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 December 31, 1995
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 426
West Bloomfield, Michigan 48322
- --------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(810) 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 January 30, 1996: 590,896.802
Enercorp, Inc.
Form 10-Q Filing for the Quarter Ended December 31, 1995
INDEX
Page
Number
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements 3
Statements of Assets and Liabilities
December 31, 1995 (Unaudited) and June 30, 1995 4
Schedule of Investments (Unaudited), December 31, 1995 5-6
Schedule of Investments June 30, 1995 7-8
Statements of Operations (Unaudited) for the Six
Months Ended December 31, 1995 and 1994 9
Statement of Cash Flows (Unaudited) for the Six
Months Ended December 31, 1995 and 1994 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 12
Item 2. Changes in Securities 12
Item 3. Defaults Upon Senior Securities 12
Item 4. Submission of Matters to a Vote of
Security Holders 12-14
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 14
Signature Page 15
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 six months ended December 31, 1995 are not necessarily
indicative of the results that may be expected for the year ended June
30, 1996. 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, 1995.
Prior period amounts associated with shares or per share
calculations have been restated to reflect the 1-for-75 reverse stock
split which became effective at the close of business December 13,
1995 (see Part II, Item 2).
3
Enercorp Inc.
Statements of Assets and Liabilities
December 31, June 30,
ASSETS 1995 1995
----------- ----------
(Unaudited)
Investments, at fair value, cost of $1,490,888 and $1,440,888
at December 31, 1995 and June 30, 1995, respectively $4,707,116 $6,445,123
Cash 62,971 1,191
Travel advance 58
Accrued interest receivable - net of allowance for
uncollectible interest receivable of $8,834 and $31,642
at December 31, 1995 and June 30, 1995, respectively 2,944 10,548
Notes receivable - related party, net of allowance for
uncollectible notes receivable of $23,147 and $74,795
at December 31, 1995 and June 30, 1995, respectively 7,715 24,931
Note receivable - other 4,000 9,500
Furniture and fixtures, net of accumulated depreciation
of $7,500 and $6,639 at December 31,1995 and
June 30 1995, respectively 4,392 5,253
Other assets 2,993 11,299
----------- ----------
4,792,131 6,507,903
=========== ==========
LIABILITIES AND NET ASSETS
Liabilities
Note payable - related company 496,310 496,310
Note payable - bank 1,000,000 823,896
Accounts payable and accrued liabilities 39,422 61,343
Accrued bonus to officer 16,322 16,322
Deferred tax liability 555,000 1,191,000
----------- ----------
2,107,054 2,588,871
----------- ----------
Net assets
Common stock, no par value: 666,666 shares
authorized, 590,896.802 shares issued and
outstanding December 31, 1995 and June 30, 1995 1,468,251 1,468,251
Retained earnings
Accumulated deficit (906,402) (852,454)
Unrealized net gain on investments, net of deferred
income taxes of $1,093,000 and $1,701,000 at
December 31, 1995 and June 30, 1995, respectively 2,123,228 3,303,235
----------- ----------
2,685,077 3,919,032
----------- ----------
4,792,131 6,507,903
=========== ==========
See notes to financial statements
4
Enercorp, Inc.
Schedule of Investments
December 31, 1995
(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.* Transportation/Telecommunications (d)(h) 400,000 60,000 866,250
Industry Supplier (d)(f) 850,000 127,500 1,840,781
(d)(f) 330,000 412,500 714,656
(b)7/97(d) 30,000 108,750 57,750
Ajay Sports, Inc.* Golf, Billiard & Furniture Manufacturer (b) 10/96 (d) 1,764,706 600,000 529,412
(b) 12/97 (d) 100,000 30,000 30,000
Preferred Stocks - Public Market Method of Valuation (d)
Ajay Sports, Inc.* Golf, Billiard & Furniture Manufacturer (g) 2,000 20,000 13,000
Warrants and Stock Options - Board Appraisal Method of Valuation
CompuSonics Video Corporation* Digital Video Product Development (c) 300,000 - -
Williams Controls, Inc.* Transportation/Telecommunications 03/01/96 (c)(d) 200,000 - 371,925
Industry Supplier 11/08/97 (c)(d) 150,000 - 269,494
01/18/99 (c)(d) 12,500 - -
01/18/99 (c)(d)(e) 12,500 - -
05/03/00 (c)(d) 25,000 - -
---------- --------
1,465,227 4,702,270
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 56
(Continued)
5
Enercorp, Inc.
Schedule of Investments (Continued)
December 31, 1995
(Unaudited)
Restrictions Number Cost
Expiration as to of and/or Fair
Company Description of Business Date Resale Shares Owned Equity Value
UNAFFILIATED COMPANIES (Continued)
Preferred Stocks - Public Market Method of Valuation (d)
Common Stocks - Cost Method of Valuation (d)
Proconnextions, Inc. Sports Memorabilia Marketing (a) 191,610 19,161 4,790
---------- --------
Sub-total - UNAFFILIATED COMPANIES 25,661 4,846
---------- --------
Total - ALL COMPANIES $1,490,888 4,707,116
========== ========
<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) 1/2 vested at 8/96 and 1/2 vested at 8/97.
(f) These shares are pledged as collateral against loans.
(g) Sale is restricted per agreement with the underwriter of the preferred stock offering until August, 1996.
(h) 150,000 shares are pledged against loans.
* 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, 1995
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.* Transportation/Telecommunications (d)(h) 400,000 60,000 1,170.000
Industry Supplier (d)(f) 850,000 127,500 2,486,250
(d)(f) 330,000 412,500 965,250
(b)7/97(d) 30,000 108,750 78,000
Ajay Sports, Inc.* Golf, Billiard & Furniture Manufacturer (b)10/96(d) 1,764,706 600,000 816,177
Warrants and Stock Options - Board Appraisal Method of Valuation
CompuSonics Video Corporation* Digital Video Product Development (c) 300,000 - -
Williams Controls, Inc.* Transportation/Telecommunications 03/01/96 (c)(d) 200,000 - 523,800
Industry Supplier 11/08/97 (c)(d) 150,000 - 383,400
01/18/99 (c)(d) 6,250 - 2,500
01/18/99 (c)(d)(e) 18,750 - -
05/03/00 (c)(d) 25,000 - -
---------- --------
1,415,227 6,434,379
UNAFFILIATED COMPANIES
Common Stocks - Public Market Method of Valuation (d)
Immune Response, Inc. Holding Company 10,000,000 5,000 -
MacGregor Sports and fitness, Inc. Sporting Goods Manufacturing and Marketing (b)11/95(d) 9,046 - 5,880
Vitro Diagnostics Diagnostic Test Kits 300 1,500 75
(Continued)
7
Enercorp, Inc.
Schedule of Investments (Continued)
June 30, 1995
Restrictions Number Cost
Expiration as to of and/or Fair
Company Description of Business Date Resale Shares Owned Equity Value
UNAFFILIATED COMPANIES (Continued)
Preferred Stocks - Public Market Method of Valuation (d)
Common Stocks - Cost Method of Valuation (d)
Proconnextions, Inc. Sports Memorabilia Marketing (a) 191,610 19,161 4,790
---------- --------
Sub-total - UNAFFILIATED COMPANIES 25,661 10,745
---------- --------
Total - ALL COMPANIES $1,440,888 6,445,124
========== ========
<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) 1/3 vested at 8/95, 8/96 and 8/97.
(f) 730,000 shares are pledged as collateral against loans.
* 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 six months
ended December 31, ended December 31,
------------------------------------------------------
1995 1994 1995 1994
------------ ----------- ------------ -----------
REVENUES
Interest and dividend income $ 2,352 $ 11,837 $ 4,881 $ 23,627
Consulting fees 31,575 -0- 31,575 -0-
Net realized gain on sale of investments 28,410 -0- 28,410 -0-
Royalties and settlement income 2,751 -0- 2,811 -0-
Recovery of bad debt 42,942 -0- 42,942 -0-
------------ ----------- ------------ -----------
108,030 11,837 110,619 23,627
------------ ----------- ------------ -----------
EXPENSES
Salaries - officer 18,000 18,000 36,000 36,000
Bonus expense - officer (2,893) 11,301 -0- 20,876
Directors' fees -0- -0- 1,000 -0-
Staff salaries 9,600 9,000 19,000 10,500
Legal, accounting and other professional fees 7,142 23,950 27,359 79,164
Interest expense - related entity 12,197 16,564 24,418 18,977
Interest expense - other 26,532 8,176 50,866 14,171
Bad debt expense 1,138 10,389 3,310 20,731
Other general and administrative expenses 19,847 13,671 30,614 25,266
------------ ----------- ------------ -----------
91,563 111,051 192,567 225,685
------------ ----------- ------------ -----------
Net gain (loss) from operations before taxes 16,467 (99,214) (81,948) (202,058)
Income taxes (4,000) 34,000 28,000 67,000
------------ ----------- ------------ -----------
Net gain (loss) from operations after taxes 12,467 (65,214) (53,948) (135,058)
------------ ----------- ------------ -----------
Net unrealized gain (loss) on investments
before tax (2,025,921) 659,592 (1,788,007) 1,240,041
Income taxes 688,900 (224,000) 608,000 (422,000)
------------ ----------- ------------ -----------
Net unrealized gain (loss) on investments
after tax (1,337,021) 435,592 (1,180,007) 818,041
------------ ----------- ------------ -----------
Increase (decrease) in net assets $(1,324,554) $ 370,378 $ (1,233,955) $ 682,983
============ =========== ============ ===========
Increase (decrease) in net assets per share $ (2.24) $ 0.63 $ (2.09) $ 1.16
============ =========== ============ ===========
See notes to financial statements
9
Enercorp, Inc.
Statements of Cash Flows
(Unaudited)
For the six months ended
December 31,
1995 1994
------------ ----------
Cash flows from operating activities:
Increase (decrease) in net assets $ (1,233,955) $ 682,983
------------ ----------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 861 1,095
Bad debt provision on notes receivable
and interest 3,310 20,730
Recovery of bad debts (42,941) -0-
Unrealized (gain) loss on investments 1,788,007 (1,240,041)
(Increase) in interest receivable (4,413) (23,625)
Decrease in accounts receivable
from affiliated company 58 250
Decrease (increase) in other assets 8,306 (994)
(Decrease) in accounts payable and
accrued expenses (21,921) (25,907)
(Decrease) in accrued salaries -0- (3,000)
Increase (Decrease) in deferred taxes (636,000) 355,000
Increase in bonus payable to officer -0- 20,876
---------- ----------
Total adjustments 1,095,267 (895,616)
---------- ----------
Net cash (used) by operating activities (138,688) (212,633)
---------- ----------
Cash flows from investing activities:
Purchase of investments (50,000) (600,000)
Issuance of notes receivable (1,500) (12,000)
Principal payments on notes receivables 75,864 -0-
--------- ----------
Net cash provided (used) by investing activities 24,364 (612,000)
--------- ----------
Cash flows from financing activities:
Proceeds from notes payable 176,104 894,500
Principal payments of notes payable -0- (70,000)
-------- ----------
Net cash provided by financing activities 176,104 824,500
-------- ----------
Increase (decrease) in cash 61,780 (133)
Cash, beginning of period 1,191 3,183
-------- ----------
Cash, end of period $ 62,971 $ 3,050
======== =======
Supplemental disclosures of cash flow information:
Interest paid $ 73,821 $ 28,226
======== =======
Interest received $ 98 $ -0-
====== =======
See notes to financial statements
10
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Material Changes in Financial Condition:
Net assets from operations decreased $1,324,554 during the quarter ended
December 31, 1995 and decreased $1,233,955 from June 30, 1995 to December 31,
1995. This compared to an increase in net assets of $370,378 during the quarter
ended December 31, 1994 and an increase of $682,983 during the six months ended
December 31 1994. The decrease during 1995 was due mainly to a decrease in the
fair market value of the Registrant's investment in its two largest investees,
Williams Controls, Inc. ("Williams") and Ajay Sports, Inc. ("Ajay"). Williams
represented 88% of the Registrant's investments (at fair value) at December 31,
1995.
The Registrant's current line of credit of $1,000,000 (which is fully borrowed
against) with Michigan National Bank ("MNB") is due on February 7, 1996. The
Registrant is seeking to increase the line of credit with MNB and other banks in
order to meet future working capital needs. There are no other known demands,
commitments, events or uncertainties which will result in or which are
reasonably likely to result in the Registrant's liquidity increasing or
decreasing in any material way. The Registrant has no material commitments for
capital expenditures as of December 31, 1995.
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:
11
The Registrant's revenues were $108,030 and $11,837 for the quarters ended
December 31, 1995 and 1994, respectively. Revenues for the six months ended
December 31, 1995 and 1994 were $110,619 and $23,267, respectively. This
increase is due mainly to increases in consulting fees, net realized gain on
sale of investments and recovery of bad debts. The Registrant's expenses for the
quarter ended December 31, 1995 decreased by $19,488 (17.5%) over the same
period of the prior year. Expenses for the six months ended December 31, 1995
decreased by $33,118 (14.7%) over the same period of the prior year. The
decrease in expenses is due mainly to reductions in bonus expense, legal expense
and bad debt expense. The Registrant's net gain from operations for the quarter
ended December 31, 1995 was $16,467, compared to a net loss from operations of
$99,214 for the quarter ended December 31, 1994. Net loss from operations for
the six months ended December 31, 1995 decreased $120,110 (59.4%) over the same
period of the prior year. This decrease is a combination of the increased
revenues and lower expenses that were noted above.
The Registrant recorded an unrealized loss on investments of $2,025,921 for the
quarter ended December 31, 1995 compared to an unrealized gain of $659,592 for
the quarter ended December 31, 1994. The Registrant recorded an unrealized loss
on investments of $1,788,007 for the six months ended December 31, 1995 compared
to an unrealized gain of $1,240,041 for the six months ended December 31, 1994.
This was due mainly to a decrease in the fair market value of Williams and Ajay.
Williams Controls, Inc. - Investee Company
The Registrant's largest investee company, Williams is a publicly held company
(Nasdaq NNM:WMCO) in which the Registrant owns common stock and warrants.
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
electronics, controls, and consumer products for the communications,
transportation and telecommunication industries.
Part II. OTHER INFORMATION
Item I. Legal Proceedings
NA
Item 2. Changes in Securities
On December 12, 1995 the shareholders of the Registrant approved a
1-for-75 reverse stock split which became effective as of the close of
business December 13, 1995. After the split, the Registrant had 666,666.666
common shares authorized and 590,896.802 shares issued and outstanding as
of December 31, 1995.
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
On December 12, 1995 the Registrant held the Annual Meeting of
Shareholders. The following proposals were voted upon:
12
Proposal #1: An amendment to Article IV of the Company's Articles of
Incorporation to cause a 1-for-75 share reverse stock split whereby every 75
shares of the Company's no par value Common Stock (the "pre-split Common Stock")
will be converted into one share of newly created no par value Common Stock (the
"post- split Common Stock").
For: 30,994,692 Against: 1,646,150 Abstain: 133,900 Not Voted: 754,800
This proposal passed.
Proposal #3: Election of directors.
Robert R. Hebard
For: 33,416,792 Withhold: 112,750 Total Voted: 33,529,542
Carl W. Forsythe
For: 33,404,292 Withhold: 125,250 Total Voted: 33,529,542
H. Samuel Greenawalt
For: 33,419,292 Withhold: 110,250 Total Voted: 33,529,542
All three nominees were elected.
Proposal #4: To ratify the appointment of Hirsch & Silberstein, P.C., as
independent auditor of the Company for the fiscal year ending June 30, 1996.
For: 32,740,844 Against: 129,400 Abstain: 650,800 Not Voted:8,498
This proposal passed.
The meeting was adjourned, as to Proposal 2(a) through (e) on the proxy
statement, until January 11, 1996, and then was again adjourned until February
9, 1996. Proposal #2 requested the shareholders to vote on the following
amendments to the Company's Articles of Incorporation to be included in the
Company's Amended and Restated Articles of Incorporation.
13
(a) To change the Company's authorized capital to 151,000,000 shares of capital
stock (if Proposal 1 to effect a reverse stock split is not approved by the
shareholders) or 11,000,000 (if Proposal 1 to effect a reverse stock split
is approved by the shareholders), which will consist of (i) 150,000,000
shares of Common Stock (if proposal 1 is not approved) or 10,000,000 shares
of Common Stock (if proposal 1 is approved) and (II) 1,000,000 shares of
preferred stock.
(b) To provide for the limitation of liability for the Company's directors
under certain circumstances.
(c) To reduce the quorum required for the transaction of business at any
shareholders meeting from a majority to one-third of the shares entitled to
vote at the meeting.
(d) To reduce the voting requirement for shareholder approval for actions
requiring a two-thirds vote from two-thirds to a majority of the shares
entitled to vote on the action.
(e) To approve all of the other amendments contained in the Restated Articles
of Incorporation which are permitted by law but which do not in any
material way change the effect of the Company's Articles of Incorporation.
The Registrant continues to solicit votes from shareholders, as of the date of
this filing, on Proposal 2(a) - (e).
Item 5. Other Information
Prior period amounts associated with shares and per share calculations
have been restated to reflect the Registrant's 1-for-75 reverse stock split
which became effective at the close of business on December 13, 1995.
On January 4, 1996, the Registrant applied to the Nasdaq Stock Market to
allow for the listing and trading of its securities on the Nasdaq SmallCap Stock
Market. The Registrant, upon completion of the reverse stock split, believed
that it met all the criteria for such listing. The application is currently
under review by Nasdaq and the Registrant expects to hear of a decision on this
application by March 31, 1996. Should the application be granted, the Registrant
currently intends to have its securities listed for trading on the SmallCap
Market.
Item 6. Exhibits and Reports on Form 8-K
On December 15, 1995 the Registrant filed a Form 8-K reporting the
results of the Annual Meeting of Shareholders. This report also stated that the
reverse split became effective at the close of business on December 13, 1995 and
the Registrant received a new stock symbol (ENCP) and a new CUSIP number
(292906-20-3).
14
Enercorp, Inc
Form 10-Q
For the Quarter Ended December 31, 1995
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
------------------
Robert R. Hebard
President and Chief Financial Officer
Date: January 30, 1996
15