FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16
OF THE SECURITIES EXCHANGE ACT OF
1934
For the quarterly period ended November 30, 2000
Inzeco Holdings Inc.
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(Translation of registrant's name into English)
999 Barton Street, Stoney Creek, Ontario L8E 5H4 Canada
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(Address of principal executive offices)
[Indicate by check mark whether the registrant files or will file annual
reports under cover Form 20-F or Form 40-F.
Form 20-F X Form 40-F
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[Indicate by check mark whether the registrant by furnishing the
information contained in this Form is also thereby furnishing the information to
the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of
1934.
Yes No X
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If "Yes" is marked, indicate below the file number assigned to the
registrant in connection with Rule 12g3-2(b): 82-
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This Form 6-K consists of the second quarter interim report of Inzeco
Holdings Inc. for the period ended November 30, 2000. All references to
dollar amounts in the Financial Statements, unless otherwise indicated, are
to Canadian dollars, presented in accordance with Canadian generally accepted
accounting principles.
INZECO HOLDINGS INC.
(A DEVELOPMENT STAGE COMPANY)
Interim Consolidated Balance Sheets
November 30, 2000 and May 31, 2000
(Unaudited)
November 30 May 31
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ASSETS
Current assets:
Cash and cash equivalents $ 2,867,635 $ 1,712,725
Miscellaneous receivable 20,126 92,953
Prepaid expenses 8,442 8,442
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2,896,203 1,814,120
Fixed assets 476,148 534,481
Goodwill, net of accumulated amortization
of $69,392 (2000 - $56,210) 39,546 52,728
Deferred development costs 1 1
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$ 3,411,898 $ 2,401,330
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LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY)
Current liabilities:
Accounts payable $ 120,944 $ 768,248
Convertible debentures 356,321 349,278
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477,265 1,117,526
Shareholders' equity (deficiency):
Share capital 8,373,046 5,613,805
Equity component of convertible debentures 10,722 10,722
Deficit (5,449,135) (4,340,723)
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2,934,633 1,283,804
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$ 3,411,898 $ 2,401,330
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See accompanying notes to interim financial statements.
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INZECO HOLDINGS INC.
(A DEVELOPMENT STAGE COMPANY)
Interim Consolidated Statements of Operations and Deficit
Three months ended November 30, 2000 and 1999
(Unaudited)
2000 1999
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Income:
Interest $ 41,200 $ 1,376
Fees and licenses - -
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41,200 1,376
Operating expenses:
General and administrative 241,824 134,148
Other 295,649 192,527
Depreciation 34,266 -
Amortization 6,591 6,591
Interest on convertible debenture 13,764 17,953
Interest and bank charges 228 119
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592,322 351,338
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Loss for the period (551,122) (349,962)
Deficit accumulated during development
stage, beginning of period
Deficit accumulated during development
stage, end of period
Loss per share $ (0.02) $ (0.02)
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Weighted average number of shares
outstanding 31,260,541 22,271,253
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See accompanying notes to interim financial statements.
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INZECO HOLDINGS INC.
(A DEVELOPMENT STAGE COMPANY)
Interim Consolidated Statements of Operations and Deficit
Cumulative six months ended November 30, 2000 and 1999
(Unaudited)
2000 1999
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Income:
Interest $ 63,826 $ 4,737
Fees and licenses - 6,077
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63,826 10,814
Operating expenses:
General and administrative 536,583 371,066
Other 532,634 258,759
Depreciation 68,533 -
Amortization 13,182 13,182
Interest on convertible debenture 20,807 36,105
Interest and bank charges 499 344
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1,172,238 679,456
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Loss for the period (1,108,412) (668,642)
Deficit accumulated during development
stage, beginning of period (4,340,723) (3,035,316)
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Deficit accumulated during development
stage, end of period $(5,449,135) $(3,703,958)
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Loss per share $ (0.04) $ (0.03)
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Weighted average number of shares
outstanding 29,055,090 22,246,450
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See accompanying notes to interim financial statements.
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INZECO HOLDINGS INC.
(A DEVELOPMENT STAGE COMPANY)
Interim Consolidated Statements of Cash Flows
Three months ended November 30, 2000 and 1999
(Unaudited)
2000 1999
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Cash provided by (used in):
Operating activities:
Loss for the period $ (551,122) $ (349,962)
Items not involving cash:
Interest on convertible debenture 13,764 17,953
Amortization 40,857 6,591
Change in non-cash operating working capital:
Miscellaneous receivable 100,944 40,860
Loan receivable - -
Prepaid expenses - -
Accounts payable & accrued liabilities 68,918 130,938
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(326,639) (154,160)
Financing activities:
Issuance of common shares 3,000 33,750
Issuance of special warrants - -
Proceeds from loan payable - -
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3,000 33,750
Investing activities:
Purchase of fixed assets - -
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- -
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Increase (decrease) in cash and
cash equivalents (323,639) (120,410)
Cash and cash equivalents,
beginning of period 3,191,274 190,444
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Cash and cash equivalents,
end of period $ 2,867,635 $ 70,035
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See accompanying notes to interim financial statements.
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INZECO HOLDINGS INC.
(A DEVELOPMENT STAGE COMPANY)
Interim Consolidated Statements of Cash Flows
(Expressed in Canadian dollars)
Cumulative six months ended November 30, 2000 and 1999
(Unaudited)
2000 1999
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Cash provided by (used in):
Operating activities:
Loss for the period $ (1,108,412) $ (668,642)
Items not involving cash:
Interest on convertible debenture 20,807 36,105
Amortization 81,715 13,182
Change in non-cash operating working capital:
Miscellaneous receivable 72,827 26,278
Loan receivable - (25,000)
Prepaid expenses - (700)
Accounts payable & accrued liabilities (661,068) (11,367)
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(1,594,131) (630,144)
Financing activities:
Issuance of common shares 2,759,241 33,750
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2,759,241 -
Investing activities:
Purchase of fixed assets (10,200) -
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(10,200) -
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Increase (decrease) in cash and
cash equivalents 1,154,910 (596,394)
Cash and cash equivalents,
beginning of period 1,712,725 666,429
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Cash and cash equivalents,
end of period $ 2,867,635 $ 70,035
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See accompanying notes to interim financial statements.
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INZECO HOLDINGS INC.
(A DEVELOPMENT STAGE COMPANY)
Notes to Interim Consolidated Statements
Three months ended November 30, 2000
(Unaudited)
1 SIGNIFICANT ACCOUNTING POLICIES:
These interim financial statements include all adjustments which in the
opinion of management are necessary in order to make the financial
statements not misleading. For a full description of accounting policies
which have been applied on a consistent basis in these interim financial
statements, except as described in note 2, refer to the Company's annual
financial statements.
2. CHANGE IN ACCOUNTING POLICY:
Effective January 1, 2000, The Canadian Institute of Chartered
Accountants ("CICA") changed the accounting standards relating to the
accounting for income taxes. The CICA's new standard on accounting for
income taxes adopts the liability method of accounting for future income
taxes. Under the liability method, future income tax assets and
liabilities are determined based on "temporary differences" (differences
between the accounting basis and the tax basis of the assets and
liabilities), and are measured using the currently enacted, or
substantively enacted, tax rates and laws expected to apply when these
differences reverse. A valuation allowance is recorded against any
future income tax asset if it is more likely than not that the asset
will not be realized. Income tax expense or benefit is the sum of the
Company's provision for current income taxes and the difference between
the opening and ending balances of the future income tax assets and
liabilities.
Prior to adoption of this new accounting standard, income tax expense
was determined using the deferral method. Under this method, deferred
income tax expense was determined based on "timing differences"
(difference between the accounting and tax treatment of items of expense
or income), and were measured using the tax rates in effect in the year
the differences originated. Certain deferred tax assets, such as the
benefit of tax losses carried forward, were not recognized unless there
was virtual certainty that they would be realized.
The adoption of this standard has had no impact on the Company's
financial position, results of operations or cash flows.
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3. SHARE CAPITAL:
(a) On June 14, 2000, the Company completed a private placement of
4,033,333 special warrants at a subscription price of $0.60 each
for gross cash proceeds of $2,420,000. Each special warrant is
convertible into 1 common share or 1.1 common shares, if a receipt
for the related prospectus is not received by October 15, 2000.
Costs of arranging the private placement, including agent's
commissions, is $217,300 plus 201,667 special warrants granted to
the agent.
The prospectus was filed on October 12, 2000 and on October 15,
2000, the special warrants were converted into 4,033,333 common
shares.
(b) On October 31, 2000, 15,000 shares were issued for gross proceeds
of $3,000.
(c) On May 31, 2000, Inzeco completed a private placement of 2,807,500
common shares with a subscription price of U.S. $0.40 per share for
gross proceeds of U.S. $1,123,000 or Cdn. $1,680,570. The shares
were fully paid, with the proceeds held in trust by the Company's
escrow agent until June 6, 2000 when the Funds were wired to the
Company. Costs of arranging the private placement were $23,466. If
the Company does not have a Registration Statement filed and
declared effective by the Securities and Exchange Commission in the
United States by December 31, 2000, the Company will be required to
issue 1 additional common share for each 10 shares issued under
this private placement.
The Registration Statement was not declared effective by December
31, 2000. Inzeco has not yet issued, for nil consideration, the
280,750 additional common shares required due to not having the
Registration Statement filed and declared effective by December 31,
2000. When these shares are issued, they will be accounted for like
a stock split with an increase to the number of shares outstanding
but no change to the value of share capital.
On November 30, 2000, the Company had 32,871,886 common shares and
2,710,250 stock options outstanding.
(d) The potential effects of the issuance of common shares under stock
option plans, as well as due to common share purchase warrants and
convertible debentures is not dilutive to the loss per share.
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INZECO HOLDINGS INC.
MANAGEMENT DISCUSSION AND ANALYSIS
January 31, 2001
The following discussion and analysis assumes the reader is familiar with the
Company's audited consolidated financial statements for the year ending May 31,
2000 and its interim financial statements dated November 30, 2000 and the notes
to the financial statements therein. This discussion and analysis contains
statements that are not historical facts and forward looking statements which
involve risk and uncertainties that could cause actual results to differ
materially from those anticipated by management or inferred by the reader.
OVERVIEW
Inzeco Holdings Inc. is commercializing RTICA(R) brand insulation through its
wholly owned subsidiary, RTICA Inc. RTICA is a competitive, high performance
insulating material made from recycled plastic with improved industrial hygiene
features compared to conventional mineral fiber products such as fiber glass.
During Q2 Fiscal 2001, the Company continued its pre-commercial activities
focusing on preparing for the commercial introduction of RTICA(R) blowing wool
in the insulation contractor market in Canada and the United States. Initial
commercial shipments of blowing wool to contractors are expected in Q4 Fiscal
2001.
Regarding the related building code, the Technical Guide, containing the
specification for blowing wool in Canada has been finalized. As soon as the
plant is running continuously we will request an Evaluation Report, or
certification from the National Research Council completing the building code
process for blowing wool in Canada. This involves both testing of our product
and an ISO like evaluation of our manufacturing, quality assurance and other
systems. We plan to present the Canadian specification with minor additions to
US national building code officials in April. The Company currently has
sufficient test results to secure permission from local building code officials
for market development installations in both Canada and the United States.
Scale up of our production facility in Stoney Creek continues with the addition
of personnel and equipment. We are about half way through our eighteen month
project. Although we are about three months behind in our projected timeline, we
are about $1,000,000 under budget with significant savings against budget in
capital expenditures and all operating categories except for legal and
professional fees for securities work.
Raw material evaluations continue with the successful evaluation of multi
layered colored beverage containers with the one of the newer barrier resins
completed.
A small manufacturing system is being constructed at NRC-Industrial Materials
Institute in Montreal for Research and Development work allowing us to focus on
commercial activities at Stoney Creek. A breakthrough in fiber production
leading to further improvements in orientation and yield and additional product
opportunities has been made. Our second patent application for equipment design
was submitted to the US Patent and Trademark Office in November.
Our shareholders at the National Insulation Contractors Exchange buying group
in the US are impatient for product. We are in daily contact with the members
and will continue to do so until we begin to ship product. Discussions with
other buying groups, distributors and contractors in both Canada and the US are
proceeding and we have a backlog of test houses arranged in Canada and the US
who are waiting for product.
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FINANCIAL
Operating Expenses for Q2 were substantially higher than the previous comparable
period. The company raised $4.65 million in May and June of 2000 which
significantly improved the company's cash position. Transaction expenses were
about $450,000, not including agent warrants. By comparison, last year we were
conserving cash as we were still arranging financing. Our cash reserve generates
interest income and our only interest expense is for the $360,000 convertible
denture held by Enbridge Inc.
The US Securities Registration process was complicated and the registration
statement was not declared effective until January 9, 2001. As a result, the
company must provide 280,000 shares to the US investors as we missed the
deadline for the SEC declaring the Company's registration statement effective.
However, we are closer to achieving our goal of trading on the Over the Counter
Bulletin Board (OTCBB) in the US and are taking steps to do so.
The company arranged repayable pre commercialization funding from National
Research Council Industrial Research Assistance Program for up to $450,000 in
addition to the R&D contribution it already receives.
The current level of spending on capital equipment and pre commercial costs is
not expected to change significantly over the next quarter. The Company
estimates that it has working capital for approximately 18 months although
working capital required to support pending commercial sales may decrease cash
reserves more than anticipated.
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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.
Inzeco Holdings Inc.
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(Registrant)
Date February 1, 2001 By: /s/ Robert Stikeman
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*(Signature) Robert Stikeman,
Chief Financial Officer
* Print the name and title of the signing officer under his signature.
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