SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A #1
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 15, 1997 (June 30, 1997)
GREENMAN TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 1-13776 71-0724248
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
7 Kimball Lane
Building A
Lynnfield, Massachusetts 01450
(Address of principal executive offices, including zip code)
(617) 224-2411
(Registrant's telephone number, including area code)
(Former name or former address, if changed since last report)
<PAGE>
Item 2. Acquisition or Disposition of Assets
On June 30, 1997, GreenMan Acquisition Corp. ("GAC"), a wholly-owned
subsidiary of GreenMan Technologies, Inc., ("GMTI" or the "Registrant") acquired
all of the capital stock of each of (i) BFI Tire Recyclers of Minnesota, Inc.
("BTM"), a wholly-owned subsidiary of Browning- Ferris Industries of Minnesota,
Inc. ("BFIM") and (ii) BFI Tire Recyclers of Georgia, Inc. ("BTG"), a
wholly-owned subsidiary of Browning-Ferris Industries of Georgia, Inc. ("BFIG").
BFIG and BFIM are both wholly-owned subsidiaries of Browning Ferris Industries,
Inc. ("BFI"). The acquisition was made pursuant to that certain Purchase and
Sale Agreement, dated as of June 30, 1997, by and among GMTI, GAC, BFI, BFIM and
BFIG and included in this Report as Exhibit 2. Further information about the
acquisition reported hereby may be found in the Registrant's press release of
July 7, 1997, included as Exhibit 99 to this Report.
In consideration for the capital stock of BTM and BTG, GAC paid BFI
$5,408,830, which amount was determined, (a) as to $3,600,000 of such amount, by
negotiation among the parties and (b) as to the balance, by the value of BTG's
and BTM's working capital. Of such consideration, $650,000 was paid from
proceeds of the private placement in April 1997 of Convertible Notes due October
1998 and Common Stock Purchase Warrants and $4,758,830 was financed by a
short-term loan from BFI to GAC, which loan must be repaid by September 30,
1997. The repayment of such loan is guaranteed by GMTI and is secured by all of
BTM's assets, all of BTG's assets and by a pledge by GAC of all of the capital
stock of BTG and BTM. The Registrant expects to refinance such loan prior to its
maturity.
Item 7. Financial Statements and Exhibits
(a) Financial Statements of businesses acquired:
BFI Tire Recyclers of Minnesota, Inc.
Independent Auditors' Report............................................ F-1
Balance Sheet as of May 31, 1997........................................ F-2
Statements of Operations - Years Ended May 31, 1997 and 1996............ F-3
Statements of Cash Flows - Years Ended May 31, 1997 and 1996............ F-4
Notes to Financial Statements........................................... F-5
BFI Tire Recyclers of Georgia, Inc.
Independent Auditors' Report ........................................... F-12
Balance Sheets as of May 31, 1997 and 1996.............................. F-13
Statements of Operations and Retained Earnings (Deficit) -
Years Ended May 31, 1997 and 1996............................. F-14
Statements of Cash Flows - Years Ended May 31, 1997 and 1996............ F-15
Notes to Financial Statements........................................... F-16
-2-
<PAGE>
(b) Pro Forma Financial Information
GreenMan Technologies, Inc. Pro Forma Combined
Financial Statements (unaudited)............................... F-20
Pro Forma Combined Balance Sheet - May 31, 1997......................... F-21
Pro Forma Combined Statement of Operations - Year
Ended May 31, 1997 .................................... F-22
Notes to Pro Forma Combined Financial Statements........................ F-23
The unaudited pro forma combined balance sheet as of May 31, 1997 gives
effect to the acquisition of BFI Tire Recyclers of Minnesota, Inc. and BFI Tire
Recyclers of Georgia, Inc. by GreenMan Technologies, Inc., as if the
acquisition, accounted for as a purchase, had occurred on May 31, 1997 and the
unaudited pro forma combined statement of operations for the year ended May 31,
1997 gives effect to the acquisition as if the acquisition had occurred at the
beginning of the period presented. The pro forma information is based on
historical financial statements of BFI Tire Recyclers of Minnesota, Inc., BFI
Tire Recyclers of Georgia, Inc. and GreenMan Technologies, Inc. after giving
effect to the proposed transaction using the purchase method of accounting and
the assumptions and adjustments in the accompanying notes to the pro forma
combined financial statements. GreenMan Technologies, Inc. will continue its
study to determine the fair value of the acquired assets and liabilities. The
pro forma combined financial statements have been prepared on the basis of
preliminary estimates.
These pro forma statements may not be indicative of the results that actually
would have occurred if the combination had been in effect on the dates indicated
or which may be obtained in the future. The pro forma financial statements
should be read in conjunction with the audited financial statements and notes of
BFI Tire Recyclers of Minnesota, Inc. and BFI Tire Recyclers of Georgia, Inc.
and the audited financial statements of GreenMan Technologies, Inc.
-3-
<PAGE>
(c) Exhibits. All of the Exhibits listed below were previously filed with the
exception of those marked with an asterisk (*).
Exhibit 2 Purchase and Sale Agreement, dated as of June 30, 1997, by and
among GreenMan Technologies, Inc. ("GMTI"), GreenMan
Acquisition Corp. ("GAC"), Browning Ferris Industries, Inc.
("BFI"), Browning-Ferris Industries of Minnesota, Inc.
("BFIM") and Browning-Ferris Industries of Georgia ("BFIG").
Exhibit 10(a) Promissory Note dated as of June 30, 1997 made by GAC to BFIM
and BFIG.
Exhibit 10(b) Noncompetition, Nonsolicitation and Confidentiality Agreement,
dated as of June 30, 1997, by and among GMTI, GAC, BFI, BFIM
and BFIG.
Exhibit 10(c) Security Agreement, dated as of June 30, 1997, by and between
BFI Tire Recyclers of Georgia, Inc. and BFIG.
Exhibit 10(d) Security Agreement, dated as of June 30, 1997, by and between
BFI Tire Recyclers of Minnesota, Inc. and BFIM.
Exhibit 10(e) Pledge Agreement, dated as of June 30, 1997, by and among GAC,
BFIM and BFIG.
Exhibit 10(f) Guaranty Agreement, dated as of June 30, 1997 by and among
GMTI, BFIM and BFIG.
Exhibit 23(a)* Consent of Schecter Dokken Kanter Andrews & Selcer, Ltd.
Exhibit 23(b)* Consent of Smith & Radigan.
Exhibit 99 Press Release, dated July 7, 1997.
-4-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
GREENMAN TECHNOLOGIES, INC.
(Registrant)
By: /s/ Joseph E. Levangie
Joseph E. Levangie
Chief Financial Officer
Date: September 15, 1997
-5-
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
BFI Tire Recyclers of Minnesota, Inc.
St. Paul, Minnesota
We have audited the balance sheet of BFI Tire Recyclers of Minnesota (a division
of BFI Tire Recyclers of Minnesota, Inc. - see basis of presentation in Note 1)
as of May 31, 1997, and the related statements of operations and cash flows for
each of the years in the two-year period ended May 31, 1997. 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 audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit 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 audit provides 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 BFI Tire Recyclers of Minnesota
as of May 31, 1997, and the results of its operations and its cash flows for
each of the years in the two-year period ended May 31, 1997, in conformity with
generally accepted accounting principles.
/s/ Schechter Dokken Kanter
Andrews & Selcer Ltd
Minneapolis, Minnesota
August 29, 1997
F-1
<PAGE>
BFI TIRE RECYCLERS OF MINNESOTA
(A Division of BFI Tire Recyclers of Minnesota, Inc.)
BALANCE SHEET
MAY 31, 1997
ASSETS
Cash $ 2,846
Accounts receivable, trade, net of
allowance for doubtful accounts of $20,000 773,503
Other receivables 1,532
Prepaid expenses 194,078
----------
Total current assets 971,959
----------
Land and improvements 334,928
Buildings 789,193
Equipment 4,423,848
----------
5,547,969
Accumulated depreciation 3,398,918
----------
2,149,051
----------
$3,121,010
==========
LIABILITIES AND DIVISION EQUITY
Current portion of long term obligations $ 25,329
Accounts payable 385,567
Accrued expenses 152,408
Deferred revenue 18,628
----------
Total current liabilities 581,932
Long term obligations 124,027
Division equity 2,415,051
----------
$3,121,010
==========
See accompanying notes to financial statements.
F-2
<PAGE>
BFI TIRE RECYCLERS OF MINNESOTA
(A Division of BFI Tire Recyclers of Minnesota, Inc.)
STATEMENTS OF OPERATIONS
YEARS ENDED MAY 31, 1997 AND 1996
1997 1996
----------- -----------
Revenues $ 6,632,781 $ 5,740,040
Costs and expenses:
Operating costs 4,981,175 3,652,448
Selling, general and administrative 1,515,929 1,029,955
Depreciation and amortization 602,178 577,079
Impairment loss 1,185,269
----------- -----------
Total costs and expenses 8,284,551 5,259,482
----------- -----------
Divisional (loss) income $(1,651,770) $ 480,558
=========== ===========
Proforma tax expense:
Historical divisional (loss) income
before taxes $(1,651,770) $ 480,558
Proforma tax (benefit) expense (661,000) 194,000
----------- -----------
Proforma divisional (loss) income
after taxes $ (990,770) $ 286,558
=========== ===========
See accompanying notes to financial statements.
F-3
<PAGE>
BFI TIRE RECYCLERS OF MINNESOTA
(A Division of BFI Tire Recyclers of Minnesota, Inc.)
STATEMENTS OF CASH FLOWS
YEARS ENDED MAY 31, 1997 AND 1996
1997 1996
------------ -----------
Cash flows from operating activities:
Divisional (loss) income before
pro forma income taxes $(1,651,770) $ 480,558
Adjustments to reconcile net (loss)
income to net cash provided by
operating activities:
Depreciation 587,918 562,819
Amortization 14,260 14,260
Allowance for doubtful accounts (7,263) 3,176
Loss on sale of assets 5,600 5,020
Impairment loss 1,185,269
Change in operating assets and
liabilities:
Receivables 364,828 (303,263)
Prepaid expenses (16,070) 4,868
Other assets 33,975
Accounts payable 75,699 30,937
Accrued expenses (34,987) 14,839
Deferred revenue (18,332) 22,578
----------- -----------
Net cash provided by operating
activities 505,152 869,767
----------- -----------
Cash flows from investing activities:
Purchase of property and equipment (228,675) (526,796)
Proceeds from sales of property
and equipment 18,000 11,875
----------- -----------
Net cash used in investing activities (210,675) (514,921)
----------- -----------
Cash flows from financing activities:
Divisional equity transactions (280,012) (340,178)
Payments on long-term obligations (14,315) (13,343)
----------- -----------
Net cash used in financing activities (294,327) (353,521)
----------- -----------
Net increase in cash 150 1,325
Cash at beginning of period 2,696 1,371
----------- -----------
Cash at end of period $ 2,846 $ 2,696
=========== ===========
Schedule of non-cash financing activities:
Net book value of transfer in (out) of
assets between divisions $ 118,304 $ (22,955)
=========== ===========
See accompanying notes to financial statements.
F-4
<PAGE>
BFI TIRE RECYCLERS OF MINNESOTA
(A Division of BFI Tire Recyclers of Minnesota, Inc.)
NOTES TO DIVISIONAL FINANCIAL STATEMENTS
YEARS ENDED MAY 31, 1997 AND 1996
1. Nature of Business and Summary of Significant Accounting Policies:
BFI Tire Recyclers of Minnesota, Inc. (a wholly owned subsidiary of
Browning-Ferris Industries, Inc. (BFI)) provides scrap tire collection and
processing of tire derived fuel in the Midwestern region of the United States.
Basis of presentation:
In June 1997, BFI Tire Recyclers of Minnesota, Inc. (TRM) and
GreenMan Technologies, Inc.(GMT) entered into a Purchase and Sale
Agreement (Agreement), whereby GMT purchased all the outstanding
stock of TRM. Prior to the closing of the Agreement, substantially
all liabilities of TRM were transferred to BFI and certain land and
building assets owned by another subsidiary of BFI were transferred
into TRM. The transfer was recorded as if it occurred as of May 31,
1995. Additionally, deferred tax assets and liabilities allocated by
BFI to TRM have been charged against divisional equity. TRM along
with the transferred assets referred to above are presented for
financial reporting purposes as a division of BFI (BFI Tire Recyclers
of Minnesota - The Division).
Historically, cash collected by The Division was transferred to BFI
and The Division's cash requirements have been funded by BFI. The
cumulative net impact of these cash transfers as well as other
intercompany transactions have been included in division equity.
There was no interest allocated to The Division during any periods
because BFI did not distinguish the elements of the intercompany
transfers between debt or equity. Accordingly, this may not be
indicative of the interest which would have been incurred by The
Division on a stand alone basis.
BFI provides services to The Division including legal, administration
of benefits and insurance programs, accounting systems support and
cash management services. The statements of operations include
administrative charges to The Division either directly or allocated
by BFI. The allocated administrative charges included in selling,
general and administrative expense for the years ended May 31, 1997
and 1996 were $880,225 and $423,508, respectively. Management of BFI
believes the charges have been allocated to The Division on a
reasonable basis; however, they are not intended to be indicative of
the costs that would have been incurred by the Division on a
stand-alone basis.
F-5
<PAGE>
BFI TIRE RECYCLERS OF MINNESOTA
(A Division of BFI Tire Recyclers of Minnesota, Inc.)
NOTES TO DIVISIONAL FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED MAY 31, 1997 AND 1996
1. Nature of Business and Summary of Significant Accounting Policies
(continued):
Basis of presentation (continued):
The Division's employees participate in employee retirement and
health plans sponsored by BFI. Related expenses have been allocated
to The Division for the years ended May 31, 1997 and 1996; however,
information with respect to accumulated plan benefits and net assets
available for benefits have not been separately determined for The
Division. The liability for these benefits will not be assumed by
GMT.
Concentration of Risk:
Tire Derived Fuel:
A product of the collection and processing of the scrap tire is tire
derived fuel (TDF). Currently, the number of commercial applications
of the TDF is limited to electrical power plants cement kilns, and
paper mills.
By-product disposal:
The Division utilizes one landfill to dispose of by-product waste.
Management estimates that the current cell has a remaining life of
three years.
Revenue Recognition:
Revenues are recognized when processing of the scrap tires has
occurred. Deferred revenue represents the estimated amount of revenue
to be recognized once tires on hand are processed.
Property and Equipment and Depreciation Methods:
Property and equipment is stated at cost adjusted for the recognition
of an impairment loss on long-lived assets. Depreciation is provided
using the straight-line method over the estimated useful lives of the
related assets as follows:
Buildings and improvements 10-25 years
Equipment 5-15 years
Amortization:
The cost of intangible assets consisting of covenants not to compete
and customer lists were amortized using straight line methods over 5
and 7 years, respectively. The costs were written off in 1997 as part
of the impairment loss (See Note 2).
F-6
<PAGE>
BFI TIRE RECYCLERS OF MINNESOTA
(A Division of BFI Tire Recyclers of Minnesota, Inc.)
NOTES TO DIVISIONAL FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED MAY 31, 1997 AND 1996
1. Nature of Business and Summary of Significant Accounting Policies
(continued):
Income taxes:
The Purchase and Sale Agreement treated the sale as a Section 338
transaction for tax reporting purposes, wherein TRM recognized gain or
loss with respect to the transaction as if it sold all of its assets
in a single transaction. Income taxes on the sale, if any, are paid at
the corporate level and accordingly a provision for income taxes is
not recorded at the division level.
Use of Estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amount 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.
2. Impairment of Long-Lived Assets:
In connection with the Purchase and Sale Agreement, property,
equipment and intangible assets were deemed to be impaired and were
written down to their fair value. Fair value, which was determined by
reference to the sales price, was less than the carrying value by
$1,185,269. An impairment loss of that amount has been charged to
operations during the year ended May 31,1997.
3. Long term obligations:
Long term obligations consist of real estate tax assessments on
property. Amounts are due in semi-annual installments of $17,824
including interest at 7.285% through the year 2002. Future maturities
of long term obligations are as follows:
Year ended May 31, Amount
1998 $ 25,329
1999 27,207
2000 29,207
2001 31,389
2002 33,716
--------
$146,848
========
F-7
<PAGE>
BFI TIRE RECYCLERS OF MINNESOTA
(A Division of BFI Tire Recyclers of Minnesota, Inc.)
NOTES TO DIVISIONAL FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED MAY 31, 1997 AND 1996
4. Division Equity:
Activity in division equity includes amounts due to BFI for disbursements
made on behalf of The Division, amounts due from BFI for cash advances
from The Division, divisional income and costs allocated to The Division
by BFI. The following is a summary of activity in division equity for the
years ended May 31, 1997 and 1996.
1997 1996
---- ----
Balance at beginning of period $4,228,529 $4,111,104
Less:
Cash advances to BFI 6,991,878 5,439,953
Divisional loss 1,651,770
Transfers of assets to other
divisions 22,955
Add:
Cash disbursements made by BFI on
behalf of The Division 5,831,641 4,676,267
Divisional income 480,558
Corporate costs allocated by BFI 880,225 423,508
Transfers of assets to The Division 118,304
---------- ----------
Balance at end of period $2,415,051 $4,228,529
========== ==========
5. Pro forma tax expense:
The pro forma tax expense reflects a provision for federal and state
income taxes at the statutory rates in effect of 40% for May 31, 1997 and
1996.
6. Processing and end user credit:
Included in revenue for the year ended May 31, 1996 is approximately
$195,000 of income received from the State of Wisconsin for processing of
tires. A retroactive credit of approximately $409,000 received in October
1995 for calendar years 1992 through 1994 is also in revenue for the year
ended May 31, 1996. The program expired effective December 31, 1996.
F-8
<PAGE>
BFI TIRE RECYCLERS OF MINNESOTA
(A Division of BFI Tire Recyclers of Minnesota, Inc.)
NOTES TO DIVISIONAL FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED MAY 31, 1997 AND 1996
7. Commitments:
Service agreements:
The Division has entered into collection and processing agreements
with substantially all of its customers. The agreements are generally
one year in length and set the price per unit the Division charges for
the collection and processing of scrap tires. The pricing is
consistent with previous years.
Sublease agreement:
The Division subleases a portion of its facility to an unrelated
Company that extracts resaleable tires from those collected by the
Division and sells them as used tires. Rent is on a month to month
basis and consists of $1,000 a month plus $.035 per pound of tire
selected for resale by the lessee. The Division is obligated as part
of one collection agreement purchased from the lessee to continue
under the sublease agreement so long as it is party to the collection
agreement. Total rents received and included in revenues for the years
ended May 31, 1997 and 1996 were approximately $165,000 and $135,500,
respectively.
F-9
<PAGE>
FINANCIAL STATEMENTS
BFI TIRE RECYCLERS OF GEORGIA, INC.
May 31, 1997
F-10
<PAGE>
Financial Statements
BFI TIRE RECYCLERS OF GEORGIA, INC.
May 31, 1997
CONTENTS:
Financial Statements
Independent Auditors' Report..................................F-12
Balance Sheets................................................F-13
Statements of Operations and Retained Earnings (Deficit)......F-14
Statements of Cash Flows......................................F-15
Notes to Financial Statements.................................F-16
F-11
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
BFI Tire Recyclers of Georgia, Inc.
We have audited the accompanying balance sheets of BFI Tire Recyclers of
Georgia, Inc. (a wholly-owned subsidiary of Browning Ferris Industries, Inc.) as
of May 31, 1997 and 1996, and the related statements of operations, retained
earnings (deficit) and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit 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 BFI Tire Recyclers of Georgia,
Inc. as of May 31, 1997 and 1996, and the results of its operations and its cash
flows for the years then ended, in conformity with generally accepted accounting
principles.
/s/ Smith & Radigan
Smith & Radigan
Atlanta, Georgia
August 29, 1997
F-12
<PAGE>
Balance Sheets
BFI TIRE RECYCLERS OF GEORGIA, INC
ASSETS
May 31,
--------------------------
1997 1996
----------- -----------
CURRENT ASSETS
Cash $ 1,904 $ 1,500
Accounts receivable, net of allowance
for doubtful accounts of $162,150 in
1997 and $7,136 in 1996 562,363 332,354
Receivable from insurance settlement 0 1,066,535
Prepaid expenses 175,511 207,166
----------- -----------
TOTAL CURRENT ASSETS 739,778 1,607,555
PROPERTY, PLANT AND EQUIPMENT
Land 132,803 132,803
Building and equipment 3,180,697 3,106,019
----------- -----------
3,313,500 3,238,822
Less accumulated depreciation (1,813,500) (1,460,236)
----------- -----------
1,500,000 1,778,586
OTHER ASSETS
Deposits 525 1,190
Advances to parent company 1,765,069 539,732
Non competition agreement, net of
accumulated amortization of $194,829
in 1997 and $190,308 in 1996 0 4,521
----------- -----------
1,765,594 545,443
----------- -----------
$ 4,005,372 $ 3,931,584
=========== ===========
F-13
<PAGE>
LIABILITIES AND STOCKHOLDER'S EQUITY
May 31,
--------------------------
1997 1996
----------- ------------
CURRENT LIABILITIES
Accounts payable $ 161,374 $ 92,690
Accrued expenses 115,563 90,163
----------- -----------
276,937 182,853
OTHER LIABILITIES
Deferred income taxes 255,000 284,000
STOCKHOLDER'S EQUITY
Common stock - par value $1 per share:
Authorized - 1,000 shares
Issued and outstanding - 1,000 shares 1,000 1,000
Additional paid-in capital 6,500,000 6,500,000
Retained earnings (deficit) (3,027,565) (3,036,269)
----------- -----------
3,473,435 3,464,731
----------- -----------
$ 4,005,372 $ 3,931,584
=========== ===========
The Notes to Financial Statements are an integral part of these Statements
F-14
<PAGE>
Statements of Operations and Retained
Earnings (Deficit)
BFI TIRE RECYCLERS OF GEORGIA, INC
May 31,
--------------------------
1997 1996
----------- -----------
REVENUES
Revenues $ 2,909,441 $ 2,510,054
COST AND EXPENSES
Cost of sales 815,232 717,929
Operating expenses 1,042,883 892,882
General and administrative 718,930 533,512
Depreciation and amortization 328,349 347,326
Loss on impairment of property, plant and 192,450 0
equipment ----------- -----------
3,097,844 2,491,649
----------- -----------
OPERATING INCOME (188,403) 18,405
OTHER INCOME (EXPENSE)
Parent Company interest income allocation 202,607 59,930
----------- -----------
202,607 59,930
----------- -----------
INCOME BEFORE INCOME TAXES 14,204 78,335
PROVISION FOR INCOME TAXES
Current 34,500 44,000
Deferred (29,000) (13,000)
----------- -----------
5,500 31,000
----------- -----------
NET INCOME 8,704 47,335
RETAINED EARNINGS (DEFICIT), BEGINNING OF (3,036,269) (3,083,604)
YEAR ----------- -----------
RETAINED EARNINGS (DEFICIT), END OF YEAR $(3,027,565) $(3,036,269)
=========== ===========
The Notes to Financial Statements are an integral part of these Statements
F-15
<PAGE>
Statements of Cash Flows
BFI TIRE RECYCLERS OF GEORGIA, INC
For the Year Ended
May 31,
--------------------------
1997 1996
----------- ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 8,704 $ 47,335
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 323,828 308,361
Amortization 4,521 38,965
Allowance for doubtful accounts 155,015 (2,865)
Loss on impairment of property,
plant and equipment 192,450 0
Decrease (increase) in:
Receivables 681,511 51,050
Inventories 0 0
Prepaid expenses 31,655 (20,492)
Other assets 665 0
Increase (decrease) in:
Accounts payable 68,684 (197,965)
Accrued expenses 25,400 950
Deferred taxes (29,000) (13,000)
----------- -----------
Total adjustments 1,454,729 165,004
----------- -----------
Net cash provided by operating
activities 1,463,433 212,339
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment (193,538) (148,797)
Advances to parent company (1,269,491) (72,877)
----------- -----------
Net cash used by investing activities (1,463,029) (221,674)
----------- -----------
INCREASE (DECREASE) IN CASH 404 (9,335)
CASH BALANCE, BEGINNING OF YEAR 1,500 10,835
----------- -----------
CASH BALANCE, END OF YEAR $ 1,904 $ 1,500
=========== ===========
Supplemental information regarding transfers of fixed assets to (from) the
parent company is as follows:
Transfers to (from) parent company $ (44,154) $ 171,457
=========== ===========
The Notes to Financial Statements are an integral part of these Statements
F-16
<PAGE>
Notes to Financial Statements
BFI TIRE RECYCLERS OF GEORGIA, INC.
May 31, 1997
Note 1 -- Summary of Significant Accounting Policies and Basis of Presentation
Basis of Presentation
BFI Tire Recyclers of Georgia, Inc. ("the Company") is a wholly-owned subsidiary
of Browning Ferris Industries, Inc. ("the parent company"). The Company is in
the business of collecting and processing scrap tires into two inch tire chips
which are then sold as alternative fuel ("TDF" -- Tire Derived Fuel) or utilized
in civil engineering projects.
Accounts Receivable
The Company's policy is to record an allowance for doubtful accounts for all
outstanding balances over ninety days past due.
Intangible Assets
The cost associated with the Company's covenant-not-to-compete is being
amortized using the straight-line method over a five-year period. Amortization
expense was $4,521 and $38,965 for the years ended May 31, 1997 and 1996,
respectively.
Fair Value of Financial Instruments
Except as otherwise disclosed herein, the Company estimates that the aggregate
fair value of all financial instruments at May 31, 1997 and 1996 does not differ
materially from the aggregate carrying values of its financial instruments
recorded in the balance sheet. The estimated fair value amounts of cash and cash
equivalents, receivables, accounts payable and accrued liabilities approximate
fair value due to their short-term nature.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities 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.
Revenue Recognition
Revenues are recognized when processing of the scrap tires has occurred.
F-17
<PAGE>
Notes to Financial Statements -- Continued
BFI TIRE RECYCLERS OF GEORGIA, INC.
May 31, 1997
Note 2 -- Property, Plant and Equipment
Property, plant and equipment are stated at cost and adjusted for the impairment
loss. Depreciation expense is provided using the straight-line method.
Depreciation expense for the years ended May 31, 1997 and 1996 was $323,828 and
$308,361, respectively. A summary of the estimated useful lives and cost is as
follows:
<TABLE>
<CAPTION>
Estimated May 31,
Useful Life 1997 1996
----------- ------------ ------------
<S> <C> <C> <C>
Land $ 132,803 $ 132,803
Building 10-25 years 736,390 720,254
Machinery and equipment 5-15 years 1,655,392 1,547,364
Trailers and cages 5-15 years 788,915 838,401
----------- -----------
3,313,500 3,238,822
Accumulated depreciation (1,813,500) (1,460,236)
----------- -----------
$ 1,500,000 $ 1,778,586
=========== ===========
</TABLE>
Expenditures for maintenance, repairs and minor renewals are charged to expense
as incurred. Significant improvements and major renewals are capitalized.
Note 3 -- Income Taxes
Deferred income taxes are provided for temporary differences in the carrying
values of assets and liabilities, principally depreciation expense, bad debt
expense and impairment losses, for financial reporting and income tax purposes.
The Company's tax rate is forty percent.
At May 31, 1997, the Company's net deferred tax liability consisted of deferred
tax assets totaling $65,000 and deferred tax liabilities totaling $320,000. At
May 31, 1996, the Company's net deferred tax liability consisted of deferred tax
assets totaling $3,000 and deferred tax liabilities totaling $287,000.
Note 4 -- Subsequent Events
The parent company has entered into a purchase and sale agreement to sell all of
the outstanding stock of the Company to GreenMan Technologies Inc. effective
June 30, 1997.
The allocation of the purchase price of the stock was $1,500,000 plus the actual
value of certain current assets and liabilities at June 30, 1997. The advances
to the parent company were not included in the sale and were written off as a
dividend to the parent company on June 30, 1997 prior to the sale. All accounts
payable were satisfied prior to the sale.
F-18
<PAGE>
Notes to Financial Statements -- Continued
BFI TIRE RECYCLERS OF GEORGIA, INC.
May 31, 1997
Note 5 -- Impairment Loss on Property, Plant and Equipment
In conjunction with the sales agreement between the parent company and GreenMan
Technologies Inc., the Company has recorded an impairment loss. The net purchase
price of the stock was less than the book value of the Company. Accordingly, a
loss on impairment of property, plant and equipment was determined to exist at
May 31, 1997. The net property, plant and equipment was reduced to $1,500,000 by
recording an impairment loss of $192,450 at May 31, 1997.
Note 6 -- Concentration of Risk
The Company entered into a five-year sales agreement with GreenMan Technologies
Inc. ("GreenMan") whereby GreenMan was obligated to accept, on a "take or pay"
basis, a minimum of approximately 7,050 tons of tire material for the period of
March 1, 1996 to September 30, 1996 and 32,000 tons of shredded waste tire
material per year starting October 1, 1996. GreenMan was obligated to pay for
the higher of: (1) the number of tons of crumb rubber produced at GreenMan's
recycling facility or (2) seventy-five percent of the amount of material
accepted, as determined on a monthly basis. The price per ton consists of a base
amount of $37.50 and an additional amount based on the publicly quoted benchmark
price of 30 to 40 mesh crumb rubber. The Company agreed to reduce the per-ton
charge by fifty percent from October 1, 1996 through June 30, 1997. This
agreement was terminated as a result of GreenMan's acquisition of the Company
(Note 4). Sales to GreenMan were approximately $365,343 in 1997 and $53,410 in
1996.
In connection with the sales agreement, the Company entered into a five-year
lease agreement with GreenMan whereby GreenMan was to lease for $1 per year
approximately 15,000 square feet of land on which GreenMan's tire recycling
facility has been built. GreenMan is responsible for all improvements and
operating costs relating to the leased premises.
Subsequent to May 31, 1997, the Company was purchased by GreenMan (Note 4).
Note 7 -- Transactions with Parent Company
The parent company charged the Company an overhead charge for management,
accounting and other services rendered by the parent. The overhead allocation
expense included in general and administrative expense on the statement of
operations for the years ended May 31, 1997 and 1996 was $158,578 and $191,120,
respectively.
In addition, the Company recorded interest income on advances to the parent
company for the years ended May 31, 1997 and 1996 of $202,607 and $59,930,
respectively. Advances to the parent company for the years ended May 31, 1997
and 1996 were $1,765,069 and $539,732, respectively.
The Company had advanced the parent company $1,765,594 and $539,732 at May 31,
1997 and 1996, respectively. The advances were written off as a dividend to the
parent company prior to the sale (Note 4).
F-19
<PAGE>
GreenMan Technologies, Inc.
BFI Tire Recyclers of Minnesota, Inc.
and
BFI Tire Recyclers of Georgia, Inc.
Pro Forma Combined Financial Statements
(unaudited)
F-20
<PAGE>
<TABLE>
<CAPTION>
PRO FORMA COMBINED BALANCE SHEET
May 31, 1997
(unaudited)
ASSETS
BFI Tire BFI Tire Pro Forma
GreenMan Recyclers of Recyclers of Adjustments (A) Pro Forma
Technologies, Inc. Minnesota, Inc. Georgia, Inc. DR (CR) Combined
------------------ ---------------- -------------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Current Assets:
Cash and cash equivalents $ 104,193 $ 2,846 $ 1,904 $ -- $ 108,943
Accounts receivable, net 550,644 773,503 562,363 (288,160) 1,743,990
145,640
Inventory 553,688 -- -- -- 553,688
Other current assets 204,155 195,610 175,511 -- 575,276
----------- ----------- ----------- ----------- -----------
Total current assets 1,412,680 971,959 739,778 (142,520) 2,981,897
Property and equipment, net 4,921,043 2,149,051 1,500,000 -- 8,570,094
Acquisition deposit 650,000 -- -- (650,000) --
Other assets, net 1,602,908 -- 525 -- 1,603,433
Advances to parent company -- -- 1,765,069 (1,765,069) --
Deferred financing costs 1,198,899 -- -- -- 1,198,899
----------- ----------- ----------- ----------- -----------
Total assets $ 9,785,530 $ 3,121,010 $ 4,005,372 $(2,557,589) $14,354,323
=========== =========== =========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Convertible notes payable $ 1,200,000 $ -- $ -- $ -- $ 1,200,000
Notes payable, other 96,739 25,329 -- -- 122,068
Obligations under capital
leases 1,045,726 -- -- -- 1,045,726
Accounts payable and
accrued expenses 2,086,313 556,603 276,937 288,160 2,631,693
----------- ----------- ----------- ----------- -----------
Total current liabilities 4,428,778 581,932 276,937 288,160 4,999,487
Convertible notes payable 2,840,000 -- -- -- 2,840,000
Notes payable, other 499,049 124,027 -- (3,874,057) 4,497,133
Obligations under capital
leases 894,238 -- -- -- 894,238
Deferred income taxes -- -- 255,000 255,000 --
----------- ----------- ----------- ----------- -----------
Total liabilities 8,662,065 705,959 531,937 (3,330,897) 13,230,858
----------- ----------- ----------- ----------- -----------
Stockholders' equity
Common stock 68,733 -- 1,000 1,000 68,733
Additional paid-in-capital 11,759,665 -- 6,500,000 6,500,000 11,759,665
Division equity -- 2,415,051 -- 2,415,051 --
Accumulated deficit (10,704,933) -- (3,027,565) (3,027,565) (10,704,933)
----------- ----------- ----------- ----------- -----------
Total liabilities and
stockholders' equity $ 9,785,530 $ 3,121,010 $ 4,005,372 $ 2,557,589 $14,354,323
=========== =========== =========== =========== ===========
</TABLE>
See accompanying notes to pro forma combined financial statements.
F-21
<PAGE>
<TABLE>
<CAPTION>
PRO FORMA COMBINED STATEMENT OF OPERATIONS
YEAR ENDED MAY 31, 1997
(unaudited)
BFI Tire BFI Tire Pro Forma
GreenMan Recyclers of Recyclers of Adjustments Pro Forma
Technologies, Inc. Minnesota, Inc. Georgia, Inc. DR (CR) Combined
------------------ ---------------- -------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Revenues $ 4,020,670 $ 6,632,781 $ 2,909,441 365,000 (1) $ 13,197,892
Cost of revenues 3,399,310 5,583,353 2,186,464 (365,000)(1) 10,804,127
------------ ------------ ------------ ------------ ------------
Gross profit 621,360 1,049,428 722,977 -- 2,393,765
------------ ------------ ------------ ------------ ------------
Operating expenses:
Research and development 353,250 -- -- -- 353,250
Selling, general and administrative 4,126,611 1,515,929 718,930 (145,640)(2) 6,215,830
Impairment loss 1,000,000 1,185,269 192,450 (1,377,719)(4) 1,000,000
------------ ------------ ------------ ------------ ------------
Total operating expenses 5,479,861 2,701,198 911,380 (1,523,359) 7,569,080
------------ ------------ ------------ ------------ ------------
Income (loss) from operations (4,858,501) (1,651,770) (188,403) (1,523,359) (5,175,315)
Other income (expenses) (2,147,978) -- 202,607 499,000(6) (2,646,978)
202,607(3)
------------ ------------ ------------ ------------ ------------
Income (loss) before income taxes (7,006,479) (1,651,770) 14,204 (821,752) (7,822,293)
Income tax expense (benefit) -- (661,000) 5,500 655,500(5) --
------------ ------------ ------------ ------------ ------------
Net income (loss) $ (7,006,479) $ (990,770) $ 8,704 $ (166,252) $ (7,822,293)
============ ============ ============ ============ ============
Net income (loss) per share ($1.25) ($1.39)
============= ============
Shares used in calculation of net
income (loss) per share 5,613,942 5,613,942
============= ============
</TABLE>
See accompanying notes to pro forma combined financial statements.
F-22
<PAGE>
NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS
The unaudited Pro Forma Combined Balance Sheet has been prepared from the
audited May 31, 1997 balance sheet of GreenMan Technologies, Inc. ("GMT") and
the audited May 31, 1997 balance sheets of BFI Tire Recyclers of Minnesota, Inc.
("BTM") and BFI Tire Recyclers of Georgia, Inc. ("BTG"). The unaudited Pro Forma
Combined Statement of Operations for the year ended May 31, 1997 has been
prepared from the audited May 31, 1997 Statement of Operations of GMT and the
audited May 31, 1997 Statements of Operations of BTM and BTG. The unaudited pro
forma combined balance sheet as of May 31, 1997 gives effect to the acquisition
of BTM and BTG by GMT, as if the acquisition, accounted for as a purchase, had
occurred on May 31, 1997 and the unaudited pro forma combined statement of
operations for the year ended May 31, 1997 gives effect to the acquisition as if
the acquisition had occurred at the beginning of the period presented. The
unaudited Pro Forma Combined Balance Sheet and the unaudited Pro Forma Combined
Statement of Operations for the Year Ended May 31, 1997 also give effect to the
following:
(A) To reflect the acquisition of BTM and BTG pursuant to the terms of the
Purchase and Sales Agreement for $3,600,000 plus Working Capital, as
adjusted.
(1) To eliminate the purchases of Tire Derived Fuel by GMT during fiscal
1997 from BTG.
(2) To eliminate BTG's provision for uncollectible accounts receivable
relating to amounts due from GMT.
(3) To reverse intercompany interest income earned by BTG on balances with
its parent company.
(4) To reverse the impairment losses recorded by BTM and BTG during the
year ended May 31, 1997.
(5) To reverse the income tax provision recorded by BTM and BTG during the
year ended May 31, 1997.
(6) To reflect interest expense on the acquisition related debt.
F-23
Exhibit 23(a)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements of
GreenMan Technologies, Inc. on Form S-3 (Nos. 333-22813 and 333-27625) of our
report dated August 29, 1997, with respect to the balance sheet of BFI Tire
Recyclers of Minnesota, Inc. (a division of BFI Tire Recyclers of Minnesota,
Inc.) as of May 31, 1997, and the related statements of operations and cash
flows for the years ended May 31, 1996 and 1997, which report appears in the
Form 8-K/A-1 of GreenMan Technologies, Inc. dated September 15, 1997.
SCHECHTER DOKKEN KANTER
ANDREWS & SELCER LTD.
Minneapolis, Minnesota 55401
September 12, 1997
Exhibit 23(b)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements of
GreenMan Technologies, Inc. on Form S-3 (Nos. 333-22813 and 333-27625) of our
report dated August 29, 1997, with respect to the balance sheet of BFI Tire
Recyclers of Georgia, Inc. as of May 31, 1997, and the related statements of
operations, stockholder's equity and cash flows for the years ended May 31, 1996
and 1997, which report appears in the Form 8-K/A-1 of GreenMan Technologies,
Inc. dated September 15, 1997.
SMITH & RADIGAN
Atlanta, Georgia 30328
September 12, 1997
