eps3515.htm
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
Form
10-Q
(Mark
One)
|
x
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For
the quarterly period ended June 30,
2009
or
|
o
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For
the transition period from _______________ to _______________
Commission
File Number: 1-13776
GreenMan
Technologies, Inc.
(Exact
name of registrant as specified in its charter)
|
(State
or other jurisdiction of
incorporation
or organization)
|
|
(I.R.S.
Employer Identification No.)
|
| |
|
|
|
205
South Garfield, Carlisle, Iowa
(Address
of principal executive offices)
|
|
50047
(Zip
Code)
|
(Registrant’s
telephone number, including area code)
205
South Garfield, Carlisle Iowa 50047
(Former
name, former address and former fiscal year, if changed since last
report)
Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes x No q
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of “large accelerated filer,”
“accelerated filer” and smaller reporting company” in Rule 12b-2 of the Exchange
Act. (Check one):
|
|
q Large
Accelerated Filer
|
q Accelerated
Filer
|
|
|
q Non-accelerated
Filer
|
x Smaller
reporting company
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes q No x
As
of August 12, 2009, there were 33,052,310 shares of the registrant’s Common
Stock were outstanding.
GreenMan
Technologies, Inc.
TABLE
OF CONTENTS
|
|
|
Page
|
|
PART
I.
|
FINANCIAL
INFORMATION
|
|
|
|
|
|
|
Item
1.
|
Consolidated
Financial Statements (unaudited)
|
|
| |
|
|
|
|
Consolidated
Balance Sheets at June 30, 2009 (unaudited) and September 30,
2008
|
3
|
|
|
Consolidated
Statements of Operations for the three and nine months ended June 30, 2009
and 2008 (unaudited)
|
4
|
|
|
Consolidated
Statement of Changes in Stockholders’ Equity (Deficit) for the nine months
ended June 30, 2009 (unaudited)
|
5
|
|
|
Consolidated
Statements of Cash Flows for the nine months ended June 30, 2009 and 2008
(unaudited)
|
6
|
|
|
Notes
to Condensed Unaudited Interim Consolidated Financial
Statements
|
7-15
|
| |
|
|
|
Item
2.
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
16-19
|
| |
|
|
|
Item
3.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
19
|
| |
|
|
|
Item
4T.
|
Controls
and Procedures
|
19
|
|
|
|
|
|
PART
II.
|
OTHER
INFORMATION
|
|
|
|
|
|
|
Item
1.
|
Legal
Proceedings
|
19
|
| |
|
|
|
Item
1A.
|
Risk
Factors
|
19
|
| |
|
|
|
Item
2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
19
|
| |
|
|
|
Item
3.
|
Defaults
Upon Senior Securities
|
19
|
| |
|
|
|
Item
4.
|
Submission
of Matters to a Vote of Security Holders
|
20
|
| |
|
|
|
Item
5.
|
Other
Information
|
20
|
| |
|
|
|
Item
6.
|
Exhibits
|
20
|
| |
|
|
|
|
Signatures
|
21
|
GreenMan
Technologies, Inc.
Consolidated
Balance Sheets
(Unaudited)
|
|
|
June 30,
2009
|
|
|
September 30,
2008
|
|
|
ASSETS
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$ |
4,723,110 |
|
|
$ |
210,080 |
|
|
Marketable
investments
|
|
|
2,844,089 |
|
|
|
— |
|
|
Accounts
receivable, trade, less allowance for doubtful accounts of $0 and $96,338
as of June 30, 2009 and September 30, 2008
|
|
|
237,758 |
|
|
|
1,135,015 |
|
|
Inventory
|
|
|
1,395,307 |
|
|
|
1,323,748 |
|
|
Other
current assets
|
|
|
916,769 |
|
|
|
291,371 |
|
|
Assets
related to discontinued operations
|
|
|
— |
|
|
|
10,145,282 |
|
|
Total
current assets
|
|
|
10,117,033 |
|
|
|
13,105,496 |
|
|
Property,
plant and equipment, net
|
|
|
540,453 |
|
|
|
551,683 |
|
|
Other
assets:
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
|
2,289,939 |
|
|
|
2,289,939 |
|
|
Long
term contracts, net
|
|
|
919,813 |
|
|
|
554,250 |
|
|
Patents,
net
|
|
|
92,195 |
|
|
|
113,433 |
|
|
Other
|
|
|
671,729 |
|
|
|
425,908 |
|
|
Assets
related to discontinued operations
|
|
|
— |
|
|
|
6,566,780 |
|
|
Total
other assets
|
|
|
3,973,676 |
|
|
|
9,950,310 |
|
|
|
|
$ |
14,631,162 |
|
|
$ |
23,607,489 |
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' EQUITY (DEFICIT)
|
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
|
Notes
payable, current
|
|
$ |
240,864 |
|
|
$ |
506,678 |
|
|
Accounts
payable
|
|
|
412,504 |
|
|
|
782,494 |
|
|
Accrued
expenses, other
|
|
|
781,063 |
|
|
|
1,176,408 |
|
|
Obligations
due under lease settlement, current
|
|
|
68,518 |
|
|
|
68,518 |
|
|
Notes
payable, related parties, current
|
|
|
— |
|
|
|
534,320 |
|
|
Liabilities
related to discontinued operations
|
|
|
— |
|
|
|
16,140,322 |
|
|
Total
current liabilities
|
|
|
1,502,949 |
|
|
|
19,208,740 |
|
|
Notes
payable, non-current
|
|
|
673,116 |
|
|
|
482,881 |
|
|
Obligations
due under lease settlement, non-current
|
|
|
505,540 |
|
|
|
580,540 |
|
|
Liabilities
related to discontinued operations
|
|
|
— |
|
|
|
3,397,258 |
|
|
Total
liabilities
|
|
|
2,681,605 |
|
|
|
23,669,419 |
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders' equity
(deficit):
|
|
|
|
|
|
|
|
|
|
Preferred
stock, $1.00 par value, 1,000,000 shares authorized, none
outstanding
|
|
|
— |
|
|
|
— |
|
|
Common
stock, $.01 par value, 60,000,000 shares authorized, 33,052,310 shares and
30,880,435 issued and outstanding at June 30, 2009 and September 30,
2008
|
|
|
330,523 |
|
|
|
308,804 |
|
|
Additional
paid-in capital
|
|
|
38,817,953 |
|
|
|
38,881,669 |
|
|
Accumulated
deficit
|
|
|
(27,169,887 |
) |
|
|
(39,252,403 |
) |
|
Accumulated
other comprehensive loss
|
|
|
(29,032 |
) |
|
|
— |
|
|
Total
stockholders’ equity (deficit)
|
|
|
11,949,557 |
|
|
|
(61,930 |
) |
|
|
|
$ |
14,631,162 |
|
|
$ |
23,607,489 |
|
See
accompanying condensed notes to unaudited interim consolidated financial
statements.
GreenMan
Technologies, Inc.
Consolidated
Statements of Operations
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended June 30,
|
|
|
Nine
Months Ended June 30,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
Net
sales
|
|
$ |
451,474 |
|
|
$ |
886,110 |
|
|
$ |
1,210,989 |
|
|
$ |
2,093,596 |
|
|
Cost
of sales
|
|
|
305,990 |
|
|
|
601,341 |
|
|
|
1,008,105 |
|
|
|
1,470,852 |
|
|
Gross
profit
|
|
|
145,484 |
|
|
|
284,769 |
|
|
|
202,884 |
|
|
|
622,744 |
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling,
general and administrative
|
|
|
902,933 |
|
|
|
734,001 |
|
|
|
2,805,052 |
|
|
|
2,302,502 |
|
|
Operating
loss from continuing operations
|
|
|
(757,449 |
) |
|
|
(449,232 |
) |
|
|
(2,602,168 |
) |
|
|
(1,679,758 |
) |
|
Other
income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
and financing costs
|
|
|
(15,435 |
) |
|
|
(42,575 |
) |
|
|
(87,836 |
) |
|
|
(114,031 |
) |
|
Other,
net
|
|
|
46,957 |
|
|
|
(27,126 |
) |
|
|
70,419 |
|
|
|
(76,800 |
) |
|
Other
income (expense), net
|
|
|
31,522 |
|
|
|
(69,701 |
) |
|
|
(17,417 |
) |
|
|
(190,831 |
) |
|
Loss
from continuing operations before income taxes
|
|
|
(725,927 |
) |
|
|
(518,933 |
) |
|
|
(2,619,585 |
) |
|
|
(1,870,589 |
) |
|
Provision for
income taxes
|
|
|
— |
|
|
|
— |
|
|
|
456 |
|
|
|
— |
|
|
Loss
from continuing operations
|
|
|
(725,927 |
) |
|
|
(518,933 |
) |
|
|
(2,620,041 |
) |
|
|
(1,870,589 |
) |
|
Discontinued
operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain
on sale of discontinued operations, net of taxes,
|
|
|
65,171 |
|
|
|
|
|
|
|
14,412,616 |
|
|
|
|
|
|
Income
(loss) from discontinued operations, net of taxes
|
|
|
(27,767 |
) |
|
|
3,511,383 |
|
|
|
289,941 |
|
|
|
4,001,252 |
|
|
|
|
|
37,404 |
|
|
|
3,511,383 |
|
|
|
14,702,557 |
|
|
|
4,001,252 |
|
|
Net
income (loss)
|
|
$ |
(688,523 |
) |
|
$ |
2,992,450 |
|
|
$ |
12,082,516 |
|
|
$ |
2,130,663 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
from continuing operations per share –basic
|
|
$ |
(0.02 |
) |
|
$ |
(0.02 |
) |
|
$ |
(0.08 |
) |
|
$ |
(0.06 |
) |
|
Income
from discontinued operations per share –basic
|
|
|
— |
|
|
|
0.12 |
|
|
|
0.47 |
|
|
|
0.13 |
|
|
Net
(loss) income per share – basic
|
|
$ |
(0.02 |
) |
|
$ |
0.10 |
|
|
$ |
0.39 |
|
|
$ |
0.07 |
|
|
Net
(loss) income per share – diluted
|
|
$ |
(0.02 |
) |
|
$ |
0.08 |
|
|
$ |
0.39 |
|
|
$ |
0.06 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average shares outstanding - basic
|
|
|
31,170,098 |
|
|
|
30,880,435 |
|
|
|
30,976,637 |
|
|
|
30,880,435 |
|
|
Weighted
average shares outstanding - diluted
|
|
|
31,170,098 |
|
|
|
35,497,427 |
|
|
|
30,976,637 |
|
|
|
35,558,341 |
|
See
accompanying condensed notes to unaudited interim consolidated financial
statements.
GreenMan
Technologies, Inc.
Consolidated
Statement of Changes in Stockholders’ Equity (Deficit)
Nine
Months Ended June 30, 2009
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
Common
Stock
|
|
|
Paid
In
|
|
|
Accumulated
|
|
|
Comprehensive
|
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit
|
|
|
Loss
|
|
|
Total
|
|
|
Balance,
September 30, 2008
|
|
|
30,880,435 |
|
|
$ |
308,804 |
|
|
$ |
38,881,669 |
|
|
$ |
(39,252,403 |
) |
|
$ |
— |
|
|
$ |
(61,930 |
) |
|
Repurchase
of warrants
|
|
|
— |
|
|
|
— |
|
|
|
(700,000 |
) |
|
|
— |
|
|
|
— |
|
|
|
(700,000 |
) |
|
Compensation
expense associated with stock options
|
|
|
— |
|
|
|
— |
|
|
|
114,800 |
|
|
|
— |
|
|
|
— |
|
|
|
114,800 |
|
|
Value
of warrants issued for services rendered
|
|
|
— |
|
|
|
— |
|
|
|
10,703 |
|
|
|
— |
|
|
|
— |
|
|
|
10,703 |
|
|
Unrealized
loss on marketable investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(29,032 |
) |
|
|
(29,032 |
) |
|
Common
stock returned per settlement agreement
|
|
|
(78,125 |
) |
|
|
(781 |
) |
|
|
(24,219 |
) |
|
|
|
|
|
|
— |
|
|
|
(25,000 |
) |
|
Common
stock issued for services rendered
|
|
|
250,000 |
|
|
|
2,500 |
|
|
|
55,000 |
|
|
|
|
|
|
|
— |
|
|
|
57,500 |
|
|
Common
stock issued for license agreement
|
|
|
2,000,000 |
|
|
|
20,000 |
|
|
|
480,000 |
|
|
|
|
|
|
|
— |
|
|
|
500,000 |
|
|
Net
income for nine months ended June 30, 2009
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
12,082,516 |
|
|
|
— |
|
|
|
12,082,516 |
|
|
Balance,
June 30, 2009
|
|
|
33,052,310 |
|
|
$ |
330,523 |
|
|
$ |
38,817,953 |
|
|
$ |
(27,169,887 |
) |
|
$ |
(29,032 |
) |
|
$ |
11,949,557 |
|
See
accompanying condensed notes to unaudited interim consolidated financial
statements.
GreenMan
Technologies, Inc.
Consolidated
Statements of Cash Flows
(Unaudited)
|
|
|
Nine
Months Ended June 30,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
|
Net
income
|
|
$ |
12,082,516 |
|
|
$ |
2,130,663 |
|
|
Adjustments
to reconcile net income to net cash used in operating
activities:
|
|
|
|
|
|
|
|
|
|
Gain
on sale of tire recycling operations
|
|
|
(19,847,445 |
) |
|
|
— |
|
|
Gain
on deconsolidation of Georgia operations
|
|
|
|
|
|
|
(2,360,930 |
) |
|
Net
settlement income from discontinued operations
|
|
|
(144,420 |
) |
|
|
— |
|
|
Deferred
income tax application
|
|
|
5,300,000 |
|
|
|
— |
|
|
Gain
on lease termination
|
|
|
(124,628 |
) |
|
|
— |
|
|
Gain
on disposal of property, plant and equipment
|
|
|
— |
|
|
|
(26,311 |
) |
|
Gain
on return of escrowed shares
|
|
|
(25,000 |
) |
|
|
— |
|
|
Shares
issued for services rendered
|
|
|
57,500 |
|
|
|
— |
|
|
Depreciation
|
|
|
240,274 |
|
|
|
1,062,415 |
|
|
Amortization
of deferred interest expense
|
|
|
359,927 |
|
|
|
5,213 |
|
|
Amortization
of customer relationships
|
|
|
890 |
|
|
|
103,746 |
|
|
Amortization
of stock option compensation expense
|
|
|
114,800 |
|
|
|
16,250 |
|
|
Amortization
of patents
|
|
|
21,237 |
|
|
|
134,437 |
|
|
Amortization
of long term contracts
|
|
|
134,437 |
|
|
|
389,076 |
|
|
Amortization
of deferred gain on sale leaseback transaction
|
|
|
(270,228 |
) |
|
|
(27,404 |
) |
|
Net
value of warrants issued
|
|
|
10,704 |
|
|
|
12,576 |
|
|
Decrease
(increase) in assets:
|
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
723,405 |
|
|
|
(659,386 |
) |
|
Product
inventory
|
|
|
(135,833 |
) |
|
|
(1,338,177 |
) |
|
Other
current assets
|
|
|
(552,774 |
) |
|
|
(181,283 |
) |
|
Other
assets
|
|
|
(155,122 |
) |
|
|
(17,185 |
) |
|
Increase
(decrease) in liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
|
(305,319 |
) |
|
|
206,563 |
|
|
Accrued
expenses and other
|
|
|
(857,664 |
) |
|
|
190,432 |
|
|
Net
cash used in operating activities
|
|
|
(3,372,743 |
) |
|
|
(359,305 |
) |
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
|
|
Purchase
of property and equipment
|
|
|
(98,865 |
) |
|
|
(1,312,010 |
) |
|
Purchase
of marketable investments
|
|
|
(2,873,141 |
) |
|
|
— |
|
|
Purchase
of warrants
|
|
|
(700,000 |
) |
|
|
— |
|
|
Cash
acquired upon purchase of business, net of transaction
costs
|
|
|
— |
|
|
|
68,571 |
|
|
Proceeds
on sale of equipment
|
|
|
— |
|
|
|
2,000 |
|
|
Proceeds
from the sale of tire recycling operations
|
|
|
27,546,652 |
|
|
|
— |
|
|
Net
cash provided by (used in) investing activities
|
|
|
23,874,646 |
|
|
|
(1,241,439 |
) |
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
|
|
Net
activity under line of credit
|
|
|
(3,300,221 |
) |
|
|
2,999,662 |
|
|
Proceeds
from notes payable
|
|
|
250,000 |
|
|
|
815,889 |
|
|
Repayment
of notes payable
|
|
|
(11,792,043 |
) |
|
|
(1,854,450 |
) |
|
Repayment
of notes payable, related party
|
|
|
(534,320 |
) |
|
|
— |
|
|
Principal
payments on obligations under capital leases
|
|
|
(1,188,625 |
) |
|
|
(194,064 |
) |
|
Net
cash (used in) provided by financing activities
|
|
|
(16,565,209 |
) |
|
|
1,767,037 |
|
|
Net
increase in cash and cash equivalents
|
|
|
3,936,694 |
|
|
|
166,293 |
|
|
Cash
and cash equivalents at beginning of period
|
|
|
786,416 |
|
|
|
376,764 |
|
|
Cash
and cash equivalents at end of period
|
|
$ |
4,723,110 |
|
|
$ |
543,057 |
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
cash flow information:
|
|
|
|
|
|
|
|
|
|
Machinery
and equipment acquired under capital leases
|
|
$ |
— |
|
|
$ |
603,756 |
|
|
Unrealized
loss on marketable investments
|
|
|
29,032 |
|
|
|
— |
|
|
Shares
issued in acquisition
|
|
|
— |
|
|
|
2,800,000 |
|
|
Interest
paid
|
|
|
477,890 |
|
|
|
1,031,656 |
|
|
Taxes
paid
|
|
|
310,949 |
|
|
|
82,323 |
|
See
accompanying condensed notes to unaudited interim consolidated financial
statements
GreenMan
Technologies, Inc.
Condensed
Notes to Interim Consolidated Financial Statements
Quarter
Ended June 30, 2009 and 2008
(Unaudited)
GreenMan
Technologies, Inc. (together with its subsidiaries “we”, “us” or “our”) was
originally founded in 1992 and has operated as a Delaware corporation since
1995. Prior to November 17, 2008, GreenMan was comprised of two business
segments, the tire recycling operations and the molded recycled rubber products
operations. As described below, our business changed substantially in November
2008, when we sold substantially all of the assets of our tire recycling
operations.
The
tire recycling operations were located in Savage, Minnesota and Des Moines, Iowa
and collected, processed and marketed scrap tires in whole, shredded or granular
form.
On
October 1, 2007, we acquired Welch Products, Inc., a company headquartered in
Carlisle, Iowa, which specializes in designing, developing, and manufacturing of
environmentally responsible products using recycled materials, primarily
recycled rubber (see Note 5). Welch’s patented products and processes include
playground safety tiles, roadside anti-vegetation products, construction molds
and highway guard-rail rubber spacer blocks. Through its prior acquisition of
Playtribe, Inc., Welch also provides innovative playground design, equipment and
installation. In March 2009, we changed Welch’s name to Green Tech Products,
Inc. which better reflects the nature of its new product-line extension strategy
beyond playground safety tiles and equipment. We are currently evaluating
additional recycled molded products that may be used in applications such as
highway anti-vegetation and field-turf encasement projects.
Recent
Developments
On
September 12, 2008 we executed an asset purchase agreement with Liberty Tire
Services of Ohio, LLC, a wholly-owned subsidiary of Liberty Tire Services, LLC,
the largest tire recycling company in the United States for sale of our tire
recycling business, subject to shareholder approval. On November 13, 2008 our
shareholders approved the sale and on November 17, 2008 we completed the
divestiture of substantially all of the assets of our GreenMan Technologies of
Minnesota, Inc. and GreenMan Technologies of Iowa, Inc. subsidiaries, which had
operated our tire recycling business, for approximately $27.7 million in cash.
(See Note 6)
On
June 17, 2009, we signed an exclusive license agreement with American Power
Group, Inc., an Iowa corporation, under which we acquired the exclusive
worldwide right to commercialize American Power Group’s patented dual fuel
alternative energy technology. American Power Group’s unique external fuel
delivery enhancement system converts existing diesel engines into more efficient
and environmentally friendly engines that have the flexibility to run on: (1)
diesel fuel and compressed natural gas; (2) diesel fuel and bio-methane; or (3)
100% diesel fuel depending on the circumstances. In conjunction with
executing the license agreement, we issued American Power Group two million
shares of our common stock, valued at $500,000 (based on the value of our stock
on the date of the license) and subject to a one-year lock-up and certain escrow
provisions. In addition, we will be required to pay royalties to American Power
Group upon the sales of dual fuel products and services. (see Notes 9 and
15)
The
consolidated financial statements include the accounts of GreenMan Technologies,
Inc. and our wholly-owned subsidiaries. All significant intercompany accounts
and transactions have been eliminated in consolidation.
In
September 2005, due to the magnitude of continued operating losses, our Board of
Directors approved plans to divest the operations of our GreenMan Technologies
of Georgia, Inc. subsidiary and dispose of its assets. Accordingly, we
classified all remaining liabilities associated with our Georgia entity and its
results of operations as discontinued operations for all periods presented in
the accompanying consolidated financial statements. In June 2008, GreenMan
Technologies of Georgia, Inc. filed for liquidation under Chapter 7 of the
federal bankruptcy laws in the Bankruptcy Court of the Middle District of
Georgia and a trustee was appointed (see Note 6). As a result of the bankruptcy
proceedings we relinquished control of our Georgia subsidiary to the Bankruptcy
Court and therefore we de-consolidated substantially all remaining obligations
from our financial statements as of June 30, 2008.
GreenMan
Technologies, Inc.
Condensed
Notes to Interim Consolidated Financial Statements
Quarter
Ended June 30, 2009 and 2008
(Unaudited)
|
2.
|
Basis
of Presentation – (Continued)
|
Because
we operated our tire recycling assets during only a portion of the fiscal year
we have included in this report relevant information on this business segment
but have classified their respective assets, liabilities and results of
operations as discontinued operations for all periods presented in the
accompanying consolidated financial statements.
The
accompanying interim financial statements are unaudited and should be read in
conjunction with the financial statements and notes thereto for the year ended
September 30, 2008 included in our Annual Report on Form 10-KSB. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with accounting principles generally accepted in the
United States of America have been condensed or omitted pursuant to the
Securities and Exchange Commission rules and regulations, although we believe
the disclosures which have been made herein are adequate to ensure that the
information presented is not misleading. The results of operations for the
interim periods reported are not necessarily indicative of those that may be
reported for a full year. In our opinion, all adjustments which are necessary
for a fair statement of operating results for the interim periods presented have
been made.
|
3.
|
Marketable
Investments
|
GreenMan
invests excess cash in marketable investments, including highly-liquid debt
instruments of the United States Government and its agencies and high-quality
corporate debt instruments. All highly-liquid investments with an original
maturity of more than three months at original purchase price are considered
investments available for sale.
GreenMan
evaluates its marketable investments periodically for possible
other-than-temporary impairment and reviews factors such as length of time to
maturity, the extent to which fair value has been below cost basis and the
Company’s intent and ability to hold the marketable investments for a period of
time which may be sufficient for anticipated recovery in market value. We
recorded impairment charges equal to the amount that the carrying value of the
available-for-sale investments exceeds the estimated fair market value of the
investments as of the evaluation date, if appropriate. The fair value for all
investments is determined based on quoted market prices as of the valuation date
as available.
Effective
January 1, 2008, GreenMan adopted SFAS No. 157, Fair Value Measurements, or
SFAS No. 157. In February 2008, the Financial Accounting Standards Board issued
FASB Staff Position No. FAS 157-2, Effective Date of FASB Statement No.
157, which provides a one year deferral of the effective date of SFAS No.
157 for non-financial assets and non-financial liabilities, except those that
are recognized or disclosed in the financial statements at fair value at least
annually. Therefore, we adopted the provisions of SFAS No. 157 with respect to
its financial assets and liabilities only. SFAS No. 157 defines fair value,
establishes a framework for measuring fair value under generally accepted
accounting principals and enhances disclosures about fair value measurements.
Fair value is defined under SFAS No. 157 as the exchange price that would be
received for an asset or paid to transfer a liability (an exit price) in the
principal or most advantageous market for the asset or liability in an orderly
transaction between market participants on the measurement date. Valuation
techniques used to measure fair value under SFAS No. 157 must maximize the use
of observable inputs and minimize the use of unobservable inputs. The standard
describes a fair value hierarchy based on three levels of inputs, of which the
first two are considered observable and the last unobservable, that may be used
to measure fair value which are the following:
|
|
·
|
Level
1 – Quoted prices in active markets for identical assets or
liabilities
|
|
|
·
|
Level
2 – Inputs other than Level 1 that are observable, either directly or
indirectly, such as quoted prices for similar assets or liabilities;
quoted prices in markets that are not active; or other inputs that are
observable or can be corroborated by observable market data for
substantially the full term of the assets or
liabilities.
|
|
|
·
|
Level
3 – Unobservable inputs that are supported by little or no market activity
and that are significant to the fair value of the assets or
liabilities.
|
GreenMan
Technologies, Inc.
Condensed
Notes to Interim Consolidated Financial Statements
Quarter
Ended June 30, 2009 and 2008
(Unaudited)
|
3.
|
Marketable
Investments – (Continued)
|
The
adoption of this statement with respect to our financial assets and liabilities,
did not impact our consolidated results of operations and financial condition,
but required additional disclosure for assets and liabilities measured at fair
value.
In
accordance with SFAS No. 157, the following table represents the fair value
hierarchy for our financial assets (cash equivalents and investments) measured
at fair value on a recurring basis as of June 30, 2009:
|
Description:
|
Level
1
|
|
Marketable
investments
|
$
2,844,089
|
During
the nine months ended June 30, 2009, we recorded an unrealized loss of $29,032
which is shown as a reduction to stockholders’ equity until such time as we sell
the underlying investments or determine the unrealized loss to be an
other-than-temporary loss at which time we will record the loss in our statement
of operations.
Basic
earnings per share represents income available to common stockholders 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 potentially 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 us relate to outstanding stock
options and warrants (determined using the treasury stock method). As we
incurred losses from continuing operations for the three and nine months ending
June 30, 2009 and 2008, potential common shares included in a diluted earnings
per share computation would result in an anti-dilutive per-share amount,
therefore, no diluted earnings per share is presented.
|
5.
|
Acquisition
of Subsidiary
|
On
October 1, 2007, we acquired Welch Products, Inc., a company headquartered in
Carlisle, Iowa, which specializes in designing, developing and manufacturing of
environmentally responsible products using recycled materials, primarily
recycled rubber. Welch’s patented products and processes include playground
safety tiles, roadside anti-vegetation products, construction molds and highway
guard-rail rubber spacer blocks. Through its prior acquisition of Playtribe,
Inc., Welch also provides innovative playground design, equipment and
installation. Welch had been one of our crumb rubber customers for the past
several years. The transaction was structured as a share exchange in which 100
percent of Welch’s common stock was exchanged for 8 million shares of our common
stock, valued at $2,800,000 based on the value of the 8 million shares issued in
this transaction on the date of issuance.
The
acquisition was accounted for as a purchase in accordance with SFAS No.
141, “Business Combinations”, and accordingly the results of Welch’s operations
since the date of acquisition are included in our consolidated financial
statements. The total purchase price of $2,890,000 including approximately
$90,000 of transaction costs has been allocated as follows:
|
Total
identifiable assets acquired
|
$
2,571,000
|
|
Total
identifiable liabilities acquired
|
$
2,821,000
|
The
total consideration paid exceeded the fair value of the net assets acquired by
$3,140,000 resulting in the recognition of $2,289,000 of goodwill and $645,000
assigned to long term contracts (in addition to $90,000 assigned to an existing
contract and being amortized over a 5-year term) based on an analysis of the
discounted future net cash flows of the contracts. In addition, we increased the
value of land and buildings by $195,000 based on a recent appraisal and
increased the value assigned to patents by $11,000 based on an analysis of
discounted future cash flows associated with the patents. The value assigned to
the long-term contracts is being amortized on a straight line basis over an
estimated useful life ranging from 48 to 60 months and the value assigned to
patents is being amortized on a straight line basis over an estimated useful
life of 60 months. In April 2009, the former Welch shareholders returned 78,125
shares of our common stock valued at $25,000 pursuant to the indemnification
terms of the October 1, 2008 asset purchase agreement. The $25,000 is included
in other income for the quarter ended June 30, 2009. We subsequently retired the
shares.
GreenMan
Technologies, Inc.
Condensed
Notes to Interim Consolidated Financial Statements
Quarter
Ended June 30, 2009 and 2008
(Unaudited)
|
5.
|
Acquisition
of Subsidiary – (Continued)
|
Included
in other current and long term assets are lease receivables which bear interest
at rates ranging from 1.99% to 5.5% per annum.
In
March 2009, we changed the name of our Welch Products Inc. subsidiary to Green
Tech Products, Inc. (see Note 1).
Amortization
expense during the next five years is anticipated to be:
|
Twelve
months ending June 30:
|
|
Contracts
|
|
|
Patents
|
|
|
Total
|
|
|
2010
|
|
$ |
179,250 |
|
|
$ |
21,667 |
|
|
$ |
200,917 |
|
|
2011
|
|
|
179,250 |
|
|
|
21,667 |
|
|
|
200,917 |
|
|
2012
|
|
|
58,310 |
|
|
|
21,667 |
|
|
|
79,977 |
|
|
2013
|
|
|
3,000 |
|
|
|
21,667 |
|
|
|
24,667 |
|
|
2014
and thereafter
|
|
|
— |
|
|
|
5,527 |
|
|
|
5,527 |
|
|
|
|
$ |
419,810 |
|
|
$ |
92,195 |
|
|
$ |
512,005 |
|
Management
annually reviews long-lived assets, goodwill and certain identifiable
intangibles to evaluate whether events or changes in circumstances indicate an
impairment of carrying value. Such reviews include an analysis of current
results and take into consideration the discounted value of projected operating
cash flows (earnings before interest, taxes, depreciation and amortization). An
impairment charge would be recognized when expected future operating cash flows
are lower than the carrying value of the assets.
|
6.
|
Discontinued
Operations
|
Georgia
Operations
Due
to the magnitude of the continuing operating losses incurred by our GreenMan
Technologies of Georgia, Inc. subsidiary ($3.4 million) during fiscal 2005, our
Board of Directors determined it to be in the best interest of our company to
discontinue all Georgia operations and completed the divestiture of its
operating assets during fiscal 2006. Accordingly, we have classified all
remaining liabilities associated with our Georgia entity and its results of
operations as discontinued operations.
On
June 27, 2008, GreenMan Technologies of Georgia, Inc. filed for liquidation
under Chapter 7 of the federal bankruptcy laws in the Bankruptcy Court of the
Middle District of Georgia and a trustee was appointed. On September 30, 2008 we
received approval of the Trustee’s Final Report of No Distribution in relation
to the Chapter 7 filing and the case is considered closed. The Trustee's Report
of No Distribution certifies that the trustee has performed the duties required
of a trustee under 11 U.S.C. Section 704 and has concluded that there are no
assets to administer. As a result of the bankruptcy proceedings we
de-consolidated substantially all remaining obligations from our financial
statements as of June 30, 2008 resulting in a one-time, pre-tax non-cash gain of
$2,360,930 which is reflected as income from discontinued operations for the
three and nine months ended June 30, 2008.
The
major classes of liabilities associated with Georgia discontinued operations
were:
|
|
|
June
30,
2009
|
|
|
September 30,
2008
|
|
|
Liabilities
related to discontinued operations:
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$ |
— |
|
|
$ |
116,664 |
|
|
Accrued
expenses, other
|
|
|
— |
|
|
|
163,147 |
|
|
Total
liabilities related to discontinued operations
|
|
$ |
— |
|
|
$ |
279,811 |
|
During
the nine months ended June 30, 2009, we recognized net income from Georgia
discontinued operations of approximately $38,000 including income of
approximately $161,000 associated with the completion of a March 2008 settlement
agreement with a former Georgia vendor and an expense of $106,564 associated
with an April 2009 settlement agreement, including legal fees with a former
Georgia vendor (see Note 11).
GreenMan
Technologies, Inc.
Condensed
Notes to Interim Consolidated Financial Statements
Quarter
Ended June 30, 2009 and 2008
(Unaudited)
|
6.
|
Discontinued
Operations – (Continued)
|
Tire
Recycling Operations
On
September 12, 2008 we executed an Asset Purchase Agreement with Liberty Tire
Services of Ohio, LLC, a wholly-owned subsidiary of Liberty Tire Services, LLC,
the largest tire recycling company in the United States, for sale of our tire
recycling business, subject to shareholder approval. On November 13, 2008 our
shareholders approved the sale and on November 17, 2008 we completed the
divestiture of substantially all of the assets of our GreenMan Technologies of
Minnesota, Inc. and GreenMan Technologies of Iowa, Inc. subsidiaries, which had
operated our tire recycling business, for approximately $27.7 million in cash.
We recognized a gain on sale of approximately $14.35 million, net of estimated
taxes of approximately $5.5 million which is included in gain on sale of
discontinued operations. During the quarter ended June 30, 2009 we received an
additional $170,000 from Liberty upon completion of the final asset and
liability reconciliation and recognized an additional gain on the disposal of
discontinued operations of $43,729 during the three months ended June 30,
2009.
We
used approximately $16.5 million of the proceeds of this sale to retire certain
transaction related obligations and other debt including approximately $12.8
million due our former primary secured lender, Laurus Master Fund, Ltd., and
approximately $645,000 of related party debt (including approximately $111,000
of accrued interest). In addition, $750,000 of the proceeds were placed in an
escrow account for twelve months to cover possible indemnification claims by the
purchaser as well as the pending finalization of several other post-closing
reconciliations.
The
major classes of assets and liabilities associated with discontinued tire
recycling operations were:
|
|
|
June
30,
2009
|
|
|
September 30,
2008
|
|
|
Assets
related to discontinued operations:
|
|
|
|
|
|
|
|
Cash
|
|
$ |
— |
|
|
$ |
576,336 |
|
|
Accounts
receivable, net
|
|
|
— |
|
|
|
3,019,978 |
|
|
Deferred
income tax asset
|
|
|
— |
|
|
|
5,300,000 |
|
|
Other
current assets
|
|
|
— |
|
|
|
1,248,968 |
|
|
Total
current assets related to discontinued operations
|
|
|
— |
|
|
|
10,145,282 |
|
|
Property,
plant and equipment (net)
|
|
|
— |
|
|
|
6,399,172 |
|
|
Other
|
|
|
— |
|
|
|
167,608 |
|
|
Total
other assets related to discontinued operations
|
|
|
— |
|
|
|
6,566,780 |
|
|
Total
assets related to discontinued operations
|
|
$ |
— |
|
|
$ |
16,712,062 |
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
related to discontinued operations:
|
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$ |
— |
|
|
$ |
1,649,530 |
|
|
Notes
payable, current
|
|
|
— |
|
|
|
9,566,387 |
|
|
Notes
payable, line of credit
|
|
|
— |
|
|
|
3,300,221 |
|
|
Accrued
expenses, other
|
|
|
— |
|
|
|
962,005 |
|
|
Capital
leases, current
|
|
|
— |
|
|
|
382,368 |
|
|
Total
current liabilities related to discontinued operations
|
|
|
— |
|
|
|
15,860,511 |
|
|
Notes
payable, non-current
|
|
|
— |
|
|
|
1,540,150 |
|
|
Capital
leases, non-current
|
|
|
— |
|
|
|
1,623,325 |
|
|
Deferred
gain on sale leaseback transaction, non-current
|
|
|
— |
|
|
|
233,783 |
|
|
Total
non-current liabilities related to discontinued operations
|
|
|
— |
|
|
|
3,397,258 |
|
|
Total
liabilities related to discontinued operations
|
|
$ |
— |
|
|
$ |
19,257,769 |
|
In
conjunction with the sale of our Minnesota tire recycling operations, we
terminated a long term land and building lease agreement and realized a gain on
termination of the lease of $124,627 which is included in income from
discontinued operations for the nine months ended June 30, 2009. In addition,
included in income from discontinued operations for the nine months ended June
30, 2009 is the remaining unamortized gain of $265,570 associated with a 2004
sale lease back transaction associated with this property. Previously, we had
been amortizing a gain of $437,337 as income ratably over the term of the
lease.
GreenMan
Technologies, Inc.
Condensed
Notes to Interim Consolidated Financial Statements
Quarter
Ended June 30, 2009 and 2008
(Unaudited)
|
6.
|
Discontinued
Operations – (Continued)
|
Net
sales and income (loss) from discontinued tire recycling operations were as
follows:
|
|
|
Three
Months Ended
|
|
|
Nine
Months Ended
|
|
|
|
|
June
30,
|
|
|
June
30,
|
|
|
June
30,
|
|
|
June
30,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
Net
sales from discontinued operations
|
|
$ |
— |
|
|
$ |
6,671,451 |
|
|
$ |
— |
|
|
$ |
15,616,828 |
|
|
Income
(loss) from discontinued operations
|
|
|
37,404 |
|
|
|
1,150,453 |
|
|
|
14,664,458 |
|
|
|
1,692,781 |
|
Raw
material inventory primarily consists of crumb rubber used in production of
molded rubber products and other manufacturing supplies by our molded recycled
rubber products operation. Finished goods primarily consist of molded products,
playground equipment and crumb rubber to be sold to third parties by our tire
recycling operations. All inventory is valued at the lower of cost or market on
the first-in first-out (FIFO) method. Inventory consists of the
following:
|
|
|
June
30,
2009
|
|
|
September
30,
2008
|
|
|
Raw
materials
|
|
$ |
78,730 |
|
|
$ |
118,530 |
|
|
Finished
goods
|
|
|
1,316,577 |
|
|
|
1,205,218 |
|
|
Total
inventory
|
|
$ |
1,395,307 |
|
|
$ |
1,323,748 |
|
|
8.
|
Property,
Plant and Equipment
|
Property,
plant and equipment consists of the following:
|
|
|
June
30,
2009
|
|
|
September
30,
2008
|
|
|
Estimated
Useful
Lives
|
|
|
Land
|
|
$ |
175,000 |
|
|
$ |
175,000 |
|
|
|
— |
|
|
Buildings
and improvements
|
|
|
285,000 |
|
|
|
285,000 |
|
|
15
years
|
|
|
Machinery
and equipment
|
|
|
1,356,948 |
|
|
|
1,344,377 |
|
|
5
- 7 years
|
|
|
Furniture
and fixtures
|
|
|
59,954 |
|
|
|
65,842 |
|
|
3
- 7 years
|
|
|
Motor
vehicles
|
|
|
31,169 |
|
|
|
5,760 |
|
|
3
- 5 years
|
|
|
|
|
|
1,908,071 |
|
|
|
1,875,979 |
|
|
|
|
|
|
Less
accumulated depreciation
|
|
|
(1,367,618 |
) |
|
|
(1,324,296 |
) |
|
|
|
|
|
Property,
plant and equipment, net
|
|
$ |
540,453 |
|
|
$ |
551,683 |
|
|
|
|
|
|
9.
|
Dual
Fuel License Agreement
|
On
June 17, 2009, we signed an exclusive license agreement with American Power
Group, Inc., an Iowa corporation, under which we acquired the exclusive
worldwide right to commercialize American Power Group’s patented dual fuel
alternative energy technology. American Power Group’s unique external fuel
delivery enhancement system converts existing diesel engines into more efficient
and environmentally friendly engines that have the flexibility to run on: (1)
diesel fuel and compressed natural gas; (2) diesel fuel and bio-methane; or (3)
100% on diesel fuel depending on the circumstances. In conjunction with
executing the license agreement, we issued American Power Group two million
shares of our common stock, valued at $500,000 (based on the value of our stock
on the date of the license) and subject to a one-year lock-up and certain escrow
provisions. In addition, we will be required to pay royalties to American Power
Group upon the sales of dual fuel products and services.
We
believe that American Power Group’s fuel technology upgrade is ideally suited
for the large domestic and international installed base of both stationary and
vehicular diesel engines estimated to be in the millions in both the U.S. and
internationally. The stationary market includes primary and backup diesel power
generation for hospitals, critical care facilities, cold storage warehouses,
data centers, financial centers and exchanges and government facilities, while
vehicular applications include school buses, public transit, refuse haulers,
commercial route fleets, government vehicles, and short-haul
trains.
GreenMan
Technologies, Inc.
Condensed
Notes to Interim Consolidated Financial Statements
Quarter
Ended June 30, 2009 and 2008
(Unaudited)
|
9.
|
Dual
Fuel License Agreement –
(Continued)
|
On
May 14, 2009, we loaned American Power Group $250,000 under a 24 month secured
promissory note bearing interest at 5% with interest only due for the first six
months with the balance (including interest) amortized in monthly payments of
principal and interest over an eighteen month period commencing in November
2009. This note was assumed as part of the July 27, 2009 acquisition of
substantially all of American Power Group’s remaining assets. (see Note
15)
|
10.
|
Notes
Payable/Credit Facilities
|
June
2006 Laurus Credit Facility
In
June 2006, we entered into a $16 million amended and restated credit facility
with Laurus Master Fund, Ltd. The credit facility consisted of a $5 million
non-convertible secured revolving note and an $11 million secured
non-convertible term note. All amounts due Laurus under the revolving note ($3.4
million) and term note ($9.4 million plus accrued interest of $35,511) were paid
off on November 17, 2008 in conjunction with the sale of our tire recycling
business (see Note 6), and this credit facility has been
terminated.
As
previously disclosed substantially all of GreenMan Technologies of Georgia,
Inc.’s assets were sold as of March 1, 2006. Several vendors of this subsidiary
commenced legal action, primarily in the state courts of Georgia, in attempts to
collect past due amounts, plus accruing interest, attorneys’ fees, and costs,
all relating to various services rendered to these subsidiaries. Although
GreenMan Technologies, Inc. itself was not a party to any of these vendor
relationships, two of the plaintiffs, representing approximately $900,000 of
these claims named GreenMan Technologies, Inc. as a defendant along with
GreenMan Technologies of Georgia, Inc.
On
June 27, 2008, GreenMan Technologies of Georgia, Inc. filed for liquidation
under Chapter 7 of the federal bankruptcy laws in the Bankruptcy Court of the
Middle District of Georgia and a trustee was appointed. As a result of the
bankruptcy proceedings all pending litigation was stayed and GreenMan
Technologies of Georgia, Inc. was de-consolidated from our financial statements
as of June 30, 2008.
During
fiscal 2008, one vendor secured a summary judgment for approximately $890,000
against GreenMan Technologies, Inc. While GreenMan Technologies, Inc. believed
it had valid defenses to these claims, as well as against any similar or related
claims that may be made against us in the future, we did not receive proper
notice of the summary judgment against us and therefore were unable to timely
appeal the judgment. Management therefore determined it to be in the best
interests of GreenMan Technologies, Inc. to reach settlement on this judgment
rather than to attempt to appeal the judgment for lack of proper notice. On
March 28, 2008, GreenMan Technologies, Inc. agreed to a cash settlement of
$450,000 with $100,000 paid upon signing the settlement agreement and nine
additional monthly payments of $38,889 commencing on April 30, 2008 and ending
on December 31, 2008. In January, 2009, after receipt of the final payment, the
plaintiff marked the judgment satisfied with the appropriate courts, at which
time we recorded a gain on settlement of approximately $161,000 relating to
amounts accrued for but forgiven per the agreement and which are included in
income from discontinued operations for the nine months ended June 30,
2009. On April 15,
2009, we settled the only remaining Georgia legal action involving GreenMan,
executing a settlement and general release agreement with the plaintiff in
return for a payment of $100,000, which is included in the loss from
discontinued operations for the nine months ended June 30, 2009.
GreenMan
Technologies, Inc.
Condensed
Notes to Interim Consolidated Financial Statements
Quarter
Ended June 30, 2009 and 2008
(Unaudited)
Stock
Options
We
maintain stock-based compensation plans, which are described more fully in Note
11 to the consolidated financial statements in our Annual Report filed on Form
10-KSB for the fiscal year ended September 30, 2008. Effective October 1, 2006,
we adopted the provisions of Statement of Financial Accounting Standards No.
123R, “Share-Based Payment” (SFAS 123R) for our share-based compensation plans.
We adopted SFAS 123R using the modified prospective transition method. Under
this transition method, compensation cost recognized includes (a) the
compensation cost for all share-based awards granted prior to, but not yet
vested, as of October 1, 2006, based on the grant-date fair value estimated in
accordance with the original provisions of SFAS 123 and (b) the compensation
cost for all share-based awards granted subsequent to September 30, 2006, based
on the grant-date fair value estimated in accordance with the provisions of SFAS
123R. In addition, we continued to use the “simplified method” as allowed under
Staff issued SAB 110, for determining expected terms on stock options for
calculating expense as our stock option exercise experience does not provide a
reasonable basis for an estimated expected option term. Amortization of stock
compensation expense was $53,069 and $114,800 for the three and nine months
ended June 30, 2009, respectively and $28,183 and $103,750 for the three and
nine months ended June 30, 2008, respectively. The unamortized compensation
expense at June 30, 2009 was $486,366 and will be amortized over a weighted
average remaining amortizable life of approximately 4.7 years.
In
November 2008, we granted options to our directors and management to purchase an
aggregate of 600,000 shares of our common stock at an exercise price of $.33 per
share, which represented the closing price of our stock on the date of each
respective grant. The options were granted under the 2005 Stock Option Plan,
have a ten-year term and vest equally over a five-year period from date of
grant. The fair value of the options at the date of grant in aggregate was
$136,000 which was determined on the date of grant using the Black-Scholes
option-pricing model with the following weighted average assumptions; dividend
yield of 0%; risk-free interest rates of approximately 2.3%; expected volatility
based on historical trading information of 87% and expected term of 5
years.
On
March 24, 2009 we purchased and retired warrants to purchase 4,811,905 shares of
common stock at an exercise price of $.01 per share held by its former secured
lender, Laurus Master Fund, Ltd for $700,000 in cash, or approximately $0.145
per share.
In
June 2009, we granted options to our directors and management to purchase an
aggregate of 700,000 shares of our common stock at an exercise price of $.23 per
share, which represented the closing price of our stock on the date of each
respective grant. The options were granted under the 2005 Stock Option Plan,
have a ten-year term and vest equally over a five-year period from date of grant
with the exception of an option to purchase 100,000 shares granted to our Chief
Executive Officer which are immediately exercisable pursuant to the terms of his
employment agreement. The fair value of the options at the date of grant in
aggregate was $110,754 which was determined on the date of grant using the
Black-Scholes option-pricing model with the following weighted average
assumptions; dividend yield of 0%; risk-free interest rates of approximately
2.3%; expected volatility based on historical trading information of 87% and
expected term of 5 years.
In
June 2009, the Board of Directors approved the issuance of 250,000 shares of
unregistered GreenMan common stock as restricted stock awards to our directors
and management in recognition of past services and recorded a $75,000 expense
(assigned fair value based on closing bid price plus the anticipated income tax
affect) associated with the issuance of these shares during the quarter ended
June 30, 2009. All recipients have agreed to hold the shares for a minimum of 18
months after issuance.
As
a result of the gain to be realized in fiscal 2009 from the sale of the tire
recycling operations (see Note 6) and anticipated overall results for fiscal
2009, we have recorded a provision for state and federal income of $5.5 million
during the nine months ended June 30, 2009 using an effective overall tax rate
of 30% (which takes into account certain state net operating loss limitations).
This amount is included in the gain on disposal of discontinued operations
during the nine months ended June 30, 2009.
GreenMan
Technologies, Inc.
Condensed
Notes to Interim Consolidated Financial Statements
Quarter
Ended June 30, 2009 and 2008
(Unaudited)
|
13.
|
Income
Taxes – (Continued)
|
Historically
we have provided a valuation reserve equal to 100% of our potential deferred tax
benefit due to the uncertainty of our ability to realize the anticipated benefit
given our historical losses. As a result of the estimated gain to be realized in
fiscal 2009 from the sale of the tire recycling operations and anticipated
overall results for fiscal 2009, we expect to be able to realize the benefit of
a portion of our federal net operating loss carry-forwards. Using an effective
overall tax rate of 30% (which takes into account certain state net operating
loss limitations) we have recognized a change in the valuation allowance of $5.3
million during the fiscal year ended September 30, 2008 based on the estimated
gain associated with the November 2008 sale of our tire recycling operations.
This deferred asset was utilized during the quarter ended December 31,
2008.
|
14.
|
Related
Party Transactions
|
On
November 18, 2008 we entered into a four-month (extended in March 2009 on a
month-to-month basis) consulting agreement at a rate of $7,500 per month with a
company owned by one of our directors who also serves as the Chairman of our
audit committee. The consulting firm is currently providing assistance in the
areas of due diligence support, “green” market opportunity identification and
evaluation, Board of Director candidate identification and evaluation and other
services as our Board may determine.
American
Power Group Acquisition
On
July 27, 2009, GreenMan and its wholly owned subsidiary GreenMan Alternative
Energy, Inc. entered into an agreement with American Power Group, Inc., an Iowa
corporation underwhich GreenMan Alternative Energy purchased substantially all
of American Power Group’s assets (excluding its patent) which we had licensed on
June 17, 2009, under an exclusive license agreement with American Power Group.
(see Note 9)
Subject
to the adjustment described below, the consideration for the acquisition
consisted of (i) approximately $850,000 in cash (financed by a local bank
through short term debt), which was used by American Power Group to retire
indebtedness to a bank, (ii) loans of approximately $611,000 from GreenMan to
American Power Group (including the $250,000 loan described in Note 9 and an
additional loan of $361,000 made on the closing date), which loans were also
assumed by GreenMan Alternative Energy and will be eliminated as intercompany
loans in consolidation subsequent to the acquisition, and (iii) the assumption
by GreenMan Alternative Energy of approximately $415,000 of American Power
Group’s accounts payable and other liabilities to third parties.
The
acquisition will be accounted for as a purchase in accordance with SFAS No. 141,
“Business
Combinations”, and accordingly the results of American Power Group’s
operations since the date of acquisition are included in our consolidated
financial statements. The total purchase price of $1,880,000 is as
follows:
|
Total
identifiable assets acquired
|
$
1,380,000
|
|
Total
identifiable liabilities acquired
|
$
1,880,000
|
The total
consideration paid exceeded the fair value of the net assets acquired by
$500,000 resulting in the recognition if $500,000 of intangibles which will be
allocated to technology acquired and goodwill. The assets acquired include a
promissory note from American Power Group of $531,000 to GreenMan and bearing
interest at the rate of 5.5% per annum. This note is subject to adjustment based
on the difference between the assets acquired and the consideration given. The
note is due in a single, lump sum payment on July 27, 2013; provided, however, that 7% of any
royalties due from time to time to American Power Group under the technology
license agreement (see Note 9) will be paid over to GreenMan Alternative Energy
rather than to American Power Group and will be considered prepayments of the
promissory note.
Item
2. Management’s Discussion and Analysis of Financial
Condition and Results of Operations
This
section contains forward-looking statements regarding future events and the
future results of GreenMan Technologies, Inc. within the meaning of the Private
Securities Litigation Reform Act of 1995. Such statements are based on current
expectations, estimates, forecasts, and projections and the beliefs and
assumptions of our management. Words such as “expect,” “anticipate,” “target,”
“goal,” “project,” “intend,” “plan,” “believe,” “seek,” “estimate,” “will,”
“likely,” “may,” “designed,” “would,” “future,” “can,” “could” and other similar
expressions that are predictions of or indicate future events and trends or
which do not relate to historical matters are intended to identify such
forward-looking statements. These statements are based on management’s current
expectations and beliefs and involve a number of risks, uncertainties and
assumptions that are difficult to predict. Consequently, our actual results may
differ materially from our predictions. We urge readers to review carefully the
risk factors described in our Annual Report on Form 10-KSB for the fiscal year
ended September 30, 2008 as well as in the other documents that we file with the
Securities and Exchange Commission. You can read these documents at
www.sec.gov.
The following information should be
read in conjunction with the unaudited consolidated financial statements and the
notes thereto included in Item 1 of this Quarterly Report, and the audited
consolidated financial statements and notes thereto and Management’s Discussion
and Analysis of Financial Condition and Results of Operations contained in our
Annual Report on Form 10-KSB filed for the fiscal year ended September 30,
2008.
Overview
As
described in Item 1, above, as a result of the bankruptcy proceedings involving
our GreenMan Technologies of Georgia, Inc. subsidiary, we de-consolidated
substantially all of our Georgia subsidiary’s remaining obligations from our
financial statements as of September 30, 2008.
Also
as described in Item 1, above, our business changed substantially in November
2008, when we sold substantially all of the assets of our tire recycling
operations. Because we operated our tire recycling assets during only a portion
of the fiscal quarter covered by this Quarterly Report on Form 10-Q we have
included in this report relevant information on this business segment but have
classified their respective assets, liabilities and results of operations as
discontinued operations for all periods presented in the accompanying
consolidated financial statements.
Results
of Operations
Three
Months ended June 30, 2009 Compared to the Three Months ended June 30,
2008
Net
sales from continuing operations for the three months ended June 30, 2009
decreased $434,636 or 49% to $451,474 as compared to net sales of $886,110 for
the three months ended June 30, 2008. The decrease is primarily attributable to
decreased playground tile and equipment sales in the Midwestern and Western
regions of the United States due to a general economic slowdown during fiscal
2009 in the United States. A majority of our revenue is derived from specific
one time installations with minimal follow on revenue from the installed
project, thus making quarterly revenue comparison particularly difficult. We
anticipate increased revenue during our seasonally strongest fourth quarter due
to warmer weather conditions and school vacation closures which allow for easier
installation conditions.
Our
gross profit for the three months ended June 30, 2009 was $145,484 or 32% of
net sales as compared to a gross profit of $284,769 or 32% of net sales for the
three months ended June 30, 2008.
Selling,
general and administrative expenses for the three months ended June 30,
2009 increased
$168,932 to $902,933 as compared to $734,001 for the three months ended June 30,
2008. The increase was primarily attributable to an increase of $115,000 in
professional expenses relating to business development initiatives and the
November 2008 sale of our tire recycling operations and an increase of
approximately $125,000 in performance based incentives. These increases were
partially offset by reduced travel, marketing and sales related
costs.
Interest
and financing expense for the three months ended June 30, 2009 decreased $27,140 to
$15,435, compared to $42,575 during the three months ended June 30, 2008 due to
decreased borrowings.
As
a result of the foregoing, our loss from continuing operations after income
taxes increased $206,994 to $725,927 for the three months ended June 30, 2009 as
compared to $518,933 for the three months ended June 30, 2008.
During
the three months ended June 30, 2009, we recognized net income from our
discontinued tire recycling operations of $37,408 associated with the final
purchase price reconciliation with the purchaser of the assets. The income from
discontinued operations for the three months ended June 30, 2008 includes
approximately $2,631,000 associated with the de-consolidation of our Georgia
subsidiary due to its bankruptcy with the balance associated with the net
results of our tire recycling.
Our
net loss for the three months ended June 30, 2009 was $688,523 or $.02 per
basic share as compared to net income of $2,992,450 or $.10 per basic share for
the three months ended June 30, 2008.
Nine
Months ended June 30, 2009 Compared to the Nine Months ended June 30,
2008
Net sales from continuing operations
for the nine months ended June 30, 2009 decreased $882,607 or 42% to $1,210,989
as compared to net sales of $2,093,596 for the nine months ended June 30, 2008. The decrease is
primarily attributable to decreased playground tile and equipment sales in the
Midwestern and Western parts of the United States of due to a general economic
slowdown during fiscal 2009 in the United States . A majority of our revenue is
derived from specific one time installations with minimal follow on revenue from
the installed project, thus making quarterly revenue comparison particularly
difficult. We anticipate
increased revenue during our seasonally strongest fourth quarter due to warmer
weather conditions and school vacation closures which allow for easier
installation conditions.
Due
to lower revenue and playground tile production during the nine months
ended June 30,
2009 our gross
profit was $202,884 or 17% of net sales compared to a gross profit of $622,744
or 30% of net sales for the nine months ended June 30, 2008. Due to slower tile
sales during the seasonally slower first half of fiscal 2009 and adequate
existing product inventory levels, management decided to produce a minimal
amount of playground tiles during the first half of fiscal 2009 and as a result
were unable to fully absorb all manufacturing overhead which negatively impacted
our year-to-date gross profit.
Selling,
general and administrative expenses for the nine months ended June 30, 2009 increased $502,550 to
$2,805,052 as compared to $2,302,502 for the nine months ended June 30, 2008.
The increase was primarily attributable to an increase of $247,000 in
professional expenses relating to business development initiatives and the
November 2008 sale of our tire recycling operations and an increase of
approximately $164,000 in performance based incentives. These increases were
partially offset by reduced travel, marketing and sales related
costs.
Interest
and financing expense for the nine months ended June 30, 2009 decreased to $87,836,
compared to $114,031 during the nine months ended June 30, 2008 due to reduced
borrowings.
As
a result of the foregoing, our loss from continuing operations after income
taxes increased $749,452 to $2,620,041 for the nine months ended June 30, 2009
as compared to $1,870,589 for the nine months ended June 30, 2008.
During
the nine months ended June 30, 2009 we recognized a gain on sale of discontinued
operations net of income taxes ($5.5 million), of $14,412,616 associated with
the sale of our tire recycling business in November 2008. The income from
discontinued operations for the nine months ended June 30, 2009 relates
primarily to the net results of our tire recycling operations including
approximately $391,000 of one-time gains associated with the termination of a
long-term land and building lease agreement in Minnesota. In addition, during
the six months ended June 30, 2009, we recognized income from Georgia
discontinued operations of approximately $44,000 relating to the net effects of
two settlement agreements with two former Georgia vendors. The income from
discontinued operations for the nine months ended June 30, 2008 includes
approximately $2,361,000 associated with the de-consolidation of our Georgia
subsidiary with the balance relating to the net results of our tire recycling
operations
Our
net income for the nine months ended June 30, 2009 was $12,082,516 or $.39 per
basic share as compared to net income of $2,130,663 or $.07 per basic share for
the nine months ended June 30, 2008.
Liquidity
and Capital Resources
As
of June 30, 2009, we had $7,567,199 in cash and cash equivalents, marketable
investments and net working capital of $8,614,084 primarily due to the sale of
our tire recycling business in November 2008. We intend to invest a portion of
the net proceeds of this transaction to grow our Green Tech Products (formerly
Welch Products) and American Power Group dual fuel technology businesses models
nationwide as well and to pursue additional recycling, alternative fuel,
alternative energy and other “green” business opportunities through our recently
announced subsidiary, GreenMan Renewable Fuel and Alternative Energy, Inc. as
described below.
We
understand that our continued existence is dependent on our ability to generate
positive operating cash flow from existing operations and to achieve profitable
status on a sustained basis. We believe we will be able to satisfy our cash
requirements through at least fiscal 2010. If Green Tech Products is unable to
achieve sustained profitability during fiscal 2009 and we are unable to obtain
additional financing to supplement our cash position, our ability to maintain
our current level of operations could be materially and adversely affected.
There is no guarantee we will be able to achieve sustained profitability of our
Green Tech Products business or of new business opportunities. Our credit
facility with Laurus Master Fund, Ltd. was terminated in November 2008, and we
have not yet established any new credit facility.
In
September 2008 we announced the formation of a new subsidiary, GreenMan
Renewable Fuel and Alternative Energy, Inc. Our primary objective for this
subsidiary is to pursue licenses, joint-ventures and long-term contracts focused
on the commercialization of existing and late-stage development products and
processes in green-based technologies including renewable fuels and alternative
energy. There has been significant global investment made over the past several
years in the area of renewable fuels, alternative energy and clean-tech
technologies and management does not see this momentum slowing down. Our initial
efforts to date have focused on rubber-based opportunities such as tire
gasification and alternative energy generation, but we have recently begun
expanding our focus into several other non-rubber based sectors which we believe
have large commercial market potential. We anticipate devoting increasing
resources over the next fiscal year to exploring our heightened participation in
this fast growing global initiative. To date, GreenMan Renewable Fuel and
Alternative Energy has generated no revenues and has not incurred any operating
expenses.
The
Consolidated Statements of Cash Flows reflect events for the nine months ended
June 30, 2009 and 2008 as they affect our liquidity. During the nine months
ended June 30, 2009, net cash used by operating activities was $3,372,743. Our
net income for the nine months ended June 30, 2009 was $12,082,516, reflecting a
$19,847,445 gain on sale of our tire recycling operations and the application of
$5.3 million of non-cash income taxes. Our cash flow was positively impacted by
the following non-cash expenses and changes to our working capital: $601,337 of
depreciation and net amortization which was offset by a $552,774 increase in
other current assets and a decrease of $1,162,983 in accounts payable and
accrued expenses. Our net income for the nine months ended June 30, 2008 was
$2,130,663, including a one time, non-cash gain of $2,360,930 associated with
the de-consolidation of our Georgia subsidiary. Our cash flow was positively
impacted by the following non-cash expenses and changes to our working capital:
$1,711,137 of depreciation and amortization and an increase in accounts payable
and accrued expenses of $396,995. These changes were offset by a $1,338,177
increase in product inventory, which is not unusual as we typically build
inventory prior to our seasonally stronger second half.
Net
cash provided by investing activities was $23,874,646 for the nine months ended
June 30, 2009, reflecting net proceeds from the sale of our scrap tire
processing operations of approximately $27.5 million. During the nine months
ended June 30, 2009, we purchased $3 million of marketable investments and used
$700,000 to purchase warrants from our former secured lender to purchase
approximately 4.8 million shares of our common stock. Net cash used by investing
activities was $1,241,439 for the nine months ended June 30, 2008, reflecting
the net purchase of equipment of $1,312,010 and $68,571 of net cash acquired in
the Welch transaction.
Net
cash used by financing activities was $16,565,209 during the nine months ended
June 30, 2009, reflecting the payoff of approximately $12.85 million associated
with our Laurus credit facility and approximately $3.4 million of other debt and
capital lease obligations associated with our discontinued scrap tire operations
and $534,320 of related party debt. Net cash provided by financing activities
was $1,767,037 during the nine months ended June 30, 2008, reflecting an
increase in our working capital line of $2,999,662, which offset normal debt
payments including the payoff of approximately $467,000 of Welch debt in
conjunction with the acquisition and capital lease repayments.
Effects
of Inflation and Changing Prices
Generally,
we are exposed to the effects of inflation and changing prices. Given the
largest component of our scrap tire collection and disposal costs is
transportation, we had been adversely affected by the significant increases in
the cost of fuel. Having sold our scrap tire recycling business, we do not
believe that future increases in fuel costs are likely to adversely affect our
business.
Environmental
Liability
There
are no known material environmental violations or assessments.
Item
3. Quantitative and Qualitative Disclosures About
Market Risk
Not
required pursuant to Item 305(e) of Regulation S-K.
Item
4T. Controls and Procedures
Our
management, with the participation of our chief executive officer and chief
financial officer, evaluated the effectiveness of our disclosure controls and
procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities
Exchange Act of 1934) as of June 30, 2009. In designing and evaluating our
disclosure controls and procedures, we recognized that any controls and
procedures, no matter how well designed and operated, can provide only
reasonable assurance of achieving their objectives and management necessarily
applied its judgment in evaluating the cost-benefit relationship of possible
controls and procedures. Based on this evaluation, our chief executive officer
and chief financial officer concluded that as of June 30, 2009, our disclosure
controls and procedures were (1) designed to ensure that material information
relating to the company, including our consolidated subsidiaries, is made known
to our chief executive officer and chief financial officer by others within
those entities, particularly during the period in which this report was being
prepared and (2) effective, in that they provide reasonable assurance that
information required to be disclosed by us in the reports that we file or submit
under the Exchange Act is recorded, processed, summarized and reported within
the time periods specified in the SEC's rules and forms.
No
change in our internal control over financial reporting (as defined in Rules
13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the fiscal
quarter ended June 30, 2009 that has materially affected, or is reasonably
likely to materially affect, our internal control over financial
reporting.
PART
II - OTHER INFORMATION
Item
1. Legal Proceedings
We
are subject to routine claims from time to time in the ordinary course of our
business. We do not believe that the resolution of any of the claims that are
currently known to us will have a material adverse effect on our company or on
our financial statements
There
have not been any material changes from the risk factors previously disclosed
under Item 6 of our Annual Report on Form 10-KSB for the fiscal year ended
September 30, 2008.
Item
2. Unregistered Sales of Equity Securities and Use of
Proceeds
On
June 8, 2009, we issued 250,000 shares of our unregistered common stock, valued
at $75,000, to certain officers and directors for services rendered. See Note
12, “Stockholder’s Equity” of Condensed Notes to the Unaudited Consolidated
Financial Statements included in this report. The issuance of these shares is
exempt from registration under the Securities Act of 1933, as amended, pursuant
to Section 4(2) of the Securities Act.
On
June 17, 2009, we issued 2,000,000 shares of our unregistered common stock,
valued at $500,000, to a third party pursuant to the terms of an exclusive
technology license agreement. See Note 9, “Dual Fuel License Agreement” of
Condensed Notes to the Unaudited Consolidated Financial Statements included in
this report. The issuance of these shares is exempt from registration under the
Securities Act of 1933, as amended, pursuant to section 4(2) of the Securities
Act.
Item
3. Defaults Upon Senior Securities
None.
Item
4. Submission of Matters to a Vote of Security
Holders
None.
Item
5. Other
None.
Item
6. Exhibits
The
following exhibits are filed with this document:
|
Exhibit
No.
|
|
Description
|
|
|
|
|
|
10.1
(1)
|
|
Exclusive
Patent License Agreement dated as of June 17, 2009, by and between
GreenMan Technologies, Inc. and American Power Group,
Inc.
|
|
|
|
|
|
10.2
(1)
|
|
Escrow
Agreement dated as of June 17, 2009, by and among GreenMan Technologies,
Inc., American Power Group, Inc. and Morse, Barnes-Brown & Pendleton,
P.C., as escrow agent.
|
|
|
|
|
|
31.1
(2)
|
—
|
Certification
of Chief Executive Officer pursuant to Rule 13a-14(a) or Rule
15d-14(a)
|
|
|
|
|
|
31.2
(2)
|
—
|
Certification
of Chief Financial Officer pursuant to Rule 13a-14(a) or Rule
15d-14(a)
|
|
|
|
|
|
32.1
(2)
|
—
|
Certification
of Chief Executive Officer under 18 U.S.C. Section 1350
|
|
|
|
|
|
32.2
(2)
|
—
|
Certification
of Chief Financial Officer under 18 U.S.C. Section
1350
|
________________________
|
(1)
|
Filed
as an exhibit to the Registrant’s Current Report on Form 8-K, dated June
17, 2009, and incorporated hereby by
reference.
|
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
GreenMan
Technologies, Inc.
By: /s/ Lyle Jensen
Lyle
Jensen
President
& Chief Executive Officer
By: /s/ Charles E. Coppa
Charles
E. Coppa
Chief
Financial Officer
Dated: August
12, 2009