U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB/A
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
GREENMAN TECHNOLOGIES, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
May 31, February 28,
1996 1997
---- ----
<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
--------- ---------
Total current assets 2,026,313 1,414,703
--------- ---------
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
--------- ---------
4,178,482 4,765,590
Less accumulated depreciation and amortization........................... (507,991) (782,055)
--------- ---------
3,670,491 3,983,535
--------- ---------
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)............................................. -- 1,423,600
Other......................................................................... 71,311 68,730
--------- ---------
2,942,179 4,217,623
--------- ---------
$ 8,638,983 $9,615,861
========= =========
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
--------- ---------
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
--------- ---------
Total liabilities........................................................... 5,103,157 6,869,816
--------- ---------
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 9,886,814
Accumulated deficit.......................................................... (3,698,454) (7,197,004)
--------- ----------
Total stockholders' equity.............................................. 3,535,826 2,746,045
--------- ----------
$ 8,638,983 $ 9,615,861
============ ===========
</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
------------ ----- ----------------
February 29, February 28, February 29, February 28,
1996 1997 1996 1997
---- ---- ---- ----
<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
-----------------
February 29, February 28,
1996 1997
---- ----
<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
----------- -----------
Net cash used for operating activities ................................ (1,966,447) (1,859,338)
----------- -----------
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
----------- -----------
Net cash used for investing activities ................................ (1,581,983) (39,338)
----------- -----------
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
----------- -----------
Net cash provided by financing activities ...................................... 4,709,607 1,879,735
----------- -----------
Net increase (decrease) in cash ...................................................... 1,161,177 (18,941)
Cash and cash equivalents at beginning of period ..................................... 109,778 153,172
----------- -----------
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.
<TABLE>
<CAPTION>
GREENMAN TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
NINE MONTHS ENDED FEBRUARY 29, 1996 AND FEBRUARY 28, 1997
CONVERTIBLE ADDITIONAL STOCK NOTES
PREFERRED STOCK COMMON STOCK PAID-IN ACCUMULATED SUBSCRIPTIONS RECEIVABLE
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT RECEIVABLE COMMON STOCK TOTAL
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, May 31, 1995 . 500,000 500,000 2,343,333 23,433 264,910 (2,120,133) -- -- (1,331,790)
Sale of preferred stock . 300,000 600,000 -- -- -- -- -- -- 600,000
Shares issued at initial
public offering ..... -- -- 1,265,000 12,650 4,570,087 -- -- -- 4,582,737
Shares issued on
conversion of notes
payable ............. -- -- 259,000 2,590 32,410 -- -- -- 35,000
Shares issued on
conversion of interest
payable ............. -- -- 100,000 1,000 499,000 -- -- -- 500,000
Shares issued for purchase
of DuraWear Corporation -- -- 75,000 750 374,250 -- -- -- 375,000
Shares issued for non-
competition agreement -- -- 70,000 700 349,300 -- -- -- 350,000
Conversion of preferred
stock ............... (800,000) (1,100,000) 800,000 8,000 1,092,000 -- -- -- --
Shares issued on exercise
of stock options ... -- -- 157,750 1,578 9,722 -- -- -- 11,300
Net loss for nine months
ended February 29, 1996 -- -- -- -- -- (763,950) -- -- (763,950)
------- ------- --------- -------- --------- ----------- ------- -------- ---------
Balance, Feb. 29 1996 -- $ -- 5,070,083 $ 50,701 $ 7,191,679 $ (2,884,083) $ -- $ -- $ 4,358,297
======= ======= ========= ======== ========= =========== ======= ======== =========
Balance, May 31, 1996 -- $ -- 5,076,083 $ 50,761 $ 7,183,519 $ (3,698,494) $ -- $ -- $ 3,535,826
Compensation expense related
to warrants issued to
non-employees under
SFAS 123 ............ -- -- -- -- 646,191 -- -- -- 646,191
Sale of common stock .... -- -- 545,000 5,450 707,792 -- -- -- 713,242
Shares issued on exercise
of stock options .... -- -- 2,400 24 312 -- -- -- 336
Compensation expense related
to warrants issued to
investors under SFAS 123 -- -- -- -- 695,000 -- -- -- 695,000
Value ascribed to convertible
debentures .......... -- -- -- -- 654,000 -- -- -- 654,000
Net loss for nine months ended
February 28, 1997 ... -- -- -- -- -- (3,498,550) -- -- (3,498,550)
------- ------- --------- -------- --------- ----------- ------- -------- ---------
Balance, February 28, 1997 -- $ -- 5,623,483 $ 56,235 $9,886,814 $(7,197,004) $ -- $ -- $2,746,045
======= ======= ========= ======== ========= =========== ======= ======== =========
See accompanying notes to consolidated financial statements.
</TABLE>
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 has recorded a deferred charge
of approximately $654,000 associated with impact of 30% discount from market to
be realized upon conversion. 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". Both deferred
charges are being amortized over the maturity of the convertible notes. As of
April 10, 1997, approximately 229,673 shares of common stock had been issued
pusuant to Debenture conversion.
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". On December 30, 1996, the Company repriced 1,048,223 warrants
issued to outsiders by issuing new warrants in exchange for their old warrants.
The new warrant price was set at the then current market price of $1.13 per
share and are immediately exercisable.
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 lacks the capability to process the tire chips received from BFI into a
higher value-added feedstock material, thus necessitating the sale of 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.
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/ Robert H. Davis
----------------------
Robert H. Davis
CHIEF EXECUTIVE OFFICER
Signature Title(s) Date
--------- -------- ----
/s/ Robert H. Davis Chief Executive Officer August 6, 1997
- ---------------------- Chairman of the Board
Robert H. Davis (Principal Executive Officer)
/s/ Joseph E. Levangie Chief Financial Officer and Director August 6, 1997
- ---------------------- (Principal Financial Officer and
Joseph E. Levangie Principal Accounting Officer)
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