United States
Securities and Exchange Commission
Washington, DC 20549
FORM 10-QSB
Quarterly Report Under Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the Quarter Ended Commission File Number
March 31, 2001 0-23812
ADVANCED RECYCLING SCIENCES, INC.
(Exact name of registrant as specified in its charter)
NEVADA
--------
(State or other jurisdiction of incorporation or organization
95-4255962
-----------
(I.R.S. Employer Identification No.)
Park Irvine Business Center, 14771 Myford Road, Suite B
--------------------------------------------------------
Tustin, CA 92780
-----------------
(Address of principal executive offices)
(714) 508-1470
---------------
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12 (b) of the Act:
None
------
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.
X Yes No
---- ----
State the number of shares outstanding of each of the registrants classes
of common equity, as of the latest practicable date.
Common stock, par value $.001; 15,348,770 shares outstanding
as of May 14, 2001
Page
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PART I. FINANCIAL INFORMATION
1. Consolidated Financial Statements
Consolidated Balance Sheet as of March 31, 2001 and
December 31, 2000 . . . . . . . . . . . . . . . . . . . . . . . . .F-3
Consolidated Statement of Operations for the three months
ended March 31, 2001 and 2000 . . . . . . . . . . . . . . . . . . .F-5
Consolidated Statement of Changes to Stockholder's
Equity for the three months ended March 31, 2001. . . . . . . . . .F-6
Statement of Consolidated Cash Flows for the three
months ended March 31, 2001 and 2000. . . . . . . . . . . . . . . .F-8
Notes to Unaudited Consolidated Financial Statements. . . . . . . F-10
2. Management Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . . . 11
PART II. OTHER INFORMATION
1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . 14
2. Changes in Securities . . . . . . . . . . . . . . . . . . . . . . . 14
3. Default upon Senior Securities. . . . . . . . . . . . . . . . . . . 15
4. Submission of Matters to a Vote of Security Holders . . . . . . . . 15
5. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . 15
6. Exhibits and Reports on Form 8-K. . . . . . . . . . . . . . . . . . 15
PART I - FINANCIAL INFORMATION
1. FINANCIAL STATEMENTS
(F-3)
Advanced Recycling Sciences, Inc. and Subsidiaries
Balance Sheets
March 31, 2001 and 2000
(UNAUDITED)
March March December
31, 2001 31, 2000 31, 2000
----------- ----------- -----------
ASSETS
Current Assets
--------------
Cash $ 186,230 $ 136,667 $ 15,321
Accounts Receivable 98,326 407,327 59,949
Interest Receivable 722 - 722
Inventory 2,909 175,990 37,528
Equipment Inventory 1,838,050 - 1,835,211
Deposit 31,409 317,003 31,409
Note & Interest Receivable - Officer 9,179 71,347 34,000
Prepaid Expenses 134,468 26,944 139,444
----------- ----------- -----------
Total Current Assets 2,301,293 1,135,278 2,153,584
Property and Equipment - Net
----------------------------
Furniture and Fixtures 19,543 52,596 22,789
Equipment 1,285,739 1,231,719 1,358,590
Vehicles 50,027 66,323 54,100
Land 149,119 157,753 149,119
Web Sites 15,364 9,168 4,825
----------- ----------- -----------
Total Property and Equipment 1,519,792 1,517,559 1,589,423
Other Assets
------------
License Rights 361,667 426,422 377,859
Patent Rights 4,065,000 - 1,715,000
Deposit - 687,487 -
Goodwill - 81,200 -
----------- ----------- -----------
Total Other Assets 4,426,667 1,195,109 2,092,859
----------- ----------- -----------
TOTAL ASSETS $8,247,752 $3,847,946 $5,835,866
=========== =========== ===========
See Accompanying Notes
(F-4)
Advanced Recycling Sciences, Inc. and Subsidiaries
Balance Sheets -Continued-
March 31, 2001 and 2000
(UNAUDITED)
March March December
31, 2001 31, 2000 31, 2000
----------- ----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
-------------------
Accrued Expenses $ 5,254 $ 66,506 $ 9,237
Accounts Payable 334,934 602,153 452,088
Notes Payable - 272,240 98,953
Interest on Notes Payable - - 3,637
Customer Deposits - 485,897 -
Franchise Tax Payable - 103,548 -
Payroll Taxes Payable 14,728 22,437 -
Sales Tax Payable 2,447 2,375 -
Current Maturities - 16,925 -
----------- ----------- -----------
Total Current Liabilities 357,363 1,572,081 563,915
Long Term Liabilities
---------------------
Capital Lease 31,475 81,089 31,475
Notes Payable 717,884 12,720 605,937
Less Current Maturities - (16,925) -
----------- ----------- -----------
Total Long Term Liabilities 749,359 76,884 637,412
Stockholders' Equity
--------------------
Common Stock 50,000,000 Shares
Authorized; Par Value of
$0.001 Per Share
15,348,770, 9,084,672 and
12,752,128 Shares Issued
and Outstanding 15,348 9,085 12,751
Paid In Capital 14,122,196 7,211,199 11,128,925
Accumulated Deficit (6,996,514) (5,021,303) (6,507,137)
----------- ----------- -----------
Total Stockholders' Equity 7,141,030 2,198,981 4,634,539
----------- ----------- -----------
TOTAL LIABILITIES &
STOCKHOLDERS' EQUITY $8,247,752 $3,847,946 $5,835,866
=========== =========== ===========
See Accompanying Notes
(F-5)
Advanced Recycling Sciences, Inc., and Subsidiaries
Statement of Operations
For the Three Months Ended March 31, 2001 and 2000
(UNAUDITED)
Three Three Twelve
Months Months Months
Ended Ended Ended
March March December
31, 2001 31, 2000 31, 2000
----------- ----------- -----------
Revenues
--------
Equipment Sales $ - $ - $ 31,709
Product Sales 50,495 101,332 82,003
Other Income - 6,882 83,115
----------- ----------- -----------
Total Revenues 50,495 108,214 196,827
Cost of Sales 34,619 59,091 141,160
----------- ----------- -----------
Gross Profit 15,876 49,123 55,667
Expenses
--------
Commissions 1,924 - 4,249
Depreciation 79,449 68,830 275,886
Amortization 16,189 16,189 64,756
Travel 21,388 35,375 91,161
Professional Fees 93,041 31,860 239,823
Office 26,941 47,602 115,293
Rent & Utilities 20,278 30,927 152,539
Administrative Expenses 84,940 273,973 33,282
Consultant Fees 146,656 171,777 793,890
Interest 119 - 13,298
Options Issued Expense 15,000 35,000 19,146
----------- ----------- -----------
Total Expenses 505,925 711,533 2,073,323
Net Income (Loss) From Operations (490,049) (662,410) (2,017,656)
See Accompanying Notes
(F-6)
Advanced Recycling Sciences, Inc. and Subsidiaries
Statement of Shareholders' Equity
From January 1, 2000 to March 31, 2001
(UNAUDITED)
Compre-
Common Stock Paid In hensive Accumulated
Stock Amount Capital Income Deficit
-----------------------------------------------------------
Balance,
January 1, 2000 9,033,123 9,033 6,692,776 - (4,358,893)
Shares Issued for
Services at $1.75
Per Share 1,515 2 2,649
Shares Issued for
Patent Rights at
$1.75 Per Share 980,000 980 1,714,200
Shares Issued for
Services at $.078
Per Share 26,618 26 20,736
Shares Issued for
Assets at $2.125
Per Share 577,386 577 1,226,368
Shares Issued for
Services at $1.625
Per Share 10,000 10 16,240
Shares Issued for
Cash at $1.00 Per
Share 1,510,970 1,511 1,509,459
Cost of Shares
Issued (332,413)
Shares issued for
Services at $1.75
Per Share 22,856 23 39,975
Shares issued for
Cash at $1.010 Per
Share 40,000 40 40,360
Shares issued for
Services at $0.687
Per Share 50,000 50 34,200
See Accompanying Notes
(F-7)
Advanced Recycling Sciences, Inc. and Subsidiaries
Statement of Shareholders' Equity
From January 1, 2000 to March 31, 2001
(UNAUDITED)
Compre-
Common Stock Paid In hensive Accumulated
Stock Amount Capital Income Deficit
-----------------------------------------------------------
Shares issued for
Cash at $0.25 Per
Share 11,428 473 117,835
Shares issued for
Conversion of Debt
at $0.25 Per Share 473,232 473 117,835
Shares issued for
Cash at $0.50 Per
Share 15,000 15 7,485
Options Issued 19,146
Foreign Currency
Translation (80,361)
Net Loss for the
Year Ended
December 31, 2000 (2,067,883)
-----------------------------------------------------------
Balance,
December 31, 2000 12,752,128 12,751 11,128,925 (80,361) (6,507,137)
Shares issued for
cash at $0.55 per
share 1,150,489 1,150 629,718
Shares issued for
Patent Rights at
$1.37 per share 1,446,153 1,446 2,348,554
Options Issued 15,000
Net loss for the
Three Months Ended
March 31, 2001 (489,377)
-----------------------------------------------------------
Balance,
March 31, 2001 15,348,770 $ 15,347 $14,122,197 $(80,361) $(6,996,514)
===========================================================
See Accompanying Notes
(F-8)
Advanced Recycling Sciences, Inc., and Subsidiaries
Statement of Cash Flows
For the Three Months Ended March 31, 2001 and 2000
(UNAUDITED)
Three Three Twelve
Months Months Months
Ended Ended Ended
March March December
31, 2001 31, 2000 31, 2000
------------- ------------- -------------
Cash Flows from Operations
--------------------------
Net Profit or (Loss) $ (489,377) $ (662,410) $(2,067,883)
Adjustments to Reconcile Net profit
or (Loss) to Net Cash
Options Issued 15,000 - 19,146
Amortization and Depreciation 95,638 85,019 340,642
Non Cash Expenses - - 280,219
Changes in Operating Assets & Liabilities
(Increase) Decrease in Accounts Receivable (38,377) (89,863) (33,748)
(Increase) Decrease in Interest Receivable - - 722
(Increase) Decrease in Inventory 34,619 (36,521) 101,941
(Increase) Decrease in Deposit on Inventory - - (31,409)
(Increase) Decrease in Equipment Inventory (2,839) - -
(Increase) Decrease in Notes Receivable
- Officer 24,851 (2,092) 35,253
(Increase) Decrease in Prepaid Expense 4,976 - (112,500)
(Increase) Decrease in Deposits - - 687,487
Increase (Decrease) in Accrued Expenses (3,983) (17,537) (74,806)
Increase (Decrease) in Accounts Payable (117,154) (51,364) (201,429)
(Decrease) Increase in Interest on Notes
Payable (3,637) - (3,637)
(Decrease) Increase in Customer Deposits - 190,714 (295,183)
Increase (Decrease) in Taxes Payable - - (103,548)
Increase (Decrease) In Payroll Taxes Payable 14,728 22,437 -
Increase (Decrease) in Sales Tax Payable 2,447 2,375 -
------------- ------------- -------------
Net Cash Provided (Used) by
Operating Activities (463,108) (559,242) (1,458,733)
See Accompanying Notes
(F-9)
Advanced Recycling Sciences, Inc., and Subsidiaries
Statement of Cash Flows -Continued-
For the Three Months Ended March 31, 2001 and 2000
(UNAUDITED)
Three Three Twelve
Months Months Months
Ended Ended Ended
March March December
31, 2001 31, 2000 31, 2000
------------- ------------- -------------
Cash Flows from Investing Activities
------------------------------------
Purchase of Fixed Assets $ (9,845) $ - $ (248,245)
------------- ------------- -------------
Net Cash Provided (Used) by
Investing Activities (9,845) - (248,245)
Cash Flows from Financing Activities
------------------------------------
Sale of Common Stock 630,868 518,475 1,177,046
Payment of Long Term Debt - - (31,250)
Increase (Decrease) in Notes Payable 12,994 15,980 333,569
------------- ------------- -------------
Net Cash Provided (Used) by
Financing Activities 643,862 534,455 1,479,365
------------- ------------- -------------
Increase (Decrease) in Cash 170,909 (24,787) (227,613)
Cash at Beginning of Period 15,321 242,934 242,934
------------- ------------- -------------
Cash at End of Period $ 186,230 $ 218,147 $ 15,321
============= ============= =============
Disclosures from Operating Activities
Interest $ 119 $ - $ -
Taxes - - 19,504
The Company issued 1,446,153 shares of common stock for the purchase of
the patent rights to the Delcing Technology.
(F-10)
Advanced Recycling Sciences, Inc., and Subsidiaries
(Formerly The Quantum Group, Inc., and Subsidiaries)
Notes to Consolidated Financial Statements
NOTE 1 - Corporate History
--------------------------
The Company was organized on December 2, 1968, under the laws of the state
of California as Acquatic Systems, Inc. On June 27, 1989, the Company
merged with Country Maid, Inc., a Nevada Corporation, the Corporate
domicile was changed to the state of Nevada. On September 18, 1992, the
name of the Company was changed to The Quantum Group, Inc. On March 26,
2001, the Company filed an Amendment to the Articles of Incorporation
changing it's name to Advanced Recycling Sciences, Inc. The Company is
registered and qualified to do business in the state of California.
NOTE 2 - Significant Accounting Policies
----------------------------------------
A. The Company uses the accrual method of accounting.
B. Revenues and directly related expenses are recognized in the period
when the goods are shipped to the customer.
C. The Company considers all short term, highly liquid investments that
are readily convertible, within three months, to known amounts as cash
equivalents. The Company currently has no cash equivalents.
D. Primary Earnings Per Share amounts are based on the weighted average
number of shares outstanding at the dates of the financial statements.
Fully Diluted Earnings Per Shares shall be shown on stock options and
other convertible issues that may be exercised within ten years of the
financial statement dates.
E. The inventory is stated at the lower of cost or market. The inventory
is a single recycling system that the Company intends to sell as a
system. The Company is currently pursuing several prospects to sell
the system.
F. Consolidation Policies: The accompanying consolidated financial
statements include the accounts of the company and its majority -
owned subsidiaries. Intercompany transactions and balances have been
eliminated in consolidation.
G. Foreign Currency Translation / Remeasurement Policy: Assets and
liabilities that occur in foreign countries are recorded at historical
cost and translated at exchange rates in effect at the end of the
year. Income Statement accounts are translated at the average
exchange rates for the year. Translation gains and losses shall be
recorded as a separate line in the equity section of the financial
statements.
H. Depreciation: The cost of property and equipment is depreciated over
the estimated useful lives of the related assets. The cost of
leasehold improvements is depreciated (amortized) over the lesser of
the length of the related assets or the estimated lives of the assets.
Depreciation is computed on the straight line method for reporting
purposes and for tax purposes.
I. Issuance of Subsidiary's Stock: The Company has elected to account for
shares issued by its subsidiary as an equity transaction.
J. Use of 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 reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
(F-11)
Advanced Recycling Sciences, Inc., and Subsidiaries
(Formerly The Quantum Group, Inc., and Subsidiaries)
Notes to Consolidated Financial Statements
NOTE 2 - Significant Accounting Policies
----------------------------------------
K. As permitted by SFAS #123 "Accounting for Stock-Based Compensation,"
the Company has elected to account for the stock option plans as a
compensation cost when options were issued at equal to or more than
fair market value.
2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL STATEMENTS
This Form 10-QSB contains certain forward-looking statements. For
this purpose any statements contained in this Form 10-QSB that are not
statements of historical fact may be deemed to be forward-looking
statements. Without limiting the foregoing, words such as "may," "will,"
"expect," "believe," "anticipate," "estimate" or "continue" or comparable
terminology are intended to identify forward-looking statements. These
statements by their nature involve substantial risks and uncertainties, and
actual results may differ materially depending on a variety of factors.
General
-------
Advanced Recycling Sciences, Inc., ("ARS " or the "Company") f.k.a.
The Quantum Group, Inc., is in the business of developing innovative
products and technologies in the environmental and recycling industries,
with specific emphasis on scrap tire rubber recycling. The Company has
developed a website that can be viewed at http://www.arsciences.com. The
website allows visitors to access an overview of the Company's activities,
obtain market information for the Company's trading stock and view the
Company's EDGAR filings. The Company also has a portal website,
http://www.tirerecycling.com.
Liquidity and Capital Resources
-------------------------------
As of March 31, 2001, the Company had cash on hand of $186,230. The
Company raised $630,868 during the three months ended March 31, 2001 in a
Regulation S offering. This is the initial funding for a 2001 Regulation
S offering. The 2001 Regulation S offering is anticipated to raise a
total of between $1,500,000 and $2,500,000 depending on market conditions.
The Company also has a commitment with an overseas investment banking firm
with whom the Company has a long term relationship to raise $800,000 either
through a private placement of shares in its subsidiary, Tires2Oil, Inc.,
or a Regulation S offering of the Company's common stock to be determined
upon finalization of a definitive underwriting agreement. The majority of
the funds from this offering will be used for the building of the pilot
plant for the Tires2Oil technology. The proceeds from this private
placement are anticipated during the second and third quarter of 2001. The
Company is in discussion with several domestic investment banking firms
regarding raising additional funds. This funding, should it materialize,
would be used to implement the Company's business development strategy.
Results of Operations
---------------------
Comparison of the three months ended March 31, 2001 and the three
months ended March 31, 2000.
The Company generated a loss of $489,377 in the quarter ended March
31, 2001, compared to a loss of $662,410 for the quarter ended March 31,
2000. This $173,033 (26%) reduction in loss is a result of general
reductions in General and Administrative expenses and the closing of the
Company's subsidiary operation in San Diego, California. The Company had
no significant sales in either year. The Company had $50,495 in crumb
rubber sales for the three months ended March 31, 2001. The Company had
$108,214 in revenue for the three months ended March 31, 2000. The crumb
rubber sales in 2001 are essentially the disposition of the inventory
remaining after the closing of the San Diego facility, and as such, will
not be repeated. No revenue from license fees was generated in either the
quarter ended March 31, 2001 or 2000. Due to the emphasis on technology
transfer, no license fee income is anticipated until a full scale
Tires2Oil plant is operational. Construction of such a plant will not
begin until and unless the pilot plant proves successful.
Historically, the majority of the Company's equipment sales were
recorded when equipment was shipped and title passed to the buyer. Typical
sales were by letter of credit, with the funds released by the bank when
the equipment was placed for shipment with the carrier. Historically,
payment for the Company's equipment sales have been made on the basis of
10% due at the time of sale, 80% due on shipment of the equipment and 10%
due on the completion of installation. This has resulted in the Company
receiving its revenue in large lump sums at irregular intervals rather than
smaller amounts at frequent intervals. Equipment purchased for the use of
a subsidiary or joint venture is recorded as a purchase of assets with no
revenue or inter-company profit generated upon the transfer to the
operating entity. The Company revised its equipment sales approach during
2000. In the future, the Company will receive fees for the design,
configuration and specification of certain pieces of equipment. The sale
will be made directly from the specified supplier to the client. The
manufacturer will warrant its equipment directly to the buyer. In addition
to the acquisition of the Tires2Oil technology and the de-icing technology
the Company's future revenue generation activities are now more focused on
technology transfer than equipment sales. While these technologies are
being developed, the Company intends to concentrate its efforts in two
complementary aspects of the crumb rubber industry. The Company intends to
construct complete crumb rubber manufacturing plants in California and
Germany. Through its subsidiary, Advanced Surfacing Technologies, Inc.,
the Company will develop specialized Crumb Rubber modified (CRM) asphalt
blending technology and equipment for the contracting industry.
Net cash used in operations was $463,106 during the three months ended
March 31, 2001 compared to $559,242 in the three months ended March 31,
2000. The primary use of cash was the funding of the net operating loss of
$489,377 for the quarter ended March 31, 2001. This was also the case in
2000, where the operating loss was $662,410. During the first quarter
2001, Accounts Receivable increased by $38,377, Inventory decreased $34,619
and Accounts Payable where reduced by $117,154. Cash used in operations in
2000 was affected by an increase in Accounts Receivable of $89,019.
Additionally, Inventory increased by $39,521, Customer Deposits decreased
by $190,714, and Accounts Payable where reduced by $89,019 during the 2000
first quarter.
12
Depreciation Expense of $79,449 for the three months ended December
31, 2001, exceeds the 2000 expense of $68,830 by $11,619. This is due to
the equipment purchased and manufactured for the QCAL operation.
Travel expenses of $21,388 for the quarter ended March 31, 2001,
decreased by 39% or $13,987 compared to $35,375 for the quarter ended
March 31, 2000. This decrease is due to eliminating marketing activities
in support of the QCAL operation.
Professional fees increased from $31,860 for the three months ended
March 31, 2000, to $93,041 for the comparable 2001 quarter. This increase
is due, primarily, to the legal activities regarding patents and related
matters for both the Tires2Oil license and the purchase of the de-icing
technology license in the first quarter of 2001. Additionally, legal
support for the Company's current and in-formation overseas joint venture
was increased, as these projects move closer to maturity.
Office expense of $26,941 for the three months ended March 31, 2001,
is a $20,661 decrease from the 2000 expenses of $47,602 for the same
quarter. This decrease is primarily due to discontinuation of the QCAL
operation in the first half of 2000.
Administrative expenses of $84,940 for the three months ended March
31, 2001, are significantly lower than the $273,973 for the comparable 2000
period. This reduction is due to closing the San Diego operation in mid
year 2000, and cessation of QCAL marketing activities.
Consulting expenses of $146,656 for the three months ended March 31,
2001 decreased from the three months ended March 31, 2000 expense of
$171,777. This decrease is primarily timing differences, and is not,
necessarily, a downward trend.
Options expense of $19,146 was recognized in 2000 as a result of the
Board of Directors approval of the 2000 employee incentive stock option
program. Options expense of $15,000 was recognized in the three months
ended March 31, 2001, for the 2001 employee incentive stock option program.
The year 2001 expense is less than the 2000 expense due to the reduced
price of the Company's stock.
13
PART II - OTHER INFORMATION
1. Legal Proceedings
There were no significant changes in the Company's litigation with
Tyre's Ecology S.r.l., during the quarter ended March 31, 2001.
There were no significant changes in the Company's litigation with
Veplas Manufacturing LTD., during the quarter ended March 31, 2001.
2. Changes in Securities
No instruments defining the rights of the holders of any class of
registered securities have been materially modified, limited or qualified.
The following securities, which are not registered under the
Securities Act of 1933, were issued since the Company's last quarterly
report for the quarter ended March 31, 2001.
On January 9, 2001, the Company issued options to purchase up to
442,969 shares of restricted common stock to certain officers, directors,
employees and consultants of the Company. Some of the options were issued
in exchange for said officers, directors, employees and consultants
surrendering options previously issued to them by the Company. The Company
received no cash for issuing these options. These options were issued
pursuant to exemptions from registration under Section 3 and Section 4(2)
of the Securities Act of 1933.
On February 19, 2001, the Company issued 1,446,153 restricted common
shares to UTEK Corporation to acquire Technology Development, Inc., a
wholly owned subsidiary of UTEK. The Company received no cash for these
shares. The shares were issued pursuant to an exemption from
registration under Section 4(2) of the Securities Act of 1933.
During the quarter ended March 31, 2001, the Company sold
1,150,489 shares of its common stock to non United States persons in Asia.
The Company received $638,068 from the sale of the shares. These shares
were sold pursuant to Regulation S promulgated by the Securities and
Exchange Commission under the Securities Act of 1933. The Company did not
offer the securities to any person in the United States, any identifiable
groups of U.S. citizens abroad, or to any U.S. Person as that term is
defined in Regulation S. At the time the buy orders were originated, the
Company reasonably believed the Buyers were outside of the United States
and were not U.S. Persons. The Company reasonably believed that the
transaction had not been pre-arranged with a buyer in the United States.
The Company has not nor will engage in any "Directed Selling Efforts" and
reasonably believes the Buyers have not nor will engage in any "Directed
Selling Efforts." The Company reasonably believed the Buyers purchased the
securities for their own accounts and for investment purposes and not with
the view towards distribution or for the account of a U.S. Person.
In March 2001, the Company issued warrants to May Davis, Inc., to
purchase up to 499,984 shares of restricted common stock. At the time of
issuance, warrants to purchase 347,216 shares vested immediately. The
remainder vests at a rate 13,888 per month for the ensuing 11 months. The
warrants expire one August 1, 2006. The warrants are exercisable at a
$1.50 per share. The warrant agreement grants May Davis piggy-back
registration rights beginning on August 1, 2001 and expiring on August 1,
14
2006. The warrants were issued in exchange for investment banking and
strategic financial planning services to be rendered by May Davis to the
Company for an eighteen month period beginning August 1, 2001. The
warrants were not offered or sold in any public offering. The warrants
were issued pursuant to an exemption from registration under Section 4(2)
of the Securities Act of 1933. No cash was received by the Company.
3. Defaults upon Senior Securities
None
4. Submission of Matters to a Vote of Security Holders
In January 2001, in accordance with the Company's Articles of
Incorporation, its Bylaws and Section 78.325 of the Nevada Revised
Statutes, the shareholders, by written shareholder consent without a
meeting approved the following actions: 1) that the Company amend its
Articles of Incorporation to effect a name change to Advanced Recycling
Sciences, Inc.; 2) in connection with the name change, the Company obtain a
new CUSIP number and a new trading symbol, "ARYC." The Company received
7,619,603 votes in favor of the above actions. No votes were cast against
the actions.
5. Other Information
Bay Area Recycling, Inc. The Company continues to negotiate the terms
of a definitive agreement with Shen Gang Development Limited to jointly
develop a crumb rubber manufacturing facility called Bay Area Recycling to
be located in Northern California. The Company expects to have a
definitive agreement in place in the near future.
6. Exhibits and Reports on Form 8-K
(A) Reports on Form 8-K
No reports on Form 8-K were filed or required to be filed during the
quarter ended March 31, 2001.
(B) Exhibits. The following exhibits are included as part of this
report:
None.
15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this to be signed on its behalf by the
undersigned thereunto duly authorized.
Advanced Recycling Sciences, Inc.
May 14, 2001 /s/ Keith J. Fryer
------------------
Keith J. Fryer
President and Chief Operating Officer
May 14, 2001 /s/ John F. Pope
----------------
John F. Pope
Vice President, Finance
Chief Accounting Officer
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