U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF
SMALL BUSINESS ISSUERS
Under Section 12(b) or (g) of
The Securities Exchange Act of 1934
RPM Technologies, Inc., formerly Mann Enterprise, Inc.
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(Name of Small Business Issuer)
Delaware 36-4063661
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(State of Incorporation) (IRS Employee ID No.)
Two MidAmerica Plaza, Suite 800, Oakbrook Terrace, IL 60181
(Address of Principal Executive Offices)
Issuer's Telephone Number: (708) 481-6713
Securities and Exchange Commission File Number ______________
Securities to be Registered under Section 12 (b) of the Act: NONE
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Securities to be Registered under Section 12 (g) of the Act:
Title of each Class Name of each
to be so Registered: Exchange on which
each Class is to be Registered:
COMMON STOCK NOT APPLICABLE
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$.001 PAR VALUE, 20,000,000 SHARES
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AUTHORIZED, 16,246,761 SHARES ISSUED
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AND OUTSTANDING AS OF 7-24-00
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Part I 3
Item 1. Description of Business 3
Item 2. Management's Discussion and Analysis or Plan of Operation 18
Item 3. Description of Property 24
Item 4. Security Ownership of Management 25
Item 5. Directors, Executives, Officers and Significant Employees 26
Item 6. Executive Compensation 28
Item 7. Certain Relationships and Related Transactions 29
Item 8. Description of Securities 30
Part II 32
Item 1. Market for Common Equity and Related Stockholder Matters 32
Item 2. Legal Proceedings 33
Item 3. Changes in or Disagreements with Accountants 33
Item 4. Recent Sales of Unregistered Securities 33
Item 5. Indemnification of Directors and Officers 34
Part F/S F-1
Item 1. Financial Statements F-2 - F-20
Part III 35
Item 1. Index to Exhibits 35
Item 2. Description of Exhibits 35
2
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Part I
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Item 1: Description of Business
A. Business Development and Summary
RPM Technologies, Inc., formerly known as Mann Enterprise, Inc. ("RPM" or the
"Company") was incorporated in the state of Delaware on April 10, 1996, engaging
in the manufacturing of food and beverage products as a development-stage
company until March 17, 2000, when it acquired RPM Technologies, Inc. of
Colorado ("RPMC") (1) in a merger transaction. The Company is authorized to
issue 20,000,000 shares of common stock at .0010 par value. The Company filed
Form D with the SEC in April 1996, utilizing an exemption from registration
under Rule 504 of Regulation D of the 1933 Securities Act, in order to
distribute 3,683,461 shares of common stock to 394 shareholders as a dividend
distribution to the stockholders of Peark Corp., with such transaction deemed as
a recapitalization pursuant to the express provisions of Rule 144(d)(3)(viii)
and SEC Release Number 6862.
Mann voted to enter into a stock-for-stock exchange between Mann and the
shareholders of RPMC on March 17, 2000, whereby Mann acquired 100% of the shares
in RPMC in return for 11,000,000 million restricted shares of the Company (2).
RPMC then effectively became a subsidiary of Mann, and subsequently merged into
the Company in the state of Delaware on March 17, 2000, which became effective
in Delaware on April 17, 2000 (3). The Company then elected the Officers and
Directors of RPMC as its Officers and Directors, who then elected to change the
name of the Company from Mann Enterprise, Inc. to RPM Technologies, Inc. As
such, we now perform all operations and sell all products and services as RPM
Technologies, Inc. The Company currently has 16,246,761 common shares issued and
outstanding.
The Company's Certificate of Incorporation Charter was revoked as of April 1,
1998 due to non-payment of Delaware franchise fees, but the Charter was
restored, effective as of March 31, 1998, once payment of back taxes of $584.00
was made to Delaware on March 10, 2000. The Company has never been subject to
Bankruptcy or Receivership proceedings, and is currently in good standing with
the State of Delware.
We are filing this Form 10-SB voluntarily with the intention of establishing
fully reporting status with the SEC. The fully reporting status with the SEC is
a necessary step in accomplishing our goal of establishing a market for our
equity securities sometime in the future. Consequently, the Company will
continue to voluntarily file all necessary reports and forms as required by
existing legislation and the SEC rules.
RPMC, incorporated in Colorado on December 10, 1997, engages in the business of
developing, producing, marketing and selling plastic pallets to several
corporate customers located throughout the United States, Canada, Central and
South America. The Company has developed what it believes to be a proprietary
processing system of producing stronger, more desirable, and more cost-effective
plastic pallets than pallets currently on the market today. The pallets are made
from recycled plastic, and overcome many of the drawbacks associated with wood,
such as limited durability, heavy weight, dangerous conditions, and
environmental concerns.
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(1) See RPMC Certificate of Incorporation in Exhibits.
(2) See Agreement of Merger between Mann and RPMC dated March 17, 2000 in
Exhibits.
(3) See Certificate of Merger between Mann and RPMC and Certificate from
Delaware dated April 17, 2000 in Exhibits.
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Since inception, the Company has been primarily involved in the research and
development of its pallet products and the development of a market for these
products. Accordingly, the Company has no substantial operations or substantial
assets, has made limited sales, and is considered to be in the development
stage. We are now focusing our business on establishing plastic pallet sales
throughout North America, beginning in 4th Quarter 2000.
B. Business of Issuer
(1.) Overview
RPMC was founded in late 1997 for the purpose of manufacturing and marketing
plastic pallets and other materials handling products from recycled plastic
materials (hence "RPM"). The Company's original shareholders consisted of Mr.
Randy Zych, Mr. Charles Foerg, Mr. James Tokoly, and Mr. Joseph Pigato,
individuals with several years of experience in various manufacturing,
marketing, and retail industries. These individuals likewise comprised RPMC's
initial Board of Directors, and began to establish the Company and its business.
During 1997, Management identified an excellent opportunity to be a major
participant in the highly fragmented pallet and pallet recycling industries,
where the annual market for both wood and plastic pallet sales in North America
is estimated at greater than US$9 Billion (4). Although wood pallets currently
comprise roughly 94% of this market, a growing trend finds many shippers
switching from Grade "A" wood pallets to plastic pallets, and studies show that
the wood pallet market has been declining at the rate of one to three percent
per year (1-3%)(5). The reasons for this are many, and are explained in greater
detail below. See "Business of Issuer: Industry; Market; Competitive
Advantages". Management thus began working on a proprietary processing system
for producing plastic pallets that would be stronger, safer, and less costly
than existing pallets in order to capitalize on this opportunity.
During early 1998, Management focused its efforts on market and product
research, product design and development, preparation of marketing plans and
strategies, and obtaining the financing necessary to grow the business. The
Company identified several markets for large scale pallet sales, including the
grocers, bottlers, distribution centers, packaged goods manufacturers, and the
automotive industry, all engaged in large amounts of shipping and materials
handling. The Company initially obtained private loans in order to help fund
these development efforts throughout 1997 and early 1998. The Company was
successful in obtaining US$350,000 in private placements during December 1998,
and then commenced an offering of common shares, exempt from registration under
Rule 504 of Regulation D, in order to retire the above-mentioned outstanding
debt, for a total of US$973,000, during October 1999.
These funds were utilized to provide capital necessary to engage consultants,
legal counsel, develop pallet designs, pay engineering fees, purchase supplies
and equipment, purchase injection molds and other raw materials, pay production
fees, and make acquisitions. We have now begun making sales of plastic pallets,
and as such are seeking additional funds to expand operations, add staff,
purchase molds and raw materials, and launch advertising and sales promotion
programs. The Company's headquarters are located at Two Mid America, Suite 800,
Oakbrook Terrace, IL 60181 and its 2,000 square foot warehouse is located just
south of Chicago, IL.
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(4) See Ward's Business Directory of U.S. Private and Public Companies, 1997.
(5) See Material Handling News, March 1998.
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Special Note - Forward-Looking Statements
Certain statements contained in this Form 10-SB, including, without limitation,
statements containing the words "believes," "anticipates," "expects" and words
of similar import, constitute "forward-looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995. Such forward-looking
statements involve known and unknown risks, uncertainties and other factors that
may cause the actual results, performance or achievements of the Company, or
industry results, to be materially different from any future results,
performance or achievements expressed or implied by such forward-looking
statements.
Such factors include, among others, the following: international, national and
local general economic and market conditions: demographic changes; the size and
growth of the plastic packaging markets for both consumer and industrial uses;
the ability of the Company to sustain, manage or forecast its growth; the
ability of the Company to successfully make and integrate acquisitions; raw
material costs and availability; new product development and introduction;
existing government regulations and changes in, or the failure to comply with,
government regulations; adverse publicity; competition; the loss of significant
customers or suppliers; fluctuations and difficulty in forecasting operating
results; changes in business strategy or development plans; business
disruptions; the ability to attract and retain qualified personnel; the ability
to protect technology; and other factors referenced in this Form 10-SB. Certain
of these factors are discussed in more detail elsewhere in this Form 10-SB.
Given these uncertainties, readers of this Form 10-SB and investors are
cautioned not to place undue reliance on such forward-looking statements. The
Company disclaims any obligation to update any such factors or to publicly
announce the result of any revisions to any of the forward-looking statements
contained herein to reflect future events or developments.
(2.) The Industry: Materials Handling and Pallets
A pallet is a portable platform for the storing or moving of cargo or freight,
and pallets have been used for decades as an efficient method for handling many
different types of materials. Until recently, pallets have primarily been
manufactured from wood. Due to technology evolution, the plastic pallet industry
began in the 1980's in response to the need for lighter-weight pallets that met
environmental regulations and concerns. Many of the early manufacturers entered
into the market through existing customers who requested a plastic pallet that
would better meet their specific application(s). Most of the early manufacturers
were local plastic products suppliers, typically without a national
sales/distribution network.
Pallets come in a wide range of shapes and sizes, depending on the purpose and
use. However, the grocery industry, which accounts for about one-third of the
demand for new pallets, uses a standard 40" x 48" pallet, and this has become
the standard pallet size in most industries in the United States. Some
industries, however, have developed specialized pallet sizes.
Block edge, rackable pallets are heavy duty pallets with nine (9) blocks between
the pallet decks, to allow true four-way entry by forklifts, pallet trucks, and
pallet jacks. These types of pallets are often used to transport goods from
manufacturers to distribution centers. Nestable pallets have "feet" on them so
that they can be easily stacked. Nestable pallets are often used to transport
goods between distribution centers and retail stores.
Existing wood pallet manufacturers had no incentive to migrate their customers
from wood to plastic, as a plastic pallet will typically last ten to fifteen
times longer than a wood pallet. Today, plastic pallets only make up
approximately 6% of the total pallet use in the United States, although this
number is growing. The trend towards plastic is increasing through increased
sales efforts by plastic manufacturers as well as more public awareness of the
environmental issues surrounding the use of wood pallets. Approximately forty
percent (40%) of the hardwood used today in the U.S. is for the production of
wooden pallets.
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Pallet recycling services involve retrieving pallets and repairing/rebuilding
and then re-selling the pallets. The market for pallet recycling services had
annual sales in excess of $2 billion in 1995, and has increased every year
through 1998. According to Company estimates, there are approximately two
billion pallets in circulation in the United States today. According to Pallet
Enterprise, an industry trade publication, respondents to an annual pallet
recycling survey reported average sales growth of approximately 32% in 1994, 13%
in 1995, and 17% in 1996. The Company believes this growth is being driven by a
number of factors including: (i) recycled pallets being 25% to 35% less
expensive than new pallets; (ii) overall demand for pallets has continued to
rise with increased shipping to more places throughout the world; and (iii)
recycled pallets offer several environmental benefits, including companies
sending fewer pallets to landfills.
According to the US Forest Service, as printed in the National Wooden Pallet and
Container Association publication, approximately 400 million new wood pallets
are purchased in the United States each year, and some sources indicate an even
greater amount. At an overall average selling price of $9.00 per pallet, the
wood pallet manufacturing and sales business is approximately a $4 billion
industry. It is estimated that the United States wood pallet industry is served
by approximately 3,600 companies, most of which are small, privately held firms
that operate in only one location. The industry is generally comprised of
companies that manufacture new pallets or repair and recycle pallets. New pallet
manufacturing generates about 60%-65% of the industry's revenues. The US Forest
Service estimates that of the approximately 1.9 billion wood pallets in
circulation in the United States today, roughly 400 million of the wood pallets
currently in circulation were newly manufactured. On an annual basis,
approximately 175 million wood pallets are recycled through a process of
retrieval, repair, re-manufacturing and secondary marketing, approximately 225
million are sent to landfills, and approximately 100 million are burned, lost,
abandoned or leave the country.
The pallet industry has experienced even more significant change and growth
during the past several years. These changes are partly due to the focus of
large and small businesses on improving the logistical efficiency of their
manufacturing and distribution systems, including the use of just-in-time
procurement, manufacturing and distribution systems. With the adoption of these
systems, expedited product movement has become increasingly important and the
demand has increased for a high-quality source of pallets distributed through an
efficient, more sophisticated system. The June 1996 issue of Modern Material
Handling states that product damage resulting from faulty wood pallets costs
between $1 - $2 billion annually, and this figure has increased during 1997 and
1998. This damage is caused by pallets breaking under load, resulting in loose
splinters and nails from the pallets, worker injury and other causes. In
addition, environmental concerns (plastic is recyclable) and product sanitation
concerns (plastic pallets can be sanitized, wood pallets cannot) have created a
strong potential demand for cost-effective plastic pallets.
Until very recently, plastic pallets had not penetrated the market
significantly, due in part to their cost. Heavy duty plastic pallets typically
cost $46-$100, heavy duty wood pallets typically cost approximately $26, and
less sturdy wood pallets typically cost $8-$11. Our RPM plastic pallets are
priced significantly below the industry average. As stated in an article in the
July 1996 issue of Material Handling Engineering, wood pallets have an estimated
useful life of 7-10 trips before repair or recycling is required. A trip, or
cycle, is defined as the movement of a pallet under a load from a manufacturer
to a distributor (or from a distributor to a retailer) and the movement of the
empty pallet back to the manufacturer. Heavy duty plastic pallets, as currently
manufactured, have a useful life of 60 or more trips, on average. As such, the
trend that appears to be emerging is a switch from wood to plastic, with the
only limiting factor being price.
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The pallet recycling industry is highly fragmented. According to industry
sources, there are an estimated 3,000 independent pallet recycling businesses in
the United States, substantially all of which operate in only one city or town.
We believe that the pallet recycling industry is consolidating and that this
consolidation is being driven by the demands of large multi-location companies
for a company such as RPM Technologies, Inc. to offer a national network to
manage the sourcing, retrieval and repair of pallets.
Due to this fragmentation, national and regional companies must currently
contract with numerous independent pallet recycling operators in order to meet
their pallet recycling needs, which can be expensive and time consuming. It is
common for businesses that use pallets to ship goods on a pallet and never
receive the pallet back, nor receive any value for the pallet. As a result, many
of these businesses view pallets as a shipping expense rather than a usable
asset. We believe that a national network of pallet recyclers would improve the
level of service and will reduce the complexity of managing the sourcing,
retrieval and repair of pallets for these multi-location companies. This in turn
will enable pallet users to view pallets as an asset to be retained rather than
an expense to be incurred.
(3.) The Market: Pallet Users
Combined sales volume from all sources reported for pallets and skids
approximate $9.0 Billion in annual sales. Of this market, about 95% of the sales
made have been pallets manufactured from wood and wood-related products.
Incidentally, since many lumber companies and other non-reporting entities also
produce wood pallets and skids, there is no readily available data providing a
completely accurate total volume of the entire market.
Data reports there are currently 161 manufacturers of wood pallets, skids,
nailed-wood boxes and containers in North America listed as reporting companies
(6). There are 63 reporting companies that manufacture only wood pallets and
skids (7). Pallet Enterprise (8) reports that there are over 2,000 companies
producing wood pallets on a local and regional basis. The Company will focus on
companies and other entities that ship their products and other larger cargo via
pallets, and illustrate the great benefits and reduced costs of the Company's
plastic pallets.
Pallets are used in virtually all United States industries in which products are
broadly distributed, including, but not limited to, the automotive, chemical,
consumer products, grocery, produce and food production, paper and forest
products, retailing and steel and metals industries. Forklifts, pallet trucks
and pallet jacks are used to move loaded pallets, reducing the need for costly
hand loading and unloading at distribution centers and warehouses.
The Company anticipates that the continued growth of the Internet and the
expansion of e-commerce will make ordering products and other goods on-line
easier and more accepted, thus increasing shipping and the need for materials
handling. Shipping giants including Fed Ex and UPS are currently capitalizing on
this trend, and the Company hopes to grow into a substantial company in a large
market. The Company believes that it can attain at least 1/2% of the total
market in the near future (roughly US$45,000,000), and has already begun
negotiations to secure contracts with various companies to purchase plastic
pallets in 2000.
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(6) See general business data regarding these companies at SIC 2448, SIC 2441
and SIC 2449.
(7) See general business data regarding these companies at SIC 2448.
(8) Publishers of Pallet Enterprise and Pallet Profile Weekly, Richmond,
Virginia.
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(4.) Products and Services; Status of any New Products
We now have the capability of producing high-grade, low-cost plastic pallets in
the most commonly used pallet sizes and configurations. Specifically, the
Company engages in the engineering of specific additives utilizing
non-homogenous materials in order to enhance the manufacturing of high-grade
plastic products, such as pallets. Research indicates an equal demand for both
rackable and stackable pallets. RPM will manufacture and/or outsource both
types, utilizing a unique design innovation that is illustrated in its
engineering drawings shown in the Exhibits.
RPM pallets will weigh considerably less than a wood pallet of comparable size.
For example, a stackable 40" X 48" RPM pallet will weigh about 18 pounds, while
a wood pallet of the same size weighs about 45 pounds, depending on the type and
size of wood components used. A RPM pallet can support 30% to 50% more weight
than a wood pallet (9). RPM's recycled plastic pallets can be made to
specification, as well, and color can be specified, based upon the appropriate
surcharge and quantity order (10). Special features include a non-slide,
sure-grip surface and bottom texture to eliminate sliding pallets and shifting
loads. An interlocking, nesting feature saves space and facilitates easier
shipping and storage. Strategically-placed drainage holes enable easy cleaning.
Undesirable characteristics such as leeching, color-transfer and odor retention
have been eliminated.
RPM's basic 40" X 48" pallet will be offered with or without a surface lip, with
or without surface texture and with or without the customer's name or logo
molded or imprinted on the pallets. The Company will have the capability of
making other proprietary products from recycled plastics, and has already
identified users who will buy custom molded material handling products such as
skids, gaylords and containers.
A. Better Pallets, Reduced Costs
The RPM pallet will weigh 50% less than a wood pallet, and considerably
less than most other plastic pallets. Significant freight and shipping
savings are thus immediately realized by companies using/switching to
plastic. Wood pallets are sold in two grades; grade one is required for
shipping edible and/or health-care related products. A grade one pallet
must be new. Grade one pallets cost 20% to 40% more than grade two pallets,
which are generally "used" pallets. All RPM pallets can be classified as
grade one pallets. RPM pallets are environmentally friendly, and as such
the pallets "save the forests" and contribute to the nation's ever-present
recycling efforts.
The Company has completed design and is ready to manufacture four (4)
pallet models, and a once-patented fork lift attachment. All pallets are
molded with one-piece construction, are resistant to most oils, chemicals
and detergents, and enhance worker safety with no sharp edges, nails or
splinters. Manufactured with recycled plastic materials, RPM's pallets
are100% recyclable, and may be returned for credit.
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(9) Based on tests conducted by the Company during its research and development
activities near Chicago, IL.
(10) Custom colors add approximately 10% to selling price.
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(i.) The RPM Heavy Duty Nestable 40" x 48" Heavy Duty Pallet can handle
a 20,000 lb. static load and a 3,000 lb. dynamic load. One-piece
construction insures durability and ease of use with true four-way
forklift and pallet jack entry. The RPM Nestable Plastic Pallet is
nestable at a 2:1 ratio, is 48" x 40", and has load capacities of
10,000 lb. static and 3,000 lb. dynamic.
(ii.) The RPM Plastic Beverage Pallet can handle a 30,000 lb. static
load and 3,000 lb. dynamic load. It has four-way forklift entry and
measures 44" x 56".
(iii.) The RPM Plastic Utility Pallet is an all-purpose pallet that
measures 40" x 48", has a static load capacity of 20,000 lb. and a
dynamic load capacity of 2,500 lb.
(iv.) The RPM Rackable Pallet has 48" x 40" dimensions and has a
capacity of 15,000 lb. static and 4,000 lb. dynamic.
(v.) The RPM Dual-Lift Quick-Set Forklift Attachment is the only
non-pallet product that the Company currently offers to shippers. It
has been covered by patent protection, (11) and is currently used by
two customer companies, including Anhauser-Busch.
The Company is currently in the final stages of engineering and design of
four (4) additional pallets, including two (2) rackable pallets and one
specifically for the automotive industry. The Company can recycle plastic
materials that many other companies and/or their processors cannot process
successfully. Sales and Marketing strategies include the RPM logo and 800
telephone number being embossed on each pallet sold, to facilitate
re-ordering, which should enable returns for recycling and establish brand
identity. The Company's Management has identified one goal being to
severely reduce sales made by wood pallet producers, with customers instead
opting for a lighter, stronger, more durable and less expensive product,
keeping up with the drastic changes in technology.
B. The Technology
The essence of the Company's technology is in its processing system. To the
best of management's knowledge, no other company is currently manufacturing
pallets in a similar manner. Additionally, the mix of recyclable plastic
materials that will be used enhances economy and structural integrity of
the product. The blend used will consist of HDPE, PPO, Polypropylene and
PET in a variety of formulations.
The Company's pallets will be based upon proprietary designs that will
enable the molder to accept and process most high-density plastic
materials, including types and colors of plastic material that existing
processors must reject or discard. An exclusive thermoplastic additive,
developed by the Company enables the amalgamation of chemically
incompatible polymers. This closely guarded trade secret permits a
significant reduction in raw material and processing costs while producing
an end product of superior strength and durability.
This material acts as a catalyst to make commingled dissimilar polymers
compatible, which would normally have little or no affinity for each other.
It reduces melt viscosity and acts as a wetting agent for inorganic
substances. Tests performed under strict laboratory conditions have clearly
indicated a marked improvement in bonding. The material enables polymers to
be molded at lower processing temperatures, and also serves as a filler or
extender to thermoplastics, thereby lowering the cost of the end product.
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(11) See Description of Property and Proprietary Technology sections herein.
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C. The Manufacturing Process
RPM's contract manufacturer will receive its raw materials or "feedstock"
(1) baled in its original form
(2) as regrind
(3) as post-industrial scrap
(4) as post-institutional recyclable plastic, and
(5) as off-grade virgin resin.
The system's ability to accept plastic material from a variety of sources
ensures an abundant supply of low-cost feedstock. The RPM process produces
lower cost plastic pallets due to: 1) Lower utility costs, 2) Lower
material costs (lighter weight pallets), 3) Consistent quality, 4) Cycle
time savings, 5) Versatile "just-in-time" delivery, and 6) higher
production rates compared to typical pallet production methods. Costs are
market driven but Management's assumptions are based upon buying recyclable
high-density plastic (HDPE) in the $0.32/lb range. HDPE will account for
approximately 75% of material used, with the remaining 25% consisting of
PPO, Polypropylene and PET.
D. Manufacturing
Early in our development, we considered building our own manufacturing
facility. Consultants, however, initially recommended outsourcing for
manufacturing, as this was not only customary in the plastic injection
molding field, but it also enabled the use of one or more molders as sales
volume increased. Additionally, having manufacturing options greatly
reduced the number of staff required to manage and operate a manufacturing
facility.
The primary disadvantage with outsourcing was a lack of complete control
over the manufacturing process and facility. Demands that products be
shipped within a specified time period might compromise the facility's
production capacity, and RPM products might not take priority over other
products that the molder is producing.
Outsourcing, however, significantly reduces start-up costs. The costs of
RPM's molds, for example, were approximately $400,000, much less than the
typical $5 million required to build a suitable manufacturing facility. See
Plant Cost Estimates below. Thus, initially, RPM will contract out all
manufacturing to any of a number of large injection molders utilizing
large-scale industrial facilities, replete with a variety of presses and
equipment. These companies will manufacture the RPM pallets at a fixed
price per pallet. RPM engineers have identified and received quotes from
qualified contract manufacturers in Illinois, Ohio, Kansas, Indiana and
Canada.
Preliminary arrangements have been made with the following injection
molders, all of whom expressed interest in manufacturing the parts required
to fabricate several versions of RPM plastic pallets:
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COMPANY LOCATION
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STRUCTURAL FOAM MOLDERS
Fort Wayne Plastics, Inc. Fort Wayne, Indiana
Vision Molded Products, Inc. Napoleon, Ohio
Horizon Plastics, Inc. Toronto, Canada
DeKalb Plastics, Inc. DeKalb, Indiana
Robinson Plastics, Inc. Coleman, Michigan
Creative Techniques, Inc. Auburn Hills, Michigan
COMPRESSION MOLDERS
IROC Bradley, Illinois
Composite Technologies Dayton, Ohio
Management anticipates that substantial cost savings will be generated
through outsourcing initially, and foresees no problems in aligning its
marketing plans with manufacturers capable of producing the pallets at
acceptable costs and in sufficient quantities to fulfill demand. Management
has determined that a contract manufacturing arrangement can generate
similar profits as those that could be achieved with a Company-owned
facility during 2000 and early 2001.
At a future date yet to be determined, the Company may build and operate
its own manufacturing facilities after market introduction has proven the
acceptance of its products. If, however, demand reaches expectations and
projections, the Company may continue contract manufacturing in conjunction
with Company-owned facilities. These decisions will be made as the
situation changes, as determined by the Company's Board of Directors.
If the Company elects to build its own plant, building is estimated at
US$30 per square foot or $1,050,000. Machinery, equipment and furnishings
are estimated at US$4,000,000, although no assurance can be given that
these costs are completely accurate. Should this scenario evolve, the
following start-up costs are anticipated:
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Plant Cost Estimate:
Office Equipment
Building Modifications $ 30,000
Phone system $ 6,000
Computers $ 11,000
Software (Office Suite & CAD) $ 6,000
Accounting Software $ 3,000
Office Furniture $ 30,000
Copier/Fax/Printer $ 5,000
Plotter $ 3,500
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TOTAL $ 94,500
Manufacturing Equipment
Foam Molding Machine $ 2,900,000
Welder $ 350,000
Chiller $ 150,000
Air Compressor & Lines $ 40,000
Nitrogen Compressor $ 50,000
Nitrogen Tank $ 15,000
Vacuum Receivers $ 50,000
Blowers $ 50,000
Silos $ 150,000
Lift trucks $ 40,000
Maintenance/Tools $ 25,000
Equipment Installation $ 300,000
Grinder & Conveyor $ 75,000
Blender $ 60,000
Stencil Stacker $ 85,000
Material Handling Equipment $ 250,000
Floor Scale $ 5,000
Lab Equipment $ 15,000
Air Handling Equipment $ 50,000
Safety Equipment $ 5,000
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Total $ 4,665,000
Total Office & Mfg. $ 4,759,500
Plant Size Requirement
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25,000 sq. feet - 40,000 sq. feet plus office, break room,
rest rooms, parking, railroad spur, heavy power, reinforced
concrete floor, high ceilings, truck dock, overhead door at
ground level, and tool crib.
The Manufacturer will operate around the clock with four rotating shifts.
Manufacturing costs are fixed with the contract manufacturer at
approximately $13.00 per stackable pallet $18.00 for the rackable version.
The process, utilizing RPM's technologies, produces lower cost plastic
pallets due to: 1) Lower utility costs, 2) Lower material costs (lighter
weight pallets), 3) Consistent quality, 4) Cycle time savings, 5) Versatile
"just-in-time" delivery, and 6) higher production rates compared to typical
pallet production methods.
E. Raw Materials; Recycling
The Company may supply raw materials to its various contract manufacturers,
but will consider material provided by the manufacturer as well, comparing
it on the basis of cost and quality. Major recyclers, large hospital
corporations, local government officials, major manufacturers and other
public and private organizations are enthusiastic at the prospects of a
local market for recyclable plastic. RPM's management has entered into
negotiations with several of these entities to purchase their recyclable
plastics. The volume of plastics these organizations generate far exceeds
RPM's startup requirements.
12
<PAGE>
The Company has established a feedstock network that has reached untapped
markets in the plastic industry. This network will supply the Company with
millions of pounds of resin each year. As soon as two or more facilities
are operational, the Company will hire an experienced, full-time employee
who will be responsible for purchasing its raw material.
(5.) Unique Competitive Advantages
We believe that we will be able to outperform our competition, as we are
confident that no other company uses the pallet processing and manufacturing
techniques we have successfully developed. Our proprietary system has a chance
to reform plastic manufacturing technology. The Company's advantages are
discussed in two categories: 1) our processing and manufacturing advantages; and
2) the advantages of our proprietary plastic pallet as compared to wood pallets:
RPM's manufacturing process is extremely cost-effective and will enable the
Company to accept unsorted and uncleaned plastic. Equally significant is the
proprietary process including an additive that transforms previously
incompatible scrap into a homogeneous blend that flows evenly into the molds.
The Company's proposed Midwest and other licensed locations will give the
Company a cost advantage over single-plant producers in high-cost metropolitan
locations.
The Company's use of contract manufacturing should enable growth by adding other
contract manufacturers without the burden of building and investing in
manufacturing operations. The Company believes its patented pallet with its
conversion feature enables the stackable pallet to be easily transformed into a
rackable pallet by the addition of one component. This reduces mold costs and
facilitates improved production time, thereby increasing bottom line profits.
With an average selling price of $22 per pallet, depending on the quantity
ordered, the RPM stackable pallet competes directly with grade one wood pallets
and is considerably less than any plastic pallet currently being produced. The
same is true for the rackable pallet. When evaluating pallet cost, a stackable
RPM plastic pallet initially costs more but its value lies in the "cost per
trip" concept, where it is much less expensive on a per shipment basis. For
example, a Grade "A" wood pallet, which typically costs about $10.00, is useable
for six or seven trips. Plastic pallets are much stronger and more durable, and
will often last a minimum of 75 trips. The RPM Stackable Pallet will cost
shippers approximately $15.00 per pallet. On the basis of cost-per-trip, which
is one of the criteria many shippers are now being forced to consider, a wood
pallet costs shippers $1.43 ($10 divided by 7) per trip, while an RPM plastic
pallet costs a relatively small $0.20 per trip ($15 divided by 75).
Of equal importance is pallet serviceability. The RPM pallet holds more weight,
carries a substantially heavier dynamic load, and will not break down during
normal usage. The RPM pallet has structural integrity and is capable of
supporting 30% to 50% more weight than a comparable wood pallet. It is estimated
that one 40" X 48" RPM pallet will accommodate a 2,500 pound dynamic load.
Management strongly believes that no other plastic pallet currently in the
marketplace competes in the price/strength category. A competitive plastic
pallet, capable of bearing similar loads, will cost shippers between $30 and $70
each.
A majority of workman's compensation claims in the United States arise directly
and indirectly from handling wood pallets. Some shippers require that two
workmen handle a wood pallet that weighs up to fifty (50) pounds. At half the
weight of wood, splintering, gouging, or puncture wounds from nails or sharp
edges are eliminated by utilization of the RPM plastic pallet. Another key
consideration is shipping costs. An RPM pallet weighs approximately 19 pounds
compared to a 45 pound wood pallet. Over the course of an entire year, a
company's savings in freight bills alone can exceed several thousand dollars by
using plastic pallets on a regular basis.
13
<PAGE>
Wood pallets consume approximately 40% of our nation's hard wood supply. Wood
pallets thus deplete our forests and present a grave disposal problem for many
communities. Additionally, wood pallets have been identified as harboring
vermin, bacteria and insects. This is one of the reasons why the FDA requires
that all food and drug products be shipped only on Grade "A" wood pallets. Once
used, they are destined to become waste, and then most likely a landfill. The
RPM pallets will not leech, absorb odors or lose color. They are likewise
scuff-resistant and colorfast, and will resist contamination and be easily
cleaned. An interlocking, nesting feature will permit more RPM pallets to be
shipped in a container or trailer. Wood pallets are typically stacked one atop
the other with no accommodations for nesting. Additionally, the RPM pallets will
be specially designed to eliminate sharp edges, burrs and other protuberances
that make wood pallets difficult to handle causing worker injuries. Finally, and
perhaps most significantly, the RPM pallets will be environmentally-sound,
including the value of saving forests and recycling waste that might otherwise
end up in landfills.
(6.) Sales and Marketing
The Company has structured several programs to initiate marketing and generate
sales, detailed as follows:
We intend to sell a stackable plastic pallet for approximately $14 in order to
compete directly with the $10 - $14 Grade "A" wood pallet, and other plastic
pallets that range in price from $19.95 to $39.95. This market segment offers
the greatest potential for both short term and long range growth. We will have a
significant price advantage over other plastic pallets because of our
cost-efficient system, due in large part to the fact that the raw materials will
generally consist of recyclable material. The pallets are produced through
proprietary designs and systems that will enable the manufacturers to accept and
process most high-density plastic materials, including types and colors of
plastic material that existing processors cannot utilize.
We have identified and appointed a number of sales agents and distributors that
will present the RPM product line to a wide variety of shippers, throughout most
of the US. We will then launch a targeted direct mail program to pallet buyers
in a wide cross-section of industries that ship large quantities of products on
pallets. These lists will also be given to RPM sales agents for follow-up.
We have plans to produce a video presentation of the RPM pallets, featuring all
of their positive characteristics and benefits, summarizing test results, and
showing the pallet subjected to the most demanding tests. Computer-generated
graphics, in tape and CD ROM formats, will show the pallet in a variety of
application situations. This will be part of the sales kit used by sales agents
and Company management in order to increase sales.
The Company will launch a targeted direct mail program to pallet buyers in a
wide cross-section of industries that ship large quantities of products on
pallets. These lists will also be given to RPM sales agents for follow-up. A
public relations firm or publicity agent will be retained to generate
product-use stories and features in selected trade and business publications.
Press kits will be prepared with photo-caption stories and reprints of these
stories will be used in direct mail campaigns and agents' sales kits.
14
<PAGE>
Management will join selected trade organizations that serve the material
handling industry, and may participate in national and international trade shows
as a possible source of new business. Trade ads will be featured in selected
trade journals that are circulated to materials handling personnel, plant
managers and purchasing agents. An advertising agency may be retained to provide
these services. The Company will also sponsor seminars and/or trade conferences
in key markets where purchasing personnel will be invited to a luncheon
presentation on contemporary materials handling and shipping techniques. The RPM
pallets will be featured, showing the savings realized by shipping goods on the
lighter, more durable plastic pallet. The Company will conduct an in-house
telemarketing program to contact prospective pallet buyers. Leads generated from
this medium will be referred to the appropriate sales person.
We will likewise prepare technical bulletins and manuals that present and
illustrate all of the features of our pallets. We will develop a high-tech
Customer Service department that will feature just-in-time deliveries and
provide technical information through our 800 telephone numbers. Additionally,
we will develop an interactive web site on the Internet to develop sales and
answer technical questions. We currently own three domain names:
e-plasticpallets.com, RPM plastic pallets.com and e-materialhandling.com.
(7.) Distribution Strategy
In order to move the product to market as expeditiously as possible, the Company
will form strategic partnerships with sales and marketing organizations. The
Company can then leverage its resources by contracting with organizations to
provide marketing and direct sales support. Further, the compensation to the
strategic partners will be based on performance and thus reduce sales and
marketing overhead.
Management has made an agreement with IPL, Inc., a $150 million Canadian
injection molder, to distribute selected material handling products outside of
Canada. These products will carry the RPM logo and name. The addition of these
products (12) to the RPM line will enhance the Company's image as a
material-handling specialist. IPL is an ISO 9001 company with an unmatched
record for quality and engineering excellence, and the Company feels that it
will greatly benefit from a relationship with a large corporation in the
plastics field.
Additionally, the Company has obtained commitments through one of its marketing
partners to have a national retail chain participate with a major manufacturer
in a pallet exchange program using the Company's rackable pallet. Other
commitments have been made by consumer goods distributors to test the use of the
stackable pallet, and by a retailer to test the rackable product in its internal
distribution of product. These "pilot" programs will form the basis of future
sales efforts and provide the Company with solid, nationally recognized
references.
The Company has also formed a relationship with a national leasing company to
provide for leasing services to its customers. In addition to the leasing
programs, the Company is establishing a recycle network to provide its customers
with a "no hassle" program whereby the Company delivers the new product and
disposes of the old product for the customer. Recycle credits will be
established for the customers either through direct rebates or through lease
credit.
The Company is seeking to establish strategic relationships to expand its
manufacturing and sales efforts to the Pacific Rim and Europe. Licensees will be
contracted with to utilize the Company's patented processes and mold designs.
Additional foreign market leverage will be gained through the Company's US
strategic partners who have foreign manufacturing and sales teams in place.
---------------------------------
(12) Totes, containers, barrels, crates, trays, bins and boxes
15
<PAGE>
(8.) Operations and Employees
The Company currently has four (4) full-time employees and/or officers,
including directors Zych and Foerg, all of whom are employees at will. All
employees are trained in all aspects of materials handling and plastic pallet
operations. During the initial design and engineering phases for the products,
the Company has maintained a low overhead and will do so until manufacturing is
substantially underway. Staffing is expected to be initiated as needed during
the coming months, including Managerial, Clerical, and Administration at
staffing level 3, and Sales, Marketing, and Customer Service being at staffing
level 4. The Company plans on adding between 5-7 full-time staff upon receipt of
funding of at least US$750,000 for these positions, although no assurance can be
given that any of these funds will be obtained.
(9.) Government Regulation and Environmental Laws
Various environmental protection laws have been enacted and amended during
recent decades in response to public concern over the environment. The Company's
plastic pallet production and recycling operations may be subject to these
evolving laws and the implementing regulations. The Company believes, however,
that the requirements of these laws, including wood disposal and plastics
recycling, may ultimately contribute, in a number of respects, to the demand for
its services. The United States environmental laws which the Company believes
are or may be, applicable to its operations include, among others, the Resource
Conservation and Recovery Act ("RCRA"), as amended by the Hazardous and Solid
Waste Amendments of 1984 ("HSWA"), the Federal Water Pollution Control Act of
1972 (the "Clean Water Act"), the Clean Air Act of 1970, as amended (the "Clean
Air Act"), Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA"), and the Pollution Prevention Act of 1990. These laws regulate the
management and disposal of wastes, control the discharge of pollutants into the
air and water, provide for the investigation and remediation of contaminated
land and groundwater resources and establish a pollution prevention program.
Various states in the United States have implemented environmental protection
laws that are similar to the applicable federal laws and, in addition, states
may require, among other things, permits to maintain existing or construct
additional EPC facilities, if necessary. For example, California, Florida and
Oregon have recently passed post-consumer recycled content laws. These laws
require that non-food plastic containers sold in those states be composed of at
least 25% post-consumer recycled plastics. Failure to comply is met with a heavy
tax. Other states are expected to enact similar legislation in the near future.
(10.) Seasonality
The Company's plastic pallet business operations tend to have varying degrees of
seasonality. A majority of the Company's targeted customers will have
high-volume shipping periods, such as during the month of December, which would
require greater production of pallets. The Company will anticipate these periods
in order to plan its production schedule as necessary.
16
<PAGE>
(11.) Proprietary Technology
The Company's composite manufacturing and plastic pallet processing system and
its development efforts in connection with waste plastics technologies involve
many trade secrets which are considered proprietary by the Company, a well as
certain methods, processes and equipment designs for which the Company has
sought additional patent protection. The Company has taken measures, which are
designed to safeguard its trade secrets, by, among other things, entering into
confidentiality and nondisclosure agreements. Should the Company's trade secrets
by disclosed notwithstanding these efforts, the business and prospects of he
Company could be materially and adversely affected.
The Company believes it has intellectual property rights in its pallet
processing system, although it has no verification of such except for its trade
secrets and related materials, and can give no assurances that the processing
system can withstand any threat of infringement. The Company also owns the
patent rights for a pallet jack or walker attachment to a forklift which allows
handling of two pallets side by side, applicable for all pallet jacks or
walkers, and has a capacity of 10,000 pounds. The patent number is #4239446, and
the product is currently being used by Anhauser-Busch. (13) Although the patent
expired in December 1997, the Company has re-applied for similar patent
protection in early 2000, and Management believes this will be approved sometime
before year-end 2000.
(12.) Competition
The Company will compete directly with manufacturers of wood and plastic
pallets. This market accounts for an estimated $9.0 billion in annual sales
according to various 1999 data, and should increase during the next three years.
The Company will compete vigorously by a concentrated marketing program that
educates, informs and clearly delineates the superiority of the RPM pallets
versus a traditional wood pallet.
Despite the Company's perceived competitive advantages, the plastic and wood
pallet markets, and the market for materials handling and related services are
extremely competitive, and there are no substantial barriers to entry. The
Company has identified over thirty (approximately 37) companies that are
currently producing some type of plastic pallet in minimal quantities, and the
Company expects that competition will intensify in the future (14). The majority
of these manufacturers are not selling to a broad market but are instead
producing in direct response to special orders, making costs and prices much
higher than the Company's scenario. Two direct competitors producing large-scale
plastic pallets include Orbis, Inc. in Oconomowoc, WI (www.orbis-mennasha.com),
and Buckhorn, Inc. in Milford, OH.
Furthermore, there are currently several Fortune 1000 companies engaged in the
production and sale of wood and plastic pallets. The Company believes that its
ability to compete successfully depends on a number of factors, including
developing its current proprietary processes and the quality of its
supplier/vendor services; the Company's ability to make acquisitions of other
plastic and/or pallet-producing companies, the pricing policies of its
competitors and suppliers; the ability of the Company to establish co-marketing
relationships, and industry and general economic trends.
One of the major competitive factors is the predominance of wooden pallet usage.
There are several key points to the difficulty in displacing the use of wooden
pallets.
First, wood pallets appear to be less costly than plastic pallets. A cursory
analysis of the operational costs associated with wood pallets will quickly
dispel this notion. A low-cost wood pallet costing $5.00 can only be used
approximately 2 times. That is an average cost per use of $2.50. A plastic
pallet can be reused over 75 times. If the plastic pallet cost $30, that yields
a per use cost of $0.40 making the plastic pallet six (6) times less expensive
than a wooden pallet.
---------------------------------
(13) See Patent Documents in Exhibits.
(14) See Thomas Register, 1999, Plastic Injection Molding Companies.
17
<PAGE>
Second, existing wood pallet manufacturers have developed long-term
relationships with their customers. This point will require the Company to focus
its marketing on establishment of the perception that the Company will be a
long-term supplier of material management products and that the Company can
provide all of its customers' material management needs.
Third, in situations where a product manufacturer ships its product on pallets
that are not returned to the manufacturer, it is difficult to justify a $30
plastic pallet for a one-time trip. For this reason, the Company will focus its
marketing efforts on "closed loop" distributors that will benefit the most from
the long life of our pallets. The Company is developing relationships with major
consumer goods and other manufacturers and their customers to establish an
environment where the original pallets are returned to the manufacturer. Similar
programs are in place today in the wood pallet industry and the Company is
seeking to emulate and improve on this process.
Item 2. Management's Discussion and Analysis or Plan of Operation
The following discussion of the results of operations and financial condition
should be read in conjunction with the financial statements and notes thereto
appearing elsewhere in this Form 10-SB reflecting operations and financial
condition both before and after the Company's acquisition of RPM Technologies,
Inc. - Colorado (RPMC).
Since late 1997, our Management team has researched and developed a unique
processing system, based upon proprietary technology, which enables us to
produce a superior plastic pallet at a price competitive to, and in some cases
lower than, wood pallets. The pallets are made from recycled plastic, are much
stronger, more efficient, and substantially safer than wood pallets.
As the plastic pallet market is still relatively undeveloped, opportunities are
currently abundant, and we are looking forward to taking advantage of our
ability to provide stronger, safer, and less costly products than our
competition. The Company has thus far invested approximately twenty-eight months
and substantial resources into the development of its proprietary pallet
processing system, as detailed elsewhere herein. The Company's research and
development costs spent from inception total $1,067,660 as of March 31, 2000.
We have successfully developed a number of pallet products which are now being
offered for sale to markets throughout North America. See "Products and
Services" herein. To date, no significant revenues are derived from these
products, and we registered net losses in the amounts of $895,457 in 1998,
$328,542 in 1999, and $213,924 through March 31, 2000. From the date of
inception, the Company's total aggregate net loss is $1,441,956.
Management feels strongly that sales of our various pallet products would have
been attained as early as mid-year 1999 if we had been able to market it more
effectively; something we were prevented from doing largely due to lack of
capital and human resources. Of the Company's products, the N4840 RPM Nestable
and the R4840 RPM Rackable Plastic Pallets, along with the 44" x 56" Beverage
Pallet, are believed by the Company to be uniquely competitive products, capable
of being sold in substantial quantities to several markets, beginning in 4th
Quarter 2000.
Due to our limited financial resources, part of our initial acquisition strategy
includes acquiring pallet and pallet recycling companies in stock-for-stock
exchanges. Due in large part to future acquisitions, targeted to begin in early
2001, we feel that we will be able to: (a) create critical mass; (b) establish
ourselves as a leader in the consolidation of the pallet and pallet recycling
industries; (c) begin to implement a national account strategy; (d) attract an
increasing number of acquisition candidates; and (e) access greater financial
resources. We will thus focus this acquisition strategy on acquiring pallet
recycling companies for a combination of cash, seller notes and stock. We
believe our ability to include a tradable security in the consideration we offer
acquisition candidates will enhance our ability to make further acquisitions.
18
<PAGE>
Liquidity and Capital Resources
Since the date of incorporation, the Company has had no revenues or operating
income. As of the date of acquisition of RPMC, the Company had no tangible
assets. As a result of the acquisition of RPMC, for the 12 months ending
December 31, 1998 the Company had total assets of $191,887 and total
stockholders' equity of $-27,257. During the same period the Company had current
assets of $65,287 and current liabilities of $219,144. The Company's capital
resources consisted of $65,287 in cash, $72,000 in net property and equipment,
which was comprised primarily of molds, tools, and dies, and $54,600 in deferred
costs associated with raising capital. The Company's executive officers and
directors were paid limited salaries and/or expense reimbursements, as the total
operating expenses paid for payroll and general and administrative expenses was
$24,903 for the period.
For the 12 months ending December 31, 1999 the Company had total assets of
$702,849, equal to the total stockholders' equity of $702,849. During the same
period the Company had current assets of $114,116 and no current liabilities,
which in part accounted for the Company's liquidity heading into 2000. The
Company's capital resources consisted of $101,616 in cash and $599,829 in net
property and equipment, which was comprised of $588,189 in molds, tools, and
dies utilized to produce plastic pallets and $11,640 in computer equipment.
For the period ending March 31, 2000 the Company had total assets of $875,857
and total stockholder's equity of $832,857. During the same period the Company
had current assets of $301,727 and current liabilities of $43,000. The Company
has not yet experienced severe liquidity problems, even with the Company's lack
of sales of its pallet products, due in large part to debt and equity investment
in the Company as detailed below.
Historically, our working capital needs have been satisfied through obtaining
debt and/or equity investment from private sources, including the Company's
founders and initial officers and directors. On August 20, 1998, the Company
issued 3,450,000 shares of unregistered, restricted common stock to various
individuals, officers, and directors for various engineering, marketing,
consulting, and management services provided to the Company. These issuances
were valued at $0.115 per share, or $396,750, which approximates the "fair
value" of the services provided to the Company and/or the related plastic pallet
technology. These costs have been charged to operations as a component of
research and development costs.
During 1997, we sought to obtain approximately $1,000,000 to fund the
manufacturing of a prototype pallet mold that would be used to test the design
concepts and serve as the initial production mold, as well as the prototype for
additional pallet molds. We then obtained approximately US$973,000, through debt
financing in the form of promissory notes, which provided sufficient capital to
create the prototype mold to produce the pallets. This debt was later
voluntarily converted into 2,365,646 shares of the Company's restricted common
stock, issued to note holders exempt from registration as per Rule 504 of
Regulation D (15) on or around August 31, 1999.
-----------------------------------------
(15) See SEC Release #7644 regarding the "Seed Capital Exemption" and related
information regarding Rule 144 and holding periods.
19
<PAGE>
In September of 1998, we initiated an effort to raise further seed capital
through a private placement of restricted securities, exempt from registration
as per Section 4(2) of the 1933 Securities Act. The Company issued 700,000
restricted shares to two investors for a total of US$350,000, utilized to form
the organizational structure, including personnel and the sales and marketing
function, and for initial printing and prototyping. During the period from
January 1, 2000 through July 24, 2000, the Company continued its private
placement of common stock sold at $0.50 per share, selling 921,197 shares of
restricted stock to a group of related investors for aggregate proceeds of
approximately US$460,599. These funds were utilized for working capital,
marketing expenses, and financing costs.
The Company anticipates meeting its working capital needs for the second half of
2000 and thereafter, primarily with revenues from operations. Until that time,
Management anticipates the need to obtain approximately US$750,000-$1,500,000 in
additional capital to continue its marketing and sales growth, for production
and distribution of its pallet products, and to cover costs of meeting its
reporting obligations under the Exchange Act, including legal and accounting
expenses. The Company will seek to borrow these funds and/or raise such funds
through either the public or private sale of its common stock. The Company has
entered into preliminary negotiations with several financing companies, private
lenders, and venture capital firms regarding a potential financing of at least
US$1,000,000. However, no assurances can be given that such financing will be
available, or that it can be obtained on terms satisfactory to the Company, if
at all. If the Company is unable to secure financing from the sale of its
securities or from private lenders, Management believes that the Company can
continue operating until revenues from current operations increase over time by
year-end 2000.
Management feels that while $750,000 is the minimal amount of funds needed to
drive substantial revenue growth by year-end 2000, the optimal amount needed,
based on Management's analysis, is between US$2,000,000 and $4,000,000, which
would be used to substantially expand our presence in US and international
markets. A better understanding of the Company's future investment goals and
strategy can be gleaned from the intended use of proceeds received from a
financing of US$3,000,000, as indicated by Management below:
The net proceeds to be received by the Company a future debt
or equity financing are estimated to be approximately
$2,750,000 after deducting commissions and other Offering
expenses payable by the Company. The Company believes the net
proceeds of this Offering will be sufficient to fund its plan
of operation for at least the next twelve months and that,
during the six month period following the Offering, it will
not be necessary for the Company to raise additional funds to
meet the expenditures required for operating its business.
20
<PAGE>
<TABLE>
<CAPTION>
Amount Type Percentage
-----------------------------------------------------------------------------------
<S> <C> <C>
$ 585,400 Working Capital and Operating Expenses (16) 19.5%
$ 561,600 2.5 million lbs. HDPE; Resin (raw materials) 18.7%
$ 510,000 ESO Press Contract at $132 per hr. average 17.0%
$ 294,500 Sales, Marketing, Advertising (SADA) (17) 9.8%
$ 250,000 Commissions Paid for Financing (18) 8.3%
$ 190,500 Management, Staffing, and New Hires (19) 6.4%
$ 128,000 Other Hardware/Equipment Purchases (20) 4.3%
$ 125,000 Research & Development Expense 4.2%
$ 78,500 Pre-owned Road Tractors (2) 2.6%
$ 68,500 Lid Mold for Stack Pallets 2.3%
$ 60,000 Accounting, Legal, Finance and Offering Fees 2.0%
$ 52,500 Pre-owned 53' Road Trailers 1.8%
$ 40,000 Travel-related Expenses for Sales, Financing 1.3%
$ 36,500 Pre-owned Granulator, 100 HP 1.2%
$ 19,000 Resin Storage Silo (60,000 lbs.) 0.6%
-------------------------------------------------------------------------------------
$3,000,000 TOTAL 100%
</TABLE>
It must be stressed however, that the amounts set forth above
are only estimates, and the Company is unable to predict
precisely what amount will be raised, if any, and what amount
will be used for any particular purpose. Nonetheless, this
suggested use of proceeds indicates a focus on the effective
sales and marketing of both rackable and stackable plastic
pallets as well as an expansion of manpower and the continued
development of technology for improved pallet products and
services.
To the extent the proceeds received are inadequate, in any
area of expenditures, supplemental amounts may be drawn from
working capital, if any. Conversely, any amounts not required
for proposed expenditures will be retained and used for
working capital. Should the proceeds actually received, if
any, be insufficient to accomplish the purposes set forth
above, the Company may be required to seek other sources to
finance the Company's operations, including individuals and
commercial lenders.
From time to time in the ordinary course of business, the
Company evaluates the acquisition of products, businesses, and
technologies that complement the Company's business, for which
a portion of the net proceeds may be used. Currently, however,
the Company has no present plans, commitments, or agreements,
and is not currently involved in any discussions with respect
to any such transactions. Pending use of the net proceeds for
the above purposes, the Company intends to invest such funds
in short-term interest-bearing securities or other instruments
as the Company deems appropriate.
Plan of Operation
The Company has focused its full attention on plastic pallet production and
better materials handling applications, and is now prepared to begin selling its
product to customers across several markets, including the food and beverage
industry, retail and distribution centers, and the automotive industry, among
others. Management feels that the Company is currently one of only a handful of
US companies that are capable of selling a variety of plastic pallets at prices
as low as $14.00 to $39.00 per pallet. The Company has also begun to increase
its sales efforts by targeting several companies who will re-sell the pallets
over the Internet, both through web sites and through advertising banners.
----------------------------------------
(16) Includes amounts to be expended on salaries, office expenses and other
general overhead costs. Salaries will include those paid to executive
officers Krupka, Cronin, Zych, Foerg, and Tokoly, amounts paid to the
Board of Directors, and other personnel, along with the development of the
Company's web site and e-commerce strategy.
(17) Represents amounts to be spent on Chicago sales office, national trade
journal advertising, sales brochures, conferences, promotions, and
sales-related travel and expense for large corporate customers of its
plastic pallet and related materials handling products. Does not include
complete development of retail marketing and packaging, to be developed at
a later date.
(18) Assumes the Company will engage a financing agent to help obtain funds,
paying approximately 8.3% of the total proceeds raised, although no
assurance can be given that this will ever occur.
(19) The Company intends to expand its full-time staff from its current four
(4) employees to eleven (11) with the receipt of the proceeds.
(20) Includes forklift, pallet shredder, resin blinder, scales, Q/C Lab setup,
dump system, dump bins, air compressor, pallet assembly press, and
miscellaneous office equipment, detailed in F/S.
21
<PAGE>
The Company intends to expand the total number of pallet distributors and
re-sellers during 4th Quarter 2000, including various companies with
e-commerce-ready web sites. The Company anticipates that revenues from
operations will be able to provide necessary cash flow sometime by year-end 2000
or early 1st Quarter 2001. Until that time, the Company intends to obtain
additional financing as detailed above.
We feel that we will have a significant price advantage over other plastic
pallets because of our cost-efficient system of utilizing recyclable material as
raw materials. The pallets are produced through a system that will enable
manufacturers to accept and process most high-density plastic materials,
including types and colors of plastic material that existing processors must
reject or discard. Due to these advantages, we have identified and appointed a
number of sales agents and distributors that will present the RPM product line
to a wide variety of shippers across North America. Although no substantial
sales of plastic pallets have been made as of yet, we plan on launching a
selective direct mail program to pallet end users in a wide cross-section of
shipping-related industries. The Company's sales agents will pursue these mail
recipients. A public relations firm or publicity agent will be retained to
generate product-use stories and features in selected trade and business
publications, and press kits will be prepared with photo-caption stories so that
reprints of these stories will be used to increase sales and product awareness.
We likewise have plans to prepare a video presentation of the entire RPM pallet
product line, emphasizing key benefits, summarizing test results and
illustrating the pallets being subjected to demanding tests (See Sales and
Marketing above). Computer-generated graphics, both in tape and CD ROM formats,
will illustrate the pallet in a variety of application situations, which will in
part comprise the sales kit utilized by sales agents and Company management in
making sales.
We will also prepare technical bulletins and manuals that present and analyze
all of the advantages and/or benefits of our pallets. By developing a high-tech,
efficient Customer Service department, we will be able to feature just-in-time
deliveries and provide technical information through a national 800 telephone
number. Additionally, the Company plans on developing an interactive Internet
web site to develop sales and answer technical questions. The Company currently
owns three domain names: "e-plasticpallets.com", "RPMplasticpallets.com", and
"e-materialhandling.com". The Company has begun the initial development of its
site, and plans on launching an interactive, e-commerce-ready site sometime
during 1st Quarter 2001.
In order to move the product to market as expeditiously as possible, we will
form strategic partnerships with several sales and marketing organizations. We
can then leverage our resources by contracting with organizations to provide
marketing and direct sales support. Further, the compensation to the strategic
partners will be in part performance-based, which will thus reduce sales and
marketing overhead. Additionally, we may also license our technology to venture
partners with the proviso that the Company's name and logo and all the Company's
operating procedures be utilized. We would receive a licensing fee and a fixed
royalty on sales of the pallets from these facilities. We would also contract
for injection molding with a gas-assisted process. Manufacturing and processing
costs are minimized because the operation is extremely cost efficient. Likewise,
raw plastic materials from various sources will be ground and processed in the
plant in some cases.
22
<PAGE>
The Company has obtained commitments through one of its marketing partners to
have a national retail chain participate with a major manufacturer in a pallet
exchange program using the Company's rackable pallet. Other commitments have
been made by consumer goods distributors to test the use of the stackable pallet
and by a retailer to test the rackable product in its internal distribution of
products. These "pilot" programs will form the basis of future sales efforts and
provide the Company with solid, nationally recognized references.
The Company has also formed a relationship with a national leasing company to
provide for leasing services to its customers. In addition to the leasing
programs, the Company is establishing a recycle network to provide its customers
with a "no hassle" program whereby the Company delivers the new product and
disposes of the old product for the customer. Recycle credits will be
established for the customers either through direct rebates or through lease
credit.
Based on key assumptions, projected financing, and market trends and analysis,
the Company has completed the following financial projections for the years 2000
through 2002:
--------------------------------------------------------------------------------
PROJECTIONS (21):
--------------------------------------------------------------------------------
2000 (22) 2001 2002
---- ---- ----
GROSS REVENUES (23) $ 2,051,700 $ 5,416,400 $ 8,820,900
COGS $ 1,004,598 $ 2,655,876 $ 4,322,046
Operating Expenses $ 368,519 $ 1,258,002 $ 1,457,075
===============================================
EARNINGS (Pre-tax) $ 678,583 $ 1,502,522 $ 3,041,779
In the event that only limited additional financing is received, the Company
understands that it may not be able to withstand the intense competition it may
face from larger and more adequately financed companies. Even if the Company
succeeds in obtaining the level of funding it considers necessary, there are no
guarantees that these projected revenues and/or profits will materialise. In
fact, keeping in mind the possibility of spiralling R & D expenses involved with
developing new plastic pallets and related technology, the Company can give no
assurances of any kind regarding funding, revenues, costs, expenses, and/or
profits.
Results of Operations
From the date of incorporation until present, the Company has had no revenues or
operating income. Prior to the acquisition of RPMC, the Company's expenses were
minimal and administrative in nature.
The results of operations discussed below reflect the combined operations of the
Company and RPMC. Included herein are audited financial statements of the
Company for fiscal year 1998 and 1999. For the years ended December 31, 1998 and
1999, the Company had no sales, had operating expenses of $895,797 and $330,567
and sustained net operating losses of $895,457 and $328,542. For the Quarter
ended March 31, 2000, the Company had no sales and had operating expenses of
$214,280 which resulted in a net loss of $213,924, or $-0.0146 per share.
(21) This information contains forward-looking statements and therefore may
involve known and unknown risks and uncertainties and other factors that
may cause the actual results, performance and achievements of the Company
to be materially different from those expressed or implied by such
forward-looking statements. Some of the factors that may cause such
material differences are set forth as risk factors detailed from time to
time in the Company's periodic reports and other financial statements, and
herein.
(22) Includes data projected for July 1 through December 31, 2000.
(23) Estimated sales figures based on key assumptions regarding all sales of
Company various pallet products, at both wholesale and retail. See
"Financial Statements" enclosed elsewhere in this Form 10-SB.
23
<PAGE>
For the year ended December 31, 1998, the Company had net cash flows from
operating activities of $-23,113, with net cash used by investing activities of
$-72,000, and net cash provided by financing activities of $160,400, for a net
increase in cash of $65,287.
For the year ended December 31, 1999, the Company had net cash flows from
operating activities of $-34,311 with net cash used by investing activities of
$-527,829 and net cash provided by financing activities of $598,469, for a net
increase in cash of $36,329.
For the quarter ended March 31, 2000, the Company had net cash flows from
investing activities of $-172,904, with net cash used by investing activities of
$-1,100 and net cash provided by financing activities of $353,932 for a net
increase in cash of $179,928.
For income tax reporting purposes, the Company has a net operating loss
carryforward as of March 31, 2000 in the amount of approximately US$1,400,000
which can be used to reduce taxable income in future years. If this carryforward
is not fully utilized, it will begin to expire in 2013. As of March 31, 2000,
December 31, 1999 and 1998, the deferred tax asset related to the Company's net
operating loss carryforward is fully reserved. See Note B (6) of Notes to
Financial Statements herein.
Item 3. Description of Property
The Company presently occupies approximately 1,500 square feet of
high-technology office space at its headquarters at Two Mid America Plaza, Suite
800, Oakbrook Terrace, IL 60181. The office is fully supported, with all the
necessary computers, office equipment, and furniture required to efficiently
manage the business of marketing and selling plastic pallet and materials
handling products. The Company currently has a one-year, renewable lease for the
space.
The Company also presently leases approximately 2,000 square feet of warehouse
space just south of Chicago, IL, where it stores its inventory of plastic
pallets, certain raw materials, and its fork lift products.
The Company currently owns the necessary machinery and equipment required to
produce plastic pallets as follows (See Balance Sheet in Financial Statements):
Tangible Property Value as of 3-31-00
----------------- -------------------
Molds, tools, and dies $ 589,289
Computer equipment $ 11,640
The Company currently owns no real property. The Company believes it has
intellectual property rights in its pallet processing system, although it has no
verification of such except for its trade secrets and related materials, and can
give no assurances that the processing system can withstand any threat of
infringement. The Company also owns the patent rights for a pallet jack or
walker attachment to a forklift which allows handling of two pallets side by
side, applicable for all pallet jacks or walkers, and has a capacity of 10,000
pounds. The patent number is #4239446, and although the patent expired in
December 1997, the Company has re-applied for similar patent protection in early
2000, and Management believes this will be approved sometime before year-end
2000 (See Proprietary Technology, above).
24
<PAGE>
The Company has not invested, nor does it intend to invest, for gain or income,
in any real estate investments, real estate mortgages, or securities related to
real estate. The possibility of such investments by the Company in the future is
not expressly forbidden under its By-laws.
Item 4. Security Ownership of Certain beneficial Owners and Management
The following table sets forth as of July 24, 2000 the name and address and the
number of shares of the Company's Common Stock, par value $0.001 per share, held
of record or beneficially by each person who held of record, or was known by the
Company to own beneficially, more than 5% of the 16,246,761 shares of Common
Stock issued and outstanding, and the name and shareholdings of each director
and of all officers and directors as a group.
<TABLE>
<CAPTION>
a) Principal Shareholders:
------------------------------------------------------------------------------------------------------
Title of Class Name and Address of Amount and Nature of Beneficial Percentage
Beneficial Owner Ownership of Class
------------------------------------------------------------------------------------------------------
<S> <C> <C>
Common Charles Foerg 2,550,550 Shares 15.70%
17W704 Butterfield Rd
Oakbrook Terrace, IL 60181
------------------------------------------------------------------------------------------------------
Common James Tokoly 905,000 Shares 5.57%
PO Box 1001
Orland Park, IL 60462
------------------------------------------------------------------------------------------------------
Common Randy Zych 2,750,000 Shares 16.93%
4918 Imperial Drive
Richton Park, IL 60462
------------------------------------------------------------------------------------------------------
b) Officers, Directors and Nominees:
------------------------------------------------------------------------------------------------------
Title of Class Name and Address of Amount and Nature of Beneficial Percentage
Beneficial Owner Ownership of Class
------------------------------------------------------------------------------------------------------
Common Charles Foerg See above See above
17W704 Butterfield Rd
Oakbrook Terrace, IL 60181
------------------------------------------------------------------------------------------------------
Common Randy Zych See above See above
4918 Imperial Drive
Richton Park, IL
------------------------------------------------------------------------------------------------------
Common James Tokoly See above See above
PO Box 1001
Orland Park, IL 60462
------------------------------------------------------------------------------------------------------
Common Charles E. Fritsch 244,150 Shares 1.50%
Two Mid America #800, Oakbrook
Terrace, IL 60181
------------------------------------------------------------------------------------------------------
Common Kevin Cronin 60,000 Shares 0.37%
Two Mid America #800, Oakbrook
Terrace, IL 60181
------------------------------------------------------------------------------------------------------
Common David Lade 50,000 Shares 0.31%
Two Mid America #800, Oakbrook
Terrace, IL 60181
------------------------------------------------------------------------------------------------------
TOTAL OFFICERS/DIRECTORS 6,559,700 Shares 40.38%
------------------------------------------------------------------------------------------------------
</TABLE>
25
<PAGE>
Item 5. Directors, Executive Officers, Promoters and Control Persons
a) The officers and directors of the Company are as follows:
Name Age Position
----------------------------------------------------------------------------
Mr. Kevin Cronin, Esq. 46 President
Mr. Charles Krupka 41 Chief Operating Officer
Mr. Randy Zych 54 Chairman
Mr. Charles Foerg 64 Secretary/Treasurer and Director
Mr. James Tokoly 39 Vice President and Director
Mr. Charles E. Fritsch 57 Vice President and Director
Mr. David Lade, CPA 42 Chief Financial Officer and Director
Mr. Douglas MacArthur 64 Outside Director
Terms of office - The term of office of each director of the Company ends at the
next annual meeting of the Company's stockholders or when such director's
successor is elected and qualifies. No date for the next annual meeting of
stockholders is specified in the Company's Bylaws or has been fixed by the Board
of Directors. The term of office of each officer of the Company ends at the next
annual meeting of the Company's Board of Directors, expected to take place
immediately after the next annual meeting of stockholders, or when such
officer's successor is elected and qualifies.
The following is a brief description of the business background of the
directors/key employees of the Company.
Mr. Kevin Cronin, Esq., 46, currently serves as President of the Company, and
possesses broad managerial experience that includes the development and
management of several business enterprises throughout the US. Mr. Cronin joined
the Company in January 2000. Mr. Cronin has a BBA degree in Management from the
University of Notre Dame and a JD from Northern Illinois University. Mr. Cronin
recently served as President and CEO of Alphadigm, Inc., a professional employer
organization specializing in placement of high-level executive managers. Mr.
Cronin has accumulated several years of in-depth experience in industry,
business consulting, finance, manufacturing and administration, and this overall
balance will be instrumental in aiding the Company as it embarks on obtaining
financing in order to begin making substantial sales of its plastic pallet
products. Mr. Cronin will be responsible for determining and formulating
policies and guidelines in order to provide overall direction for the Company.
26
<PAGE>
Mr. Charles Krupka, 41, has over fifteen years of sales and management
experience, and has been Chief Operating Officer for the Company since April
2000. Mr. Krupka was a principal of Polycytek, Inc., a plastic pallet
manufacturing concern, for three years. Polycytek was created in 1995 and molded
44" x 56" beverage pallets for Royal Ecoproducts, a wholly owned subsidiary of
Royal Group Technologies, Inc. for sale to Crown, Cork and Seal. Mr. Krupka has
his BS in Agricultural Economics from Michigan State University, and an MBA from
the University of Michigan. Mr. Krupka is a member of the Society of Plastic
Engineers and the Material Handling Institute of America. Mr. Krupka's extensive
experience in all aspects of producing and selling pallets to several industries
make him instrumental in the Company's growth strategy, where he will be in
charge of all pallet manufacturing and product development activities for the
Company.
Mr. Randy Zych, 54, has been Chairman of the Board of Directors for the Company
since its inception in 1997. Mr. Zych has spent most of the past twenty-five
years working as an entrepreneur, developing and promoting various new
businesses, including several manufacturing companies. As a principal in several
start-up ventures, Mr. Zych provided the business experience and market
knowledge necessary to develop these businesses and subsequently take certain
companies into the public market. Mr. Zych's knowledge of plastic products'
manufacturing came from his experiences as CEO of Creative Image Products, Inc.,
where he was responsible for the development of the company's plastic products.
As RPM's original founder, Mr. Zych investigated the state of current plastic
manufacturing processes, and subsequently helped to develop the process upon
which RPM has based its technology. Mr. Zych's skills as arbitrator and
negotiator come to bear in the Company's development of relationships with the
financial community, vendors and contract manufacturers. Mr. Zych also has
extensive knowledge of stocks and financial markets, including business cycles
and investment trends. This knowledge will be instrumental in assisting the
Company as it plans to enter the public markets for the first time in early
2001.
Mr. Charles W. Foerg, 64, Secretary/Treasurer and a Director for the Company,
has been with the Company since its inception in 1997. Mr. Foerg has accumulated
over 25 years of experience in financing, building, and managing several
companies across many industries, with jobs and duties covering executive
management, marketing, technology acquisition, quality control and manufacturing
operations. Mr. Foerg has extensive experience in marketing management, business
start-ups and advertising, and has held positions in sales management, product
management, marketing and advertising. Mr. Foerg's experience in advertising
includes working as Account Supervisor and Vice President for Young & Rubicam
Advertising and BBD&O Advertising. As an independent marketing consultant, Mr.
Foerg worked with a variety of business start-ups, assisting in the successful
development of several core businesses. Mr. Foerg holds a BA in Economics from
Southern Illinois University and an MBA from the University of Detroit.
Mr. James Tokoly, 39, has served as Vice President and Director for the Company
since 1998. Mr. Tokoly will direct and coordinate the Company's efforts to
license its technology to manufacturing companies throughout the world, whereby
the Company will receive licensing and/or royalty fees. Mr. Tokoly will also
coordinate logistics and pallet distribution activity among customers in the US,
and eventually on an international basis. Since 1988, Mr. Tokoly has headed his
own marketing firm as President and CEO. In this capacity, Mr. Tokoly has
managed operations, provided long-term leadership, and developed new accounts
for the premium publishing business. Here Mr. Tokoly established new standards
for advertising revenues for the firm. Mr. Tokoly is skilled in sales
management, motivation, and communication, which will be instrumental in helping
to drive the Company's concerted sales efforts in latter part of 2000 and
beyond.
27
<PAGE>
Mr. Charles E. Fritsch, 57, currently serves as Vice President and has been a
Director for the Company since 1999. Mr. Fritsch will be responsible for
acquisitions of new material handling products and companies. From 1983 until
1996, Mr. Fritsch was President and COO for Waffer International, Inc., the
largest manufacturer of plastic products in Taiwan. Mr. Fritsch thus brings
top-level management experience in the development, administration and
manufacturing of plastic products. Previously, Mr. Fritsch was CEO and President
of ARC United Group of Companies, an import/export business, and in 1969 he
founded International Marketing Service, Inc. which provided consulting services
to foreign and domestic companies. Mr. Fritsch has traveled abroad extensively,
and has valuable business contacts in the Far East, Europe, and Latin America.
Mr. Fritsch received his BS from the University of Wisconsin in 1963 and an MA
from DePaul University in Chicago.
Mr. Douglas E. MacArthur, 64, will be an outside representative for the Company
when production is sufficient to fill his needs in the southwest. Mr. MacArthur
offers significant experience in shipping and cargo transport services. From
1982 until 1996, Mr. MacArthur managed Aviation Logistics International
Corporation from a start-up into a highly successful airline contracts company,
specializing in cargo and service functions. From 1980 until 1982 Mr. MacArthur
acted as Vice President for cargo marketing for Braniff International Airlines,
thoroughly revising its domestic and international cargo programs while
producing $24 million in revenue during the first year of the transformation.
From 1977 until 1980, Mr. MacArthur served as Vice President of Marketing and
Planning, and managed the transition from an automotive parts charter carrier to
the then-largest domestic all-cargo carrier operation in the world. From 1963
until 1976 Mr. MacArthur acted as director of cargo sales for Trans World
Airlines. Mr. MacArthur received BS in Civil Engineering from the Virginia
Military Institute in 1959 and an MBA from the University of Virginia's Graduate
School of Business in 1963.
Mr. David A. Lade, 42, has been Chief Financial Officer and a Director for the
Company since 1999. Mr. Lade will act as controller, where he will be
responsible for all aspects of accounting, budgeting, cash management, tax
planning, bank relations and acquisition analysis for the Company. Mr. Lade will
establish financial policies, prepare loan proposals, and manage financial
planning and investments for the Company. From 1995 until 1997, Mr. Lade was an
independent financial consultant, and served as part-time controller for several
closely held corporations. As a consultant, Mr. Lade contributed in all areas of
accounting, budgeting, cash management, bank relations and acquisition analysis.
From 1987 until 1995, Mr. Lade worked as Controller for AGA Gas Central, where
he was responsible for financial reporting and analysis, strategic planing,
customer service and branch administration. While there, Mr. Lade streamlined
financial and operational reporting, identifying key performance measures with
his project team and Price Waterhouse consultants. From 1983 until 1987, Mr.
Lade was Experienced Audit Senior for Arthur Anderson & Co., where he served as
a member of the commercial audit division. As a first year senior, Mr. Lade
achieved the highest annual billable hours among commercial audit seniors. Mr.
Lade became a Certified Public Accountant in 1984, and a Registered Securities
Representative (Series 6 Exam) in 1992. Mr. Lade has been listed in the "Who's
Who" in Finance and Industry since 1987. Mr. Lade received his MBA from Wright
State University in 1983, where he received the Outstanding MBA Award.
Item 6. Executive Compensation
The aggregate accrued annual remuneration of each of the three highest paid
persons who are officers or directors as a group during 1999, the last fiscal
year, follows.
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------
Name of Individual Capacities in which Remuneration is Received 1999 Aggregate
Remuneration
-------------------------------------------------------------------------------------------------------
<S> <C>
Randy Zych Chief Executive Officer $60,000
-------------------------------------------------------------------------------------------------------
Charles Foerg President $50,000
-------------------------------------------------------------------------------------------------------
James Tokoly Vice-President of Marketing $36,000
-------------------------------------------------------------------------------------------------------
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
Proposed remuneration payments the Company plans to make in the future to its
directors and officers is listed below:
-------------------------------------------------------------------------------------------------------
Name of Individual Capacities in which Remuneration is Anticipated Expected 2000 Remuneration
to be Received
-------------------------------------------------------------------------------------------------------
<S> <C> <C>
Kevin Cronin President $ 75,000
-------------------------------------------------------------------------------------------------------
Charles Krupka COO $ 60,000
-------------------------------------------------------------------------------------------------------
Randy Zych Chairman of the Board $ 50,000
-------------------------------------------------------------------------------------------------------
Charles Foerg Secretary & Treasurer & Director $ 50,000
-------------------------------------------------------------------------------------------------------
David Lade Chief Financial Officer $ 40,000
-------------------------------------------------------------------------------------------------------
Charles Fritsch Vice President $ 40,000
-------------------------------------------------------------------------------------------------------
James Tokoly Vice-President, Marketing, Director $ 40,000
-------------------------------------------------------------------------------------------------------
TOTAL OFFICERS $355,000
-------------------------------------------------------------------------------------------------------
</TABLE>
Board Compensation
As of July 24, 2000, the Company's directors receive no compensation for
attendance at board meetings. Subsequent to July 24, 2000, the Company's
directors have adopted a resolution providing for the reimbursement for all
reasonable out-of-pocket expenses incurred by the directors in connection with
their attendance at the board meetings.
Options/SAR Grants in Last Fiscal Year
No individual grants of stock options (whether or not in tandem with SARs), or
freestanding SARs were made during the last completed fiscal year to any of the
named executive officers.
Bonuses and Deferred Compensation
There are no compensation plans or arrangements, including payments to be
received from the Company, with respect to any person named as a director,
executive officer, promoter or control person above which would in any way
result in payments to any such person because of his resignation, retirement, or
other termination of such person's employment with the Company or its
subsidiaries, or any change in control of the Company, or a change in the
person's responsibilities.
Item 7. Certain Relationships and Related Transactions
Savoia Corporation
On January 4, 1999, the Company entered into an agreement with Savoia
Corporation, a Delaware Corporation, whereby the Company purchased all rights to
the designs, engineering, production and sales of the plastic pallet and the
assumption of all Savoia's other assets and liabilities for the purchase price
of US$470,000, at the price of $0.115 per share. Savoia agreed to accept
4,086,956 shares of the Company's Common Stock in lieu of the full purchase
price. Additionally, Savoia delivered to the Company all designs, plans and
marketing research relating to the pallets, along with a five-year non-compete
agreement24. Both Mr. Zych and Mr. Foerg served as Directors for both Savoia and
RPM, thus indicating a potential conflict of interest regarding these
transactions (See Below).
----------------------------------------
(24) See "Asset Purchase Agreement" between Savoia Corporation and the
Company, dated January 4, 1999, attached in Exhibits.
29
<PAGE>
Conflicts of Interest
Other than as described herein the Company is not expected to have significant
dealings with affiliates other than the transaction described above. If there
are such dealings the parties will attempt to deal on terms competitive in the
market and on the same terms that either party would deal with a third person.
However, conflicts of interest are inherent in such dealings, and there is no
assurance that such transactions will be favorable to the Company, due to the
lack of arms length bargaining. This applies in particular to the dealings
between the Company and Savoia Corporation, as the same Directors serve for both
companies. Presently none of the officers and directors have any individual
transactions which they contemplate entering into with the Company, aside from
the matters described herein.
Management will attempt to resolve any conflicts of interest that may arise in
favor of the Company. Failure to do so could result in fiduciary liability to
management. Delaware General Corporation Law Section 145 permits provisions in
the articles, by-laws or resolutions approved by shareholders which limit
liability of directors for breach of fiduciary duty to certain specified
circumstances.
RPM Technologies, Inc. has adopted provisions to its Articles of Incorporation
and Bylaws which limit the liability of its Officers and Directors, and,
according to the Delaware General Corporation Law, provide that a director shall
not be personally liable to the Company or any other person for any statement,
vote, decision, or failure to act, regarding corporate management or policy,
unless (a) the director breached or failed to perform his duties as a director;
and (b) the director's breach of, or failure to perform, those duties
constitute: (i) a violation of the criminal law; (ii) a transaction from which
the director derived an improper personal benefit; (iii) a circumstance under
which the liability provisions for unlawful distributions are applicable; (iv)
in a proceeding by or in the right of the Company to procure a judgment in its
favor or by or in the right of a shareholder, conscious disregard for the best
interest of the Company, or willful misconduct; or (v) in a proceeding by or in
the right of someone other than the Company or a shareholder, recklessness or an
act or omission which was committed in bad faith or with malicious purpose or in
a manner exhibiting wanton and willful disregard of human rights, safety, or
property.
Item 8. Description of Securities.
A. Common Stock
The Company is authorized to issue 20,000,000 shares of Common Stock (the
"Common Stock") with a par value of $.001. As of the date of this Form 10-SB,
the Company has 16,246,761 shares of Common Stock issued and outstanding among
543 shareholders (See Transfer Agent Shareholder List for total list of
shareholders).
RPM Technologies, Inc.'s holders of Common Stock are each entitled to cast one
vote for each Share held of record on all matters presented to shareholders.
Cumulative voting is not allowed; hence, the holders of a majority of the
outstanding Common Stock can elect all directors.
30
<PAGE>
Holders of Common Stock are entitled to receive such dividends as may be
declared by the Board of Directors out of funds legally available therefor and,
in the event of liquidation, to share pro rata in any distribution of the
Company's assets after payment of liabilities. The Board of Directors in not
obligated to declare a dividend and it is not anticipated that dividends will be
paid until the Company is in profit.
Holders of Common Stock do not have preemptive rights to subscribe to additional
shares if issued by the Company. There are not conversion, redemptions, sinking
fund or similar provisions regarding the Common Stock. All of the outstanding
Shares of Common Stock are fully paid and non-assessable and all of the Shares
of Common Stock offered thereby will be, upon issuance, fully paid and
non-assessable.
Holders of Shares of Common Stock will have full rights to vote on all matters
brought before shareholders for their approval, subject to preferential rights
of holders of any series of Preferred Stock, although there are currently no
Preferred Stock authorized. The holders of Common Stock will have no conversion,
preemptive or other subscription rights. The Shares of Common Stock outstanding
are validly issued, fully paid, and nonassessable.
B. Preferred Stock
The Company's Board of Directors is not currently authorized to issue any shares
of Preferred Stock, nor does the Board of Directors contemplate establishing any
other series as of such date. Any issuance of such Preferred Stock may have the
effect of delaying or preventing a change in control of the Company without
further shareholder action and may adversely effect the rights and powers,
including voting rights, of the holders of Common Stock.
C. Voting Rights
Holders of the Company's Common Stock are entitled to one vote per Share for
each Common Share held of record by Company shareholders.
D. Shares Eligible For Future Sale
Of the Company's 16,246,761 shares of Common Stock, the 12,563,300 shares are
deemed "restricted securities" as that term is defined in Rule 144 of the 1933
Securities Act ("Rule 144"), and may not be resold without registration under
the Securities Act. Provided certain requirements are met, these shares may be
resold pursuant to Rule 144 or may only be resold pursuant to another exemption
from the registration requirement.
Generally, Rule 144 provides that a holder of restricted shares of an issuer
which maintains certain available public information, where such shares are held
for two years or more, may sell in "brokers' transactions" every three months
the greater of: (a) an amount equal to one percent of the Company's outstanding
shares; or (b) an amount equal to the average weekly volume of trading in such
securities during the preceding four calendar weeks prior to the sale. A Form
144 must also be filed with SEC notifying that agency of the shares being sold
pursuant to Rule 144. Persons who are not affiliates of the Company may sell
shares beneficially owned for at least two years at the time of the proposed
sale without regard to volume or manner of sale restrictions. Lastly, there is
no existing public or other market for the Shares, and there is no assurance
that any such market will develop in the foreseeable future.
31
<PAGE>
PART II
Item 1. Market Price of and Dividends on the Registrant's Common Equity and
Other Shareholder Matters
To the best of the Company's knowledge, there is no "established trading market"
for the Company's common stock. At July 24, 2000, the Company's common stock was
not quoted on any recognized exchange, although Management intends on trading
its shares on the NASD's OTC Bulletin Board some time in the near future.
As of July 24, 2000 there the Company had 16,246,761 shares of common stock
issued and outstanding, held by approximately 543 shareholders of record.
Of the Company's 16,246,761 shares of Common Stock, the 11,000,000 shares issued
to RPMC shareholders in the stock-for-stock exchange transaction are deemed
"restricted securities" as that term is defined in Rule 144 of the 1933
Securities Act ("Rule 144"), and may not be resold without registration under
the Securities Act. Provided certain requirements are met, these shares may be
resold pursuant to Rule 144 or may only be resold pursuant to another exemption
from the registration requirement. Likewise, the 1,563,300 shares issued
subsequent to the stock-for-stock exchange, in private placement transactions as
per Section 4(2) of the 1933 Securities Act, are also deemed "restricted
securities", and may not be sold without registration under the Act.
The original Mann shareholders were issued 3,683,461 shares under Rule 504 of
Regulation D on or around April 10, 1996 for a total of $3,684.00, pursuant to a
recapitalization according to the express provisions of Rule 144(d)(3)(viii) and
Release Number 6862 of the Securities and Exchange Commission, whereby the
holder's holding period for shares received in this distribution will include
the holding period commenced more than two years prior to the date of the
acquisition of the shares.
As such, any such shares which are held by a "non-affiliated person" of the
issuer are not subject to any resale restrictions imposed by the 1933 Securities
Act, so long as the seller has been a "non-affiliated person" of the issuer for
three months prior to the date of the sale, and that furthermore any shares held
by a "non-affiliated person" are not subject to the volume limitations imposed
by the 1933 Securities Act upon the resale thereof. In addition, if any of these
shares of Mann stock are held by non-affiliates for at least one year since same
were acquired from Mann or an affiliate, said shares will be eligible for sale
pursuant to Rule 144(k), provided such sale is not prohibited by any of the
other provisions of Rule 144.
Generally, Rule 144 provides that a holder of restricted shares of an issuer
which maintains certain available public information, where such shares are held
for two years or more, may sell in "brokers' transactions" every three months
the greater of: (a) an amount equal to one percent of the Company's outstanding
shares; or (b) an amount equal to the average weekly volume of trading in such
securities during the preceding four calendar weeks prior to the sale. A Form
144 must also be filed with SEC notifying that agency of the shares being sold
pursuant to Rule 144. Persons who are not affiliates of the Company may sell
shares beneficially owned for at least two years at the time of the proposed
sale without regard to volume or manner of sale restrictions. Lastly, there is
no existing public or other market for the Shares, and there is no assurance
that any such market will develop in the foreseeable future.
32
<PAGE>
Dividend Policy
The Company does not currently intend to declare or pay any dividends on its
Common Stock for at least nine (9) months, except to the extent that such
payment is consistent with the Company's overall financial condition and plans
for growth. As the Company obtains the projected profits, substantial dividends
may be delivered to the shareholders of record. Any future determination to
declare and pay dividends will be at the discretion of the Company's Board of
Directors and will be dependent on the Company's financial condition, results of
operations, cash requirements, plans for expansion, legal limitations,
contractual restrictions and other factors deemed relevant by the Board of
Directors.
Transfer Agent
As of April 1, 1999, the transfer agent for the Company's common stock is
American Securities Transfer and Trust, Inc., 12039 W. Alameda Parkway / Z-2,
Lakewood, CO 80228.
Item 2. Legal Proceedings
There are no legal proceedings filed, or to the Company's knowledge, threatened
against the Company that the Company believes would have, individually or in the
aggregate, a material adverse effect upon its financial condition or results of
operations. See Statement of Litigation in Exhibits.
Item 3. Changes in and Disagreements with Accountants
Not Applicable.
Item 4. Recent Sales of Unregistered Securities
Private Placement to a limited number of investors under 4(2) of the 1933
Securities Act
During December of 1998, the Company commenced a private placements of its
common stock, sold at $0.50 per share, to two (2) investors, which management
believes is exempt from registration under ss.4(2) of the 1933 Securities Act.
The Company sold 500,000 to Mr. John Flaxel for US$250,000 and sold 200,000
shares to Mr. Richard S. Simpson for US$100,000, for a total of 700,000 shares
for US$350,000, at the price of $0.50 per share. These shares are all deemed
"restricted securities".
During the period from January 1, 2000 through July 24, 2000, the Company
continued its private placement of common stock sold at $0.50 per share, selling
921,197 shares of restricted stock to a group of related investors for aggregate
proceeds of approximately US$460,599. These shares are also all deemed
"restricted securities".
The Company reasonably believes that these investors qualify as "accredited
investors" and/or "sophisticated" as allowed with a Purchaser Representative as
per Rule 506 of Regulation D of the 1933 Securities Act, and these are
illustrated by the subscription agreements, purchaser questionnaires, and
Suitability Warranties signed by these individuals, which are kept file at the
Company's offices.
33
<PAGE>
Offering Exempt from Registration under Rule 504 of Regulation D, October 1999
During October 1999, the Company commenced several sales of its common stock, at
$0.50 per share, which management believes are exempt from registration under
Rule 504 of Regulation D of the 1933 Securities Act. The Company sold 1,947,000
of its Common Shares, to 24 individual shareholders, for an aggregate total of
US$973,000. See the Company's Form D, filed with the SEC, attached.
Item 5. Indemnification of Directors and Officers
The Bylaws of the Company provide for indemnification of its directors, officers
and employees as follows: "Each Director and Officer of this corporation shall
be indemnified by the corporation against all costs and expenses actually and
necessarily incurred by him or her in connection with the defense of any action,
suit or proceeding in which he or she may be involved or to which he or she may
have been made a party by reason of his or her being or having been such
director or officer, except in relation to matters as to which he or she shall
be finally adjudged in such action, suit or proceeding to be liable for
negligence or misconduct in the performance of duty."
The Bylaws of the Company further states that the Company shall provide to any
person who is or was a director, officer, employee or agent of the Corporation
or is or was serving at the request of the Corporation as a director, officer,
employee or agent of the corporation, partnership, joint venture, trust or
enterprise, the indemnity against expenses of a suit, litigation or other
proceedings which is specifically permissible under applicable Delaware law.
The Board of Directors may, in its discretion, direct the purchase of liability
insurance by way of implementing the provisions of this Article. However, the
Company has yet to purchase any such insurance and has no plans to do so. The
Articles of Incorporation of the Company states that a director or officer of
the corporation shall not be personally liable to this corporation or its
stockholders for damages for breach of fiduciary duty as a director or officer,
but this Article shall not eliminate or limit the liability of a director or
officer for (i) acts or omissions which involve intentional misconduct, fraud or
a knowing violation of the law or (ii) the unlawful payment of dividends. Any
repeal or modification of this Article by stockholders of the corporation shall
be prospective only, and shall not adversely affect any limitation on the
personal liability of a director or officer of the corporation for acts or
omissions prior to such repeal or modification.
34
<PAGE>
RPM TECHNOLOGIES, INC.
(formerly Mann Enterprise, Inc.)
(a development stage company)
Financial Statements
and
Auditor's Report
March 31, 2000 and
December 31, 1999 and 1998
S. W. HATFIELD, CPA
certified public accountants
Use our past to assist your future (sm)
F-1
<PAGE>
RPM TECHNOLOGIES, INC.
(formerly Mann Enterprise, Inc.)
(a development stage company)
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Certified Public Accountants F-3
Annual Financial Statements
Balance Sheets as of March 31, 2000, December 31, 1999 and 1998 F-4
Statements of Operations and Comprehensive Income for the three months ended
March 31, 2000, for the years ended December 31, 1999 and 1998, and for
the period from April 10, 1996 (date of
inception) through March 31, 2000 F-5
Statement of Changes in Stockholders' Equity
for the period from April 10, 1996 (date of
inception) through March 31, 2000 F-6
Statements of Cash Flows
for the three months ended March 31, 2000, for the years ended December
31, 1999 and 1998, and for the period from April 10, 1996 (date of
inception) through March 31, 2000 F-7
Notes to Financial Statements F-9
Accountant's Review Report F-13
Interim Financial Statements
Balance Sheets as of March 31, 2000 and 1999 F-14
Statements of Operations and Comprehensive Income
for the three months ended March 31, 2000 and 1999 F-15
Statements of Cash Flows
for the three months ended March 31, 2000 and 1999 F-16
Notes to Financial Statements F-17
Exhibit 27.1 - Financial Data Schedule F-21
</TABLE>
F-2
<PAGE>
S. W. HATFIELD, CPA
certified public accountants
Member: American Institute of Certified Public Accountants
SEC Practice Section
Information Technology Section
Texas Society of Certified Public Accountants
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Stockholders
RPM Technologies, Inc.
(formerly Mann Enterprise, Inc.)
We have audited the accompanying balance sheets of RPM Technologies, Inc.
(formerly Mann Enterprise, Inc.) (a Delaware corporation and a development stage
company) as of March 31, 2000, December 31, 1999 and 1998 and the related
statements of operations and comprehensive income, changes in stockholders'
equity and cash flows for the three months ended March 31, 2000 and for each of
the years ended December 31, 1999 and 1998, respectively, and for the period
from April 10, 1996 (date of inception) through March 31, 2000. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of RPM Technologies, Inc.
(formerly Mann Enterprise, Inc.) (a development stage company) as of March 31,
2000, December 31, 1999 and 1998, and the results of its operations and its cash
flows for the three months ended March 31, 2000 and for each of the years ended
December 31, 1999 and 1998, respectively, and for the period from April 10, 1996
(date of inception) through March 31, 2000, in conformity with generally
accepted accounting principles.
By: /s/ S. W. Hatfield, CPA
---------------------------
S. W. HATFIELD, CPA
Dallas, Texas
May 23, 2000
Use our past to assist your future sm
P. O. Box 820395 9002 Green Oaks Circle, 2nd Floor
Dallas, Texas 75382-0395 Dallas, Texas 75243-7212
214-342-9635 (voice) (fax) 214-342-9601
800-244-0639 [email protected]
F-3
<PAGE>
RPM TECHNOLOGIES, INC.
(formerly Mann Enterprise, Inc.)
(a development stage company)
BALANCE SHEETS
March 31, 2000, December 31, 1999 and 1998
<TABLE>
<CAPTION>
March 31, December 31, December 31,
2000 1999 1998
----------- ----------- -----------
ASSETS
------
<S> <C> <C> <C>
Current Assets
Cash and cash equivalents $ 281,544 $ 101,616 $ 65,287
Prepaid expenses 20,183 12,500 --
----------- ----------- -----------
Total current assets 301,727 114,116 65,287
----------- ----------- -----------
Property and equipment - at cost
Molds, tools and dies 589,289 588,189 72,000
Computer equipment 11,640 11,640 --
----------- ----------- -----------
600,929 599,829 72,000
Accumulated depreciation (26,799) (11,096) --
----------- ----------- -----------
Net property and equipment 574,130 588,733 72,000
----------- ----------- -----------
Other assets
Deferred costs of raising capital -- -- 54,600
----------- ----------- -----------
TOTAL ASSETS $ 875,857 $ 702,849 $ 191,887
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Notes payable to investors $ -- $ - $215,000
Accrued interest payable -- -- 4,144
Accounts payable - trade 33,000 -- --
Due to affiliate 10,000 -- --
----------- ----------- -----------
Total current liabilities 43,000 - 219,144
----------- ----------- -----------
Commitments and contingencies
Stockholders' Equity
Preferred stock - $1.00 par value
1,000,000 shares authorized
None issued and outstanding -- -- --
Common stock - $0.001 par value
20,000,000 shares authorized
15,723,461, 15,036,064, and 12,670,418
shares issued and outstanding,
respectively 15,723 15,036 12,670
Additional paid-in capital 2,259,090 1,915,845 859,563
Deficit accumulated during the development phase (1,441,956) (1,228,032) (899,490)
----------- ----------- -----------
Total stockholders' equity 832,857 702,849 (27,257)
----------- ----------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 875,857 $ 702,849 $ 191,887
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
RPM TECHNOLOGIES, INC.
(formerly Mann Enterprise, Inc.)
(a development stage company)
STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
Three months ended March 31, 2000 and
Years ended December 31, 1999 and 1998 and
Period from April 10, 1996 (date of inception) through March 31, 2000
<TABLE>
<CAPTION>
Period from
April 10, 1996
Three months (date of inception)
ended Year ended Year ended through
March 31, December 31, December 31, March 31,
2000 1999 1998 2000
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues $ -- $ -- $ -- $ --
------------ ------------ ------------ ------------
Operating Expenses
Research and development costs 100,924 99,986 866,750 1,067,660
Payroll and related expenses 9,697 30,236 13,852 53,785
General and administrative expenses 87,957 149,506 11,051 252,547
Interest expense -- 39,743 4,144 43,887
Depreciation 15,702 11,096 -- 26,798
------------ ------------ ------------ ------------
Total operating expenses 214,280 330,567 895,797 1,444,677
------------ ------------ ------------ ------------
Loss from operations (214,280) (330,567) (895,797) (1,444,677)
Other income
Interest income 356 2,025 340 2,721
------------ ------------ ------------ ------------
Loss before provision
for income taxes (213,924) (328,542) (895,457) (1,441,956)
Provision for income taxes -- -- -- --
------------ ------------ ------------ ------------
Net Loss (213,924) (328,542) (895,457) (1,441,956)
Other comprehensive income -- -- -- --
------------ ------------ ------------ ------------
Comprehensive Loss $ (213,924) $ (328,542) $ (895,457) $ (1,441,956)
============ ============ ============ ============
Net loss per weighted-average
share of common stock
outstanding, calculated on
Net Loss - basic and fully diluted $ (0.01) $ (0.02) $ (0.08) $ (0.17)
============ ============ ============ ============
Weighted-average number
of shares of common
stock outstanding 15,539,680 13,467,608 11,734,456 8,582,128
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
RPM TECHNOLOGIES, INC.
(formerly Mann Enterprise, Inc.)
(a development stage company)
STATEMENT OF CHANGES INSTOCKHOLDERS' EQUITY
Period from April 10, 1996 date of inception) through March 31, 2000
<TABLE>
<CAPTION>
Additional
Common Stock paid-in Accumulated
Shares Amount capital deficit Total
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Initial capitalization of
Mann Enterprise, Inc.
in April 1996 3,683,461 $ 3,683 $ -- $ -- $ 3,683
Initial capitalization of
RPM Technologies, Inc.
in August 1998 1,450,000 1,450 -- -- 1,450
Capital contributed to
support corporate entity -- -- 350 -- 350
Net loss for the period -- -- -- (4,033) (4,033)
----------- ----------- ----------- ----------- -----------
Balances at December 31, 1996 5,133,461 5,133 350 (4,033) 1,450
Net loss for the period -- -- -- -- --
----------- ----------- ----------- ----------- -----------
Balances at December 31, 1997 5,133,461 5,133 350 (4,033) 1,450
Common stock issued for
Acquisition of technology
development in process 4,086,957 4,087 465,913 -- 470,000
Professional, product
development and
organizational expenses 3,450,000 3,450 393,300 -- 396,750
Net loss for the year -- -- -- (895,457) (895,457)
----------- ----------- ----------- ----------- -----------
Balances at December 31, 1998 12,670,418 12,670 859,563 (899,490) (27,257)
Common stock issued for
conversion of debt and
accrued interest 2,365,646 2,366 1,180,457 -- 1,182,823
Less cost of raising capital -- -- (124,175) -- (124,175)
Net loss for the year -- -- -- (328,542) (328,542)
----------- ----------- ----------- ----------- -----------
Balances at December 31, 1999 15,036,064 15,036 1,915,845 (1,228,032) 702,849
Capital to support corporate entity -- -- 234 -- 234
Sale of common stock 687,397 687 343,011 -- 343,698
Net loss for the year -- -- -- (213,924) (213,924)
----------- ----------- ----------- ----------- -----------
Balances at March 31, 2000 15,723,461 $ 15,723 $ 2,259,090 $(1,441,956) $ 832,857
=========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
RPM TECHNOLOGIES, INC.
(formerly Mann Enterprise, Inc.)
(a development stage company)
STATEMENTS OF CASH FLOWS
Three months ended March 31, 2000 and
Years ended December 31, 1999 and 1998 and
Period from April 10, 1996 (date of inception) through March 31, 2000
<TABLE>
<CAPTION>
Period from
April 10, 1996
Three months (date of inception)
ended Year ended Year ended through
March 31, December 31, December 31, March 31,
2000 1999 1998 2000
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Cash Flows from Operating Activities
Net loss for the period $ (213,924) $ (328,542) $ (895,457) $(1,441,956)
Adjustments to reconcile net loss
to net cash provided by operating
activities
Depreciation 15,703 11,096 -- 26,799
Expenses paid with common stock -- 255,892 868,200 1,127,775
(Increase) Decrease in
Prepaid expenses (7,683) (12,500) -- (20,183)
Increase (Decrease) in
Accounts payable 33,000 -- -- 33,000
Accrued interest -- 39,743 4,144 43,887
----------- ----------- ----------- -----------
Net cash used in operating activities (172,904) (34,311) (23,113) (230,678)
----------- ----------- ----------- -----------
Cash Flows from Investing Activities
Purchase of property and equipment (1,100) (527,829) (72,000) (600,929)
----------- ----------- ----------- -----------
Cash Flows from Financing Activities
Funds advanced by affiliate -net 10,000 -- -- 10,000
Capital contributed to support
the corporate entity 234 -- -- 584
Proceeds from notes payable -- 668,044 215,000 883,044
Cash paid to raise capital -- (69,575) (54,600) (124,175)
Proceeds from sales of
common stock 343,698 -- -- 343,698
----------- ----------- ----------- -----------
Net cash used in financing activities 353,932 598,469 160,400 1,113,151
----------- ----------- ----------- -----------
Increase in Cash 179,928 36,329 65,287 281,544
Cash at beginning of period 101,616 65,287 -- --
----------- ----------- ----------- -----------
Cash at end of period $ 281,544 $ 101,616 $ 65,287 $ 281,544
=========== =========== =========== ===========
</TABLE>
- Continued -
The accompanying notes are an integral part of these financial statements.
F-7
<PAGE>
RPM TECHNOLOGIES, INC.
(formerly Mann Enterprise, Inc.)
(a development stage company)
STATEMENTS OF CASH FLOWS - CONTINUED
Three months ended March 31, 2000 and
Years ended December 31, 1999 and
1998 and Period from April 10, 1996 (date of inception) through March 31, 2000
<TABLE>
<CAPTION>
Period from
April 10, 1996
Three months (date of inception)
ended Year ended Year ended through
March 31, December 31, Dec. 31, March 31,
2000 1999 1998 2000
============== ============== ====== ==========
<S> <C> <C> <C> <C>
Supplemental Disclosure of
Interest and Income Taxes Paid
Interest paid for the period $ -- $ -- $ -- $ --
============== ============== ====== ==========
Income taxes paid for the period $ -- $ -- $ -- $ --
============== ============== ====== ==========
Supplemental Disclosure of
Non-cash Investing and
Financing Activities
Common stock exchanged for
notes payable and accrued
interest $ -- $ 1,182,823 $ -- $1,182,823
============== ============== ====== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-8
<PAGE>
RPM TECHNOLOGIES, INC.
(formerly Mann Enterprise, Inc.)
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
NOTE A - ORGANIZATION AND DESCRIPTION OF BUSINESS
Mann Enterprise, Inc. was incorporated on April 10, 1996 in accordance with the
laws of the State of Delaware. The Company was formed to seek a merger with,
acquisition of or affiliation with a privately-owned entity wishing to become
publicly-owned.
The Company, in April 1996, filed a Form D, using an exemption from registration
under Regulation 504, with the U. S. Securities and Exchange Commission to
distribute approximately 3,683,461 shares of common stock as a dividend
distribution to the stockholders of Peark Corp..
On March 17, 2000, Mann Enterprise, Inc. merged with and into RPM Technologies,
Inc., a Colorado corporation. Mann Enterprise, Inc. was the surviving entity to
the merger and concurrent with the merger changed its corporate name to RPM
Technologies, Inc. The merged entities are referred to as Company.
At the time of the merger, Mann Enterprise, Inc. and RPM Technologies, Inc.
shared common ownership and management. Accordingly, the merger was accounted
for pursuant to Interpretation #39 of Accounting Principles Board Opinion # 16,
"Business Combinations", whereby the combination of entities under common
control are accounted for on an "as-if-pooled" basis. The combined financial
statements of Mann Enterprise, Inc. and RPM Technologies, Inc. became the
historical financial statements of the Company as of the first day of the first
period presented.
RPM Technologies, Inc. was incorporated on December 10, 1997 in accordance with
the laws of the State of Colorado. The Company is in the business to develop,
produce, market and sell plastic pallets to various unrelated entities located
throughout the United States, Canada, Central and South America. The Company has
developed what it believes is a proprietary process for the manufacture of
plastic pallets at costs comparable to those currently in use constructed of
wood which will meet current and future anticipated environmental standards,
encourage the preservation of trees and promote plastic recycling.
Since inception, the Company has been principally involved in research and
development of its products and the development of a market for its products.
Accordingly, the Company has no substantial operations or substantial assets and
is considered to be in the "development stage". During the second quarter of
2000, the Company began direct sales of its plastic pallet products and
anticipates exiting the development stage.
For segment reporting purposes, the Company operated in only one industry
segment during the periods represented in the accompanying financial statements
and makes all operating decisions and allocates resources based on the best
benefit to the Company as a whole.
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 and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
F-9
<PAGE>
RPM TECHNOLOGIES, INC.
(formerly Mann Enterprise, Inc.)
(a development stage company)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
1. Cash and cash equivalents
-------------------------
The Company considers all cash on hand and in banks, including accounts in
book overdraft positions, certificates of deposit and other highly-liquid
investments with maturities of three months or less, when purchased, to be
cash and cash equivalents.
2. Property and equipment
----------------------
Property and equipment is recorded at cost and is depreciated on a
straight-line basis, over the estimated useful lives (generally 3 to 10
years) of the respective asset. Major additions and betterments are
capitalized and depreciated over the estimated useful lives of the related
assets. Maintenance, repairs, and minor improvements are charged to expense
as incurred.
3. Organization costs
------------------
The Company has adopted the provisions of AICPA Statement of Position 98-5,
"Reporting on the Costs of Start-Up Activities" whereby all organizational
and initial costs incurred with the incorporation and initial
capitalization of the Company were charged to operations as incurred.
4. Research and development expenses
---------------------------------
Research and development expenses are charged to operations as incurred.
5. Advertising expenses
--------------------
Advertising and marketing expenses are charged to operations as incurred.
6. Income Taxes
------------
At March 31, 2000, the Company has a net operating loss carryforward for
income purposes of approximately $1,400,000. If this carryforward is not
fully utilized, it will begin to expire in 2013. As of March 31, 2000,
December 31, 1999 and 1998, respectively, the deferred tax asset related to
the Company's net operating loss carryforward is fully reserved.
7. Earnings (loss) per share
-------------------------
Basic earnings (loss) per share is computed by dividing the net income
(loss) by the weighted-average number of shares of common stock and common
stock equivalents (primarily outstanding options and warrants). Common
stock equivalents represent the dilutive effect of the assumed exercise of
the outstanding stock options and warrants, using the treasury stock
method. The calculation of fully diluted earnings (loss) per share assumes
the dilutive effect of the exercise of outstanding options and warrants at
either the beginning of the respective period presented or the date of
issuance, whichever is later. As of March 31, 2000, December 31, 1999 and
1998, the Company had no warrants and/or options outstanding.
F-10
<PAGE>
RPM TECHNOLOGIES, INC.
(formerly Mann Enterprise, Inc.)
(a development stage company)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE C - FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of cash, accounts receivable, accounts payable and notes
payable, as applicable, approximates fair value due to the short term nature of
these items and/or the current interest rates payable in relation to current
market conditions.
NOTE D - CONCENTRATIONS OF CREDIT RISK
The Company maintains its cash accounts in a financial institution subject to
insurance coverage issued by the Federal Deposit Insurance Corporation (FDIC).
Under FDIC rules, the Company is entitled to aggregate coverage of $100,000 per
account type per separate legal entity per individual financial institution.
During the three months ended March 31, 2000 and for each of the years ended
December 31, 1999 and 1998, the Company had credit risk exposures in excess of
the FDIC coverage as follows:
<TABLE>
<CAPTION>
Highest Lowest Number of days
exposure exposure with exposure
-------- -------- --------------
<S> <C> <C> <C>
Year ended December 31, 1998 none none none
Year ended December 31, 1999 $136,171 $9,597 166
Three months ended March 31, 2000 $195,605 $103,607 78
</TABLE>
The Company has experienced no losses from these exposures.
NOTE E - NOTES PAYABLE
During 1998 and 1999, the Company issued various $25,000 unsecured convertible
notes payable to various investors pursuant to a Private Placement Memorandum
dated November 12, 1998. The notes bore interest at 10.0% per annum, payable
semi-annually. The notes were convertible into common stock of the Company at
any time prior to the notes maturity at $0.50 per share. On August 31, 1999, the
Company converted the notes, with the written affirmation of the noteholder(s),
into an aggregate of 2,365,646 shares of restricted, unregistered common stock
of the Company for 100.0% outstanding notes payable and all accrued, but unpaid,
interest.
NOTE F - COMMON STOCK TRANSACTIONS
On August 20, 1998, the Company issued 4,086,957 shares of unregistered,
restricted common stock to an affiliated entity to acquire 100.0% of the rights
to plastic pallet technology in process for completion and further development
to achieve the Company's initial business plans and goals. These shares were
valued at approximately $0.115 per share, or $470,000, which equaled the
affiliated entity's cumulative development costs to that date. These costs have
been charged to operations as a component of research and development costs.
F-11
<PAGE>
RPM TECHNOLOGIES, INC.
(formerly Mann Enterprise, Inc.)
(a development stage company)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE F - COMMON STOCK TRANSACTIONS - Continued
On August 20, 1998, the Company issued 3,450,000 shares of unregistered,
restricted common stock to various individuals, officers and directors for
various engineering, marketing, consulting and management services provided to
the Company and the plastic pallet technology in process as of the transaction
date. These issuances were valued at $0.115 per share, or $396,750, which
approximates the "fair value" of the services provided to the Company and/or the
related plastic pallet technology. These costs have been charged to operations
as a component of research and development costs.
On August 31, 1999, the Company issued 2,365,646 shares of unregistered,
restricted common stock in exchange for convertible 10.0% notes payable with an
outstanding face value of approximately $1,138,936 and accrued, but unpaid,
interest of approximately $43,887.
During the period from January 1, 2000 through March 31, 2000, the Company sold
an aggregate 632,947 shares of unregistered, restricted common stock to a group
of related investors pursuant to a Private Stock Subscription Agreement at a
price of $0.50 per share for aggregate proceeds of approximately $343,698.
NOTE G - COMMITMENTS
In January 2000, the Company purchased the rights to certain technology for a
pallet related product for $1,100 cash and 25,000 shares of unregistered,
restricted common stock at an unspecified date. The acquisition agreement also
requires a royalty payment of approximately $7.50 per unit sold. As of March 31,
2000, the Company is still in the research and development phase on this product
and no sales have been made. The 25,000 shares of unregistered, restricted
common stock are anticipated to be issued during the second quarter of 2000.
F-12
<PAGE>
S. W. HATFIELD, CPA
certified public accountants
Member: American Institute of Certified Public Accountants
SEC Practice Section
Information Technology Section
Texas Society of Certified Public Accountants
Independent Accountant's Report
-------------------------------
Board of Directors and Shareholders
RPM Technologies, Inc.
(formerly Mann Enterprise, Inc.)
We have reviewed the accompanying balance sheets of RPM Technologies, Inc.
(formerly Mann Enterprise, Inc.) (a Delaware corporation and a development stage
company) as of March 31, 2000 and 1999 and the accompanying statement of
operations and comprehensive income and statement of cash flows for the three
months ended March 31, 2000 and 1999. These financial statements are prepared in
accordance with the instructions for Form 10-QSB, as issued by the U. S.
Securities and Exchange Commission, and are the sole responsibility of the
company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression on an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying consolidated financial statements for them to be in
conformity with generally accepted accounting principles.
By: /s/ S. W. HATFIELD, CPA
---------------------------
S. W. HATFIELD, CPA
Dallas, Texas
June 13, 2000
Use our past to assist your future (sm)
P. O. Box 820395 9002 Green Oaks Circle, 2nd Floor
Dallas, Texas 75382-0395 Dallas, Texas 75243-7212
214-342-9635 (voice) (fax) 214-342-9601
800-244-0639 [email protected]
F-13
<PAGE>
RPM Technologies, Inc.
(formerly Mann Enterprise, Inc.)
(a development stage company)
Balance Sheets
March 31, 2000 and 1999
(Unaudited)
<TABLE>
<CAPTION>
March 31, March 31,
2000 1999
----------- -----------
ASSETS
<S> <C> <C>
Current Assets
Cash and cash equivalents $ 281,544 $ 189,139
Prepaid expenses 20,183 101,675
----------- -----------
Total current assets 301,727 290,814
----------- -----------
Property and equipment - at cost
Molds, tools and dies 589,289 287,000
Computer equipment 11,640 --
----------- -----------
600,929 287,000
Accumulated depreciation (26,799) --
----------- -----------
Net property and equipment 574,130 287,000
----------- -----------
Other assets
Deferred costs of raising capital -- --
----------- -----------
TOTAL ASSETS $ 875,857 $ 577,814
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Notes payable to investors $ -- $ 610,544
Accrued interest payable -- 14,092
Accounts payable - trade 33,000 --
Due to affiliate 10,000 --
----------- -----------
Total current liabilities 43,000 624,636
----------- -----------
Commitments and contingencies
Stockholders' Equity Preferred stock - $1.00 par value
1,000,000 shares authorized
None issued and outstanding -- --
Common stock - $0.001 par value
20,000,000 shares authorized
15,723,461 and 12,670,418
shares issued and outstanding,
respectively 15,723 12,670
Additional paid-in capital 2,259,090 859,563
Deficit accumulated during the development phase (1,441,956) (919,055)
----------- -----------
Total stockholders' equity 832,857 (46,822)
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 875,857 $ 577,814
=========== ===========
</TABLE>
The financial information included herein has been prepared by management
without audit by independent certified public accountants. See accompanying
accountants' review report. The accompanying notes are an integral part of these
financial statements.
F-14
<PAGE>
RPM Technologies, Inc.
(formerly Mann Enterprise, Inc.)
(a development stage company)
Statements of Operations and Comprehensive Income
Three months ended March 31, 2000 and 1999
(Unaudited)
<TABLE>
<CAPTION>
Three months Three months
ended ended
March 31, March 31,
2000 1999
------------ ------------
<S> <C> <C>
Revenues $ -- $ --
------------ ------------
Operating Expenses
Research and development costs 100,924 500
Payroll and related expenses 9,697 5,842
General and administrative expenses 87,957 3,631
Interest expense -- 9,948
Depreciation 15,702 --
------------ ------------
Total operating expenses 214,280 19,921
------------ ------------
Loss from operations (214,280) (19,921)
Other income
Interest income 356 356
------------ ------------
Loss before provision
for income taxes (213,924) (19,565)
Provision for income taxes -- --
------------ ------------
Net Loss (213,924) (19,565)
Other comprehensive income -- --
------------ ------------
Comprehensive Loss $ (213,924) $ (19,565)
============ ============
Net loss per weighted-average
share of common stock
outstanding, calculated on
Net Loss - basic and fully diluted $ (0.01) nil
============ ============
Weighted-average number
of shares of common
stock outstanding 15,539,680 12,670,418
============ ============
</TABLE>
The financial information included herein has been prepared by management
without audit by independent certified public accountants. See accompanying
accountants' review report. The accompanying notes are an integral part of these
financial statements.
F-15
<PAGE>
RPM Technologies, Inc.
(formerly Mann Enterprise, Inc.)
(a development stage company)
Statements of Cash Flows
Three months ended March 31, 2000 and 1999
(Unaudited)
<TABLE>
<CAPTION>
Three months Three months
ended ended
March 31, March 31,
2000 1999
<S> <C> <C>
Cash Flows from Operating Activities
Net loss for the period $(213,924) $ (19,565)
Adjustments to reconcile net loss to net
cash provided by operating activities
Depreciation 15,703 --
Expenses paid with common stock -- --
(Increase) Decrease in
Prepaid expenses (7,683) --
Increase (Decrease) in
Accounts payable 33,000 --
Accrued interest -- 9,948
--------- ---------
Net cash used in operating activities (172,904) (9,617)
--------- ---------
Cash Flows from Investing Activities
Purchase of property and equipment (1,100) (215,000)
--------- ---------
Cash Flows from Financing Activities
Funds advanced by affiliate -net 10,000 --
Capital contributed to support the corporate entity 234 --
Proceeds from notes payable -- 395,544
Cash paid to raise capital -- (47,075)
Proceeds from sales of common stock 343,698 --
--------- ---------
Net cash used in financing activities 353,932 348,469
--------- ---------
Increase in Cash 179,928 123,852
Cash at beginning of period 101,616 65,287
--------- ---------
Cash at end of period $ 281,544 $ 189,139
========= =========
Supplemental Disclosure of Interest and Income Taxes Paid
Interest paid for the period $ -- $ --
========= =========
Income taxes paid for the period $ -- $ --
========= =========
</TABLE>
The financial information included herein has been prepared by management
without audit by independent certified public accountants. See accompanying
accountants' review report. The accompanying notes are an integral part of these
financial statements.
F-16
<PAGE>
RPM Technologies, Inc.
(formerly Mann Enterprise, Inc.)
(a development stage company)
Notes to Financial Statements
Note A - Organization and Description of Business
Mann Enterprise, Inc. was incorporated on April 10, 1996 in accordance with the
laws of the State of Delaware. The Company was formed to seek a merger with,
acquisition of or affiliation with a privately-owned entity wishing to become
publicly-owned.
The Company, in April 1996, filed a Form D, using an exemption from registration
under Regulation 504, with the U. S. Securities and Exchange Commission to
distribute approximately 3,683,461 shares of common stock as a dividend
distribution to the stockholders of Peark Corp..
On March 17, 2000, Mann Enterprise, Inc. merged with and into RPM Technologies,
Inc., a Colorado corporation. Mann Enterprise, Inc. was the surviving entity to
the merger and concurrent with the merger changed its corporate name to RPM
Technologies, Inc. The merged entities are referred to as Company.
At the time of the merger, Mann Enterprise, Inc. and RPM Technologies, Inc.
shared common ownership and management. Accordingly, the merger was accounted
for pursuant to Interpretation #39 of Accounting Principles Board Opinion # 16,
"Business Combinations", whereby the combination of entities under common
control are accounted for on an "as-if-pooled" basis. The combined financial
statements of Mann Enterprise, Inc. and RPM Technologies, Inc. became the
historical financial statements of the Company as of the first day of the first
period presented.
RPM Technologies, Inc. was incorporated on December 10, 1997 in accordance with
the laws of the State of Colorado. The Company is in the business to develop,
produce, market and sell plastic pallets to various unrelated entities located
throughout the United States, Canada, Central and South America. The Company has
developed what it believes is a proprietary process for the manufacture of
plastic pallets at costs comparable to those currently in use constructed of
wood which will meet current and future anticipated environmental standards,
encourage the preservation of trees and promote plastic recycling.
Since inception, the Company has been principally involved in research and
development of its products and the development of a market for its products.
Accordingly, the Company has no substantial operations or substantial assets and
is considered to be in the "development stage". During the second quarter of
2000, the Company began direct sales of its plastic pallet products and
anticipates exiting the development stage.
For segment reporting purposes, the Company operated in only one industry
segment during the periods represented in the accompanying financial statements
and makes all operating decisions and allocates resources based on the best
benefit to the Company as a whole.
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 and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
F-17
<PAGE>
RPM Technologies, Inc.
(formerly Mann Enterprise, Inc.)
(a development stage company)
Notes to Financial Statements - Continued
Note B - Summary of Significant Accounting Policies
1. Cash and cash equivalents
-------------------------
The Company considers all cash on hand and in banks, including accounts in
book overdraft positions, certificates of deposit and other highly-liquid
investments with maturities of three months or less, when purchased, to be
cash and cash equivalents.
2. Property and equipment
----------------------
Property and equipment is recorded at cost and is depreciated on a
straight-line basis, over the estimated useful lives (generally 3 to 10
years) of the respective asset. Major additions and betterments are
capitalized and depreciated over the estimated useful lives of the related
assets. Maintenance, repairs, and minor improvements are charged to expense
as incurred.
3. Organization costs
------------------
The Company has adopted the provisions of AICPA Statement of Position 98-5,
"Reporting on the Costs of Start-Up Activities" whereby all organizational
and initial costs incurred with the incorporation and initial
capitalization of the Company were charged to operations as incurred.
4. Research and development expenses
---------------------------------
Research and development expenses are charged to operations as incurred.
5. Advertising expenses
--------------------
Advertising and marketing expenses are charged to operations as incurred.
6. Income Taxes
------------
At March 31, 2000, the Company has a net operating loss carryforward for
income purposes of approximately $1,400,000. If this carryforward is not
fully utilized, it will begin to expire in 2013. As of March 31, 2000 and
1999, respectively, the deferred tax asset related to the Company's net
operating loss carryforward is fully reserved.
7. Earnings (loss) per share
-------------------------
Basic earnings (loss) per share is computed by dividing the net income
(loss) by the weighted-average number of shares of common stock and common
stock equivalents (primarily outstanding options and warrants). Common
stock equivalents represent the dilutive effect of the assumed exercise of
the outstanding stock options and warrants, using the treasury stock
method. The calculation of fully diluted earnings (loss) per share assumes
the dilutive effect of the exercise of outstanding options and warrants at
either the beginning of the respective period presented or the date of
issuance, whichever is later. As of March 31, 2000 and 1999, respectively,
the Company had no warrants and/or options outstanding.
F-18
<PAGE>
RPM Technologies, Inc.
(formerly Mann Enterprise, Inc.)
(a development stage company)
Notes to Financial Statements - Continued
Note C - Fair Value of Financial Instruments
The carrying amount of cash, accounts receivable, accounts payable and notes
payable, as applicable, approximates fair value due to the short term nature of
these items and/or the current interest rates payable in relation to current
market conditions.
Note D - Concentrations of Credit Risk
The Company maintains its cash accounts in a financial institution subject to
insurance coverage issued by the Federal Deposit Insurance Corporation (FDIC).
Under FDIC rules, the Company is entitled to aggregate coverage of $100,000 per
account type per separate legal entity per individual financial institution.
During the three months ended March 31, 2000 and 1999, the Company had credit
risk exposures in excess of the FDIC coverage as follows:
<TABLE>
<CAPTION>
Highest Lowest Number of days
exposure exposure with exposure
-------- -------- --------------
<S> <C> <C> <C> <C> <C>
Three months ended March 31, 2000 $195,605 $103,607 78
Three months ended March 31, 1999 $136,171 $99,884 20
</TABLE>
The Company has experienced no losses from these exposures.
Note E - Notes Payable
During 1998 and 1999, the Company issued various $25,000 unsecured convertible
notes payable to various investors pursuant to a Private Placement Memorandum
dated November 12, 1998. The notes bore interest at 10.0% per annum, payable
semi-annually. The notes were convertible into common stock of the Company at
any time prior to the notes maturity at $0.50 per share. On August 31, 1999, the
Company converted the notes, with the written affirmation of the noteholder(s),
into an aggregate of 2,365,646 shares of restricted, unregistered common stock
of the Company for 100.0% outstanding notes payable and all accrued, but unpaid,
interest.
Note F - Common Stock Transactions
On August 20, 1998, the Company issued 4,086,957 shares of unregistered,
restricted common stock to an affiliated entity to acquire 100.0% of the rights
to plastic pallet technology in process for completion and further development
to achieve the Company's initial business plans and goals. These shares were
valued at approximately $0.115 per share, or $470,000, which equaled the
affiliated entity's cumulative development costs to that date. These costs have
been charged to operations as a component of research and development costs.
F-19
<PAGE>
RPM Technologies, Inc.
(formerly Mann Enterprise, Inc.)
(a development stage company)
Notes to Financial Statements - Continued
Note F - Common Stock Transactions - Continued
On August 20, 1998, the Company issued 3,450,000 shares of unregistered,
restricted common stock to various individuals, officers and directors for
various engineering, marketing, consulting and management services provided to
the Company and the plastic pallet technology in process as of the transaction
date. These issuances were valued at $0.115 per share, or $396,750, which
approximates the "fair value" of the services provided to the Company and/or the
related plastic pallet technology. These costs have been charged to operations
as a component of research and development costs.
On August 31, 1999, the Company issued 2,365,646 shares of unregistered,
restricted common stock in exchange for convertible 10.0% notes payable with an
outstanding face value of approximately $1,138,936 and accrued, but unpaid,
interest of approximately $43,887.
During the period from January 1, 2000 through March 31, 2000, the Company sold
an aggregate 632,947 shares of unregistered, restricted common stock to a group
of related investors pursuant to a Private Stock Subscription Agreement at a
price of $0.50 per share for aggregate proceeds of approximately $343,698.
Note G - Commitments
In January 2000, the Company purchased the rights to certain technology for a
pallet related product for $1,100 cash and 25,000 shares of unregistered,
restricted common stock at an unspecified date. The acquisition agreement also
requires a royalty payment of approximately $7.50 per unit sold. As of March 31,
2000, the Company is still in the research and development phase on this product
and no sales have been made. The 25,000 shares of unregistered, restricted
common stock are anticipated to be issued during the second quarter of 2000.
F-20
PART III
Item 1. Index to and Description of Exhibits.
Exhibit Exhibit
Number Name
------ ----
2.1 Certificate and Agreement of Merger by and among RPM
Technologies Inc., Colorado and Mann Enterprises Inc. dated
March 17, 2000
3.(i) Certificate of Incorporation of the Registrant.
3.(ii) Bylaws of the Registrant.
4.1 Form of Stock Certificate of Common Stock.
4.2 Private Stock Purchase Agreement to Limited Number of
Investors.
4.3 Qualified Purchaser Questionnaire for Private Stock Purchase.
4.4 Representation of Investor Suitability for Private Stock
Purchase.
5.1 Legal Review Summary of the Registrant.
10.1 Asset Purchase Agreement of Savoia Corporation
99.1 New York Form M-11 filed by the Registrant.
99.2 SEC Form D filed by the Registrant.
99.3 Certificate of Incorporation for RPM Technologies, Inc. -
Colorado.
99.4 Certificate of Good Standing of the Registrant.
35
<PAGE>
SIGNATURE PAGE
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this registration statement to be signed on its behalf by the
undersigned, thereto duly authorized.
RPM Technologies, Inc. (Registrant)
Date: August 1, 2000
By: /s/ Randy Zych
----------------------------------
Randy Zych
Chief Executive Officer and Chairman of the Board
Date: August 1, 2000
By:
----------------------------------
Randy Zych
Chief Executive Officer and Chairman of the Board
Date: August 1, 2000
By: /s/ Kevin Cronin
----------------------------------
Kevin Cronin
President and Director
Date: August 1, 2000
By:
----------------------------------
Kevin Cronin
President and Director
