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, 2000
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
incorporation or organization) Identification No.)
7 Kimball Lane, Building A, Lynnfield, MA 01940
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code (781) 224-2411
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Securities registered pursuant to Section 12 (b) of the Exchange Act:
Title of each class Name of each exchange on which registered
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Common Stock, $ .01 par value Boston Stock Exchange
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(Title of each class)
Securities registered pursuant to Section 12 (g) of the Exchange Act:
Common Stock, $ .01 par value
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(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, 2000 were
$18,051,731.
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 January 8,
2001 was $5,009,326.
As of January 8, 2001, 13,348,231 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. ("GreenMan") is engaged in the business of
collecting, shredding and marketing scrap tires. The tire recycling operations
are located in Jackson, Georgia and Savage, Minnesota.
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.
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 were aimed at yielding
profits and enhancing 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 of GreenMan 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.
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 was incorporated as GreenMan Technologies of
South Carolina, Inc. In February 2000, management decided to consolidate the
operations of GreenMan Technologies of South Carolina into GreenMan Technologies
of Georgia in order to maximize the processing capacity of the Georgia facility
and eliminate continued operating losses at the South Carolina facility. The
consolidation was concluded in March 2000 and GreenMan continues to provide
collection services to its South Carolina customer base.
In March 1999, GreenMan decided to discontinue operations at its DuraWear
subsidiary in order to eliminate continued operating losses and focus efforts on
the core business of tire recycling. GreenMan recorded a loss on disposal of
DuraWear of $920,000 and wrote down DuraWear's net assets to their estimated
fair market value. On June 14, 1999, GreenMan sold substantially all of
DuraWear's assets, excluding land and buildings which were retained by GreenMan
subject to the existing mortgage. On June 30, 2000, GreenMan sold the DuraWear
land and building to the third party for $600,000 resulting in a $94,469 loss on
the sale.
Products and Services
GreenMan's tire recycling operations located in Minnesota and Georgia are
paid a fee to collect, transport and process scrap tires into two inch rubber
chips which are then sold for two applications: (1) as tire derived fuel to
cement kilns, pulp and paper producers and electric utilities; or (2)
utilization in civil engineering projects such as landfill construction or road
stabilization projects. 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 collects tires from two
sources:
o local, regional and national tire stores; and
o unwanted tire piles that have become abatement sites which
governmental entities intervene to clean up.
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Manufacturing/Processing
Collectively, GreenMan's tire recycling operations currently have the
capacity to process up to 24 million passenger tire equivalents annually.
GreenMan processed approximately 18.2 million passenger tire equivalents in the
year ended September 30, 2000 and approximately 17.3 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 has
identified technology that would recycle the processing residual into marketable
components of rubber and steel. See "Product Development".
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 275 million passenger tire equivalents
(approximately one per person per year) were 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 a total of approximately 175 million passenger
tire equivalents are currently recycled with approximately 115 million burned as
tire derived fuel, 20 million used in civil engineering applications and 40
million used in various other applications such as crumb rubber production,
retreading and export. Thus, approximately 100 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 annually during the last two fiscal
years. GreenMan has identified equipment which management believes will recycle
the processing residual into saleable components of rubber and steel. GreenMan
intends to establish its first processing residual production capacity during
fiscal 2001, subject to funding (See item 6, Liquidity And Capital Resources).
There can be no assurance that GreenMan will be able to secure funding for such
equipment.
GreenMan has conducted market research over the past several years and
concluded that significant market opportunities could exist for crumb rubber to
be used as chemical feedstocks or for incorporation in various products. Crumb
rubber can be produced either through the use of mechanical grinding methods
("ambiently") or through the use of cryogenic (freezing) methods
("cryogenically") using a feedstock of tire chips. There is also research being
conducted in the areas of rubber modified asphalt and the re-incorporation of
crumb rubber into new automobile and truck tires. The Company believes that the
largest areas of growth are in applications where fine mesh crumb rubber is used
to enhance the characteristics of existing product formulations, thereby
commanding premium pricing.
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. This has greatly slowed the
commercialization of modified crumb rubber. 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 and GreenMan's current emphasis on
expanding the core business of tire collection and processing , management
concluded that the value of the chemically modified crumb rubber for asphalt
technologies was impaired and therefore has wrote off the $103,853 investment in
the chemically modified crumb rubber for asphalt technologies at September 30,
1999.
Research and development expenses for the years ended September 30, 2000
and 1999 were $32,639 and $126,463 respectively.
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Customers
There were no customers that accounted for 10% or more of consolidated net
sales during the fiscal years ended September 30, 2000 and 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, Bridgestone/Firestone, Continental,
Michelin, many local and regional tire outlets and state and local governments.
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.
Competition
GreenMan has positioned itself as a leader in tire recycling operations
and estimates that collectively its current operations process approximately 7%
of tires currently generated domestically, making it one of the largest tire
recyclers in the United States.
GreenMan believes that the limited success experienced by its competitors
is due to industry disaggregation among small and under-capitalized companies
and their 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.
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.
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.
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GreenMan has used the name "GreenMan" in interstate commerce since
inception 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 enhance trademark rights. There can be no assurance,
however, that such a trademark application will be approved.
Employees
As of September 30, 2000, GreenMan had 92 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.
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
industrial zoned land. GreenMan Technologies of Georgia owns an industrial
building and an office building in Jackson, Georgia, located on approximately 21
acres of industrial zoned land. Management believes these facilities are
adequate for its current needs and have adequate space to accommodate expansion
if required to meet ongoing growth.
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.
Item 3. Legal Proceedings
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 from the
date of the fire through December 31, 1998. Discovery in ongoing in this matter
and no trial date has been set. GreenMan 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, 2000.
Part II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
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 Class A Common Stock Purchase Warrants began trading on the
Over the Counter Bulletin Board under the symbols "GMTI" and "GMTIW",
respectively. The common stock and warrants continued to trade on the Boston
Stock Exchange under the symbols "GMY" and "GMYW", respectively. 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.
On September 29, 2000, GreenMan's Class A Common Stock Purchase Warrants
expired unexercised and are no longer listed on the Over the Counter Bulletin
Board or Boston Stock Exchange.
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The following table sets forth the high and low bid quotations for the
Common Stock 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.
Common Stock
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High Low
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Fiscal 1999
Quarter Ended December 31, 1998 $0.59 $0.34
Quarter Ended March 31, 1999 1.38 0.41
Quarter Ended June 30, 1999 0.97 0.66
Quarter Ended September 30, 1999 0.78 0.47
Fiscal 2000
Quarter Ended December 31, 1999 $0.47 $0.19
Quarter Ended March 31, 2000 0.88 0.31
Quarter Ended June 30, 2000 0.59 0.34
Quarter Ended September 30, 2000 0.53 0.28
On January 8, 2001, the closing bid price of the common stock was $.52.
As of January 8, 2001, management estimates the approximate number of
stockholders of record of GreenMan's Common Stock was 3,400.
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.
Investment Banking Agreement
On January 22, 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 commencing in 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 commencing in January 2001 through January 2004 at
prices ranging from $2.00 to $2.50 per share.
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Item 6. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
Year ended September 30, 2000 Compared to year ended September 30, 1999
Net sales for the year ended September 30, 2000 increased $1,713,912 or
10% to $18,051,731 (or $.99 per passenger tire equivalent) as compared to
$16,337,819 (or $.94 per passenger tire equivalent) for the year ended September
30, 1999. GreenMan processed over 18 million passenger tire equivalents during
the year ended September 30, 2000 as compared to approximately 17 million
passenger tire equivalents during the year ended September 30, 1999. The
increased abatement work at our Minnesota operations and the increased overall
quality of revenue (revenue per passenger tire equivalent) offset the decreased
volume experienced at our Southeastern U.S. operations as the result of facility
consolidations and the completion of certain abatement work at our Georgia
operation in fiscal 1999.
Gross profit for the year ended September 30, 2000 was $3,717,676 or 21%
of net sales as compared to $3,301,906 or 20% of net sales for the year ended
September 30, 1999. The increase was primarily attributable to improved
performance at GreenMan's Minnesota operations which offset the impact of
decreased volumes in GreenMan's Southeastern U.S. operations and operating
inefficiencies experienced in South Carolina as resources were focused on
cleanup/transfer and closure activities during a majority of the second quarter
of fiscal 2000. Management has identified approximately $178,000 of
non-reccurring costs incurred as a result of the consolidation in addition to
approximately $123,000 of charges associated with the repair/transfer and
installation of certain equipment used in the South Carolina operations into our
Minnesota operations during the first half of fiscal 2000.
Research and development expenditures were $32,639 for the year ended
September 30, 2000 as compared to $126,463 for the year ended September 30,
1999. The decrease is due to the fact that during the prior period, a
significant effort was expended evaluating processes and equipment relating to
GreenMan's proposed waste wire separation project which management believes will
recycle the tire processing residual into saleable components of rubber and
steel.
Selling, general and administrative expenses were $3,528,099 or 20% of net
sales for the year ended September 30, 2000, as compared to $3,953,959 or 24% of
net sales for the year ended September 30, 1999. The reduction is due to the
focused effort to reduce corporate and operating overhead expenses and the
shutdown of the South Carolina operations in February.
As a result of the consolidation of the South Carolina operations into the
Georgia operations during the second quarter of fiscal 2000, management
determined that certain equipment was no longer necessary and initiated an
effort to sell the excess equipment. In addition, management determined that
based on reduced revenues, tire volumes and estimated future cash flows
associated with South Carolina operations, the net book value of the goodwill
associated with GreenMan Technologies of South Carolina exceeded the estimated
market value. As a result of the foregoing, GreenMan recorded a non-cash
impairment loss of $326,235 during the year ended September 30, 2000.
During the year ended September 30, 1999, GreenMan recorded a non-cash
impairment loss of $752,360 associated with a change in use of equipment at
GreenMan Technologies of South Carolina and the consolidation of all Georgia
based processing equipment into GreenMan Technologies of Georgia's operations
during fiscal 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.
GreenMan had an operating loss of $169,297 or 1% of net sales for the year
ended September 30, 2000 as compared to an operating loss of $1,703,064 or 10%
of net sales for the year ended September 30, 1999. The operating loss for the
year ended September 30, 2000 includes $510,623 of cumulative losses associated
with GreenMan's closed South Carolina operations and the $326,235 non-cash
impairment loss.
Interest and financing costs for the year ended September 30, 2000
increased $85,110 or 9% to $1,070,531 as compared to $985,421 for the year ended
September 30, 1999. The increase is attributable to increased interest rates and
the inclusion of approximately $150,000 associated with GreenMan's effort to
refinance it's existing credit facility.
GreenMan recorded $556,356 of forgiveness of indebtedness during the year
ended September 30, 2000 as a result of renegotiating and settling certain
outstanding obligations. GreenMan also recorded an additional $94,469 loss on
disposal of discontinued operations associated with the final disposition of the
DuraWear real estate in June 2000. During the year ended September 30, 1999,
GreenMan recorded a $955,000 casualty loss associated with the litigation that
ensued from GreenMan Technologies of Louisiana's fire and a loss associated with
discontinued operations of DuraWear amounting to $1,101,285.
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GreenMan had a net loss of $829,530 or $0.07 per share for the year ended
September 30, 2000 as compared to a net loss of $4,657,861 or $0.43 per share
for the year ended September 30, 1999.
Liquidity and Capital Resources
Since its inception, GreenMan has satisfied its capital requirements
through the sale of common and preferred stock and debt securities to investors,
loans from affiliated and unaffiliated lenders, the acquisition of machinery and
equipment through capital leases and notes payable, and the issuance of common
stock and common stock options and warrants in lieu of cash for services
rendered.
GreenMan has incurred losses since its inception aggregating $24,843,396
and has a working capital deficiency of $3,717,557 at September 30, 2000. During
the past three years, GreenMan has divested and/or closed under performing
non-core operations and eliminated the use of non-conventional financing methods
which have contributed over $18.7 million of GreenMan's cumulative losses.
Management understands that GreenMan's continued existence is dependent on its
ability to achieve profitable status and raise additional financing.
In order to ensure the future viability of GreenMan, management has
implemented or is in the process of implementing the following actions:
1. Bank Refinancing/Alternative Financing
Approximately $3.3 million of current liabilities are associated with
GreenMan's credit facility with Finova Capital Corporation ("Finova"), which
expires on March 31, 2001. On January 5, 2001, GreenMan executed a commitment
letter with Coast Business Credit ("Coast") for a five year, $7 million credit
facility. The new credit facility includes a $4 million working capital line of
credit and approximately $3 million of term debt with $1 million earmarked to be
utilized for implementing GreenMan's first waste wire processing equipment line.
In addition, as part of the credit facility, Coast has also agreed to provide a
ninety day, $1.65 million bridge loan to be collateralized by GreenMan's
Minnesota and Georgia real estate. The transaction is anticipated to be
completed on or before January 31, 2001 and is expected to provide GreenMan with
approximately $1.7 million of new working capital after paying off the Finova
credit facility and other transaction fees.
GreenMan proposes to repay the $1.65 million bridge loan by entering into
a sale and lease back transaction in which GreenMan would sell it's Minnesota
and Georgia real estate and lease such properties back on a long term basis. If
successful, of which there can be no assurance, GreenMan would receive
approximately $2.2 million from the proposed transaction resulting in an
additional $550,000 of working capital after paying off the Coast real estate
bridge loan.
2. Operating Performance Enhancements
In February 2000, management decided to consolidate the operations of
GreenMan Technologies of South Carolina into GreenMan Technologies of Georgia in
order to maximize the processing capacity of the Georgia facility and eliminate
continued operating losses which aggregated $1.54 million as of September 30,
2000.
In November 2000, GreenMan implemented a headcount reduction which is
anticipated to reduce operating expenses by approximately $600,000 on an
annualized basis, commencing January 2001. The reductions were made in order to
improve the efficiency of the operations and are not anticipated to impede our
immediate efforts to achieve sustained profitability. Our efforts to identify
additional cost reduction opportunities are ongoing.
As a result of the new Coast credit facility, $1,000,000 has been
earmarked for implementing our first waste wire processing equipment line. The
equipment is intended to reduce our processing residual disposal costs which
have exceeded $1,000,000 annually during the last two fiscal years and provide
new sources of revenue through the sale of the liberated rubber and steel.
In addition, efforts are continuing to improve our overall quality of
revenue (total revenue realized per passenger tire equivalent) as noted in our
increase from $.94 per passenger tire equivalent for the year ended September
30, 1999 to $.99 per passenger tire equivalent for the year ended September 30,
2000. We identified several large customers that have agreed to pay a premium
for smaller material than currently being produced. We have implemented several
processing changes where appropriate, in order to produce a larger quantity of
smaller material on a limited basis, but anticipate the implementation of the
waste wire processing equipment to significantly increase the amount of smaller
material generated.
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GreenMan has recorded $556,356 of forgiveness of indebtedness during the
year ended September 30, 2000 as a result of renegotiating certain outstanding
obligations in an effort to strengthen GreenMan's financial position.
During the year ended September 30, 2000 GreenMan received sales proceeds
of $302,191 for idle equipment and $600,000 for real estate held for investment
and is currently marketing idle equipment with a carrying value of $350,000 in
order to raise additional capital.
In September 2000, GreenMan reached an agreement with Republic Services of
Georgia, Limited Partnership ("RSLP") (as successor to United Waste Services,
Inc.) whereby RSLP agreed to extend the conversion date of the $3.2 million of
Class B Convertible Preferred Stock held by RSLP for an additional year or until
March 2002. The new agreement also provides GreenMan the opportunity prior to
March 2002 to repurchase the $3.2 million of Class B Convertible Preferred Stock
for $1.5 million in cash and the issuance of 100,000 shares of GreenMan's Common
Stock at any time prior to March 2002.
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.
Private Offering of Common Stock
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 year ended
September 30, 2000, GreenMan sold 1,585,632 shares of common stock for net
proceeds of $437,899. As of September 30, 2000, 3,124,245 shares of unregistered
common stock have been sold to investors including officers and directors for
$1,000,000 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.
Convertible Notes Payable-Related Party
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 September 30, 2000, the Company had issued $375,000 of
convertible notes to an investor (who became a director of GreenMan in March
2000) and issued immediately exercisable five year warrants to purchase 125,000
shares of common stock at exercise prices ranging from $.31 to $.50 per share.
GreenMan also recorded deferred financing costs of $10,500 in connection with
the issuance of the warrants and paid $5,000 in fees to a placement agent. The
convertible notes payable are due twelve months after issuance and are payable
in cash or unregistered common stock at a conversion price of $1.00 per share.
The investor has been granted piggy-back registration rights to register the
common stock. In September 2000, the investor agreed to extend the maturity date
of each note for an additional twelve months from their original maturity.
Management believes that placement of these securities is exempt from
registration under Section 4(2) of the Securities Act of 1933, as amended.
10
<PAGE>
Debenture Offerings
December 1997 Debentures
In December 1997, GreenMan issued 8% 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. The
debentures were convertible 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. 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.
During the year ended September 30, 1999, the unconverted remaining balance of
$389,740 of initial debentures and $28,457 of accrued interest were converted
into 1,395,358 shares of common stock.
Pursuant to the agreements, the holders 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 additional debenture bore similar terms to the initial debentures. Pursuant
to the terms of the agreements, GreenMan was obligated to borrow at least
$1,000,000 in additional debentures or provide the holders and placement agent,
warrants to purchase an additional 40,000 shares of common stock in the
aggregate.
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 $204,000 associated with the 25% discount from market to be
realized upon conversion of the additional debentures and the issuance of
warrants to purchase 54,000 shares of common stock to the investors and
placement agents. The deferred charges were amortized over the estimated life of
the initial and additional debentures. During the year ended September 30, 1999,
the additional debentures of $450,000 and $44,636 of accrued interest were
converted into 1,622,381 shares of common stock.
GreenMan notified the debenture holders in March 1999, that it would not
borrow the remaining $550,000 of the commitment and in October 1999, issued
immediately exercisable two-year warrants to purchase 40,000 shares of common
stock to the holders and placement agent at an exercise price of $1.52 per
share.
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 complete the proposed Coast $7 million credit facility and
repay the existing Finova credit facility prior to the March 31, 2001
maturity;
o the ability to complete the proposed real estate sale/leaseback
transaction or refinance the $1.65 million Coast bridge loan under
acceptable terms,
o the ability to successfully implement the proposed waste wire project and
realize the anticipated cost reductions and revenue enhancements;
o the delisting of GreenMan's common stock 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 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.
11
<PAGE>
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
GreenMan has experienced no significant business interruptions as a result
of year 2000 problems.
Item 7. Financial Statements
For information required with respect to this Item 7, see "Consolidated
Financial Statements" on pages F-1 through F-20 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:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Maurice E. Needham ................... 60 Chairman of the Board of Directors
Robert H. Davis ...................... 58 Chief Executive Officer; President; Director
Charles E. Coppa ..................... 37 Chief Financial Officer; Treasurer; Secretary
Mark Maust ........................... 42 Vice President of Operations
Lew F. Boyd .......................... 55 Director
Jagruti Oza .......................... 40 Director
Dr. Allen Kahn........................ 79 Director
</TABLE>
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. Each outside director receives $2,500 per board meeting fee
to be paid to each outside director. Each outside director also participates in
the Non-Employee Director Stock Option Plan.
GreenMan has established an Audit Committee consisting of Ms. Oza and Mr.
Boyd 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.
12
<PAGE>
CHARLES E. COPPA has served as 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.
MARK MAUST has been Vice President of Operations since July 2000 and Vice
President of GreenMan Technologies of Minnesota, Inc. since July 1997. Prior to
joining GreenMan, Mr. Maust served as Vice President for BFI Tire Recyclers of
Minnesota, Inc. from July 1991 to June 1997. Mr. Maust was Vice President of
Maust Tire Recycling from 1988 to 1991, when the business was sold to BFI and he
joined BFI as a Vice President.
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.
ALLEN KAHN, M.D. operates a private medical practice in Chicago, Illinois,
which he founded in 1953. Dr. Kahn has been actively involved as an investor in
privately held companies since 1960. From 1965 through 1995 Dr. Kahn served as a
member of the Board of Directors of Nease Chemical Company (currently German
Chemical Company), Hollymatic Corporation and Pay Fone Systems (currently Pay
Chex, Inc.). Dr. Kahn currently serves as a director of InfraCorps, Inc., a
technology-based construction firm focusing on the installation and
rehabilitation of subsurface pipelines using trenchless technologies.
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 such 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.
13
<PAGE>
Item 10. Executive Compensation
The following table summarizes the compensation paid or accrued for
services rendered during the fiscal year ended September 30, 2000, to the Chief
Executive Officer, the Vice President of Operations and the Chief Financial
Officer. 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>
Long-Term
Annual Compensation Compensation
------------------- (1) Securities
Name and Other Annual Underlying All Other
Principal Position Fiscal Year Salary Bonus Compensation Options (2) Compensation
------------------ ----------- ------ ----- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Robert H. Davis .......... 2000* $230,000 $ -- $ 14,292 125,000 $ --
Chief Executive Officer .. 1999 265,000 -- 12,636 475,000 --
Mark Maust ............... 2000** $132,500 $ 53,333 $ 18,664 200,000 $ --
Vice President ........... 1999 112,500 50,000 18,091 10,000 --
Charles E. Coppa ......... 2000*** $125,000 $ -- $ 7,200 100,000 $ --
Chief Financial Officer .. 1999 102,500 -- 7,200 100,000 --
</TABLE>
----------
* Based upon GreenMan's performance, Mr. Davis has chosen to defer payment
of $46,000 of accrued compensation due him and invested an additional
$49,000 (net of taxes) of compensation due him into unregistered GreenMan
common stock during the year ended September 30, 2000
** Based upon GreenMan's performance, Mr. Maust has chosen to defer payment
of $46,000 of accrued compensation due him and invested an additional
$25,000 (net of taxes) of compensation due him into unregistered GreenMan
common stock.
*** Based upon GreenMan's performance, Mr. Coppa has chosen to defer payment
of $29,000 of accrued compensation due him and invested an additional
$29,000 (net of taxes) of compensation due him into unregistered GreenMan
common stock.
(1) Represents payments made to or on behalf of Messrs. Davis, Maust and Coppa
for health insurance and auto allowances.
(2) The fiscal 2000 grants represent options granted in February 2000 for Mr.
Davis, options granted in January 2000 to Mr. Maust and options granted in
February 2000 for Mr. Coppa. The fiscal 1999 grants represent options
granted in April 1999 and July 1999 for Mr. Davis, options granted in
December 1998 to Mr. Maust and options granted in December 1998 and July
1999 for Mr. Coppa.
Options/SAR Grants Table
The following table sets forth each grant of stock options made during the
year ended September 30, 2000 held by the executives named in the Summary
Compensation Table above
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
% of Total Market
Options Price
Number of Securities Granted to Exercise On Date
Underlying Options Employees in Price of Grant Expiration
Name Granted Fiscal Year Per Share Per Share Date
---- ------- ----------- --------- --------- ----
<S> <C> <C> <C> <C> <C>
Robert H. Davis ............ 125,000 (1) 16.7% $ .50 $ .50 02/18/10
Mark Maust ................. 200,000 (1) 26.7% $ .49 $ .49 01/14/10
Charles E. Coppa............ 100,000 (1) 13.4% $ .50 $ .50 02/18/10
</TABLE>
(1) Vests equally over a five year period.
14
<PAGE>
The following table sets forth information concerning the value of
unexercised options as of September 30, 2000 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, 2000 (1) at September 30, 2000 (2)
--------------------------------- -------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Robert H. Davis ............ 247,000 768,000 $ -- $ --
Mark Maust ................. 41,000 259,000 $ 240 $ 2,960
Charles E. Coppa ........... 72,000 258,000 $ 240 $ 960
</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, 2000.
The options granted to the executive officers became exercisable commencing July
17, 1998 in the case of Mr. Davis, December 30, 1997 in the case of Mr. Maust
and March 23, 1999 in the case of Mr. Coppa 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,
2000.
Employment Agreements
In July 1997, GreenMan entered into a five year employment agreement with
Mr. Needham pursuant to which Mr. Needham will receive a salary of $90,000 per
annum. Any increases or bonuses will be made at the discretion of the Board of
Directors upon the recommendation of the Compensation Committee. The agreement
provides for payment of six months salary as a severance payment for termination
without cause.
In April 1999, GreenMan entered into a three year employment agreement
with Mr. Davis pursuant to which Mr. Davis will receive a salary of $230,000 per
annum with an additional $50,000 of deferred compensation in the first year. The
agreement automatically renews for an additional three years upon each
anniversary, unless notice of non-renewal is given by either party. Any
increases will be made at the discretion of the Board of Directors upon the
recommendation of the Compensation Committee. The agreement also provides for
Mr. Davis to receive incentive compensation based on the following formula:
Consolidated Net Income Before Incentive Cumulative
Income Taxes Compensation Rate Maximum
$0 - $1,000,000 5% $ 50,000
$1,000,001 - $2,000,000 7.5% 125,000
$2,000,001+ 2.5% 125,000+
The agreement provides for payment of twelve months salary as a severance
payment for termination without cause. Based upon GreenMan's performance, Mr.
Davis has chosen to defer payment of $46,000 of accrued compensation due him at
September 30, 2000 and invested an additional $49,000 (net of taxes) of
compensation due him into unregistered GreenMan common stock during the year
ended September 30, 2000.
In June 1999, GreenMan entered into a two year employment agreement with
Mr. Coppa pursuant to which Mr. Coppa will receive a salary of $120,000 per
annum. The agreement automatically renews for an additional two years upon each
anniversary, unless notice of non-renewal is given by either party. Any
increases or bonuses will be made at the discretion of the Board of Directors
upon the recommendation of the Compensation Committee. The agreement provides
for payment of twelve months salary as a severance payment for termination
without cause. Based upon GreenMan's performance, Mr. Coppa has chosen to defer
payment of $29,000 of accrued compensation due him at September 30, 2000 and
invested an additional $29,000 (net of taxes) of compensation due him into
unregistered GreenMan common stock.
15
<PAGE>
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-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, 2000, there were 2,002,000 options granted and
outstanding under the 1993 Stock Option Plan of which 508,400 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, 2000, options to purchase 20,000 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.
16
<PAGE>
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, 2000;
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.
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, 2000, 13,348,231 shares of common
stock were issued and outstanding.
SECURITY OWNERSHIP OF MANAGEMENT AND DIRECTORS
Number of Shares Percentage of
Name (1) Beneficially Owned (2) Class
-------- ---------------------- -----
Dr. Allen Kahn (3)................... 1,859,741 13.80%
Maurice E. Needham (4)............... 1,251,451 9.17%
Robert H. Davis (5)................... 616,325 4.53%
Charles E. Coppa (6).................. 374,352 2.79%
Lew F. Boyd (7)....................... 273,338 2.03%
Mark Maust (8)........................ 139,716 1.04%
Jagruti Oza (9)....................... 109,388 *
All officers and directors as a group
(7 persons) ....................... 4,624,311 32.43%
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Number of Shares Percentage of
Beneficially Owned Class
------------------ -----
Richard Ledet (10)................... 854,600 6.02%
United Waste Service Inc. (11)........ 320,000 100%
----------
* 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 254,000 shares of Common Stock issuable pursuant to immediately
exercisable stock options and warrants
(4) Includes 300,200 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 owned by Mr. Needham's
wife. Does not include 602,300 shares of Common Stock issuable pursuant to
outstanding stock options that are not currently exercisable.
(5) Includes 247,000 shares of Common Stock issuable pursuant to immediately
exercisable stock options and warrants. Does not include 768,000 shares of
Common Stock issuable pursuant to outstanding stock options that are not
currently exercisable.
(6) Includes 72,000 shares of Common Stock issuable pursuant to immediately
exercisable stock options and warrants. Does not include 258,000 shares of
Common Stock issuable pursuant to outstanding stock options that are not
currently exercisable.
(7) Includes 86,000 shares of Common Stock issuable pursuant to immediately
exercisable stock options and warrants. Does not include 72,000 shares of
Common Stock issuable pursuant to outstanding stock options that are not
currently exercisable.
17
<PAGE>
(8) Includes 41,000 shares of Common Stock issuable pursuant to immediately
exercisable stock options and warrants. Does not include 259,000 shares of
Common Stock issuable pursuant to outstanding stock options that are not
currently exercisable.
(9) Includes 34,200 shares of Common Stock issuable pursuant to immediately
exercisable stock options and warrants. Does not include 1,800 shares of
Common Stock issuable pursuant to outstanding stock options that are not
currently exercisable.
(10) Mr. Ledet's address is 2960 NE Broadway, Des Moines, IA 50317.
(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 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 the period of October 1998 through September 2000, Messrs. Needham,
Davis, Coppa, Maust, Boyd, Kahn and Ms. Oza purchased an aggregate of 1,700,888
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
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. This agreement was
amended on September 30, 2000 to extend the maturity of the note until April 15,
2002 and increase the interest rate to 9.5%.
Messrs. Needham and Davis have personally guaranteed the current $5.0
million asset-based credit facility provided by Finova Capital Corporation.
Messrs. Needham, Davis and Coppa have personally guaranteed the $1.1
million note payable issued to Cryopolymers Leasing Inc. in May 1999.
Dr. Kahn has loaned GreenMan $375,000 as of September 30, 2000 under the
terms of an October 1999 private offering of 10% convertible notes payable and
warrants. GreenMan has issued to Dr. Kahn immediately exercisable five year
warrants to purchase 125,000 shares of common stock at exercise prices ranging
from $.31 to $.50 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 investor has been granted piggy-back
registration rights to register the common stock. In September 2000, the
investor agreed to extend the maturity date of each note for an additional
twelve months from their original maturity.
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 co-owned by
Mr. Maust. Rent expense associated with payments made to Valley View Farms for
the years ended September 30, 1999 and 2000 was $141,070 and $259,102.
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 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.
18
<PAGE>
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.
*4.3 -- Form of Warrant Agreement between GreenMan and OTC
Corporate Transfer Services Co.
*10.5 -- 1993 Stock Option Plan.
*10.9 -- Stock Option Letter dated April 25, 1994 issued to Lew F.
Boyd.
*10.10 -- Intentionally Omitted.
*10.13 -- Form of confidentiality and non-disclosure agreement for
executive employees.
**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.
(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.
(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.
19
<PAGE>
(5) 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
***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
(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 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, 2000
20
<PAGE>
GreenMan Technologies, Inc.
Index to Consolidated Financial Statements
Page
----
Independent Auditors' Report F-2
Consolidated Balance Sheets as of September 30, 1999 and 2000 F-3
Consolidated Statements of Loss for the Years Ended F-4
September 30, 1999 and 2000
Consolidated Statements of Changes in Stockholders' Equity F-5
for the Years September 30, 1999 and 2000
Consolidated Statements of Cash Flows for the Years Ended F-6
September 30, 1999 and 2000
Notes to Consolidated Financial Statements F-7
21
<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 30,1999 and 2000 and the
related consolidated statements of loss, changes in stockholders' equity and
cash flows for the years ended September 30, 1999 and 2000. 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 auditing standards generally
accepted in the United States of America. 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, 1999 and 2000 and the results of their
operations and cash flows for the years ended September 30, 1999 and 2000 in
conformity with accounting principles generally accepted in the United States of
America.
/S/ WOLF & COMPANY, P.C.
------------------------
WOLF & COMPANY, P.C
Boston, Massachusetts
December 15, 2000, except for Notes 4 and 17, as to which the date is January 5,
2001.
22
<PAGE>
GreenMan Technologies, Inc.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
September 30,
1999 2000
------------ ------------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents ......................................................... $ 2,233 $ 52,589
Accounts receivable, trade, less allowance for doubtful accounts of $166,582
and $70,930 as of September 30, 1999 and 2000 ................................... 2,189,487 2,200,724
Equipment held for sale ........................................................... 635,000 350,000
Other current assets .............................................................. 704,918 527,412
------------ ------------
Total current assets ........................................................ 3,531,638 3,130,725
------------ ------------
Other assets:
Property, plant and equipment, net .................................................. 7,584,321 6,766,685
------------ ------------
Deferred loan costs ............................................................... 143,091 43,251
Goodwill, net ..................................................................... 1,796,717 1,426,602
Real estate held for investment, net .............................................. 707,908 --
Other ............................................................................. 296,044 196,876
------------ ------------
Total other assets .......................................................... 2,943,760 1,666,729
------------ ------------
$ 14,059,719 $ 11,564,139
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Convertible notes payable, current ................................................ $ 300,000 $ --
Notes payable, current ............................................................ 2,573,064 3,649,901
Accounts payable .................................................................. 2,431,411 1,848,576
Accrued expenses, other ........................................................... 1,846,896 1,168,967
Obligations under capital leases, current ......................................... 140,725 180,838
------------ ------------
Total current liabilities ................................................... 7,292,096 6,848,282
Convertible notes payable, related party ........................................... -- 375,000
Notes payable, non-current portion ................................................. 3,805,744 1,825,884
Obligations under capital leases, non-current portion .............................. 585,590 519,815
------------ ------------
Total liabilities ........................................................... 11,683,430 9,568,981
------------ ------------
Stockholders' equity:
Preferred stock, $1.00 par value, 1,000,000 shares authorized: Class B
convertible, liquidation value $10 per share, 320,000 shares issued
and outstanding at September 30, 1999 and 2000 .................................. 3,200,000 3,200,000
Common stock, $.01 par value, 20,000,000 shares authorized; 11,762,599 and
13,348,231 shares issued and outstanding at September 30, 1999 and 2000 ......... 117,626 133,482
Additional paid-in capital ........................................................ 23,127,529 23,560,072
Accumulated deficit ............................................................... (24,013,866) (24,843,396)
Notes receivable, common stock ..................................................... (55,000) (55,000)
------------ ------------
Total stockholders' equity .................................................. 2,376,289 1,995,158
------------ ------------
$ 14,059,719 $ 11,564,139
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
GreenMan Technologies, Inc.
Consolidated Statements of Loss
<TABLE>
<CAPTION>
Years Ended September 30,
1999 2000
-------------- --------------
<S> <C> <C>
Net sales .................................................. $ 16,337,819 $ 18,051,731
Cost of sales .............................................. 13,035,913 14,334,055
-------------- --------------
Gross profit ............................................... 3,301,906 3,717,676
-------------- --------------
Operating expenses:
Research and development ............................... 126,463 32,639
Selling, general and administrative .................... 3,953,959 3,528,099
Impairment losses ...................................... 924,548 326,235
-------------- --------------
Total operating expenses ........................... 5,004,970 3,886,973
-------------- --------------
Operating loss ............................................. (1,703,064) (169,297)
-------------- --------------
Other income (expense):
Interest and financing costs ........................... (985,421) (1,070,531)
Other, net ............................................. 44,909 (51,589)
Casualty loss .......................................... (955,000) --
Forgiveness of indebtedness ............................ 97,000 556,356
-------------- --------------
Other (expense), net ............................... (1,798,512) (565,764)
-------------- --------------
Loss from continuing operations ............................ (3,501,576) (735,061)
-------------- --------------
Discontinued operations
Loss from discontinued operations ...................... (236,285) --
Loss on disposal of discontinued operations ............ (920,000) (94,469)
-------------- --------------
(1,156,285) (94,469)
-------------- --------------
Net Loss ................................................... $ (4,657,861) $ (829,530)
============== ==============
Loss from continuing operations per share - basic .......... ($ 0.32) ($ 0 .06)
Loss from discontinued operations per share - basic ........ (0.02) --
Loss on disposal of discontinued operations - basic ....... (0.09) (0.01)
-------------- --------------
Net Loss per share - basic ................................. $ (0.43) $ (0.07)
============== ==============
Weighted average shares outstanding ........................ 10,750,855 12,289,300
============== ==============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
GreenMan Technologies, Inc.
Consolidated Statements of Changes in Stockholders' Equity
Years Ended September 30, 1999 and 2000
<TABLE>
<CAPTION>
Preferred Stock Common Stock
--------------------- ------------------------
Shares Amount Shares Amount
-------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Balance, September 30, 1998 ............ 320,000 $3,200,000 6,910,247 $ 69,103
Shares issued on conversion of notes
payable and accrued interest ......... -- -- 3,017,739 30,177
Fair value of conversion discount on
accrued interest associated with
convertible notes payable ............ -- -- -- --
Sale of common stock ................... -- -- 1,538,613 15,386
Stock issued for services rendered ..... -- -- 50,000 500
Shares purchased and retired ........... -- -- (4,000) (40)
Shares issued in settlement of lease
obligations .......................... -- -- 250,000 2,500
Fair value of warrants issued in
settlement of lease obligations ...... -- -- -- --
Net loss for the year ended September
30, 1999 ............................. -- -- -- --
------- ---------- ----------- ---------
Balance, September 30, 1999 ............ 320,000 3,200,000 11,762,599 117,626
Sale of common stock ................... -- -- 1,585,632 15,856
Fair value of warrants issued in
convertible debt offering ............ -- -- -- --
Net loss for the year ended September
30, 2000 ............................. -- -- -- --
------- ---------- ----------- ---------
Balance, September 30, 2000 ............ 320,000 $3,200,000 13,348,231 $ 133,482
======= ========== =========== =========
<CAPTION>
Notes
Additional Receivable
Paid-in Accumulated Common
Capital Deficit Stock Total
------------ ------------ ---------- -----------
<S> <C> <C> <C> <C>
Balance, September 30, 1998 ............ $ 21,366,619 $(19,356,005) -- $ 5,279,717
Shares issued on conversion of notes
payable and accrued interest ......... 882,656 -- -- 912,833
Fair value of conversion discount on
accrued interest associated with
convertible notes payable ............ 16,100 -- -- 16,100
Sale of common stock ................... 539,614 -- (55,000) 500,000
Stock issued for services rendered ..... 24,500 -- -- 25,000
Shares purchased and retired ........... (1,960) -- -- (2,000)
Shares issued in settlement of lease
obligations .......................... 200,000 -- -- 202,500
Fair value of warrants issued in
settlement of lease obligations ...... 100,000 -- -- 100,000
Net loss for the year ended September
30, 1999 ............................. -- (4,657,861) -- (4,657,861)
------------ ------------ -------- -----------
Balance, September 30, 1999 ............ 23,127,529 (24,013,866) (55,000) 2,376,289
Sale of common stock ................... 422,043 -- -- 437,899
Fair value of warrants issued in
convertible debt offering ............ 10,500 -- -- 10,500
Net loss for the year ended September
30, 2000 ............................. -- (829,530) -- (829,530)
------------ ------------ -------- -----------
Balance, September 30, 2000 ............ $ 23,560,072 $(24,843,396) $(55,000) $ 1,995,158
============ ============ ======== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
GreenMan Technologies, Inc.
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Years Ended September 30,
1999 2000
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss ........................................................................... $(4,657,861) $ (829,530)
Adjustments to reconcile net loss to net cash provided by operating activities:
Impairment loss .................................................................... 924,548 326,235
Loss on disposal of property, plant and equipment .................................. -- 79,791
Amortization of deferred financing costs ........................................... 322,404 99,240
Depreciation and amortization ...................................................... 1,701,489 1,579,727
Common stock and warrants issued for services, settlement of lease obligations
and convertible debt offerings ................................................. 327,500 10,500
Loss on disposal of discontinued operations ........................................ 920,000 94,469
Forgiveness of indebtedness ........................................................ (97,000) (556,356)
Decrease (increase) in assets:
Accounts receivable ............................................................ (578,575) (11,237)
Inventory ...................................................................... 28,112 --
Insurance claim receivable ..................................................... 2,120,284 --
Other current assets ........................................................... 35,941 177,506
Increase (decrease) in liabilities:
Accounts payable ............................................................... 833,381 (292,712)
Accrued expenses ............................................................... 33,480 (411,096)
----------- -----------
Net cash (used for) provided by operating activities ........................ 1,913,703 266,537
----------- -----------
Cash flows from investing activities:
Purchase of property and equipment ................................................. (1,680,812) (702,368)
Proceeds on disposal of property and equipment and other assets .................... 121,451 946,799
(Increase) decrease in other assets ................................................ (39,213) 99,168
----------- -----------
Net cash provided by (used for) investing activities .......................... (1,598,574) 343,599
----------- -----------
Cash flows from financing activities:
Proceeds from notes payable ........................................................ 879,251 667,698
Repayment of notes payable ......................................................... (1,113,045) (1,499,772)
Net (repayments) advances under line of credit ..................................... 287,996 (70,949)
Net proceeds from convertible notes payable ........................................ -- 375,000
Repayment of convertible notes payable ............................................. -- (300,000)
Repayment of notes payable - related parties ....................................... (4,956) --
Principal payments on obligations under capital leases ............................. (1,021,357) (169,656)
Repurchase of common stock ......................................................... (2,000) --
Net proceeds on the sale of common stock ........................................... 500,000 437,899
----------- -----------
Net cash used for financing activities ........................................ (474,111) (559,780)
----------- -----------
Net (decrease) increase in cash ........................................................ (158,982) 50,356
Cash and cash equivalents at beginning of year ......................................... 161,215 2,233
----------- -----------
Cash and cash equivalents at end of year ............................................... $ 2,233 $ 52,589
=========== ===========
Supplemental cash flow information:
Machinery and equipment acquired under capital leases ................................ 737,250 143,994
Common stock issued upon conversion of notes payable and accrued interest ............ 912,833 --
Interest paid ........................................................................ 522,208 913,255
State taxes paid ..................................................................... -- 29,747
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
GreenMan Technologies, Inc.
Notes To Consolidated Financial Statements
1. Summary of Significant Accounting Policies
Business
GreenMan Technologies, Inc. ("GreenMan") is engaged in the business of
collecting, shredding and marketing scrap tires. The tire recycling operations
are located in Jackson, Georgia and Savage, Minnesota.
In March 1999, GreenMan discontinued operations at its wholly-owned
subsidiary, DuraWear Corporation ("DuraWear") and in June 1999, sold
substantially all of DuraWear's assets and liabilities to a third party. The
remainder of their assets were disposed of in June 2000. DuraWear manufactured,
installed and marketed a diverse range of abrasive resistant ceramic and polymer
products.
On September 4, 1998, GreenMan acquired all of the scrap tire collection
and processing assets of United Waste Service, Inc., a wholly owned subsidiary
of Republic Services, Inc. The two recycling operations were located in Georgia
and South Carolina. The Georgia operations were combined with GreenMan
Technologies of Georgia during the year ended September 30, 1999. The South
Carolina operations were incorporated as GreenMan Technologies of South
Carolina. In February 2000, management decided to consolidate the operations of
GreenMan Technologies of South Carolina into GreenMan Technologies of Georgia in
order to maximize the processing capacity of the Georgia facility and eliminate
continued operating losses at the South Carolina facility. The consolidation was
concluded in March 2000 and GreenMan continues to provide collection services to
its South Carolina customer base.
In August 1998, GreenMan Technologies of Louisiana's crumb rubber
processing facility was severely damaged by a fire, which necessitated the
closure of this operation which was completed in December 1998.
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 since
September 4, 1998. All significant intercompany accounts and transactions are
eliminated in consolidation.
GreenMan sold substantially all the assets of its industrial materials
operation (DuraWear) located in Alabama in June 1999 to a third party. The
remainder of the assets were disposed of in June 2000. As a result, the
consolidated financial statements were restated to reflect the operating results
of this business segment as discontinued operations for all periods presented.
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, the valuation reserve on deferred
taxes and the value of equity instruments issued. The amount that may be
ultimately realized from equipment held for resale and notes receivable could
differ materially from the values recorded in the accompanying financial
statements as of September 30, 2000.
Cash Equivalents
Cash equivalents include short-term investments with original maturities
of three months or less.
<PAGE>
GreenMan Technologies, Inc.
Notes To Consolidated Financial Statements
1. Summary of Significant Accounting Policies - (Continued)
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 the 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.
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.
<PAGE>
GreenMan Technologies, Inc.
Notes To Consolidated Financial Statements
2. Acquisition of Subsidiary
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 Class B convertible 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. In September 2000, GreenMan
renegotiated the terms of the Class B Convertible Preferred (See Note 11).
Simultaneous with the acquisition, GreenMan entered into an equipment financing
agreement which provided the $850,000 for the transaction. The acquired assets
were 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 and subsequently combined into GreenMan
Technologies of Georgia in February 2000). 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.
Goodwill recorded in connection with the acquisition of subsidiaries is
being amortized over 10 years on a straight line basis. Amortization expense for
the years ended September 30, 1999 and 2000 was $226,416 and $370,115
respectively.
In February 2000, management decided to consolidate the operations of
GreenMan Technologies of South Carolina into GreenMan Technologies of Georgia in
order to maximize the processing capacity of the Georgia facility and eliminate
continued operating losses at the South Carolina facility. As a result,
management determined that certain equipment was no longer necessary and
initiated an effort to sell the excess equipment. The net book value of the
identified assets exceeded the estimated market value and accordingly, GreenMan
recorded a non-cash impairment losses of $752,360 and $154,235 during the years
ended September 30, 1999 and 2000, respectively. In addition, management
determined that based on reduced revenues, tire volumes and estimated future
cash flows associated with South Carolina operations, the net book value of the
goodwill associated with GreenMan Technologies of South Carolina exceeded the
estimated market value and accordingly, a non-cash impairment loss of $172,000
was recorded at March 31, 2000. Equipment held for sale aggregating $150,000 is
included in current assets at September 30, 2000.
3. Discontinued Operations
In March 1999, GreenMan decided to discontinue operations at its DuraWear
subsidiary in order to eliminate continued operating losses and focus efforts on
the core business of tire recycling. GreenMan recorded a loss on disposal of
DuraWear of $920,000 and wrote down DuraWear's net assets to their estimated
fair market value at March 31, 1999.
On June 14, 1999, a third party paid $16,451 for substantially all assets
and liabilities of DuraWear, excluding the land and buildings which were
retained by GreenMan subject to the existing mortgage. The land and buildings
were included in real estate held for investment at September 30, 1999. On June
30, 2000, GreenMan sold the DuraWear land and building to the third party for
$600,000 resulting in a $94,469 loss on the sale. GreenMan used $387,246 of the
net proceeds to retire the existing mortgage.
During the year ended September 30, 1999 DuraWear had revenues totaling
$407,947 and reported a loss associated with this discontinued operation of
$1,156,285. The consolidated financial statements have been restated to reflect
the net operating results of DuraWear as a separate line item for all periods
presented.
4. Management's Plans for Raising Additional Capital
GreenMan has incurred losses since its inception aggregating $24,843,396
and has a working capital deficiency of $3,717,557 at September 30, 2000. During
the past three years, GreenMan has divested and/or closed under performing
non-core operations and eliminated the use of non-conventional financing
methods. Management understands that GreenMan's continued existence is dependent
on its ability to achieve profitable status and raise additional financing.
<PAGE>
GreenMan Technologies, Inc.
Notes To Consolidated Financial Statements
4. Management's Plans for Raising Additional Capital - (Continued)
Accordingly, management has implemented or is in the process of
implementing the following actions:
1. Bank Refinancing/Alternative Financing
Approximately $3.3 million of current liabilities are associated with
GreenMan's credit facility with Finova Capital Corporation ("Finova"), which
expires on March 31, 2001. On January 5, 2001, GreenMan executed a commitment
letter with Coast Business Credit ("Coast") for a five year, $7 million credit
facility. The new credit facility includes a $4 million working capital line of
credit and approximately $3 million of term debt with $1 million earmarked to be
utilized for implementing GreenMan's first waste wire processing equipment line.
In addition, as part of the credit facility, Coast has also agreed to provide a
ninety day, $1.65 million bridge loan to be collateralized by GreenMan's
Minnesota and Georgia real estate. The transaction is anticipated to be
completed on or before January 31, 2001 and is expected to provide GreenMan with
approximately $1.7 million of new working capital after paying off the Finova
credit facility and other transaction fees.
GreenMan proposes to repay the $1.65 million bridge loan by entering into
a sale and lease back transaction in which GreenMan would sell it's Minnesota
and Georgia real estate and lease such properties back on a long term basis. If
successful, of which there can be no assurance, GreenMan would receive
approximately $2.2 million from the proposed transaction resulting in an
additional $550,000 of working capital after paying off the Coast real estate
bridge loan.
2. Operating Performance Enhancements
During fiscal 2000, management consolidated GreenMan Technologies of South
Carolina into GreenMan Technologies of Georgia to maximize the processing
capacity of the Georgia facility and reduce the losses of the separate entities.
In fiscal 2001, management has implemented several further cost reduction
programs designed to achieve profitability while improving the efficiency of
GreenMan Technologies of Georgia.
Additionally, management believes that the proceeds from the Coast credit
facility that have been earmarked for the waste wire project will reduce
residual disposal costs and provide for increased revenue per passenger tire
equivalent through the sale of the steel by-product and the premium prices paid
for the smaller tire chips.
5. Property, Plant and Equipment
Property, plant and equipment consists of the following:
<TABLE>
<CAPTION>
September 30, September 30, Estimated
1999 2000 Useful Lives
------------- ------------- ------------
<S> <C> <C> <C>
Land ..................................... $ 655,377 $ 655,377
Buildings ................................ 1,667,702 1,680,077 10-20 years
Machinery and equipment .................. 3,967,537 4,100,115 5-10 years
Furniture and fixtures ................... 88,023 100,237 3-5 years
Motor vehicles ........................... 3,028,711 3,252,795 3-10 years
----------- -----------
9,407,350 9,788,601
Less accumulated depreciation
and amortization (1,823,029) (3,021,916)
----------- -----------
Property, plant and equipment, net $ 7,584,321 $ 6,766,685
=========== ===========
</TABLE>
<PAGE>
GreenMan Technologies, Inc.
Notes To Consolidated Financial Statements
5. Property, Plant and Equipment - (Continued)
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 impairment losses of $752,360 at September 30, 1999 and
$154,235 at September 30, 2000.
Depreciation and amortization expense for the years ended September 30,
1999 and 2000 was $1,353,447 and $1,381,612 respectively.
6. Other Assets
Other assets consist of the following:
<TABLE>
<CAPTION>
September 30, 1999 September 30, 2000
------------------ ------------------
<S> <C> <C>
Note receivable and accrued interest.......... $ 119,579 $ 136,676
Deposits and miscellaneous.................... 176,465 60,200
--------- ---------
$ 296,044 $ 196,876
========= =========
</TABLE>
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. 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 concluded that the
value of its technology license was impaired and therefore wrote-off as an
impairment loss the remaining $68,335 investment in the licensed technology at
September 30, 1999. Amortization expense for the year ended September 30, 1999
was $10,004.
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. This agreement
was amended on September 30, 2000 to extend the maturity of the note until April
15, 2002 and increase the interest rate to 9.5%.
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 to be developed.
In April 1999, GreenMan and the licensor agreed to terminate the license
agreements. In return for payments made to date and the return of previously
issued warrants to purchase common stock, GreenMan received assignment of two
developed technologies, one of which is patented, for crumb rubber modification.
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 concluded that the value of the technologies was impaired and
therefore wrote-off as an impairment lossthe $103,853 investment in the
technologies at September 30, 1999.
<PAGE>
GreenMan Technologies, Inc.
Notes To Consolidated Financial Statements
7. Convertible Notes Payable
December 1997 Debentures
In December 1997, GreenMan issued 8% 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. The
debentures were convertible 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. 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.
During the year ended September 30, 1999, the unconverted remaining balance of
$389,740 of the initial debentures and $28,457 of accrued interest were
converted into 1,395,358 shares of common stock.
Pursuant to the agreements, the holders 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 additional debenture bore similar terms to the initial debentures. Pursuant
to the terms of the agreements, GreenMan was obligated to borrow at least
$1,000,000 in additional debentures or provide the holders and placement agent,
warrants to purchase an additional 40,000 shares of common stock in the
aggregate.
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 $204,000 associated with the 25% discount from market to be
realized upon conversion of the additional debentures and the issuance of
warrants to purchase 54,000 shares of common stock to the investors and
placement agents. The deferred charges were amortized over the estimated life of
the initial and additional debentures. Amortization and interest expense for the
year ended September 30, 1999 was $332,494. During the year ended September 30,
1999, the additional debentures of $450,000 and $44,636 of accrued interest were
converted into 1,622,381 shares of common stock.
GreenMan notified the debenture holders in March 1999, that it would not
borrow the remaining $550,000 of the commitment and in October 1999, issued
immediately exercisable two-year warrants to purchase 40,000 shares of common
stock to the holders and placement agent at an exercise price of $1.52 per
share.
June 1998 Convertible Note
In June 1998, GreenMan issued a $300,000 10% convertible note payable in
settlement of all amounts owed under certain leases. The note was payable in 36
monthly payments of $9,680 and convertible into common stock at the holder's
option at $1.38 per share. GreenMan did not make any payments on the convertible
note payable during the year ended September 30, 1999 and was deemed in default.
During the period of October 1999 to May 2000, GreenMan paid $195,000 towards
the outstanding obligation and on June 30, 2000, paid the remaining balance of
principal and interest less a $28,500 discount in full settlement of all amounts
due under the convertible note payable.
Convertible Notes Payable-Related Party
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 September 30, 2000, the Company had issued $375,000 of
convertible notes to an investor (who became a director of GreenMan in March
2000) and issued immediately exercisable five year warrants to purchase 125,000
shares of common stock at exercise prices ranging from $.31 to $.50 per share.
GreenMan also recorded deferred financing costs of $10,500 in connection with
the issuance of the warrants and paid $5,000 in fees to a placement agent. The
convertible notes payable are due twelve months after issuance and are payable
in cash or unregistered common stock at a conversion price of $1.00 per share.
The investor has been granted piggy-back registration rights to register the
common stock. In September 2000, the investor agreed to extend the maturity date
of each note for an additional twelve months from their original maturity.
The deferred charges are being amortized over the life of the notes
payable. Amortization and interest expense for the year ended September 30, 2000
was $38,250.
<PAGE>
GreenMan Technologies, Inc.
Notes To Consolidated Financial Statements
8. Notes Payable
GreenMan Technologies of Minnesota and GreenMan Technologies of Georgia
collectively have a secured asset-based credit facility with Finova Capital
Corporation. Initially the credit facility was issued by Heller Financial, Inc.
in February 1998. In May 1999, Heller sold the credit facility to Fremont
Financial Corporation who in turn in December 1999 sold the credit facility to
Finova Financial Corporation ("Finova"). There were no modifications to the
existing terms of the credit facility as a result of the sales. The credit
facility consists of several term loans and a working capital line of credit
which were originally scheduled to mature in February 2001. GreenMan has granted
a security interest in the capital stock of GreenMan Technologies of Minnesota
and GreenMan Technologies of Georgia to Finova in addition to providing a
Company guarantee and the personal guarantee of two 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 of certain covenants at September 30, 2000.
GreenMan 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 each of the years
ended September 30, 1999 and 2000 was $107,345.
During the fourth quarter of fiscal 2000, GreenMan reached an agreement
with Finova whereby, Finova agreed to increase availability under the existing
working capital line of credit by $400,000 in return for a monthly fee of
$10,000 and an acceleration of the maturity date of the credit facility from
February 2001 to November 30, 2000.
In November 2000, GreenMan and Finova agreed to extend the maturity of the
credit facility through March 31, 2001 in return for an additional monthly fee
of $10,000.
<TABLE>
<CAPTION>
Notes payable consists of the following at: September 30, September 30,
1999 2000
------------- -------------
<S> <C> <C>
Line of credit, Finvoa, secured by eligible accounts receivable of GreenMan
Technologies of Minnesota and GreenMan Technologies of Georgia, guaranteed by
GreenMan and two officers, and bearing interest at prime plus 1.5% (10% and
11.25% at September 30, 1999 and 2000, respectively). ........................ $ 1,004,813 $ 1,255,675
Term note payable, Finova, secured by all real estate of GreenMan Technologies
of Minnesota and GreenMan Technologies of Georgia, guaranteed by GreenMan and
two officers, due in monthly installments of $23,333 including interest at
prime plus 1.75% (10.25% and 11.25% at September 30, 1999 and 2000,
respectively) and a final installment of the remaining principal balance due
March 2001 ................................................................... 946,266 666,266
Term note payable, Finvoa, secured by all machinery and equipment of GreenMan
Technologies of Minnesota and GreenMan Technologies of Georgia, guaranteed by
GreenMan and two officers, due in monthly installments of $31,667 including
interest at prime plus 1.75% (10.25% and 11.25% at September 30, 1999 and
2000, respectively) and a final installment of the remaining principal balance
due March 2001 ............................................................... 1,298,333 918,333
Term note payable, Finova, secured by all machinery and equipment of GreenMan
Technologies of Minnesota and GreenMan Technologies of Georgia, guaranteed by
GreenMan and two officers, due in monthly installments of $14,667 including
interest at prime plus 1.75% (10.25% and 11.25% at September 30, 1999 and
2000, respectively) and a final installment of the remaining principal balance
due March 2001. .............................................................. 674,000 498,000
Term note payable, Cryopolymers Leasing, guaranteed by three 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 1,092,455
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% (9.5% at September 30, 1999) and
a final installment of the remaining principal balance due July 2000.......... 395,960 --
Other term notes payable and assessments, secured by equipment and requiring
monthly installments ......................................................... 961,250 1,045,056
----------- -----------
6,378,808 5,475,785
Less current portion ........................................................... (2,573,064) (3,649,901)
----------- -----------
Notes payable, non-current portion $ 3,805,744 $ 1,825,884
=========== ===========
</TABLE>
<PAGE>
GreenMan Technologies, Inc.
Notes To Consolidated Financial Statements
8. Notes Payable - (Continued)
The following is a summary of maturities of notes payable at September 30, 2000:
Years Ending
September 30,
-------------
2001 ....................................... $ 3,649,901
2002 ....................................... 271,683
2003 ....................................... 262,732
2004 ....................................... 171,251
2005........................................ 1,120,218
-----------
$ 5,475,785
===========
Interest expense for the years ended September 30, 1999 and 2000 were
$570,967 and $793,242 respectively.
9. Capital Leases
GreenMan leases machinery and equipment with a cost of $798,223 and
$960,664 under capital lease agreements at September 30, 1999 and 2000,
respectively. Accumulated amortization amounted to $13,303 and $131,994, at
September 30, 1999 and 2000, respectively. Amortization expense for the years
ended September 30, 1999 and 2000 amounted to $17,504 and $118,690.
In September 1999, GreenMan Technologies of Georgia entered into a
five-year equipment lease with a company co-owned by an officer. 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 is classified as a capital lease with a
cost 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 March 2000, the leased equipment was transferred to
GreenMan Technologies of Minnesota which assumed responsibility for all future
lease obligations.
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 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.
<PAGE>
GreenMan Technologies, Inc.
Notes To Consolidated Financial Statements
9. Capital Leases - (Continued)
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 8);
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 during the year ended
September 30,1999. The $1,100,000 note payable is personally guaranteed by three
officers of GreenMan. GreenMan has pledged the common stock of GreenMan
Technologies of South Carolina as collateral to the three 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, 2000:
Years Ending
September 30,
-------------
2001 ................................... $ 247,102
2002 ................................... 240,681
2003 ................................... 170,054
2004.................................... 157,819
2005.................................... 29,052
---------
Total minimum lease payments ............... 844,708
Less amount representing interest .......... (144,055)
---------
Present value of minimum lease payments .... $ 700,653
=========
Interest expense on capital leases for the years ended September 30, 1999
and 2000 were $14,081and $83,795 respectively.
10. Commitments and Contingencies
Employment Agreements
GreenMan has employment agreements with three officers which provide for
base salaries, participation in employee benefit programs and severance payments
for termination without cause.
Rental Agreements
GreenMan rents several pieces of equipment on a monthly basis from a
company co-owned by an officer. Rent expense for the years ended September 30,
1999 and 2000 was $141,070 and $259,102 respectively.
GreenMan leases approximately 3,380 square feet of office space at a
monthly rental of $4,601under a five-year lease. Rent expense for the years
ended September 30, 1999 and 2000 were $53,472 and $54,326 respectively.
Litigation
GreenMan is involved in litigation in the ordinary course of business.
Actions were commenced against GreenMan by a Louisiana landlord for alleged
negligence in the operation of a plant that was destroyed in a fire (See Note
9). 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.
<PAGE>
GreenMan Technologies, Inc.
Notes To Consolidated Financial Statements
11. Stockholders' Equity
Private Offering of Common Stock
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 year ended
September 30, 1999, GreenMan sold 1,538,613 shares of common stock for proceeds
of $555,000 and during the year ended September 30, 2000, 1,585,632 shares were
sold for net proceeds of $437,899. As of September 30, 2000, 3,124,245 shares of
unregistered common stock have been sold to investors including officers and
directors for $992,899 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.
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>
Year Ended Year Ended
September 30,1999 September 30,2000
------------------------------- --------------------------------
Weighted Average Weighted Average
Exercise Exercise
Shares Price Shares Price
----------- ---------------- ------------- -----------------
<S> <C> <C> <C> <C>
Outstanding at beginning of period 1,274,500 $ 1.37 1,898,500 $ 1.02
Granted 870,000 0.67 317,000 .52
Canceled (246,000) 1.65 (213,500) 1.42
Exercised -- -- -- --
--------- ---------
Outstanding at end of period 1,898,500 1.02 2,002,000 0.89
========= =========
Exercisable at end of period 377,300 1.45 508,400 1.12
========= =========
Reserved for future grants at end of
period 90,780
=========
Weighted average fair value of options
granted during the period $ 0.21 $ 0.11
</TABLE>
Information pertaining to options outstanding under the plan at September 30,
2000 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 - .63 716,000 8.9 $ .51 94,000 $ .49
$ .81 - 1.09 1,241,000 7.9 .99 385,400 1.04
$ 1.35 - 1.45 5,000 3.6 1.35 5,000 1.35
$ 4.70 - 5.00 40,000 6.8 4.70 24,000 4.70
--------- -------
2,002,000 8.2 $ .89 508,400 $ 1.12
========= =======
</TABLE>
<PAGE>
GreenMan Technologies, Inc.
Notes To Consolidated Financial Statements
11. Stockholders' Equity - (Continued)
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, 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, 2000, options to purchase 20,000 shares of
common stock, at prices ranging from $.59 to $16.90 per share, have been
granted. During the years ended September 30, 1999 and 2000, options were
granted to purchase 8,000 shares common stock per year at $.88 and $.59 per
share, respectively, exercisable for a period of ten years. The weighted average
fair value of the options on the date of grant was $.31 and $.15 per share,
respectively, for the years ended September 30, 1999 and 2000.
Other Stock Options and Warrants
Information pertaining to all other options and warrants outstanding under the
plan at September 30, 2000 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>
$ .31 - 1.09 1,973,500 5.1 $ .86 1,173,000 $ .87
$ 1.50 - 3.44 254,000 2.4 2.29 254,000 2.29
$ 4.85 - 35.00 467,400 1.7 16.43 443,400 17.01
--------- ---------
2,694,900 4.3 $ 3.70 1,870,400 $ 4.89
========= =========
</TABLE>
On February 1, 2000, GreenMan granted non-qualified options to purchase
325,000 shares of common stock at $.50 per share to three officers of the
company. The options vest over five years and are exercisable for a period of
ten years.
On January 22,1999, 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.
<PAGE>
GreenMan Technologies, Inc.
Notes To Consolidated Financial Statements
11. Stockholders' Equity - (Continued)
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:
Year Ended Year Ended
September 30, September 30,
1999 2000
--------------- ----------------
Net loss:
As reported $ (4,657,861) $ (829,530)
Pro forma (4,830,253) (980,517)
Net loss per share - basic:
As reported $ (0.43) $ (0.07)
Pro forma (0.45) (0.08)
Common stock equivalents have been excluded from all calculations of net
loss per share because the effect of including them would be anti-dilutive.
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 years ended September 30, 1999
and 2000 were: dividend yields of 0%; risk-free interest rates 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 September 30, 1999 and 2000, were dividend
yields of 0%; risk-free interest rates of 5.5%; expected volatility of 50%
respectively, and expected lives of 2 years.
Common Stock Reserved
GreenMan has reserved common stock at September 30, 2000 as follows:
Stock option plans ........................... 2,049,280
Other stock options .......................... 1,337,500
Other warrants ............................... 1,357,400
---------
4,744,180
=========
At September 30, 2000, GreenMan has 20,000,000 shares of authorized common
stock of which 13,348,231 shares are outstanding.
Class B Convertible Preferred Stock
In September 1998, GreenMan issued $3,200,000 of Class B convertible
preferred stock in conjunction with the acquisition of certain scrap tire
collection and processing assets of United Waste Service, Inc., a wholly owned
subsidiary of Republic Services, Inc.. 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. Based upon
the average closing bid price of GreenMan's common stock from September 4, 1998
to January 8, 2001, the total number of shares reserved in connection with the
convertible preferred stock is 5,925,926.
In September 2000, GreenMan reached an agreement with Republic Services of
Georgia, Limited Partnership ("RSLP") (as successor to United Waste Services,
Inc.) whereby RSLP agreed to extend the conversion date of the Class B
convertible preferred stock held by RSLP for an additional year or until March
2002. The new agreement also provides GreenMan the opportunity to repurchase the
all Class B convertible preferred stock held by RSLP for $1.5 million plus
100,000 shares of GreenMan's Common Stock at any time prior to March 2002.
<PAGE>
GreenMan Technologies, Inc.
Notes To Consolidated Financial Statements
12. 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.
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.
On September 29, 2000, GreenMan's Class A Common Stock Purchase Warrants
expired unexercised and are no longer listed on the Over the Counter Bulletin
Board or Boston Stock Exchange.
13. 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 and 2000, one customer accounted for 11.5% and
10.5%, respectively of consolidated accounts receivable. During the years ended
September 30, 1999 and 2000 no customer accounted for 10% or more of
consolidated net sales.
14. Income Taxes
There was no provision for income taxes for the year ended September 30,
1999 and 2000 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:
September 30, September 30,
1999 2000
------------- -------------
Deferred tax asset:
Federal ........................... $ 6,223,000 $ 6,268,000
State ............................. 1,268,000 1,278,000
----------- -----------
7,491,000 7,546,000
Valuation reserve ................... (7,491,000) (7,546,000)
----------- -----------
Net deferred tax asset .............. $ -- $ --
=========== ===========
The following differences give rise to deferred income taxes:
September 30, September 30,
1999 2000
------------- -------------
Net operating loss carryforward ..... $ 5,671,000 $ 6,149,000
Research tax credit carryforward .... 17,000 17,000
Non-deductible losses ............... 1,369,000 1,371,000
Other ............................... 434,000 9,000
----------- -----------
7,491,000 7,546,000
Valuation reserve ................... (7,491,000) (7,546,000)
----------- -----------
Net deferred tax asset .............. $ -- $ --
=========== ===========
The change in the valuation reserve is as follows:
Year Ended Year Ended
September 30, September 30,
1999 2000
------------- -------------
Balance at beginning of period ..... $ 6,118,000 $ 7,491,000
Increase due to current period net
operating loss ..................... 1,373,000 55,000
----------- -----------
Balance at end of period ........... $ 7,491,000 $ 7,546,000
=========== ===========
<PAGE>
GreenMan Technologies, Inc.
Notes To Consolidated Financial Statements
14. Income Taxes - (Continued)
As of September 30, 2000, GreenMan has net operating loss carryforwards of
approximately $16,054,000. The Federal and state net operating loss
carryforwards expire in varying amounts beginning in 2008 and 2000,
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.
15. Fair Value of Financial Instruments
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.
At September 30, 2000, 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 $375,000 convertible note
payable is $375,000 at September 30, 2000 (See Note 7).
16. 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 during the years ended September 30,
1999 and 2000 respectively.
17. Subsequent Events
On January 5, 2001, GreenMan executed a commitment letter with Coast
Business Credit, a division of Southern Pacific Bank, for a five year, $7
million credit facility. The new credit facility includes a $4 million working
capital line of credit and approximately $3 million of term debt with $1 million
earmarked to be utilized for implementing GreenMan's first waste wire processing
equipment line. The transaction is anticipated to be completed on or before
January 31, 2001.
<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 16, 2001
----------------------
Maurice E. Needham
/s/ Robert H. Davis Chief Executive Officer, January 16, 2001
------------------- President and Director
Robert H. Davis
/s/ Charles E. Coppa Chief Financial Officer, January 16, 2001
-------------------- Treasurer and Secretary
Charles E. Coppa (Principal Financial Officer
and Principal
Accounting Officer)
/s/ Lew F. Boyd Director January 16, 2001
---------------
Lew F. Boyd
/s/ Jagruti Oza Director January 16, 2001
---------------
Jagruti Oza
/s/ Dr. Allen Kahn Director January 16, 2001
------------------
Dr. Allen Kahn
<PAGE>
Exhibit 11
GreenMan Technologies, Inc.
Statement Regarding Net Loss per Share
September 30, 2000
Year Ended Year Ended
September 30, September 30,
1999 2000
------------------------------------
Net loss .................................. $ (4,657,861) $ (829,530)
============ ==========
Net loss per share - basic ................ $ (0.43) $ (0.07)
============ ==========
Weighted average shares outstanding ....... 10,750,855 12,289,300
============ ==========
