U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-KSB
(Mark One)
|X| ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 [FEE REQUIRED]
For the fiscal year ended September 30, 1999
OR
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 [NO FEE REQUIRED]
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 (I.R.S. Employer Identification No.)
incorporation or organization)
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
--------------
Securities registered pursuant to Section 12 (b) of the Exchange Act:
<TABLE>
<CAPTION>
Title of each class Name of each exchange on which registered
- ------------------- -----------------------------------------
<S> <C>
Common Stock, $ .01 par value Boston Stock Exchange
- ---------------------------------------
(Title of each class)
Class A Common Stock Purchase Warrants Boston Stock Exchange
- ---------------------------------------
(Title of each class)
</TABLE>
Securities registered pursuant to Section 12 (g) of the Exchange Act:
Common Stock, $ .01 par value
- ---------------------------------------
(Title of each class)
Class A Common Stock Purchase Warrants
- ---------------------------------------
(Title of each class)
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Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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 |_|
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B in this form, and no disclosure will be contained, to the best of
registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. |X|
The issuer's revenues for the fiscal year ended September 30, 1999 were
$16,337,819.
The aggregate market value of the voting stock held by non-affiliates computed
by reference to the average bid and asked prices of such stock, as of December
1, 1999 was $3,624,695.
As of December 1, 1999, 11,762,599 shares of common stock of issuer were
outstanding.
Transitional Small Business Disclosure Format (check one) Yes |_| No |X|
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PART 1
Item 1. Description of Business
General
GreenMan Technologies, Inc. is engaged in the business of collecting,
shredding and marketing scrap tires for use as an alternative fuel source or
utilized in civil engineering applications. The tire recycling operations are
located in Jackson, Georgia; Batesburg, South Carolina and Savage, Minnesota.
History
GreenMan was incorporated in the State of Arkansas on September 16, 1992
and reincorporated in the State of Delaware on June 27, 1995. In June 1998, the
Board of Directors of GreenMan adopted a change of its fiscal year from May 31
to September 30. Accordingly, the transition period information contained herein
reflects a four-month transition period.
GreenMan was initially formed to develop, manufacture and sell
"environmentally friendly" plastic and thermoplastic rubber feedstock, rubber
parts and products manufactured using recycled materials. Although successful in
the technical development of commercial and proprietary products, GreenMan
determined during the year ended May 31, 1998 that concentration on raw
materials management would be more profitable in the near term. Accordingly,
most valued-added initiatives involving product development/manufacturing were
curtailed in order to concentrate on operations that would yield profits and
enhance long-term shareholder value.
In June 1997, GreenMan acquired from Browning-Ferris Industries, Inc, all
of the capital stock of two subsidiaries engaged in the scrap tire collection
and processing business: BFI Tire Recyclers of Minnesota, Inc. and BFI Tire
Recyclers of Georgia, Inc. As a result of the acquisitions, the two companies
became wholly-owned subsidiaries of GreenMan and were renamed GreenMan
Technologies of Minnesota, Inc. and GreenMan Technologies of Georgia, Inc.,
respectively.
In November 1997, GreenMan acquired all of the capital stock of
Cryopolymers, Inc., a company located in St. Francisville, Louisiana engaged in
processing scrap tire chips into crumb rubber. As a result of the acquisition,
the company became a wholly-owned subsidiary and was renamed GreenMan
Technologies of Louisiana, Inc. Due to a fire at its facility in August 1998,
GreenMan Technologies of Louisiana ceased processing operations and was
completely closed in December 1998.
In January 1998, GreenMan closed its Arkansas molding operations in order
to eliminate continued operating losses. The molding operations were previously
engaged in providing injection molding manufacturing services to customer
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.
In June 1998, GreenMan signed a letter of intent to acquire all of the
capital stock of Mac's Tire Recyclers a privately-held tire recycler located in
Saltillo, Mississippi. GreenMan operated the Mac's Tire Recyclers facility for
the period from June 1, 1998 until April 16, 1999 under a management agreement
which provided for a management fee equal to 90% of the net income of Mac's Tire
Recyclers before depreciation and income taxes. The management agreement term
expired on April 16, 1999 and accordingly, GreenMan is no longer managing Mac's
Tire Recyclers operations. Based upon due diligence, both parties have agreed
not to proceed with the acquisition.
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's existing operations during year ended September 30,
1999. The South Carolina operation has been incorporated as GreenMan
Technologies of South Carolina, Inc.
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 an estimated loss on
disposal of DuraWear of $920,000 and wrote down DuraWear's net assets to their
estimated fair market value. On June 14, 1999, GreenMan sold substantially all
of DuraWear's assets, excluding land and buildings. The buyer also executed a
one-year lease for use of the land and buildings retained by GreenMan at a
monthly rental of $4,500. The lease automatically renews for an additional two
(2) one-year terms unless notice of non-renewal is given by the buyer at least
ninety days prior to the end of the term. The buyer has been granted an option
to purchase the land and buildings for $850,000 during the term of the lease.
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Products and Services
GreenMan's tire recycling operations are paid a fee to collect, transport
and process scrap tires into two inch rubber chips which are then sold as tire
derived fuel to cement kilns, pulp and paper producers and electric utilities,
or utilized in civil engineering projects such as landfill construction or road
stabilization projects. GreenMan Technologies of Minnesota, GreenMan
Technologies of Georgia and GreenMan Technologies of South Carolina collect
tires from two sources:
o local, regional and national tire stores; and
o abatement sites where governmental entities intervene to clean up
unwanted tire piles.
Prior to the fire at GreenMan Technologies of Louisiana, a small portion of the
rubber chip flow was utilized for the production of crumb rubber.
In January 1998, GreenMan ceased the production of its 34-gallon trash
containers using GEM-Stock or GreenMan Environmental Materials, and closed its
Arkansas injection molding plant. As a result of GreenMan's current emphasis on
expanding the core business of tire collection and processing versus continued
development of recycled content products and management's belief that
significant resources would be required to accelerate product development in the
near term, management has concluded that the value of its GEM Stock technology
license is impaired at September 30, 1999 and therefore has written off its
remaining $68,335 investment in the licensed technology.
Manufacturing/Processing
Collectively, GreenMan's tire recycling operations currently have the
capacity to process up to 30 million passenger tire equivalents annually.
GreenMan processed approximately 10 million passenger tire equivalents in the
year ended May 31, 1998, approximately 14.6 million passenger tire equivalents
on an annualized basis during the transition period and over 17 million
passenger tire equivalents during the year ended September 30, 1999. The method
used to process tires is a series of commercially available shredders that
sequentially reduce tires from whole-size to two-inch chips. Bead-steel is
removed magnetically yielding a "95% wire-free chip". The recycling process
recovers about 65% of the incoming tire with about 35% being disposed as
processing residual. GreenMan is evaluating technology that would recycle the
processing residual into marketable components of rubber and steel See -
"Product Development".
Prior to the August 1998 fire, GreenMan's plant in St. Francisville,
Louisiana utilized a two-inch rubber tire chip as feedstock to cryogenically
produce crumb rubber. The operation also developed a process to create
chemically modified crumb rubber for application in the asphalt industry.
Raw Materials
GreenMan believes it will have access to a supply of tires sufficient to
meet its requirements for tire derived fuel and civil engineering markets for
the foreseeable future. The tire recycling operations collectively own and
operate key pieces of heavy equipment to provide services to governmental
agencies seeking contractors to clean up tire piles. Specialized equipment for
unique contracts is rented on an as-needed basis. According to the Scrap Tire
Management Council, in 1998,about 270 million passenger tire equivalents (one
per person per year) are discarded annually in the United States in addition to
the estimated 3 billion scrap passenger tire equivalents already stockpiled in
landfills and illegal tire piles. The Scrap Tire Management Council estimates
that approximately 115 million scrap passenger tire equivalents are burned as
tire derived fuel, 20 million scrap passenger tire equivalents are used in civil
engineering applications, 40 million scrap passenger tire equivalents are used
in various other applications such as crumb rubber production, retreading and
export with the remaining tires landfilled. Thus, approximately 95 million
passenger tire equivalents are now added annually to landfills. Accordingly,
there is a more than ample supply of non-recycled tires to meet GreenMan's
growth plan and to utilize the collective processing capacities.
Product Development
GreenMan's Minnesota and Georgia tire processing operations recover about
65% of the incoming tires processed with the balance disposed of as processing
residual at a cost which exceeded $1,000,000 in the year ended September 30,
1999. The tire chip market for GreenMan Technologies of South Carolina's
products does not require the steel to be removed during processing, therefore
eliminating most processing residual. GreenMan has identified and is currently
field testing equipment which management believes will recycle the processing
residual into saleable components of rubber and steel. GreenMan
4
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intends to establish the first processing residual production line at GreenMan
Technologies of Georgia in the year ended September 30, 2000, subject to
funding. There can be no assurance that GreenMan will be able to secure funding
for such equipment.
In January 1998, GreenMan entered into a license agreement with a
privately-held company under which it acquired the exclusive rights and license
to use a proprietary crumb rubber modification to be developed for use in the
asphalt industry. In August 1998, GreenMan entered into a second license
agreement with the licensor under which it acquired the exclusive rights and
license to use a series of four proprietary technologies under development. In
April 1999, GreenMan and the licensor agreed to terminate the January 1998 and
August 1998 license agreements. In return for payments made to date, GreenMan
received assignment of two developed technologies (one of which is patented) for
crumb rubber modification.
In February 1998, GreenMan entered into an exclusive technology
commercialization agreement with the Federal Highway Administration whereby
GreenMan was working with major asphalt manufacturers and contractors to
incorporate patented Federal Highway Administration binder technology --
together with ultra-fine crumb rubber -- to create a high-performance,
cost-effective asphalt blend. Designated chemically modified crumb rubber for
asphalt, this advanced material formulation addresses on-going highway problems
of: aging, rutting, low-temperature cracking, fatigue cracking, moisture
sensitivity, and adhesion between asphalt and aggregate material. These six
performance factors are among the most common causes of pavement failure. In
June 1998, GreenMan received certification of its crumb rubber modification
technology by the Federal Highway Administration and completed the first
commercial application of chemically modified crumb rubber for asphalt in
September 1998 in Connecticut.
During the year ended September 30, 1999, the technical group addressing
chemically modified crumb rubber for asphalt within the Federal Highway
Administration was re-deployed and/or disbanded which has greatly slowed the
commercialization initiative. Management believes that without significant
Federal Highway Administration involvement, alternatives such as chemically
modified crumb rubber for asphalt will not become a value added market
opportunity in the near term. As a result of the limited effort being exerted by
the Federal Highway Administration, GreenMan's current emphasis on expanding the
core business of tire collection and processing versus continued development of
asphalt related initiatives, management has concluded that the value of the
chemically modified crumb rubber for asphalt technologies is impaired and
therefore has written off the $103,853 investment in the chemically modified
crumb rubber for asphalt technologies at September 30, 1999.
Research and development expenses for the year ended May 31, 1998 and the
four months ended September 30, 1997 and 1998 were $675,252, $97,176 and
$150,132, respectively. Research and development expenses for the year ended
September 30, 1999 were $126,463.
Customers
There were no customers that accounted for 10% or more of consolidated net
sales during the fiscal year ended May 31, 1998, the transition period or the
fiscal year ended September 30, 1999. The tire recycling operations have a
diversified collection and product sales program that minimizes their
vulnerability to the loss of any one customer. The diverse base of customers
includes Goodyear, Firestone, Continental, Michelin and many local and regional
tire outlets.
GreenMan does not have any long-term contracts pursuant to which any
customer is required to purchase any minimum amount of products or provide any
minimum amount of tires. There can be no assurance that GreenMan will continue
to receive orders of the same magnitude as in the past from existing customers
or that it will be able to market its current or proposed products to new
customers. The loss of any individual customer would not have a material adverse
effect on the business of GreenMan and its subsidiaries, taken as a whole.
Sales and Marketing
The tire recycling operations utilize in-house sales staff for securing
new accounts and marketing processed materials. This strategy maximizes revenue
and concentrates sales/marketing efforts on highly focused initiatives.
Sales/marketing personnel have extensive experience in the tire industry and in
industries where processed materials are consumed.
5
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Competition
Historically, companies in the tire collection and processing industry
have generated sufficient quantities of tires to satisfy the growing needs of
tire derived fuel users such as cement kilns, pulp and paper producers and
electric utilities or utilized in civil engineering projects such as landfill
construction or road stabilization projects. There are also several companies
that break down the tire material into its elemental components and sell the
components individually. GreenMan believes that the limited success experienced
by its competitors is due to industry disaggregation among small and
under-capitalized companies and limited success in identifying and producing a
market strategy for recycling tires. Consequently, GreenMan believes there is an
opportunity for industry consolidation and certain strategic value-added
vertical integration.
GreenMan has positioned itself as a leader in tire recycling operations
and estimates that collectively its current operations process approximately 6%
of tires currently generated domestically, making it the second largest tire
recycler in the United States.
Government Regulation
GreenMan's tire recycling and manufacturing activities may be subject to
extensive and rigorous government regulation designed to protect the
environment. Management does not expect that GreenMan's activities will result
in the emission of air pollutants, the disposal of combustion residues, or the
storage of hazardous substances. The establishment and operation of plants for
tire recycling, however, are subject to obtaining numerous permits and
compliance with environmental and other government regulations. The process of
obtaining required regulatory approvals can be lengthy and expensive. The
Environmental Protection Agency and comparable state and local regulatory
agencies actively enforce environmental regulations and conduct periodic
inspections to determine compliance with government regulations. Failure to
comply with applicable regulatory requirements can result in, among other
things, fines, suspensions of approvals, seizure or recall of products,
operating restrictions, and criminal prosecutions. Furthermore, changes in
existing regulations or adoption of new regulations could impose costly new
procedures for compliance, or prevent GreenMan from obtaining, or affect the
timing of, regulatory approvals. GreenMan uses its best efforts to keep abreast
of changed or new regulations for immediate implementation.
Protection of Intellectual Property Rights and Proprietary Rights
None of the equipment or machinery that GreenMan currently uses or intends
to use in its respective current or proposed manufacturing activities is
proprietary. Any competitor can acquire equivalent equipment and machinery on
the open market. GreenMan has acquired exclusive perpetual world-wide rights to
a proprietary additive technology, which in the future could enable GreenMan to
blend a broader range of virgin and recycled plastics together, and/or combine
such plastics with crumb rubber from recycled tires.
GreenMan has used the name "GreenMan" in interstate commerce and asserts a
common law right in and to such names. A trademark search was conducted prior to
GreenMan's initial public offering for the name "GreenMan" which found that
there are no significantly similar names currently being used in GreenMan's
current and intended industries. GreenMan may file an application with the U.S.
Department of Commerce, Patent and Trademark Office to register its name and
establish trademark rights. There can be no assurance, however, that such a
trademark application will be approved.
Employees
As of September 30, 1999, GreenMan had 97 full time employees. Neither
GreenMan nor its subsidiaries are a party to any collective bargaining
agreements, and each considers the relationship with their employees to be
satisfactory.
6
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Item 2. Description of Properties
GreenMan Technologies of Minnesota owns two industrial buildings and an
office building in Savage, Minnesota, located on approximately 8 acres of land
zoned for industrial expansion. GreenMan Technologies of Georgia owns an
industrial building and an office building in Jackson, Georgia, located on
approximately 21 acres of land zoned for industrial expansion. These locations
have adequate space to accommodate expansion if required to meet ongoing growth.
GreenMan Technologies of South Carolina leases approximately two acres of
industrial space in Batesburg, South Carolina at $5,000 per month under a
one-year lease which expired in September 1999 and was extended until March 2000
at a rate of $7,500 per month. Management does not believe the current space is
adequate for future needs.
Management believes that GreenMan's existing Georgia and Minnesota
facilities are adequate for its current needs. However, GreenMan's management is
currently evaluating alternatives for relocating GreenMan Technologies of South
Carolina's operations.
GreenMan leases approximately 3,380 square feet of office space in
Lynnfield, Massachusetts at a monthly rental of $4,456 under a five-year lease
which expires in June 2003.
DuraWear, a subsidiary, no longer in operation, owns two industrial
buildings and an office building in Birmingham, Alabama, located on five acres
of land zoned for industrial expansion. GreenMan is currently leasing the
available space to a third party under a one-year lease at a monthly rental of
$4,500. The lease automatically renews for an additional two (2) one-year terms
unless notice of non-renewal is given by the third party at least ninety days
prior to the end of the term. GreenMan has granted the third party an option to
purchase the land and buildings for $850,000 during the term of the lease.
Item 3. Legal Proceedings
In February 1999, MAC Funding Corporation commenced an action in the U.S.
District Court for the District of Massachusetts against GreenMan. In the
complaint, MAC Funding Corporation alleged that it is 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 GreenMan to MAC Funding
Corporation dated July 1, 1998. GreenMan did not file a defense to the claim as
it does not believe it has any defense to the claim and was noted in default by
the court on April 29, 1999. A default judgement of $346,126 was issued in June
1999. In October 1999 a payment plan was established with MAC Funding
Corporation whereby GreenMan would pay $75,000 per month until the balance was
paid off. As of December 1, 1999 GreenMan had paid $150,000 to MAC Funding
Corporation.
On January 27,1999, GreenMan received correspondence from attorneys for
Cryopolymers Leasing, Inc., the lessor of GreenMan Technologies of Louisiana's
cryogenic equipment purporting to terminate the lease restructuring and
demanding payment of the original lease buyout of approximately $3,100,000.
Cryopolymers Leasing also sought an additional $400,000 for cryogenic rubber
recycling equipment it contended was purchased on behalf of GreenMan. In
February 1999, Cryopolymers Leasing commenced suit against GreenMan, GreenMan
Technologies of Louisiana and Lexington Insurance Company seeking, among other
things, to terminate the lease restructuring agreement, force GreenMan to
purchase or lease certain additional cryogenic rubber recycling equipment and
for damages. On May 14, 1999, GreenMan and Cryopolymers Leasing reached a
settlement whereby Cryopolymers Leasing agreed to assign to GreenMan all
interest in and to any additional insurance proceeds to be received as a result
of the August 1998 fire; transfer ownership to GreenMan of certain additional
cryogenic rubber recycling equipment purchased by Cryopolymers Leasing on behalf
of GreenMan; and withdraw from all legal proceedings against GreenMan. In
return, GreenMan:
o paid Cryopolymers Leasing $1,700,000 of escrowed insurance proceeds;
o executed a $1,100,000 sixty-month note payable, bearing interest at
7.75% with monthly payments of $7,553 and a balloon payment due June
2004. The interest rate may be increased to 21% in the event the
note is deemed in default;
o issued 250,000 shares of common stock (valued at $202,500);
o issued immediately exercisable warrants to purchase 450,000 shares
of common stock (valued at $100,000) for a period of ten years at
$.81 per share;
o paid all fees associated with the settlement agreement.
GreenMan determined the total settlement to equal $3,255,000 resulting in
an additional casualty loss of $955,000. The $1,100,000 note payable is
personally guaranteed by four officers of GreenMan. The common stock of
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GreenMan Technologies of South Carolina has been pledged as collateral to the
four officers for their personal guarantees. GreenMan is currently marketing the
additional cryogenic rubber equipment to potential purchasers.
In November 1998, St. Francisville Industrial Park, Inc. commenced an
action in the Twentieth Judicial District Court, Parish of West Feliciana, State
of Louisiana. The claim alleged that as a result of the negligence of GreenMan
or one of its affiliates, a building which was being leased by GreenMan
Technologies of Louisiana, Inc., as successor in interest to a lease between St.
Francisville Industrial Park, as lessor, and Cryopolymers, Inc., as lessee,
burned and was damaged. St. Francisville Industrial Park is claiming $275,000
for damage to the building and $230,500 for unpaid accelerated rent since the
date of the fire through December 31, 1998. GreenMan has not yet filed a defense
to this claim, but intends to do so. GreenMan believes that it has valid
defenses to these claims and intends to defend vigorously.
Item 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of the shareholders during the
fourth quarter of the fiscal year ended September 30, 1999.
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PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
GreenMan's Common Stock and the Class A Common Stock Purchase Warrants
were delisted from the Nasdaq Small Cap Market System effective July 7, 1999. On
July 8, 1999, GreenMan's common stock and Class A Common Stock Purchase Warrants
began trading on the Over the Counter Bulletin Board under the symbols "GMTI"
and "GMTIW", respectively. GreenMan's common stock and warrants continue to
trade on the Boston Stock Exchange under the symbols "GMY" and "GMYW",
respectively.
On July 7, 1999, GreenMan was notified that as a result of noncompliance
with the $1.00 minimum bid requirement and a violation of the marketplace rules
regarding shareholder approval, GreenMan's securities would no longer be listed
on Nasdaq's Small Cap Market effective July 7, 1999. GreenMan filed an appeal
with NASDAQ requesting a review of the decision and a reinstatement of its
securities on the NASDAQ Small Cap Market. In August 1999, notice was received
from the Nasdaq Listing and Hearing Review Council that the appeal would be
considered and the decision will be reviewed in January 2000. There can be no
assurance, however, that GreenMan's appeal will be successful and that its
securities will be reinstated on Nasdaq's Small Cap Market.
GreenMan's management anticipates that the absence of listing on the
Nasdaq's Small Cap Market for GreenMan's common stock may have a material
adverse effect on the market for, and potentially the market price of the common
stock.
The following table sets forth the high and low bid quotations for the
common stock and Class A Common Stock Purchase Warrants for the periods
indicated as quoted on the Over the Counter Bulletin Board effective July 8,
1999 and by the Nasdaq Small Cap Market System for all prior periods. These
quotations reflect inter-dealer prices, without retail mark-up, mark-down or
commission and may not necessarily represent actual transactions.
<TABLE>
<CAPTION>
Class A Common Stock
Common Stock Purchase Warrants
------------------------ ---------------------
High Low High Low
---- --- ---- ---
<S> <C> <C> <C> <C>
Fiscal 1998
Quarter Ended August 31, 1997 $8.91 $2.81 $1.72 $0.65
Quarter Ended November 30, 1997 8.28 4.53 1.72 0.63
Quarter Ended February 28, 1998 4.22 1.41 0.94 0.31
Quarter Ended May 31, 1998 4.44 0.94 0.59 0.16
Transition Period
Quarter Ended August 31, 1998 $2.44 $0.94 $0.38 $0.16
Month Ended September 30, 1998 1.00 0.56 0.16 0.06
Fiscal 1999
Quarter Ended December 31, 1998 $0.59 $.34 $0.03 $0.03
Quarter Ended March 31, 1999 1.38 0.41 0.03 0.03
Quarter Ended June 30, 1999 0.97 0.66 0.09 0.03
Quarter Ended September 30, 1999 0.78 0.47 0.09 0.01
</TABLE>
On December 1, 1999, the closing bid price of the common stock was $.31
and the closing bid price for the Class A Common Stock Purchase Warrants was
$.01.
As of December 1, 1999, management estimated that the approximate number
of stockholders of record of GreenMan's Common Stock was 3,600. GreenMan has not
paid any cash dividends on its common stock since inception and it does not
anticipate paying any cash dividends in the foreseeable future.
There are currently 13 registered market makers of GreenMan's common
stock.
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Investment Banking Agreement
In January 1999, GreenMan executed a two-year investment banking and
corporate financing agreement with Schneider Securities Inc. In exchange for
services to be provided, GreenMan agreed to:
o pay an annual fee of $25,000;
o issue 50,000 shares of unregistered common stock which are subject
to an eighteen month lock-up agreement (valued at $25,000);
o issue warrants to purchase 150,000 shares of common stock
exercisable January 2000 through January 2004 at prices ranging from
$1.00 to $1.50 per share; and
o issue warrants to purchase 100,000 shares of common stock
exercisable January 2001 through January 2004 at prices ranging from
$2.00 to $2.50 per share.
Item 6. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
Year ended September 30, 1999 Compared to Four Months ended September 30, 1998
Net sales for the year ended September 30, 1999 were $16,337,819 as
compared to $4,605,612 for the four months ended September 30, 1998. GreenMan
processed over 17 million passenger tire equivalents during the year ended
September 30, 1999 as compared to approximately 4.87 million passenger tire
equivalents during the four months ended September 30, 1998 or approximately
14.6 million passenger tire equivalents on an annualized basis. The 16% increase
in annualized passenger tire equivalents was attributable to focused market
expansion efforts at GreenMan Technologies of Minnesota and GreenMan
Technologies of Georgia and the impact of the September 4, 1998 acquisition of
the United Waste Service tire processing and collection assets. Included in
revenue for the year ended September 30, 1999 and the four months ended
September 30, 1998 is $19,085 and $223,000, respectively of income associated
with the Mac's Tire Recyclers management agreement which expired in April 1999.
Gross profit for the year ended September 30, 1999 was $3,301,906 or 20%
of net sales as compared to $1,401,049 or 30% of net sales for the four months
ended September 30, 1998. The impact of the increased fiscal 1999 volume was
offset by a lower than average gross profit during the last half of fiscal 1999
as a result of equipment maintenance problems experienced at GreenMan
Technologies of South Carolina. These problems resulted in increased processing,
disposal and transportation costs as GreenMan Technologies of South Carolina
tires were transferred to GreenMan Technologies of Georgia for processing. In
August 1999, GreenMan Technologies of South Carolina executed a long term lease
for new processing equipment which has eliminated the excessive equipment
maintenance /downtime and high transfer/transportation costs experienced by
GreenMan Technologies of South Carolina. The decrease in gross profit was also
attributable to increased disposal and subcontracting costs associated with
consolidating the United Waste Service Georgia based tire recycling assets into
GreenMan Technologies of Georgia which was concluded in August 1999.
Research and development expenditures were $126,463 for the year ended
September 30,1999 as compared to $150,132 for the four months ended September
30, 1998. The decrease is due to the fact that during the prior period, a
significant effort was expended in the area of crumb rubber research and
development. The results for the year ended September 30, 1999 include increased
expenses associated with the proposed wire separation project.
Selling, general and administrative expenses were $3,953,959 or 24% of net
sales for the year ended September 30, 1999, as compared to $1,161,971 or 25% of
net sales for the four months ended September 30, 1998.
As a result of a change in use of equipment at GreenMan Technologies of
South Carolina and the consolidation of the Georgia based processing equipment
into GreenMan Technologies of Georgia's operations during fiscal 1999,
management determined that certain equipment was no longer necessary and
initiated an effort to sell the excess equipment. Based upon discussions with
third party equipment brokers and due to the unique nature of certain equipment,
management estimates the net book value of the identified assets exceeded the
estimated market value and accordingly, recorded an impairment loss of $752,360
at September 30, 1999. This was in addition to a $172,188 impairment loss
associated with the write-off of GreenMan's investment in the chemically
modified crumb rubber for asphalt technologies and the GEM-Stock license
agreement.
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As a result of the foregoing, GreenMan had an operating loss of $1,703,064
or 10% of net sales for the year ended September 30, 1999 as compared to an
operating profit of $88,946 or 2% of net sales for the four months ended
September 30, 1998.
Interest and financing costs for the year ended September 30, 1999 were
$985,421 or 6% of net sales compared to $636,462 or 14% of net sales for the
four months ended September 30, 1998. GreenMan recorded a $955,000 casualty loss
during fiscal 1999 associated with the litigation that ensued from GreenMan
Technologies of Louisiana's fire. Other expenses for the four months ended
September 30, 1998, include $550,000 relating to GreenMan's write-off of its
investment in two joint ventures, $185,000 of uncollectible equipment deposits
and the $1,450,000 casualty loss associated with the fire at GreenMan
Technologies of Louisiana. These expenses were offset by a $500,000 forgiveness
of debt associated with a restructuring agreement with respect to GreenMan
Technologies of Louisiana's capital lease.
The $236,285 loss from discontinued operations and $920,000 loss on
disposal for the year ended September 30, 1999 is associated with the March 1999
decision to close DuraWear and the subsequent sale in June 1999 of substantially
all of DuraWear's assets, excluding land and buildings.
GreenMan had a net loss of $4,657,861 or $0.43 per share for the year
ended September 30, 1999 as compared to a net loss of $2,326,086 or $0.37 per
share for the four months ended September 30, 1998.
Four Months ended September 30, 1998 Compared to Four Months ended September 30,
1997
Net sales for the four months ended September 30, 1998 were $4,605,612 as
compared to $2,462,416 for the four months ended September 30, 1997. The
increase of $2,143,196 or 87% was primarily attributable to the inclusion of
revenues from GreenMan Technologies of Minnesota and GreenMan Technologies of
Georgia for the entire four months as they were acquired on June 30, 1997 and
the impact of the September 4, 1998 acquisition of the United Waste Service tire
processing and collection assets. In addition, the Minnesota and Georgia
operations experienced an average 37% internal growth in tires processed as
compared to the comparable period in 1997. The increase also includes $223,000
of income associated with the Mac's Tire Recyclers management agreement.
Gross profit for the four months ended September 30, 1998 improved to 30%
of net sales or $1,401,049 as compared to 28% of net sales or $698,942 for the
four months ended September 30, 1997. This was attributable to the inclusion of
the United Waste Service tire processing and collection assets and the income
from Mac's Tire Recyclers which offset GreenMan Technologies of Louisiana's
negative $87,000 gross profit. GreenMan Technologies of Louisiana operated under
limited operating conditions prior to the August 1998 fire as GreenMan continued
its crumb rubber research and development efforts.
Research and development expenditures were $150,132 for the four months
ended September 30, 1998 as compared to $97,176 for the four months ended
September 30, 1997. The increase was attributable to continued crumb rubber
research and development efforts which were being conducted at GreenMan
Technologies of Louisiana. This facility had operated as the technical proving
ground for crumb rubber production and applications research and was
instrumental in obtaining Federal Highway Administration certification in June
1998 of GreenMan's crumb rubber modification technology for use in the asphalt
industry.
Selling, general and administrative expenses were $1,161,971 for the four
months ended September 30, 1998, or 25% of sales as compared to $713,198 or 29%
of sales, for the same period of the prior year. The four months ended September
30, 1998 include operating expenses of $75,498 associated with the inclusion of
GreenMan Technologies of Louisiana which was acquired in November 1997 and
expenses associated with GreenMan Technologies of Minnesota and GreenMan
Technologies of Georgia for a full four month period.
As a result of the foregoing, GreenMan had an operating profit of $88,946
for the four months ended September 30, 1998 as compared to an operating loss of
$111,432 for the comparable period ending September 30, 1997.
Interest and financing costs decreased by $390,758 to $636,462 for the
four months ended September 30, 1998 due to decreased amortization of the
financing costs associated with the issuance of convertible debentures.
Approximately $418,000 of financing costs were expensed during the period ended
September 30, 1998 as compared to $801,574, including $112,500 of penalties, for
the comparable period in 1997.
Other expenses for the four months ended September 30, 1998, include
$550,000 relating to the write-off of GreenMan's investment in two joint
ventures, $185,000 of uncollectible equipment deposits and the $1,450,000
casualty loss associated with the August 21, 1998 fire at GreenMan Technologies
of Louisiana. These expenses were partially offset by a $500,000 forgiveness of
debt associated a restructuring agreement with respect to GreenMan Technologies
of Louisiana's capital lease.
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GreenMan reported a loss from discontinued operations of $6,957 and
$294,252 for the four months ended September 30, 1998 and 1997, respectively.
GreenMan experienced a net loss of $2,326,086, or $0.37 per share for the
four months ended September 30, 1998 as compared to a loss of $1,429,015, or
$0.90 per share for the four months ended September 30, 1997.
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 and common stock options and warrants in lieu of cash for services
rendered.
GreenMan has incurred losses since its inception aggregating $24,013,866,
has a working capital deficiency of $3,760,458 at September 30, 1999 and is in
default of certain debt obligations. 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 achieve 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 Divesting under performing non-core operations and eliminating use
of non-traditional financing methods;
o Reducing operating and overhead costs where appropriate;
o Negotiating with existing secured creditors to refinance existing
long term debt;
o Continuing to identify and evaluate financing alternatives; and
o Consideration of further consolidation initiatives to reduce
operating costs and enhance profitability.
During the past two years, GreenMan has divested and/or closed under
performing operations which have contributed over $13 million of GreenMan's
cumulative losses and eliminated the use of non-conventional financing methods
(discounted convertible debentures) which contributed an additional $4.0 million
in cumulative losses. Approximately $3,358,000 or 72% of the $4,657,861 loss for
the year ended September 30, 1999 is associated with non re-occuring events
which include the divestiture of DuraWear, the $955,000 casualty loss associated
with the Louisiana fire, the $924,548 impairment loss and amortization of the
remaining financing costs associated with the December 1997 convertible
debentures. Management estimates the corporate wide impact of the equipment
operation and maintenance problems experienced at GreenMan Technologies of South
Carolina to have exceeded $700,000 of additional operating expenses during the
year ended September 30, 1999. In August 1999, GreenMan executed a long term
lease for new processing equipment which has eliminated the excessive equipment
maintenance/downtime and high transfer/ transportation costs experienced during
the year ended September 30, 1999. GreenMan has also reduced its corporate
overhead by over $250,000 during the year ended September 30, 1999.
Management has identified $635,000 of idle equipment and is currently
marketing the equipment for sale in order to raise additional capital. GreenMan
has also identified and is currently field testing equipment which management
believes will recycle the tire processing residual 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 that such financing 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 a violation of the 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. 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.
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Management is currently evaluating several immediate financing
alternatives which would enhance the Company'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 the Company 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 December 1, 1999, the Company had issued $300,000 of convertible
notes and issued immediately exercisable five year warrants to purchase 100,000
shares of common stock at an exercise price of $.31 per share. 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
investors have been granted piggy-back registration rights to register the
common stock.
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 for working capital (the
offering was subsequently increased to $1,000,000 in March 1999). As of December
1, 1999, 1,568,613 shares of unregistered common stock have been sold to
investors including officers and directors for approximately $500,000 of net
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 GreenMan's 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.
During the period of March 1998 to May 1998, GreenMan sold 1,257,734
shares of unregistered common stock and immediately exercisable two year
warrants to purchase 325,000 shares of common stock at exercise prices ranging
from $1.75 to $3.88 per share to investors including officers and directors for
approximately $1,500,000. The proceeds from these sales were applied to working
capital. The investors were granted piggy-back registration rights to register
the common stock and the common stock issuable upon exercise of the warrants and
have agreed not to sell or transfer the shares for a period of at least twelve
months after issuance. GreenMan also granted immediately exercisable warrants to
purchase 8,332 shares of common stock at an exercise price of $3.88 per share to
a third party in conjunction with the offering. The weighted average fair value
of the warrants on the date of grant was $.50 per share.
Management believes that placement of these securities is exempt from
registration under Section 4(2) of the Securities Act of 1933, as amended.
Insurance Receivable
In August 1998, GreenMan Technologies of Louisiana's facility was damaged
by a fire which necessitated the closure of the operation. Management does not
intend to rebuild in St. Francisville, Louisiana and does not plan to
re-establish cryogenic crumb rubber processing capabilities at this time.
Under the terms of GreenMan Technologies of Louisiana's $3,000,000
property insurance policy, the insurance company paid $2,050,000 towards the
insured loss. The remaining $950,000 may be paid if GreenMan can demonstrate, to
the insurance company's satisfaction, that GreenMan has invested at least
$3,000,000 (replacement policy limit) in alternative tire recycling equipment
that satisfies the replacement requirements of the insurance policy. There can
be no assurance that this will be the case or that GreenMan will ever receive
the additional insurance proceeds. GreenMan has submitted a proposal to the
insurance company, which has been approved and would allow GreenMan Technologies
to receive the remaining funds due under the policy. GreenMan will recognize the
remaining $950,000 of insurance proceeds when it has received such funds from
the insurance company. As a result of the closure of GreenMan Technologies of
Louisiana, management wrote down all assets to their estimated net realizable
value and accrued for all remaining estimated fire related costs at September
30, 1998 resulting in a casualty loss of $1,450,000. In April 1999, GreenMan
received approximately $200,000 from the insurance company associated with its
business interruption policy.
GreenMan received a written agreement from Cryopolymers Leasing, Inc., the
lessor of GreenMan Technologies of Louisiana's cryogenic equipment whereby they
agreed to forgive $500,000 of capital lease obligations in return for a $500,000
payment when GreenMan received the actual cash value payment from the insurance
company. Cryopolymers Leasing also agreed in writing to execute a ten-year note
payable with GreenMan for the remaining capital lease balance of $1,600,000. The
note would bear interest at 10% per annum and be payable in monthly payments of
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$21,144 including interest and principal starting in June 1999. GreenMan
recorded this forgiveness of debt as other income for the period ended September
30, 1998. On January 27,1999, GreenMan received correspondence from attorneys
for Cryopolymers Leasing purporting to terminate the lease restructuring
agreement and demanding payment of the original lease buyout of approximately
$3,100,000. Cryopolymers Leasing also sought an additional $400,000 for
cryogenic rubber recycling equipment they contended was purchased on behalf of
GreenMan. In February 1999, Cryopolymers Leasing commenced suit against
GreenMan, GreenMan Technologies of Louisiana and Lexington Insurance Company
seeking, among other things, to set aside the lease restructuring agreement
concerning the cryogenic equipment lease, force GreenMan to purchase or lease
certain additional cryogenic rubber recycling equipment and for damages.
On May 14, 1999, GreenMan and Cryopolymers Leasing reached a settlement
whereby Cryopolymers Leasing agreed to assign to GreenMan all interest in and to
any additional insurance proceeds to be received as a result of the August 21,
1998 fire; transfer ownership to GreenMan of certain additional cryogenic rubber
recycling equipment purchased by Cryopolymers Leasing on behalf of GreenMan; and
withdraw from all legal proceedings against GreenMan. In return, GreenMan:
o paid Cryopolymers Leasing $1,700,000 of escrowed insurance proceeds;
o executed a $1,100,000 sixty month note payable, bearing interest at
7.75% with monthly payments of $7,553 and a balloon payment due June
2004. The interest rate may be increased to 21% in the event the
note is deemed in default;
o issued 250,000 shares of common stock (valued at $202,500);
o issued immediately exercisable warrants to purchase 450,000 shares
of common stock (valued at $100,000) for a period of ten years at $
.81 per share; and
o paid all fees associated with the settlement agreement.
GreenMan determined the total settlement to equal $3,255,000 resulting in
an additional casualty loss of $955,000 which was recorded in the quarter ended
March 31, 1999. The $1,100,000 note payable is personally guaranteed by four
officers of GreenMan. The common stock of GreenMan Technologies of South
Carolina has been pledged as collateral to the four officers for their personal
guarantee. GreenMan is currently marketing the additional cryogenic crumb rubber
recycling equipment to potential purchasers.
Debenture Offerings
December 1997 Debentures
In December 1997, GreenMan issued debentures in the aggregate principal
amount of $1,600,000 and immediately exercisable two-year warrants to purchase
32,000 shares of Common Stock at an exercise price of $3.13 per share. Each
debenture bears interest at 8% and is due December 15, 2000. The debentures are
convertible at any time commencing upon the earlier to occur of (i) the
effective date of the registration statement covering the shares issuable upon
conversion of the debentures, or (ii) 60 days following the date of issuance at
a conversion price equal to the lower of the average closing bid prices on the
five trading days preceding the date of the closing of the offering or 75% of
the average closing bid prices on the five trading days preceding the date of
the conversion of the debentures. The debentures automatically convert into
shares of common stock upon maturity. GreenMan also issued immediately
exercisable two-year warrants to purchase 32,000 shares of common stock at an
exercise price of $3.13 per share to the placement agent. The net proceeds from
the offering were approximately $1,350,000 after deducting commissions and
expenses of approximately $250,000. GreenMan used $750,000 of the proceeds to
paydown the outstanding loan payable to Browning- Ferris Industries, Inc. for
the purchase of GreenMan Technologies of Minnesota and GreenMan Technologies of
Georgia. As of September 30, 1999, all of the initial debentures and accrued
interest have been converted into shares of common stock.
Pursuant to the agreements, the holders agreed to purchase up to
$2,000,000 in additional debentures in multiple tranches during 12 months
following the effective date of the registration statement covering the shares
issuable upon conversion. Each tranche shall be for the purchase of between
$75,000 and $175,000 in additional debentures and may be completed at the
election of GreenMan subject to certain conditions. Each additional debenture
shall bear similar terms to the initial debentures including the issuance of
warrants per additional debenture to both the holders and the placement agent.
The additional debentures are convertible within two days of issuance. Pursuant
to the terms of the agreements, GreenMan is obligated to borrow at least
$1,000,000 in additional debentures or GreenMan must provide the holders and
placement agents, warrants to purchase an additional 40,000 shares of common
stock. GreenMan issued $450,000 of
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additional debentures during the period ended September 30, 1998 and immediately
exercisable two-year warrants to purchase 27,000 shares of common stock at
exercise prices ranging from $1.17 to $2.41 per share. GreenMan also issued
immediately exercisable two-year warrants to purchase 27,000 shares of common
stock at exercise prices ranging from $1.17 to $2.41 per share to the placement
agent. During the period of October 1998 to January 1999, all additional
debentures and $44,636 of accrued interest were converted into 1,622,381 shares
of common stock. GreenMan has notified the debenture holders that it will not
borrow the remaining $550,000 of the commitment and has not issued the
additional warrants as of September 30, 1999.
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).
GreenMan completed the filing of Form 8-K for the acquisition in April
1999. As a result, of its delay in filing such Form 8-K, GreenMan is ineligible
to register securities using SEC Form S-3 until April 2000 and is subject to
certain penalties.
Acquisition of GreenMan Technologies of Minnesota and GreenMan Technologies of
Georgia
In June 1997, GreenMan acquired from Browning-Ferris Industries, Inc, all
of the capital stock of two subsidiaries engaged in the scrap tire collection
and processing business: BFI Tire Recyclers of Minnesota, Inc. and BFI Tire
Recyclers of Georgia, Inc. As a result of the acquisitions, both companies
became wholly-owned subsidiaries of GreenMan and were renamed GreenMan
Technologies of Minnesota, Inc. and GreenMan Technologies of Georgia, Inc.,
respectively. GreenMan agreed to pay $5,331,516 for all of the outstanding
capital stock of the two companies of which $650,000 had been previously paid as
a deposit and the balance of $4,681,516 was financed by a short-term note.
In February 1998, GreenMan secured a $5.0 million asset-based credit
facility from Heller Financial Inc. and used approximately $3.9 million to repay
the balance due on the notes plus interest. The credit facility consists of:
o $1,400,000 of three-year term notes secured by real estate, payable
in monthly principal installments of $23,333 plus interest at prime
plus 1.75% (10.25% at September 30, 1999) with a balloon payment of
$583,380 due in February 2001;
o $1,900,000 of three-year term notes secured by machinery and
equipment, payable in monthly principal installments of $31,667,
plus interest at prime plus 1.75% (10.25% at September 30, 1999)
with a balloon payment of $791,620 due in February 2001; and
o a working capital line of credit of up to $1,700,000 secured by the
eligible accounts receivable, as defined. The line of credit bears
interest at prime plus 1.5% (10.0% at September 30, 1999).
GreenMan has granted a security interest in the capital stock of GreenMan
Technologies of Minnesota and GreenMan Technologies of Georgia to Heller
Financial Inc. in addition to providing a corporate guarantee and the personal
guarantee of three officers. The credit facility contains certain covenants
including minimum net worth and certain restrictions on intercompany cash
transactions. GreenMan is either in compliance with the terms of the credit
facility or has received a waiver of compliance at September 30, 1999.
In May 1999, GreenMan was notified that Heller Financial Inc. had sold the
credit facility to Fremont Financial Corporation. GreenMan has not been notified
of any material modifications to the existing terms of the credit facility as a
result of the sale.
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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, cure existing
defaults and fund continued internal growth;
o the ability to realize the remaining $950,000 due under the property
insurance policy in conjunction with the Louisiana fire;
o the ability to relocate GreenMan Technologies of South Carolina
prior to the March 2000 lease extension expiration;
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 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; 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.
Year 2000 Date Conversion
Many computer software systems, as well as certain hardware and equipment
utilizing date-sensitive information, were configured to use a two-digit date
field, which will preclude them from properly recognizing dates in the year
2000. The inability to properly recognize date-sensitive information in the year
2000 could render systems inoperable or cause them to incorrectly process
operational or financial information.
GreenMan hired A+ Computer Specialists and Granitech Inc. to assess and
replace its office PC's that are not year 2000 compatible during calendar 1999.
GreenMan has obtained written confirmation that the software used on its PC's is
year 2000 compatible.
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In addition, machinery and equipment often use or are controlled or
monitored by electronic devices that contain embedded microchips. Such machinery
and equipment could be rendered partially or totally inoperable if embedded
microchips are date-sensitive and do not properly recognize the year 2000.
Management has taken steps to resolve year 2000 compliance issues that may
be created by customers, suppliers and financial institutions with whom GreenMan
does business. However, there can be no guarantee that the systems of other
entities will be converted timely.
Management has:
o identified critical supplier and customer related issues;
o assessed the year 2000 readiness of equipment located at all of its
operating facilities; and
o determined what contingency plans may be required.
At this time, the potential effects in the event that GreenMan or third
parties are unable to resolve year 2000 problems timely are not determinable,
however, management believes it has resolved its own year 2000 issues. The
amounts charged to expense related to the Year 2000 computer compliance
modifications, have not been and are not expected to be material to GreenMan's
financial position, results of operations or cash flows.
As of January 11, 2000, GreenMan has experienced no significant business
interruptions as a result of year 2000 problems.
Recent Accounting Pronouncements
Statement of Financial Accounting Standards No. 131, "Disclosures about
Segments of an Enterprise and Related Information" is effective for financial
statements for fiscal years beginning after December 15, 1997. The statement
establishes standards for the way that public companies report information about
operating segments in annual and interim financial statements and selected
information about operating segments in interim financial reports issued to
shareholders. It also establishes standards for related disclosures about
products and services, geographic areas and major customers. Generally,
financial information is required to be reported on the basis that it is used
internally for evaluating segment performance and deciding how to allocate
resources to segments.
The statement also requires companies to report information about the way
that operating segments were determined, the product and services provided by
the operating segments, differences between the measurements used in reporting
segment information and those used by GreenMan in its general purpose financial
statements, and changes in the measurement of segment amounts from period to
period.
Item 7. Financial Statements
For information required with respect to this Item 7, see "Consolidated
Financial Statements" on pages F-1 through F-29 of this report.
Item 8. Changes In and Disagreements With Accountants on Accounting and
Financial Disclosure
None
Item 9. Directors, Executive Officers and Key Employees
The Directors and executive officers of GreenMan are as follows:
Name Age Position
---- --- --------
Maurice E. Needham ... 59 Chairman of the Board of Directors
Robert H. Davis ...... 57 Chief Executive Officer; President; Director
Charles E. Coppa ..... 36 Acting Chief Financial Officer; Treasurer;
Secretary
Robert D. Maust ...... 61 Vice President of Operations; Director
Lew F. Boyd .......... 54 Director
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Jagruti Oza .......... 39 Director
James F. O'Connor..... 58 Director
Each director is elected for a period of one year at the annual meeting of
stockholders and serves until his or her successor is duly elected by the
stockholders. The officers are appointed by and serve at the discretion of the
Board of Directors. In fiscal 1998, the Board of Directors approved a $2,500 per
board meeting fee to be paid to each outside director commencing with the March
12, 1998 meeting. Each outside director also participates in the Non-Employee
Director Stock Option Plan.
GreenMan has established an Audit Committee consisting of Ms. Oza, Mr.
Boyd and Mr. O'Connor and a Compensation Committee consisting of Messrs. Needham
and Boyd.
MAURICE E. NEEDHAM has been Chairman since June 1993. From June 1993 to
July 21, 1997, Mr. Needham also served as Chief Executive Officer. He also
serves as a Director of Comtel Holdings, an electronics contract manufacturer
since April 1999. He previously served as Chairman of Dynaco Corporation, a
manufacturer of electronic components which he founded in 1987. Prior to 1987,
Mr. Needham spent 17 years at Hadco Corporation, a manufacturer of electronic
components, where he served as President, Chief Operating Officer and Director.
ROBERT H. DAVIS has been Chief Executive Officer and a Director since July
1997. Prior to joining GreenMan, Mr. Davis served as Vice President of Recycling
for Browning-Ferris Industries, Inc. of Houston, Texas ("BFI") since 1990. As an
early leader of BFI's recycling division, Mr. Davis grew that operation from
startup to $650 million per year in profitable revenues. A 25-year veteran of
the recycling industry, Mr. Davis has also held executive positions with Fibres
International, Garden State Paper Company, and SCS Engineers, Inc.
CHARLES E. COPPA has served as Acting Chief Financial Officer, Treasurer
and Secretary since March 1998. From October 1995 to March 1998, he served as
Corporate Controller. Mr. Coppa was Chief Financial Officer and Treasurer of
Food Integrated Technologies of Brookline, MA, a publicly-traded development
stage company from July 1994 to October 1995. Prior to joining Food Integrated
Technologies, Inc., Mr. Coppa served as Corporate Controller for Boston Pacific
Medical, Inc., a manufacturer and distributor of disposable medical products and
Corporate Controller for Avatar Technologies, Inc., a computer networking
company.
ROBERT D. MAUST has been Vice President of Operations since July 1997 and
was President of the recycling operations from December 1996 to July 1997 and a
Director since July 1997. Prior to joining GreenMan, Mr. Maust was Vice
President for BFI's tire recycling operations from July 1991 to 1996 and was
instrumental in growing that operation from 5 million tires per year to 22
million tires per year over a five-year period. An entrepreneur/manager with
over ten years experience in tire recycling, Mr. Maust was President of Maust
Tire Recycling from 1988 to 1991, when he sold the business to BFI and joined
BFI as Vice President. On November 30, 1999, Mr. Maust resigned as a Director of
GreenMan.
LEW F. BOYD has been a Director since August 1994. Mr. Boyd is the founder
and since 1985 has been the Chief Executive Officer of Coastal International,
Inc., an international business development and executive search firm,
specializing in the energy and environmental sectors. Previously, Mr. Boyd had
been Vice President/General Manager of the Renewable Energy Division of Butler
Manufacturing Corporation and had served in academic administration at Harvard
and Massachusetts Institute of Technology.
JAGRUTI OZA has been a Director since March 1998. Ms. Oza is Vice
President - Strategy and Acquisitions for VNU Marketing Information Services, a
subsidiary of VNU, a $3 billion international publishing and marketing
information service company. Previously, Ms. Oza was Vice President - Corporate
Planning for Public Service Enterprise Group ("PSEG") from March 1995 to March
1998, a holding company with $6 billion in annual revenues whose businesses
include electric and gas utility, international power development and retail
energy services. From 1991 to 1995, Ms. Oza held various managerial positions at
PSEG including Regional Manager - Fossil Generation, overseeing the operation of
three power plants. Prior to joining PSEG, Ms. Oza was a management consultant
with Bain and Company (from 1987 to 1990) providing strategic management
services to multinational companies in the chemical, consumer products and
retail service industries.
JAMES F. O'CONNOR, CPA has been a Director since April 1999. Mr. O'Connor
is currently Managing Director of The Chartwell Company, a private merchant and
investment bank that provides merger-and-acquisition transaction services,
investment capital, and fiscal advisory services. Prior to joining The Chartwell
Company in 1997, Mr. O'Connor served from 1994-1997 as senior executive for
strategy, mergers and acquisitions, and operations at BBA Group
18
<PAGE>
plc, a $1.9 billion London-based manufacturing group of materials technology and
aviation-related services and products. In 1983, Mr. O'Connor co-founded
Ingoldsby, O'Connor & Company, which provided strategic investment-banking
services to middle-market companies on behalf of their merger-and-acquisition
activities. From 1976 to 1983, he served in several executive positions,
including Vice President of Finance, for BTR Inc./SW Industries, a one billion
dollar company. Additionally, from 1964-1976 he was an Audit Manager for Arthur
Andersen LLP in Boston.
Compliance with Section 16(a) of the Securities and Exchange Act of 1934
Section 16(a) of the Securities and Exchange Act of 1934 requires
GreenMan's directors and executive officers, and persons who own more than 10%
of GreenMan's Common Stock, to file with the Securities and Exchange Commission
initial reports of ownership of GreenMan's Common Stock and other equity
securities on Form 3 and reports of changes in s`uch ownership on Form 4 and
Form 5. Officers, directors and 10% Stockholders are required by the Securities
and Exchange Commission regulations to furnish GreenMan with copies of all
Section 16 (a) forms they file.
To the best of management's knowledge, based solely on review of the
copies of such reports furnished to GreenMan during and with respect to, its
most recent fiscal year, and written representation that no other reports were
required, all Section 16 (a) filing requirements applicable to its officers,
directors and 10% Stockholders were complied with.
Item 10. Executive Compensation
The following table summarizes the compensation paid or accrued for
services rendered during the fiscal year ended September 30, 1999, the
transition period and the fiscal year ended May 31, 1998 to the Chief Executive
Officer and the Vice President of Operations. GreenMan did not grant any
restricted stock awards or stock appreciation rights or make any long-term plan
payouts during the periods indicated.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long-Term
------------------- Compensation
(1) Securities
Name and Other Annual Underlying All Other
Principal Position Fiscal Year Salary Bonus Compensation Options (3) Compensation (2)
------------------ ----------- ------ ----- ------------ ----------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Robert H. Davis ........ 1999** $ 265,000 $ -- $ 12,636 475,000 $ --
Chief Executive Officer 1998* 61,539 -- 3,985 -- --
1998 188,000 -- 7,740 415,000 --
Robert D. Maust ........ 1999 $ 125,000 $ -- $ 20,405 100,000 $
Vice President 1998* 38,464 -- 5,685 -- --
1998 125,000 -- 11,940 140,000 19,000
</TABLE>
- ----------
* Note: Information for the 1998 period reflects the period from June 1,
1998 through September 30, 1998.
** Based upon GreenMan's performance, Mr. Davis has chosen to defer payment
of $65,000 of accrued compensation due him.
(1) Represents payments made to or on behalf of Messrs. Davis and Maust for
health insurance and auto allowances.
(2) Represents payments made to Mr. Maust for relocation expenses.
(3) The fiscal 1999 grants represent options granted in April 1999 and July
1999 for Mr. Davis and options granted in December 1998 and July 1999 to
Mr. Maust. The fiscal 1998 grants represent options granted in July 1997
and March 1998 for Mr. Davis and options granted in December 1996 and
March 1998 to Mr. Maust. Does not include 20,000 warrants to purchase
shares of common stock granted to Mr. Davis pursuant to a stock purchase
agreement and 6,400 warrants to purchase shares of common stock granted to
Mr. Maust pursuant to the terms of loans made to GreenMan by Mr. Maust.
19
<PAGE>
Options/SAR Grants Table
The following table sets forth each grant of stock options made during the
year ended September 30, 1999 held by the executives named in the Summary
Compensation Table above
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
% of Total Market
Number of Securities Options Exercise Price
Underlying Options Granted to Price On Date
Name Granted Employees in Per of Grant Expiration
- ---- ------- Fiscal Year Share Per Share Date
----------- ----- --------- ----
<S> <C> <C> <C> <C> <C>
Robert H. Davis ........ 385,000 (1) 44.3% $ .81 $ .81 04/02/09
90,000 (2) 10.3% $ .53 $ .53 07/22/09
Robert D. Maust ........ 10,000 (2) 1.1% $ .38 $ .38 12/01/08
90,000 (2) 10.3% $ .53 $ .53 07/22/09
</TABLE>
- ----------
(1) Vests equally over a seven year period.
(2) Vests equally over a five year period.
The following table sets forth information concerning the value of
unexercised options as of September 30, 1999 held by the executives named in the
Summary Compensation Table above.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES(1)
<TABLE>
<CAPTION>
Value of Unexercised
Number of Unexercised In-the-Money Options
Options at September 30, 1999 (1) at September 30, 1999 (2)
--------------------------------- -------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Robert H. Davis ..... 91,000 799,000 $ -- $ --
Robert D. Maust ..... 40,000 230,000 $ -- $ 1,200
</TABLE>
- ----------
(1) There were no options exercised by any of the executive officers named in
the Summary Compensation Table during the fiscal year ended September 30, 1999.
The options granted to the executive officers became exercisable commencing July
17, 1998 in the case of Mr. Davis and December 30, 1997 in the case of Mr. Maust
at an annual rate of 20% of the underlying shares of Common Stock. The options
granted to Mr. Davis pursuant to his April 1999 employment agreement vest over a
seven-year period.
(2) Assumes that the value of shares of common stock is equal to $.50 per share,
which was the closing bid price as listed by OTC Bulletin Board on September 30,
1999.
Employment Agreements
GreenMan has employment agreements with four officers which provide for
base salaries, participation in employee benefit plans and severance payments
for termination without cause.
Stock Option Plan
GreenMan's 1993 Stock Option Plan, was established to provide incentive
stock options to purchase shares of common stock to employees, officers,
directors and consultants. In March 1999, GreenMan's stockholders approved an
increase to the number of shares authorized under the 1993 Stock Option Plan to
2,000,000 shares.
Options granted under the 1993 Stock Option Plan may be either options
intended to qualify as "incentive stock options" under Section 422 of the
Internal Revenue Code of 1986, as amended or non-
20
<PAGE>
qualified stock options. Incentive stock options may be granted under the
1993 Stock Option Plan to employees, including officers and directors who are
employees. Non-qualified options may be granted to employees, directors and
consultants of GreenMan.
The 1993 Stock Option Plan is administered by the Board of Directors who
has the authority to determine;
o the persons to whom options will be granted;
o the number of shares to be covered by each option;
o whether the options granted are intended to be incentive stock
options;
o the manner of exercise; and
o the time, manner and form of payment upon exercise of an option.
Incentive stock options granted under the 1993 Stock Option Plan may not
be granted at a price less than the fair market value of the Common Stock on the
date of grant (or less than 110% of fair market value in the case of persons
holding 10% or more of the voting stock of GreenMan). Non-qualified stock
options may be granted at an exercise price established by the Board which may
not be less than 85% of fair market value of the shares on the date of grant.
Incentive stock options granted under the 1993 Stock Option Plan must expire no
more than ten years from the date of grant, and no more than five years from the
date of grant in the case of incentive stock options granted to an employee
holding 10% or more of the voting stock of GreenMan.
As of September 30, 1999, there were 1,898,500 options granted and
outstanding under the 1993 Stock Option Plan of which 377,300 options were
exercisable at prices ranging from $0.38 to $5.65.
Non-Employee Director Stock Option Plan
On January 24, 1996, the Board of Directors adopted the 1996 Non-Employee
Director Stock Option Plan and the stockholders' approved it on June 7, 1996.
The purpose of the Non-Employee Director Stock Option Plan is to promote the
interests of GreenMan by providing an inducement to obtain and retain the
services of qualified persons who are not officers or employees to serve as
members of the Board of Directors. The Board of Directors has reserved 60,000
shares of common stock for issuance under Non-Employee Director Stock Option
Plan and as of September 30, 1999, options to purchase 16,000 shares of common
stock have been granted.
Each person who was a member of the Board of Directors on January 24,
1996, and was not an officer or employee, was automatically granted an option to
purchase 2,000 shares of common stock. In addition, after an individual's
initial election to the Board of Directors, any director who is not an officer
or employee and who continues to serve as a director will automatically be
granted on the date of the Annual Meeting of Stockholders an additional option
to purchase 2,000 shares of common stock. The exercise price per share of
options granted under the Non-Employee Director Stock Option Plan is 100% of the
fair-market value of the common stock on the business day immediately prior to
the date of the grant and is immediately exercisable for a period of ten years
from the date of the grant.
Employee Benefit Plan
Effective August 1999, GreenMan has implemented a Section 401(k) plan for
all eligible employees. Employees are permitted to make elective deferrals of up
to 15% of employee compensation and employee contributions to the 401(k) plan
are fully vested at all times. GreenMan may make discretionary contributions to
the 401(k) plan which become vested over a period of five years. There were no
corporate contributions to the 401(k) plan as of September 30, 1999..
Item 11. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information regarding beneficial
ownership of the common stock as of September 30, 1999;
o by each person who is known by GreenMan to own beneficially 5% or
more of the outstanding shares of common stock;
o by each director and officer of GreenMan (including any "group" as
used in Section 13(d)(3) of the Securities Exchange Act of 1934);
and
o by all directors and officers of GreenMan as a group.
21
<PAGE>
Unless otherwise indicated below, to the knowledge of GreenMan, all
persons listed below have sole voting and investment power with respect to their
shares of common stock, except to the extent authority is shared by spouses
under applicable law. As of September 30, 1999, 11,762,599 shares of common
stock were issued and outstanding.
SECURITY OWNERSHIP OF MANAGEMENT AND DIRECTORS
<TABLE>
<CAPTION>
Number of Shares Percentage of
Name (1) Beneficially Owned (2) Class
- -------- ---------------------- -----
<S> <C> <C>
Maurice E. Needham (3)................................. 1,108,783 9.31%
Robert H. Davis (4).................................... 291,797 2.46%
Robert D. Maust (5).................................... 235,156 1.99%
Charles E. Coppa (6)................................... 206,951 1.75%
Lew F. Boyd (7)........................................ 177,228 1.50%
Jagruti Oza (8)........................................ 106,788 *
James F. O'Connor (9).................................. 29,000 *
All officers and directors as a group 2,155,703 17.63%
(7 persons) .....................................
</TABLE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
<TABLE>
<CAPTION>
Number of Shares Percentage of
Beneficially Owned Class
------------------ -----
<S> <C> <C>
Joseph E. Levangie (10)................................ 1,190,093 9.61%
United Waste Service Inc. (11)......................... 320,000 100%
</TABLE>
- ----------
* Less than 1% of the outstanding Common Stock.
(1) Each person's address is care of GreenMan Technologies, Inc., 7 Kimball
Lane, Building A, Lynnfield, MA 01940
(2) Pursuant to the rules of the Securities and Exchange Commission, shares of
Common Stock that an individual or group has a right to acquire within 60
days pursuant to the exercise of options or warrants are deemed to be
outstanding for the purpose of computing the percentage ownership of such
individual or group, but are not deemed to be outstanding for the purpose
of computing the percentage ownership of any other person shown in the
table.
(3) Includes 152,100 shares of Common Stock issuable pursuant to immediately
exercisable stock options and warrants. Also includes 59,556 shares of
Common Stock and 10,000 shares of Common Stock issuable pursuant to
immediately exercisable outstanding warrants owned by Mr. Needham's wife.
Does not include 660,400 shares of Common Stock issuable pursuant to
outstanding stock options that are not currently exercisable.
(4) Includes 111,000 shares of Common Stock issuable pursuant to immediately
exercisable stock options and warrants. Does not include 799,000 shares of
Common Stock issuable pursuant to outstanding stock options that are not
currently exercisable.
(5) Includes 40,000 shares of Common Stock issuable pursuant to immediately
exercisable stock options and warrants. Does not include 230,000 shares of
Common Stock issuable pursuant to outstanding stock options that are not
currently exercisable.
(6) Includes 35,000 shares of Common Stock issuable pursuant to immediately
exercisable stock options and warrants. Does not include 204,000 shares of
Common Stock issuable pursuant to outstanding stock options that are not
currently exercisable.
(7) Includes 63,000 shares of Common Stock issuable pursuant to immediately
exercisable warrants. Does not include 96,000 shares of Common Stock
issuable pursuant to outstanding stock options that are not currently
exercisable.
(8) Includes 31,600 shares of Common Stock issuable pursuant to immediately
exercisable stock options and warrants. Does not include 2,400 shares of
Common Stock issuable pursuant to outstanding stock options that are not
currently exercisable.
(9) Includes 29,000 shares of Common Stock issuable pursuant to immediately
exercisable stock options and warrants.
(10) Includes 626,500 shares of Common Stock issuable pursuant to immediately
exercisable stock options and warrants. Mr. Levangie's address is 9 Cot
Hill Road, Bedford, MA 01730
(11) Represents shares of Class B Convertible Preferred Stock that are
convertible into shares of Common Stock any time commencing February 3,
2001. The conversion price of the Class B Convertible Preferred Stock in
effect at any time shall be determined by dividing the Issuance Price by
the Average Closing Bid Price. The terms are defined in the
22
<PAGE>
Asset Purchase Agreement between United Waste Service, Inc. and GreenMan
which was filed in GreenMan's Form 8-K on October 5, 1998. United Waste
Service, Inc.'s address is c/o Republic Services, Inc., 110 S.E. 6th
Street, Suite 2800, Ft. Lauderdale, FL 33301
Item 12. Certain Relationships and Related Transactions
Stock Issuances; Stock Options; Warrants
During June and July 1997, Messrs. Needham, Levangie, Maust, and another
officer were granted warrants to purchase 15,440 shares, in aggregate of common
stock pursuant to the terms of loans made to GreenMan. The warrants have
exercise prices ranging from $3.60 to $4.85 per share.
In March 1998, Messrs. Davis, Levangie, Coppa, and Boyd purchased an
aggregate of 334,334 unregistered shares of Common Stock and were granted
immediately exercisable, two-year warrants to purchase 74,000 shares of Common
Stock pursuant to the terms of the March 1998 private offering. The warrants are
exercisable at $1.75 per share.
During the period of October 1998 through January 1999, Messrs. Needham,
Davis, Coppa, Boyd, Ms. Oza and Mr. Levangie purchased an aggregate of 599,230
unregistered shares of Common Stock pursuant to the terms of the October 1998
private offering. In January 1999, Messrs. Davis and Coppa were advanced $55,000
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 two officers.
The investors were 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.
Loans; Personal Guarantees
On May 30, 1997, Messrs. Needham and Levangie were issued 10% convertible
notes, due October 30, 1998 in the amount of $640,000 for amounts previously
borrowed by GreenMan during the period of May 1996 to May 1997. They were also
issued warrants to purchase 25,600 shares of common stock at an exercise price
of $4.40 per share. The warrants expired unused during fiscal 1999. The notes
are convertible after 120 days into shares of common stock at a conversion price
equal to the lower of the average closing bid prices on the five trading days
preceding May 30, 1997 or 70% of the average closing bid prices on the five
trading days preceding the date of the conversion of such notes.
During June and July 1997, GreenMan borrowed an additional $386,000 from
Messrs. Needham, Levangie, Maust, and another officer and issued warrants to
purchase 15,440 shares of common stock at exercise prices ranging from $3.60 to
$4.85 per share. The warrants expired unused during fiscal 1999. The notes are
convertible after a one hundred and twenty day holding period into shares of
common stock at a conversion price equal to the lower of the average of the
closing bid prices on the five trading days preceding the closing or 70% of the
average of the closing bid prices on the five trading days preceding the date of
the conversion of such notes. On March 24, 1998, the officers converted
$1,026,000 of principal and $75,711 of accrued interest into 1,260,193 shares of
unregistered common stock.
In January 1998, Mr. Davis was advanced $104,000 under an 8.5% secured
loan agreement with both principal and interest due January 2001. The loan is
secured by 111,111 shares of common stock owned by Mr. Davis.
Messrs. Needham, Levangie, and Davis have personally guaranteed the
current $5.0 million asset-based credit facility provided by Heller Financial
Inc. in February 1998 (now held by Fremont Financial Corporation).
Messrs. Needham, Davis, Maust and Coppa have personally guaranteed the
$1.1 million note payable issued to Cryopolymers Leasing Inc. in May 1999.
In June 1999, in order to obtain a release from the mortgage holder of its
security interest in the DuraWear assets sold, GreenMan was required to reduce
the outstanding principal balance by $8,193 and Mr. Needham was required to
provide a personal guarantee.
Related Party Transactions
During the year ended September 30, 1999, several pieces of equipment were
rented on a monthly basis from Valley View Farms, Inc., a company owned by Mr.
Maust and another officer. Rent expense for the year ended September 30, 1999
associated with payments made to Valley View Farms was $141,070.
In September 1999, GreenMan Technologies of Georgia entered into a
five-year equipment lease with Valley View Farms. Under the terms of the lease,
GreenMan Technologies of Georgia is required to pay $6,421 per month rental and
has
23
<PAGE>
the ability to apply 85% of all payments made towards the purchase of the
equipment at the end of the lease. The lease was classified as a capital lease
at September 30, 1999 with an equipment value of $187,250.
All transactions, including loans, between GreenMan and its officers,
directors, principal stockholders, and their affiliates are approved by a
majority of the independent and disinterested outside directors on the Board of
Directors, and are on terms no less favorable to GreenMan than could be obtained
from unaffiliated third parties.
Item 13. Exhibits and Reports on Form 8-K
(a) Exhibits
The following exhibits required by Item 601 of Regulation S-B are filed as
part of this Form 10-KSB.
Exhibit
No. Description
--- -----------
*3.1 -- Certificate of Incorporation of GreenMan Technologies,
Inc.
*3.2 -- Articles of Incorporation of J.W. DuraWear, Inc. (Name
changed to DuraWear Corporation in Certificate of Merger
of DuraWear Corporation into J.W. DuraWear, Inc. dated
November 29, 1990).
*3.3 -- Certificate of Stock Designation of GreenMan
Technologies, Inc. dated August 10, 1995.
*3.4 -- By-laws of GreenMan Technologies, Inc.
(2) 3.5 -- Certificate of Amendment to the Certificate of
Incorporation of GreenMan Technologies, Inc.
(3) 3.6 -- Certificate of Amendment to the Certificate of
Incorporation of GreenMan Technologies, Inc.
*4.1 -- Specimen certificate for Common Stock of GreenMan.
*4.2 -- Specimen certificate for Class A Redeemable Common Stock
Purchase Warrant.
*4.3 -- Form of Warrant Agreement between GreenMan and OTC
Corporate Transfer Services Co.
*4.4 -- Form of Warrant issued to Landmark International
Equities, Inc.
*10.5 -- 1993 Stock Option Plan.
*10.8 -- Stock Option Letter dated June 10, 1993 issued to Joseph
E. Levangie.
*10.9 -- Stock Option Letter dated April 25, 1994 issued to Lew F.
Boyd.
*10.10 -- Intentionally Omitted.
*10.11 -- Stock Option Letter dated April 26, 1995 issued to Joseph
E. Levangie.
*10.13 -- Form of confidentiality and non-disclosure agreement for
executive employees.
**10.35 -- Amended and Restated Term Note dated October 1, 1995
between DuraWear Corporation and SouthTrust Bank of
Alabama, National Association.
**10.36 -- Loan Modification and Consent Agreement dated October
1, 1995 between DuraWear Corporation and SouthTrust Bank
of Alabama, National Association.
**10.37 -- Commercial Lease dated October 13, 1995 between GreenMan
Technologies, Inc. and Kimball Realty Trust.
(1) 10.43 -- Common Stock Purchase Warrant issued in June 1996 to
Palomar Medical Technologies, Inc.
(2) 10.54 -- Employment Agreement between GreenMan and Robert D. Maust.
(3) 10.64 -- Act of sale of Common Stock of Cryopolymers, Inc. between
Messer Griesheim Industries, Inc. and GreenMan
Technologies, Inc.
(3) 10.65 -- Agreement of Settlement and Release between Messer
Griesheim Industries, Inc. and GreenMan Technologies, Inc.
24
<PAGE>
(3) 10.66 -- Act of sale of Common Stock of Cryopolymers, Inc. between
Cryopolymers Leasing, Inc. and GreenMan Technologies, Inc.
(3) 10.67 -- Act of sale of Common Stock of Cryopolymers, Inc. between
Cryopolymers Management Inc. and GreenMan Technologies,
Inc.
(3) 10.68 -- Equipment Lease between Cryopolymers Leasing, Inc. and
GreenMan Technologies, Inc.
(3) 10.69 -- Letter from Palomar Medical Technologies, Inc. to
GreenMan extending the maturity date of the December 1996
Note
(3) 10.70 -- Form of Securities Purchase Agreement between GreenMan
and various investors in connection with the December
1997 Offering of Convertible Notes due December 2000 and
Warrants.
(3) 10.71 -- Form of Registration Rights Agreement between GreenMan
and various investors in connection with the December
1997 Offering of Convertible Notes due December 2000 and
Warrants.
(3) 10.72 -- Form of Convertible Notes due December 2000
(3) 10.73 -- Form of Common Stock Purchase Warrant
(4) 10.74 -- Loan and Security Agreement by and among GreenMan
Technologies of Minnesota, Inc., GreenMan Technologies of
Georgia, Inc., and Heller Financial Inc.
(4) 10.75 -- Promissory Note - Real Estate issued by GreenMan
Technologies of Minnesota and GreenMan Technologies of
Georgia in favor of Heller
(4) 10.76 -- Promissory Note - Equipment issued by GreenMan
Technologies of Minnesota and GreenMan Technologies of
Georgia in favor of Heller.
(4) 10.77 -- Form of Stock Pledge and Security Agreement delivered by
GreenMan and GreenMan Acquisition Corp. to Heller.
(4) 10.78 -- Form of Guaranty delivered by GreenMan and certain
officers of GreenMan in favor of Heller.
(5) 10.79 -- Management Agreement between GreenMan Technologies of
Mississippi, Inc. and Mac's Tire Recyclers
(6) 10.80 Financial Consulting and Investment Banking Agreement
between GreenMan and Schneider Securities dated January
22, 1999.
***11.1 -- Statement Regarding Computation of Earnings Per Share.
***21.1 -- List of All Subsidiaries
***23.1 -- Consent of Wolf & Company, P.C. dated January 12, 2000.
***27.1 -- Financial Data Schedule
- --------
* Filed as an Exhibit to GreenMan's Registration Statement on Form SB-2 No.
33-86138 and incorporated herein by reference.
** Filed as an Exhibit to GreenMan's Form 10-QSB for the Quarter Ended
November 30, 1995 or the Form 10-KSB for the Year Ended May 31, 1996 and
incorporated herein by reference.
*** Filed as an Exhibit herein.
(1) Filed as an Exhibit to GreenMan's Form 10-QSB for the Quarter Ended August
31,1996, and incorporated herein by reference.
(2) Filed as an Exhibit to GreenMan's Form 10-KSB for the year ended May 31,
1998, as amended.
(3) Filed as an Exhibit to GreenMan's Form 10-QSB for the Quarter Ended
November 30, 1997 and incorporated herein by reference
25
<PAGE>
(4) Filed as an Exhibit to GreenMan's Form 10-QSB for the Quarter Ended
February 28, 1998 and incorporated herein by reference
(5) Filed as an Exhibit to GreenMan's Form 10-QSB for the Quarter Ended
December 31, 1998 and incorporated herein by reference
(6) Filed as an Exhibit to GreenMan's Form 10-QSB for the Quarter Ended March
31, 1999 and incorporated herein by reference
Item 13(b). Reports on Form 8-K.
There were no reports filed on Form 8-K during the quarter ended September
30, 1999
26
<PAGE>
GreenMan Technologies, Inc.
Index to Consolidated Financial Statements
Page
----
Independent Auditors' Report F-2
Consolidated Balance Sheets as of September 30, 1998 F-3
and 1999
Consolidated Statements of Loss for the Year Ended F-4
May 31,1998, the Four Months Ended September 30, 1997
and 1998 and the Year ended September 30, 1999
Consolidated Statements of Changes in Stockholders' F-5
Equity for the Year Ended May 31, 1998, the Four
Months Ended September 30, 1998, and the Year Ended
September 30, 1999
Consolidated Statements of Cash Flows for the Year F-6
Ended May 31, 1998, the Four Months Ended September
30, 1997 and 1998, and the Year Ended September 30,
1999.
Notes to Consolidated Financial Statements F-8
F-1
<PAGE>
Independent Auditors' Report
The Board of Directors and Stockholders
GreenMan Technologies, Inc.
Lynnfield, Massachusetts
We have audited the accompanying consolidated balance sheets of GreenMan
Technologies, Inc. and subsidiaries as of September 30,1998 and 1999 and the
related consolidated statements of loss, changes in stockholders' equity and
cash flows for the year ended May 31, 1998, the four months ended September 30,
1998 and the year ended September 30, 1999. These consolidated financial
statements are the responsibility of GreenMan's management. Our responsibility
is to express an opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of GreenMan Technologies, Inc.
and subsidiaries at September 30, 1998 and 1999 and the results of their
operations and cash flows for the year ended May 31,1998, the four months ended
September 30, 1998 and the year ended September 30, 1999 in conformity with
generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that
GreenMan will continue as a going concern. As discussed in Note 4 to the
consolidated financial statements, GreenMan has suffered recurring losses, is in
default on certain debt obligations and has a working capital deficiency that
raise substantial doubt about its ability to continue as a going concern.
Management's plans in regard to these matters are also described in Note 4. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
/S/ WOLF & COMPANY, P.C.
------------------------
WOLF & COMPANY, P.C
Boston, Massachusetts
December 17, 1999
F-2
<PAGE>
GreenMan Technologies, Inc.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
September 30,
----------------------------
1998 1999
------------ ------------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents .................................................................... $ 161,215 $ 2,233
Accounts receivable, trade, less allowance for doubtful accounts of $58,166 and
$166,582 as of September 30, 1998 and 1999 ............................................... 1,685,885 2,189,487
Inventory .................................................................................... 229,037 --
Insurance claim receivable ................................................................... 2,120,284 --
Equipment held for sale ...................................................................... -- 635,000
Other current assets ......................................................................... 740,859 704,918
------------ ------------
Total current assets ................................................................... 4,937,280 3,531,638
------------ ------------
Property, plant and equipment, net .............................................................. 9,126,573 7,584,321
------------ ------------
Other assets:
Deferred financing costs ..................................................................... 306,304 --
Deferred loan costs .......................................................................... 250,436 143,091
Goodwill, net ................................................................................ 2,347,143 1,796,717
Real estate held for investment, net ......................................................... -- 707,908
Other ........................................................................................ 439,023 296,044
------------ ------------
3,342,906 2,943,760
------------ ------------
$ 17,406,759 $ 14,059,719
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Convertible notes payable, current ........................................................... $ 300,000 $ 300,000
Notes payable, related party ................................................................. 4,956 --
Notes payable, current ....................................................................... 1,678,399 2,573,064
Accounts payable ............................................................................. 1,714,529 2,431,411
Accrued expenses, other ...................................................................... 1,932,789 1,846,896
Obligations under capital leases, current .................................................... 542,058 140,725
------------ ------------
Total current liabilities .............................................................. 6,172,731 7,292,096
Convertible notes payable, non-current portion .............................................. 839,740 --
Notes payable, non-current portion .......................................................... 3,546,207 3,805,744
Obligations under capital leases, non-current portion ....................................... 1,568,364 585,590
------------ ------------
Total liabilities ...................................................................... 12,127,042 11,683,430
------------ ------------
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, 1998 and 1999 ............................................... 3,200,000 3,200,000
Common stock, $.01 par value, 20,000,000 shares authorized; 6,910,247 and
11,762,599 shares issued and outstanding at September 30, 1998 and 1999 .................. 69,103 117,626
Additional paid-in capital ................................................................... 21,366,619 23,127,529
Accumulated deficit .......................................................................... (19,356,005) (24,013,866)
Notes receivable, common stock ............................................................... -- (55,000)
------------ ------------
Total stockholders' equity ............................................................. 5,279,717 2,376,289
------------ ------------
$ 17,406,759 $ 14,059,719
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
GreenMan Technologies, Inc.
Consolidated Statements of Loss
<TABLE>
<CAPTION>
Year Ended Four Months Ended September 30, Year Ended
May 31, ------------------------------- September 30,
1998 1997 1998 1999
------------ ------------ ------------ ------------
(unaudited)
<S> <C> <C> <C> <C>
Net sales ................................................... $ 9,135,487 $ 2,462,416 $ 4,605,612 $ 16,337,819
Cost of sales ............................................... 6,623,133 1,763,474 3,204,563 13,035,913
------------ ------------ ------------ ------------
Gross profit ................................................ 2,512,354 698,942 1,401,049 3,301,906
------------ ------------ ------------ ------------
Operating expenses:
Research and development ............................... 675,252 97,176 150,132 126,463
Selling, general and administrative .................... 3,380,396 713,198 1,161,971 3,953,959
Impairment losses ...................................... -- -- -- 924,548
------------ ------------ ------------ ------------
Total operating expenses ........................... 4,055,648 810,374 1,312,103 5,004,970
------------ ------------ ------------ ------------
Operating (loss) profit ..................................... (1,543,294) (111,432) 88,946 (1,703,064)
------------ ------------ ------------ ------------
Other income (expense):
Interest and financing costs ........................... (2,837,255) (1,027,220) (636,462) (985,421)
Other, net ............................................. 11,281 3,889 (821,613) 44,909
Casualty loss .......................................... -- -- (1,450,000) (955,000)
Forgiveness of indebtedness ............................ -- -- 500,000 97,000
------------ ------------ ------------ ------------
Other (expense), net ............................... (2,825,974) (1,023,331) (2,408,075) (1,798,512)
------------ ------------ ------------ ------------
Loss from continuing operations ............................. (4,369,268) (1,134,763) (2,319,129) (3,501,576)
------------ ------------ ------------ ------------
Discontinued operations:
Loss from discontinued operations ...................... (855,718) (294,252) (6,957) (236,285)
Loss on disposal of discontinued operations ............ (1,100,000) -- -- (920,000)
------------ ------------ ------------ ------------
(1,955,718) (294,252) (6,957) (1,156,285)
------------ ------------ ------------ ------------
Net loss .................................................... $ (6,324,986) $ (1,429,015) $ (2,326,086) $ (4,657,861)
============ ============ ============ ============
Loss from continuing operations per share - basic ........... $ (1.68) $ (0.72) $ (0.37) $ (0.32)
Loss from discontinued operations per share - basic ......... (0.33) (0.18) -- (0.02)
Loss on disposal of discontinued operations - basic ......... (0.43) -- -- (0.09)
------------ ------------ ------------ ------------
Net loss per share - basic .................................. $ (2.44) $ (0.90) $ (0 .37) $ (0.43)
============ ============ ============ ============
Weighted average shares outstanding ......................... 2,596,776 1,579,548 6,247,793 10,750,855
============ ============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
GreenMan Technologies, Inc.
Consolidated Statements of Changes in Stockholders' Equity
Year Ended May 31, 1998, Four Months Ended September 30, 1998
and Year Ended September 30, 1999
<TABLE>
<CAPTION>
Preferred Stock Common Stock Additional
-------------------------- -------------------------- Paid-in
Shares Amount Shares Amount Capital
----------- ------------ ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Balance, May 31, 1997 ............................ -- $ -- 1,374,659 $ 13,747 $ 11,814,651
Shares issued upon conversion of notes payable
and accrued interest .......................... -- -- 2,998,101 29,981 4,967,060
Fair value of warrants issued in convertible
debt offerings ................................ -- -- -- -- 39,800
Fair value of conversion discounts on
convertible notes payable ..................... -- -- -- -- 699,000
Shares issued on exercise of stock warrants ...... -- -- 36,000 360 224,640
Shares and warrants issued for purchase of
Cryopolymers, Inc. ............................ -- -- 153,402 1,534 773,466
Shares issued pursuant to capital lease
agreement ..................................... -- -- 33,333 333 99,667
Sale of common stock ............................. -- -- 1,257,734 12,577 1,487,423
Shares issued on exercise of stock options ....... -- -- 4,790 48 1,860
Net loss for year ended May 31, 1998 ............. -- -- -- -- --
----------- ------------ ---------- ------------ ------------
Balance, May 31, 1998 ............................ -- -- 5,858,019 58,580 20,107,567
Shares issued on conversion of notes payable and
accrued interest .............................. -- -- 1,022,228 10,223 1,010,432
Fair value of warrants issued in convertible
debt offering ................................. -- -- -- -- 54,000
Fair value of conversion discount on
convertible notes payable ..................... -- -- -- -- 150,000
Fair value of conversion discount on accrued
interest associated with convertible notes
payable ....................................... -- -- -- -- 14,920
Shares issued for services ....................... -- -- 30,000 300 29,700
Shares issued for purchase of certain United Waste
Services, Inc. assets ......................... 320,000 3,200,000 -- -- --
Net loss for the four months ended September 30,
1998 .......................................... -- -- -- -- --
----------- ------------ ---------- ------------ ------------
Balance, September 30, 1998 ...................... 320,000 3,200,000 6,910,247 69,103 21,366,619
Shares issued on conversion of notes payable
and accrued interest .......................... -- -- 3,017,739 30,177 882,656
Fair value of conversion discount on accrued
interest associated with convertible notes
payable ....................................... -- -- -- -- 16,100
Sale of common stock ............................. -- -- 1,538,613 15,386 539,614
Stock issued for services rendered ............... -- -- 50,000 500 24,500
Shares purchased and retired ..................... -- -- (4,000) (40) (1,960)
Shares issued in settlement of lease
obligations ................................... -- -- 250,000 2,500 200,000
Fair value of warrants issued in settlement of
lease obligations ............................. -- -- -- -- 100,000
Net loss for the year ended September 30, 1999.... -- -- -- -- --
----------- ------------ ---------- ------------ ------------
Balance, September 30, 1999 ...................... 320,000 $ 3,200,000 11,762,599 $ 117,626 $ 23,127,529
=========== ============ ========== ============ ============
</TABLE>
<TABLE>
<CAPTION>
Notes
Receivable
Accumulated Common
Deficit Stock Total
------------ ------------ ------------
<S> <C> <C> <C>
Balance, May 31, 1997 ............................ $(10,704,933) -- $ 1,123,465
Shares issued upon conversion of notes payable
and accrued interest .......................... -- -- 4,997,041
Fair value of warrants issued in convertible
debt offerings ................................ -- -- 39,800
Fair value of conversion discounts on
convertible notes payable ..................... -- -- 699,000
Shares issued on exercise of stock warrants ...... -- -- 225,000
Shares and warrants issued for purchase of
Cryopolymers, Inc. ............................ -- -- 775,000
Shares issued pursuant to capital lease
agreement ..................................... -- -- 100,000
Sale of common stock ............................. -- -- 1,500,000
Shares issued on exercise of stock options ....... -- -- 1,908
Net loss for year ended May 31, 1998 ............. (6,324,986) -- (6,324,986)
------------ ------------ ------------
Balance, May 31, 1998 ............................ (17,029,919) -- 3,136,228
Shares issued on conversion of notes payable and
accrued interest .............................. -- -- 1,020,655
Fair value of warrants issued in convertible
debt offering ................................. -- -- 54,000
Fair value of conversion discount on
convertible notes payable ..................... -- -- 150,000
Fair value of conversion discount on accrued
interest associated with convertible notes
payable ....................................... -- -- 14,920
Shares issued for services ....................... -- -- 30,000
Shares issued for purchase of certain United Waste
Services, Inc. assets ......................... -- -- 3,200,000
Net loss for the four months ended September 30,
1998 .......................................... (2,326,086) -- (2,326,086)
------------ ------------ ------------
Balance, September 30, 1998 ...................... (19,356,005) -- 5,279,717
Shares issued on conversion of notes payable
and accrued interest .......................... -- -- 912,833
Fair value of conversion discount on accrued
interest associated with convertible notes
payable ....................................... -- -- 16,100
Sale of common stock ............................. -- (55,000) 500,000
Stock issued for services rendered ............... -- -- 25,000
Shares purchased and retired ..................... -- -- (2,000)
Shares issued in settlement of lease
obligations ................................... -- -- 202,500
Fair value of warrants issued in settlement of
lease obligations ............................. -- -- 100,000
Net loss for the year ended September 30, 1999.... (4,657,861) -- (4,657,861)
------------ ------------ ------------
Balance, September 30, 1999 ...................... $(24,013,866) $ (55,000) $ 2,376,289
============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
GreenMan Technologies, Inc.
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Four Months Ended
Year Ended September 30, Year Ended
May 31, -------------------------- September 30,
1998 1997 1998 1999
----------- ----------- ----------- -----------
(unaudited)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss ....................................... $(6,324,986) $(1,429,015) $(2,326,086) $(4,657,861)
Adjustments to reconcile net loss to net cash
provided by (used for) operating activities:
Impairment losses .............................. -- -- -- 924,548
Amortization of deferred financing costs ....... 1,746,234 688,380 468,470 322,404
Write-off of joint venture and deposits ....... -- -- 735,000 --
Depreciation and amortization .................. 1,313,454 335,007 520,580 1,701,489
Common stock and warrants issued for
services and settlement of lease
obligations ................................. -- -- 30,000 327,500
Loss on disposal of discontinued operations .... 1,100,000 -- -- 920,000
Write down of equipment due to fire ............ -- -- 3,078,668 --
Forgiveness of indebtedness .................... -- -- (500,000) (97,000)
Decrease (increase) in assets:
Accounts receivable ........................ 486,914 159,695 (210,821) (578,575)
Inventory .................................. 269,901 (49,479) 99,541 28,112
Insurance claim receivable ................. -- -- (2,120,284) 2,120,284
Other current assets ....................... 172,279 (10,989) (348,740) 35,941
Increase (decrease) in liabilities:
Accounts payable ........................... 202,468 520,776 199,158 833,381
Accrued expenses ........................... 553,661 296,110 266,018 33,480
----------- ----------- ----------- -----------
Net cash (used for) provided by operating
activities .............................. (480,075) (510,555) (108,496) 1,913,703
----------- ----------- ----------- -----------
Cash flows from investing activities:
Purchase of property and equipment ............. (1,146,177) (389,248) (385,001) (1,680,812)
Proceeds on disposal of property and equipment . 810,000 -- -- 121,451
Refund of equipment deposits ................... 100,000 100,000 15,000 --
Cash acquired upon purchase of
Cryopolymers Inc. .......................... 172,064 -- -- --
Deferred loan costs ............................ (322,000) (173,800) -- --
(Increase) decrease in other assets ............ (246,547) (76,535) (123,851) (39,213)
----------- ----------- ----------- -----------
Net cash used for investing activities ... (632,660) (539,583) (493,852) (1,598,574)
----------- ----------- ----------- -----------
Cash flows from financing activities:
Net proceeds from convertible note payable ..... 1,350,000 -- 371,393 --
Proceeds from notes payable .................... 3,511,379 -- 70,680 879,251
Repayment of notes payable ..................... (4,989,869) (33,597) (249,541) (1,113,045)
Net advances under line of credit .............. 279,309 -- 437,508 287,996
Proceeds from notes payable - related parties .. 386,000 386,000 -- --
Repayment of notes payable - related parties ... (58,829) (15,282) (19,415) (4,956)
Principal payments on obligations under capital
leases ....................................... (1,015,393) (120,353) (28,025) (1,021,357)
Net proceeds on exercise of common stock options
and warrants ................................. 226,908 224,352 -- --
Repurchase of common stock ..................... -- -- -- (2,000)
Net proceeds on the sale of common stock ....... 1,500,000 -- -- 500,000
----------- ----------- ----------- -----------
Net cash provided by (used for) financing
activities .............................. 1,189,505 441,120 582,600 (474,111)
----------- ----------- ----------- -----------
Net increase (decrease) in cash ..................... 76,770 412,092 (19,748) (158,982)
Cash and cash equivalents at beginning of period .... 104,193 104,193 180,963 161,215
----------- ----------- ----------- -----------
Cash and cash equivalents at end of period .......... $ 180,963 $ 516,285 $ 161,215 $ 2,233
=========== =========== =========== ===========
</TABLE>
(Continued)
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
GreenMan Technologies, Inc.
Consolidated Statements of Cash Flows
(Concluded)
<TABLE>
<CAPTION>
Four Months Ended
Year Ended September 30, Year Ended
May 31, -------------------------- September 30,
1998 1997 1998 1999
----------- ----------- ----------- -----------
(unaudited)
<S> <C> <C> <C> <C>
Supplemental cash flow information:
Machinery and equipment acquired under capital leases .. $2,771,876 $ -- $ -- $ 737,250
Convertible note payable issued in settlement of capital
lease .............................................. -- -- 300,000 --
Common stock issued upon conversion of notes payable
and accrued interest ............................... 4,997,041 700,000 1,020,655 912,833
Common stock issued pursuant to capital lease
agreement .......................................... 100,000 -- -- --
Value of conversion discounts and warrants issued in
connection with convertible notes payable .......... 738,800 173,800 204,000 --
Interest paid .......................................... 672,996 55,200 186,240 522,208
</TABLE>
Supplemental Schedule of Noncash Investing and Financing Activities
On June 30, 1997, GreenMan purchased all of the capital stock of BFI Tire
Recyclers of Minnesota, Inc. and BFI Tire Recyclers of Georgia, Inc. as follows:
Fair value of assets acquired $ 5,472,910
Fair value of liabilities assumed 141,394
-----------
Fair value of net assets acquired 5,331,516
Acquisition deposit (650,000)
-----------
Note payable issued $ 4,681,516
===========
On November 19, 1997, GreenMan purchased all of the capital stock of
Cryopolymers, Inc. as follows:
Fair value of assets acquired $ 1,016,597
Fair value of liabilities assumed 341,597
-----------
Fair value of net assets acquired 675,000
Common stock issued (744,000)
Value ascribed to warrants issued under SFAS No. 123 (31,000)
-----------
Excess of cost over fair value of net assets $ 100,000
===========
On September 4, 1998, GreenMan acquired all of the scrap tire collection and
processing assets of United Waste Service, Inc. as follows:
Fair value of assets acquired $ 2,335,000
Fair value of liabilities assumed 300,000
-----------
Fair value of net assets acquired 2,035,000
Preferred stock issued (3,200,000)
Cash (850,000)
-----------
Excess of cost over fair value of net assets $ 2,015,000
===========
During the year ended May 31, 1998, $100,000 of equipment deposits was
reclassified to property, plant and equipment and $400,000 was reclassified to
investment in joint venture.
In connection with the discontinued operations, GreenMan transferred
equipment with a net book value of $477,000 and related capital lease
obligations of $777,000 to accounts payable at May 31, 1998.
See accompanying notes to consolidated financial statements.
F-7
<PAGE>
GreenMan Technologies, Inc.
Notes To Consolidated Financial Statements
(Information for the Four Months Ended September 30, 1997 is unaudited)
1. Summary of Significant Accounting Policies
Business
GreenMan Technologies, Inc. is engaged in the business of collecting,
shredding and marketing scrap tires. The tire recycling operations are located
in Jackson, Georgia; Batesburg, South Carolina and Savage, Minnesota.
Until closure in January 1998, GreenMan also operated an injection molding
operation located in Malvern, Arkansas. In August 1998, GreenMan's Louisiana
crumb rubber processing facility was severely damaged by a fire which
necessitated the closure of the operation. In March 1999, GreenMan decided to
discontinue operations at its wholly-owned subsidiary, DuraWear Corporation and
in June 1999 sold substantially all of DuraWear's assets and liabilities to a
third party. DuraWear manufactured, installed and marketed a diverse range of
abrasive resistant ceramic and polymer products.
In June 1997, GreenMan acquired from Browning-Ferris Industries, Inc, all
of the capital stock of two subsidiaries engaged in the scrap tire collection
and processing business: BFI Tire Recyclers of Minnesota, Inc. and BFI Tire
Recyclers of Georgia, Inc. As a result of the acquisitions, the two companies
became wholly-owned subsidiaries of GreenMan and were renamed GreenMan
Technologies of Minnesota, Inc. and GreenMan Technologies of Georgia, Inc.,
respectively.
In November 1997, GreenMan acquired all of the capital stock of
Cryopolymers, Inc., a company located in St. Francisville, Louisiana engaged in
processing scrap tire chips into crumb rubber. As a result of the acquisition,
Cryopolymers Inc. became a wholly-owned subsidiary and was renamed GreenMan
Technologies of Louisiana, Inc. Due to a fire at its facility in August 1998,
GreenMan Technologies of Louisiana's ceased processing operations and was
completely closed in December 1998.
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 operation has been incorporated as GreenMan Technologies of South
Carolina, Inc.
Basis of Presentation
The consolidated financial statements include the results of operations of
GreenMan Technologies of Minnesota and GreenMan Technologies of Georgia since
July 1, 1997, GreenMan Technologies of Louisiana since November 19, 1997 and
GreenMan Technologies of South Carolina since September 4, 1998. All significant
intercompany accounts and transactions are eliminated in consolidation.
GreenMan discontinued operations at the Arkansas molding operation
effective January 1998 and sold substantially all the assets of its industrial
materials operation located in Alabama in June 1999 to a third party. As a
result, the consolidated financial statements were restated to reflect the
operating results of these business segments as discontinued operations for all
periods presented.
Change in Fiscal Year
On June 24,1998, the Board of Directors adopted a change of GreenMan's
fiscal year-end from May 31 of each year to September 30.
F-8
<PAGE>
GreenMan Technologies, Inc.
Notes To Consolidated Financial Statements
(Information for the Four Months Ended September 30, 1997 is unaudited)
1. Summary of Significant Accounting Policies - (Continued)
Management Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the amounts of revenues and expenses recorded during the
reporting period. Actual results could differ from those estimates. Such
estimates relate primarily to the estimated lives of property and equipment, the
value of goodwill and other intangible assets and the value of equity
instruments issued. The amount that may be ultimately realized from equipment
held for resale, joint ventures and notes receivable could differ materially
from the values recorded in the accompanying financial statements as of
September 30, 1999.
Cash Equivalents
Cash equivalents include short-term investments with original maturities
of three months or less.
Inventory
Inventory is valued at the lower of cost or market on a first-in first-out
method.
Property and Equipment
Property and equipment are stated at cost. Depreciation and amortization
expense is provided on the straight-line method. Expenditures for maintenance,
repairs and minor renewals are charged to expense as incurred. Significant
improvements and major renewals are capitalized.
Deferred Financing Costs
Deferred financing costs represent costs incurred in connection with
raising capital through the issuance of convertible debentures. The amount is
amortized to expense over the estimated life of the debenture.
Deferred Loan Costs
Deferred loan costs represent costs incurred in connection with securing
financing for GreenMan Technologies of Minnesota, GreenMan Technologies of
Georgia and the acquisition of the scrap tire and collection assets of United
Waste Service, Inc. The amount is amortized to expense over the life of the
related notes payable.
Revenue Recognition
Revenues from product sales are recognized when the products are shipped.
Revenues from tire processing are recognized when processing of the tires has
occurred.
Income Taxes
Deferred tax assets and liabilities are recorded for temporary differences
between the financial statement and tax bases of assets and liabilities using
the currently enacted income tax rates expected to be in effect when the taxes
are actually paid or recovered. A deferred tax asset is also recorded for net
operating loss and tax credit carryforwards to the extent their realization is
more likely than not. The deferred tax expense for the period represents the
change in the deferred tax asset or liability from the beginning to the end of
the period.
F-9
<PAGE>
GreenMan Technologies, Inc.
Notes To Consolidated Financial Statements
(Information for the Four Months Ended September 30, 1997 is unaudited)
1. Summary of Significant Accounting Policies - (Continued)
Stock-Based Compensation
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation", encourages all entities to adopt a fair value based
method of accounting for employee stock compensation plans, whereby compensation
cost is measured at the grant date based on the value of the award and is
recognized over the service period, which is usually the vesting period.
However, it also allows an entity to continue to measure compensation cost of
those plans using the intrinsic value based method of accounting prescribed by
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees", whereby compensation cost is the excess, if any, of the quoted
market price of the stock at the grant date (or other measurement date) over the
amount an employee must pay to acquire the stock. Stock options issued under
GreenMan's stock option plans generally have no intrinsic value at the grant
date, and under Accounting Principles Board Opinion No. 25 no compensation cost
is recognized for them. GreenMan has elected to continue to apply the accounting
in Accounting Principles Board Opinion No. 25 and, as a result, has provided pro
forma disclosures of net income and earnings per share and other disclosures, as
if the fair value based method of accounting had been applied. The pro forma
disclosures include the effects of all awards granted after May 31, 1995.
Net 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.
Comprehensive Income
GreenMan adopted Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income" as of June 1, 1998. Accounting principles
generally require recognized revenue, expenses, gains and losses to be included
in net income. Various statements, however, require companies to report certain
changes in assets and liabilities as a separate component of the equity section
of the balance sheet such as unrealized gains and losses on available for sale
securities, foreign currency items and minimum pension liability adjustments.
These items along with net income are components of comprehensive income. There
were no other items of comprehensive income during the year ended May 31,1998,
the four months ended September 30, 1998 and the year ended September 30, 1999.
Segment Disclosures
Statement of Financial Accounting Standards No. 131, "Disclosures about
Segments of an Enterprise and Related Information", is effective for financial
statements for fiscal years beginning after December 15, 1997 and establishes
standards for the way that public companies report information about operating
segments in annual and interim financial statements and selected information
about operating segments in interim financial reports issued to shareholders. It
also establishes standards for related disclosures about products and services,
geographic areas and major customers. Generally, financial information is
required to be reported on the basis that it is used internally for evaluating
segment performance and deciding how to allocate resources to segments. This
statement also requires companies to report information about the way that
operating segments were determined, the products and services provided by the
operating segments, differences between the measurements used in reporting
segment information and those used by GreenMan in its general purpose financial
statements, and changes in the measurement of segment amounts from period to
period.
F-10
<PAGE>
GreenMan Technologies, Inc.
Notes To Consolidated Financial Statements
(Information for the Four Months Ended September 30, 1997 is unaudited)
2. Acquisition of Subsidiaries
On June 30, 1997, GreenMan acquired from Browning-Ferris Industries, Inc,
all of the capital stock of two subsidiaries engaged in the scrap tire
collection and processing business: BFI Tire Recyclers of Minnesota, Inc. and
BFI Tire Recyclers of Georgia, Inc. As a result of the acquisitions, the two
companies became wholly-owned subsidiaries of GreenMan and were renamed GreenMan
Technologies of Minnesota, Inc. and GreenMan Technologies of Georgia, Inc.,
respectively. GreenMan agreed to pay $5,331,516 for all of the outstanding
capital stock of the two companies of which $650,000 had been previously paid as
a deposit and the balance of $4,681,516 was financed by a short-term note, at an
interest rate of 10% from Browning-Ferris Industries, Inc. In February 1998,
GreenMan secured a $5.0 million asset-based credit facility and used
approximately $3,900,000 to repay the balance due on the note plus interest. The
acquisition has been accounted for by the purchase method of accounting, and
accordingly, the net assets and results of operations of GreenMan Technologies
of Minnesota and GreenMan Technologies of Georgia are included in the
consolidated financial statements since the date of acquisition.
On November 19, 1997, GreenMan acquired all of the capital stock of
Cryopolymers, Inc., a company located in St. Francisville, Louisiana engaged in
processing scrap tire chips into crumb rubber. As a result of the acquisition,
Cryopolymers, Inc. became a wholly-owned subsidiary and was renamed GreenMan
Technologies of Louisiana, Inc. The purchase price consisted of (1) $744,000 in
shares of common stock (153,402 shares); (2) warrants to purchase 240,000 shares
of common stock exercisable commencing April 1, 1998 for a period of five years
at prices ranging from $15.00 to $35.00 per share; and (3) additional warrants
to purchase 20,000 shares of common stock exercisable at $4.85 per share for a
period of five years and vesting over a two-year period. The total purchase
price was $775,000 based upon the value of the common stock and a $31,000 value
ascribed to the 260,000 warrants. The acquisition has been accounted for as a
purchase and accordingly, the operations of GreenMan Technologies of Louisiana
are included in the consolidated financial statements since the date of
acquisition. Goodwill was recorded as the total consideration paid exceeded the
fair value of the net assets acquired by $100,000. In August 1998, GreenMan
Technologies of Louisiana's facility was severely damaged by a fire which
necessitated the closure of the operation. As a result, the remaining goodwill
balance was charged to amortization expense in the period ended September 30,
1998.
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 (as defined)
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. The 320,000 shares
of Class B convertible preferred stock have a liquidation value of $10 per share
and no voting rights. Simultaneous with the acquisition, GreenMan entered into
an equipment financing agreement which provided the $850,000 for the
transaction. The acquired assets are located in Georgia (combined with GreenMan
Technologies of Georgia during the year ended September 30, 1999) and South
Carolina (incorporated as GreenMan Technologies of South Carolina, Inc.). The
acquisition has been accounted for as a purchase and accordingly, the operations
are included in the consolidated financial statements since the date of
acquisition. Goodwill was recorded as the total consideration paid exceeded the
fair value of the net assets acquired by $2,015,000.
F-11
<PAGE>
GreenMan Technologies, Inc.
Notes To Consolidated Financial Statements
(Information for the Four Months Ended September 30, 1997 is unaudited)
2. Acquisition of Subsidiaries - (Continued)
The following unaudited proforma financial information summarizes the
consolidated results of operations of GreenMan and the subsidiaries as if the
acquisitions had occurred at the beginning of the year eneded May 31, 1998. The
unaudited proforma information is not necessarily indicative of the results of
operations that would have occurred had the purchase been made at the beginning
of the fiscal year or of future results of operations of the combined companies.
<TABLE>
<CAPTION>
Four Months Ended
Year Ended September 30,
May 31, ----------------------------
1998 1997 1998
------------ ------------ ------------
<S> <C> <C> <C>
Revenue $ 15,051,209 $ 4,914,508 $ 6,355,580
Income (loss) from continuing operations (3,961,823) (83,978) 351,509
Net loss (5,917,540) (1,401,561) (2,064,462)
Net loss per share - basic (2.28) (0.89) (0.33)
</TABLE>
GreenMan also recorded $498,000 of goodwill associated with the October
1995 acquisition of DuraWear. In March 1999, the remaining $324,010 balance of
the DuraWear goodwill was written off in connection with the plans to
discontinue operations at DuraWear.
Goodwill recorded in connection with the acquisition of subsidiaries is
being amortized over 10 years on a straight line basis. Amortization expense for
the year ended May 31, 1998 was $54,846. Amortization expense for the periods
ended September 30, 1997 and 1998 was $16,616 and $128,409, respectively.
Amortization expense for the year ended September 30, 1999 was $226,416.
3. Discontinued Operations
In January 1998, GreenMan discontinued operations at its Arkansas
injection molding facility. During the year ended May 31, 1998 the facility's
revenues totaled $1,126,627 and during the four months ended September 30, 1997,
the facility's revenues totaled $713,174.
GreenMan recorded an estimated loss on disposal of the facility of
$1,100,000. The consolidated financial statements were restated to reflect the
net operating results of the facility as a separate line item for all periods
presented. GreenMan reported a loss from discontinued operations for the year
ended May 31, 1998 and the period ended September 30, 1997 of $660,954 and
$244,115, respectively. In July 1998, GreenMan disposed of the remaining assets
and converted $300,000 of the capital lease obligations into a $300,000, 10%
convertible note payable. The note is payable in 36 monthly payments of $9,680
and is convertible into common stock at the holder's option at $1.38 per share.
GreenMan had not made any payments on the convertible note payable as of
September 30, 1999, is currently in default and the note is classified as a
current liability. In October 1999, a payment plan was established with the
creditor whereby GreenMan would pay $75,000 per month until the balance was paid
off. As of December 1, 1999, $150,000 has been paid towards the outstanding
obligation. At September 30, 1998 and 1999, GreenMan had approximately $246,000
and $102,000, respectively of the facility's net obligations remaining which are
included in accrued expenses. GreenMan is continuing to negotiate payment terms
with the remaining creditors.
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. During the year ended May 31, 1998 and the
four months ended September 30, 1997 and 1998, DuraWear's revenues totaled
$1,876,032, $619,529 and $429,197 respectively. DuraWear's revenues for the year
ended September 30, 1999 were $407,947.
GreenMan recorded an estimated 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. At September 30,
1999, the land and buildings have been reclassified to real estate held for
investment. In order to obtain a release from the mortgage holder of its
security interest in the assets sold, the outstanding principal balance of the
mortgage had to be reduced by $8,193 and an officer of GreenMan was required to
provide a personal guarantee.
F-12
<PAGE>
GreenMan Technologies, Inc.
Notes To Consolidated Financial Statements
(Information for the Four Months Ended September 30, 1997 is unaudited)
3. Discontinued Operations - (Continued)
The third party executed a one-year lease for use of the land and buildings
retained by GreenMan at a monthly rental of $4,500. The lease automatically
renews for an additional two (2) one-year terms unless notice of non-renewal is
given by the third party at least ninety days prior to the end of the term. The
third party has been granted an option to purchase the land and buildings for
$850,000 during the term of the lease.
The consolidated financial statements have been restated to reflect the
net operating results of DuraWear as a separate line item for all periods
presented. GreenMan reported a loss from discontinued operations associated with
DuraWear of $50,137 and $6,957 for the four months ended September 30, 1997 and
1998, respectively, and $194,764 for the year ended May 31, 1998. The loss from
discontinued operations for the year ended September 30, 1999 was $236,285. At
September 30, 1998 and 1999 DuraWear's assets totaled $1,979,493 and $707,908,
respectively, and represented 11% and 5% of consolidated assets.
4. Need for Additional Capital
GreenMan has incurred losses since its inception aggregating $24,013,866,
has a working capital deficiency of $3,760,458 at September 30, 1999 and is in
default of certain debt obligations. 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 achieve 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 term debt and achieving profitability. Management
does not believe that adjustments or reclassifications of recorded assets and
liabilities are necessary at this time.
5. Insurance Claim Receivable on Casualty Loss
In August 1998, GreenMan Technologies of Louisiana's facility was damaged
by a fire which necessitated the closure of the operation. Under the terms of
GreenMan Technologies of Louisiana's $3,000,000 property insurance policy, the
insurance company paid $2,050,000 towards the insured loss. The remaining
$950,000 may be paid if GreenMan can demonstrate, to the insurance company's
satisfaction, that GreenMan has invested at least $3,000,000 (replacement policy
limit) in alternative tire recycling equipment that satisfies the replacement
requirements of the insurance policy. There can be no assurance that this will
be the case or that the additional insurance proceeds will ever be received. In
January 1999, GreenMan submitted a proposal to the insurance company, which
would allow it to receive the remaining funds due under the policy. GreenMan
will recognize the remaining $950,000 of insurance proceeds when it has received
such funds from the insurance company. As a result of the closure of GreenMan
Technologies of Louisiana, management wrote down all GreenMan Technologies of
Louisiana assets to their estimated net realizable value and accrued for all
remaining estimated fire related costs at September 30, 1998 resulting in a
casualty loss of $1,450,000. GreenMan also recorded an insurance receivable of
$70,284 at September 30, 1998 associated with its business interruption policy.
In April 1999, GreenMan received approximately $200,000 from the insurance
company associated with its business interruption policy.
6. Inventory
Inventory consists of the following at:
September 30,
1998
-------------
Raw materials ........................................ $ 8,517
Work in process ...................................... 19,552
Finished goods ....................................... 200,968
----------
$ 229,037
==========
All inventory is associated with DuraWear and was sold to a third party in
June 1999.
F-13
<PAGE>
GreenMan Technologies, Inc.
Notes To Consolidated Financial Statements
(Information for the Four Months Ended September 30, 1997 is unaudited)
7. Property, Plant and Equipment
Property, plant and equipment consists of the following:
<TABLE>
<CAPTION>
September 30, September 30, Estimated
1998 1999 Useful Lives
------------------ ------------------- ------------------
<S> <C> <C> <C>
Land ........................................... $ 879,162 $ 655,377
Buildings ...................................... 2,561,924 1,667,702 10-20 years
Machinery and equipment ........................ 4,007,240 3,967,537 5-10 years
Furniture and fixtures ......................... 91,564 88,023 3-5 years
Motor vehicles ................................. 2,699,498 3,028,711 3-10 years
----------- -----------
10,239,388 9,407,350
Less accumulated depreciation
and amortization (1,112,815) (1,823,029)
----------- -----------
Property, plant and equipment, net $ 9,126,573 $ 7,584,321
=========== ===========
</TABLE>
As a result of a change in use of equipment at GreenMan Technologies of
South Carolina and the consolidation of the Georgia based processing equipment
acquired from United Waste Services into GreenMan Technologies of Georgia's
operations during the year ended September 30, 1999, management determined that
certain equipment was no longer necessary and initiated an effort to sell the
excess equipment. Based upon discussions with third party equipment brokers and
due to the unique nature of certain equipment, management estimates that the net
book value of the identified assets exceeded the estimated market value and
accordingly, recorded an impairment loss of $752,360 at September 30, 1999.
Equipment held for sale is included in current assets at September 30, 1999.
Depreciation and amortization expense for the year ended May 31, 1998 was
$1,057,273. Depreciation and amortization expense for the periods ended
September 30, 1997 and 1998 was $276,240 and $388,839 respectively. Depreciation
and amortization expense for the year ended September 30, 1999 was $1,353,447.
8. Other Assets
Other assets consist of the following:
<TABLE>
<CAPTION>
September 30, 1998 September 30, 1999
------------------- --------------------
<S> <C> <C>
Licensing fee, net ................................... $ 78,339 $ --
Note receivable and accrued interest.................. 110,735 119,579
Deposits and miscellaneous............................ 249,949 176,465
---------- -----------
$ 439,023 $ 296,044
========== ===========
</TABLE>
In conjunction with the 1995 acquisition of DuraWear, GreenMan entered
into a three-year non-competition agreement with the former sole shareholder of
DuraWear valued at $350,000. This agreement was fully amortized at May 31,1998.
Amortization expense for the year ended May 31, 1998 and the period ended
September 30, 1997 was $155,557 and $38,889, respectively.
In April 1996, GreenMan paid a one-time $100,000 license fee for a
perpetual license agreement with a privately-held R&D company under which it
acquired the exclusive world-wide rights and license to use a proprietary
additive technology for co-mingling (mixing or blending) of dissimilar plastics
and rubber. In connection with this license, GreenMan may be required to pay a
3% royalty fee on the sale of blended material for use as a raw material. The
license fee was being amortized over an estimated ten-year useful life of the
technology. As a result of GreenMan's current emphasis on expanding the core
business versus continued development of recycled content products and
management's belief that significant resources would be required to accelerate
product development in the near term, management has concluded that the value of
its technology license is impaired at September 30, 1999 and therefore has
written off its remaining $68,335 investment in the licensed technology.
Amortization expense for the year ended May 31, 1998 and for the periods ended
September 30, 1997 and 1998 was $9,996, $3,332 and $3,332, respectively.
Amortization expense for the year ended September 30, 1999 was $10,004.
F-14
<PAGE>
GreenMan Technologies, Inc.
Notes To Consolidated Financial Statements
(Information for the Four Months Ended September 30, 1997 is unaudited)
8. Other Assets - (Continued)
In January 1998, $104,100 was advanced to an officer under an 8.5% secured
loan agreement with both principal and interest due January 2001. The loan is
secured by 111,111 shares of common stock owned by the officer.
In April 1998, GreenMan paid a $150,000 deposit towards the formation of a
joint venture intended to address the process of extracting high value chemical
commodities from scrap tires. As a result of the inability of the joint venture
partner to secure the necessary project financing and the limited operating
history of the joint venture partner, management has determined the deposit to
be uncollectible. This amount is included in other expenses for the period ended
September 30, 1998.
In January 1998, GreenMan entered into a license agreement with a
privately-held company under which it acquired the exclusive rights and license
to use a proprietary crumb rubber modification to be developed for use in the
asphalt industry. In connection with this license, GreenMan paid the licensor
$30,000 as of September 30, 1998. In August 1998, GreenMan entered into a second
license agreement with the licensor under which it acquired the exclusive rights
and license to use a series of four proprietary technologies to be developed. In
connection with this license GreenMan was required to pay $150,000 over a twelve
month period and issue warrants to purchase shares of common stock of GreenMan
as each of the four technologies are conveyed to GreenMan.
In April 1999, GreenMan and the licensor agreed to terminate the license
agreements. In return for payments made to date, GreenMan received assignment of
two developed technologies, one of which is patented, for crumb rubber
modification. The licensor also returned all warrants previously issued.
Management believes that without significant Federal Highway Administration
involvement alternatives such as chemically modified crumb rubber asphalt will
not become a value added market opportunity in the near term. As a result of the
limited effort being exerted by the Federal Highway Administration and
GreenMan's current emphasis on expanding the core business of tire collection
and processing versus continued development of asphalt related initiatives,
management has concluded that the value of the technologies is impaired and
therefore has written off the $103,853 investment in the technologies at
September 30, 1999.
9. Investment in Joint Venture
During the year ended May 31, 1996, GreenMan purchased a cryogenic
recycling line for $1,500,000 and placed an additional $300,000 deposit towards
the purchase of an additional cryogenic recycling line. In 1997, the production
capacity of the line was evaluated and management decided to re-deploy the
equipment in a joint venture with Crumb Rubber Technologies, Inc., the original
equipment manufacturer. As a result of the decision to refocus existing
resources, the risks associated with a startup venture, and GreenMan's minority
interest in the joint venture, management decided to write-down the carrying
value of the equipment to the equipment's estimated liquidation value at May 31,
1997. Accordingly, a $1,000,000 impairment loss was recorded in fiscal 1997
against the investment in the cryogenic recycling equipment.
The joint venture with Crumb Rubber Technologies was formed to collect and
process tires in the State of New York and to market the crumb rubber derived
from the tires to existing opportunities for larger mesh crumb rubber such as in
rubber mats, ground cover and as a filler in asphalt applications. GreenMan
contributed the cryogenic crumb rubber equipment (valued at $400,000) previously
purchased from Crumb Rubber Technologies into the venture as its capital
contribution while they contributed certain facilities, equipment, customer
contracts, licenses and permits and will provide operational and technical
expertise. As a result of the joint venture's inability to generate significant
revenues since inception, GreenMan's minority ownership position in the joint
venture and management's belief that it is unlikely to generate any significant
revenue from the joint venture, management wrote-off its $400,000 investment in
the joint venture at September 30, 1998.
Pursuant to the terms of the joint venture agreement, Crumb Rubber
Technologies agreed to return $300,000 of equipment deposits to GreenMan by
March 1998. As of September 30, 1998 they had repaid $115,000 but due to Crumb
Rubber Technologies inability to maintain the agreed upon payment schedule and
the uncollateralized nature of the deposits management wrote off the $185,000
F-15
<PAGE>
GreenMan Technologies, Inc.
Notes To Consolidated Financial Statements
(Information for the Four Months Ended September 30, 1997 is unaudited)
9. Investment in Joint Venture - (Continued)
balance to other expenses in the period ended September 30, 1998. During the
year ended September 30, 1999, GreenMan recovered $35,000 from Crumb Rubber
Technologies and recorded it as other income.
In December 1999, GreenMan agreed to sell its minority interest in the
joint venture to Crumb Rubber Technologies and forgive all remaining amounts due
from them in return for $60,000 to be paid by January 31, 2000 and the return of
previously issued warrants to purchase shares of GreenMan's common stock.
GreenMan received representations from Crumb Rubber Technologies that there were
no obligations due by GreenMan as a result of its minority ownership in the
joint venture.
10. Convertible Notes Payable
January 1997 Debentures
In January 1997, GreenMan concluded a $1,525,000 offering of 7%
convertible subordinated debentures and immediately exercisable, one-year
warrants to purchase 152,500 shares of common stock at an exercise price of
$6.25 per share. The net proceeds from the offering were approximately
$1,310,000 after deducting commissions and expenses of approximately $215,000.
GreenMan recorded non-cash deferred financing costs of $75,000 in connection
with the issuance of the warrants to purchase 152,500 shares and recorded a
deferred charge of approximately $654,000 associated with the 30% discount from
market to be realized upon conversion of the debentures. GreenMan also recorded
non-cash deferred financing costs of $695,000 in connection with the issuance of
warrants to purchase 210,000 shares of common stock to the placement agents.
These warrants are immediately exercisable at prices ranging from $.25 to $6.25
per share with 120,000 warrants expiring in December 1999 and 90,000 expiring in
January 1998. The deferred charges were amortized to expense over the estimated
life of the debentures. Amortization and interest expense on the debentures for
both the year ended May 31, 1998 and the period ended September 30, 1997 was
$271,484, respectively. As of May 31, 1998, all debentures had been converted
into 502,181 shares of GreenMan's common stock and all deferred charges had been
amortized to expense. Investors from the January offering exercised 36,000
warrants during the year ended May 31, 1998 resulting in net proceeds to
GreenMan of $225,000.
April 1997 Notes
In April 1997, GreenMan concluded a $1,500,000 offering of convertible
notes due eighteen months after closing and warrants to purchase 60,000 shares
of common stock at exercise prices ranging from $4.85 to $5.25 per share. The
note holders receive 800 shares of GreenMan's common stock in lieu of interest
for each $100,000 invested. The net proceeds from the offering were
approximately $1,247,000 after deducting commissions and expenses of
approximately $253,000. GreenMan also issued immediately exercisable two-year
warrants to purchase 30,968 shares of common stock at an exercise price of $4.85
per share to the placement agents. GreenMan recorded a deferred charge of
approximately $643,000 associated with the 30% discount from market to be
realized upon conversion. GreenMan also recorded non-cash deferred financing
costs of $64,600 in connection with the issuance of warrants to purchase 90,968
shares of common stock to the investors and placement agents. These deferred
charges were amortized to expense over the estimated life of the notes.
Amortization expense and interest expense on the notes for the year ended May
31,1998 and the period ended September 30, 1997 was $696,633 and $298,560,
respectively. GreenMan also recorded $162,500 of additional financing costs
pursuant to late registration terms for the year ended May 31, 1998 and $112,500
for the period ended September 30, 1997.
During the year ended May 31, 1998, all notes were converted into
1,089,449 shares of common stock including 49,813 shares associated with accrued
interest and all deferred charges had been amortized to expense. The 90,968
warrants issued pursuant to the offering expired unused.
F-16
<PAGE>
GreenMan Technologies, Inc.
Notes To Consolidated Financial Statements
(Information for the Four Months Ended September 30, 1997 is unaudited)
10. Convertible Notes Payable - (Continued)
December 1997 Debentures
In December 1997, GreenMan issued debentures in the aggregate principal
amount of $1,600,000 and immediately exercisable two-year warrants to purchase
32,000 shares of Common Stock at an exercise price of $3.13 per share. Each
debenture bears interest at 8% and is due December 15, 2000. The debentures are
convertible at any time commencing upon the earlier to occur of (i) the
effective date of the registration statement covering the shares issuable upon
conversion of the debentures, or (ii) 60 days following the date of issuance at
a conversion price equal to the lower of the average closing bid prices on the
five trading days preceding the date of the closing of the offering or 75% of
the average closing bid prices on the five trading days preceding the date of
the conversion of the debentures. The debentures automatically convert into
shares of common stock upon maturity. GreenMan also issued immediately
exercisable two-year warrants to purchase 32,000 shares of common stock at an
exercise price of $3.13 per share to the placement agent.
The net proceeds from the offering were approximately $1,350,000 after
deducting commissions and expenses of approximately $250,000. GreenMan recorded
a deferred charge of approximately $533,000 associated with the 25% discount
from market to be realized upon conversion of the debentures. GreenMan also
recorded deferred financing costs of $32,000 in connection with the issuance of
warrants to purchase 64,000 shares of common stock to the investors and
placement agents.
Pursuant to the agreements, the holders have agreed to purchase up to
$2,000,000 in additional debentures during the 12 months following the effective
date of the registration statement covering the shares issuable upon conversion.
Each tranche shall be for the purchase of between $75,000 and $175,000 in
additional debentures and may be completed at the election of GreenMan subject
to certain conditions. Each additional debenture shall bear similar terms to the
initial debentures including the issuance of warrants per additional debenture
to both the holders and the placement agent. The additional debentures are
convertible within two days of issuance. Pursuant to the terms of the
agreements, GreenMan is obligated to borrow at least $1,000,000 in additional
debentures or GreenMan must provide the holders and placement agents, warrants
to purchase an additional 40,000 shares of common stock in the aggregate. During
the year ended May 31, 1998, $240,433 of the initial debentures and $7,127 of
accrued interest were converted into 98,984 shares of common stock. During the
period ended September 30, 1998, $969,827 of the initial debentures and $50,828
of accrued interest were converted into 1,022,228 shares of common stock. During
the period of October to December 1998, the remaining $389,740 of initial
debentures and $28,457 of accrued interest were converted into 1,395,358 shares
of common stock.
GreenMan issued $450,000 of additional debentures during the period ended
September 30, 1998 and immediately exercisable two-year warrants to purchase
27,000 shares of Common Stock at exercise prices ranging from $1.17 to $2.41 per
share. GreenMan also issued immediately exercisable two-year warrants to
purchase 27,000 shares of common stock at exercise prices ranging from $1.17 to
$2.41 per share to the placement agent. GreenMan recorded a deferred charge of
approximately $150,000 associated with the 25% discount from market to be
realized upon conversion of the additional debentures. GreenMan also recorded
deferred financing costs of $54,000 in connection with the issuance of warrants
to purchase 54,000 shares of common stock to the investors and placement agents.
During the year ended September 30, 1999, all additional debentures and $44,636
of accrued interest were converted into 1,622,381 shares of common stock.
GreenMan has notified the debenture holders that it will not borrow the
remaining $550,000 of the commitment and has not issued the additional warrants
as of September 30, 1999.
The deferred charges were amortized over the estimated life of the initial
and additional debentures. Amortization and interest expense for the year ended
May 31, 1998 and the period ending September 30, 1998 was $478,235 and $462,921,
respectively. Amortization and interest expense for the year ended September 30,
1999 was $332,494.
F-17
<PAGE>
GreenMan Technologies, Inc.
Notes To Consolidated Financial Statements
(Information for the Four Months Ended September 30, 1997 is unaudited)
10. Convertible Notes Payable - (Continued)
June 1998 Convertible Note
As a result of the January 1998 shutdown of the injection molding
operations (See Note 3), GreenMan sold miscellaneous assets and leased machinery
and equipment for $810,000 in May 1998. The proceeds plus an additional $100,000
were remitted to the equipment lessors in full settlement of all amounts due
under the corresponding lease obligations. In June 1998, the remaining injection
molding assets were sold for $477,000. GreenMan paid $450,000 of the proceeds
and issued a $300,000 10% convertible note payable to the lessor in full
settlement of all amounts owed under the leases. The note is payable in 36
monthly payments of $9,680 and is convertible into common stock at the holder's
option at $1.38 per share. GreenMan had not made any payments on the convertible
note payable as of September 30, 1999, is currently in default and has
classified the note as a current liability. In October 1999, a payment plan was
established with the creditor whereby GreenMan would pay $75,000 per month until
the balance was paid off. As of December 1, 1999, GreenMan had paid $150,000
towards the outstanding obligation.
11. Notes Payable
On February 5, 1998, GreenMan Technologies of Minnesota and GreenMan
Technologies of Georgia collectively secured a $5.0 million asset-based credit
facility from Heller Financial Inc. The credit facility consisted of: (i)
$1,400,000 of three-year term notes secured by real estate (ii) $1,900,000 of
three-year term notes secured by machinery and equipment and (iii) a working
capital line of credit of up to $1,700,000. GreenMan has granted a security
interest in the capital stock of GreenMan Technologies of Minnesota and GreenMan
Technologies of Georgia to Heller Financial Inc. in addition to providing a
Company guarantee and the personal guarantee of three officers of GreenMan. The
credit facility contains certain covenants including minimum net worth and
certain restrictions on intercompany cash transactions. GreenMan is either in
compliance with the terms of the credit facility or has received a waiver of
compliance at September 30, 1999.
The proceeds from the credit facility were used to repay the balance of
$3,906,071, including interest, due under the short-term note payable to
Browning-Ferris Industries for the purchase of GreenMan Technologies of
Minnesota and GreenMan Technologies of Georgia. GreenMan also incurred
approximately $322,000 of deferred loan costs associated with securing the
credit facility. These deferred charges are being amortized over the life of the
term notes. Amortization expense for the year ended May 31, 1998, the period
ended September 30, 1998 and the year ended September 30, 1999 was $35,782,
$35,782 and $107,345, respectively.
On September 4, 1998, Heller Financial Inc. provided GreenMan Technologies
of Georgia an additional $850,000 term note secured by machinery and equipment.
GreenMan Technologies of Georgia used the proceeds to aquire the scrap tire
collection and processing assets of United Waste Service. In connection with the
term note, the working capital line of credit was reduced from $1,700,000 to
$1,079,000.
In May 1999, GreenMan was notified that Heller had sold the credit
facility to Fremont Financial Corporation. There have been no modifications to
the existing terms of the credit facility as a result of the sale.
F-18
<PAGE>
GreenMan Technologies, Inc.
Notes To Consolidated Financial Statements
(Information for the Four Months Ended September 30, 1997 is unaudited)
11. Notes Payable - (Continued)
<TABLE>
<CAPTION>
Notes payable consists of the following at: September 30, September 30,
1998 1999
------------ ------------
<S> <C> <C>
Term note payable to a bank, secured by a mortgage on real estate held for
investment, guaranteed by GreenMan and an officer, due in monthly installments
of $4,500 including interest at prime plus 1% (9.25% and 9.5% at September 30,
1998 and 1999, respectively) and a final installment of the remaining
principal balance due July 2000 ................................................ $ 425,885 $ 395,960
Term note payable, secured by all real estate of GreenMan Technologies of
Minnesota and GreenMan Technologies of Georgia, guaranteed by GreenMan and
three officers, due in monthly installments of $23,333 including interest at
prime plus 1.75% (10% and 10.25% at September 30, 1998 and 1999, respectively)
and a final installment of the remaining principal balance due February 2001 .... 1,236,667 946,266
Term note payable, secured by all machinery and equipment of GreenMan
Technologies of Minnesota and GreenMan Technologies of Georgia, guaranteed by
GreenMan and three officers, due in monthly installments of $31,667 including
interest at prime plus 1.75% (10% and 10.25% at September 30, 1998 and 1999,
respectively) and a final installment of the remaining principal balance due
February 2001 ................................................................... 1,678,334 1,298,333
Term note payable, secured by all machinery and equipment of GreenMan
Technologies of Minnesota and GreenMan Technologies of Georgia, guaranteed by
GreenMan and three officers, due in monthly installments of $14,667 including
interest at prime plus 1.75% (10% and 10.25% at September 30, 1998 and 1999,
respectively) and a final installment of the remaining principal balance due
February 2001 ................................................................... 850,000 674,000
Term note payable, guaranteed by four officers, due in monthly installments of
$7,553 including interest at 7.75% and a final installment of the remaining
principal balance due June 2004. Default on the note results in an interest
rate of 21% and an acceleration of the maturity date. ........................... -- 1,098,186
Line of credit, secured by eligible accounts receivable of GreenMan Technologies
of Minnesota, GreenMan Technologies of Georgia and GreenMan Technologies of
South Carolina, guaranteed by GreenMan and three officers, and bearing
interest at prime plus 1.5% (9.75% and 10% at September 30, 1998 and 1999,
respectively). .................................................................. 716,817 1,004,813
Other term notes payable and assessments, secured by equipment and requiring monthly
installments .................................................................... 316,903 961,250
------------ ------------
5,224,606 6,378,808
Less current portion .............................................................. (1,678,399) (2,573,064)
------------ ------------
Notes payable, non-current portion $ 3,546,207 $ 3,805,744
============ ============
</TABLE>
The following is a summary of maturities of notes payable at September 30,
1999:
Years Ending
September 30,
-------------
2000 ............................................... $ 2,573,064
2001 ............................................... 2,325,403
2002 ............................................... 177,933
2003 ............................................... 154,454
2004................................................ 1,147,954
-----------
$ 6,378,808
===========
Interest expense for the year ended May 31, 1998 and the periods ended
September 30, 1997 and 1998 was $478,497, $137,803 and $158,963, respectively.
Interest expense for the year ended September 30, 1999 was $570,967.
F-19
<PAGE>
GreenMan Technologies, Inc.
Notes To Consolidated Financial Statements
(Information for the Four Months Ended September 30, 1997 is unaudited)
12. Related Party Debt Agreements
Convertible Notes Payable, Related Parties
On December 30, 1996, GreenMan renegotiated the remaining principal
balance of $1,200,000 due to a company that was related to a director, under 10%
notes payable. The outstanding principal balance was converted into a 10%
secured convertible note payable, due July 1, 1997 and convertible into
GreenMan's common stock at a conversion price of $5.00 per share. The note was
secured by an interest in GreenMan's cryogenic tire recycling equipment.
GreenMan also reduced the exercise price of the 60,000 warrants granted in
connection with this borrowing to $5.65 per share and recorded a non cash
expense of $36,000 in connection with the reduction in the exercise price.
Interest expense for the year ended May 31, 1998 and the period ended September
30, 1997 amounted to $115,658 and $55,234, respectively.
As of May 31, 1998, the holder had converted its entire $1,200,000 note
payable and $165,741 of accrued interest into 297,257 shares of common stock
pursuant to the terms of the convertible note payable. A portion of the
conversion included a one time 15% reduction in the conversion price as an
inducement to convert the balance due under the note.
Convertible Notes Payable, Officers
In May 1996, GreenMan borrowed $325,000 from an officer. This unsecured
note payable bore interest at prime plus 1.5% per annum. From September 1996 to
May 1997 an additional $624,300 was borrowed from this officer and another
officer. During January 1997 and May 1997, $345,000 was repaid to these
officers.
On May 30, 1997, GreenMan refinanced the remaining principal balance and
accrued interest plus accrued business expenses owed to these officers and
issued each officer 10% convertible notes, due October 30, 1998 in the amount of
$640,000 and warrants to purchase 25,600 shares of common stock at an exercise
price of $4.40 per share. The notes are convertible after 120 days into shares
of common stock at a conversion price equal to the lower of the average closing
bid prices on the five trading days preceding May 30, 1997 or 70% of the average
closing bid prices on the five trading days preceding the date of the conversion
of such notes. GreenMan has recorded a deferred charge of approximately $274,000
associated with the 30% discount from market to be realized upon conversion.
GreenMan also recorded non-cash deferred financing costs of $11,500 in
connection with the issuance of the warrants to purchase 25,600 shares of common
stock.
During June and July 1997, GreenMan borrowed an additional $386,000 from
four officers under similar terms to the May 30, 1997 convertible notes and
issued warrants to purchase 15,440 shares of common stock at exercise prices
ranging from $3.60 to $4.85 per share. GreenMan recognized a deferred charge of
approximately $166,000 associated with the 30% discount from market to be
realized upon conversion and $7,800 of non-cash deferred financing costs in
connection with the issuance of the warrants to purchase 15,440 shares of common
stock to the officers. In March 1998, the four officers converted $1,026,000 of
principal and $75,711 of accrued interest into 1,260,193 shares of unregistered
common stock. Interest expense for the year ended May 31, 1998 and the period
ended September 30, 1997 was $76,045 and $31,129, respectively. Amortization of
deferred financing costs for the year ended May 31, 1998 and the period ended
September 30, 1997 was $459,300 and $137,160, respectively. All warrants issued
pursuant to the convertible notes expired in the year ended September 30, 1999
unused.
Notes Payable, Related Party
Pursuant to the terms of the DuraWear stock purchase agreement, GreenMan
assumed a promissory note payable to DuraWear's former sole stockholder who is
also a stockholder of GreenMan. The note was payable in 36 equal monthly
installments of principal plus accrued interest at prime plus 1.5%, adjusted
annually. The note was paid off in October 1998. Interest expense for the year
ended May 31, 1998 and the periods ended September 30, 1997 and 1998 was $5,435,
$2,412 and $571, respectively.
F-20
<PAGE>
GreenMan Technologies, Inc.
Notes To Consolidated Financial Statements
(Information for the Four Months Ended September 30, 1997 is unaudited)
13. Capital Leases
GreenMan leases machinery and equipment with a cost of $59,601 and
$798,223 under capital lease agreements at September 30, 1998 and 1999,
respectively. Accumulated amortization amounted to $31,433 and $13,303, at
September 30, 1998 and 1999, respectively. Amortization expense on assets under
capital leases for the year ended May 31, 1998 and the periods ended September
30, 1997 and 1998 was $299,857, $3,974 and $3,974, respectively. Amortization
expense for the year ended September 30, 1999 amounted to $17,504.
In September 1999, GreenMan Technologies of Georgia entered into a
five-year equipment lease with a company owned by two officers. Under the terms
of the lease, GreenMan Technologies of Georgia is required to pay $6,421 per
month rental and has the ability to apply 85% of all payments towards the
purchase of the equipment. The lease was classified as a capital lease at
September 30, 1999 with an equipment value of $187,250.
In August 1999, GreenMan Technologies of South Carolina entered into a
five-year equipment lease agreement. Under the terms of the lease GreenMan
Technologies of South Carolina is required to pay $12,234 per month rental. The
lease was classified as a capital lease at September 30, 1999 with an equipment
value of $610,973.
In October 1997, GreenMan entered into a fifteen-year cryogenic equipment
lease agreement with Cryopolymers Leasing. Under the terms of the agreement,
GreenMan Technologies of Louisiana was paying $25,500 per month plus an
additional $100,000 of bonus rent per year for the first six years of the
agreement. The bonus rents were payable in GreenMan's common stock with the
number of shares determined using the closing bid price of the common stock on
each December 31. The lease was classified as a capital lease at May 31, 1998
with an equipment value of $2,771,876. As a result of the August 21, 1998 fire
at GreenMan Technologies of Louisiana, the leased cryogenic equipment was
destroyed.
GreenMan received a written agreement from the lessor of the cryogenic
equipment whereby Cryopolymers Leasing agreed to forgive $500,000 of capital
lease obligations in return for a $500,000 payment when GreenMan received the
actual cash value payment from the insurance company. Cryopolymers Leasing
agreed in writing to execute a 10-year note payable with GreenMan for the
remaining capital lease balance of $1,600,000. The note would bear interest at
10% per annum and be payable in monthly payments of $21,144 including interest
and principal starting in June 1999. GreenMan recorded this forgiveness of debt
as other income for the period ended September 30, 1998. On January 27, 1999,
GreenMan received correspondence from attorneys for Cryopolymers Leasing
purporting to terminate the lease restructuring and demanding payment of the
original lease buyout of approximately $3,100,000. Cryopolymers Leasing also
sought an additional $400,000 for cryogenic rubber recycling equipment they
contended was purchased on behalf of GreenMan. In February 1999, Cryopolymers
Leasing commenced suit against GreenMan, GreenMan Technologies of Louisiana and
Lexington Insurance Company seeking, among other things, to terminate the
restructuring agreement concerning the cryogenic equipment lease, force GreenMan
to purchase or lease certain additional cryogenic rubber recycling equipment and
for damages.
On May 14, 1999, GreenMan and the lessor reached a settlement whereby the
lessor agreed to assign to GreenMan all interest in and to any additional
insurance proceeds to be received as a result of the August 21, 1998 fire;
transfer ownership of the additional cryogenic rubber recycling equipment to
GreenMan; and withdraw from all legal proceedings against GreenMan. In return,
GreenMan paid the lessor;
o $1,700,000 of escrowed insurance proceeds;
o executed a $1,100,000 sixty month note payable, bearing interest at 7.75%
with monthly payments of $7,553 and a balloon payment due June 2004 (see
Note 11);
o issued 250,000 shares of common stock (valued at $202,500);
o issued immediately exercisable warrants to purchase 450,000 shares of
common stock (valued at $100,000) for a period of ten years at $.81 per
share; and
o paid all fees associated with the settlement agreement.
F-21
<PAGE>
GreenMan Technologies, Inc.
Notes To Consolidated Financial Statements
(Information for the Four Months Ended September 30, 1997 is unaudited)
13. Capital Leases - (Continued)
GreenMan determined the total settlement to equal $3,255,000 resulting in an
additional casualty loss of $955,000 which was recorded in the quarter ended
March 31, 1999. The $1,100,000 note payable is personally guaranteed by four
officers of GreenMan. GreenMan has pledged the common stock of GreenMan
Technologies of South Carolina as collateral to the four officers for their
personal guarantee. GreenMan has assigned a value of $200,000 to the cryogenic
crumb rubber recycling equipment and is currently marketing the equipment to
potential purchasers.
The following is a schedule of the future minimum lease payments under the
capital leases together with the present value of net minimum lease payments at
September 30, 1999:
Years Ending
September 30,
-------------
2000 ......................................... $ 223,862
2001 .......................................... 223,862
2002 .......................................... 217,441
2003........................................... 146,813
2004........................................... 134,579
---------
Total minimum lease payments ....................... 946,557
Less amount representing interest .................. (220,242)
---------
Present value of minimum lease payments ............ $ 726,315
=========
Interest expense on capital leases for the year ended May 31, 1998 and the
periods ended September 30, 1997 and 1998 was $200,681, $66,894 and $29,432,
respectively. Interest expense on capital leases for the year ended September
30, 1999 was $14,081.
14. Commitments and Contingencies
Employment Agreements
GreenMan has employment agreements with four officers which provide for
base salaries, participation in employee benefit programs and severance payments
for termination without cause.
Rental Agreements
During the year ended September 30, 1999, GreenMan rented several pieces
of equipment on a monthly basis from a company owned by two officers. Rent
expense for the year ended September 30, 1999 was $141,070.
GreenMan leases approximately 3,380 square feet of office space at a
monthly rental of $4,456 under a five-year lease. Rent expense for the year
ended May 31, 1998 and the periods ended September 30, 1997 and 1998 was
$38,856, $12,952 and $17,464, respectively. Rent expense for the year ended
September 30, 1999 was $53,472.
GreenMan also assumed several equipment operating leases as a result of
the acquisition of the tire collection and processing assets of United Waste.
Future annual rent commitments under equipment leases are as follows: 2000 -
$82,896, 2001 - $64,766, 2002 - $43,929 and 2003 - $22,852. Rent expense for the
four months ended September 30, 1998 and the year end September 30, 1999 was
$9,898 and $107,412, respectively.
Litigation
GreenMan is involved in litigation in the ordinary course of business.
Actions were commenced against GreenMan for defaulting on a promissory note (See
Notes 3 and 10) and by the Louisiana landlord for alleged negligence in the
operation of the plant that was destroyed in a fire (See Note 5). In the
Louisiana case, GreenMan intends to defend itself vigorously and does not
believe the case will result in a material adverse effect on its financial
position and results of operations.
F-22
<PAGE>
GreenMan Technologies, Inc.
Notes To Consolidated Financial Statements
(Information for the Four Months Ended September 30, 1997 is unaudited)
15. Stockholders' Equity
Common Stock Transactions
The following shares of common stock were issued pursuant to convertible
notes and debentures during the periods noted below:
<TABLE>
<CAPTION>
Total
Principal Interest Shares
Year Ended May 31, 1998 Converted Converted Issued
- ----------------------- ----------- ----------- ---------
<S> <C> <C> <C>
January 1997 offering (Note 10)................. $ 675,000 $ -- 252,218
April 1997 offering (Note 10)................... 1,500,000 107,029 1,089,449
Related party (Note 12)......................... 1,200,000 165,741 297,257
Officers (Note 12).............................. 1,026,000 75,711 1,260,193
December 1997 offering (Note 10)................ 240,433 7,127 98,984
----------- --------- ---------
$ 4,641,433 $ 355,608 2,998,101
=========== ========= =========
Period Ended September 30, 1998
- -------------------------------
December 1997 offering (Note 10)................ $ 969,827 $ 50,828 1,022,228
=========== ========= =========
Year Ended September 30, 1999
- -----------------------------
December 1997 offering (Note 10)................ $ 839,740 $ 73,093 3,017,739
=========== ========= =========
</TABLE>
Investors from the January 1997 offering exercised 36,000 warrants during
the year ended May 31, 1998, resulting in net proceeds to GreenMan of $225,000.
On August 24, 1998, GreenMan issued 30,000 shares of common stock for
services rendered to GreenMan.
Private Offering of Common Stock and Warrants
During the period of March 1998 to May 1998, GreenMan sold 1,257,734
shares of unregistered common stock and immediately exercisable two year
warrants to purchase 325,000 shares of common stock at exercise prices ranging
from $1.75 to $3.88 per share to investors including officers and directors for
approximately $1,500,000. The investors were granted piggy-back registration
rights to register the common stock and the common stock issuable upon exercise
of the warrants. GreenMan also granted warrants to purchase 8,332 shares of
common stock at an exercise price of $3.88 per share to a third party in
conjunction with the offering. The weighted average fair value of the warrants
on the date of grant was $ 0.50 per share.
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). As of September 30, 1999,
1,538,613 shares of unregistered common stock have been sold to investors
including officers and directors for approximately $500,000 of net 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.
Non -Employee Director Stock Option Plan
Under the terms of the 1996 Non-Employee Director Stock Option Plan on a
non-employee director's initial election to the Board of Directors, they are
automatically granted an option to purchase 2,000 shares of the common stock.
Each person who was a member of the Board of Directors on January 24, 1996, and
was not an officer or employee, was automatically granted an option to purchase
2,000 shares of common stock. In addition, after an individual's initial
election to the Board of Directors, any director who is not an officer or
employee and who continues to serve as a director will automatically be granted,
on the date of the annual meeting of stockholders,
F-23
<PAGE>
GreenMan Technologies, Inc.
Notes To Consolidated Financial Statements
(Information for the Four Months Ended September 30, 1997 is unaudited)
15. Stockholders' Equity - (Continued)
an additional option to purchase 2,000 shares of common stock. The exercise
price per share of options granted under the Non-Employee Director Stock Option
Plan is 100% of the fair-market value of the common stock on the business day
immediately prior to the date of the grant and is immediately exercisable for a
period of ten years from the date of the grant.
The Board of Directors has reserved 60,000 shares of common stock for
issuance and as of September 30, 1999, options to purchase 16,000 shares of
common stock, at prices ranging from $.88 to $16.90 per share, have been
granted. During the year ended May 31, 1998, options were granted to purchase
6,000 shares of common stock at $1.09 per share for a period of ten years.
During the year ended September 30, 1999, options were granted to purchase 8,000
shares of common stock at $.88 per share for a period of ten years. The weighted
average fair value of the options on the date of grant was $.21 and $.31 per
share, respectively, for the years ended May 31, 1998 and September 30, 1999.
Stock Option Plan
The 1993 Stock Option Plan was established to provide stock options to
employees, officers, directors and consultants. In March 1999, GreenMan's
stockholders approved an increase to the number of shares authorized under the
Plan to 2,000,000 shares.
The Board of Directors will grant options and establish the terms of the
grant in accordance with the provisions of the 1993 Stock Option Plan. Stock
options granted are summarized as follows:
<TABLE>
<CAPTION>
Four Months Ended Year Ended
Year Ended May 31, 1998 September 30, 1998 September 30,1999
----------------------------- ---------------------------- ----------------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
----------- ------------- ------------- ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of period 143,340 $ 4.05 1,274,500 $ 1.37 1,274,500 $ 1.37
Granted 1,182,600 1.21 -- -- 870,000 0.67
Canceled (46,200) 5.53 -- -- (246,000) 1.65
Exercised (5,240) .62 -- -- -- --
--------- --------- ---------
Outstanding at end of period 1,274,500 1.37 1,274,500 1.37 1,898,500 1.02
========= ========= =========
Exercisable at end of period 41,940 1.91 58,120 2.20 377,300 1.45
========= ========= =========
Reserved for future grants at end of
period 714,780 714,780 90,780
========= ========= =========
Weighted average fair value of options
granted during the period $ 0.31 N/A $ 0.21
</TABLE>
F-24
<PAGE>
GreenMan Technologies, Inc.
Notes To Consolidated Financial Statements
(Information for the Four Months Ended September 30, 1997 is unaudited)
15. Stockholders' Equity - (Continued)
Information pertaining to options outstanding under the plan at September 30,
1999 is as follows:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
-------------------------------------------- ------------------------------
Weighted
Average Weighted Weighted
Remaining Average Average
Exercise Number Contractual Exercise Number Exercise
Prices Outstanding Life Price Exercisable Price
- ------ -------------- ------------- ----------- ----------------- ----------
<S> <C> <C> <C> <C> <C>
$ .38 - .63 434,000 9.6 $ .52 14,000 $ .45
$ .81 - 1.09 1,398,800 8.8 1.00 321,600 1.09
$ 1.35 - $ 1.45 7,200 4.6 1.38 7,200 1.38
$ 4.70 - $ 5.00 40,500 7.8 4.70 16,500 4.71
$ 5.65 18,000 7.3 5.65 18,000 5.65
--------- -------
1,898,500 8.9 $ 1.02 377,300 $ 1.45
========= =======
</TABLE>
Other Stock Options
The Company granted options to purchase 3,000 shares of common stock at
$5.00 per share through February 2000 and 4,000 shares of common stock at $5.00
per share through April 2005 in the year ended May 31, 1995.
On December 30, 1996, GreenMan granted ten year options to purchase 60,000
shares of common stock at an exercise price of $5.65 per share to certain
officers. These options vest over a five-year period. The weighted average fair
value of the options on the date of grant was $1.40 per share.
On March 23, 1998, GreenMan granted options to purchase 1,487,500 shares
of common stock at an exercise price of $1.09 per share through March 2008 to
certain officers, directors and outside individuals. These options vest over a
five-year period. As of September 30, 1999, 180,000 of these options expired
unused.
On March 31, 1999, GreenMan granted options to purchase 75,000 shares of
common stock at an exercise price of $.88 per share through March 2002 to its
non-employee directors. These options vest over a one-year period. The weighted
average fair value of the options on the date of grant was $.21 per share.
Other Warrants
In connection with GreenMan's initial public offering, warrants were
issued to purchase 253,000 shares of common stock at $25.00 per share through
September 28, 2000. Also in connection with the conversion of preferred stock
260,000 warrants were issued under the same terms.
In January 1996, GreenMan granted warrants to purchase 13,400 shares of
common stock for services rendered. The exercise price is $16.90 through January
2006. On December 30, 1996, these warrants were repriced to $5.65 which was the
closing bid price of the common stock on December 30, 1996. The weighted average
fair value of the repriced warrants on the date of grant was $1.40 per share.
During June 1996, GreenMan granted warrants to purchase 196,247 shares of
common stock at exercise prices ranging from $15.00 to $19.40 per share through
June 1999 and 2001. On December 30, 1996, 136,247 of the original 196,247
warrants were repriced to $5.65 per share. The weighted average fair value of
the repriced warrants on the date of grant was $1.40 per share. During the year
ended September 30, 1999, 126,247 warrants expired unused.
On December 30, 1996, GreenMan granted 80,000 three-year warrants to one
of its investment bankers at an exercise price of $.25 per share and recorded a
non-cash expense of $400,000 for the year ended May 31, 1997.
F-25
<PAGE>
GreenMan Technologies, Inc.
Notes To Consolidated Financial Statements
(Information for the Four Months Ended September 30, 1997 is unaudited)
15. Stockholders' Equity - (Continued)
On September 23, 1998, GreenMan granted warrants to purchase 78,829 shares
of common stock for a period of two years at an exercise price of $1.11 per
share pursuant to a technology license agreement (See Note 8). These warrants
were returned unexercised in April 1999.
In December 1998, GreenMan granted warrants to purchase 25,000 shares of
common stock for a period of three years an exercise price of $.41 per share for
services rendered. The weighted average fair value of the options on the date of
grant was $.08 per share.
In January 1999, GreenMan executed a two-year investment banking and
corporate financing agreement with Schneider Securities Inc. In exchange for
services to be provided, GreenMan agreed to:
o pay an annual fee of $25,000;
o issue 50,000 shares of unregistered common stock which are subject
to an eighteen month lock-up agreement (valued at $25,000);
o issue warrants to purchase 150,000 shares of common stock
exercisable January 2000 through January 2004 at prices ranging from
$1.00 to $1.50 per share and;
o issue warrants to purchase 100,000 shares of common stock
exercisable January 2001 through January 2004 at prices ranging from
$2.00 to $2.50 per share.
In May 1999, GreenMan granted warrants to purchase 450,000 shares of
common stock for a period of ten years at an exercise price of $.81 per share
(valued at $100,000) pursuant to a settlement agreement (See Note 13). The
weighted average fair value of the options on the date of grant was $.22 per
share.
Stock-Based Compensation
GreenMan has two stock-based compensation plans and stock options issued
outside of the plans, which are described above. GreenMan applies Accounting
Principles Board Opinion No. 25 and related interpretations in accounting for
stock options issued to employees and directors. Had the compensation cost for
the stock options issued to employees and directors been determined based on the
fair value at the grant dates consistent with Statement of Financial Accounting
Standards No. 123, the net loss and net loss per share would have been adjusted
to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
Four Months Ended
September 30, Year Ended
Year Ended ------------------------------- September 30,
May 31, 1998 1997 1998 1999
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Net loss:
As reported $ (6,324,986) $ (1,429,015) $ (2,326,086) $ (4,657,861)
Pro forma (6,457,825) (1,463,295) (2,360,366) $ (4,830,253)
Net loss per share - basic:
As reported $ (2.44) $ (0.90) $ (0.37) $ (0.43)
Pro forma (2.49) (0.93) (0.38) (0.45)
</TABLE>
Common stock equivalents have been excluded from all calculations of net
loss per share because the effect of including them would be anti-dilutive.
F-26
<PAGE>
GreenMan Technologies, Inc.
Notes To Consolidated Financial Statements
(Information for the Four Months Ended September 30, 1997 is unaudited)
15. Stockholders' Equity - (Continued)
The fair value of each option grant under the 1993 Stock Option Plan and
the 1996 Non-Employee Director Stock Option Plan is estimated on the date of
grant using the Black-Scholes option-pricing model with the following weighted
average assumptions used for grants during the year ended May 31,1998, dividend
yield of 0%; risk-free interest rate of 5.5%; expected volatility of 40% and
expected lives of 2 years. There were no options granted under the plans during
the period ended September 30, 1998. The weighted average assumptions used for
grants during the year ended September 30, 1999 were: dividend yield of 0%;
risk-free interest rate of 5.5%; expected volatility of 50% and expected
lives of 5 years.
Weighted average assumptions used in valuing stock options issued outside
of the plans during the years ended May 31, 1998 and September 30, 1999, were
dividend yields of 0%; risk-free interest rate of 5.5%; expected volatility of
40% and 50% respectively, and expected lives of 2 years.
Common Stock Reserved
GreenMan has reserved common stock at September 30, 1999 as follows:
<TABLE>
<S> <C>
Initial public offering warrants ................................... 253,000
Warrants issued on conversion of preferred stock ................... 260,000
Stock option plans ................................................. 2,049,280
Other stock options ................................................ 1,449,500
Other warrants ..................................................... 1,804,733
---------
5,816,513
=========
</TABLE>
At September 30, 1999, GreenMan has 20,000,000 shares of authorized common
stock of which 11,762,599 shares are outstanding. The Class B convertible
preferred stock is convertible into shares of GreenMan's common stock beginning
in February 2001. Based upon the average closing bid price of GreenMan's common
stock from September 4, 1998 to December 1, 1999, the total number of shares
reserved in connection with the convertible preferred stock is 4,923,077 and is
subject to adjustment (See Note 2).
16. Market for Common Stock
On October 29, 1998, GreenMan received notice from the Nasdaq Stock
Market, Inc. stating its common stock would be delisted from the Nasdaq Small
Cap Market if, in the ninety day period ended January 29, 1999, GreenMan could
not demonstrate compliance with the $1.00 minimum bid price for ten consecutive
trading days. As of January 29, 1999, GreenMan had not regained full compliance
with the minimum bid price requirement and requested an oral appeal to the
Nasdaq's Listing and Hearing Review Committee. On March 26, 1999, GreenMan also
received notice from the Nasdaq Small Cap Market that GreenMan had violated
marketplace rules regarding shareholder approval in connection with the
September 1998 acquisition of the scrap tire collection and processing assets of
United Waste Service, Inc.
On April 9, 1999, management attended a hearing of the Listing and Hearing
Review Committee and requested an extension of time in order to comply with the
$1.00 minimum bid requirement. Management also provided documentation
substantiating its contention that marketplace rules were not violated in
regards to the acquisition of the scrap tire collection and processing assets of
United Waste Service, Inc.
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 August 1999,
notice was received from the Nasdaq Listing and Hearing Review Council that the
appeal would be considered and the decision will be reviewed in January 2000.
There can be no assurance, however, that the appeal will be successful or
the securities reinstated on Nasdaq's Small Cap Market. 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.
F-27
<PAGE>
GreenMan Technologies, Inc.
Notes To Consolidated Financial Statements
(Information for the Four Months Ended September 30, 1997 is unaudited)
17. 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.
At September 30, 1999, one customer accounted for 11.5% of consolidated
accounts receivable. During the year ended May 31, 1998, the four months ended
September 30, 1997 and 1998, and the year ended September 30, 1999, no customer
accounted for 10% or more of consolidated net sales.
18. Income Taxes
There was no provision for income taxes for the year ended May 31, 1998,
the periods ended September 30, 1997 and 1998 and the year ended September 30,
1999 due to GreenMan's net operating losses and its valuation reserve against
deferred tax assets. The difference between the statutory federal income tax
rate of 34% and the effective tax rates is primarily due to net operating losses
incurred by GreenMan and the valuation reserve against its deferred tax assets.
The components of the net deferred tax asset are as follows:
<TABLE>
<CAPTION>
September 30, September 30,
1998 1999
-------------- --------------
<S> <C> <C>
Deferred tax asset:
Federal ........................................ $ 5,106,000 $ 6,223,000
State .......................................... 1,012,000 1,268,000
------------- --------------
6,118,000 7,491,000
Valuation reserve ................................. (6,118,000) (7,491,000)
------------- --------------
Net deferred tax asset ............................ $ -- $ --
============= ==============
</TABLE>
The following differences give rise to deferred income taxes:
<TABLE>
<CAPTION>
September 30, September 30,
1998 1999
-------------- --------------
<S> <C> <C>
Net operating loss carryforward ................... $ 5,012,000 $ 5,671,000
Research tax credit carryforward .................. 17,000 17,000
Non-deductible losses ............................. 546,000 1,369,000
Other ............................................. 543,000 434,000
------------- --------------
6,118,000 7,491,000
Valuation reserve ................................. (6,118,000) (7,491,000)
------------- --------------
Net deferred tax asset ............................ $ -- $ --
============= ==============
</TABLE>
The change in the valuation reserve is as follows:
<TABLE>
<CAPTION>
Four Months Ended
Year Ended September 30, Year Ended
May 31, -------------------------- September 30,
1998 1997 1998 1999
---------- ----------- ------------ ----------
<S> <C> <C> <C> <C>
Balance at beginning of period ... $3,184,000 $3,184,000 $5,250,000 $6,118,000
Increase due to current period net
operating loss ................ 2,066,000 243,000 868,000 1,373,000
---------- ---------- ---------- ----------
Balance at end of period ......... $5,250,000 $3,427,000 $6,118,000 $7,491,000
========== ========== ========== ==========
</TABLE>
As of September 30, 1999, GreenMan has net operating loss carryforwards of
approximately $14,806,000. The Federal and state net operating loss
carryforwards expire in varying amounts beginning in 2008 and 1999,
respectively. In addition, GreenMan has Federal tax credit carryforwards of
approximately $17,000 available to reduce future tax liabilities. The Federal
tax credit carryforwards expire beginning in 2008. Use of net operating loss and
tax credit carryforwards is subject to annual limitations based on ownership
changes in GreenMan's common stock as defined by the Internal Revenue Code.
F-28
<PAGE>
GreenMan Technologies, Inc.
Notes To Consolidated Financial Statements
(Information for the Four Months Ended September 30, 1997 is unaudited)
19. Letter of Intent
On June 1, 1998, GreenMan signed a letter of intent to acquire all of the
capital stock of Mac's Tire Recyclers, a privately-held tire recycler located in
Saltillo, Mississippi. GreenMan operated the Mac's Tire Recyclers facility for
the period from June 1, 1998 until April 16, 1999 under a management agreement
which provided for a management fee equal to 90% of the net income of Mac's Tire
Recyclers before depreciation and income taxes. GreenMan recognized $223,000 and
$19,085 under this agreement for the period ended September 30, 1998 and the
year ended September 30, 1999, respectively. At September 30, 1998 and 1999,
GreenMan had accounts receivable from Mac's Tire Recyclers of $183,000 and
$35,400, respectively, which represents unpaid management fees. The management
agreement term expired on April 16, 1999 and accordingly, GreenMan is no longer
managing Mac's Tire Recyclers operations. Based upon due diligence, both parties
have agreed not to proceed with the acquisition.
20. Fair Value of Financial Instruments
At September 30, 1998, GreenMan's financial instruments consist of notes
payable to related parties, banks and others, and convertible notes payable.
Notes payable to related parties, banks, and others approximate their fair
values as these instruments bear interest at market rates. The fair value of the
$300,000 convertible note payable is $300,000 at September 30, 1998 as the
conversion price per share is in excess of the fair value of the common stock.
The fair value of the $839,740 in convertible notes payable outstanding is
approximately $1,120,000 based on the fair value of the common stock issuable on
conversion of the notes.
At September 30, 1999, GreenMan's financial instruments consist of notes
payable to banks and others, and convertible notes payable. Notes payable to
banks and others approximate their fair values as these instruments bear
interest at market rates. The fair value of the $300,000 convertible note
payable is $300,000 at September 30, 1999 (See Note 10).
21. Employee Benefit Plan
Effective August 1999, GreenMan has implemented a Section 401(k) plan for
all eligible employees. Employees are permitted to make elective deferrals of up
to 15% of employee compensation and employee contributions to the 401(k) plan
are fully vested at all times. GreenMan may make discretionary contributions to
the 401(k) plan which become vested over a period of five years. There were no
corporate contributions to the 401(k) plan as of September 30, 1999.
22. Subsequent Events
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 December 1, 1999, the Company had issued $300,000 of convertible
notes and issued immediately exercisable five year warrants to purchase 100,000
shares of common stock at an exercise price of $.31 per share. 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
investors have been granted piggy-back registration rights to register the
common stock.
F-29
<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
Pursuant to the requirements of the Securities Act of 1934, this report
has been signed by the following persons on behalf of the Registrant in the
capacities and on the dates indicated.
Signature Title(s) Date
--------- -------- ----
/s/ Maurice E. Needham Chairman of the Board January 12, 2000
- ----------------------
Maurice E. Needham
/s/ Robert H. Davis Chief Executive Officer, President January 12, 2000
------------------- and Director
Robert H. Davis
/s/ Charles E. Coppa Chief Financial Officer, January 12, 2000
-------------------- Treasurer and Secretary
Charles E. Coppa (Principal Financial
Officer and Principal
Accounting Officer)
/s/ Lew F. Boyd Director January 12, 2000
---------------
Lew F. Boyd
/s/ Jagruti Oza Director January 12, 2000
---------------
Jagruti Oza
/s/ James F. O'Connor Director January 12, 2000
---------------------
James F. O'Connor
Exhibit 11
GreenMan Technologies, Inc.
Statement Regarding Net Loss per Share
September 30, 1999
<TABLE>
<CAPTION>
Four Months Ended
Year Ended September 30, Year Ended
May 31, ---------------------------- September 30,
1998 1997 1998 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net loss .......................... $ (6,324,986) $ (1,429,015) $ (2,326,086) $ (4,657,861)
============ ============ ============ ============
Net loss per share - basic ........ $ (2.44) $ (0.90) $ (0 .37) $ (0.43)
============ ============ ============ ============
Weighted average shares outstanding 2,596,776 1,579,548 6,247,793 10,750,855
============ ============ ============ ============
</TABLE>
Exhibit 23.1
Consent of Wolf & Company, P.C.
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the registration
statements of GreenMan Technologies, Inc. on Form S-3 (Nos. 333-22813,
333-27625, and 333-49485) of our report, which contains an explanatory paragraph
about GreenMan's ability to continue as a going concern, dated December 17,
1999, on the consolidated balance sheets of GreenMan Technologies, Inc. as of
September 30, 1998 and 1999 and the related consolidated statements of loss,
changes in stockholders' equity and cash flows for the year ended May 31, 1998,
the four months ended September 30, 1998 and the year ended September 30, 1999
which report appears in the Form 10-KSB of GreenMan Technologies, Inc. for the
year ended September 30, 1999.
/s/ Wolf & Company, P.C.
------------------------
Wolf & Company, P.C.
Boston, Massachusetts
January 12, 2000
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
Exhibit 27
GreenMan Technologies, Inc.
Form 10-KSB
September 30, 1999
Financial Data Schedule
<ARTICLE> 5
<CIK> 0000932699
<NAME> GreenMan Technologies, Inc.
<MULTIPLIER> 1
<CURRENCY> USD
<S> <C>
<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-END> SEP-30-1999
<EXCHANGE-RATE> 1
<CASH> 2,233
<SECURITIES> 0
<RECEIVABLES> 2,356,069
<ALLOWANCES> 166,582
<INVENTORY> 0
<CURRENT-ASSETS> 3,531,638
<PP&E> 9,407,350
<DEPRECIATION> 1,823,029
<TOTAL-ASSETS> 14,059,719
<CURRENT-LIABILITIES> 7,292,096
<BONDS> 4,391,334
0
3,200,000
<COMMON> 117,626
<OTHER-SE> (941,337)
<TOTAL-LIABILITY-AND-EQUITY> 14,059,719
<SALES> 16,337,819
<TOTAL-REVENUES> 16,337,819
<CGS> 13,035,913
<TOTAL-COSTS> 5,004,970
<OTHER-EXPENSES> (813,091)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (985,421)
<INCOME-PRETAX> (3,501,576)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,501,576)
<DISCONTINUED> (1,156,285)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,657,861)
<EPS-BASIC> (0.43)
<EPS-DILUTED> (0.43)
</TABLE>
