U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[x] QUARTERLY REPORT PURSUANT SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: December 31, 1997
[ ] TRANSITION REPORT PURSUANT SECTION 13 OF 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________________ to _______________
Commission file number 0-28704
CREATIVE RECYCLING TECHNOLOGIES, INC.
(Exact name of small business issuer as specified in its charter)
GEORGIA 84-1122431
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
3500 PARKWAY LANE, SUITE 435, NORCROSS, GEORGIA 30092
(Address of principal executive offices)
(770)729-9010
(Issuer's telephone number)
NOT APPLICABLE
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes ____ No
_X___
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the last practicable date:
733,280 SHARES OF CLASS A COMMON STOCK, NO PAR VALUE
10,000 SHARES OF CLASS B COMMON STOCK, NO PAR VALUE
AS OF MAY 12, 1998
Transitional Small Business Disclosure Format (check one):
Yes __ No _X_
<PAGE>
CREATIVE RECYCLING TECHNOLOGIES, INC.
TABLE OF CONTENTS
PAGE
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheet dated September 30, 1997 3
Consolidated Statement of Operations 4
Consolidated Statements of Cash Flows for the
Three Months Ended September 30, 1996 and 1997 5
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial 7
Condition and Results of Operations
PART II. OTHER INFORMATION 8
2
<PAGE>
PART I. - FINANCIAL INFORMATION
CREATIVE RECYCLING TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
December 31, June 30,
1997 1997
-------- --------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 10,858 $ 36,656
Inventory 17,222 14,039
Due from related party 572 -
Due from officers and
stockholders 220,812 91,444
Other receivables 6,161 6,655
---------- ----------
Total current assets 255,625 148,794
Property and equipment-net of accumulated
Depreciation 280,329 348,801
Other assets:
Intangibles net of accumulated amortization
Of $7,167 and $10,707 20,281 21,501
Deposits 39,119 39,119
Deferred discounts 8,773 -
----------- ----------
$ 604,127 $ 558,215
=========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
Current liabilities:
Accounts payable $ 179,809 $ 184,394
Accrued expenses 179,996 119,169
Notes payable 306,453 333,614
Advance banquet deposits 22,080 26,973
Deferred revenue 47,392 13,833
Deferred rent 23,640 26,640
----------- ----------
Total current liabilities 759,370 701,623
----------- ----------
Commitments and contingencies
Stockholders' equity (deficiency):
Common stock, Class A no par value,
1,800,000,000 shares authorized 3,018,592 and
4,384,116 shares issued and outstanding 4,163,684 3,814,880
Common stock, Class B no par value, 200,000,000
Shares authorized, 200,000 shares issued
And outstanding 200 200
Preferred stock, Series A, convertible, stated
value $25,000, 20 shares authorized, 14 shares
issued and outstanding 350,000 350,000
Preferred stock, Series B convertible, stated
value $15, 12,000 shares authorized,
2,918 issued and outstanding 43,770 43,770
Preferred stock, Series C, convertible,
stated value $50,000, 12 shares authorized,
no shares issued or outstanding - -
Accumulated deficit (4,712,897) 4,352,258)
----------- ----------
Total stockholders' equity (deficiency) (155,243) (143,408)
----------- ----------
$ 604,127 $ 558,215
=========== ==========
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
CREATIVE RECYCLING TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED DECEMBER 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
For the three months For the six months
ended December 31, ended December 31,
1997 1996 1997 1996
------ ------ ------ ------
<C> <S> <S> <S> <S>
Net sales $ 644,516 $ 703,959 $ 962,234 $ 1,115,833
--------- ----------- ---------- -----------
Operating expenses:
Operating and maintenance 482,494 547,638 859,159 921,604
General and administrative 183,460 444,310 366,231 694,941
Depreciation and
amortization 36,082 35,899 72,002 71,789
----------- ----------- ---------- -----------
Total operating expenses 702,036 1,027,847 1,297,392 1,688,334
----------- ----------- ---------- -----------
Loss from operations (57,520) (323,888) (335,158) (572,501)
----------- -----------
Other income (expense):
Other income 12 201 460 7,410
Interest expense (13,479) (22,676) (25,214) (28,902)
----------- ----------- ---------- -----------
(13,467) (22,475) (359,912) (21,492)
----------- ----------- ---------- -----------
Net (loss) $ (70,987) $(346,363) (359,912) (593,993)
=========== =========== ========== ===========
Per share information:
Weighted average shares
Outstanding 7,605,199 3,249,512 6,536,324 3,135,719
=========== =========== =========== ===========
Basic and diluted loss
per share $ (0.01) $ (0.11) $ (0.06) $ (0.19)
=========== =========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
CREATIVE RECYCLING TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
For the three months For the six months
ended December 31, ended December 31,
1997 1996 1997 1996
----------- ------------ ----------- -----------
<C> <S> <S> <S> <S>
Cash flows from operating activities:
Net loss $ (70,987) $ (346,363) $ (359,912) $ (593,993)
Adjustments to reconcile net loss
To net cash provided by (used in)
Operating activities:
Depreciation and amortization 36,082 35,899 72,002 71,789
Changes in assets and liabilities:
(Increase) decrease in accounts receivable - (13,948) - (11,459)
(Increase) decrease in inventory (2,471) (3,610) (3,183) (5,157)
(Increase) decrease in prepaid expenses (624) (282,984) - (283,297)
(Increase) decrease due from related party (572) - (572) -
(Increase) decrease in other receivables 1,956 - 493 -
(Increase) decrease in deferred discounts (8,773) - (8,773) -
(Increase) decrease in accounts
payable and accrued expenses (43,809) (43,909) 55,515 (89,999)
(Decrease) increase in taxes payable - (5,010) - 44,624
Increase (decrease) in advance
banquet deposits (17,246) - (4,893) -
Increase (decrease) in deferred revenue 35,527 14,848 33,559 54,483
----------- ----------- ---------- ----------
Total adjustments 70 (289,714) 144,148 (219,016)
----------- ----------- ---------- ----------
Net cash (used in) operating
activities (70,917) (645,077) (215,764) (813,009)
----------- ----------- ---------- ----------
Cash flows from investing activities:
Purchase of fixed assets - (5,962) (2,309) (10,821)
----------- ----------- ---------- ----------
Net cash (used in) investing
activities - (5,962) (2,309) (10,821)
Cash flows from financing activities:
Net proceeds from issuance of
common stock 118,560 1,339,388 348,804 1,359,388
Payments of deposits - (180) - (1,701)
Proceeds from due to officers and
and stockholders - (472,642) - (320,641)
Payment on long-term debt (27,161) (42,999) (27,161) (42,999)
Advances to due from officers and
stockholders (37,187) (113,325) (129,368) (117,625)
---------- ---------- ---------- ----------
Net cash provided by financing
Activities 54,212 710,242 192,275 878,422
---------- ---------- ---------- ----------
Net increase in cash and cash
equivalents (16,705) 59,203 (25,798) 52,592
Beginning-cash and cash equivalents 27,563 16,148 36,656 22,759
Ending-cash and cash equivalents $ 10,858 $ 75,351 $ 10,858 $ 75,351
========== ========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
CREATIVE RECYCLING TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared
inaccordance with generally accepted accounting principles for interim
financial information and Item 310(b) of Regulation SB. They do not include
all of the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management,
all adjustments (consisting only of normal recurring adjustments) considered
necessary for a fair presentation have been included. The results of
operations for the periods presented are not necessarily indicative of the
results to be expected for the full year. For further information, refer to
the financial statements of the Company as of June 30, 1997, and the notes
thereto, included in the Company's Form 10-KSB.
2. REINCORPORATION
At a special meeting of the shareholders of the Company held on April 13,
1998, the shareholders voted to a approve a merger of the Company with and
into Creative Recycling Technologies, Inc. ("CRT"), a wholly owned subsidiary
of the Company incorporated under the laws of the State of Georgia, for the
purpose of changing the Company's state of incorporation from Colorado to
Georgia. The merger became effective on April 14, 1998. As of the effective
date of the merger, the Company ceased to exist as a separate legal entity,
and CRT assumed, and became the owner of, all of the liabilities and assets of
the Company by operation of law. Under the Agreement and Plan of Merger,
common and preferred shareholders of the Company received, for each share of
common or preferred stock which they owned in the Company, one share of common
or preferred stock in the CRT which has the same rights, preferences and
limitations as the shares which they owned in the Company immediately before
the effective date of the merger.
Effective upon the close of trading on April 14, 1998, the Company effected a
1-for-20 reverse stock split of its Class A and Class B Common Stock. All per
share amounts herein have not been adjusted to reflect the effects of the
reverse stock split, except for disclosure of the number of outstanding shares
of each class on the cover page.
3. COMMON STOCK
For the period October 1, 1997 to December 31, 1997, the Company issued
2,073,250 shares of Class A Common Stock in private placements, and realized
net proceeds of $91,140 therefrom. In addition, 100,000 shares of Class A
Common Stock were issued upon the conversion of $14,960 of convertible debt.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1997 the Company had a working capital deficit of ($503,745),
compared to a working capital deficit of ($552,829) on June 30, 1997. On
December 31, 1997, and June 30, 1997, the Company had cash and cash
equivalents of $10,858, and $36,656, respectively. During the quarter ended
December 31, 1997, the Company's working capital was impacted by a continued
loss from operations, offset by $91,140 in new capital raised from the private
placement of shares of common stock.
As of the quarter ended December 31, 1997, the Company had substantial trade
liabilities, all of which it was unable to pay in the ordinary course of
business. In addition, the Company was in default in the payment of principle
and interest on $306,453 of note indebtedness. Currently, the Company is
dependent upon advances from shareholders and the sale of stock to meet its
financing needs. There is no guaranty that the Company will be able to obtain
additional financing from these sources.
RESULTS OF OPERATIONS
For the three months ended December 31, 1997 and 1996, net sales were
$644,516 and $703,959, respectively, for a decrease of 8%. This decrease is
partly due to the poor tourist market experienced by the area in which the
Company's restaurants are located.
The drop in net sales was offset by a substantial drop in general and
administrative expenses from $440,310 in the quarter ended December 31, 1996
to $183,460 in the quarter ended December 31, 1997, representing a 58%
decline from the prior year. Management expects this trend to continue for the
remainder of fiscal 1998. For the three months ended December 31, 1997,
7
<PAGE>
operating expenses also decreased substantially from the prior year, decreasing
12% to $482,494 from $547,638 in the three months ended December 31,
1996. The Company attributes the reduction in operating and general and
administrative costs to better cost containment. The Company experienced a loss
from operations of $57,520 and a net loss of $70,987, for the three months
ended December 31, 1997. In contrast, for the three months ended December 31,
1996, the Company had a loss from operations of $323,888 and a net loss of
$346,363.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
8
<PAGE>
(a) Exhibits:
REGULATION
S-B NUMBER EXHIBIT
27 Financial Data Schedule
(b) The Company did not file any reports on Form 8-K during the
quarter ended December 31, 1997.
SIGNATURES
In accordance with the requirements of the Securities Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
CREATIVE RECYCLING TECHNOLOGIES, INC.
May 14, 1998 \s\ June M. Cuba
Date June M. Cuba
Chief Financial Officer
9
</TEXT/
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> OCT-01-1997
<PERIOD-END> DEC-31-1997
<EXCHANGE-RATE> 1
<CASH> 10,858
<SECURITIES> 0
<RECEIVABLES> 220,812
<ALLOWANCES> 0
<INVENTORY> 17,222
<CURRENT-ASSETS> 255,625
<PP&E> 812,472
<DEPRECIATION> 532,143
<TOTAL-ASSETS> 604,127
<CURRENT-LIABILITIES> 759,370
<BONDS> 0
0
393,770
<COMMON> 4,163,684
<OTHER-SE> (4,712,897)
<TOTAL-LIABILITY-AND-EQUITY> 604,127
<SALES> 644,516
<TOTAL-REVENUES> 644,516
<CGS> 0
<TOTAL-COSTS> 702,036
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 13,479
<INCOME-PRETAX> (70,987)
<INCOME-TAX> 0
<INCOME-CONTINUING> (70,987)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (70,987)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> (.01)
</TABLE>
