SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] Quarterly report pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the quarterly period ended December 31, 2000
[ ] Transition report under Section 13 or 15(d) of the Exchange Act
Commission file number 0-30285
ENERGY VENTURES INC.
(Exact name of small business issuer as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
(IRS Employer Identification No.)
43 Fairmeadow Avenue, Toronto, Ontario, Canada M2P 1W8
(Address of principal executive offices)(Zip Code)
(416) 733-2736
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months, and (2) has been
subject to such filing requirements for the past 90 days.
Yes [ ] No [X]
As of February 28, 2001, the Registrant had 13,628,979 shares of its Common
Stock outstanding.
Transitional Small Business Disclosure Format: Yes [ ] No [X]
ENERGY VENTURES INC. AND SUBSIDIARIES
(a development stage company)
CONSOLIDATED BALANCE SHEET
(Unaudited)
December 31, September 30,
2000 2000
ASSETS
Current Assets:
Cash $ 35,240 $ 3,793
Accounts receivable 32,740 5,059
Refundable investment tax credits 106,905 106,311
Due from related parties - 10,975
Prepaid expenses and other current assets 224,672 704,120
---------------- -----------------
Total current assets 399,557 830,258
Property and Equipment, net of accumulated depreciation of $121,868 and $105,096 434,959 418,640
License and Technology Costs, net of accumulated amortization of $151,095 and $141,241 303,832 313,686
- ------------------------------------------------------------------------------------------------------------------------------------
Total Assets $ 1,138,348 $ 1,562,584
====================================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses $ 526,752 $ 308,983
Deferred revenue 25,000 50,000
Due to related parties 305,441 177,346
Debentures payable 497,678 497,678
---------------- -----------------
Total current liabilities 1,354,871 1,034,007
Loan Payable 132,864 47,376
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities 1,487,735 1,081,383
- ------------------------------------------------------------------------------------------------------------------------------------
Commitments and Contingencies
Stockholders' Equity:
Preferred stock - $.0001 par value; authorized 5,000,000 shares, none issued
Common stock - $.0001 par value; authorized 50,000,000 shares,
issued and outstanding 13,628,979 and 13,571,979 shares 1,363 1,357
Additional paid-in capital 7,434,494 7,142,120
Accumulated other comprehensive income 3,741 8,130
Deficit accumulated during the development stage (7,788,985) (6,670,406)
- ------------------------------------------------------------------------------------------------------------------------------------
Stockholders' equity (349,387) 481,201
- ------------------------------------------------------------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity $ 1,138,348 $ 1,562,584
====================================================================================================================================
See Notes to Consolidated Financial Statements
ENERGY VENTURES INC. AND SUBSIDIARIES
(a development stage company)
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
Period from
Three months ended November 19, 1996
December 31, December 31, (inception) to
2000 1999 December 31, 2000
(Restated)
- ---------------------------------------------------------------------------------------------------------------------------
Revenue $ 25,000 $ 66,675 $ 437,544
Expenses:
Research and development costs 256,584 109,939 1,263,406
Professional fees 140,896 33,910 1,259,893
General and administrative 196,516 314,649 4,188,616
Interest and financing costs 522,957 5,316 1,241,295
Depreciation and amortization 26,626 21,656 273,319
============================================================================================================================
Total expenses 1,143,579 485,470 8,226,529
============================================================================================================================
Net loss $ (1,118,579) $ (418,795) $ (7,788,985)
============================================================================================================================
Loss per common share - basic and diluted ($0.08) ($0.03)
============================================================================================================================
Weighted-average number of common
shares outstanding - basic and diluted 13,608,359 12,642,470
============================================================================================================================
See Notes to Consolidated Financial Statements
ENERGY VENTURES INC. AND SUBSIDIARIES
(a development stage company)
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
Period from
Three months ended November 19, 1996
December 31, December 31, (inception) to
2000 1999 December 31, 2000
(Restated)
- -------------------------------------------------------------------------------------------------------------------
Cash flows from operating activities:
Net loss $ (1,118,579) $ (418,795) $ (7,788,985)
Adjustments to reconcile net loss to net cash used
in operating activities
Depreciation and amortization 26,626 21,656 273,143
Noncash interest on advances settled with related party - - 28,604
Common stock issued to founders - - 146,801
Noncash compensatory charge on stock issued to an officer - - 3,018,815
Common stock issued for services 70,000 - 364,557
Noncash compensatory charge on stock options issued to an officer - 275,950 275,950
Issuance of compensatory stock options - - 515,496
Issuance of compensatory stock warrants 364,602 - 943,813
Noncash compensatory charge for extension of the expiration
date of options 199,875 - 199,875
Changes in operating assets and liabilities: - - -
Increase in accounts receivable (27,681) (52,584) (32,740)
Increase in refundable investment tax credits (594) (27,510) (106,905)
Decrease (increase) in prepaid expenses and other current
assets 114,846 6,875 (33,238)
(Decrease) increase in accounts payable and accrued expenses 217,769 (108,256) 526,752
(Decrease) increase in deferred revenue (25,000) - 25,000
- -------------------------------------------------------------------------------------------------------------------
Net cash used in operating activities (178,136) (302,664) (1,643,062)
- -------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Purchases of property and equipment (33,091) (1,892) (106,827)
Acquisition of license and technology - - (4,927)
- -------------------------------------------------------------------------------------------------------------------
Cash used in investing activities (33,091) (1,892) (111,754)
- -------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Proceeds from related parties' advances 139,070 207,120 552,787
Proceeds from issuance of debentures - - 497,678
Proceeds from loan payable 85,488 - 132,864
Proceeds from issuance of common stock - 100,000 505,481
Proceeds from issuance of common stock upon exercise of options - - 75,000
Proceeds from issuance of common stock upon exercise of warrants 22,505 - 22,505
- -------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 247,063 307,120 1,786,315
- -------------------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash (4,389) (2,564) 3,741
- -------------------------------------------------------------------------------------------------------------------
Net increase in cash 31,447 - 35,240
Cash at beginning of period 3,793 - -
- -------------------------------------------------------------------------------------------------------------------
Cash at end of period $ 35,240 $ - $ 35,240
===================================================================================================================
Supplemental disclosure of cash flow information:
- -------------------------------------------------------------------------------------------------------------------
Cash paid during the period for interest $ 26,215 $ 19,622 $ 89,139
===================================================================================================================
Supplemental schedule of noncash investing and financing activities:
- -------------------------------------------------------------------------------------------------------------------
Issuance of common stock for payment of laboratory equipment $ - $ - $450,000
===================================================================================================================
Issuance of common stock in satisfaction of debt related to acquisition of
- -------------------------------------------------------------------------------------------------------------------
license and technology $ - $ - $450,000
===================================================================================================================
Issuance of common stock for payment of advances owed to an officer $ - $ - $275,950
===================================================================================================================
Issuance of stock warrants to debenture holders in connection with extension of
maturity dates $ - $ - $191,614
===================================================================================================================
See Notes to Consolidated Financial Statements
ENERGY VENTURES INC. AND SUBSIDIARIES
(a development stage company)
CONSOLIDATED STATEMENT OF COMPREHENSIVE OPERATIONS
(Unaudited)
Period from
Three months ended November 19, 1996
December 31, December 31, (inception) to
2000 1999 December 31, 2000
(Restated)
- ----------------------------------------------------------------------------------------------------------------------------
Net loss $(1,118,579) $(418,795) $(7,788,985)
Other comprehensive income (loss):
Foreign currency translation (4,389) (2,623) 3,741
- -----------------------------------------------------------------------------------------------------------
Comprehensive loss $(1,122,968) $(421,418) $(7,785,244)
==========================================================================================================
See Notes to Consolidated Financial Statements
ENERGY VENTURES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2000
(Unaudited)
1. Basis of Presentation:
The financial statements at December 31, 2000 and for the three-month
period then ended are unaudited and reflect all adjustments
(consisting only of normal recurring adjustments) which are, in the
opinion of management, necessary for a fair presentation of the
financial position and operating results for the interim period. The
financial statements have been prepared in accordance with the rules
and regulations of the Securities and Exchange Commission and
therefore omit certain information and footnote disclosures normally
included in financial statements prepared in accordance with accounting
principles generally accepted in the United States of America. The
Company believes that the disclosures contained in the financial
statements are adequate to make the information presented therein not
misleading. The financial statements should be read in conjunction with
the financial statements and notes thereto, together with management's
discussion and analysis of financial condition and results of
operations, contained in the Company's Annual Report on Form 10-KSB for
the fiscal year ending September 30, 2000.
The results of operations for the three-month period ended December 31,
2000 are not necessarily indicative of the results that may be expected
for the entire fiscal year ending September 30, 2001.
2. Stock Transactions:
On October 2, 2000, the Company issued 17,000 shares of common stock at
$1.38 per common share (valued at approximately $23,000) upon the
exercising of warrants by a debenture holder.
On November 17, 2000, the Company extended the expiration date of
options issued to employees and nonemployees to purchase 155,100 shares
of common stock exercisable at $0.50 from January 2, 2001 to the
earlier of until March 31, 2001 or a proposed common stock offering.
For the three-month period ended December 31, 2000, the Company
recorded a charge to operations for approximately $69,000, representing
the differential between the fair value of the common stock and the
exercise price of options issued to employees to purchase 55,100 shares
of common stock as of the date of extension. Additionally, during the
current period, the Company recorded a charge to operations for
approximately $131,000, representing the fair value of options issued
to nonemployees to purchase 100,000 shares of common stock as of the
date of extension.
On November 22, 2000, the Company entered into an agreement with
consultants to provide services to the Company. The Company issued the
consultants 40,000 shares of common stock for those services. For the
three-month period ended December 31, 2000, the Company recorded a
charge to operations for approximately $70,000, representing the fair
value of the shares of common stock on the issuance date.
3. Restatement of Prior Period Amounts
For comparability, certain 1999 amounts have been reclassified, where
appropriate, to conform to the financial statement presentation used in
2000. Additionally, for the three-month period ended December 31, 1999,
the statement of operations has been revised to reflect a noncash
compensatory charge of $275,950 for options issued to an officer at a
price below the fair value of the common stock.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
Certain statements made in this Quarterly Report on Form 10-QSB are
"forward-looking" statements within the meaning of the Private Securities
Litigation Reform Act of 1995. Such statements involve known and unknown risks,
uncertainties, and other factors that may cause actual results, performance, or
achievements of the Company to be materially different from any future results,
performance, or achievements expressed or implied by such forward-looking
statements. Although the Company believes that the expectations reflected in
such forward-looking statements are based upon reasonable assumptions, the
Company's actual results could differ materially from those set forth in the
forward-looking statements. Certain factors that might cause such a difference
include, but are not limited to, general economic conditions, our ability to
complete development and then market our products, competitive factors and other
risk factors as stated in other of our public filings with the Securities and
Exchange Commission.
This report is for the three month interim period ended December 31,
2000. Accordingly, this section will primarily discuss the Company's position as
of such date.
Overview
Energy Ventures Inc. (hereafter, the "Company" or "EVI") was formed in
November 1996, to research, develop and commercialize rechargeable battery
technologies. The Company has four core battery technologies - 1) Lithium Ion
("LI") now licensed to Pacific Lithium Limited ("PLL") of New Zealand), 2)
Nickel Zinc ("NiZn"), 3) Zinc Carbon Bromine ("ZnCBr") and 4) the Direct
Methanol Fuel Cell ("DMFC"), which technology was developed in October 1999. The
company is currently working on the development and optimization of the latter
three technologies with the highest priority being directed towards the Direct
Methanol Fuel Cell.
The Company's major focus is upon two areas - the research and
development of the Company's Direct Methanol Fuel Cell Technology and the
Pre-Commercialization of the company's Nickel Zinc and Carbon-Zinc Bromine
technologies. Costs relating to the latter project are in large part supported
by the Industrial Research Assistance Program through the Pre-Commercialization
contribution agreement executed in March 2000. The company expects to spend
significant sums upon expanding its battery testing capability and has purchased
and is refurbishing a pilot battery production line to further expand its
facilities at the Ottawa laboratory. While there can be no assurance that our
business plan for the next year will be successful, the R&D programs, strategic
alliances and targeted financing planned for the Company are expected to support
the Company's activities until significant income streams of royalties and
license fees develop.
Comparative Disclosure
During the quarter ended December 31, 2000, the Company was still a
development stage company and has yet to achieve significant revenues. Revenues,
in the quarter ended December 31, 2000 of $25,000 resulted in a decrease of 63%
compared to the quarter revenues of the prior year, approximately $67,000. The
decrease in revenues during the quarter is a result of a decrease in fees earned
in joint research development projects. Pursuant to the terms of the License
Agreement, such revenues should continue at the minimum rate of $100,000 per
annum through March 2002. We expect revenues from PLL to increase once PLL
commences selling LI cathode materials and LI batteries containing such
materials thereby generating additional royalties for the Company. Other revenue
sources will not result until the Company successfully completes the
commercialization of its other technologies and is able to successfully license
them to battery manufacturers.
The Company's expenses in the quarters ended December 31, 2000 and 1999
totaled approximately $1,144,000 and $485,000 respectively resulting in an
increase of 136%. This increase was a result of the Company incurring noncash
financing costs of approximately $365,000 relating to the issuance of stock
warrants to debenture holders. Additionally, the Company incurred charges of
approximately $70,000 for common stock issued to consultants for investment
advisory services provided in connection with the Company filing a preliminary
prospectus in Canada for the sale of shares of common stock. Also the Company
incurred noncash compensatory charges of approximately $200,000 in connection
with the extension of the expiration dates of options previously issued to
employees and to laboratory consultants. During the prior year's quarter, the
Company incurred noncash compensatory charges of approximately $276,000 for
options issued to an officer.
Expenses, excluding such items, totaled approximately $509,000 in the
current year and approximately $209,000 in the prior year. The most significant
costs included in such values are the Company's technology expenses i.e.
expenses related to the research and development cost of the company's battery
technologies (approximately $191,000 in 2000 - a 74% increase over the prior
years approximately $110,000).
Research and development costs increased approximately 134% to $257,000
for the quarter ended December 31, 2000 from approximately $110,000 for the same
period of 2000. The increase in research and development costs resulted from the
Company incurring non cash compensatory charges of approximately $66,000 for the
extension of the expiration dates of options previously issued to laboratory
consultants. During the current period, the Company incurred additional salary
costs for four new laboratory technicians added to its staff in April 2000.
Professional fees increased approximately 315% to $141,000 for the
quarter ended December 31, 2000 from approximately $34,000 for the same period
of 2000. The increase in professional fees is a result of additional accounting
and legal fees incurred in connection with securities law matters arising from
the Company's compliance with the federal securities laws and costs incurred on
the filing of a preliminary prospectus in Canada for the sale of shares of
common stock.
General and administrative expenses decreased by approximately $119,000
to $196,000 for the quarter ended December 31, 2000. The net decrease in general
and administrative expenses resulted from the Company incurring additional
noncash compensatory charges of approximately $142,000 for the same period of
2000, while incurring additional salary costs of approximately $23,000 during
the current period.
Interest and financing costs increased by approximately $518,000 to
$523,000 for the quarter ended December 31, 2000 from approximately $5,000 for
the same period of 2000. A significant portion of the increase in interest and
financing costs is noncash financing costs of approximately $365,000 relating to
the issuance of stock warrants to debenture holders. Additionally, the Company
incurred charges of approximately $70,000 for common stock issued to consultants
for investment advisory services in connection with the Company filing a
preliminary prospectus for the sale of shares of common stock. The Company also
incurred other financing and interest costs amounting to approximately $83,000
during the current period pertaining to the outstanding debentures.
Liquidity
At December 31, 2000, the Company had approximately $35,000 cash on
hand and a working capital deficiency of approximately $955,000. The Company has
approximately $100,000 in monthly expenses and $8,000 in revenues.
The Company is seeking to raise new capital to support its growth and
technology research and development costs and to fund expanded capital
facilities. At December 31, 2000, the Company owed approximately $498,000
relating to Debentures due to be paid in January and February 2001. The Company
repaid approximately $50,000 of such Debentures in January and February 2001 and
must under their current terms repay approximately $448,000 of the Debentures on
February 28, 2001. However, the Company is currently negotiating with the agent
of the Debenture holders and expects that such Debentures will be extended and
become due on the closing date of the Company's current share offering in
Canada.
In late 2000, the Company filed a Preliminary Prospectus in Canada in
connection with an offering of public shares to investors who are residents of
six specified Canadian Provinces. Northern Securities Inc., the Company's
investment banker, is currently actively marketing such offering and based upon
expressions of interest to date, have indicated to the Company that they expect
to successfully raise new capital of a minimum of $2,000,000 on or before March
31, 2001. The Company believes that it will successfully raise $3,300,000 rather
than the stated $2,000,000 based upon investor discussions to date and due
diligence activities of such possible investors. There can be no assurance,
however, that this or any other financing will be successful, and if it is not
successful, additional debt financing will be required and the Company's
research and development activities will have to be reduced or will not
accelerate to the extent they otherwise intended. The Company continues to the
date hereof to be funded by the President and Chief Executive Officer of the
Company (at the date hereof the sum owed to such President and Chief Executive
Officer approximates $355,000). The Company understands that he intends to
continue to support the Company until the share offering in Canada is
successfully completed.
The Company has a long standing Alliance Agreement with National
Research Council of Canada and is currently in advanced discussions with The
Alberta Research Council Inc. (ARC) of Alberta, Canada concerning a joint
research and development program. ARC and the Company have agreed in principle
on a joint development program to create prototype fuel cells based upon the
Company's Direct Methanol Fuel Cell technology. A comprehensive joint
development agreement is currently being negotiated with ARC under the expected
terms of which ARC will contribute $2 million in technical and other resources
over a three year period in exchange for common shares of the company and
warrants to purchase common shares of the Company in quantities yet to be
finalized. National Research Council of Canada has verbally indicated its
intention to support such initiative by allocating technical staff to the
project and providing other significant support. Such arrangements will
collectively, the Company anticipates, enhance the likelihood of the public
offering of shares being successful.
PART II
OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 2. Changes in Securities.
On October 2, 2000, the Company issued 17,000 shares of common stock
at $1.38 per common share (valued at approximately $23,000) upon the
exercising of warrants by a debenture holder.
On November 17, 2000, the Company extended the expiration date of
options issued to employees and nonemployees to purchase 155,100 shares
of common stock exercisable at $0.50 from January 2, 2001 to the
earlier of until March 31, 2001 and a proposed common stock offering.
For the three-month period ended December 31, 2000, the Company
recorded a charge to operations for approximately $69,000, representing
the differential between the fair value of the common stock and the
exercise price of options issued to employees to purchase 55,100 shares
of common stock as of the date of extension. Additionally, during the
current period, the Company recorded a charge to operations for
approximately $131,000, representing the fair value of options issued
to nonemployees to purchase 100,000 shares of common stock as of the
date of extension.
On November 22, 2000, the Company entered into an agreement with
consultants to provide services to the Company. The Company issued the
consultants 40,000 shares of common stock for those services. For the
three-month period ended December 31, 2000, the Company recorded a
charge to operations for approximately $70,000, representing the fair
value of the shares of common stock on the issuance date.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to Vote of Security Holders.
None.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
(a) 27 Financial Data Schedule
(b) None.
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant
caused this Report to be signed on its behalf by the undersigned thereto duly
authorized.
Date: March 6, 2001
ENERGY VENTURES INC.
/s/D. Wayne Hartford
D. Wayne Hartford
Chief Executive Officer
/s/Peter F. Searle
Peter F. Searle
Vice President, Finance