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 June 30, 2000 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 (781) 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 August 1, 2000
Common Stock, $.01 par value, 12,888,392 shares
<PAGE>
GreenMan Technologies, Inc.
Form 10-QSB
Quarterly Report
June 30, 2000
Table of Contents
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION Page
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<S> <C>
Item 1. Financial Statements (*)
Unaudited Condensed Consolidated Balance Sheets as of September 30, 1999 and June 30, 2000 3
Unaudited Condensed Consolidated Statements of Operations for the three and nine months
ended June 30, 1999 and June 30, 2000 4
Unaudited Condensed Consolidated Statement of Changes in Stockholders' Equity for the nine
months ended June 30, 2000 5
Unaudited Condensed Consolidated Statements of Cash Flows for
the nine months ended June 30, 1999 and June 30, 2000
6
Notes to Unaudited Condensed Consolidated Financial Statements 7-9
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 10-13
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 September 30, 1999 has been taken from
audited financial statements at that date and should be read in
conjunction therewith. All other financial statements are unaudited.
<PAGE>
GreenMan Technologies, Inc.
Unaudited Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
September 30, June 30,
1999 2000
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<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ...................................................... $ 2,233 $ 368,383
Accounts receivable, trade, less allowance for doubtful accounts of $166,582
and $59,715 as of September 30, 1999 and June 30, 2000 ...................... 2,189,487 2,095,178
Equipment held for sale ........................................................ 635,000 466,784
Other current assets ........................................................... 704,918 506,182
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Total current assets ..................................................... 3,531,638 3,436,527
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Property and equipment, net ...................................................... 7,584,321 6,976,181
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Other assets:
Deferred loan costs ............................................................ 143,091 70,086
Goodwill, net .................................................................. 1,796,717 1,475,523
Real estate held for investment, net ........................................... 707,908 --
Other .......................................................................... 296,044 228,268
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2,943,760 1,773,877
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$14,059,719 $12,186,585
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Convertible notes payable, current ............................................. $ 300,000 $ 375,000
Notes payable, current ......................................................... 2,573,064 3,691,367
Accounts payable ............................................................... 2,431,411 2,208,769
Other current liabilities ...................................................... 1,846,896 1,221,884
Obligations under capital leases, current ...................................... 140,725 150,539
----------- -----------
Total current liabilities ................................................ 7,292,096 7,647,559
Notes payable, non-current portion ............................................. 3,805,744 1,901,196
Obligations under capital leases, non-current portion .......................... 585,590 471,938
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Total liabilities ........................................................ 11,683,430 10,020,693
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Stockholders' equity:
Preferred stock, $1.00 par value, 1,000,000 shares authorized: Class B
convertible, liquidation value $10 per share, 320,000 shares issued and
outstanding at September 30, 1999 and June 30, 2000 ......................... 3,200,000 3,200,000
Common stock, $.01 par value, 20,000,000 shares authorized; 11,762,599 and
12,888,392 shares issued and outstanding at September 30, 1999 and
June 30, 2000 ............................................................... 117,626 128,884
Additional paid-in capital ..................................................... 23,127,529 23,436,451
Accumulated deficit ............................................................ (24,013,866) (24,544,443)
Notes receivable, common stock (55,000) (55,000)
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Total stockholders' equity ............................................... 2,376,289 2,165,892
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$14,059,719 $12,186,585
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</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements
<PAGE>
GreenMan Technologies, Inc.
Unaudited Condensed Consolidated Statements of Operations
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
June 30, June 30, June 30, June 30,
1999 2000 1999 2000
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<S> <C> <C> <C> <C>
Net sales ..................................................... $ 4,053,549 $ 4,627,945 $ 12,239,161 $ 13,467,014
Cost of sales ................................................. 3,158,219 3,517,221 9,210,266 10,723,928
------------ ------------ ------------ ------------
Gross profit .................................................. 895,330 1,110,724 3,028,895 2,743,086
------------ ------------ ------------ ------------
Operating expenses:
Research and development .................................. 15,750 4,825 46,625 28,289
Selling, general and administrative ....................... 670,708 798,380 2,588,718 2,677,217
Impairment loss ........................................... -- -- -- 326,235
------------ ------------ ------------ ------------
Total operating expenses .............................. 686,458 803,205 2,635,343 3,031,741
------------ ------------ ------------ ------------
Operating profit (loss) ....................................... 208,872 307,519 393,552 (288,655)
------------ ------------ ------------ ------------
Other income (expense):
Interest and financing costs .............................. (131,097) (233,331) (716,072) (697,981)
Casualty loss ............................................. -- -- (955,000) --
Forgiveness of indebtedness ............................... -- 227,992 -- 466,325
Other, net ................................................ (2,592) (22,484) 12,483 84,203
------------ ------------ ------------ ------------
Other (expense), net .................................. (133,689) (27,823) (1,658,589) (147,453)
------------ ------------ ------------ ------------
Income (Loss) from continuing operations ...................... 75,183 279,696 (1,265,037) (436,108)
------------ ------------ ------------ ------------
Discontinued operations:
Loss from discontinued operations ......................... -- -- (181,285) --
Loss on disposal of discontinued operations ............... -- (94,469) (920,000) (94,469)
------------ ------------ ------------ ------------
-- (94,469) (1,101,285) (94,469)
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Net income (loss) ............................................. $ 75,183 $ 185,227 $ (2,366,322) $ (530,577)
============ ============ ============ ============
Income (Loss) from continuing operations per share - basic .... $ 0.01 $ 0.03 $ (0.12) $ (0.03)
Income (Loss) from discontinued operations per share - basic .. -- (0.01) (0.02) (0.01)
Income (Loss) on disposal of discontinued operations - basic .. -- -- (0.08) --
------------ ------------ ------------ ------------
Net income (loss) per share - basic ........................... $ 0.01 $ 0.02 $ (0.22) $ (0.04)
============ ============ ============ ============
Weighted average shares outstanding ........................... 11,625,091 12,196,996 10,653,117 12,001,330
============ ============ ============ ============
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
<PAGE>
GreenMan Technologies, Inc.
Consolidated Statement of Changes in Stockholders' Equity
Nine Months Ended June 30, 2000
<TABLE>
<CAPTION>
Notes
Preferred Stock Common Stock Additional Receivable
---------------------- ------------------ Paid-in Accumulated Common
Shares Amount Shares Amount Capital Deficit Stock Total
---------- ---------- ---------- --------------------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, September 30, 1999 ..... 320,000 $3,200,000 11,762,599 $117,626 $23,127,529 $(24,013,866) $(55,000) $2,376,289
Sale of common stock ............ -- -- 1,125,793 11,258 298,422 -- -- 309,680
Fair value of warrants issued in
convertible debt offering...... -- -- -- -- 10,500 -- -- 10,500
Net loss for the nine months
ended June 30, 2000 ........... -- -- -- -- -- (530,577) -- (530,577)
------- ---------- ---------- -------- ----------- ------------ -------- ----------
Balance, June 30, 2000 .......... 320,000 $3,200,000 12,888,392 $128,884 $23,436,451 $(24,544,443) $(55,000) $2,165,892
======= ========== ========== ======== =========== ============= ========= ==========
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
<PAGE>
GreenMan Technologies, Inc.
Unaudited Condensed Consolidated Statements of Cash Flow
<TABLE>
<CAPTION>
Nine Months Ended
June 30, June 30,
1999 2000
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<S> <C> <C>
Cash flows from operating activities:
Net loss ...................................................................... $ (2,366,322) $ (530,577)
Adjustments to reconcile net loss to net cash provided by operating activities:
Amortization of deferred financing costs ...................................... 306,304 --
Depreciation and amortization ................................................. 1,228,211 1,295,086
Common stock and warrants issued in settlement of lease obligations ........... 302,500 --
Impairment loss ............................................................... -- 326,235
Loss on disposal of discontinued operations ................................... 920,000 94,469
Forgiveness of indebtedness ................................................... -- (466,325)
Decrease (increase) in assets:
Accounts receivable ....................................................... (478,242) 94,309
Inventory ................................................................. 196,543 --
Insurance claim receivable ................................................ 2,120,284 --
Other current assets ...................................................... (4,164) 198,736
(Decrease) increase in liabilities:
Accounts payable .......................................................... 190,367 (222,642)
Accrued expenses .......................................................... (666,767) (158,687)
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Net cash (used for) provided by operating activities ................... 1,748,714 630,604
------------ ------------
Cash flows from investing activities:
Purchase of property and equipment ............................................ (1,116,297) (623,316)
Proceeds on disposal of property and equipment and other assets ............... 16,451 820,798
(Increase) decrease in other assets ........................................... (118,758) 67,776
------------ ------------
Net cash (used for) provided by investing activities ..................... (1,218,604) 265,258
------------ ------------
Cash flows from financing activities:
Net advances under line of credit ............................................. 221,914 81,209
Net proceeds from convertible notes payable ................................... -- 370,000
Repayment of convertible notes payable ........................................ -- (300,000)
Proceeds from notes payable ................................................... 524,228 588,239
Repayment of notes payable .................................................... (788,286) (1,455,963)
Repayment of notes payable related parties .................................... (4,956) --
Principal payments on obligations under capital leases ........................ (1,010,422) (122,877)
Net proceeds on the sale of common stock ...................................... 500,000 309,680
Repurchase of common stock .................................................... (2,000) --
------------ ------------
Net cash (used for) provided by financing activities ........................ (559,522) (529,712)
------------ ------------
Net (decrease) increase in cash ................................................... (29,412) 366,150
Cash and cash equivalents at beginning of period .................................. 161,215 2,233
------------ ------------
Cash and cash equivalents at end of period ........................................ $ 131,803 $ 368,383
============ ============
Supplemental cash flow information:
Machinery and equipment acquired under capital leases ........................... $ -- $ 19,038
Common stock issued upon conversion of notes payable and accrued interest ....... 912,666 --
Interest paid ................................................................... 716,072 629,016
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
<PAGE>
GreenMan Technologies, Inc.
Notes To Unaudited Condensed Consolidated Financial Statements
June 30, 2000
1. Business
GreenMan Technologies, Inc. ("GreenMan") is engaged in the business of
collecting, shredding and marketing scrap tires. The tire recycling operations
are located in Jackson, Georgia and Savage, Minnesota.
In February 2000, management decided to consolidate the operations of
GreenMan Technologies of South Carolina into GreenMan Technologies of Georgia in
order to maximize the processing capacity of the Georgia facility and eliminate
continued operating losses at the South Carolina facility. The consolidation was
concluded in March 2000 and GreenMan continues to provide collection services to
its South Carolina customer base.
In March 1999, GreenMan discontinued operations at its wholly-owned
subsidiary, DuraWear Corporation ("DuraWear") and in June 1999, sold
substantially all of DuraWear's assets and liabilities to a third party. The
remainder of their assets were disposed of in June 2000. DuraWear manufactured,
installed and marketed a diverse range of abrasive resistant ceramic and polymer
products.
On September 4, 1998, GreenMan acquired all of the scrap tire collection
and processing assets of United Waste Service, Inc., a wholly owned subsidiary
of Republic Services, Inc. The two recycling operations were located in Georgia
and South Carolina. The Georgia operations were combined with GreenMan
Technologies of Georgia during the year ended September 30, 1999. The South
Carolina operations were incorporated as GreenMan Technologies of South Carolina
which was subsequently consolidated into the operations of GreenMan Technologies
of Georgia.
In August 1998, GreenMan Technologies of Louisiana's crumb rubber
processing facility was severely damaged by a fire, which necessitated the
closure of the operation in December 1998.
2. Basis of Presentation
The consolidated financial statements include the results of operations of
GreenMan Technologies of Minnesota, GreenMan Technologies of Georgia, GreenMan
Technologies of Louisiana and GreenMan Technologies of South Carolina. All
significant intercompany accounts and transactions are eliminated in
consolidation. The consolidated financial statements have been restated to
reflect the operating results of DuraWear as discontinued operations for all
periods presented.
The financial statements are unaudited and should be read in conjunction
with the financial statements and notes thereto for the year ended September 30,
1999 included in GreenMan'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 rules and regulations,
although management 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.
3. Net Income (Loss) Per Share
Basic earnings per share represents income available to common stock
divided by the weighted average number of common shares outstanding during the
period. Diluted earnings per share reflects additional common shares that would
have been outstanding if potential dilutive common shares had been issued, as
well as any adjustment to income that would result from the assumed conversion.
Potential common shares that may be issued by GreenMan relate to outstanding
stock options and warrants (determined using the treasury stock method),
preferred stock and convertible debt. The assumed conversion of outstanding
dilutive stock options, warrants and preferred stock would increase the shares
outstanding but would not require an adjustment to income as a result of the
conversion. For all periods presented, options, warrants, preferred stock and
convertible debt were anti-dilutive and excluded from the net loss per share
computation.
<PAGE>
GreenMan Technologies, Inc.
Notes To Unaudited Condensed Consolidated Financial Statements
June 30, 2000
4. Discontinued Operations
In March 1999, GreenMan decided to discontinue operations at its DuraWear
subsidiary in order to eliminate continued operating losses and focus efforts on
the core business of tire recycling. GreenMan recorded a loss on disposal of
DuraWear of $920,000 and wrote down DuraWear's net assets to their estimated
fair market value at March 31, 1999.
On June 14, 1999, a third party paid $16,451 for substantially all assets
and liabilities of DuraWear, excluding the land and buildings which were
retained by GreenMan subject to the existing mortgage. On June 30, 2000,
GreenMan sold the DuraWear land and building to the third party for $600,000
resulting in a $94,469 loss on the sale. GreenMan used $212,154 of the net
proceeds to retire the existing mortgage.
During the year ended September 30, 1999 DuraWear had revenues totaling
$407,947 and reported a loss from discontinued operations of $1,156,285. For the
nine months ended June 30, 1999, DuraWear's revenues were $407,947. The
consolidated financial statements have been restated to reflect the net
operating results of DuraWear as a separate line item for all periods presented.
5. Need for Additional Capital
GreenMan has incurred losses since its inception aggregating $24,544,443
and had a working capital deficiency of $4,211,032 at June 30, 2000. In
addition, the commencement of involuntary bankruptcy proceedings or the
inability to maintain compliance with the terms of long-term debt obligations
may result in additional defaults, the acceleration of debt repayment terms and
a further deterioration in GreenMan's financial position. These conditions raise
substantial doubt about GreenMan's ability to continue as a going concern.
GreenMan's continued existence is dependent on its ability to maintain
profitable status and raise additional financing. Management plans to resolve
the doubt by evaluating existing financing alternatives, negotiating with
existing secured creditors, attempting to refinance existing long and short term
debt and maintaining profitability. Management does not believe that adjustments
or reclassifications of recorded assets and liabilities are necessary at this
time.
6. Property, Plant and Equipment
Property, plant and equipment consists of the following:
<TABLE>
<CAPTION>
September 30, June 30, Estimated
1999 2000 Useful Lives
----------- ----------- -------------
<S> <C> <C> <C>
Land .................................. $ 655,377 $ 655,377
Buildings ............................. 1,667,702 1,678,193 10-20 years
Machinery and equipment ............... 3,967,537 3,996,937 5-10 years
Furniture and fixtures ................ 88,023 98,366 3-5 years
Motor vehicles ........................ 3,028,711 3,233,768 3-10 years
----------- -----------
9,407,350 9,662,641
Less accumulated depreciation
and amortization (1,823,029) (2,686,460)
----------- -----------
Property, plant and equipment, net $ 7,584,321 $ 6,976,181
=========== ===========
</TABLE>
<PAGE>
GreenMan Technologies, Inc.
Notes To Unaudited Condensed Consolidated Financial Statements
June 30, 2000
7. Convertible Notes Payable
June 1998 Convertible Note
In June 1998, GreenMan issued a $300,000 10% convertible note payable in
settlement of all amounts owed under certain leases. The note was payable in 36
monthly payments of $9,680 and convertible into common stock at the holder's
option at $1.38 per share. As of September 30, 1999, GreenMan had not made any
payments on the convertible note payable and was deemed in default. During the
period of October 1999 to May 2000, GreenMan paid $195,000 towards the
outstanding obligation and on June 30, 2000, paid the remaining balance of
principal and interest less a $28,500 discount in full settlement of all amounts
due under the convertible note payable.
Private Offering of Convertible Notes Payable and Warrants
In October 1999, GreenMan commenced a private offering of 10% convertible
notes payable and warrants in an effort to raise up to $500,000 in gross
proceeds. As of June 30, 2000, the Company had issued $375,000 of convertible
notes to an investor (who became a director of GreenMan in March 2000) and
issued immediately exercisable five year warrants to purchase 125,000 shares of
common stock at exercise prices ranging from $.31 to $.50 per share. GreenMan
also recorded deferred financing costs of $10,500 in connection with the
issuance of the warrants and paid $5,000 in fees to a placement agent. The
convertible notes payable are due twelve months after issuance and are payable
in cash or unregistered common stock at a conversion price of $1.00 per share.
The investor has been granted piggy-back registration rights to register the
common stock.
The deferred charges are being amortized over the life of the notes
payable. Amortization and interest expense for the three and nine months ended
June 30, 2000 was $10,500 and $27,200, respectively.
8. Common Stock Transactions
In October 1998, GreenMan commenced a private offering of common stock in
an effort to raise up to $500,000 in gross proceeds (the offering was
subsequently increased to $1,000,000 in March 1999). During the nine months
ended June 30, 2000, GreenMan sold 1,125,793 shares of common stock for gross
proceeds of $309,680. As of June 30, 2000, 2,664,404 shares of unregistered
common stock have been sold to investors including officers and directors for
$864,681 of gross proceeds. In January 1999, GreenMan advanced $55,000 to two
officers under 8.5% secured loan agreements with both principal and interest due
January 2002. The proceeds were used to participate in the private placement and
the loans are secured by 191,637 shares of common stock owned by the officers.
The investors have been granted piggy-back registration rights to register the
common stock and have agreed not to sell or transfer the shares for a period of
at least twelve months after issuance.
9. Segment Information
GreenMan operates in one business segment, the collecting, shredding and
marketing of scrap tires to be used as feedstock for tire derived fuel, civil
engineering projects and/or for further processing into crumb rubber. In March
1999, GreenMan decided to discontinue operations at its industrial materials
subsidiary in order to eliminate continued operating losses and focus efforts on
the core business of tire recycling.
<PAGE>
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 GreenMan's Form
10-KSB filed for the year ended September 30, 1999.
Results of Operations
Three Months ended June 30, 2000 Compared to the Three Months ended June 30,
1999
Net sales for the three months ended June 30, 2000 increased 14% to
$4,627,945 as compared to $4,053,549 for the three months ended June 30, 1999.
GreenMan collected 4.4 million passenger tire equivalents during the quarter
ended June 30, 2000 as compared to 5.0 million passenger tire equivalents for
the quarter ended June 30, 1999. The decrease in passenger tire equivalents is
attributable to reduced volumes at GreenMan's Southeastern U.S. operations as
the result of facility consolidations and the completion of certain Georgia
abatement work in fiscal 1999. The 14% increase in total revenues was
attributable to an increase in the overall quality of revenue (revenue per
passenger tire equivalent) during the quarter.
Gross profit for the three months ended June 30, 2000 was $1,110,724 or
24% of net sales as compared to $895,330 or 22% of net sales for the three
months ended June 30, 1999. The increase is attributable to an increased quality
of revenue and the improving performance of GreenMan's Southeastern U.S.
operations.
Operating expenses for the three months ended June 30, 2000 were $803,205
and remained consistent at 17% of net sales as compared to $686,458 for the
three months ended June 30, 1999.
GreenMan recorded $227,992 of forgiveness of indebtedness during the
quarter ended June 30, 2000 as a result of renegotiating and settling certain
outstanding obligations in an effort to strengthen GreenMan's financial
position. GreenMan also recorded an additional $94,469 loss on disposal of
discontinued operations associated with the final disposition of the DuraWear
real estate in June 2000. The real estate had been written down to its estimated
fair value when DuraWear's operations were discontinued in 1999.
GreenMan had a net income of $185,227 or $.02 per share for the three
months ended June 30, 2000 as compared to a net income of $75,183, or $0.01 per
share for the three months ended June 30,1999.
Nine Months ended June 30, 2000 Compared to the Nine Months ended June 30, 1999
Net sales for the nine months ended June 30, 2000 increased 10% to $13,467,014
as compared to $12,239,161 for the nine months ended June 30, 1999. GreenMan
collected approximately 13.5 million passenger tire equivalents during the nine
months ended June 30, 2000 as compared to approximately 14 million passenger
tire equivalents during the comparable period in 1999. The increased abatement
work at our Minnesota operations and the increased overall quality of revenue
(revenue per passenger tire equivalent) offset the decreased volume experienced
at our Southeastern U.S. operations as the result of facility consolidations and
the completion of certain abatement work at our Georgia operation in fiscal
1999.
Gross profit for the nine months ended June 30, 2000 was $2,743,086 or 20%
of net sales as compared to $3,028,895 or 25% of net sales for the six months
ended June 30, 1999 March 31, 1999. The decrease was primarily attributable to
decreased volumes in GreenMan's Southeastern U.S. operations and operating
inefficiencies experienced in South Carolina as resources were focused on
cleanup/transfer and closure activities during a majority of the second quarter.
Management has identified approximately $178,000 of non-reoccurring costs
incurred as a result of the consolidation in addition to approximately $123,000
of charges associated with the repair/transfer and installation of the South
Carolina shredder into GreenMan's Minnesota operations during the second
quarter.
<PAGE>
As a result of the consolidation of the South Carolina operations into the
Georgia operations during the second quarter, management determined that certain
equipment was no longer necessary and initiated an effort to sell the excess
equipment. The net book value of the identified assets exceeded the estimated
market value and accordingly, GreenMan recorded a non-cash impairment loss of
$154,235 at March 31, 2000. In addition, management determined that based on
reduced revenues, tire volumes and estimated future cash flows associated with
South Carolina operations, the net book value of the goodwill associated with
GreenMan Technologies of South Carolina exceeded the estimated market value and
accordingly, a non-cash impairment loss of $172,000 was recorded at March 31,
2000
Operating expenses, exclusive of the impairment losses were $2,705,506 for
the nine months ended June 30, 2000, or 20% of sales as compared to $2,635,343,
or 22% of sales, for the nine months ended June 30, 1999.
GreenMan recorded $466,325 of forgiveness of indebtedness during the nine
months ended June 30, 2000 as a result of renegotiating and settling certain
outstanding obligations in an effort to strengthen GreenMan's financial
position. GreenMan also recorded an additional $94,469 loss on disposal of
discontinued operations associated with the final disposition of the DuraWear
real estate in June 2000. During the nine months ended June 30, 1999, GreenMan
recorded a $955,000 casualty loss associated with the litigation that ensued
from GreenMan Technologies of Louisiana's fire and a loss associated with
discontinued operations of $1,101,285
The Company experienced a net loss of $530,577 (including $326,235 of
non-cash impairment losses) or $.04 per share for the nine months ended June 30,
2000 as compared to a net loss of $2,366,322, or $0.22 per share for the nine
months ended June 30, 1999.
Liquidity and Capital Resources
Since its inception, GreenMan has satisfied its capital requirements
through the sale of common and preferred stock and debt securities 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 options and warrants in lieu of cash for services rendered.
GreenMan has incurred losses since its inception aggregating $24,544,443
and at June 30, 2000 has a working capital deficiency of $4,211,032 (which has
been reduced by $1,227,436 since March 31, 2000). In addition, the commencement
of involuntary bankruptcy proceedings or the inability to maintain compliance
with the terms of long-term debt obligations may result in additional defaults,
the acceleration of debt repayment terms, and a further deterioration in
GreenMan's financial position. These conditions raise substantial doubt about
GreenMan's ability to continue as a going concern. GreenMan's continued
existence is dependent on its ability to maintain profitable status and raise
additional financing. Management plans to resolve the doubt by:
o Focusing corporate resources on growing GreenMan's core business of tire
collection and processing;
o Reducing operating and overhead costs where appropriate;
o Continuing to renegotiate with existing secured and unsecured creditors to
refinance or reach settlement of existing long and short term debt;
o Continuing to identify and evaluate financing alternatives.
During the past two and one half years, GreenMan has divested/closed and
or consolidated under performing operations which have contributed over $14.5
million of GreenMan's cumulative losses. Additionally, GreenMan eliminated the
use of non-conventional financing methods (discounted convertible debentures)
which contributed an additional $4.0 million in cumulative losses. GreenMan has
also reduced its corporate overhead by over $350,000 on an annualized basis.
In February 2000, management decided to consolidate the operations of
GreenMan Technologies of South Carolina into GreenMan Technologies of Georgia in
order to maximize the processing capacity of the Georgia facility and eliminate
continued operating losses at the South Carolina facility which aggregated
approximately $1.54 million through March 31, 2000.
<PAGE>
GreenMan has recorded $466,325 of forgiveness of indebtedness during the
nine months ended June 30, 2000 as a result of renegotiating certain outstanding
obligations in an effort to strengthen GreenMan's financial position.
During the nine months ended June 30, 2000 GreenMan received sales
proceeds of $224,524 for idle equipment and $600,000 for real estate held for
investment and is currently marketing idle equipment with a carrying value of
$466,784 in order to raise additional capital. GreenMan used a portion of the
sales proceeds to payoff approximately $538,000 of notes payable during the
quarter ended June 30, 2000.
GreenMan has also identified equipment which management believes will
recycle tire processing residuals which are currently disposed of at a cost
exceeding $1,000,000 per year, into saleable components of rubber and steel.
Management is evaluating financing alternatives for purchase of this equipment
but there can be no assurance at this time that such financing will be concluded
in the near future on favorable terms, if at all.
Approximately $3.4 million of current liabilities are associated with
GreenMan's credit facility with Finova Capital Corporation, which is classified
as a current liability. GreenMan is currently evaluating several financing
alternatives in an effort to refinance the existing obligations. No assurances
can be given that such refinancing will be concluded in the near future on
favorable terms, if at all
On July 7, 1999, GreenMan was notified that as a result of noncompliance
with the $1.00 minimum bid requirement and the violation of marketplace rules
regarding shareholder approval, GreenMan's securities would no longer be listed
on Nasdaq's Small Cap Market effective July 7, 1999. Effective July 8, 1999, the
common stock and warrants began trading on the Over the Counter Bulletin Board
and continue to trade on the Boston Stock Exchange. GreenMan filed an appeal
with Nasdaq Small Cap Market requesting a review of the decision and a
reinstatement of its securities on the Nasdaq Small Cap Market. In February
2000, GreenMan was notified by the Hearing Review Council that the decision to
delist GreenMan's securities would not be reversed. Management anticipates that
the absence of listing on Nasdaq's Small Cap Market for the common stock may
have a material adverse effect on the market for, and potentially the market
price, of the common stock.
Management is currently evaluating several immediate financing
alternatives, which would enhance GreenMan's financial position and is
diligently working to determine the feasibility of each alternative. No
assurances can be given that such financing will be concluded in the near future
on favorable terms, if at all. If GreenMan is unable to obtain additional
financing, its ability to continue as a going concern could be materially and
adversely affected.
Private Offering of Convertible Notes Payable and Warrants
In October 1999, GreenMan commenced a private offering of 10% convertible
notes payable and warrants in an effort to raise up to $500,000 in gross
proceeds. As of June 30, 2000, the Company had issued $375,000 of convertible
notes to an investor (who became a director of GreenMan in March 2000) and
issued immediately exercisable five year warrants to purchase 125,000 shares of
common stock at exercise prices ranging from $.31 to $.50 per share. GreenMan
also recorded deferred financing costs of $10,500 in connection with the
issuance of the warrants and paid $5,000 in fees to a placement agent. The
convertible notes payable are due twelve months after issuance and are payable
in cash or unregistered common stock at a conversion price of $1.00 per share.
The investor has been granted piggy-back registration rights to register the
common stock.
Management believes that placement of these securities is exempt from
registration under Section 4(2) of the Securities Act of 1933, as amended.
Private Offering of Common Stock and Warrants
In October 1998, GreenMan commenced a private offering of common stock in
an effort to raise up to $500,000 in gross proceeds (the offering was
subsequently increased to $1,000,000 in March 1999). During the nine months
ended June 30, 2000, GreenMan sold 1,125,793 shares of common stock for gross
proceeds of $309,680. As of June 30, 2000, 2,664,404 shares of unregistered
common stock have been sold to investors including officers and directors for
$864,681 of gross proceeds. In January 1999, GreenMan advanced $55,000 to two
officers under 8.5% secured loan agreements with both principal and interest due
January 2002. The proceeds were used to participate in the private placement and
the loans are secured by 191,637 shares of common stock owned by the officers.
The investors have been granted piggy-back registration rights to register
<PAGE>
the common stock and have agreed not to sell or transfer the shares for a period
of at least twelve months after issuance
Management believes that placement of these securities is exempt from
registration under Section 4(2) of the Securities Act of 1933, as amended.
Acquisition of United Waste Service's Tire Related Assets
On September 4, 1998, GreenMan acquired all of the scrap tire collection
and processing assets of United Waste Service, Inc., a wholly owned subsidiary
of Republic Services, Inc. GreenMan paid $4,050,000 for the acquired assets in
the form of $850,000 in cash and $3,200,000 of preferred stock. The preferred
stock is convertible into GreenMan's common stock beginning in February 2001
based upon the higher of the trailing 15 day average closing bid prices prior to
the conversion date or the average of the closing bid prices during the period
from September 3, 1998 to February 3, 2001. Simultaneous with the acquisition,
GreenMan entered into an equipment financing agreement with Heller Financial
Inc., which provided the $850,000 for the transaction. The acquired assets are
located in Lawrenceville, Georgia (subsequently combined with GreenMan
Technologies of Georgia) and Batesburg, South Carolina (incorporated as GreenMan
Technologies of South Carolina).
Cautionary Statement
Information contained or incorporated by reference in this document
contains "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995, which statements can be identified by
the use of forward-looking terminology such as "may," "will," "would," "can,"
"could," "intend," "plan," "expect," "anticipate," "estimate" or "continue" or
the negative thereof or other variations thereon or comparable terminology. The
following matters constitute cautionary statements identifying important factors
with respect to such forward-looking statements, including certain risks and
uncertainties that could cause actual results to differ materially from those in
such forward-looking statements.
Factors Affecting Future Results
There are several factors which may effect the future operating results of
GreenMan, including:
o the ability to obtain additional financing at acceptable terms to
eliminate the current working capital deficit and fund continued internal
growth;
o the ability to realize the anticipated consolidation benefits associated
with the consolidation of GreenMan's South Carolina operations into the
Georgia operations without the loss of significant South Carolina
customers;
o the ability to renegotiate the conversion price of the Class B convertible
preferred stock if, in February 2001, the conversion price were to result
in a change in control;
o the delisting of GreenMan's securities from the Nasdaq Small Cap Stock
Market and the effect on the market for, and potentially the market price
of, GreenMan's common stock;
o the ability to realize the remaining $950,000 due under the property
insurance policy in conjunction with the Louisiana fire; and
o general economic conditions.
GreenMan's plans and objectives are based on assumptions that it will be
successful in receiving additional financing to fund future growth and that
there will be no material adverse change in GreenMan's operations or business.
There can be no assurance that GreenMan will obtain such financing on acceptable
terms.
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 GreenMan. As a result, there can be no assurance that
GreenMan will be able to achieve or sustain profitability on a quarterly or
annual basis. In light of the significant uncertainties inherent in GreenMan's
business, forward-looking statements made in this report should not be regarded
as a representation by GreenMan or any other person that the objectives and
plans of GreenMan will be achieved.
Environmental Liability
There are no known material environmental violations or assessments.
<PAGE>
Year 2000 Date Conversion
GreenMan has experienced no significant business interruptions as a result
of year 2000 problems.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
In February 1999, MAC Funding Corporation ("MAC") commenced an
action in the U.S. District Court for the District of Massachusetts
against GreenMan. The claim alleged that MAC was owed $315,000 (as
of December 31, 1998) plus interest accruing thereon, attorneys'
fees, and costs all as provided in a promissory note issued by the
Company to MAC dated July 1, 1998.
On June 30, 2000 MAC agreed that in return for payments made to date
plus an additional $150,000 which was paid by GreenMan on June 30,
2000, MAC would release GreenMan from any/all further obligations
under the promissory note and terminate all legal proceedings.
There were no other significant changes in legal proceedings during
the quarter ended June 30, 2000.
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
Exhibit 11 -- Statement regarding net loss per share.
Exhibit 27 -- Financial Data Schedule.
(b) Reports on Form 8-K
There were no reports filed during the three months ended June 30,
2000.
<PAGE>
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
By: GreenMan Technologies, Inc.
/s/ Charles E. Coppa
--------------------
Chief Financial Officer
