UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended March 31, 1997
OR
()TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)OF THE SECURITIES ACT OF 1934
FOR THE TRANSITION PERIOD FROM______________ TO _______________
Commission File Number: 0-9083
Enercorp, Inc.
(Exact name of Registrant as specified in its Charter)
Colorado 84-0768802
_____________________________ ______________________
State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
7001 Orchard Lake Road, Suite 424
West Bloomfield, Michigan 48322
_______________________________________ ___________
(Address of principal executive offices) (Zip Code)
(248) 851-5654
__________________________________________________
(Registrant's telephone number, including area code)
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, and (2) has been subject to such filing requirements
for the past 90 days.
Yes___X____ No _____
Number of shares of common stock outstanding at May 14, 1997: 590,897
Enercorp, Inc.
Form 10-Q Filing for the Third Quarter Ended March 31, 1997
INDEX
Page
Number
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements 3
Statements of Assets and Liabilities March 31,1997
(Unaudited)and June 30, 1996 4
Schedule of Investments (Unaudited), March 31, 1997 5-6
Schedule of Investments June 30, 1996 7-8
Statements of Operations (Unaudited) for the Nine
Months Ended March 31, 1997 and 1996 9
Statements of Cash Flows (Unaudited) for the Nine
Months Ended March 31, 1997 and 1996 10
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 11-12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 2. Changes in Securities 13
Item 3. Defaults Upon Senior Securities 13
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13
Signature Page 14
2
Enercorp, Inc.
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
The accompanying interim unaudited condensed financial statements have
been prepared in accordance with the instructions to Form 10-Q and do
not include all the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the
opinion of the management, all adjustments (consisting of normal
recurring adjustments) considered necessary for a fair presentation have
been included, and the disclosures are adequate to make the information
presented not misleading. Operating results for the nine months ended
March 31, 1997 are not necessarily indicative of the results that may be
expected for the year ended June 30, 1997. These statements should be
read in conjunction with the financial statements and notes thereto
included in the Annual 10-K Report (filed with the Securities and
Exchange Commission) for the year ended June 30, 1996.
3
Enercorp, Inc.
March 31, June 30,
1997 1996
------------ -----------
ASSETS (Unaudited)
Investments, at fair value, cost of $1,623,388
and $1,532,388 at March 31, 1997 and
June 30, 1996 $ 4,335,099 $ 3,966,630
Cash 319 495
Accounts receivable - related parties 2,985 125,000
Accrued interest receivable - net of allowance
for uncollectible interest receivable of $11,870
and $10,045 at March 31, 1997 and
June 30, 1996 respectively 3,958 3,351
Accrued interest receivable - related party 9,377 -0-
Note receivable, net of allowance for
uncollectible note receivable of $23,147 at
March 31, 1997 and June 30, 1996 7,715 7,715
Note receivable - related party 200,000 -0-
Furniture and fixtures, net of accumulated
depreciation of $4,325 and $3,840 at
March 31, 1997 and June 30, 1996, respectively 4,610 3,530
Other assets 6,183 17,036
------------ -----------
$ 4,570,246 $ 4,123,757
============ ===========
LIABILITIES AND NET ASSETS
Liabilities
Note payable - bank $ 1,658,450 $ 1,454,721
Accounts payable and accrued liabilities 29,507 6,149
Deferred tax liability 436,000 360,000
------------ -----------
2,123,957 1,820,870
------------ -----------
Net assets
Common stock, no par value: 10,000,000 shares
authorized, 590,897 shares issued and
outstanding March 31, 1997 and June 30, 1996 1,468,251 1,468,251
Preferred stock, no par value: 1,000,000
shares authorized, -0- issued and outstanding -0- -0-
Accumulated deficit (811,673) (772,604)
Unrealized net gain on investments, net of
deferred income taxes of $922,000 and $827,000
at March 31, 1997 and June 30, 1996, respectively 1,789,711 1,607,240
------------ -----------
2,446,289 2,302,887
------------ -----------
$ 4,570,246 $ 4,123,757
============ ===========
4
Enercorp, Inc.
Schedule of Investments
March 31, 1997
(Unaudited)
Restrictions Number Cost
Expiration as to of and/or Fair
Company Description of Business Date Resale Shares Owned Equity Value
AFFILIATED COMPANIES
Common Stocks - Public Market Method of Valuation (d)
CompuSonics Video Corporation* Digital Video Product Development 1,751 $ - $ 2
10,000,000 106,477 9,000
Williams Controls, Inc.* Manufacturer of sensors, controls, and (f) 400,000 60,000 900,000
communication systems for the
transportation, telecommunication and
agricultural industries. (f) 850,000 127,500 1,912,500
(f) 330,000 412,500 742,500
(b) 5/97(f) 30,000 108,750 60,000
(b)10/98(f) 50,000 125,000 100,000
Ajay Sports, Inc.* Golf & Casual Furniture Manufacturer 1,764,706 600,000 297,794
(b)12/97 100,000 37,500 16,875
Preferred Stocks - Public Market Method of Valuation (d)
Ajay Sports, Inc.* Golf & Casual Furniture Manufacturer 2,000 20,000 9,450
Warrants and Stock Options - Board Appraisal Method of Valuation (d)
CompuSonics Video Corporation* Digital Video Product Development (c) 300,000 - -
Williams Controls, Inc.* Manufacturer of sensors, controls, and 11/08/97 (c) 150,000 - 282,150
communication systems for the 08/04/99 (c)(e) 25,000 - -
transportation, telecommunication and 05/03/00 (c) 25,000 - -
agricultural industries. 09/13/99 (c) 50,000 - -
------------ ----------
1,597,727 4,330,271
(Continued)
5
Enercorp, Inc.
Schedule of Investments (Continued)
March 31, 1997
(Unaudited)
Restrictions Number Cost
Expiration as to of and/or Fair
Date Resale Shares Owned Equity Value
Company Description of Business
UNAFFILIATED COMPANIES
Common Stocks - Public Market Method of Valuation (d)
Immune Response, Inc. Holding Company 10,000,000 5,000 -
Vitro Diagnostics Diagnostic Test Kits 300 1,500 38
Proconnextions, Inc. Sports Memorabilia Marketing (a) 191,610 19,161 4,790
------------ ------------
Sub-total - UNAFFILIATED COMPANIES 25,661 4,828
------------ ------------
Total - ALL COMPANIES $ 1,623,388 $ 4,335,099
============ ===========
<FN>
(a) Non-public company whose securities are privately owned.
(b) May be sold under the provisions of Rule 144 of the Securities Act of 1933
after a holding period which expires in the month indicated.
(c) No public market for this security exists.
(d) A discount factor as determined by the Company's Board of Directors has
been applied to those stocks valued by the public market method which have
restrictions as to resale.
(e) 75% currently vested; 25% vesting 8/97.
(f) Pledged as collateral against a line of credit with NBD Bank.
*This entity is considered an affiliated company since the Company owns more
than 5% but less than 25% of the Investee company's outstanding common stock.
Because of this, the Company would be affected by a sales limitation of one
percent of the investee's outstanding common stock during any three-month
period, or the average of the last four weeks' trading volume, whichever is
greater.
</FN>
6
Enercorp, Inc.
Schedule of Investments
June 30, 1996
Restrictions Number Cost
Expiration as to of and/or Fair
Company Description of Business Date Resale Shares Owned Equity Value
AFFILIATED COMPANIES
Common Stocks - Public Market Method of Valuation (d)
CompuSonics Video Corporation* Digital Video Product Development 1,751 $ - $ 2
10,000,000 106,477 9,000
Williams Controls, Inc.* Manufacturer of sensors, controls, and (f) 400,000 60,000 720,000
communication systems for the (f) 850,000 127,500 1,530,000
transportation, telecommunication and (f) 330,000 412,500 594,000
agricultural industries. (b)4/98 (f) 100,000 34,000 180,000
(b)5/97 (f) 30,000 108,750 48,000
Ajay Sports, Inc.* Golf & Casual Furniture Manufacturer (b)10/96 1,764,706 600,000 617,647
(b)12/97 100,000 37,500 35,000
Preferred Stocks - Public Market Method of Valuation (d)
Ajay Sports, Inc.* Golf & Casual Furniture Manufacturer 2,000 20,000 13,500
Warrants and Stock Options - Board Appraisal Method of Valuation (d)
CompuSonics Video Corporation* Digital Video Product Development (c) 300,000 - -
Williams Controls, Inc.* Manufacturer of sensors, controls, and 11/08/97 (c) 150,000 - 214,649
communication systems for the 08/04/99 (c)(e) 25,000 - -
transportation, telecommunication and 05/03/00 (c) 25,000 - -
agricultural industries. --------- ---------
1,506,727 3,961,798
(Continued)
7
Enercorp, Inc.
Schedule of Investments (Continued)
June 30, 1996
Restrictions Number Cost
Expiration as to of and/or Fair
Date Resale Shares Owned Equity Value
Company Description of Business
UNAFFILIATED COMPANIES
Common Stocks - Public Market Method of Valuation (d)
Immune Response, Inc. Holding Company 10,000,000 5,000 -
Vitro Diagnostics Diagnostic Test Kits 300 1,500 42
Proconnextions, Inc. Sports Memorabilia Marketing (a) 191,610 19,161 4,790
---------- ----------
Sub-total - UNAFFILIATED COMPANIES 25,661 4,832
---------- ----------
Total - ALL COMPANIES $ 1,532,388 $3,966,630
============ ==========
<FN>
(a) Non-public company whose securities are privately owned.
(b) May be sold under the provisions of Rule 144 of the Securities Act of 1933
after a holding period which expires in the month indicated.
(c) No public market for this security exists.
(d) A discount factor as determined by the Company's Board of Directors has
been applied to those stocks valued by the public market method which
have restrictions as to resale.
(e) 25% vesting at 8/94, 8/95, 8/96 and 8/97.
(f) Pledged as collateral against a line of credit with NBD Bank.
* This entity is considered an affiliated company since the Company owns more
than 5% but less than 25% of the Investee company's outstanding common
stock. Because of this, the Company would be affected by a sales limitation
of one percent of the investee's outstanding common stock during any
three-month period, or the average of the last four weeks' trading volume,
whichever is greater.
</FN>
8
Enercorp, Inc.
Statements of Operations
(Unaudited)
For the Three Months For the Nine Months
Ended March 31 Ended March 31
---------------------------- ---------------------------
1997 1996 1997 1996
-------- ------------ ------------ --------------
REVENUES
Interest income $ 799 $ 1,612 $ 2,440 $ 6,493
Interest income from related entities 4,562 -0- 9,377 -0-
Consulting fees from related companies 224 10,018 1,788 41,593
Net realized gain on sale of investments -0- 241,000 216,000 269,410
Royalties and settlement income -0- (16) -0- 2,795
Recovery of bad debt -0- -0- -0- 42,942
Dividend income from affiliated company -0- -0- 1,000 -0-
------------ ----------- ----------- -----------
5,585 252,614 230,605 363,233
------------ ----------- ----------- -----------
EXPENSES
Salaries - officer 25,375 18,000 100,250 54,000
Bonus expense - officer -0- -0- -0- -0-
Directors' fees -0- -0- -0- 1,000
Staff salaries -0- 9,600 20,332 28,600
Legal, accounting and other professional fees 457 2,675 6,470 30,034
Interest expense - related entity -0- 4,884 -0- 29,302
Interest expense - other 40,707 31,672 119,507 82,538
Bad debt expense 600 604 1,827 3,914
Other general and administrative expenses 15,276 20,160 40,288 50,774
--------- --------- ------------ -----------
82,415 87,595 288,674 280,162
----------- --------- ------------ -----------
Net income (loss) from operations before taxes (76,830) 165,019 (58,069) 83,071
Income taxes 26,000 (57,000) 19,000 (29,000)
---------- ---------- ------------ -----------
Net income (loss) from operations after taxes (50,830) 108,019 (39,069) 54,071
---------- ---------- ------------ ------------
Net unrealized gain (loss) on investments
before taxes 651,560 544,380 277,471 (1,243,627)
Income taxes (222,000) (186,000) (95,000) 422,000
---------- ---------- ----------- ------------
Net unrealized gain (loss) on investment
after taxes 429,560 358,380 182,471 (821,627)
----------- --------- ----------- ------------
Increase (decrease) in net assets $ 378,730 $ 466,399 $ 143,402 $ (767,556)
======== ======== =========== ============
Increase (decrease) in net assets per share $ 0.64 $ 0.79 $ 0.24 $ (1.30)
========== ======== ========== ============
9
Enercorp, Inc.
Statements of Cash Flows
(Unaudited)
For the Nine Months
Ended March 31,
--------------------------
1997 1996
----------- ------------
Cash flows from operating activities:
Increase (decrease) in net assets $ 143,402 $ (767,556)
----------- ------------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 1,557 1,292
Bad debt provision on notes receivable
and interest net of write offs 1,827 3,915
Stock received in lieu of consulting fees -0- (37,500)
Gain on sale of investments (216,000) -0-
Loss on sale of fixed assets 777 -0-
Recovery of bad debts -0- (42,941)
Decrease in unrealized gain
on investments (277,471) 1,243,627
(Increase) decrease in accounts receivable
- related party 122,015 -0-
(Increase) in interest receivable (2,433) (5,221)
(Increase) in interest
receivable - related party (9,377) (2,768)
Decrease in other assets 10,853 (9,451)
Increase (decrease) in acts.
payable and accrued exp. 23,359 (50,437)
(Decrease) in deferred taxes 76,000 (393,000)
Decrease in bonus payable to officer -0- (16,322)
----------- ------------
Total adjustments (268,893) 691,194
----------- ------------
Net cash (used) by operating activities (125,491) (76,362)
----------- ------------
Cash flows from investing activities:
Purchase of investments (125,000) (54,000)
Proceed from sale of investments 250,000 -0-
Payments received from notes receivable -0- 77,864
Issuance of notes receivable (200,000) (1,500)
Purchase of furniture and fixtures - net (3,414) -0-
----------- ------------
Net cash provided by investing activities (78,414) 22,364
----------- ------------
Cash flows from financing activities:
Payments to notes payable -0- (496,310)
Proceeds from notes payable 203,729 549,825
----------- ------------
Net cash provided by financing activities 203,729 53,515
----------- ------------
Increase in cash (176) (483)
Cash, beginning of period 495 1,191
----------- ------------
Cash, end of period $ 319 $ 708
=========== ============
Supplemental disclosures of cash flow information:
Interest paid $ 72,051 $ 119,517
=========== ============
Interest received $ -0- $ 403
=========== ============
10
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Material Changes in Financial Condition:
Net assets increased by $378,730, or $.64 per share, during the third
quarter ended March 31, 1997. This compares to an increase in net assets of
$466,399, or $.79 per share, during the third quarter ended March 31, 1996.
The increase during the quarter was due mainly to an increase in the fair
market value of the Registrant's investment in its largest investee,
Williams Controls, Inc. ("Williams"), which represented 92% of the
Registrant's investments (at fair value) at March 31, 1997.
The Registrant has a line of credit, payable on demand, with NBD Bank
("NBD"). The collateral is all of the shares of Williams common stock
currently owned by the Registrant (1,660,000 shares) and all future shares
of Williams common stock acquired by the Registrant. The interest rate is
NBD's prime rate plus 1%. The Registrant may borrow up to the lesser of
$2,000,000 or 50% of the fair market value of the collateral. The amount
available at March 31, 1997, based on the above formula, was $341,550.
NBD had verbally informed the Registrant in January 1997, that its demand
loan expiration was extended until January 31, 1998. Subsequent to that, in
April 1997, NBD verbally informed the Registrant that the expiration of its
credit line was not January 31, 1998, but rather April 30, 1997, with
possible extension pending further review of the Registrant's principal
investee, Williams Controls, Inc. completing a refinancing of its bank
credit facility. NBD has taken no further action on this matter at this
time. Should NBD not continue its lending relationship, the Registrant will
pursue alternative financing sources to help meet its cash flow needs.
At March 31, 1997 the Registrant's borrowing availability against the NBD
line of credit was $341,550. The Registrant has several options for
continued cash flow including; (1) a potential waiver from NBD of the
formula cap; (2) increasing the availability with NBD by pledging Ajay's
common stock and preferred stock as additional collateral; (3) selling
shares of Ajay or Williams common stock; or (4) demanding from Ajay,
payment of the $200,000 note payable. NBD has not been asked, nor has it
indicated a willingness to entertain the modifications indicated in points
(1) and (2) above.
The amount outstanding on the NBD loan at March 31, 1997 and June 30, 1996
were $1,658,450 and $1,454,721, respectively. As of March 31, 1997, the
Registrant has no material commitments for capital expenditures.
11
On September 27, 1996 the Registrant loaned Ajay Sports, Inc. ("Ajay")
$200,000 for working capital. This loan is a 90-day note with an interest
rate of NBD's prime rate plus 1%. In December 1997 the Registrant changed
this note to a demand note. The accrued interest on the note at March 31,
1997 was $9,377. The Registrant expects repayment of the note and interest
some time during 1997.
The Registrant's liquidity is affected primarily by the business success,
securities prices and marketability of its investee companies and by the
amount and timing of new or incremental investments it makes.
Material Changes in Results of Operations:
The Registrant's revenues were $5,585 and $252,614 for third quarter ended
March 31, 1997 and 1996, respectively. The decrease in revenues for the
quarter compared with the prior year's quarter, is due mainly to a decrease
in consulting fees and the decrease in net realized gain on the sale of
investments. The Registrant's operating expenses for the third quarter
ended March 31, 1997 decreased by $5,180 (6%) over the same period of the
prior year. This was due mainly to the reduction of staff level.
The Registrant recorded an unrealized gain on investments of $651,560 for
the third quarter ended March 31, 1997 compared to a gain of $544,380 for
the third quarter ended March 31, 1996. This is mainly due to the changes
in fair market value of the Registrant's investment in Williams.
Williams Controls, Inc. - Investee Company
The Registrant's largest investee company, Williams Controls, is a publicly
held company (NASDAQ: WMCO) in which the Registrant owns common stock and
options. Management recognizes that there is risk associated with its lack
of diversification due to its large investment concentration in Williams.
Williams Controls, Inc., through its subsidiary companies, manufactures and
markets sensors, controls, and communication systems for the
transportation, telecommunication and agricultural industries.
12
Part II. OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
None
13
Enercorp, Inc.
Form 10-Q
For the Third Quarter Ended March 31, 1997
Signature Page
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.
Enercorp, Inc.
(Registrant)
BY:/s/Robert R. Hebard
------------------------
President and Chief Financial Officer
Date: May 15, 1997
14