10-QSB/A
1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB/A
AMENDMENT NO. 1
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED: March 31, 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 March 31, 2000: 10,643,947
The number of class N shares outstanding at March 31, 2000: 68,130,269
<PAGE>
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
RECYCLENET CORPORATION AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
PAGE
Condensed Consolidated Balance Sheets March 31, 2000 and
December 31, 1999 (Unaudited). . . . . . . . . . . . . . . . . . F-2
Condensed Consolidated Statements of Operations for the
Three Months Ended March 31, 2000 and 1999 (Unaudited) . . . . . F-3
Condensed Consolidated Statements of Cash Flows for the
Three Months Ended March 31, 2000 and 1999 (Unaudited) . . . . . F-4
Notes to Condensed Consolidated Financial Statements . . . . . . . F-5
<PAGE>
RECYCLENET CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
March 31, December 31,
2000 1999
---------- ----------
ASSETS
Current Assets
Cash. . . . . . . . . . . . . . . . . . . . . . $ 49,227 $ 61,167
Trade accounts receivable, net of $2,065
and $2,168 allowance for bad debt . . . . . . 42,337 30,289
Note receivable . . . . . . . . . . . . . . . . 22,500 15,000
---------- ---------
Total Current Assets . . . . . . . . . . . 114,064 106,456
---------- ---------
Computer Equipment. . . . . . . . . . . . . . . . 13,693 13,693
Less accumulated depreciation . . . . . . . . . (5,094) (3,520)
---------- ---------
Net Equipment . . . . . . . . . . . . . . 8,599 10,173
---------- ---------
Total Assets. . . . . . . . . . . . . . . . . . . $ 122,663 $ 116,629
========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Trade accounts payable. . . . . . . . . . . . . $ 9,932 $ 18,023
Accrued liabilities . . . . . . . . . . . . . . 2,094 2,650
Deferred revenue. . . . . . . . . . . . . . . . 51,649 43,328
---------- ---------
Total Current Liabilities . . . . . . . . 63,675 64,001
---------- ---------
Stockholders' Equity
Class N convertible shares (and Class X shares
of Amalco) - $0.01 par value; 70,896,789
shares authorized; 68,130,269 shares issued
and outstanding . . . . . . . . . . . . . . . 681,303 681,303
Common shares - $0.01 par value; 79,103,211
shares authorized; 10,643,947 shares issued
and outstanding . . . . . . . . . . . . . . . 106,439 106,439
Additional paid-in capital. . . . . . . . . . . 447,926 447,926
Accumulated deficit . . . . . . . . . . . . . . (1,176,680) (1,183,040)
---------- ---------
Total Stockholders' Equity. . . . . . . . 58,988 52,628
---------- ---------
Total Liabilities and Stockholders' Equity. . . . $ 122,663 $ 116,629
========== =========
See the accompanying notes to condensed consolidated financial statements.
F-3
<PAGE>
RECYCLENET CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the Three Months
Ended March 31,
-------------------------
2000 1999
----------- -----------
Sales. . . . . . . . . . . . . . . . . . . . . $ 294,605 $ 32,234
Cost of Sales. . . . . . . . . . . . . . . . . 173,568 -
----------- -----------
Gross Profit . . . . . . . . . . . . . . . . . 121,037 32,234
----------- -----------
Operating Expenses
General and administrative expenses. . . . . 116,351 44,519
Exchange gain. . . . . . . . . . . . . . . . (1,675) (105)
Marketing expense (paid with stock). . . . . - 116,100
Professional fees (paid with stock). . . . . - 423,917
----------- -----------
Total Operating Expenses. . . . . . . . . 114,676 584,431
----------- -----------
Net Income (Loss). . . . . . . . . . . . . . . $ 6,361 $ (552,197)
=========== ===========
Basic Income (Loss) Per Common Share . . . . . $ 0.00 $ (0.01)
=========== ===========
Diluted Income (Loss) Per Common Share . . . . $ 0.00 $ (0.01)
=========== ===========
Weighted-Average Number of Common Shares Used
in Basic Per Share Calculation. . . . . . . . 10,643,947 70,841,075
=========== ===========
Weighted-Average Number of Common Shares Used
in Diluted Per Share Calculation. . . . . . . 78,774,216 70,841,075
=========== ===========
See the accompanying notes to condensed consolidated financial statements.
F-4
<PAGE>
RECYCLENET CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Three Months
Ended March 31,
-------------------------
2000 1999
----------- -----------
Cash Flows From Operating Activities
Net income (loss). . . . . . . . . . . . . . $ 6,361 $ (552,197)
Adjustments to reconcile net loss to net
cash used by operating activities:
Depreciation. . . . . . . . . . . . . . . 1,574 117
Marketing expense paid with common stock. - 116,100
Common stock issued for services. . . . . - 423,917
Exchange (gain) loss. . . . . . . . . . . (1,675) (105)
Changes in assets and liabilities:
Accounts receivable . . . . . . . . . . . (12,048) 1,624
Receivable from supplier. . . . . . . . . (7,500) -
Prepaid expenses. . . . . . . . . . . . . - (4,183)
Accounts payable. . . . . . . . . . . . . (8,092) 2,863
Accrued liabilities . . . . . . . . . . . (556) -
Deferred revenue. . . . . . . . . . . . . 8,321 (1,960)
----------- -----------
Net Cash Used in Operating Activities. . . (13,615) (13,824)
----------- -----------
Cash Flows From Investing Activities
Purchase of equipment. . . . . . . . . . . . - (912)
----------- -----------
Net Cash Used in Investing Activities. . . - (912)
----------- -----------
Cash Flows From Financing Activities
Proceeds of issuance of common shares. . . . - 109,476
----------- -----------
Net Cash Provided by Financing Activities. . . - 109,476
----------- -----------
Effect of Exchange Rate Changes on Cash. . . . 1,675 105
----------- -----------
Increase (Decrease) in Cash. . . . . . . . . . (11,940) 94,845
Cash at Beginning of Period . . . . . . . . . 61,167 55,257
----------- -----------
Cash at End of Period. . . . . . . . . . . . . $ 49,227 $ 150,102
=========== ===========
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.
See the accompanying notes to condensed consolidated financial statements.
F-5
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The accompanying financial statements have been
prepared by Recyclenet Corporation and subsidiaries
and are unaudited. In the opinion of management,
the accompanying unaudited financial statements
contain all necessary adjustments 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 connection
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 ended
December 31, 2000.
Amounts previously reported for March 31, 2000 and
for the three months then ended have been adjusted
to conform to the audited consolidated financial
statements for December 31, 1999 and for the year
then ended.
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) and the accounts of Andela Products
Corporation, 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.
BUSINESS CONDITION - The Company has experienced an
operating profit of $6,400 for the three months
ended March 31, 2000 compared to an operating loss
of $522,200 during the first period of 1999.
Operating cash flow during the first quarter of
2000 was negative at $11,900, primarily resulting
from the increase in Accounts Receivable and a
Receivable from Supplier. During the similar
period in 1999, cash flow was $94,800 positive
recorded primarily from the issuance of common
shares for $109,500.
The increase in Stockholder's Equity at March 31,
2000 of $6,400 to $59,000 compared to $52,600 at
December 31,1999 reflects the operating profit for
the first quarter of 2000. This is the first
quarter that the company has recorded a profit
while still building the infrastructure to operate
our business. The Management of RecycleNet will
closely control the Operating Expenses while
focusing our efforts to increase our sales
revenues. This combination of activities should
improve our operating profits in the ensuing months.
BASIC AND DILUTED INCOME (LOSS) PER COMMON SHARE -
Basic income (loss) per common share was calculated
by dividing the net income (loss) by the weighted-
average number of common shares that were converted
into Class N (and Class X) shares through the date
of the merger plus the weighted-average number of
common shares outstanding thereafter. 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 would be anti-dilutive.
NOTE RECEIVABLE - At March 31, 2000, the Company
had loaned a total of $22,500 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.
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 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--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 $109,476 or $0.51
per share. During March 1999, the Company issued
833,717 shares of common stock for services. The
shares were recorded at their fair value $423,917
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.
During the first quarter of 2000, there were no
changes in the number of class N common shares and
(class X shares of Amalco) and no changes in the
number of common shares outstanding.
NOTE 4 -- SUBSEQUENT EVENTS
During April and May of 2000, 138,700 shares of
Class N convertible shares (and Class X shares of
Amalco) were exchanged for 138,700 common shares of
the Company.
On July 14, 2000, the Company entered into an
agreement whereby the Company issued 27,322,608
shares of common stock for the acquisition
metalworld.com, Inc.
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 consolidated
statement of Accumulated Deficit recorded a correspondingly large
deficit.
Sales Revenues
Jan 1 to Mar 31, 2000 Jan 1 to Mar 31, 1999
Sales Revenues USD $294,600 $32,200
Sales revenues recorded for the three months ended
March 31, 2000 of $294,600 have increased $262,400
from $32,200 during the similar period of 1999.
Revenues from our web site services of $121,000 was
$87,800 over the $33,200 recorded in 1999, which
shows the favorable increase in our web site
business during the year. Sales of Andela Products
Corporation of $173,600 were also recorded this
quarter. Since Andela Products Corporation was
acquired at the end of the first quarter of 1999,
no sales were recorded last year in that quarter.
RecycleNet hired its first sales person in mid
January of 1999 and subsequently hired additional
personnel throughout the year. Their efforts are
recorded in our increased sales revenues and we
expect to add additional personnel with the
corresponding revenue increases.
Gross Profit
Jan 1 to Mar 31, 2000 Jan 1 to Mar 31, 1999
Gross Profit USD $121,000 $ 32,200
Gross Profit of $121,000 in the first quarter of
2000 was also substantially higher than the $32,200
recorded in the similar period of 1999. Gross
Profit is a direct result of our revenue associated
with our web site activities. Gross profit related
to the Andela business has not contributed any
significant amount to our operations as of yet. We
continue to focus our activities at generating
revenue associated with our web site services and
graphic advertising.
Operating Expenses
Jan 1 to Mar 31, 2000 Jan 1 to Mar 31, 1999
General and Administration
Expenses USD $116,400 $44,500
General and Administrative Expenses increased from
$44,500 in 1999 to $116,400 for the first quarter
of 2000. The majority of costs in this category is
for salaries and related benefits which accounts
for $81,900 of the first quarter of 2000 compared
to $21,100 in the first period of 1999.
As discussed above in our revenue section, we hired
additional personnel throughout the year 1999 to
capture the additional sales activity. Also our
increased business activity and associated long
distance costs were also directly proportional to
the increased number of sales staff contacting our
customers throughout the world.
Some additional costs for travelling to trade shows
and administering a higher level of business
activity also contributed to slightly higher costs
in the first quarter of the year 2000 as compared
to the first period of 1999. We expect to continue
to tightly control costs in the year 2000 while
increasing revenues as quickly as we can.
Jan 1 to Mar 31, 2000 Jan 1 to Mar 31, 1999
Marketing Expense $ - $ 116,100
Professional Fees - 423,900
--------- ----------
- 540,000
========= ==========
Marketing and Professional Fees of $116,100 and
$423,900 respectively were costs included in 1999
and were paid for by the issuance of stock. These
expenses were one-time costs and similar costs were
not incurred in the first quarter of 2000. Please
take note that these expenses did not reduce our
cash balances and thus did not jeopardize our cash
liquidity in 1999.
Net Profit (Loss)
Jan 1 to Mar 31, 2000 Jan 1 to Mar 31, 1999
Net Profit (Loss) $6,400 ($ 552,200)
Net profit of $6,400 reported in the first quarter
of 2000 was a significant improvement over the
$552,197 loss recorded in the similar period of
1999. As noted above, marketing and professional
fees totaling $540,000 which were paid for by the
issuance of stock, accounted for the majority of
the loss recorded in 1999. Without this non-cash
expense of $540,000, our loss for the first period
of 1999 would have been approximately $12,000.
Management expects our profits will continue to
improve in the year 2000 as we will closely control
our expenses and use our resources to increase
revenues.
Liquidity and Capital Resources
As at March 31, 2000, the company's cash position
was $49,200, a $11,900 reduction from the $61,200
recorded at December 31, 1999. Our Accounts
Receivable have increased to $42,300 from $30,300
reflecting our increase in sales revenue activities
during the same period.
Accounts Payable was reduced by $8,100 during this
same period while deferred revenues increased by
$8,300.
During the first period of 1999, RecycleNet raised
$109,500 by the issue of company stock which
improved our cash position as at March 31, 1999 to
$150,100. Throughout the year 1999, additional
sales personnel were hired and these funds were
used to increase our business activity level. Our
sales force has now been trained and they are
generating more revenues than the costs associated
with attaining these revenues.
Management expects that our operations will now
generate consistent profits and correspondingly,
positive cash flows. Management's efforts must be
focused on increasing sales revenues without a
corresponding increase in expenditures thus
increasing shareholder value over the long term.
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 sub sequent
month that proportion which is provided in services.
As at March 31, 2000, deferred revenue of $51,700
increased $8,300 over the December 31, 1999 amount.
This is a direct result of increased sales revenue
and this amount will be recorded into sales revenue
each month in the future as these services are
provided.
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 8K
A report on form 8-K was filed on January 26, 2000.
The Company reported Item 6: Resignation of
Registrant's Directors.
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
October 3, 2000
BY: /s/ Paul Roszel
----------------------------------
Paul Roszel, Chairman of the Board of Directors
BY: /s/ Richard Ivanovick
-----------------------------------
Richard Ivanovick, C.A., CFO
