PROSPECTUS
GreenMan Technologies, Inc.
2,912,500 Shares of Common Stock
This Prospectus relates to 2,912,500 shares of Common Stock, $.01 par
value per share ("Common Stock" or the "Shares"), of GreenMan Technologies, Inc.
(the "Company", the "Registrant" or "GreenMan") consisting of (i) up to
1,700,000 Shares issuable upon conversion of the Company's 7% Convertible
Subordinated Debentures (the "Debentures"); (ii) 762,500 Shares issuable by the
Company upon exercise of certain Common Stock Purchase Warrants (the "Investor
Warrants") issued to the purchasers of the Debentures in conjunction with the
sale of the Debentures; and (iii) 450,000 Shares issuable by the Company upon
exercise of certain Common Stock Purchase Warrants issued in payment of certain
brokerage commissions (the "Broker Warrants" and, together with the Investor
Warrants, the "Warrants") arising from the sale of the Debentures. Each Warrant
is exercisable for one share of Common Stock and has an exercise price of $1.25
per Warrant. To the extent that the Warrants are exercised, the Company will
receive proceeds equal to the exercise price of the Warrants.
All Shares to be registered hereby are to be offered by the selling
stockholders listed herein (the "Selling Stockholders"), and the Company will
receive no proceeds from the resale by the Selling Stockholders of Shares
issuable upon conversion of the Debentures or exercise of the Warrants. The
Company has agreed to indemnify certain of the Selling Stockholders against
certain liabilities, including certain liabilities under the Securities Act of
1933, as amended (the "Act"), or to contribute to payments which such Selling
Stockholders may be required to make in respect thereof.
The Company's Common Stock is listed on the National Association of
Securities Dealers Automated Quotation System ("NASDAQ") and traded on the
NASDAQ SmallCap Market under the symbol "GMTI" and on the Boston Stock Exchange
under the symbol "GMY". The last reported bid price of the Common Stock on the
NASDAQ SmallCap Market on March 21, 1997 was $1.25.
----------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COM-
MISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
----------------------
AN INVESTMENT IN THE SECURITIES OFFERED HEREBY
INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS"
AT PAGES 4 THROUGH 11.
----------------------
It is anticipated that usual and customary brokerage fees will be paid
by the Selling Stockholders on the sale of the Common Stock registered hereby.
The Company will pay the other expenses of this offering. See "Plan of
Distribution". The offer of 2,912,500 shares of Common Stock by the Selling
Stockholders as described in this Prospectus is referred to as the "Offering".
----------------------
The date of this Prospectus is March 24, 1997.
<PAGE>
No person has been authorized to give any information or to make any
representations other than those contained or incorporated by reference in this
Prospectus in connection with the offer contained in this Prospectus and, if
given or made, such information or representations must not be relied upon as
having been authorized by the Company or the Selling Stockholders. This
Prospectus does not constitute an offer to sell or solicitation of an offer to
buy securities in any jurisdiction to any person to whom it is unlawful to make
such offer or solicitation. Neither the delivery of this Prospectus nor any sale
made hereunder shall, under any circumstances, create an implication that there
has been no change in the affairs of the Company since the date hereof or the
information contained or incorporated by reference herein is correct at any time
subsequent to the date hereof.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). The Registration
Statement, the exhibits and schedules forming a part thereof and the reports,
proxy statements and other information filed by the Company with the Commission
can be inspected and copies obtained at the public reference facilities
maintained by the Commission at Judiciary Plaza, Room 1024, 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the following regional offices of the
Commission: Chicago Regional Office, Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661-2511; and New York Regional Office, Seven
World Trade Center, Suite 1300, New York, New York 10048. Copies of such
material can be obtained at prescribed rates from the Public Reference Section
of the Commission at its principal office at 450 Fifth Street, N.W., Washington,
D.C. 20549. Such materials may also be accessed electronically by means of the
Commission's home page at http://www.sec.gov. This prospectus, which constitutes
part of a Registration Statement filed by the Company with the Commission under
the Act omits certain information contained in the Registration Statement in
accordance with the rules and regulations of the Commission. Reference is hereby
made to the Registration Statement and the Exhibits relating thereto for further
information with respect to the Company and the Securities offered hereby. Any
statements contained herein concerning provisions of any documents are not
necessarily complete, and, in each instance, reference is made to the copy of
such document filed as an Exhibit to the Registration Statement or otherwise
filed with the Commission. Each such statement is qualified in its entirety by
such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, which have been filed with the Commission
pursuant to the Exchange Act, are hereby incorporated in this Prospectus and
specifically made a part hereof by reference: (i) the Company's Annual Report on
Form 10-KSB for the fiscal year ended May 31, 1996; (ii) the Company's Quarterly
Reports on Form 10-QSB for the quarters ended August 31, 1996 and November 30,
1996; and (iii) the description of the Company's Common Stock contained in the
Registration Statement on Form SB-2 File No. 33-86138 filed with the Commission
on November 9, 1994, as amended. All documents filed by the Company pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of
this Prospectus and prior to the termination of the Offering of the Shares shall
be deemed to be incorporated by reference into this Prospectus and to be a part
hereof from the respective dates of filing of such documents.
-2-
<PAGE>
Any statement contained herein or in a document incorporated or deemed
to be incorporated herein by reference shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein (or in the applicable Prospectus Supplement), or in any
subsequently filed document that also is or is deemed to be incorporated herein
by reference, modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
The Company hereby undertakes to provide without charge to each person
to whom this Prospectus is delivered, upon the written or oral request of such
person, a copy of any and all of the information that has been incorporated by
reference in this Prospectus (excluding exhibits unless such exhibits are
specifically incorporated by reference into the information that this Prospectus
incorporates). Requests for such copies should be made to the Company at its
principal executive offices, 7 Kimball Lane, Building A, Lynnfield,
Massachusetts 01940, Attention: Charles Coppa, telephone (617) 224-2411.
PROSPECTUS SUMMARY
The following summary information is qualified in its entirety by the
more detailed information appearing elsewhere in this Prospectus or incorporated
herein by reference and the financial statements which are incorporated herein
by reference.
THE COMPANY GreenMan Technologies, Inc. was formed primarily to
develop, manufacture and sell "environmentally
friendly" plastic and thermoplastic rubber parts
and products that are manufactured using recycled
materials and/or are themselves partially or wholly
recyclable. The Company has two business segments, a
molding operation located in Malvern, Arkansas and
a recycling operation, located in Jackson, Georgia. The
Company also owns all of the outstanding common stock
of DuraWear Corporation "DuraWear"), an Alabama
corporation located in Birmingham, Alabama, which
manufactures, installs and markets high quality
ceramic, polymer composite, and alloy steel
materials utilized in such industries as paper and pulp,
mining, coal handling and grain storage and
transportation.
RISK FACTORS The Offering involves substantial risk. See "Risk
Factors".
SECURITIES OFFERED 2,912,500 shares of Common Stock, $.01 par value
per share.
OFFERING PRICE All or part of the Shares offered hereby may be sold
from time to time in amounts and on terms to be
determined by the Selling Stockholders at the time of
sale.
USE OF PROCEEDS The Company will receive no part of the proceeds from
the sale of the shares registered pursuant to this
Registration Statement other than the exercise price of
the Warrants.
NASDAQ TRADING SYMBOL GMTI
-3-
<PAGE>
RISK FACTORS
An investment in the Securities offered hereby involves a high degree
of risk and should only be purchased by investors who can afford to lose their
entire investment. The following factors, in addition to those discussed
elsewhere in the Prospectus, should be considered carefully in evaluating the
Company and its business.
Limited Operating History
Since its inception in 1992, the Company's primary activities have been
raising capital and developing its injection molding and assembly operations.
The Company's success is dependent upon the successful development and marketing
of its current and future products and increasing revenue. The probability of
such success is highly dependent upon the Company increasing its customer base
and volume of injection molding and assembly operations, its ability to market
successfully its proposed GreenMan consumer products, as well as the
commencement of operations for the recovery of crumb rubber from tires, among
other things. The likelihood of the Company's overall success must be considered
in light of the problems, expenses, difficulties, complications and delays
frequently encountered in connection with the establishment of a new business
and the development of new technologies. These include, but are not limited to,
manufacturing on a high-capacity, multi-shift basis, competition, technological
obsolescence, development of new products by competitors, the need to develop
market expertise, setbacks in product development, market acceptance, sales and
marketing and government regulation.
Continuing Operating Losses; Explanatory Paragraph in Independent Auditors'
Report on GreenMan's Financial Statements Regarding the Company's Ability to
Continue as a Going Concern
The Company has not been profitable since its inception. For the fiscal
years ended May 31, 1994, 1995 and 1996, the Company incurred net losses of
$660,105, $1,092,006 and $1,578,321, respectively. For the six months ended
November 30, 1996, the Company reported a net loss of $2,157,341, a working
capital deficit of $3,214,150 and an accumulated deficit of $5,855,795. The
Company expects to continue to incur losses for the foreseeable future, and
there can be no assurance that the Company will achieve or maintain
profitability or that any revenue growth can be sustained in the future.
The Company's independent auditors have included an explanatory
paragraph in their report on the Company's financial statements for the year
ended May 31, 1996 to the effect that the Company's ability to continue as a
going concern is contingent upon its ability to secure financing and attain
profitable operations. In addition, the Company's ability to continue as a going
concern must be considered in light of the problems, expenses and complications
frequently encountered by its entrance into established markets and the
competitive environment in which the Company operates.
Uncertainty of Success of Proposed Crumb Rubber Facility
The Company has allocated approximately $1,000,000 from the proceeds of
its initial public offering in September 1995 for the construction of a crumb
rubber recycling facility. As of November 30, 1996, approximately $865,000 of
the total estimated construction costs of $1,000,000 have been expended. The
Company's recycling operation, which has not yet begun generating significant
-4-
<PAGE>
revenue, is operating under limited conditions as the Company has made a
decision to upgrade its Jackson, Georgia crumb rubber production facility to
produce a higher-grade product. As a result, the Company will redeploy its
current equipment in a yet-to-be-announced joint venture. During this
refacilitation, the Company is required to sell lower value-added Tire Derived
Fuel ("TDF") as a way to fulfill its obligation to BFI Tire Recyclers of
Georgia, Inc., a wholly owned subsidiary of Browning- Ferris Industries ("BFI"),
as described herein. The Company is obligated to "take or pay" for 605 tons per
month of TDF chips starting in August 1996 from BFI pursuant to a December 1995
agreement. BFI has acknowledged the delay in production and has agreed to reduce
the Company's obligation by fifty percent (50%) through March 1997. In addition,
there can be no assurance that crumb rubber will ever be produced in commercial
quantities at a price that will be competitive with, or at a level of quality
that will be comparable or superior to, crumb rubber currently available on the
market, or that any significant revenues or profits will be generated by sales
of crumb rubber.
Limited Experience in Producing GEM Stock; Uncertainty of Market Acceptance
The Company has developed, and is currently marketing on a limited
basis, a proprietary thermoplastic rubber material, called GEM Stock, using
recovered crumb rubber in combination with recycled plastic waste and virgin
plastic. In April 1996, the Company signed a license agreement with Plastic
Solutions of Texas, Inc. ("PSTI") for the exclusive worldwide right and license
to use PSTI's proprietary additive technology for co-mingling (mixing and
blending) dissimilar plastics and rubber. This license agreement provides the
Company with the ability to incorporate significantly more types of low cost
recycled plastic and rubber into the production of GEM Stock. As currently
manufactured, products made using GEM Stock have properties that are comparable
to those products made using virgin rubber or plastic at a significant cost
savings to the Company. The Company believes that GEM Stock is suitable as a raw
material for use in the manufacture of many of the types of commercial parts and
products currently manufactured by its molding operation. To date, revenues from
products made using GEM Stock have accounted for less than 10% of the Company's
revenues, and, as a result, there can be no assurance that the Company will be
able to manufacture GEM Stock in quantities necessary to achieve significant
revenues and profits. The Company may encounter difficulties in increasing
production or in hiring and training additional personnel to produce and sell
its GEM Stock material in commercial quantities in a timely manner, which could
have a materially adverse effect on the Company's business, financial condition
and results of operations.
In addition, the costs of producing crumb rubber for the GEM Stock
material may be more than anticipated by the Company, in which event the expense
of producing GEM Stock material may result in its not being a cost-effective
alternative to other raw materials even if its environmental advantages, if any,
can be demonstrated, of which there can be no assurance.
No independent market surveys or reports have been obtained regarding
the markets for the Company's GEM Stock material or for products using GEM
Stock, nor are any such reports planned by the Company. Management believes that
the Company's internal needs for GEM Stock will be addressed first, thereby
allowing the Company to become its own customer for raw materials for use in the
manufacture of its GreenMan products. Accordingly, there can be no assurance
that there will be commercial acceptance of GEM Stock or products manufactured
using GEM Stock or that significant revenues can be generated therefrom.
Uncertainty of Market Acceptance of Proposed GreenMan Consumer Products
In the Spring of 1997, the Company expects to commence production and
sale of the first of its proposed GreenMan consumer products, a GEM Stock trash
container. The Company also intends to use GEM Stock as the primary raw material
-5-
<PAGE>
in the manufacture of the Company's proposed line of environmentally friendly,
or "green" consumer products, such as recycling totes, trash cans, playground
and recreational furniture, landscape timbers, corral and picket fencing,
storage bins, and home-use composters. These products are intended to be made
using the broad spectrum of crumb rubber mesh (or particle) sizes to be produced
at the Jackson, Georgia facility. The Company is evaluating the economic and
manufacturing feasibility of several of these proposed products and has
conducted preliminary discussions with possible distributors of such products.
There can be no assurance that such discussions will result in orders for the
products, consumer acceptance of the products or significant revenues for the
Company. There also can be no assurance that the Company will be able to
manufacture and market its proposed GreenMan consumer products, and if
successfully commercialized, that the Company will ever receive significant
revenues from sales of its proposed consumer products, or that any sales
therefrom will be profitable. Results of operations will depend on numerous
factors, including regulatory actions, competition and market acceptance of the
Company's proposed consumer products. The potential profitability of the
Company's consumer product operations will also depend upon the costs associated
with producing crumb rubber, as well as the costs of complying with any
applicable environmental regulations, over which the Company may have little or
no control.
Need for Additional Financing to Finance Expansion Plans; Restrictions on Future
Equity Financing
Based on the Company's operating plans, management believes that the
available working capital together with revenues from operations, the sale of
common stock and the purchase of equipment through lease financing arrangements,
will be sufficient to meet the Company's cash requirements through the fourth
quarter of fiscal 1997. In December 1996, the Company renegotiated the 10% notes
payable to Palomar Medical Technologies, Inc. which had an outstanding principal
balance of $1,200,000 and were due in two installments of $700,000 due on
January 1, 1997 and $500,000 due on June 1, 1997. The outstanding balance was
converted into a 10% convertible note payable (the "Palomar Note"), due on July
1, 1997 and convertible into GreenMan common stock, at Palomar's option, on July
1, 1997. The conversion price is $1.00 per share.
On January 22, 1997, the Company concluded a $1,500,000 offering of 7%
convertible subordinated debentures and warrants to purchase 1,200,000 shares of
Common Stock (the "January Offering"). The debentures sold in the January
Offering are convertible into shares of Common Stock at a conversion price equal
to the lower of the closing bid price on the date prior to the closing of the
January Offering or the closing bid price on the date prior to the conversion of
such debentures. The net proceeds from the January Offering were approximately
$1,300,000 after deducting commissions and expenses of approximately $200,000.
The proceeds were used to repay notes payable, to purchase manufacturing
equipment and for general working capital needs. The Company expects that
additional financing will be required after this time in order to fund continued
growth. Management has identified and is currently evaluating several additional
financing alternatives and is diligently working to determine the feasibility of
each alternative. The Company has commenced the offering of 7% convertible
debentures in an effort to raise up to $1,500,000 in gross proceeds. If the
Company is unable to obtain additional financing, its ability to maintain its
current level of operations could be materially and adversely affected and the
Company may be required to adjust its operating plans accordingly.
Pursuant to its Underwriting Agreement with the underwriter of its
initial public offering, the Company may not, for a period of two years from the
Closing, issue any Common Stock or Preferred Stock or any warrants, options or
other rights to purchase Common Stock or Preferred Stock without the consent of
the Underwriter. The Company currently has no commitments for any such
-6-
<PAGE>
financing, and there can be no assurance that financing will be available when
needed or on terms acceptable to the Company or that the Underwriter will
consent to the terms of any proposed financing. In the event that the Company is
unable to obtain financing when needed, it would be forced to restrict its
development activities to a significant extent or discontinue some or all of its
operations.
Dependence on Joint Ventures; Lack of Control Over Possible Joint Ventures
The Company's ability to develop, manufacture and market its proposed
line of environmentally friendly, or "green" consumer products as well as
manufacture GEM Stock on a cost effective basis, will be constrained by the
Company's limited financial and human resources. In order to increase its
potential ability to develop a broader range of products in a shorter period of
time than might otherwise be possible, the Company will seek to enter into joint
ventures or other strategic alliances with entities that have financial,
technical, marketing or other complementary resources. The inability of the
Company to enter into such arrangements could significantly impede the
development of products by the Company. Even if the Company enters into joint
venture agreements, the Company will not be in a position to control such joint
ventures since it is likely that joint venture partners will have greater
financial, technical or marketing resources. In addition, in the event of
disagreement between the Company and possible joint venture partners, the
Company's development and marketing plans could be seriously delayed or
terminated since the Company would likely not be in a position to alter or
terminate a joint venture agreement or to buy out its joint venture partners.
There can be no assurance that appropriate co-venturers or others can be found,
that the Company will be able to enter into such arrangements on acceptable
terms, or that such arrangements will result in the more rapid or successful
development, manufacture or sale of products.
Dependence upon Major Customers
In the fiscal year ended May 31, 1996, two customers accounted for
approximately 38% and 14%, respectively, of the Company's consolidated net
sales. The Company does not have long-term contracts pursuant to which any
customer is required to purchase any minimum amount of products. There can be no
assurance that the Company will continue to receive orders of the same magnitude
from existing customers or that it will be able to market its current or
proposed products to new customers. The loss of any major customer by the
Company would have a materially adverse effect on the business of the Company as
a whole.
The Company's Dependence upon Suppliers of Raw Materials
Generally, raw materials required for the Company's molding operation
are purchased directly from suppliers on a purchase order basis rather than a
contract basis. There can be no assurance that, absent contracts with firm price
and delivery terms, that suppliers will not increase their prices, change their
credit terms or impose other conditions of sale that may be unfavorable to the
Company. While the Company does not believe that it would experience any
significant difficulty in obtaining materials from alternative sources on
comparable terms, there can be no assurance that such supplies could be obtained
on price and delivery terms favorable to the Company. Until such time, if ever,
that the Company begins to produce GEM Stock in sufficient quantities for its
own use on cost efficient basis, it is, and will be, required to purchase crumb
rubber and recycled and virgin plastic from third parties in order to produce
its proposed GreenMan consumer products. Management believes that there are
currently a limited number of suppliers of high-quality crumb rubber that is
free of fiber and metal. In addition, when and if the Company commences
production of GEM Stock in commercial quantities, it will primarily require used
tires as raw materials.
-7-
<PAGE>
The Company believes that the overall supply of tires will be
sufficient to meet the Company's requirements for crumb rubber in the
foreseeable future based on the Company's agreement with BFI whereby BFI will
supply the Company's Recycling operation with a minimum of 3.5 million tires per
year, initially for 5 years with the ability to extend the agreement for another
15 years. The Company has reason to believe that through its nationwide
operations, BFI has access to more than 40 million additional tires per year for
processing. In addition, according to Scrap Tire News, nearly 225 million
passenger automobile tires are currently discarded annually in the U.S., and of
that total approximately 1% are used for asphalt pavement, 11% are burned to
provide energy, approximately 2% are processed for retreading, and the remaining
tires are landfilled, adding more than 200 million tires annually to the
estimated 3 billion tires already stockpiled in landfills.
DuraWear obtains its primary raw materials, consisting of alumina and
nickel oxides from a number of sources on a purchase order rather than a
contract basis. Therefore, the price and other terms upon which such materials
are obtained are also subject to change over which DuraWear has no control.
Management believes that competitive alternate sources of such raw materials are
available, but there can be no assurance that this would be the case at a time
when such sources might be needed by the Company.
DuraWear's Dependence upon Third-Party Manufacturers
DuraWear manufactures its ceramic products at the facility it owns in
Birmingham, Alabama. DuraWear's polymer composites and other products are
manufactured by third parties on a contract basis. DuraWear's polymer composite
products are currently produced by only one supplier to DuraWear's
specifications under a confidentiality agreement, and the number of alternative
suppliers is limited. Management has identified several alternative suppliers
for DuraWear's polymer composite products in the event that there are any
adverse changes in its existing relationships. With the exception of its polymer
composites, the Company believes that there are multiple manufacturing sources
available for DuraWear's other products. While DuraWear has longstanding
relationships with its current suppliers, such facilities are not controlled by
DuraWear, and they could sever their relationships with DuraWear at any time. In
such event, particularly as regards the products for which there are now limited
suppliers, it could be difficult for DuraWear to find other suppliers that could
manufacture DuraWear's products to the specifications required by DuraWear on
acceptable terms, if at all.
Significant Competition
The injection molding contract manufacturing industry is highly
competitive and characterized by severe price-cutting by small regional
contractors. While the Company believes that its facility, modern equipment and
advanced quality control are attractive features to potential customers, there
can be no assurance that the Company can capture adequate competitive contracts
to achieve or sustain profitability, either at its present location or at any
satellite location it seeks to establish.
In seeking to introduce and market its proposed GreenMan consumer
products, the Company will be competing with many established manufacturers of
similar products. Most of these competitors have substantially greater financial
and marketing resources and significantly greater name recognition among both
retailers and consumers than the Company. A number of companies with products
made from recycled tires have already entered the market. For example, OMNI
Rubber Products manufactures solid-rubber, non-steel reinforced railroad
crossings from recycled crumb rubber and R.A.S. Recycling, Inc., together with
Royal Rubber Manufacturing, are developing playground and recreational surfacing
mats made of recycled tire rubber. In addition, several companies manufacture
-8-
<PAGE>
products similar to the Company's proposed GreenMan line of products, such as
industrial floor mats, playground furniture, and landscape timbers. There can be
no assurance that the Company will be able to compete successfully in the
consumer market.
If the Company is successful in manufacturing and selling its GEM
Stock, of which there can be no assurance, the Company will compete with other
producers and suppliers of traditional plastic and thermoplastic rubber
products, including recycled and virgin products. The Company's success in
marketing its products will depend on its ability to convince potential buyers
that its products are of comparable or superior quality to alternative products
and that they are also comparable in cost to competing products. There can be no
assurance that the Company will be able to compete effectively with established
producers, many of which have substantially greater financial and manufacturing
resources than those of the Company.
DuraWear has several competitors for its products, most of whom have
greater financial and marketing resources than DuraWear. In the ceramics market,
competitors include Coors Ceramics Co., Champion and Packo International
Ceramics, Inc. and in the polymer composite market include Solidur Plastics,
DuPont and BP America. DuraWear competes on the basis of the longer-lasting wear
resistance performance of its products as compared to products offered by
competitors. Management believes that DuraWear products offer customers
significant cost advantages, notwithstanding DuraWear's products' higher prices.
Government and Environmental Regulation
The Company's tire recycling and manufacturing activities are subject
to extensive and rigorous government regulation designed to protect the
environment. Management does not expect that the Company's activities will
result in the emission of air pollutants, the disposal of combustion residues,
or the storage of hazardous substances (as is the case with other tire recycling
processes such as pyrolysis). The establishment and operation of plants for tire
recycling are subject to obtaining numerous permits and complying with
environmental and other government regulations, both in the U.S. and most
foreign countries. The process of obtaining required regulatory approvals can be
lengthy and expensive. Moreover, regulatory approvals, if granted, may include
significant limitations on the Company's operations. The EPA and comparable
state and local regulatory agencies actively enforce environmental regulations
and conduct periodic inspections to determine compliance with government
regulations. Failure to comply with applicable regulatory requirements can
result in, among other things, fines, suspensions of approvals, seizure or
recall of products, operating restrictions, and criminal prosecutions.
Furthermore, changes in existing regulations or adoption of new regulations
could impose costly new procedures for compliance, or prevent the Company from
obtaining, or affect the timing of, regulatory approvals.
The effect of government regulation may be to delay for a considerable
period of time or to prevent the Company from developing its business as planned
and/or impose costly requirements on the Company, the result of which may be to
furnish an advantage to its competitors or to make the Company's business less
profitable, or unprofitable, to operate.
Technological Changes
The contract manufacturing of plastic and thermoplastic rubber products
and the injection molding industry are characterized by ongoing technological
change. The Company will have limited resources to devote to research and
development of new products, and as a result, technological advances by any
present or potential competitors could render obsolete both present and future
-9-
<PAGE>
products of the Company. Although the Company is not currently aware of any
technological changes which have rendered the Company's products obsolete, there
can be no assurance that in the future the Company's technology will not be
rendered obsolete as a result of technological developments. Many companies with
substantially greater resources than the Company are engaged in the development
of products and processes using recycled tires.
Limited Protection of Proprietary Information
None of the equipment or machinery that the Company currently uses or
intends to use in its current or proposed manufacturing activities are
proprietary. Any competitor can acquire equivalent equipment and machinery on
the open market. The Company believes that it has developed specialized know-how
in the blending of plastics and rubber for use in its molding machines and that
its processes are proprietary. The Company has acquired exclusive world-wide
rights to a proprietary additive technology which will enable the Company to
blend a broader range of virgin and recycled plastics together, and/or combine
such plastics with crumb rubber from recycled tires. The Company also believes
that many of the formulae and processes used in manufacturing DuraWear's
products are proprietary, and DuraWear has executed confidentiality agreements
with the appropriate employees and subcontractors. However, there can be no
assurance that competitors will not develop processes or products of comparable
efficiency and quality. DuraWear does not have any patents and does not believe
any of its products are patentable. Moreover, there can be no assurance that any
patents that may be granted in the future will be enforceable or provide the
Company with meaningful protection from competitors. Even if a competitor's
products were to infringe patents owned by the Company, it could be very costly
for the Company to enforce its rights in an infringement action, and such action
would divert funds and resources otherwise used in the Company's operations.
Consequently, there can be no assurance that the Company would elect to
prosecute potential patent infringement claims it might have. Furthermore, there
can be no assurance that the Company's proposed products will not infringe any
patents or rights of others.
The Company has used the name "GreenMan" and other trade names in
interstate commerce and asserts a common law right in and to such names. A
trademark search has been conducted for the name "GreenMan" which found that
there are no significantly similar names currently being used in the Company's
current and intended industries. The Company intends to file an application with
the U.S. Department of Commerce, Patent and Trademark Office to register its
name and establish trademark rights. There can be no assurance, however, that
such a trademark application will be approved. Although the Company has been
using the GreenMan name for its custom molding services and has not yet begun
significant marketing for its consumer products, the inability of the Company to
continue to use the name in connection with such services as well as in
connection with the proposed GreenMan consumer products could have an adverse
effect on the Company's efforts to establish name recognition for its products
in the commercial and consumer marketplace.
DuraWear has registered trademarks for a number of products, including
CeraDur and Xylethon and has used the name "ExcelloSlide" and other trade names
in interstate commerce and asserts a common law right in and to such names.
There can be no assurance, however, that such right would sufficiently protect
the Company's right to use such names or that, if and when the Company files
trademark applications for such names, that such applications would be approved.
-10-
<PAGE>
Current Lack of, and Possible Unavailability of, Product Liability Insurance
Coverage
The Company presently maintains limited product liability insurance
relating to its products, and does not intend to increase such coverage for its
current products in the foreseeable future. The Company intends to seek
additional coverage with respect to any consumer products it markets in the
future. However, there can be no assurance that such coverage will be available
at affordable rates or that the coverage limits of the Company's insurance
policies, if any, will be adequate, if and when the Company markets its proposed
GreenMan consumer products. Such insurance is expensive and in the future may
not be available on acceptable terms, if at all. Although the Company has not
experienced any product liability claims to date, a successful claim brought
against the Company could have a materially adverse effect on the Company's
business, financial condition and results of operations.
Dependence Upon Key Personnel
The Company's success depends, to a significant extent, upon key
members of management. The loss of services of one or more of these persons,
especially the Company's Chief Executive Officer and Chairman of the Board of
Directors, Maurice E. Needham, and the Company's President, James F. Barker,
could have a materially adverse effect on the business of the Company. The
Company has entered into three-year employment agreements with each of Messrs.
Needham, Barker and Joseph E. Levangie, a director and the Company's Chief
Financial Officer. The Company has purchased key-employee life insurance
policies, each in the amount of $1,000,000, to insure the lives of Mr. Needham
and Mr. Barker. The Company believes that its future success will also depend in
part upon its ability to attract, retain and motivate qualified personnel.
Competition for such personnel is intense. There can be no assurance that the
Company will be successful in attracting and retaining such personnel.
Volatility of Stock Price
The market for securities of early stage, rapidly growing companies,
including those of the Company, has been highly volatile. The market price of
the Company's Common Stock has fluctuated between $8.63 and $1.00 from October
1995 to March 1997 and was $1.25 on March 21, 1997, and it is likely that the
price of the Common Stock will continue to fluctuate widely in the future.
Announcements of technical innovations, new commercial products, patent or
proprietary rights or other developments by the Company or its competitors could
have a significant impact on the Company's business and the market price of the
Common Stock.
Limited Trading Volume of Common Stock
The development of a public market having the desirable characteristics
of liquidity and orderliness depends upon the presence in the marketplace of a
sufficient number of willing buyers and sellers at any given time, over which
neither the Company nor any market maker has any control. Accordingly, there can
be no assurance that a significant trading market for the securities offered
hereby will develop, that quotations will be available on the NASDAQ as
contemplated, or if a significant market develops, that such market will
continue. Although the trading volume for the Common Stock, as reported by
NASDAQ, averaged 245,997 shares per week during the period from October 1995 to
February 1997 and 160,396 shares per week during the four-week period ended
February 28, 1997, there can be no assurance that persons purchasing the
securities offered hereby will be able readily to sell the securities at the
time or price desired.
-11-
<PAGE>
Adverse Consequences Associated with Reservation of Substantial Shares of Common
Stock
As of November 30, 1996, the Company had reserved 4,258,233 shares of
Common Stock for issuance upon the exercise of its publicly-traded warrants,
underwriter warrants and other warrants. The foregoing number of shares does not
include up to 1,700,000 shares of Common Stock reserved for issuance upon
conversion of the debentures or the 1,200,000 shares of Common Stock reserved
for issuance upon the exercise of the warrants issued in the January Offering
nor the 1,200,000 shares of Common Stock issuable upon conversion of the note
issued to Palomar Medical Technologies, Inc. on December 31, 1996. In addition,
the Company has reserved 1,270,700 shares for issuance to employees, officers,
directors and consultants under its 1993 Stock Option Plan and its 1996 Director
Stock Option Plan and 866,000 shares for issuance under other options and
warrants. The price which the Company may receive for the Common Stock issuable
upon exercise of such options and warrants will, in all likelihood, be less than
the market price of the Common Stock at the time of such exercise. Consequently,
for the life of such options and warrants, the holders thereof may have been
given, at nominal cost, the opportunity to profit from a rise in the market
price of the Common Stock.
The exercise of all of the aforementioned securities may also adversely
affect the terms under which the Company could obtain additional equity capital.
In all likelihood, the Company would be able to obtain additional equity capital
on terms more favorable to the Company at the time the holders of such
securities choose to exercise them. In addition, should a significant number of
these securities be exercised, the resulting increase in the amount of the
Common Stock in the public market may reduce the market price of the Common
Stock. Also, the Company has agreed that, under certain circumstances, it will
register under Federal and state securities laws certain securities issuable in
connection with warrants issued to the underwriter of the Company's initial
public offering.
THE COMPANY
The Company was incorporated under the laws of the State of Arkansas on
September 16, 1992 and reincorporated under the laws of the State of Delaware on
June 27, 1995. The Company was formed primarily to develop, manufacture and sell
"environmentally friendly" plastic and thermoplastic rubber parts and products
that are manufactured using recycled materials and/or are themselves partially
or wholly recyclable. On October 10, 1995, the Company acquired all of the
outstanding common stock of DuraWear.
The Company's molding operation, located in Malvern, Arkansas, provides
injection molding manufacturing services to customers' specifications in the
production of plastic and thermoplastic rubber parts for such products as stereo
components and speakers, water filters and pumps, plumbing components and
automotive accessories. The molding operation uses leased state-of-the-art
injection molding equipment that is energy and labor efficient, has fast cycle
times and minimizes production waste. The facility also conducts R&D testing and
development of the Company's GreenMan Environmental Materials ("GEM") Stock and
tests the use of these materials in the manufacture of a variety of "sample"
products.
The Company's molding operation is scheduled to commence the
manufacture of the Company's first consumer product, a GEM Stock trash
container, in the Spring of 1997. Future proposed products, to be manufactured
utilizing injection molding, will also be produced at the molding operation,
which management expects to result in a gradual transition from contract/custom
molding to captive molding activities.
-12-
<PAGE>
The Company's recycling operation, located in Jackson, Georgia, was
established to develop low-cost sources of rubber and plastic waste (made from
recycled plastics and crumb rubber from tires) for use in the production of the
Company's GEM Stock and to develop markets for end-products to be made using the
GEM Stock.
The Company has targeted several markets with products incorporating
significant amounts of recovered crumb rubber and plastic waste, including the
building industry with anti-fatigue floor mats, roofing products, and timbers;
the lawn and garden market with landscape timbers, and fencing; the consumer
products market with trash containers, recycling totes, and storage containers;
and the transportation industry with nose cones, barriers, railroad ties and
railway crossing mats. Through an agreement with Browning Ferris Industries
("BFI"), the Company has a secured multi-year supply of waste tires to feed the
Company's Jackson, Georgia crumb rubber processing operation.
USE OF PROCEEDS
The Company will receive no part of the proceeds from the resale by the
Selling Stockholders of any Shares issuable upon conversion of the Debentures or
upon exercise of the Warrants. The gross proceeds to be received by the Company
from exercise of all of the Warrants (assuming that all of the Warrants are
exercised at $1.25 per Warrant) are $1,515,625, and management intends to such
proceeds for general working capital purposes including expenditures in
connection with the development, sales and marketing of future products for the
Company.
SELLING STOCKHOLDERS
The following table sets forth information concerning the beneficial
ownership of Shares of Common Stock by the Selling Stockholders as of the date
of this Prospectus and the number of such shares included for sale in this
Prospectus assuming the sale of all Shares being offered by this Prospectus. To
the best of the Company's knowledge, none of the Selling Stockholders have held
any office or maintained any material relationship with the Company or its
predecessors or affiliates over the past three years. The Selling Stockholders
reserve the right to reduce the number of Shares offered for sale or to
otherwise decline to sell any or all of the Shares registered hereunder.
The principal of and interest accrued on the Debentures are convertible
into shares of Common Stock at a conversion price per share equal to the lower
of (a) the closing bid price for the Common Stock on the date of issuance of the
Debentures, as reported by NASDAQ, or (b) seventy percent (70%) of the Market
Price of the Common Stock. As defined in the Debentures, the "Market Price" is
the closing bid price of the Common Stock on the trading day immediately
preceding the date on which such Debenture is converted into Common Stock, as
reported by NASDAQ, or the closing bid price in the over-the counter market or,
in the event the Common Stock is listed on a stock exchange, the Market Price
shall be the average closing price on the exchange, as reported to the Wall
Street Journal.
For purposes of the following table, the Company has assumed that all
of the principal of and accrued interest on the Debentures have been converted
to Common Stock at a conversion price of $.91875 per share which price is
seventy percent (70%) of the Common Stock's closing bid price of $1.3125 on
February 5, 1997. The calculation of the number of Shares owned after the
Offering assumes that all of the Shares offered hereby are sold.
-13-
<PAGE>
<TABLE>
<CAPTION>
Shares to be Sold in Offering
-----------------------------
Shares from Shares from
Shares Owned Conversion of Exercise of Shares Owned
Name of Selling Stockholder Prior to Offering Debentures Warrants After Offering
--------------------------- ----------------- ---------- -------- --------------
<S> <C> <C> <C> <C>
AT Investments S.A 0 489,796 225,000(1) 0
Austost Anstalt Schaan 0 326,531 150,000(1) 0
UFH Endowment Ltd. 0 326,531 150,000(1) 0
Paril Holding 0 217,687 100,000(1) 0
FT Trading Company 0 217,687 100,000(1) 0
Joseph Friedman 0 54,422 25,000(1) 0
Kent R. Jones 0 27,211 12,500(1) 0
London Select 0 0 292,500(2) 0
Enterprises, Ltd
International Karen 0 0 157,500(2) 0
Nisuin Fonds
Corporation
<FN>
(1) Represents shares of Common Stock issuable pursuant to Investor
Warrants, each exercisable for Common Stock at $1.25 per share for one
year from the date of issuance, and issued in conjunction with the sale
of the Debentures, to each purchaser of a Debenture, in an amount equal
to a warrant to purchase one share of Common Stock for every $2.00 of
principal of Debentures purchased by such investor.
(2) Represents shares of Common Stock issuable pursuant to Broker Warrants,
each exercisable for Common Stock at $1.25 per share for one year from
the date of issuance, which Warrants were issued in payment of
commissions in connection with brokerage services arising from the sale
of the Debentures.
</FN>
</TABLE>
PLAN OF DISTRIBUTION
Of the 2,912,500 Shares being registered herein for sale by the Selling
Stockholders, (i) up to 1,700,000 Shares are issuable upon conversion of the
Debentures; (ii) 762,500 Shares are issuable uponexercise of the Investor
Warrants issued to the purchasers of the Debentures in conjunction with the
offering of the Debentures; and (iii) 450,000 Shares are issuable upon exercise
of the Broker Warrants issued in payment of certain brokerage commissions and
arising from the sale of the Debentures. All Shares to be registered hereby are
to be offered by certain security holders of the Company, and, other than the
exercise price of the Warrants, the Company will receive no proceeds from the
sale of Shares offered hereby.
-14-
<PAGE>
The Selling Stockholders may sell the Common Stock registered in
connection with this Offering on the NASDAQ market system or otherwise. There
will be no charges or commissions paid to the Company by the Selling
Stockholders in connection with the issuance of the Shares. It is anticipated
that usual and customary brokerage fees will be paid by the Selling Stockholders
upon sale of the Common Stock offered hereby. The Company will pay the other
expenses of this Offering. The Shares may be sold from time to time by the
Selling Stockholders, or by pledges, donees, transferees or other successors in
interest. Such sales may be made on one or more exchanges or in the
over-the-counter market, or otherwise at prices and at terms then prevailing or
at prices related to the then current market price, or in negotiated
transactions. The Shares may be sold by one or more of the following: (a) a
block trade in which the broker so engaged will attempt to sell the Shares as
agent but may position and resell a portion of the block as principal to
facilitate the transaction; (b) purchases by a broker or dealer as principal and
resale by such broker or dealer for its account pursuant to this Prospectus; (c)
an exchange distribution in accordance with the rules of NASDAQ; and (d)
ordinary brokerage transactions. In effecting sales, brokers or dealers engaged
by the Selling Stockholders may arrange for other brokers or dealers to
participate. Brokers or dealers will receive commissions or discounts from
Selling Stockholders in amounts to be negotiated prior to the sale. Such brokers
or dealers and any other participating brokers or dealers may be deemed to be
"underwriters" within the meaning of the Act in connection with such sales. In
addition, any securities covered by this prospectus which qualify for sale
pursuant to Rule 144 of the Act may be sold under Rule 144 rather than pursuant
to this Prospectus.
The Company has agreed to indemnify certain of the Selling Stockholders
against certain liabilities, including certain liabilities under the Act, or to
contribute to payments which a Selling Stockholder may be required to make in
respect thereof.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be
passed upon for the Company by Sullivan & Worcester LLP, One Post Office Square,
Boston, Massachusetts 02109. John A. Piccione, Esq., a partner at Sullivan &
Worcester LLP holds options to purchase 50,000 shares of Common Stock.
EXPERTS
The financial statements of the Company appearing in the Company's
Annual Report (Form 10- KSB) for the fiscal year ended May 31, 1996, have been
audited by Wolf & Company, P.C. independent auditors as set forth in their
report thereon included therein and incorporated herein by reference. Such
financial statements are incorporated herein by reference in reliance upon such
report given upon the authority of such firm as experts in accounting and
auditing.
DISCLOSURE OF COMMISSION POSITION ON
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Commission such indemnification is against
public policy as expressed in such Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the Shares being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in such Act and will
be governed by the final adjudication of such issue.
-15-
