U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended FEBRUARY 28, 1997 Commission File Number 1-13776
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GREENMAN TECHNOLOGIES, INC.
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(Exact name of small business issuer as specified in its charter)
DELAWARE 71-0724248
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(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
7 KIMBALL LANE, BUILDING A, LYNNFIELD, MA 01940
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code (617) 224-2411
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(Former name, former address and former fiscal year, if changed
since last report.)
Indicate by check mark whether the issuer (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes _X_ No ___
Number of shares outstanding as of April 10, 1997
Common Stock, $.01 par value, 5,853,156 shares
GREENMAN TECHNOLOGIES, INC.
FORM 10-QSB
QUARTERLY REPORT
FEBRUARY 28, 1997
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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PART I - FINANCIAL INFORMATION
<S> <C> <C>
Item 1. Financial Statements (*)
Unaudited Condensed Consolidated Balance Sheets as of May 31, 1996 and
February 28, 1997 3
Unaudited Condensed Consolidated Statements of Loss for the three and
nine months ended February 29, 1996 and February 28, 1997 4
Unaudited Condensed Consolidated Statements of Cash Flows for the nine
months ended February 29, 1996 and February 28, 1997 5-6
Notes to Unaudited Condensed Consolidated Financial Statements 7-8
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations 9-13
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 14
Item 2. Changes in Securities 14
Item 3. Defaults Upon Senior Securities 14
Item 4. Submission of Matters to a Vote of Security Holders 14
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 14
Signatures 15
</TABLE>
* The financial information at May 31, 1996 has been taken from audited
financial statements at that date and should be read in conjunction therewith.
All other financial statements are unaudited.
GREENMAN TECHNOLOGIES, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
May 31, February 28,
1996 1997
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<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents..................................................... $ 153,172 $ 134,231
Accounts receivable, trade, less allowance for doubtful accounts of $31,751 and
$23,772 as of May 31, 1996 and February 28, 1997............................ 605,255 529,141
Inventory .................................................................... 525,279 457,707
Loan and note receivable...................................................... 500,000 100,000
Other current assets.......................................................... 242,607 193,624
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Total current assets 2,026,313 1,414,703
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Property and equipment, at cost:
Land....................................................................... 223,785 223,785
Buildings.................................................................. 910,400 910,400
Machinery and equipment.................................................... 2,026,131 2,538,546
Furniture and fixtures..................................................... 88,276 89,792
Motor vehicles............................................................. 33,932 64,822
Leasehold improvements..................................................... 895,958 938,245
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4,178,482 4,765,590
Less accumulated depreciation and amortization........................... (507,991) (782,055)
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3,670,491 3,983,535
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Other assets:
Equipment deposits............................................................ 1,883,400 1,862,711
Goodwill, net................................................................. 465,246 427,860
Non-competition agreement, net................................................ 272,222 184,722
Notes receivable (Note 3)..................................................... 150,000 150,000
Licensing Fee................................................................. 100,000 100,000
Deferred Financing Costs (Note 5)............................................. -- 769,600
Other......................................................................... 71,311 68,730
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2,942,179 3,563,623
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$ 8,638,983 $8,961,861
========= ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable, related parties (Note 4)....................................... $ 1,378,253 $ 682,006
Notes payable, bank, current portion ......................................... 140,289 196,909
Convertible notes payable (Notes 4 and 5)..................................... 2,725,000
Accounts payable.............................................................. 718,770 851,429
Accrued expenses, other....................................................... 680,318 1,023,649
Obligations under capital leases, current..................................... 311,679 349,340
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Total current liabilities................................................... 3,229,309 5,828,333
Notes payable, bank, non-current portion........................................ 475,008 332,677
Notes payable, related parties, non-current portion (Note 4).................... 578,897 42,320
Obligations under capital leases................................................ 819,943 666,486
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Total liabilities........................................................... 5,103,157 6,869,816
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Stockholders' equity (Note 6):
Preferred stock, $1.00 par value, 1,000,000 shares authorized, no shares issued
and outstanding............................................................ -- --
Common stock, $.01 par value, 20,000,000 shares authorized; 5,076,083 shares
issued and outstanding at May 31, 1996 and 5,623,483 shares issued and
outstanding at February 28, 1997........................................... 50,761 56,235
Additional paid-in capital................................................... 7,183,519 9,232,814
Accumulated deficit.......................................................... (3,698,454) (7,197,004)
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Total stockholders' equity.............................................. 3,535,826 2,092,045
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$ 8,638,983 $ 8,961,861
============ ============
</TABLE>
See accompanying notes to unaudited condensed
consolidated financial statements.
GREENMAN TECHNOLOGIES, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF LOSS
<TABLE>
<CAPTION>
Three Months Ended Nine MonthsEnded
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February 29, February 28, February 29, February 28,
1996 1997 1996 1997
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<S> <C> <C> <C> <C>
Net sales................................................. $ 1,448,675 $ 873,290 $ 3,001,200 $ 2,556,297
Cost of sales............................................... 977,594 750,043 2,186,730 2,204,590
----------- ----------- --------- ------------
Gross profit ............................................... 471,081 123,247 814,470 351,707
----------- ----------- ---------- ------------
Operating expenses:
Research and development .............................. 13,000 38,250 33,324 155,656
Selling, general and administrative .................... 736,263 1,174,973 1,422,415 3,212,670
----------- ----------- ---------- -----------
Total operating expenses............................ 749,263 1,213,223 1,455,739 3,368,326
----------- ----------- ----------- -----------
Operating loss............................................. (278,182) (1,089,976) (641,269) (3,016,619)
----------- ----------- --------- -------------
Other income (expense):
Interest expense,net.................................... (22,177) (96,301) (162,604) (275,906)
Financing costs (Note 5).............................. -- (145,400) -- (175,533)
Other, net.............................................. 18,783 (9,532) 39,923 (30,492)
----------- ------------ ----------- ------------
Other income (expense), net......................... (3,394) (251,233) (122,681) (481,931)
----------- ----------- ----------- ------------
Net loss.................................................... $ (281,576) $(1,341,209) $ (763,950) $ (3,498,550)
=========== =========== =========== =============
Net loss per share (Note 2)................................. $ (.06) $ (. 24) $ (.17) $ (.65)
=========== ========= ======== ========
Shares used in calculation of net loss per share........... 4,962,297 5,623,483 4,540,223 5,388,710
=========== =========== =========== ============
</TABLE>
See accompanying notes to unaudited condensed
consolidated financial statements.
GREENMAN TECHNOLOGIES, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Months Ended
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February 29, February 28,
1996 1997
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<S> <C> <C>
Cash flows from operating activities:
Net loss ......................................................................... $ (763,950) $(3,498,550)
Adjustments to reconcile net loss to net cash used for
operating activities:
Depreciation and amortization ................................................ 209,819 398,950
Common stock warrants and options issued for services
rendered ................................................................... -- 646,203
Amortization of deferred financing costs ..................................... -- 139,400
(Increase) decrease in assets:
Accounts receivable ....................................................... (190,939) 76,114
Inventory ................................................................. (118,387) 67,572
Other current assets ...................................................... (83,177) 48,983
Deferred offering costs ................................................... (386,195) (214,000)
(Decrease) increase in liabilities:
Accounts payable .......................................................... (19,100) 132,659
Accrued expenses .......................................................... (614,518) 343,331
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Net cash used for operating activities ................................ (1,966,447) (1,859,338)
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Cash flows from investing activities:
Increase in notes receivable ..................................................... -- (100,000)
Repayment of loan receivable,related party ....................................... -- 500,000
Purchase of property and equipment ............................................... (505,089) (462,608)
Equipment deposits ............................................................... (700,000) 20,689
Acquisition of DuraWear, net of cash acquired .................................... (370,027) --
(Increase) decrease in other assets .............................................. (6,867) 2,581
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Net cash used for investing activities ................................ (1,581,983) (39,338)
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Cash flows from financing activities:
Proceeds from convertible notes .................................................. -- 1,525,000
Proceeds from notes payable ...................................................... -- 46,550
Repayment of notes payable ....................................................... (1,128,622) (132,261)
Proceeds from notes payable, related parties ..................................... -- 750,000
Repayment of notes payable, related parties ...................................... -- (782,824)
Principal payments on obligations under capital leases ........................... (162,431) (240,296)
Net proceeds on sale of preferred stock .......................................... 600,000 --
Net proceeds from initial public offering ........................................ 5,389,360 --
Net proceeds on exercise of common stock options ................................. 11,300 337
Net proceeds on sale of common stock ............................................. -- 713,229
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Net cash provided by financing activities ...................................... 4,709,607 1,879,735
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Net increase (decrease) in cash ...................................................... 1,161,177 (18,941)
Cash and cash equivalents at beginning of period ..................................... 109,778 153,172
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Cash and cash equivalents at end of period ........................................... $ 1,270,955 $ 134,231
=========== ===========
Supplemental cash flow information:
Machinery and equipment acquired under capital leases ............................ $ 121,004 $ 124,500
Common stock issued on conversion of accrued interest ............................ 500,000 --
Common stock issued on conversion of notes payable ............................... 35,000 --
Common stock issued for non-competition agreement ................................ 350,000 --
Common stock issued upon conversion of preferred stock ........................... 1,100,000 --
Interest paid .................................................................... 222,335 195,397
</TABLE>
See accompanying notes to unaudited condensed
consolidated financial statements.
GREENMAN TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOW
(CONCLUDED)
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES
On October 10, 1995, the Company purchased all of the capital stock of
DuraWear Corporation as follows:
Fair value of assets acquired ............. $ 1,704,603
Fair value of liabilities assumed ......... 1,428,081
-----------
Fair value of net assets acquired .......... 276,522
Common stock issued ........................ (375,000)
Cash paid .................................. (400,000)
-----------
Excess of cost over fair value of net assets $ 498,478
===========
See accompanying notes to consolidated financial statements.
GREENMAN TECHNOLOGIES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 28, 1997
1. BASIS OF PRESENTATION
The consolidated financial statements include the results of the Company
and its wholly-owned subsidiary, DuraWear Corporation which was acquired on
October 10, 1995. All significant intercompany accounts and transactions are
eliminated in consolidation.
The financial statements are unaudited and should be read in conjunction
with the financial statements and notes thereto for the fiscal year ended May
31, 1996 included in the Company's Form 10-KSB. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to the Securities and Exchange Commission ("SEC") rules and
regulations, although the Company believes the disclosures which have been made
are adequate to make the information presented not misleading.
The results of operations for the periods reported are not necessarily
indicative of those that may be expected for a full year. In the opinion of
management, all adjustments (consisting only of normal recurring adjustments)
which are necessary for a fair statement of operating results for the interim
periods presented have been made.
2. NET LOSS PER SHARE
Net loss per share is based on the weighted average number of common
shares outstanding during the period. A staff accounting bulletin issued by the
Securities and Exchange Commission requires that common stock, options, warrants
and other potentially dilutive instruments issued within one year prior to the
initial filing of a registration statement for an initial public offering be
treated as outstanding for all periods prior to the effective date of the
registration for purposes of the net loss per share computation.
3. NOTE RECEIVABLE
In September 1996, the Company loaned $100,000 to an unaffiliated
company in the form of a six month secured loan, bearing interest at prime
(8.25% at February 28, 1997) with principal and interest due in March 1997. The
note is secured by an interest in manufacturing equipment utilized by the
unaffiliated company and was repaid in March 1997.
4. NOTES PAYABLE, RELATED PARTIES
During the period of September 1996 to December 1996 the Company
borrowed $550,000 in aggregate from two officers of the Company. These unsecured
notes payable bear interest at prime plus 1.5% (9.75% at February 28, 1997) per
annum with principal and interest due on the earlier of 120 days after the date
of issuance or the tenth business day following the consummation of a minimum
$3,000,000 of additional financing by the Company. The Company repaid $275,000
of principal in January 1997 and has received an extension of maturity for the
remaining balance.
In December 1996, the Company renegotiated the 10% notes payable to
Palomar Medical Technologies, Inc. ("Palomar"), a company in which one of the
Company's directors also holds a position as a divisional officer. The notes 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 principal balance was converted into a 10% secured convertible note
payable, due July 1, 1997 and convertible into the Company's common stock, at
Palomar's option, on July 1, 1997. The conversion price is $1.00 per share. The
note is secured by an interest in the Company's cryogenic tire recycling
equipment.
5. CONVERTIBLE NOTES PAYABLE
In January 1997, the Company concluded a $1,525,000 offering of 7%
convertible subordinated debentures (the "Debentures") and warrants to purchase
762,500 shares of common stock (the "January Offering") at an exercise price of
$1.25 per share. The Debentures are convertible into shares of common stock at a
conversion price equal to the lower of the closing bid price on the date of the
January Offering closing or 70% of the closing bid price on the date prior to
the conversion of such Debentures. The Debentures automatically convert into
shares of common stock one year after issuance. The net proceeds from the
January Offering were approximately $1,310,000 after deducting commissions and
expenses of approximately $214,000. The Company also recorded non-cash deferred
financing costs of $695,000 in connection with the issuance of warrants to
purchase 1,050,000 shares of common stock to the placement agents in accordance
with SFAS No. 123, "Accounting for Stock-Based Compensation". This charge is
being amortized over the maturity of the convertible notes. As of April 10,
1997, approximately 229,673 shares of common stock had been issued pursuant to
Debenture conversions.
GREENMAN TECHNOLOGIES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 28, 1997
6. COMMON STOCK TRANSACTIONS
On September 26, 1996, the Company sold 545,000 shares of common stock
to three foreign investors at $1.51 per share. Net proceeds were $713,227 after
deducting commissions and expenses aggregating $109,723.
7. COMMON STOCK OPTIONS AND WARRANTS
The Company accounts for the fair value of its common stock options and
warrants in accordance with FASB Statement No. 123, "Accounting for Stock-Based
Compensation".
8. SUBSEQUENT EVENTS
In March 1997, the Company commenced the offering of convertible
subordinated debentures (the "March Offering") in an effort to raise up to
$1,500,000 in gross proceeds. On March 9, 1997, the Company closed the sale of
$750,000 of convertible subordinated debentures due eighteen months after
closing and warrants to purchase 150,000 shares of common stock (the "March
Offering") at an exercise price of $1.16 per share. The debentures are
convertible into shares of common stock at a conversion price equal to the lower
of 70% of the average closing bid price on the five trading days preceding the
date of the March Offering closing or 70% of the average closing bid price on
the five trading days preceding the date of the conversion of such debentures.
The debenture holders will receive 4,000 shares of the Company's common stock
upon conversion in lieu of interest for each $100,000 invested. The net proceeds
from the initial portion of the March Offering were approximately $652,500 after
deducting commissions and expenses aggregating approximately $97,500.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following information should be read in conjunction with the
unaudited condensed consolidated financial statements and the notes thereto
included in Item 1 of the Quarterly Report, and the audited consolidated
financial statements and notes thereto and Management's Discussion and Analysis
of Financial Condition and Results of Operations contained in the Company's Form
10-KSB filed for the fiscal year ended May 31, 1996.
OVERVIEW
GreenMan Technologies, Inc. (the "Company" or "GreenMan") 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.
The Company's Molding operation (the "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 facility also
conducts research and development on the Company's GreenMan Environmental
Materials ("GEM") Stock and tests the use of these materials in the manufacture
of a variety of possible 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
fourth quarter of fiscal 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 (manufacturing products for third parties) to captive molding
(manufacturing products under the GreenMan name) activities.
The Company's Recycling operation (the "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
automotive industry with automobile tires; 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. The
Company's GEM Stock and crumb rubber will be used in the production of the
Company's proposed consumer and industrial products, sold as a merchant chemical
to other users of virgin plastic or rubber or sold in its raw state. Through an
agreement with BFI Tire Recyclers of Georgia, Inc., a wholly owned subsidiary of
Browning-Ferris Industries ("BFI"), the Company has secured a multi-year supply
of waste tires to feed the Company's Jackson, Georgia crumb rubber processing
operation.
In October 1995, the Company completed its initial public offering and
received net proceeds of approximately $5,390,000 after underwriting commissions
and other issuance costs paid at the closing.
On October 10, 1995, the Company acquired all of the outstanding common
stock of DuraWear Corporation ("DuraWear"). DuraWear which is located in
Birmingham, Alabama, manufactures, installs and markets a diverse range of high
quality ceramic, polymer composite, and alloy steel materials engineered to
resist severely abrasive and corrosive conditions typically encountered in bulk
material handling systems in such industries as paper and pulp, mining, coal
handling and grain storage and transportation.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED FEBRUARY 28, 1997 COMPARED TO THE THREE MONTHS ENDED
FEBRUARY 29, 1996
Net sales for the three months ended February 28, 1997 were $873,290 as
compared to $1,448,675 for the three months ended February 29, 1996. The
decrease of $575,385 or 40% is primarily due to a reduction in contract molding
and assembly business as customers continued to utilize existing inventories of
products during the first half of the quarter. The receipt of new orders and
molds from new and existing customers during the second half of the quarter
contributed to a 115% increase in molding and assembly business compared to the
previous quarter ended November 30, 1996. The effort to secure additional custom
molding business from new customers is ongoing and will continue until the
Company concludes the transition from custom to captive molding. The Company
anticipates commencing the production of a GEM Stock trash container during the
quarter ended May 31, 1997 and continues to identify and evaluate additional
captive molding opportunities.
Gross profit for the three months ended February 28, 1997 was $123,247
or 14% of net sales as compared to $471,081 or 33% of net sales for the three
months ended February 29, 1996. This decrease is partially attributable to the
reduction in contract molding business as the Company transitions to a series of
Company labeled "green" products, using its own design, molds and sales
distribution. Also having a negative impact on gross profit is the Company's
decision to upgrade its Jackson, Georgia crumb rubber production facility to
produce 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 TDF ("Tire Derived Fuel") as a
way to fulfill its BFI obligation. The Company had a gross loss of $97,292 on
the sale of TDF chips for the quarter ended February 28, 1997. The Company is
obligated to "take or pay for" 605 tons 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
through March 1997.
Research and development expenditures were $38,250 during the three
months ended February 28, 1997 as compared to $13,000 for the same 1996 period.
The significant increase is attributable to the Company's ongoing efforts to
identify new proprietary products and expand the applications of existing
product lines.
Selling, general and administrative expenses were $1,174,973 for the
three months ended February 28, 1997 compared to $736,263 representing a 60% or
$438,710 increase from the same 1996 period. The results for the quarter ended
February 28, 1997 reflect $138,761 of costs associated with the Company's
recycling operation which is operating under limited conditions as a result of
the decision to upgrade the Jackson, Georgia crumb rubber production facility to
produce higher-grade product and redeploy its current equipment. The Company
also recognized a net $361,000 non-cash expense in connection with the issuance
of common stock warrants and options and the repricing of certain previously
issued common stock warrants and options in accordance with SFAS No. 123,
"Accounting for Stock-Based Compensation".
As a result of the foregoing, the operating loss for the three months
ended February 28, 1997 increased by $811,794 to $1,089,976 as compared to an
operating loss of $278,182 for the comparable 1996 period. Approximately 45% of
the increase is attributable to the non-cash impact of implementing FASB No.
123. Interest expense increased by $74,124 to $96,301 for the three months ended
February 28, 1997 due to increased borrowings related to equipment and working
capital financing. The Company also recognized $139,400 of financing expense
amortization associated with the issuance of the January 1997 convertible
debentures. This expense includes $109,000 of non-cash expense in connection
with the issuance of common stock warrants and options in accordance with SFAS
No. 123, "Accounting for Stock-Based Compensation".
The Company experienced a net loss of $1,341,209, or $.24 per share for
the three months ended February 28, 1997 as compared to a net loss of $281,576,
or $.06 per share for the three months ended February 29, 1996.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
NINE MONTHS ENDED FEBRUARY 28, 1997 COMPARED TO THE NINE MONTHS ENDED
FEBRUARY 29, 1996
Net sales for the nine months ended February 28, 1997 were $2,556,297 as
compared to $3,001,200 for the nine months ended February 29, 1996. The decrease
of $444,903 or 15% is due to a 49% decrease in contract molding and assembly
business. This was offset by the inclusion of a full nine months of DuraWear
sales in fiscal 1997 compared to approximately five months in fiscal 1996 as
DuraWear was acquired in October 1995. The reduction in contract molding and
assembly business is attributable to customers utilizing existing inventories of
products during the first half of fiscal 1997. The Company experienced a 115%
increase in molding and assembly revenue in the quarter ended February 28, 1997
compared to the previous quarter ended November 30, 1996 due to the receipt of
new orders and molds from new and existing customers. The effort to secure
additional custom molding business from new customers is ongoing and will
continue until the Company concludes the transition from custom to captive
molding.
Gross profit for the nine months ended February 28, 1997 was $351,707 or
14% of net sales as compared to $814,470 or 27% of net sales for the nine months
ended February 29, 1996. This decrease is partially attributable to the 49%
reduction in contract molding business as the Company transitions to a series of
Company - labeled "green" products, using its own design, molds and sales
distribution. Also having a negative impact on gross profit is the Company's
decision to upgrade its Jackson, Georgia crumb rubber production facility to
produce 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 TDF ("Tire Derived Fuel") as a
way to fulfill its BFI obligation. The Company had a gross loss of $250,316 on
the sale of TDF chips for the nine months ended February 28, 1997. The Company
is obligated to "take or pay for" 605 tons 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
until March 1997.
Research and development expenditures were $155,656 for the nine months
ended February 28, 1997 as compared to $33,324 for the same 1996 period. The
significant increase is attributable to the Company's ongoing efforts to
identify new proprietary products and expand the applications of existing
product lines.
Selling, general and administrative expenses increased $1,790,255 to
$3,212,670 for the nine months ended February 28, 1997 as compared to $1,422,415
for the same 1996 period. The increase was partially attributable to the
inclusion of a full nine months of DuraWear's operating expenses totaling
$794,909 which resulted in a $305,068 increase in expenses for the nine months
ended February 28, 1997 compared to the same 1996 period. These expenses include
$87,500 relating to amortization of a three-year non-competition agreement and
$37,386 relating to goodwill amortization. In addition, the Company initiated a
significant financial public relations campaign during the first quarter which
resulted in a one time charge of approximately $200,000. This campaign consisted
of newsprint articles, television features and the mailing of over 100,000
financial information packages to potential investors. The results for the nine
months ended February 28, 1997 also reflect $371,439 of costs associated with
the Company's recycling operation which is operating under limited conditions as
a result of the decision to upgrade the Jackson, Georgia crumb rubber production
facility to produce higher-grade product and redeploy its current equipment. The
Company also recognized $616,070 in non-cash expenses in connection with the
issuance of common stock warrants and options and the repricing of certain
previously issued common stock warrants and options in accordance with SFAS No.
123, "Accounting for Stock-Based Compensation". In addition, the Company's
expenses increased due to increased corporate development and marketing
activities.
As a result of the foregoing, the operating loss for the nine months
ended February 28, 1997 increased by $2,375,350 to $3,016,619 as compared to an
operating loss of $641,269 for the comparable 1996 period. Approximately 26% of
the increase is attributable to the non-cash impact of implementing FASB No.
123. Interest expense increased by $113,302 to $275,906 for the nine months
ended February 28, 1997 due to increased borrowings related to equipment and
working capital financing. The Company also recognized $175,533 of financing
expense amortization associated with the Company's efforts to raise additional
capital during fiscal 1997. This expense includes $145,133 of non-cash expense
in connection with the issuance of common stock warrants and options in
accordance with SFAS No. 123, "Accounting for Stock-Based Compensation".
The Company experienced a net loss of $3,498,550, or $.65 per share for
the nine months ended February 28, 1997 as compared to a net loss of $763,950,
or $.17 per share for the nine months ended February 29, 1996.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
Since its inception, the Company has satisfied its capital requirements
through the sale of common and preferred stock to investors, loans from
affiliated and unaffiliated lenders, the acquisition of machinery and equipment
through capital leases and notes payable, and the issuance of common stock and
common stock options and warrants in lieu of cash for services rendered.
During June 1996, the Company borrowed $200,000 from Palomar Medical
Technologies, Inc. ("Palomar"), a company in which one of the Company's
directors also holds a position as a divisional officer of the company. The note
payable bears interest at 10% per annum with principal and interest due at the
earlier of the tenth business day following the consummation by the Company of a
minimum $3,000,000 of additional financing or January 1, 1997.
During September 1996, the Company sold 545,000 shares of common stock
to three foreign investors at $1.51 per share. Net proceeds were $713,227 after
deducting commissions and expenses aggregating $109,723. Approximately $521,000
of the proceeds were utilized to repay loans from Palomar.
In December 1996, the Company renegotiated the 10% notes payable to
Palomar 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 principal balance was converted into a 10% secured
convertible note payable, due July 1, 1997 and convertible into the Company's
common stock, at Palomar's option, on July 1, 1997 at a conversion price of
$1.00 per share. The note is secured by an interest in the Company's cryogenic
tire recycling equipment.
During the period of September 1996 to December 1996 the Company
borrowed $550,000 in the aggregate from two officers of the Company. These
unsecured notes payable bear interest at prime plus 1.5% (9.75% at February 28,
1997) per annum with principal and interest due on the earlier of 120 days after
the date of issuance or the tenth business day following the consummation of a
minimum $3,000,000 of additional financing by the Company. The Company repaid
$275,000 of principal in January 1997 and has received an extension of maturity
for the remaining balance.
In January 1997, the Company concluded a $1,525,000 offering of 7%
convertible subordinated debentures and warrants to purchase 762,500 shares of
common stock (the "January Offering") at an exercise price of $1.25 per share.
The debentures sold are convertible into shares of common stock at a conversion
price equal to the lower of the closing bid price on the date of the January
Offering closing or 70% of the closing bid price on the date prior to the
conversion of such debentures. The net proceeds from the January Offering were
approximately $1,310,000 after deducting commissions and expenses of
approximately $215,000. Approximately $304,000 of the proceeds were utilized to
repay loans from officers.
At February 28, 1997, the Company had cash of $134,231, a working
capital deficit of $4,413,630, net capital of $2,092,045 and accumulated losses
of $7,197,004.
In March 1997, the Company commenced the offering of convertible
subordinated debentures in an effort to raise upto $1,500,000 in gross proceeds.
On March 9, 1997, the Company closed on the sale of $750,000 of convertible
subordinated debentures and warrants to purchase 150,000 shares of common stock
(the "March Offering") at an exercise price of $1.16 per share. The debentures
sold are convertible into shares of common stock at a conversion price equal to
the lower of 70% of the average closing bid price on the five days preceding the
date of the March Offering closing or 70% of the average closing bid price on
the five days preceding the date of the conversion of such debentures. The
debenture holders receive 4000 shares of common stock upon conversion in lieu of
interest for each $100,000 invested. The net proceeds from the March Offering
were approximately $652,500 after deducting commissions and expenses aggregating
approximately $97,500.
Based on the Company's operating plans, management believes that the
available working capital together with revenues from operations, the sale of
convertible debentures and common stock and the purchase of equipment through
lease financing arrangements, will be sufficient to meet the Company's cash
requirements through the first quarter of fiscal 1998. 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 immediate
financing alternatives and diligently working to determine the feasibility of
each alternative. 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.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FACTORS AFFECTING FUTURE RESULTS
The Company's revenue and operating results may fluctuate from quarter
to quarter and from year to year due to a combination of factors, including: (i)
production of crumb rubber in commercial quantities at a price that will be
competitive in the market; (ii) the Company's ability to secure additional
customers for its products thereby reducing its reliance on a few major
customers; (iii) market acceptance of the Company's proposed GEM Stock material
and GreenMan consumer products; (iv) ability to obtain raw materials from
suppliers on terms acceptable to the Company; and (v) general economic
conditions. The Company's plans and objectives are based on assumptions that the
Company will be successful in producing crumb rubber at a price that will be
competitive in the market, that the Company will be successful in receiving
additional financing to fund future growth and that there will be no material
adverse change in the Company's operations or business.
Assumptions relating to the foregoing involve judgments with respect to,
among other things, future economic, competitive and market conditions all of
which are difficult or impossible to predict accurately and many of which are
beyond the control of the Company. As a result of the foregoing, there can be no
assurance that the Company will be able to achieve or sustain profitability on a
quarterly or annual basis. In light of the significant uncertainties inherent in
the Company's business, forward looking statements made in this report should
not be regarded as representations by the Company or any other person that the
objectives and plans of the Company will be achieved.
PART II - OTHER INFORMATION
FEBRUARY 28, 1997
Item 1. Legal Proceedings
There has been no significant change in legal proceedings during
the quarter ended February 28, 1997.
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits. The following exhibits, required by Item 601 of
Regulation S-13 are filed as part of this
Quarterly Report on Form 10-QSB
Exhibit 10.1 -- 10% Secured Convertible Promissory Note, issued
December 31, 1996, by GreenMan Technologies, Inc.
to Palomar Medical Technologies, Inc.
Exhibit 10.2 -- Security Interest, dated December 31, 1996,
issued by GreenMan Technologies, Inc. to Palomar
Medical Technologies, Inc.
Exhibit 10.3* -- Form of Subscription Agreement, dated January
1997, issued by GreenMan Technologies, Inc. to
various investors.
Exhibit 10.4* -- Form of 7% Convertible Debenture, dated January
1997, issued by GreenMan Technologies, Inc. to
various investors.
Exhibit 10.5* -- Form of Common Stock Purchase Warrant, dated
January 1997, issued by GreenMan Technologies,
Inc. to various investors.
Exhibit 11.0 -- Statement regarding net loss per share.
Exhibit 27 -- Financial Data Schedule
-------------------
* Filed as an exhibit to the Company's Form 8-K, dated
January 29, 1997
(b) On January 29, 1997, the Company filed a Form 8-K describing the
issuance of $1,525,000 of 7% convertible subordinated debentures and warrants to
purchase 762,500 shares of common stock at an exercise price of $1.25 per share.
The debentures were sold pursuant to Regulation D of the Securities Act of 1933,
as amended (the "Act") and are convertible into shares of common stock at a
conversion price equal to the lower of the closing bid price on the date of the
closing or 70% of the closing bid price on the date prior to the conversion of
such debentures.
Pursuant to the terms of the subscription agreement between the
Company and each of the purchasers, the Company agreed to register the Common
Stock issuable upon conversion of such debentures and exercise of such warrants
on a Form S-3 registration statement on or before March 27, 1997. In the event
that the registration statement was not declared effective on or before such
date, all non-U.S. investors would be entitled to resell the common stock
issuable upon conversion of such debentures and warrants pursuant to Regulation
S of the Act. The Company's From S-3 was filed as of March 5, 1997 and declared
effective on March 24, 1997.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934 , the
Registrant certifies that it has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
By: GreenMan Technologies, Inc.
/s/ Maurice E. Needham
----------------------
MAURICE E. NEEDHAM
CHIEF EXECUTIVE OFFICER AND CHAIRMAN OF THE BOARD
Signature Title(s) Date
--------- -------- ----
/s/ Maurice E. Needham Chief Executive Officer and April 14, 1997
- ---------------------- Chairman of the Board
Maurice E. Needham (Principal Executive Officer)
/s/ Joseph E. Levangie Chief Financial Officer and Director April 14, 1997
- ---------------------- (Principal Financial Officer and
Joseph E. Levangie Principal Accounting Officer)
EXHIBIT 10.1
10% SECURED CONVERTIBLE NON-NEGOTIABLE PROMISSORY NOTE
$1,200,000.00 Lynnfield, Massachusetts
December 31, 1996
On July 1, 1997 (the "Maturity Date"), for value received, the
undersigned GreenMan Technologies, Inc., a Delaware corporation (the "Maker"),
promises to pay to Palomar Medical Technologies, Inc., a Delaware corporation
(the "Payee"), the principal sum of One Million Two Hundred Thousand United
States Dollars ($1,200,000) or the then outstanding principal amount hereof,
together with interest on any and all principal amounts remaining unpaid
hereunder from time to time outstanding from the date hereof until payment in
full, such interest to be payable at such rates and such times as are
hereinafter specified.
1. INTEREST AND PRINCIPAL
1.01 Interest. The Maker shall pay interest on the outstanding
principal amount of this Note from the date hereof until such principal amount
is paid in full at the rate of ten percent (10%) per annum. Interest payments
shall be due on July 1, 1997 (the "Payment Date"). Any overdue installment of
interest or principal shall bear interest at the rate of fifteen percent (15%)
per annum. Interest shall be calculated on the basis of a 365 day year for the
actual number of days elapsed.
1.02 Principal. The entire outstanding principal of this Note together
with interest accrued thereon shall be paid on July 1, 1997.
1.03 Prepayment. This Note may be prepaid, without premium or penalty,
in whole or in part, at any time or from time to time after December 31, 1996,
at the option of the Maker, by paying to the Payee an amount equal to the amount
to be prepaid together with interest accrued thereon through the date of
prepayment.
1.04 Delivery of Payment. All payments made hereunder shall be made by
check mailed first class, postage paid to the Payee at the address set forth
above or to such other address as the Payee may from time to time designate in
writing to the Maker. Such payments shall be accompanied by a notice setting
forth in reasonable detail (a) the amount of interest and principal being paid
and (b) the remaining principal amount. If any payments are required to be made
on a day which is not a Business Day (as hereinafter defined) the date on which
such payment is required to be made shall be extended to, and such payment shall
be required to be made on, the next Business Day. "Business Day" shall mean a
day other than Saturday, Sunday and any day which shall be in the City of
Beverly, Massachusetts, a legal holiday or a day on which banking institutions
are authorized by law to close.
2. AGREEMENTS
2.01 Security. The Maker hereby grants, conveys, and assigns to the
Payee security interest in the following described property, to wit: the
Collateral, as such term is defined in that certain Security Agreement, of even
date herewith, by and between the Maker and the Payee as security for the
payment of the obligations of the Maker under the Note. Any disposition of the
Collateral by or on behalf of the Payee shall be made in accordance with the
provisions of that certain Security Agreement, of even date herewith, by and
between the Maker and the Payee.
1
3. DEFAULTS AND REMEDIES
3.01 Events of Default. An "Event of Default" shall occur if:
(a) the Maker defaults in the payment of interest on this Note
when the same becomes due and payable and such Default continues for a
period of 30 days;
(b) the Maker defaults in the payment of principal on this
Note when the same becomes due and payable, at maturity or otherwise,
and such Default continues for a period of 30 days;
(c) the Maker fails to comply with any of the other agreements
contained in this Note, and the Default continues for the period and
after the notice specified below;
(d) the Maker pursuant to or within the meaning of any
Bankruptcy Law (as defined below):
(i) commences a voluntary case;
(ii) consents to the entry of an order against it for
relief in an involuntary case; or
(iii) makes a general assignment for the benefit of
its creditors; or
(e) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that:
(i) is for relief against the Maker in an involuntary
case;
(ii) appoints a Custodian (as hereinafter defined)
for all or substantially all of the assets of the Company; or
(iii) orders a liquidation of the Company.
The term "Bankruptcy Law" means Title 11, U.S. Code or any similar
federal or state law. The term "Custodian" means any receiver, trustee,
assignee, liquidator, or similar official under any Bankruptcy Law.
A default under clause (c) above shall not constitute an Event of
Default until Payee notifies the Maker of the Default and the Maker does not
cure the Default within 60 days of such notice. The notice must specify the
Event of Default, demand that it be remedied, and state that it is a notice of
Event of Default.
3.02 Acceleration. If an Event of Default occurs and is continuing, the
holder of this Note may, by notice to the Maker, declare the principal of and
accrued interest on this Note to be immediately due and payable.
3.03 Other Remedies. Subject to Section 3.02, if an Event of Default
occurs and is continuing, the holder of this Note may pursue any available
remedy to collect the payment of interest, principal or premium, if any, on this
Note or to enforce any provision of this Note. A delay or omission by the holder
of this Note in exercising any right or remedy accruing upon an Event of Default
shall not impair the right or remedy or constitute a waiver or acquiescence in
the Event of Default. All remedies are cumulative to the extent permitted by
law.
2
4. CONVERSION
4.01 Conversion Privilege. Payee may convert this Note into the Common
Stock, $.01 par value per share ("Common Stock") of Maker at any time after June
1, 1997 and before the close of business on the maturity date of this Note. The
number of shares of Common Stock issuable upon conversion of the Note shall be
determined by dividing the principal amount to be converted by the conversion
price in effect on the conversion date and rounding down to the nearest full
share.
The initial conversion price shall be $1.00 per share, subject to
adjustment in certain events.
4.02 Conversion Procedure. To convert the Note, Payee shall surrender
the Note to Maker. As soon as practical thereafter, the Company shall deliver,
or cause to be delivered, a certificate for the number of full shares of Common
Stock issuable upon the conversion and a check for the value of any fractional
share. The person in whose name the certificate is registered shall be treated
as a stockholder of record on and after the conversion date.
If the Note is converted in part, the Maker shall issue to the Payee a
new Note equal in principal amount to the unconverted portion of the Note
surrendered.
If the last day on which a Note may be converted is not a Business Day,
the Note may be submitted for conversion on the next succeeding day that is a
Business Day.
4.03 Fractional Shares. Maker shall not issue a fractional share of
Common Stock upon conversion of the Note. Instead, Maker shall deliver its check
for the current market value of the fractional share. The current market value
of a fraction of a share shall be determined by multiplying the Current Market
Price (as hereinafter defined) of a full share by the fraction and rounding
upward to the nearest cent.
The "Current Market Price" means the average of the Closing Market
Prices (as hereinafter defined) for each of the trailing 30 trading days prior
to the determination on the Current Market Price. The "Closing Market Price"
means (a) the closing bid price on the NASDAQ National Market System (if so
quoted) or the NASDAQ Small Cap listings (if so quoted), in each case as
reported in the Wall Street Journal, or by the National Quotation Bureau, Inc.,
or (b) if the Common Stock shall not be so quoted, if the Common Stock shall be
traded on the New York Stock Exchange or the American Stock Exchange, the
closing sales price of the Common Stock on the exchange on which the Common
Stock is listed or if there shall have been no sales on any day for which the
Current Market Price is to be determined then the average of the bid and asked
price at the end of such day. In the absence of such a quotation, the Maker
shall determine the Current Market Price on the basis of such quotations as it
considers appropriate.
4.04 Taxes on Conversion. Maker shall pay any documentary, stamp or
similar issue or transfer tax due on the issue of shares of Common Stock upon
the conversion. However, Payee shall pay any such tax which is due because the
shares are issued in a name other than such Payee's name.
4.05 Maker to Provide Stock. Maker shall, prior to June 1, 1997,
reserve out of its authorized but unissued Common Stock or its Common Stock held
in treasury enough shares of Common Stock to permit the conversion of this Note.
All shares of common Stock which may be issued upon conversion of the
Note shall be fully paid and non-assessable.
Maker shall comply with all securities laws regulating the offer and
delivery of shares of Common Stock upon conversion of the Note and shall use its
best efforts to list such shares on each national securities exchange on which
the Common Stock is listed and on the NASDAQ if the Common Stock is so listed.
3
4.06 Adjustment for Changes in Capital Stock. If Maker:
(a) pays a dividend or makes a distribution on its Common
Stock in shares of its Common Stock;
(b) subdivides its outstanding shares of Common Stock into a
greater number of shares;
(c) combines its outstanding shares of Common Stock into a
smaller number of shares;
(d) makes a distribution on its Common Stock in shares of its
capital stock other than Common Stock; or
(e) issues by reclassification of its Common Stock any shares
of its capital stock,
then the conversion privilege and the conversion price in effect immediately
prior to such action shall be adjusted so that the Payee may receive the number
of shares of capital stock of the Company or amount of other consideration which
Payee would have received immediately following such action if Payee had
converted the Note immediately prior to such action.
The adjustment shall become effective immediately after the record date
in the case of a dividend or distribution and immediately after the effective
date in the case of a subdivision, combination or reclassification.
4.07 Adjustment for Rights Issue. If Maker distributes any rights or
warrants to all holders of its Common Stock entitling them for a period expiring
within 60 days after the record date mentioned below to purchase shares of
Common Stock at a price per share less than the Current Market Price per share
on that record, the conversion price shall be adjusted in accordance with the
formula:
N x P
-----
O + M
------
C1 = C x
O + N
where:
C1 = the adjusted conversion price.
C = the current conversion price.
O = the number of shares of Common Stock outstanding on the record date.
N = the number of additional shares of Common Stock offered.
P = the offering price per share of the additional shares.
M = the current market price per share of Common Stock on the
record date.
The adjustment shall become effective immediately after the record date
for the determination of stockholders entitled to receive the rights or
warrants.
4.08 Adjustment for Other Distributions. If Maker distributes to all
holders of its Common Stock any of its assets or debt securities or any rights
or warrants to purchase securities of Maker, the conversion price shall be
adjusted in accordance with the formula:
M - F
-----
C1 = C x
M
4
where:
C1 = the adjusted conversion price.
C = the current conversion price.
M = the Current Market Price per share of Common
Stock on the record date mentioned below.
F = the fair market value on he record date of the assets,
securities, rights or warrants applicable to one
share of Common Stock. Maker shall determine the fair
market value.
The adjustment shall become effective immediately after the record date
for the determination of stockholders entitled to receive the distribution.
This Section 4.08 does not apply to (a) cash dividends or cash
distributions paid out of consolidated current or retained earnings as shown on
the books of the Company, or (b) rights or warrants referred to in Section 4.07.
4.09 When Adjustment May Be Deferred. No adjustment in the conversion
price need be made unless the adjustment would require an increase or decrease
of at least 1% in the conversion price. Any adjustments that are not made shall
be carried forward and taken into account in any subsequent adjustment.
All calculations under this Section 4 shall be made to the nearest cent
or to the nearest whole share, as the case may be.
4.10 When No Adjustment Required. No adjustment need be made for rights
to purchase Common Stock pursuant to a plan of the Maker for reinvestment of
dividends or interest. No adjustment need be made for a change in, or
elimination of, the par value of the Common Stock.
To the extent the Note becomes convertible into cash, no adjustment
need be made thereafter as to the cash. Interest will not accrue on the cash.
4.11 Notice of Adjustment. Whenever the conversion price is adjusted,
Maker shall promptly mail to Payee a notice of the adjustment briefly stating
the facts requiring the adjustment and the manner of computing it. Absent
manifest error, the notice shall be conclusive evidence that the adjustment is
correct.
4.12 Notice of Certain Transactions. If:
(a) Maker takes any action that would require an adjustment in
the conversion price pursuant to Section 4.06, 4.07 or 4.08;
(b) Maker takes any action that would require a supplement to
this Note pursuant to Section 4.13; or
(c) there is a liquidation or dissolution of Maker,
Maker shall mail to Payee a notice stating the proposed record date for a
dividend or distribution or the proposed effective date of a subdivision,
combination, reclassification, consolidation, merger, transfer, lease,
liquidation or dissolution. Maker shall mail the notice at least 15 days before
such date. Failure to mail the notice or any defect in it shall not affect the
validity of the transaction.
5
4.13 Reorganization of Maker. If Maker is a party to a merger which
reclassifies or changes its outstanding Common Stock the person obligated to
deliver securities, cash or other assets upon conversion of this Note shall
enter into a supplement to this Note. If the issuer of securities deliverable
upon conversion of the Note is an affiliate of the surviving, transferee or
lessee corporation, that issuer shall join in the supplement.
The supplement to this Note shall provide that the Payee may convert it
into the kind and amount of securities, cash or other assets which he would have
owned immediately after the consolidation, merger, transfer or lease if he had
converted the Note immediately before the effective date of the transaction. The
supplement to this Note shall provide for adjustments which shall be as nearly
equivalent as may be practical to the adjustments provided for in this Section
4. The successor to Maker shall mail to Payee a notice briefly describing the
supplement to this Note.
If this Section applies, Section 4.06 shall not apply.
4.14 Maker Determination Final. Absent manifest error, any
determination that the Maker or its Board of Directors shall make pursuant to
Section 4.03, 4.06, 4.07, 4.08 or 4.11 shall be conclusive and binding upon the
Payee.
5. USURY
It is the intention of the parties hereto to conform strictly to
applicable usury laws now or hereafter in effect. In the event that any of the
terms or provisions of this Note are in conflict with applicable usury law this
Section 5 shall govern as to such terms or provisions, and this Note shall in
all other respects remain in full force and effect. If any transaction
contemplated hereby would be usurious, it is agreed that the aggregate of all
consideration which constitutes interest under applicable law that is contracted
for, charged or received under this Note shall under no circumstances exceed the
maximum interest allowed by applicable law. Accordingly, if interest in excess
of the legal maximum is contracted for, charged or received: (i) this Note shall
be automatically reformed so that the effective rate of interest shall be
reduced to the maximum rate of interest permitted by applicable law, for the
purpose of determining said rate and to the extent permitted by applicable law,
all interest contracted for, charged or received shall be amortized, prorated
and spread throughout the full term of this Note so that the effective rate of
interest is uniform throughout the life of this Note, and (ii) any excess of
interest over the maximum amount allowed under applicable law shall be applied
as a credit against the then unpaid principal amount hereof.
6. MISCELLANEOUS
The undersigned hereby waives presentment, demand for payment, notice
of dishonor, and any and all other notices or demands in connection with the
delivery, acceptance, performance, default or enforcement of this Note, and
hereby consents to any extensions of time, renewals, releases of any party to
this Note, waivers or modifications that may be granted or consented to by the
Payee in respect to the time of payment or any other provision of this Note.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS
(EXCLUSIVE OF THE LAWS GOVERNING CONFLICTS OF LAWS) OF THE COMMONWEALTH OF
MASSACHUSETTS.
By: Maurice E. Needham
----------------------
Name: Maurice E. Needham
Title: Chief Executive Officer
6
Exhibit 10.2
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "Security Agreement") dated as of
December 31, 1996 between GreenMan Technologies, Inc., a Delaware corporation
(the "Company"), and Palomar Medical Technologies, Inc. (the "Secured Party");
W I T N E S S E T H T H A T:
WHEREAS, the Company owes the Secured Party one million two hundred
ninety seven thousand three hundred and seventy dollars ($1,297,370) pursuant to
a note dated December 31, 1996, by the Company in favor of the Secured Party in
the principal amount of $1,200,000 (the "Note");
WHEREAS, in order to induce the Secured Party not to call the Loan, the
Company has agreed to grant a continuing security interest in and to the
Collateral (as hereafter defined) to secure its obligations under the Note;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and intending to be legally bound hereby, the parties hereto agree
as follows:
SECTION 1. Definitions
Terms defined in the Note and not otherwise defined herein have, as
used herein, the respective meanings provided for therein. The following
additional terms, as used herein, have the following respective meanings:
"Accounts" means all "accounts" as defined in the Uniform Commercial
Code ("UCC") (as defined below) now owned or hereafter acquired by the Company
and shall also mean and include all accounts receivable, contract rights, book
debts, notes, drafts and other obligations or indebtedness owing to the Company
arising from the sale, lease or exchange of goods or other property by it and/or
the performance of services by it (including, without limitation, any such
obligation which might be characterized as an account, contract right or general
intangible under the Uniform Commercial Code in effect in any jurisdiction) and
all of the Company's rights in, to and under all purchase orders for goods,
services or other property, and all of the Company's rights to any goods,
services or other property represented by any of the foregoing (including
returned or repossessed goods and unpaid sellers rights of rescission, replevin,
reclamation and rights to stoppage in transit) and all monies due to or to
become due to the Company under all contracts for the sale, lease or exchange of
goods or other property and/or the performance of services by it (whether or not
yet earned by performance on the part of the Company), in each case whether now
in existence or hereafter arising or acquired including, without limitation, the
right to receive the proceeds of said purchase orders and contracts and all
collateral security and guarantees of any kind given by any Person with respect
to any of the foregoing.
"Collateral" has the meaning set forth in Section 3.
"Documents" means all "documents" (as defined in the UCC) or other
receipts covering, evidencing or representing goods, now owned or hereafter
acquired, by the Company.
"Equipment" means all "equipment" (as defined in the UCC) now owned or
hereafter acquired by the Company, including, without limitation, all motor
vehicles, trucks and trailers.
"General Intangibles" means all "general intangibles" (as defined in
the UCC) now owned or hereafter acquired by the Company, including, without
limitation, all obligations or indebtedness owing to the Company (other than
Accounts) from whatever source arising, and all patent licenses, patents,
trademark licenses, trademarks, rights in intellectual property, goodwill, trade
names, service marks, mask works, trade secrets, copyrights, permits and
licenses.
"Instruments" means all "instruments", "chattel paper" or "letters of
credit" (each as defined in the UCC) evidencing, representing, arising from or
existing in respect of, relating to, securing or otherwise supporting the
payment of, any of the Accounts, including, without limitation, promissory
notes, drafts, bills of exchange and trade acceptances, now owned or hereafter
acquired by the Company.
"Inventory" means all "inventory" (as defined in the UCC), now owned or
hereafter acquired by the Company, wherever located, and shall also mean and
include, without limitation, all raw materials and other materials and supplies,
work-in-process and finished goods and any products made or processed therefrom
and all substances, if any, commingled therewith or added thereto.
"Perfection Certificate" means a certificate substantially in the form
of Exhibit A hereto, completed and supplemented with the schedules and
attachments contemplated thereby to the satisfaction of the Secured Party, and
duly executed by the chief financial officer of the Company.
"Permitted Financing Statements" means any financing statements naming
the Company as Debtor filed in connection with any liens permitted under Section
3 of the Note.
"Permitted Liens" means the Security Interests and the liens on the
Collateral permitted to be created assumed or to exist pursuant to Section 3 of
the Note.
"Proceeds" means all proceeds of, and all other profits, rentals or
receipts, in whatever form, arising from the collection, sale, lease, exchange,
assignment, licensing or other disposition of, or realization upon, collateral,
including, without limitation, all claims of the Company against third parties
for loss of, damage to or destruction of, or for proceeds payable under, or
unearned premiums with respect to, policies of insurance in respect of, any
collateral, and any condemnation or requisition payments with respect to any
collateral, in each case whether now existing or hereafter arising.
"Secured Obligations" means all obligations of the Company to the
Secured Party under the Note.
"Security Interests" means the security interests granted pursuant to
Section 3, as well as all other security interests created or assigned as
additional security for the Secured Obligations pursuant to the provisions of
this agreement.
"UCC" means the Uniform Commercial Code as in effect on the date hereof
in Georgia; provided that if by reason of mandatory provisions of law, the
perfection or the effect of perfection or non-perfection of the Security
Interests in any Collateral is governed by the Uniform Commercial Code as in
effect in a jurisdiction other than Georgia, "UCC" means the Uniform Commercial
Code as in effect in such other jurisdiction for purposes of the provisions
hereof relating to such perfection or effect of perfection or nonperfection.
SECTION 2. Representations and Warranties
The Company represents and warrants as follows:
(A) The Company has good title to all of the Collateral, free
and clear of any Liens other than the Permitted Liens.
(B) Neither the Company (nor its predecessors has performed )
any acts which might prevent the Secured Party from enforcing any of the terms
of this Agreement or which would limit the Secured Party in any such
enforcement. Other than the Permitted Financing Statements and financing
statements or other similar or equivalent documents or instruments with respect
to the Security Interests and Permitted Liens, no financing statement, mortgage,
security agreement or similar or equivalent document or instrument covering all
or any part of the Collateral is on file or of record in any jurisdiction in
which such filing or recording would be effective to
-2-
perfect a Lien on such Collateral. No Person named as secured party in any
Permitted Financing Statement has any Lien on any of the Collateral. No
Collateral is in the possession of any Person (other than the Company) asserting
any claim thereto or security interest therein, except that the Secured Party or
its designee may have possession of Collateral as contemplated hereby.
(C) Not later than the date hereof, the Company shall deliver the
Perfection Certificate to the Secured Party. The information set forth therein
shall be correct and complete.
(D) When UCC financing statements in appropriate form have been filed
in the offices specified in the Perfection Certificate to the extent that a
security interest therein may be perfected by filing pursuant to the UCC, the
Security Interests shall constitute valid and perfected security interests in
the Collateral (except Inventory in transit), in each case prior to all other
Liens and rights of others therein except for the Permitted Liens.
(E) The Inventory and Equipment are insured in accordance with the
requirements of this Security Agreement.
SECTION 3. The Security Interests
(A) In order to secure the full and punctual payment of the Secured
Obligations in accordance with the terms thereof, and to secure the performance
of all of the obligations of the Company hereunder, the Company hereby
hypothecates, assigns, pledges and grants to the Secured Party a continuing
security interest in and to all right, title and interest of the Company in the
following property, whether now owned or existing or hereafter acquired or
arising and regardless of where located (all being collectively referred to as
the "Collateral"):
(1) A CRT-1 System used to recover crumb rubber from discarded
automobile tires through a cryogenic freezing process, consisting of
the following equipment:
(a) Tire Shredder - Weight 2.5 Tons
2829 mm X 915 mm X 2134 mm
(b) Feeder - screw conveying system - Weight 1 Ton
5182 mm X 250 mm X 250 mm
(c) Freezing System
Naturally cooling air freezing system -
Weight 9.6 Tons 4960 mm X 1800 mm X 3500 mm
(d) Processing Chamber
Stainless steel Freezing chamber - Weight
2.5 Tons 5790 mm X 1016 mm X 1016 mm
(e) Hammer Mill - Heavy duty magnesium - Weight 3.5
Tons Custom Designed by Crumb Rubber Technology
3708 mm X 3708 mm X 2515 mm
(f) Screw Conveyer - Heavy duty magnesium - Custom
Built to Size
(g) Vibrating Fiber Separator - Custom
designed from fiber from tires - Weight 1.5 Tons
2630 mm X 1315 mm X 1389 mm
(h) Magnetic Separator - Stainless Steel - Weight .5 Ton
4058 mm X 550 mm X 3716 mm
(i) Crumb Rubber Classification System -
Vibrating Screen Tables, Various Mesh Sizes
- Weight .5 Ton 1000 mm X 1000 mm X 1200 mm
(j) Control Panel for Items (a) through (i).
-3-
(2) All books and records (including, without limitation, customer
lists, marketing information, credit files, price lists, operating records,
vendor and supplier price lists, sales literature, computer programs, printouts
and other computer materials and records) of the Company pertaining to the
equipment listed in item 3(A)(1) above; and
(3) All Proceeds of, attachments or accessions to, or substitutions for
all the equipment listed in item 3(A)(1) above.
(B) The Security Interests are granted as security only and shall not
subject the Secured Party to, or transfer or in any way affect or modify, any
obligation or liability of the Company with respect to any of the Collateral or
any transaction in connection therewith.
SECTION 4. Further Assurances; Covenants
The Company covenants as follows:
(A) The Company will not, without giving the Secured Party 60 days
prior written notice, change (i) the locations of its places of business and its
chief executive office or (ii) the locations where it keeps or holds the
Collateral or records relating thereto from the applicable locations described
in the Perfection Certificate, or (iii) its name, identity or corporate
structure in any manner. In the event of any such change, the Company shall, at
its cost and expense, cooperate with the Secured Party and cause to be filed or
recorded additional financing statements, amendments or supplements to existing
financing statements, continuation statements or other documents required to be
recorded or filed in order to perfect and protect the Security Interests.
(B) The Company will, from time to time, at its expense, execute,
deliver, file and record any statement, assignment, instrument, document,
agreement or other paper and take any other action (including, without
limitation, any filings of financing or continuation statements under the UCC)
that the Secured Party may from time to time reasonably determine to be
necessary or desirable in order to create, preserve, upgrade in rank (to the
extent required hereby), perfect, confirm or validate the Security Interests or
to enable the Secured Party to obtain the full benefits of this Agreement, or to
enable the Secured Party to exercise and enforce any of its rights, powers and
remedies hereunder with respect to the Collateral. To the extent permitted by
law, the Company hereby authorizes the Secured Party to execute and file
financing statements or continuation statements without the Company's signature
appearing thereon. The Company agrees that a carbon, photographic or other
reproduction of this Security Agreement or of a financing statement is
sufficient as a financing statement. The Company shall pay the costs of, or
incidental to, any recording or filing of any financing or continuation
statements concerning the Collateral.
(C) If the Collateral is at any time in the possession or control of
any warehouseman, bailee or any of the Company's agents or processors, the
Company shall, upon the request of the Secured Party, notify such warehouseman,
bailee, agent or processor of the Security Interests created hereby and to hold
all such Collateral for the Secured Party's account subject to the Secured
Party's instructions.
(D) The Company shall keep complete and accurate books and records
relating to the Collateral, and stamp or otherwise mark such books and records
in such manner as the Secured Party may reasonably request in order to reflect
the Security Interests.
(E) Without the prior written consent of the Secured Party, the Company
will not (a) sell, lease, exchange, assign or otherwise dispose of, or grant any
option with respect to, any Collateral and, in the case of any such sale or
exchange, the Security Interests created hereby in such item (but not in any
Proceeds arising from such sale or exchange) shall cease immediately without any
further action on the part of the Secured Party; or (b) create, incur or suffer
to exist any Lien with respect to the Collateral, except for the Permitted
Liens.
-4-
(F) The Company will maintain, with financially sound and reputable
companies, insurance policies (1) insuring the Collateral against loss by fire,
explosion, theft and such other casualties as may be reasonably satisfactory to
the Secured Party and (2) insuring the Company and the Secured Party against
liability for personal injury and property damage relating to the Collateral,
such policies to be in such form and amounts and having such coverage as may be
reasonably satisfactory to the Secured Party, with losses payable to the Company
and the Secured Party as their respective interests may appear. All such
insurance shall (a) contain a breach of warranty clause in favor of the Secured
Party, (b) provide that no termination, cancellation, material reduction in
amount or material change in coverage thereof shall be effective until at least
30 days after receipt by the Secured Party of written notice thereof, (c) in the
case of the policies referenced in (2) above, name the Secured Party as
additional insured and (d) be reasonably satisfactory in all other respects to
the Secured Party. From time to time upon the request of the Secured Party, the
Company shall deliver to the Secured Party a report of a reputable insurance
broker with respect to such insurance in such form as the Secured Party may from
time to time reasonably request.
(G) The Company will, promptly upon request, provide to the Secured
Party all information and evidence it may reasonably request concerning the
Collateral, to enable the Secured Party to enforce the provisions of this
Security Agreement.
SECTION 5. General Authority
The Company hereby irrevocably appoints the Secured Party its true and
lawful attorney, with full power of substitution, in the name of the Company,
the Secured Party, or otherwise, for the sole use and benefit of the Secured
Party, but at the Company's expense, to the extent permitted by law to exercise,
at any time and from time to time while an Event of Default has occurred and is
continuing, all or any of the following powers with respect to the Collateral:
(i) to demand, sue for, collect, receive and give acquittance for any
and all monies due or to become due thereon or by virtue thereof,
(ii) to settle, compromise, compound, prosecute or defend any action or
proceeding with respect thereto,
(iii) to sell, transfer, assign or otherwise deal in or with the same
or the proceeds or avails thereof, as fully and effectually as if the Secured
Party were the absolute owner thereof, and
(iv) to extend the time of payment of any or all thereof and to make
any allowance and other adjustments with reference thereto;
provided that the Secured Party shall give the Company not less than ten days
prior written notice of the time and place of any sale or other intended
disposition of the Collateral. The Company agrees that such notice constitutes
"reasonable notification" within the meaning of Section 9-504(3) of the UCC.
SECTION 6. Remedies upon Event of Default
(A) If any Event of Default has occurred and is continuing, the Secured
Party may exercise all rights of a secured party under the UCC (whether or not
in effect in the jurisdiction where such rights are exercised) and, in addition,
the Secured Party may, without being required to give any notice, except as
herein provided or as may be required by law, sell the Collateral or any part
thereof at public or private sale, for cash, upon credit or for future delivery,
and at such price or prices as the Secured Party may deem satisfactory. The
Secured Party may be the purchaser of the Collateral so sold at any public sale
(or, if the Collateral is of a type customarily sold in a recognized market or
is of a type which is the subject of widely distributed standard price
quotations, at any private sale) and thereafter hold the same, absolutely, free
from any right or claim of whatsoever kind. The Company will execute and deliver
such documents and take such other action as the Secured Party deems necessary
or advisable in order that any such sale may be made in compliance with law.
Upon any such sale the Secured Party shall have the
-5-
right to deliver, assign and transfer to the purchaser thereof the Collateral so
sold. Each purchaser at any such sale shall hold the Collateral so sold to it
absolutely, free from any claim or right of whatsoever kind, including any
equity or right of redemption of the Company and the Company, to the extent
permitted by law, hereby specifically waives all rights of redemption, stay or
appraisal which it has or may have under any law now existing or hereafter
adopted. The notice (if any) of such sale required by Section 5 shall (1) in
case of a public sale, state the time and place fixed for such sale, and (2) in
the case of a private sale, state the day after which such sale may be
consummated. Any such public sale shall be held at such time or times within
ordinary business hours and at such place or places as the Secured Party may fix
in the notice of such sale. At any such sale the Collateral may be sold in one
lot as an entirety or in separate parcels, as the Secured Party may determine.
The Secured Party shall not be obligated to make any such sale pursuant to any
such notice. The Secured Party may, without notice or publication, adjourn any
public or private sale or cause the same to be adjourned from time to time by
announcement at the time and place fixed for the sale, and such sale may be made
at any time or place to which the same may be so adjourned. In case of any sale
of all or any part of the Collateral on credit or for future delivery, the
Collateral so sold may be retained by the Secured Party until the selling price
is paid by the purchaser thereof, but the Secured Party shall not incur any
liability in case of the failure of such purchaser to take up and pay for the
Collateral so sold and, in case of any such failure, such Collateral may again
be sold upon like notice. The Secured Party, instead of exercising the power of
sale herein conferred upon it, may proceed by a suit or suits at law or in
equity to foreclose the Security Interests and sell the Collateral, or any
portion thereof, under a judgment or decree of a court or courts of competent
jurisdiction.
(B) For the purpose of enforcing any and all rights and remedies under
this Security Agreement the Secured Party may (i) require the Company to, and
the Company agrees that it will, at its expense and upon the request of the
Secured Party, forthwith assemble all or any part of the Collateral as directed
by the Secured Party and make it available at a place designated by the Secured
Party which is, in its opinion, reasonably convenient to the Secured Party and
the Company, whether at the premises of the Company or otherwise, (ii) to the
extent permitted by applicable law, enter, with or without process of law and
without breach of the peace, any premise where any of the Collateral is or may
be located, and without charge or liability to it seize and remove such
Collateral from such premises, (iii) have access to and use the Company's books
and records relating to the Collateral and (iv) prior to the disposition of the
Collateral, store or transfer it without charge in or by means of any storage or
transportation facility owned or leased by the Company, process, repair or
recondition it or otherwise prepare it for disposition in any manner and to the
extent the Secured Party deems appropriate to preserve and enhance its value
and, in connection with such preparation and disposition, use, as a licensee (or
if no decline in the value of the Collateral would result, otherwise) without
charge any trademark, trade name, copyright, patent or technical process used by
the Company.
SECTION 7. Limitation on Duty of Secured Party in Respect of Collateral.
Beyond the safe custody thereof in accordance with applicable law, the
Secured Party shall have no duty as to any Collateral in its possession or
control or in the possession or control of any agent or bailee or any income
thereon or as to the preservation of rights against prior parties or any other
rights pertaining thereto. The Secured Party shall be deemed to have exercised
reasonable care in the custody and preservation of the Collateral in its
possession if the Collateral is accorded treatment substantially equal to that
which it accords its own property of like nature, and shall not be liable or
responsible for any loss or damage to any of the Collateral, or for any
diminution in the value thereof, by reason of the act or omission of any
warehouseman, carrier, forwarding agency, consignee or other agent or bailee
selected by the Secured Party in good faith and in the absence of gross
negligence.
SECTION 8. Application of Proceeds
Upon the occurrence and during the continuance of an Event of Default,
the proceeds of any sale of, or other realization upon, all or any part of the
Collateral shall be applied by the Secured Party in the following order of
priorities:
-6-
first, to payment of the expenses of such sale or other
realization, including reasonable compensation to the Secured Party and its
agents and counsel in connection therewith, and all expenses, liabilities and
advances incurred or made by the Secured Party in connection therewith, and any
other unreimbursed expenses for which the Secured Party is to be reimbursed
pursuant to the Agreement;
second, to the payment of accrued but unpaid interest on the
Secured Obligations;
third, to the payment of unpaid principal of the Secured
Obligations;
fourth, to the payment of all other Secured Obligations, until
all Secured Obligations shall have been paid in full; and
finally, to payment to the Company or its successors or
assigns, or as a court of competent jurisdiction may direct, of any surplus then
remaining from such proceeds.
The Secured Party may make distributions hereunder in cash or in kind or in any
combination thereof.
SECTION 9. Expenses
In the event that the Company fails to comply with the provisions of
the Note or this Agreement, such that the value of the Collateral or the
validity, perfection, rank or value of any Security Interest is thereby
diminished or potentially diminished or put at risk, the Secured Party may
effect such compliance on behalf of the Company, and the Company shall reimburse
the Secured Party for the costs thereof within two Business Days of demand
therefor. All insurance expenses and all reasonable expenses of protecting,
storing, warehousing, appraising, insuring, handling, maintaining, and shipping
the Collateral, any and all excise, property, sales, and use taxes imposed by
any state, federal, or local authority on any of the Collateral, or in respect
of the sale or other disposition thereof, shall be borne and paid by the
Company; and if the Company fails to promptly pay any portion thereof when due,
the Secured Party may, at its option, but shall not be required to, pay the same
and charge the Company's account therefor, and the Company agrees to reimburse
the Secured Party therefor on demand. All sums so paid or incurred by the
Secured Party for any of the foregoing and any and all other sums for which the
Company may become liable hereunder and all reasonable costs and expenses
(including attorneys' fees, legal expenses and court costs) reasonably incurred
by the Secured Party in enforcing or protecting the Security Interests or any of
their rights or remedies under this Agreement, shall, together with interest
thereon until paid at the rate applicable to advances made under the Agreement,
be additional Secured Obligations hereunder.
SECTION 10. Termination of Security Interests
Upon the repayment in full of all Secured Obligations and the
termination of the Note, the Security Interests shall terminate and all rights
to the Collateral shall revert to the Company, and this Security Agreement shall
terminate and no longer be of any force and effect.
SECTION 11. Notices
All notices, approvals, requests, demands and other communications
hereunder shall be given in accordance with the Agreement.
SECTION 12. Waivers. Non-Exclusive Remedies
No failure on the part of the Secured Party to exercise, and no delay
in exercising and no course of dealing with respect to, any right under the Note
or this Agreement shall operate as a waiver thereof; nor shall any single or
partial exercise by the Secured Party of any right under the Note or this
Agreement preclude any other or further exercise thereof or the exercise of any
other right. The rights in this Agreement and the Note are cumulative and are
not exclusive of any other remedies provided by law.
-7-
SECTION 13. Successors and Assigns
This Agreement is for the benefit of the Secured Party and its
successors and assigns, and in the event of an assignment of all or any of the
Secured Obligations, the rights hereunder, to the extent applicable to the
indebtedness so assigned, may be transferred with such indebtedness. This
Agreement shall be binding on the Company and its successors and assigns.
SECTION 14. Changes in Writing
Neither this Agreement nor any provision hereof may be changed, waived,
discharged or terminated orally, but only in writing signed by the Company and
the Secured Party.
SECTION 15. Governing Law
THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY
THE INTERNAL LAWS OF THE COMMONWEALTH OF MASSACHUSETTS, EXCEPT AS OTHERWISE
REQUIRED BY MANDATORY PROVISIONS OF LAW AND EXCEPT TO THE EXTENT THAT REMEDIES
PROVIDED BY THE LAWS OF ANY JURISDICTION OTHER THAN THE COMMONWEALTH OF
MASSACHUSETTS ARE GOVERNED BY THE LAWS OF SUCH JURISDICTION.
SECTION 16. Severability
If any provision hereof is invalid and unenforceable in any
jurisdiction, then, to the fullest extent permitted by law, (i) the other
provisions hereof shall remain in full force and effect in such jurisdiction and
shall be liberally construed in favor of the Secured Party in order to carry out
the intentions of the parties hereto as nearly as may be possible; and (ii) the
invalidity or unenforceability of any provision hereof in any jurisdiction shall
not affect the validity or enforceability of such provision in any other
jurisdiction.
SECTION 17. Counterparts
This Agreement may be executed in any number of counterparts, all of
which taken together shall constitute one and the same instrument and any of the
parties hereto may execute this Agreement by signing any such counterpart.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
GREENMAN TECHNOLOGIES, INC.
By: Maurice E. Needham
------------------
Name: Maurice E. Needham
Title: Chief Executive Officer
PALOMAR MEDICAL TECHNOLOGIES, INC.
By: Joseph Caruso
------------------
Name: Joseph Caruso
Title: Chief Financial Officer
-8-
EXHIBIT 11
GREENMAN TECHNOLOGIES, INC.
STATEMENT REGARDING NET LOSS PER SHARE
FEBRUARY 28, 1997
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED ENDED
FEBRUARY 29, 1996 FEBRUARY 29, 1996
------------------- -----------------
<S> <C> <C>
Net loss.......................................... $ (281,576) $ (763,950)
=========== ===========
Shares used in calculation of loss per share:
Weighted Common shares outstanding pre-IPO (1)(2) -- 1,839,314
Weighted Common shares outstanding post-IPO 4,962,297 2,700,909
--------- ---------
4,962,297 4,540,223
========= =========
Net loss per share................................ $ (.06) $ (.17)
======= =======
Three Months Nine Months
Ended Ended
February 28, 1997 February 28, 1997
------------------ -----------------
Net loss.......................................... $ (1,341,209) $ (3,498,550)
============= =============
Shares used in calculation of loss per share:
Weighted average common shares outstanding 5,623,483 5,388,710
========= =========
Net loss per share................................ $ (.24) $ (.65)
======= =======
</TABLE>
(1) Includes all common shares outstanding prior to the initial public offering
in accordance with the Staff Accounting Bulletin.
(2) Includes common equivalent shares outstanding as follows: (i) 500,000 shares
of Class A convertible preferred stock convertible into 500,000 shares of
common stock; (ii) 259,000 shares of common stock issued pursuant to
convertible debt at the closing of the initial public offering; (iii)
695,000 shares issuable pursuant to outstanding stock options and warrants;
and (iv) 300,000 shares of Class B convertible preferred stock convertible
into 300,000 shares of common stock. All of these shares were issued or have
exercise prices per share which are less than the initial public offering
price per share. The treasury stock method was not used in calculating
common equivalent shares.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> May-31-1997
<PERIOD-END> Feb-28-1997
<CASH> 134,231
<SECURITIES> 0
<RECEIVABLES> 552,913
<ALLOWANCES> 23,772
<INVENTORY> 457,707
<CURRENT-ASSETS> 1,414,623
<PP&E> 4,765,590
<DEPRECIATION> 782,055
<TOTAL-ASSETS> 8,961,861
<CURRENT-LIABILITIES> 5,828,333
<BONDS> 3,978,912
0
0
<COMMON> 56,235
<OTHER-SE> 9,232,814
<TOTAL-LIABILITY-AND-EQUITY> 8,961,861
<SALES> 2,556,297
<TOTAL-REVENUES> 2,556,297
<CGS> 2,204,590
<TOTAL-COSTS> 2,204,590
<OTHER-EXPENSES> 3,574,351
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 275,906
<INCOME-PRETAX> (3,498,550)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,498,550)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,498,550)
<EPS-PRIMARY> (.65)
<EPS-DILUTED> (.65)
</TABLE>
