the issuer's Common Shares,
$.010 par value, outstanding.
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RECYCLENET CORPORATION
INDEX
Table of Contents
Part I
Item 1. Description of Business ........................................3
Item 2. Description of Property ........................................4
Item 3. Legal Proceedings ..............................................4
Item 4. Submission of Matters to a Vote of Security Holders ............4
Part II
Item 5. Market for Common Equity and Related Stockholder Matters .......4
Item 6. Management's Discussion and Analysis of Financial
Condition and Results of Operations.............................4
Item 7. Financial Statements............................................8
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..............................
FORWARD LOOKING STATEMENTS
RecycleNet Corporation (the "Company","we" or "us") cautions readers that
certain important factors may affect our actual results and could cause such
results to differ materially from any forward-looking statements that may
have been made in this Form 10-KSB or that are otherwise made by or
on behalf of us. For this purpose, any statements contained in the Form 10-KSB
that are not statements of historical fact may be deemed to be forward-looking
statements. Without limiting the generality of the foregoing, words such as
"may," "expect," "believe," "anticipate," "intend," "could," "estimate,"
"plan" or "continue" or the negative other variations thereof or comparable
terminology are intended to identify forward-looking statements. Factors that
may affect our results include, but are not limited to, our limited history of
non-profitability, our dependence on a limited number of customers and key
personnel, the need for additional financing and our dependence on certain
industries. We also subject to other risks detailed herein or detailed from
time to time in our filings with the Securities and Exchange Commission.
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PART-I
ITEM 1. DESCRIPTION OF BUSINESS
Background
RecycleNet Corporation is recognized internationally as a pioneer and leader,
providing dynamic and business critical Internet based information technology
services. RecycleNet Corporation provides "Global Access to Recycling Markets"
(GARM) through dynamic Internet portals that facilitate e-commerce trading.
Web sites include:
Recycler's World a worldwide trading site for Information related to secondary
or recyclable commodities, by-products, used & surplus items or materials.
C.R.U.M.B. (Crumb Rubber Universal Marketing Bureau)
auto.recycle.net the Internet's Used Vehicle Marketplace
equip.recycle.net the Internet's Used Equipment Marketplace
used.recycle.net the Internet's Used and Collectibles Marketplace
SEC-MAT - The Secondary Materials & Commodity Clearinghouse
Each of the industry specific web sites functions as a business to business
trading resource and a business to consumer marketplace. RecycleNet Corporation
derives its revenues from three business segments, Internet Portal Services,
Proprietary Exchange Software and E-Commerce Services.
Marketing
The Company's marketing strategy is designed to strengthen and increase brand
awareness, increase customer traffic to the web sites, build customer
loyalty, encourage repeat site visitation and develop incremental product and
service revenue opportunities. The Company inventively applies technology to
deliver personalized service programs to ensure customer satisfaction and
loyalty.
The Company's goal is to attract industry decision-makers to its web sites on
a regular and consistent basis by developing and providing customer and free
services. Marketing strategy consists of traditional print media advertising,
direct and indirect outbound email advertising, Internet advertising, trade
show participation, trade association partnerships and strategic alliances
with other media and related companies and organizations.
Due to the Company's excellent customer service record over the past 4 years,
RecycleNet benefits from positive "word of mouth" and customer referrals.
Every effort is made to achieve frequent communication with and obtain feedback
from customers to continually improve services/products.
Competition
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 oline 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, Its business, 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.
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ITEM 2. DESCRIPTION OF PROPERTY
The Company maintains shared office space at 7 Darren Place, Guelph Ontario
Canada and this space is provided at no charge to the company by Inter-
Continental Recycling Inc.
ITEM 3. LEGAL PROCEEDINGS
Neither the Company nor any of it's officers, directors or greater than 10%
beneficial shareholders are involved in any litigation or legal proceedings
involving the business of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote by Security Holders during the last
quarter of this fiscal year.
Part II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The following table sets out the high and low trade prices of our stock
for the periods indicated.
Calendar Years High Price Low Price
1999 Quarter: Fourth $0.500 $0.120
Third $0.550 $0.218
Second $0.850 $0.310
First $1.050 $0.040
1998 Quarter: Fourth $0.075 $0.060
Third $0.100 $0.060
Second $0.139 $0.046
First $0.070 $0.045
1997 Quarter: Fourth $0.070 $0.040
Third $0.070 $0.040
Second $0.070 $0.046
First $0.075 $0.035
ITEM. 6 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Cautionary Statement Regarding Forward-Looking Statements
Certain statements Contained in this Section and elsewhere in this Form 10-KSB
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
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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 becaused 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 records as
received a substantial paid-in capital and the consolidated statement of
operations records a correspondingly large expense.
To assist the readers of these financial statements, we have reported normal
operational sales and expenses resulting in an operating loss before special
expenses.
We have itemized the special expenses below that are not cash paid expenses
and did not result from any payments from our bank accounts.
Sales Revenues
Jan 1 to Dec 31, 1999 Dec 22, 1997 to Dec 31, 1998
Sales Revenues USD $579,600 $101,000
Sales revenues for the year ending December 31, 1999 were recorded at $579,600,
an increase of $478,600 over the similar period of 1998. This 573% increase
in revenue reflects our strong web site increased activity, resulting in a
corresponding increase in customer requests for participation in our business.
We hired our first sales person in January 1999 and an additional two people
in October 1999 to accommodate this increased business activity. We are
presently in a position to hire additional sales personnel once again to
properly accommodate our customer requests.
Sales in our e-commerce section amounted to $379,200 of the total sales of
$579,600. This year RecycleNet Web Sales amounted to $200,400 compared to our
sales revenue in 1998 of $101,000. This is a very favorable increase of
$99,400 or 98% over last year.
Gross Profit
Jan 1 to Dec 31, 1999 Dec 22, 1997 to Dec 31, 1998
Gross Profit USD $199,800 $ 86,900
The Gross Profit increase of $112,900 or 129% over last year's results was
directly related to revenue increase of our web related business. Sales of our
E-commerce business of approximately $380,000 USD resulted in a gross loss of
under $1,000. Each additional sales dollar increase as selling costs
associated with generating these revenues are recorded below in General and
Administrative expenses.
Operating Expenses
Jan 1 to Dec 31, 1999 Dec 22, 1997 to Dec 31, 1998
General and
Administration
Expenses USD $309,300 $95,200
The general and administrative expenses increased $214,100 this year over the
similar period last year. This was essentially caused by the following
factors:
a) an increase in sales personnel to accommodate our increased business
activity resulting in higher salary and related benefit costs
b) an increase in administrative staff to deal with the development of our
Rhodium WebWeaver, and our auto.recycle.net web site and related business
activities
c) an increase in expenses especially legal and accounting fees associated
with our responsibility to properly file our financial statements under
United States Accounting Rules and our preliminary filings with the
Securities and Exchange Commission
Now that we have filed with the SEC our financial statements and elaborated on
our business activities under the prescribed formats, we expect our legal and
accounting fees for normal operations to be reduced appreciably in the future.
Jan 1 to Dec 31, 1999 Dec 22, 1997 to Dec. 31, 1998
Marketing Expense $ 116,100 $ 0
Professional Fees 423,900 0
Merger and Acquisition Expense 400,000 0
--------- ---------
940,000 0
========= =========
In our notes to consolidated financial statements, Note 4 - Stockholder's
Equity is an explanation of the number of shares which were issued and the
basis for their value for services provided as arketing, professional fees
and merger and acquisition expenses. Please note that these expenses were
not paid out in cash and did not reduce our bank and cash balances nor did it
affect our liquidity position.
Net Profit (Loss)
Jan 1 to Dec 31, 1999 Dec 22, 1997 to Dec 31, 1998
Net Profit (Loss) ($1,047,200) ($ 9,500)
Net Loss for the year ended December 31, 1999 was ($1,047,200).
However, as noted above our loss after adjusting for the expense paid
for by shares was ($1,047,200) less ($940,000) resulting in an operating
loss of ($107,200). Our sales revenues continue to increase each month
and sales in the last quarter of 1999 of $263,300 were our best of any
quarter and supports our positive outlook for our business. Our general
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and administrative costs will rise at a much slower rate than our
increase in sales revenue resulting in a monthly profit position in the
near future.
Liquidity and Capital Resources
As at December 31, 1999, the company's cash and short term investment
totaled $76,200 compared to $55,300 at December 31, 1998, an increase of
$20,900. Accounts receivable also increased $3,800 to $30,300 in the
same comparable period.
Our current liabilities have increased in 1999, primarily to provide for
professional services for legal and accounting regarding year-end
responsibilities associated with being a public entity.
Our working cash position has improved slightly from last year at this
time and our current operating activities are generating positive cash
flow. Since we have no debt, we can use these resources to expand our
business activities or acquire another similar business.
RecycleNet Corporation completed the acquisition of Andela
Products Ltd. of Richfield Springs, New York in the quarter ended
June 30, 1999. Andela Products Ltd. is involved in strategic
marketing programs for recyclable commodities and has developed a
unique Internet based service. RecycleNet anticipates Andela
Products Ltd. will add significant revenues for the Company in the
future.
The acquisition of Andela Products Ltd. was completed by utilizing
a contingency of shares of RecycleNet, the Ontario Corporation
that were budgeted prior to the March 19, 1999 reorganization of
the Company; subsequently this acquisition has no effect on the
Company's cash position and no shareholder dilution will take place.
Deferred Revenue
Deferred revenue results from RecycleNet customers who pay for their
service purchases in advance, such as quarterly, half year, or annually.
RecycleNet records the initial payment in deferred revenue and then
recognizes in each month that proportion which is provided in services.
As at December 31, 1999, deferred revenue amounted to $43,300 US
compared to $36,000 as at December 31, 1998 and this amount will be
recorded into sales revenue each month in the future as these services
are provided. The increase in deferred revenue is directly related to
the increased sales revenue we are billing each month.
Year 2000 Compliance
December 31, 1999 has come and gone. The whole world was expecting a
catastrophic incident to occur somewhere and at any time close to just
after midnight in each of the time zones. Thankfully, thanks to the
preparedness of thousands of individuals and companies who reprogrammed
their critical software and spent untold hours testing, the world did
not experience any significant event related to Y2000. We were also
thankful that none of our operations were effected in any way and had no
effect on our continuing operations.
ITEM. 7 FINANCIAL STATEMENTS
RECYCLENET CORPORATION
INDEX TO FINANCIAL STATEMENTS
PAGE
Report of Independent Certified Public Accountants . . . . . . . . . F-2
Consolidated Balance Sheets - December 31, 1999 and 1998 . . . . . . F-3
Consolidated Statements of Operations for the Years Ended
December 31, 1999 and 1998. . . . . . . . . . . . . . . . . . . . . F-4
Consolidated Statements of Stockholders' Equity for the Years Ended
December 31, 1998 and 1999. . . . . . . . . . . . . . . . . . . . . F-5
Consolidated Statements of Cash Flows for the Years ended
December 31, 1999 and 1998. . . . . . . . . . . . . . . . . . . . . F-6
Notes to Consolidated Financial Statements . . . . . . . . . . . . . F-7
F-1
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HANSEN, BARNETT & MAXWELL
A Professional Corporation
CERTIFIED PUBLIC ACCOUNTANTS
(801) 532-2200
MEMBER OF AICPA DIVISION OF FIRMS Fax (801) 532-7944
MEMBER OF SECPS 345 East Broadway, Suite 200
MEMBER OF SUMMIT INTERNATIONAL ASSOCIATES Salt Lake City, Utah 84111-2693
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and the Board of Directors
RecycleNet Corporation
We have audited the consolidated balance sheet of RecycleNet Corporation and
subsidiaries as of December 31, 1999 and 1998 and the related consolidated
statements of operations, cash flows and stockholders' equity for the years
then ended. 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 auditing standards generally
accepted in the United States. 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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
RecycleNet Corporation and subsidiaries as of December 31, 1999 and 1998 and
the results of their operations and their cash flows for the years then
ended, in conformity with accounting principles generally accepted in the
United States.
The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed in
Note 1 to the consolidated financial statements, the Company has had
recurring losses from operations that raises substantial doubt about its
ability to continue as a going concern. Management's plans concerning these
matters are also described in Note 1. The consolidated financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.
HANSEN, BARNETT & MAXWELL
Salt Lake City, Utah
March 13, 2000
F-2
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RECYCLENET CORPORATION
CONSOLIDATED BALANCE SHEETS
DECEMBER 31,
----------------------
1999 1998
---------- ----------
ASSETS
Current Assets
Cash . . . . . . . . . . . . . . . . . . . . . . $ 61,167 $ 55,257
Trade accounts receivable, net of $2,065
allowance for bad debt. . . . . . . . . . . . . 30,289 26,505
Note receivable. . . . . . . . . . . . . . . . . 15,000 -
---------- ----------
Total Current Assets. . . . . . . . . . . . . 106,456 81,762
---------- ----------
Computer Equipment. . . . . . . . . . . . . . . . . 13,693 5,351
Less accumulated depreciation. . . . . . . . . . (3,520) (762)
---------- ----------
Net Equipment . . . . . . . . . . . . . . . . 10,173 4,589
---------- ----------
Total Assets. . . . . . . . . . . . . . . . . . . . $ 116,629 $ 86,351
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Trade accounts payable . . . . . . . . . . . . . $ 18,023 $ 4,460
Accrued liabilities. . . . . . . . . . . . . . . 2,650 -
Deferred revenue . . . . . . . . . . . . . . . . 43,328 31,525
---------- ----------
Total Current Liabilities . . . . . . . . . . 64,001 35,985
---------- ----------
Stockholders' Equity
Common shares - $0.01 par value; 150,000,000
shares authorized
Class N common shares (and Class X shares
of Amalco); 70,896,789 shares designated;
68,130,269 shares and 69,462,602 shares
issued and outstanding. . . . . . . . . . . . 681,303 694,626
Common shares; 10,643,947 shares and no
shares issued and outstanding . . . . . . . . 106,439 -
Additional paid-in capital . . . . . . . . . . . 6,520,094 5,563,718
Accumulated deficit. . . . . . . . . . . . . . . (7,255,208) (6,207,978)
---------- ----------
Total Stockholders' Equity. . . . . . . . . . 52,628 50,366
---------- ----------
Total Liabilities and Stockholders' Equity. . . . . $ 116,629 $ 86,351
========== ==========
The accompanying notes are an integral part of these consolidated
financial statements.
F-3
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RECYCLENET CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years
Ended December 31,
------------------------
1999 1998
----------- -----------
Sales . . . . . . . . . . . . . . . . . . . . . . $ 579,617 $ 100,974
Cost of Sales . . . . . . . . . . . . . . . . . . 379,853 14,033
----------- -----------
Gross Profit. . . . . . . . . . . . . . . . . . . 199,764 86,941
----------- -----------
Operating Expenses
General and administrative expenses. . . . . . (309,286) (95,151)
Exchange gain (loss) . . . . . . . . . . . . . 2,324 (1,250)
Marketing expense (paid with stock). . . . . . (116,100) -
Professional fees (paid with stock). . . . . . (423,932) -
Merger and acquisition expense (paid
with stock) . . . . . . . . . . . . . . . . . (400,000) -
----------- -----------
Total Operating Expenses. . . . . . . . . . . . . (1,246,994) (96,401)
----------- -----------
Net Loss. . . . . . . . . . . . . . . . . . . . . $(1,047,230) $ (9,460)
=========== ===========
Basic and Diluted Loss Per Class N (and
Class X) Common and Common Share . . . . . . . . $ (0.01) $ (0.00)
=========== ===========
Weighted-Average Number of Class N (and Class X)
Common and Common Shares Used in Per Share
Calculation. . . . . . . . . . . . . . . . . . . 76,818,099 69,211,287
=========== ===========
The accompanying notes are an integral part of these consolidated
financial statements.
F-4
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RECYCLENET CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Class N Common Shares
(and Class X
Shares of Amalco) Common Shares Additional Total
----------------------- ----------------------- Paid-in Accumulated Stockholders'
Shares Amount Shares Amount Capital Deficit Equity
----------- ---------- ----------- ---------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance - December 31, 1997. . . . . 68,975,240 $ 689,752 - $ - $ 5,505,555 $(6,198,518) $ (3,211)
Issuance for cash, January 30, 1998,
$0.09 per share . . . . . . . . . . 7,738 77 - - 609 - 687
Issuance for cash, February through
October 1998, $0.13 per share . . . 479,624 4,797 - - 57,553 - 62,350
Net loss for the year. . . . . . . . - - - - - (9,460) (9,460)
----------- ---------- ----------- ---------- ----------- ----------- ----------
Balance - December 31, 1998. . . . . 69,462,602 694,626 - - 5,563,718 (6,207,978) 50,366
Issuance for cash, February and
March 1999, $0.51 per share . . . . 213,570 2,137 - - 107,338 - 109,475
Issuance for services, March 1999,
$0.51 per share . . . . . . . . . . 833,717 8,337 - - 415,581 - 423,917
Issuance to acquire Andela Products
Corporation, March 11, 1999,
$0.30 per share . . . . . . . . . . 386,900 3,869 - - 112,231 - 116,100
Issuance to acquire Garbalizer
Machinery Corporation, March 19,
1999, $0.00 per share . . . . . . . - - 7,877,427 78,774 (78,774) - -
Contribution of 2,000,000 Class N
(and Class X) common shares by
principal shareholder and issuance for
merger and reorganization services,
August 19, 1999, $0.20 per share. . (2,000,000) (20,000) 2,000,000 20,000 400,000 - 400,000
Conversion of 766,520 Class N
(and Class X) common shares to
common shares, August 19, 1999. . . (766,520) (7,665) 766,520 7,665 - - -
Net loss for the year. . . . . . . . - - - - - (1,047,230) (1,047,230)
----------- ---------- ----------- ---------- ----------- ----------- ----------
Balance - December 31, 1999. . . . . 68,130,269 $ 681,303 10,643,947 $ 106,439 $ 6,520,094 $(7,255,208) $ 52,628
=========== ========== =========== ========== =========== =========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statments.
F-5
<PAGE>
RECYCLENET CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years
Ended December 31,
------------------------
1999 1998
----------- -----------
Cash Flows From Operating Activities
Net loss . . . . . . . . . . . . . . . . . . . $(1,047,230) $ (9,460)
Adjustments to reconcile net loss to net
cash used by operating activities:
Depreciation . . . . . . . . . . . . . . . . 2,758 762
Marketing expense paid with common stock . . 116,100 -
Common stock issued for services . . . . . . 823,919 -
Exchange (gain) loss . . . . . . . . . . . . (2,324) 1,250
Changes in assets and liabilities:
Accounts receivable. . . . . . . . . . . . . (3,784) (27,447)
Receivable from supplier . . . . . . . . . . (15,000) -
Accounts payable . . . . . . . . . . . . . . 16,212 4,618
Deferred revenue . . . . . . . . . . . . . . 11,803 32,645
----------- -----------
Net Cash Provided by (Used in) Operating
Activities. . . . . . . . . . . . . . . . . . . . (97,546) 2,368
----------- -----------
Cash Flows From Investing Activities
Purchase of equipment . . . . . . . . . . . . . (8,342) (5,351)
----------- -----------
Net Cash Used in Investing Activities. . . . . . . (8,342) (5,351)
----------- -----------
Cash Flows From Financing Activities
Payment of note payable to shareholder. . . . . - (10,103)
Proceeds of issuance of common shares . . . . . 109,474 63,036
----------- -----------
Net Cash Provided by Financing Activities. . . . . 109,474 52,933
----------- -----------
Effect of Exchange Rate Changes on Cash. . . . . . 2,324 (1,980)
----------- -----------
Increase in Cash . . . . . . . . . . . . . . . . . 5,910 47,970
Cash at Beginning of Year. . . . . . . . . . . . . 55,257 7,287
----------- -----------
Cash at End of Year. . . . . . . . . . . . . . . . $ 61,167 $ 55,257
=========== ===========
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 Corporation and 7,877,421 shares to
acquire Garbalizer Machinery Corporation.
During August 1999, the Company received
2,000,000 shares as a contribution from a
shareholder. The Company reissued these
shares as compensation for acquisition and
merger services valued at $400,000.
The accompanying notes are an integral part of these consolidated
financial statements.
F-6
<PAGE>
RECYCLENET CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE 1-ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The accompanying financial statements present the
consolidated financial position of RecycleNet
Corporation and subsidiaries and the results of their
operations and their cash flows in accordance with
accounting principles generally accepted in the United
States.
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. Accordingly, the
accompanying financial statements present the historical
operations of RecycleNet for the periods prior to March
19, 1999. Those historical 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) and the
accounts of Andela Products Corporation, from the date
of its acquisition. The consolidated entity is referred
to hereafter as the Company. Intercompany 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.
F-7
<PAGE>
USE OF ESTIMATES - The preparation of financial
statements in conformity with generally accepted
accounting principles requires management to make
estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the
financial statements and the reported amounts of
revenues and expenses during the reporting periods.
Actual results could differ from those estimates.
BUSINESS CONDITION - The Company has experienced
operating losses of $1,047,230 and $9,460 during the
years ended December 31, 1999 and 1998, respectively,
and had negative cash flows from operations activities
of $97,546 during the year ended December 31, 1999. At
December 31, 1999, the Company had an accumulated
deficit of $7,255,208. These conditions raise
substantial doubt about the Company's ability to
continue as a going concern. The accompanying financial
statements do not include any adjustments relative to
the recoverability and classification of the asset
carrying amounts or the amount and classification of
liabilities that might result from the outcome of this
uncertainty.
FAIR VALUES OF FINANCIAL INSTRUMENTS - The amounts
reported as cash, trade accounts receivable, accounts
payable, accrued liabilities and deferred revenue are
considered to be reasonable approximations of their fair
values. The fair value estimates were based on market
information available to management at the time of the
preparation of the financial statements.
BASIC AND DILUTED LOSS PER CLASS N (AND CLASS X) SHARE
AND COMMON SHARE - Basic and diluted loss per common
share has been computed by dividing net loss by the
weighted-average number of Class N (and Class X) common
shares and common shares outstanding during the year.
NOTE RECEIVABLE - At December 31, 1999, the Company had
loaned $15,000 to Andela Tool & Machine as a loan
towards their immediate working capital needs. Repayment
is expected by December 31, 2000. The loan is unsecured.
The loan is non-interest bearing and payment terms have
not been established.
COMPUTER EQUIPMENT - Equipment is stated at cost.
Maintenance and repairs of equipment are charged to
operations and major improvements are capitalized. Upon
retirement, sale, or other disposition, the cost and
accumulated depreciation are eliminated from the
accounts and gain or loss is included in operations.
Depreciation is computed using the straight-line method
over the estimated useful lives of the property and
equipment, which are three to four years. Depreciation
expense was $2,758 and $762 for the years ended December
31, 1999 and 1998, respectively.
REVENUE RECOGNITION - Revenue from providing services
are recognized as the services are performed. Customers'
pre-payments are recorded as a liability until services
have been performed.
ADVERTISING COSTS - Advertising costs are charged to
expense in the period incurred. Advertising expense for
the years ended December 31, 1999 and 1998 were $7,841
and $473, respectively.
NOTE 2-ACQUISITION OF ANDELA PRODUCTS CORPORATION
The Company acquired Andela Products Corporation by
issuing 386,900 shares of Class N and Class X common
stock on March 11, 1999, as explained in Note 1. The
acquisition was primarily for the purpose of obtaining
F-8
<PAGE>
marketing rights to glass recycling equipment. The
common shares issued were recorded at their fair value
of $116,100 and were accounted for as marketing expense.
The operations of Andela Products Corporation have been
included in the accompanying consolidated financial
statements from March 11, 1999.
NOTE 3-INCOME TAXES
Deferred tax assets are comprised of the following at
December 31, 1999 and 1998:
1999 1998
---------- ----------
Operating loss carry forwards . . . . . . . . . $ 53,714 $ 2,615
Less: Valuation allowance . . . . . . . . . . . (53,714) (2,615)
---------- ----------
Net Deferred Tax Asset. . . . . . . . . . . . . $ - $ -
========== ==========
The following is a reconciliation of the amount of
benefit that would result from applying the federal
statutory rate to pretax loss with the provision for
income taxes for the years ended December 31:
1999 1998
---------- ----------
Tax at statutory rate (34%) . . . . . . . . . . $ (356,058) $ (3,216)
Non-deductible expenses . . . . . . . . . . . . 307,327 -
Provincial benefit net of federal tax . . . . . (29,735) -
Deferred tax asset valuation change . . . . . . 51,099 2,615
Effect of foreign losses with no federal
benefit. . . . . . . . . . . . . . . . . . . . 27,367 601
---------- ----------
Total Income Tax Benefit. . . . . . . . . . . . $ - $ -
========== ==========
As of December 31, 1999, the Company had Canadian
operating loss carryforwards for tax purposes of
$112,371 which expire if not used beginning in 2005. In
addition, the Company has U.S. operating loss
carryforwards of approximately $77,125 which expire if
not used in 2014.
NOTE 4-STOCKHOLDERS' EQUITY
On March 19, 1999, the articles of incorporation were
amended to change the authorized capital to 150,000,000
common shares with a par value of $0.01 per share. The
board of directors is authorized to designate one or
more series within the class of common shares and to
designate relative preferences, limitations and rights.
The Board has designated 70,896,789 common shares as
Class N common shares. The Class N common shares have
voting rights of one vote per share and are non-equity
participating. Amalco, the Ontario subsidiary, is
authorized to issue an unlimited number of Class X
common shares. The Class X common shares of Amalco are
non-voting but equity participating. 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 of
Amalco for each common share of the Company.
During February through March 1999, the Company issued
213,570 shares of common stock for cash. The proceeds
from the issuance were $109,475 or $0.51 per share.
During March 1999, the Company issued 833,717 shares of
common stock for services. The shares were recorded at
F-9
<PAGE>
their fair value $423,932 or $0.51 per share based upon
the price shares were issued for cash during that same
time.
On March 11, 1999 the Company issued 386,900 shares of
Class N and Class X common stock to acquire Andela
Corporation, as explained in Note 1. The value assigned
to the shares was $0.30 per share based on the market
value at which the Company's common shares traded after
the reorganization of RecycleNet.
In conjunction with the reorganization of RecycleNet, a
principal shareholder converted 2,000,000 Class N and
Class X common shares into 2,000,000 common shares on
August 19, 1999. The shareholder contributed the common
shares to the Company. The shares were then reissued
to an individual for his assistance in the merger and
reorganization. The common shares issued were recorded
at their fair value of $400,000 or $0.20 per share based
upon the market value at which the Company's common
shares were trading at the time of issuance. The cost of
the related services was charged to expense.
ITEM. 8 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
As at December 31, 1999 the company does not have any changes in
or accounting convention disagreements with any of its independent
accountants.
7
<PAGE>
Part III
ITEM. 9 DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
The directors and officers of the Company are as follows:
Name Age Position Term of Office
- ------------ ----- ---------------------------------- --------------------
Paul Roszel 43 Chairman of the Board of Directors Inception to Present
Mikael Prydz 35 President, CEO & Director 3/99 to 20/03/00
Richard R.
Ivanovick CA 59 Chief Financial Officer &
Director 3/99 to present
Paul Roszel has been involved with the business engaged in by the
Company since 1988. From 1988 to 1995, Mr. Roszel published a
newsletter entitled "The Recycler's Exchange", which was a
regional industry newsletter circulating to an estimated 3200
recycling based businesses throughout Ontario, Canada. In late
1994, Mr. Roszel began developing the concept of a web site
utilizing the World Wide Web on the Internet to distribute the
information regarding recyclable material markets electronically.
The web site was activated on-line in early May 1995. Mr. Roszel
has over 22 years of hands on experience in the recycling
industry. He has been actively involved in the development and
implementation of collection, processing, transportation and
sales/marketing programs for secondary commodities.
Mikael L. Prydz joined the Company in November 1998, and was
appointed President and CEO in March 1999. Effective March 20, 2000
Mr. Prydz has resigned his Directorship and Presidency to pursue other
interests.
Richard R. Ivanovick CA also joined the Company in November 1998.
For the twenty three years prior to the present, Mr. Ivanovick has
been serving as President of Marsh Tire Services, Ltd., Ontario,
Canada, which company is involved in automobile service, sales and
leasing and car and truck rentals in the Guelph, Ontario area.
Mr. Ivanovick intends to divest himself of ownership in that
business and devote his whole efforts to the business of the
Company commencing in the Year 2000.
The Company's form 10-SB registration statement became effective on
February 2, 2000. At that date, the foregoing persons were required to
have filed Initial Statements of Beneficial Ownership of Securities on
Form 3. None of these persons owns, directly or indirectly, any common
shares of the Company. Each of them, however, owns class N shares of
the Company, which are convertible into common shares on a one-to-one
basis. Due to a misunderstanding of the filing requirements, these
persons were late in reporting their ownership of the Class N shares.
The Forms 3 have been filed with the Securities and Exchange Commission
and fully disclose their ownership of securities of the Company.
Further, the Company has instituted a Reporting Compliance program
designed to avoid late filings of Forms under Section 16 in the future.
ITEM. 10 EXECUTIVE COMPENSATION
The following table shows compensation earned during fiscal 1998
and 1999 by the Officers and Directors of the Company. They are
the only persons who received compensation during those periods.
No other miscellaneous compensation was paid or stock options granted
during those periods.
8
<PAGE>
Summary Compensation Table
--------------------------
Name & Principal Positions Fiscal Year Salary
-------------------------- ----------- ----------
Paul Roszel, Chairman of the 1999 $27,000 US
Board of Directors 1998 $27,000 US
Mikael Prydz, President, CEO
& Director (Note 1) 1999 $23,000
1998 $NIL
Richard Ivanovick CA, CFO &
Director (Note 2) 1999 $NIL
1998 $NIL
Note 1: For the years ended December 31, 1998, Mr. Mikael Prydz,
President and Director did not receive any salary or benefits of the
Corporation. As of May 1, 1999 Mr. Prydz has started receiving a salary
of $33,800 US per year. In addition, Mr. Prydz received 180,052 Class N
shares in RecycleNet Utah in lieu of wages prior to the March 19, 1999
reverse takeover.
Note 2: For the years ended December 31, 1998 and 1999, Mr. Richard
Ivanovick, CFO and Director did not receive any salary or benefits of
the Corporation. As of this filing date, March 2000, Mr. Ivanovick is
not drawing any salary or benefits. Mr. Ivanovick received 210,721
Class N shares in RecycleNet Utah in lieu of wages prior to the March
19, 1999 reverse takeover.
ITEM. 11 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following tables sets forth, as of the date herein, the share
ownership of each person known by the Company to be the beneficial owner
of 5% or more of the Company's shares, each officer and director
individually and all directors and officers of the Company as a group.
Percentage of
Ownership
(on a fully
Title Name & Address of Amount and Nature converted
of Class Beneficial Owner of Beneficial Owner basis)
- -------- ----------------- ------------------------- ---------
Class N Inter-Continental 58,033,269 shares (voting) 73.70%
Recycling, Inc. (Note 2)
7 Darren Place
Guelph, Ontario Canada
Class N Paul Roszel 3,526,312 shares (voting) 4.48%
7 Darren Place
Guelph, Ontario Canada
Class N Mikael Prydz 517,129 shares (voting) 0.66%
352 Green Acres Drive Resigned as Director
Waterloo, Ontario and President/CEO
Canada March 20, 1999 (Note 3)
Class N Richard Ivanovick CA 597,722 shares (voting) 0.76%
23 Cottontail Place
Cambridge, Ontario
Canada
9
<PAGE>
Common Garbalizer Corporation 4,489,897 shares (voting & 5.70%
of America investment)
1588 South Main 2nd (Note 4)
Fl. Suite 200
Salt Lake City, Utah
USA
(1) Class N shares are convertible into common
shares on a one for one basis.
(2) Inter-Continental Recycling Inc. is owned and
beneficially held by the immediate family of Mr.
Paul Roszel, a director of the Company.
(3) Mr. Mikael Prydz owns 517,129 Class N shares,
which he holds both personally and through
Investors Retirement Holdings Inc., a company that
he controls.
(4) Garbalizer Corporation of America owns
3,569,897 common shares directly and Garb-Oil &
Power Corporation (a company controlled by
Garbalizer Corporation of America) owns 920,000
common shares equating to 4,489,897 common shares
beneficially owned.
ITEM. 12 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company has an agreement with Inter-Continental Recycling, Inc., an
Ontario Corporation with its Head Office address at 7 Darren Place,
Guelph Ontario. Inter-Continental Recycling, Inc. is controlled 100% by
the immediate family of mr. Paul Roszel and owns 58,033,269 Class N shares
of RecycleNet Corporation.
Inter-Continental Recycling Inc. operates a pool of qualified personnel,
working on development projects, computer programming updates and sales
activities for various companies.
RecycleNet Corporation is billed $860.00 US monthly for direct costs for
web hosting fees and utilization of bandwidth. It is also billed
monthly for services supplied directly for management and sales
activities, which vary monthly based on the activity level.
In August 1999, 2,000,000 Class N Shares were gifted to RecycleNet
Corporation by Mr. Paul Roszel, for which he received no compensation.
Subsequently, RecycleNet Corporation issued 2,000,000 common shares to
Mr. John C. Brewer, formerly the President of Garbalizer Machinery
Corporation, in consideration of Mr. Brewer rendering of service to the
Corporation and its new management in connection with the March 19, 1999
reorganization of Garbalizer Machinery Corporation into RecycleNet
Corporation.
On September 23, 1999 RecycleNet Corporation signed a letter of intent
to purchase 100% of the common shares of fiberglass.com, inc., a Utah
Company. Inter-Continental Recycling Inc. is the majority owner of
fiberglass.com, inc., which is controlled by Mr. Paul Roszel and his
family. Mr. Paul Roszel through his holdings also controls the majority
of the shares in RecycleNet Utah. This acquisition is expected to be
complete prior to December 31, 2000 under the terms included in the
agreement.
There are no other transactions during the last two years, or proposed
transactions, between the Company and any director or officer or greater
than 5% shareholder in which such persons had or is to have a direct or
indirect material interest. The Company has no stock options; option
plans or other incentive compensation plans at the present time,
although the Company anticipates that it may adopt incentive
compensation plans in the near future. Further, the Company has no
formal management or employment agreements with any of its officers,
directors or other employees.
10
<PAGE>
The Company intends to enter into agreements in the future with other
companies or entities to process credit card merchant transactions, for
which the Company will receive a fee. Officers, directors and greater
than 5% shareholders of the Company may have a direct or indirect
interest in future potential business or entities in the recycling
industry.
ITEM. 13 EXHIBITS AND REPORTS ON FORM 8-K
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act the
registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
RECYCLENET CORPORATION
March 29, 2000
BY: /s/__________________________
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.
March 29, 2000
BY: /s/___________________________
Paul Roszel, Chairman of the Board of Directors
March 29, 2000
BY: /s/___________________________
Richard Ivanovick, C.A., CFO
11
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted form the balance
sheet as of December 31, 1999, and statements of operations 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> 61,167
<SECURITIES> 0
<RECEIVABLES> 30,289
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 106,456
<PP&E> 13,693
<DEPRECIATION> 3,520
<TOTAL-ASSETS> 116,629
<CURRENT-LIABILITIES> 64,001
<BONDS> 0
0
0
<COMMON> 787,742
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 116,629
<SALES> 579,617
<TOTAL-REVENUES> 579,617
<CGS> 379,853
<TOTAL-COSTS> 379,853
<OTHER-EXPENSES> 1,246,994
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,047,230)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,047,230)
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<NET-INCOME> (1,047,230)
<EPS-BASIC> (0.01)
<EPS-DILUTED> (0.01)
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