U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended December 31, 1999 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
- -------------------------------- ------------------------------------
(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
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------------------------------------------------------------------
(Former name, former address and former fiscal year, if
changed since last report.)
Indicate by check mark whether the issuer (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes |X| No |_|
Number of shares outstanding as of February 14, 2000
Common Stock, $.01 par value, 11,990,716 shares
<PAGE>
GreenMan Technologies, Inc.
Form 10-QSB
Quarterly Report
December 31, 1999
Table of Contents
PART I - FINANCIAL INFORMATION Page
----
Item 1. Financial Statements (*)
Unaudited Condensed Consolidated Balance Sheets as of
September 30, 1999 and December 31, 1999 3
Unaudited Condensed Consolidated Statements of Loss for the
three months ended December 31, 1998 and 1999 4
Unaudited Condensed Consolidated Statement of Changes in
Stockholders' Equity for the three months ended December 5
31, 1999
Unaudited Condensed Consolidated Statements of Cash Flows
for the three months ended December 31, 1998 and 1999 6
Notes to Unaudited Condensed Consolidated Financial Statements 7-10
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 11-14
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 15
Item 2. Changes in Securities 15
Item 3. Defaults Upon Senior Securities 15
Item 4. Submission of Matters to a Vote of Security Holders 15
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 15
Signatures 16
* The financial information at September 30, 1999 has been taken from
audited financial statements at that date and should be read in
conjunction therewith. All other financial statements are unaudited.
<PAGE>
GreenMan Technologies, Inc.
Unaudited Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
September 30, December 31,
1999 1999
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ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents .............................................. $ 2,233 $ 102,280
Accounts receivable, trade, less allowance for doubtful accounts
of $166,582 and $131,256 as of September 30, 1999 and December
31,1999 ............................................................ 2,189,487 2,603,025
Equipment held for sale................................................. 635,000 497,500
Other current assets ................................................... 704,918 582,007
----------------- -----------------
Total current assets 3,531,638 3,784,812
----------------- -----------------
Property, plant and equipment, net ....................................... 7,584,321 7,391,525
----------------- -----------------
Other assets:
Deferred loan costs .................................................... 143,091 116,255
Goodwill, net .......................................................... 1,796,717 1,746,344
Real estate held for investment, net.................................... 707,908 703,531
Other .................................................................. 296,044 339,050
----------------- -----------------
2,943,760 2,905,180
----------------- -----------------
$ 14,059,719 $ 14,081,517
================= =================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Convertible notes payable, current ..................................... $ 300,000 $ 425,000
Notes payable, current ................................................. 2,573,064 2,797,733
Accounts payable........................................................ 2,431,411 2,354,526
Other current liabilities .............................................. 1,846,896 1,808,317
Obligations under capital leases, current .............................. 140,725 164,338
----------------- -----------------
Total current liabilities ........................................ 7,292,096 7,549,914
Notes payable, non-current portion ..................................... 3,805,744 3,605,857
Obligations under capital leases, non-current portion .................. 585,590 547,503
----------------- -----------------
Total liabilities ................................................ 11,683,430 11,703,274
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Stockholders' equity:
Preferred stock, $1.00 par value, 1,000,000 shares authorized:
Class B convertible, liquidation value $10 per share, 320,000
shares issued and outstanding ...................................... 3,200,000 3,200,000
Common stock, $.01 par value, 20,000,000 shares authorized; 11,762,599
and 11,990,716 shares issued and outstanding at September 30, 1999
and December 31,1999 ............................................... 117,626 119,907
Additional paid-in capital ............................................. 23,127,529 23,186,254
Accumulated deficit .................................................... (24,013,866) (24,072,918)
Notes receivable, common stock.......................................... (55,000) (55,000)
----------------- -----------------
Total stockholders' equity........................................ 2,376,289 2,378,243
----------------- -----------------
$ 14,059,719 $ 14,081,517
================= =================
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements
<PAGE>
GreenMan Technologies, Inc.
Unaudited Condensed Consolidated Statements of Loss
<TABLE>
<CAPTION>
Three Months Ended
December 31,
1998 1999
----------------------------------
<S> <C> <C>
Net sales............................................... $ 4,380,951 $ 4,559,253
Cost of sales .......................................... 3,077,398 3,516,527
----------- -----------
Gross profit ........................................... 1,303,553 1,042,726
----------- -----------
Operating expenses:
Research and development ........................... 14,375 13,464
Selling, general and administrative ................ 972,132 881,274
----------- -----------
Total operating expenses ....................... 986,508 894,738
----------- -----------
Operating profit........................................ 317,045 147,988
----------- -----------
Other income (expense):
Interest and financing costs........................ (426,514) (225,450)
Other, net ......................................... (960) 18,410
----------- -----------
Other (expense), net ........................... (427,474) (207,040)
----------- -----------
Loss from continuing operations ........................ (110,429) (59,052)
Discontinued operations:
Loss from discontinued operations................... (110,384) --
----------- -----------
Net loss ............................................... $ (220,813) $ (59,052)
=========== ===========
Loss from continuing operations per share - basic....... $ (0.01) $ --
Loss from discontinued operations per share - basic..... (0.01) --
----------- -----------
Net loss per share - basic ............................. $ (0.02) --
=========== ===========
Weighted average shares outstanding..................... 9,109,847 11,818,291
=========== ===========
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
<PAGE>
GreenMan Technologies, Inc.
Unaudited Condensed Consolidated Statement of Changes in Stockholders' Equity
Three Months Ended December 31, 1999
<TABLE>
<CAPTION>
Preferred Stock Common Stock
--------------------------- --------------------------
Shares Amount Shares Amount
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Balance, September 30, 1999 ............. 320,000 $ 3,200,000 11,762,599 $ 117,626
Sale of common stock .................... -- -- 228,117 2,281
Fair value of warrants issued in
convertible debt offering ............. -- -- -- --
Net loss for the three months ended
December 31, 1999 ..................... -- -- -- --
------------ ------------ ------------ ------------
Balance, December 31, 1999 .............. 320,000 $ 3,200,000 11,990,716 $ 119,907
============ ============ ============ ============
<CAPTION>
Notes
Additional Receivable
Paid-in Accumulated Common
Capital Deficit Stock Total
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Balance, September 30, 1999 ............. $ 23,127,529 $ 24,013,866) $ (55,000) $ 2,376,289
Sale of common stock .................... 51,225 -- -- 53,506
Fair value of warrants issued in
convertible debt offering ............. 7,500 -- -- 7,500
Net loss for the three months ended
December 31, 1999 ..................... -- (59,052) -- (59,052)
------------ ------------ ------------ ------------
Balance, December 31, 1999 .............. $ 23,186,254 $(24,072,918) $ (55,000) $ 2,378,243
============ ============ ============ ============
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
<PAGE>
GreenMan Technologies, Inc.
Unaudited Condensed Consolidated Statements of Cash Flow
<TABLE>
<CAPTION>
Three Months Ended
December 31,
1998 1999
------------------------
Cash flows from operating activities:
<S> <C> <C>
Net loss .............................................................. $(220,813) $ (59,052)
Adjustments to reconcile net loss to net cash provided by (used for)
operating activities:
Amortization of deferred financing costs .............................. 285,193 --
Depreciation and amortization ......................................... 428,454 409,571
(Increase) decrease in assets:
Accounts receivable ............................................... (397,256) (413,178)
Inventory ......................................................... 46,049 --
Insurance claim receivable ........................................ 400,058 --
Other current assets .............................................. 83,253 122,911
Increase (decrease) in liabilities:
Accounts payable .................................................. 126,923 (76,885)
Other current liabilities ......................................... (404,028) (38,579)
--------- ---------
Net cash provided by (used for) operating activities ....... 347,833 (55,572)
--------- ---------
Cash flows from investing activities:
Purchase of property and equipment .................................... (450,883) (102,253)
Deferred loan costs ................................................... (14,205) --
Proceeds on disposal of property and equipment ........................ -- 137,500
Decrease (increase) in other assets ................................... 85,124 (43,006)
--------- ---------
Net cash used for investing activities ........................... (379,964) (7,759)
--------- ---------
Cash flows from financing activities:
Net advances under line of credit ..................................... 92,971 280,766
Repayment of notes payable ............................................ (241,522) (346,942)
Proceeds from notes payable ........................................... 200,419 90,952
Proceeds from convertible notes payable ............................... -- 295,000
Repayment of convertible notes payable ................................ -- (175,000)
Repayment of notes payable, related party ............................. (4,956) --
Principal payments on obligations under capital leases ................ (7,793) (34,904)
Net proceeds on the sale of common stock .............................. 365,000 53,506
--------- ---------
Net cash provided by financing activities ........................... 404,119 163,378
--------- ---------
Net increase in cash ...................................................... 371,988 100,047
Cash and cash equivalents at beginning of period .......................... 161,215 2,233
--------- ---------
Cash and cash equivalents at end of period ................................ $ 533,203 $ 102,280
========= =========
Supplemental cash flow information:
Machinery and equipment acquired under capital leases ................... $ -- $ 19,038
Common stock issued upon conversion of notes payable and accrued interest 628,127 --
Interest paid ........................................................... 134,343 179,289
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
<PAGE>
GreenMan Technologies, Inc.
Notes To Unaudited Condensed Consolidated Financial Statements
December 31, 1999
1. 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.
In August 1998, GreenMan's Louisiana crumb rubber processing facility was
severely damaged by a fire which necessitated the closure of the operation 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.
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.
2. Basis of Presentation
The consolidated financial statements include the results of operations of
GreenMan Technologies of Minnesota, GreenMan Technologies of Georgia, GreenMan
Technologies of Louisiana and GreenMan Technologies of South Carolina. All
significant intercompany accounts and transactions are eliminated in
consolidation. The consolidated financial statements have been restated to
reflect the operating results of DuraWear as discontinued operations for all
periods presented.
The financial statements are unaudited and should be read in conjunction
with the financial statements and notes thereto for the year ended September 30,
1999 included in GreenMan's Form 10-KSB. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to the Securities and Exchange Commission rules and regulations,
although management believes the disclosures which have been made are adequate
to make the information presented not misleading. The results of operations for
the periods reported are not necessarily indicative of those that may be
expected for a full year. In the opinion of management, all adjustments
(consisting only of normal recurring adjustments) which are necessary for a fair
statement of operating results for the interim periods presented have been made.
3. Net Loss Per Share
Basic earnings per share represents income available to common stock
divided by the weighted average number of common shares outstanding during the
period. Diluted earnings per share reflects additional common shares that would
have been outstanding if potential dilutive common shares had been issued, as
well as any adjustment to income that would result from the assumed conversion.
Potential common shares that may be issued by GreenMan relate to outstanding
stock options and warrants (determined using the treasury stock method),
preferred stock and convertible debt. The assumed conversion of outstanding
dilutive stock options, warrants and preferred stock would increase the shares
outstanding but would not require an adjustment to income as a result of the
conversion. For all periods presented, options, warrants, preferred stock and
convertible debt were anti-dilutive and excluded from the net loss per share
computation.
<PAGE>
GreenMan Technologies, Inc.
Notes To Unaudited Condensed Consolidated Financial Statements
December 31, 1999
4. Discontinued Operations
In March 1999, GreenMan decided to discontinue operations at its DuraWear
subsidiary in order to eliminate continued operating losses and focus efforts on
the core business of tire recycling. GreenMan recorded 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. The land and buildings have been reclassified to real estate held for
investment.
During the year ended September 30, 1999 and the three months ended
December 31, 1998, DuraWear's revenues totaled $407,947 and $196,820
respectively. 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 $110,384 for the three months ended December 31,
1998. At December 31, 1999, DuraWear's assets totaled $703,531 and represented
5% of consolidated assets.
5. Need for Additional Capital
GreenMan has incurred losses since its inception aggregating $24,072,918,
has a working capital deficiency of $3,765,102 at December 31, 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.
6. Property, Plant and Equipment
Property, plant and equipment consists of the following:
<TABLE>
<CAPTION>
September 30, December 31, Estimated
1999 1999 s Useful Lives
----------- ----------- ------------
<S> <C> <C> <C>
Land .................................................... $ 655,377 $ 668,877
Buildings ............................................... 1,667,702 1,671,422 10-20 years
Machinery and equipment ................................. 3,967,537 4,011,360 5-10 years
Furniture and fixtures .................................. 88,023 87,976 3-5 years
Motor vehicles .......................................... 3,028,711 3,089,006 3-10 years
----------- -----------
9,407,350 9,528,641
Less accumulated depreciation
and amortization .................................... (1,823,029) (2,137,116)
----------- -----------
Property, plant and equipment, net .................... $ 7,584,321 $ 7,391,525
=========== ===========
</TABLE>
<PAGE>
GreenMan Technologies, Inc.
Notes To Unaudited Condensed Consolidated Financial Statements
December 31, 1999
7. Investment in Joint Venture
In August 1997, GreenMan formed a joint venture with Crumb Rubber
Technologies, Inc. to collect and process tires in the State of New York and to
market the crumb rubber derived from the tires. 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 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, however, due to
Crumb Rubber Technologies inability to maintain the agreed upon payment schedule
and the uncollateralized nature of the deposits management wrote off the balance
of $185,000. 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. GreenMan received $20,000 from Crumb Rubber Technologies during
the quarter ended December 31, 1999 and recorded it as other income. The
remaining $40,000 was received in February 2000.
<PAGE>
GreenMan Technologies, Inc.
Notes To Unaudited Condensed Consolidated Financial Statements
December 31, 1999
8. Convertible Notes Payable
June 1998 Convertible Note
In June 1998, GreenMan issued a $300,000 10% convertible note payable in
settlement of all amounts owed under certain leases. The note 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 agreed to make monthly payments
until the balance was paid off. As of February 14, 2000, GreenMan had paid
$175,000 towards the outstanding obligation.
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 31, 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.
GreenMan also recorded deferred financing costs of $7,500 in connection with the
issuance of the warrants and paid $5,000 in fees to a placement agent. The
convertible notes payable are due twelve months after issuance and are payable
in cash or unregistered common stock at a conversion price of $1.00 per share.
The investors have been granted piggy-back registration rights to register the
common stock.
The deferred charges are being amortized over the life of the notes
payable. Amortization and interest expense for the quarter ended December 31,
1999 was $6,200.
9. Common Stock Transactions
In October 1998, GreenMan commenced a private offering of common stock in
an effort to raise up to $500,000 in gross proceeds (the offering was
subsequently increased to $1,000,000 in March 1999). During the three months
ended December 31, 1999, GreenMan sold 228,117 shares of common stock for gross
proceeds of $53,506. As of December 31, 1999, 1,766,730 shares of unregistered
common stock have been sold to investors including officers and directors for
approximately $608,506 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.
<PAGE>
GreenMan Technologies, Inc.
Notes To Unaudited Condensed Consolidated Financial Statements
December 31, 1999
10. Market for Common Stock
On July 7, 1999, GreenMan was notified that as a result of noncompliance
with the $1.00 minimum bid requirement and the violation of marketplace rules
regarding shareholder approval, GreenMan's securities would no longer be listed
on Nasdaq's Small Cap Market effective July 7, 1999. Effective July 8, 1999, the
common stock and warrants began trading on the Over the Counter Bulletin Board
and continue to trade on the Boston Stock Exchange. GreenMan filed an appeal
with Nasdaq Small Cap Market requesting a review of the decision and a
reinstatement of its securities on the Nasdaq Small Cap Market. In February
2000, GreenMan was notified by the Hearing Review Council that the decision to
delist GreenMan's securities would not be reversed.
Management anticipates that the absence of listing on Nasdaq's Small Cap
Market for the common stock may have a material adverse effect on the market
for, and potentially the market price of the common stock.
11. 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.
12. Subsequent Events
During the year ended September 30, 1999, GreenMan Technologies of South
Carolina experienced significant equipment operation and maintenance problems.
Management estimates the corporate wide impact of the South Carolina operating
problems to have exceeded $700,000 of additional operating expenses during that
period.
In February 2000, management decided to consolidate the operations of
GreenMan Technologies of South Carolina into GreenMan Technologies of Georgia in
order to eliminate continued operating losses and maximize the processing
capacity of GreenMan's Georgia facility. The consolidation is anticipated to be
completed in March 2000. GreenMan will continue to provide collection services
to its South Carolina customer base and at this time management does not believe
that adjustments or reclassifications of recorded assets and liabilities are
necessary.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following information should be read in conjunction with the unaudited
condensed consolidated financial statements and the notes thereto included in
Item 1 of the Quarterly Report, and the audited consolidated financial
statements and notes thereto and Management's Discussion and Analysis of
Financial Condition and Results of Operations contained in GreenMan's Form
10-KSB filed for the year ended September 30, 1999.
Results of Operations
Three Months ended December 31, 1999 Compared to the Three Months ended
December 31, 1998
Net sales for the three months ended December 31, 1999 were $4,559,253 as
compared to $4,380,951 for the three months ended December 31, 1998. GreenMan
collected 4.7 million passenger tire equivalents during the quarter ended
December 31, 1999 as compared to 4.8 million passenger tire equivalents for the
quarter ended December 31, 1998. The slight decrease in passenger tire
equivalents was attributable to increased competition in the South Carolina
market and reduced Georgia based volume as result of the consolidation of the
Lawrenceville location in 1999 as well as the completion of Georgia abatement
projects. GreenMan's Minnesota operations collected approximately 300,000 more
passenger tire equivalents during the quarter ended December 31, 1999 as a
result of increased abatement work.
Gross profit for the three months ended December 31, 1999 was $1,042,726
or 23% of net sales as compared to $1,303,553 or 30% of net sales for the three
months ended December 31, 1998. The decrease was primarily attributable to
increased competition in the South Carolina market resulting in decreased
volumes and more competitive pricing. In February 2000, management decided to
consolidate the operations of GreenMan of South Carolina into GreenMan of
Georgia in order to eliminate continued operating losses and maximize the
processing capacity of GreenMan's Georgia facility.
Operating expenses were $894,738 for the three months ended December 31,
1999, or 20% of net sales as compared to $986,508 or 23% of net sales, for the
three months ended December 31, 1998.
As a result of the foregoing, GreenMan had an operating profit of $147,988
for the three months ended December 31, 1999 as compared to an operating profit
of $317,045 for three months ended December 31, 1998.
Interest and financing costs for the quarter ended December 31, 1999
decreased by $201,064 to $225,450 due to the elimination of financing cost
amortization associated with the issuance of convertible debentures in 1997 and
1998. Approximately $285,000 of financing costs were expensed during the period
ended December 31, 1998.
The Company experienced a net loss of $59,052, or less than $0.01 per
share for the three months ended December 31, 1999 as compared to a net loss of
$220,813, or $0.02 per share for the three months ended December 31, 1998. The
net loss for the three months ended December 31, 1998 includes a $110,384 loss
from discontinued operations associated with the March 1999 decision to close
DuraWear.
Liquidity and Capital Resources
Since its inception, GreenMan has satisfied its capital requirements
through the sale of common and preferred stock and debt securities to investors,
loans from affiliated and unaffiliated lenders, the acquisition of machinery and
equipment through capital leases and notes payable, and the issuance of common
stock, options and warrants in lieu of cash for services rendered.
GreenMan has incurred losses since its inception aggregating $24,072,918,
has a working capital deficiency of $3,765,102 at December 31, 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;
<PAGE>
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. Additionally, GreenMan eliminated the use of non-conventional
financing methods (discounted convertible debentures) which contributed an
additional $4.0 million in cumulative losses. GreenMan has also reduced its
corporate overhead by over $350,000 on an annualized basis.
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.
In February 2000, management decided to consolidate the operations of
GreenMan Technologies of South Carolina into GreenMan Technologies of Georgia in
order to eliminate continued operating losses and maximize the processing
capacity of GreenMan Technologies of Georgia's facility. GreenMan will continue
to provide collection services to its South Carolina customer base and at this
time management does not believe that adjustments or reclassifications of
recorded assets and liabilities are necessary.
During the quarter ended December 31,1999 GreenMan sold $137,500 of idle
equipment and is currently marketing an additional $497,500 of idle equipment 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 at this time 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 the violation of marketplace rules
regarding shareholder approval, GreenMan's securities would no longer be listed
on Nasdaq's Small Cap Market effective July 7, 1999. Effective July 8, 1999, the
common stock and warrants began trading on the Over the Counter Bulletin Board
and continue to trade on the Boston Stock Exchange. GreenMan filed an appeal
with Nasdaq Small Cap Market requesting a review of the decision and a
reinstatement of its securities on the Nasdaq Small Cap Market. In February
2000, GreenMan was notified by the Hearing Review Council that the decision to
delist GreenMan's securities would not be reversed. Management anticipates that
the absence of listing on Nasdaq's Small Cap Market for the common stock may
have a material adverse effect on the market for, and potentially the market
price, of the common stock.
Management is currently evaluating several immediate financing
alternatives which would enhance GreenMan's financial position and is diligently
working to determine the feasibility of each alternative. No assurances can be
given that such financing will be concluded in the near future on favorable
terms, if at all. If GreenMan is unable to obtain additional financing, its
ability to continue as a going concern could be materially and adversely
affected.
Private Offering of Convertible Notes Payable and Warrants
In October 1999, GreenMan commenced a private offering of 10% convertible
notes payable and warrants in an effort to raise up to $500,000 in gross
proceeds. As of December 31, 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.
Management believes that placement of these securities is exempt from
registration under Section 4(2) of the Securities Act of 1933, as amended.
<PAGE>
Private Offering of Common Stock and Warrants
In October 1998, GreenMan commenced a private offering of common stock in
an effort to raise up to $500,000 in gross proceeds (the offering was
subsequently increased to $1,000,000 in March 1999). As of December 31, 1999,
1,766,730 shares of unregistered common stock have been sold to investors
including officers and directors for approximately $608,506 of gross proceeds.
In January 1999, GreenMan advanced $55,000 to two officers under 8.5% secured
loan agreements with both principal and interest due January 2002. The proceeds
were used to participate in the private placement and the loans are secured by
191,637 shares of common stock owned by the officers. The investors have been
granted piggy-back registration rights to register the common stock and have
agreed not to sell or transfer the shares for a period of at least twelve months
after issuance.
Management believes that placement of these securities is exempt from
registration under Section 4(2) of the Securities Act of 1933, as amended.
Acquisition of United Waste Service's Tire Related Assets
On September 4, 1998, GreenMan acquired all of the scrap tire collection
and processing assets of United Waste Service, Inc., a wholly owned subsidiary
of Republic Services, Inc. GreenMan paid $4,050,000 for the acquired assets in
the form of $850,000 in cash and $3,200,000 of preferred stock. The preferred
stock is convertible into GreenMan's common stock beginning in February 2001
based upon the higher of the trailing 15 day average closing bid prices prior to
the conversion date or the average of the closing bid prices during the period
from September 3, 1998 to February 3, 2001. Simultaneous with the acquisition,
GreenMan entered into an equipment financing agreement with Heller Financial
Inc. which provided the $850,000 for the transaction. The acquired assets are
located in Lawrenceville, Georgia (subsequently combined with GreenMan
Technologies of Georgia) and Batesburg, South Carolina (incorporated as GreenMan
Technologies of South Carolina).
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.
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 consolidate GreenMan Technologies of South Carolina
operations into GreenMan of Georgia and realize the anticipated
consolidation benefits without the loss of significant South Carolina
customers;
o the ability to renegotiate the conversion price of the Class B convertible
preferred stock if, in February 2001, the conversion price were to result
in a change in control;
<PAGE>
o the delisting of GreenMan's securities from the Nasdaq Small Cap Stock
Market and the effect on the market for, and potentially the market price
of, GreenMan's common stock;
o the ability to realize the remaining $950,000 due under the property
insurance policy in conjunction with the Louisiana fire; and
o general economic conditions.
GreenMan's plans and objectives are based on assumptions that it will be
successful in receiving additional financing to fund future growth and that
there will be no material adverse change in GreenMan's operations or business.
There can be no assurance that GreenMan will obtain such financing on acceptable
terms.
Assumptions relating to the foregoing involve judgments with respect to,
among other things, future economic, competitive and market conditions, all of
which are difficult or impossible to predict accurately and many of which are
beyond the control of GreenMan. As a result, there can be no assurance that
GreenMan will be able to achieve or sustain profitability on a quarterly or
annual basis. In light of the significant uncertainties inherent in GreenMan's
business, forward-looking statements made in this report should not be regarded
as a representation by GreenMan or any other person that the objectives and
plans of GreenMan will be achieved.
Environmental Liability
There are no known material environmental violations or assessments.
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. 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.
As of February 14, 2000, GreenMan has experienced no significant business
interruptions as a result of year 2000 problems.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
There have been no significant changes in legal proceedings
during the quarter ended December 31, 1999.
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
Exhibit 11 -- Statement regarding net loss per share.
Exhibit 27 -- Financial Data Schedule.
(b) Reports on Form 8-K
There were no reports filed on Form 8-K during the quarter ended December
31, 1999.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934 , the
Registrant certifies that it has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
By: GreenMan Technologies, Inc.
/s/ Robert H. Davis
-------------------
Robert H. Davis
Chief Executive Officer
By: GreenMan Technologies, Inc.
/s/ Charles E. Coppa
--------------------
Chief Financial Officer, Treasurer,
Secretary
Exhibit 11
GreenMan Technologies, Inc.
Statement Regarding Net Loss per Share
December 31, 1999
Three Months Ended
December 31,
1998 1999
-------------------------
Net (loss) profit from continuing operations........ $ (110,429) $ (59,052)
Net loss from discontinued operations............... $ (110,384) $ --
----------- -----------
Net (loss) income ................................. $ (220,813) $ (59,052)
=========== ===========
Net (loss) income per share - basic ............... $ (0.02) $ --
=========== ===========
Weighted average shares outstanding ................ 9,109,847 11,818,291
=========== ===========
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-END> DEC-31-1999
<CASH> 102,280
<SECURITIES> 0
<RECEIVABLES> 2,734,281
<ALLOWANCES> 131,256
<INVENTORY> 0
<CURRENT-ASSETS> 3,784,812
<PP&E> 9,528,641
<DEPRECIATION> 2,137,116
<TOTAL-ASSETS> 14,081,517
<CURRENT-LIABILITIES> 7,549,914
<BONDS> 3,605,857
0
3,200,000
<COMMON> 119,907
<OTHER-SE> (941,664)
<TOTAL-LIABILITY-AND-EQUITY> 14,081,517
<SALES> 4,559,253
<TOTAL-REVENUES> 4,559,253
<CGS> 3,516,527
<TOTAL-COSTS> 894,738
<OTHER-EXPENSES> (18,410)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (234,132)
<INCOME-PRETAX> (59,052)
<INCOME-TAX> 0
<INCOME-CONTINUING> (59,052)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (59,052)
<EPS-BASIC> (0.00)
<EPS-DILUTED> (0.00)
</TABLE>
