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 March 31, 2002
[ ] Transition report under Section 13 or 15(d) of the Exchange Act
Commission file number 0-30285
ENERGY VISIONS 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 [X] No [ ]
As of March 31, 2002, the Issuer had 17,867,116 shares of outstanding Common
Stock.
Transitional Small Business Disclosure Format: Yes [ ] No [X]
Item 1. Financial Statements
ENERGY VISIONS INC. AND SUBSIDIARIES
(a development stage company)
CONSOLIDATED STATEMENT OF OPERATIONS
(expressed in U.S. dollars)
(Unaudited)
Period from
Three months ended Six months ended November 19, 1996
March 31, March 31, March 31, March 31, (inception) to
2002 2001 2002 2001 March 31, 2002
Revenue $ 25,000 $ 66,072 $ 50,000 $ 91,072 $ 603,495
Expenses:
Research and development costs 208,767 167,226 406,791 423,810 2,269,398
Professional fees 93,111 65,920 181,303 206,816 1,653,503
General and administrative 69,232 50,015 143,403 246,531 4,621,433
Interest and financing costs 4,920 531,199 9,693 1,054,156 2,303,696
Depreciation and amortization 31,191 28,474 62,155 55,100 428,929
Total expenses: 407,221 842,834 803,345 1,986,413 11,276,959
Net loss $ (382,221) $ (776,762) $ (753,345) $(1,895,341) $ (10,673,464)
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Loss per common share - basic and diluted ($0.02) ($0.06) ($0.04) ($0.14)
====================================================================================================================================
Weighted-average number of common
shares outstanding - basic and diluted 17,673,960 13,628,979 17,651,223 13,618,463
====================================================================================================================================
See Notes to Consolidated Financial Statements
ENERGY VISIONS INC. AND SUBSIDIARIES
(a development stage company)
CONSOLIDATED BALANCE SHEET
(expressed in U.S. dollars)
(Unaudited)
March 31, September 30,
2002 2001
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ASSETS
Current Assets:
Cash and cash equivalents $ 29,094 $ 489,074
Accounts receivable, net of allowance of $141,000 and $90,000, respectively 3,133 8,077
Refundable investment tax credits 85,850 86,725
Prepaid expenses and other current assets 60,718 96,505
--------------- ----------------
Total current assets 178,795 680,381
Property and Equipment, net of accumulated depreciation of $227,000 and $185,000 434,905 423,233
License and Technology costs, net of accumulated amortization of $201,000 and $181,000 253,480 273,549
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Total Assets $ 867,180 $ 1,377,163
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses $ 544,317 $ 494,861
Due to related parties 502,673 495,302
--------------- ----------------
Total current liabilities 1,046,990 990,163
Loan Payable 270,711 273,470
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Total liabilities 1,317,701 1,263,633
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Commitments and Contingencies
Stockholders' Equity (deficiency):
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 17,867,116 and 17,628,979 shares 1,787 1,763
Additional paid-in capital 10,183,663 10,000,174
Accumulated other comprehensive income 37,493 31,712
Deficit accumulated during the development stage (10,673,464) (9,920,119)
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Stockholders' equity (deficiency) (450,521) 113,530
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Total Liabilities and Stockholders' Equity (deficiency) $ 867,180 $ 1,377,163
==================================================================================================================================
See Notes to Consolidated Financial Statements
ENERGY VISIONS INC. AND SUBSIDIARIES
(a development stage company)
CONSOLIDATED STATEMENT OF CASH FLOWS
(expressed in U.S. dollars)
(Unaudited)
Period from
Six months ended November 19, 1996
March 31, March 31, (inception) to
2002 2001 March 31, 2002
Cash flows from operating activities:
Net loss $ (753,345) $(1,895,341) $(10,673,464)
Adjustments to reconcile net loss to net cash used
in operating activities
Depreciation and amortization 62,155 55,100 428,929
Allowance for doubful accounts 51,000 141,000
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
Issuance of compensatory stock options 515,496
Issuance of compensatory stock warrants 109,981 851,276 2,157,172
Noncash compensatory charge for extension of the
expiration date of options 199,875 282,875
Changes in operating assets and liabilities: -
Increase in accounts receivable (46,056) (39,896) (144,133)
(Increase) decrease in refundable investment tax credits 875 19,514 (85,850)
Decrease (increase) in prepaid expenses
and other current assets 35,787 133,753 (60,718)
Increase in accounts payable
and accrued expenses 49,456 311,785 544,317
(Decrease) increase in deferred revenue - (50,000) -
- ----------------------------------------------------------------------------------------------------------
Net cash used in operating activities (490,147) (343,934) (3,059,649)
- ----------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Purchases of property and equipment (53,758) (42,667) (212,387)
Acquisition of license and technology (4,927)
- ----------------------------------------------------------------------------------------------------------
Cash used in investing activities (53,758) (42,667) (217,314)
- ----------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Proceeds from related parties' advances, net 7,371 304,167 750,019
Proceeds from (repayments on) issuance of debentures (85,769) 497,678
Proceeds from (payments on) loan payable, net (2,759) 165,944 270,711
Proceeds from issuance of common stock 73,532 2,150,329
Proceeds from issuance of common stock upon
exercise of warrants & options 22,505 97,505
Repayment of debentures (497,678)
Increase in deferred offering costs (67,000) -
- ----------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 78,144 339,847 3,268,564
- ----------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash 5,781 45,988 37,493
Net increase in cash (459,980) (766) 29,094
Cash and cash equivalents at beginning of period 489,074 3,793
- ----------------------------------------------------------------------------------------------------------
Cash at end of period $ 29,094 $ 3,027 $ 29,094
==========================================================================================================
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 2,322 $ 28,358 $ 178,704
==========================================================================================================
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 $ 590,120 $ 1,308,336
==========================================================================================================
Issuance of common stock to agent for extension of maturity dates $ 75,170
==========================================================================================================
Issuance of stock warrants for related party advances $ 29,663
==========================================================================================================
See Notes to Consolidated Financial Statements
ENERGY VISIONS INC. AND SUBSIDIARIES
(a development stage company)
CONSOLIDATED STATEMENT OF COMPREHENSIVE OPERATIONS
(expressed in U.S. dollars)
- ------------------------------------------------------------------------------------------------------------------------------------
Period from
Three months ended Six months ended November 19, 1996
March 31, March 31, March 31, March 31, (inception) to
2002 2001 2002 2001 March 31, 2002
- ------------------------------------------------------------------------------------------------------------------------------------
Net Loss $ (382,221) $ (776,762) $(753,345) $(1,895,341) $ (10,673,464)
- ------------------------------------------------------------------------------------------------------------------------------------
Other comprehensive income (loss):
Foreign Currency Translation 2,919 50,377 5,781 45,988 37,493
- ------------------------------------------------------------------------------------------------------------------------------------
Comprehensive loss $ (379,302) $ (726,385) $ (747,564) $(1,849,353) $ (10,635,971)
====================================================================================================================================
See Notes to Consolidated Financial Statements
ENERGY VISIONS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2002
(Unaudited)
1. Basis of Presentation:
The financial statements at March 31, 2002 and for the three month and
six month periods ended March 31, 2002 and 2001, 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 periods. 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, 2001.
In July 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 142, Goodwill
and Other Intangible Assets. Under SFAS No. 142, goodwill is no longer
subject to amortization over its estimated useful life. Rather,
goodwill is subject to at least an annual assessment for impairment by
applying a fair-value based test. Additionally, an acquired intangible
asset should be separately recognized if the benefit of the intangible
asset is obtained through contractual or other legal rights, or if the
intangible asset can be sold, transferred, licensed, rented or
exchanged, regardless of the acquiror's intent to do so. The Company
is in the process of determining the impact of this pronouncement on
its financial position and operations.
The results of operations for the three month and six month periods
ended March 31, 2002 is not necessarily indicative of the results that
may be expected for the entire fiscal year ending September 30, 2002.
2. Due To Related Parties:
Advances amounting to approximately $503,000 at March 31, 2002, from
the Company's president and chief executive officer and a company
controlled by this individual, of which approximately $495,000 cannot
be repaid out of the proceeds of the Company's August 2001 Canadian
offering pursuant to an agreement with the Canadian Venture Exchange
("CDNX") for a period of one year from the date of closing of that
offering and are included in current liabilities in the accompanying
consolidated balance sheet. Included in the advances is accrued
interest of approximately $7,000.
3. Stock Options:
On October 2, 2001, the Company's board of directors approved a new
stock option plan (the "Plan") which will become effective upon its
approval by the CDNX and the Company's shareholders. A maximum of
3,500,000 options to purchase shares of common stock can be issued by
the Company under the proposed Plan.
On October 2, 2001, the Company agreed to issue options to purchase
150,000 shares of common stock at an exercise price of $0.27 (Cdn
$0.43) per common share to two officers and directors under the
proposed Plan. On November 1, 2001, the Company agreed to issue
options to purchase 500,000 shares of common stock at an exercise
price of $0.41 (Cdn $0.65) per common share to officers and directors
and a nonemployee under the proposed Plan. On November 22, 2001, the
Company agreed to issue options to purchase 110,000 shares of common
stock at an exercise price of $0.39 (Cdn $0.63) per common share to an
employee and nonemployee under the proposed Plan. On January 11, 2002,
the Company agreed to issue options to purchase 50,000 shares of
common stock at an exercise price of $0.31 (Cdn $0.50) per common
share to an employee under the proposed Plan. These options will be
issued and become exercisable over an eighteen month period upon the
approval of the proposed Plan.
4. Noncash Compensation:
During the six month period ended March 31, 2002 the Company recorded
a charge to operations of approximately $110,000, which represents
research and development services performed by the Alberta Research
Council Inc. ("ARC") during the period. At March 31, 2002, Special
Warrants issued but not earned by ARC were approximately 644,000.
5. Private Placement:
On March 14, 2002, the Company completed a private offering of 238,137
shares of common stock in Canada and received net proceeds of
approximately $116,000 Canadian dollars (approximately US $74,000). In
connection with this private offering, warrants to purchase 238,137
shares of common stock were issued, exercisable at $0.47 (Cdn. $0.75)
per common share.
6. Proposed Transaction:
On April 16, 2002, the Company signed an agreement to purchase
1,000,000 preferred shares of Pure Energy Inc. ("PEI") at a price of
Cdn. $1,000,000, to be paid by the issuance of 1,000,000 shares of the
Company's common stock at a price of Cdn. $1.00 per share. The
proposed agreement and issuance of the Company's common shares is
subject to approval from various regulatory agencies. The preferred
shares acquired by the Company are convertible into common shares of
PEI and together with additional PEI shares that the Company may
purchase pursuant to a four month unconditional option, when combined
with the PEI shares currently held by Wayne Hartford, the Company's
principal shareholder, will constitute a controlling interest in PEI.
The ability of the Company to complete the proposed transaction
involves a number of risks and uncertainties and there is no assurance
that the proposed transaction will be completed.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
The following discussion should be read in conjunction with the
financial statements and related notes which are included under Item 1.
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 and six month periods ended March 31,
2002. The reader is directed to the Company's Annual Report on Form 10-KSB
filing for more information about the Company. Accordingly, this section will
primarily discuss the Company's position as of the filing date hereof.
Overview
Energy Visions Inc. (hereafter, the "Company" or "EVI") was formed in 1996 to
research, develop and commercialize rechargeable battery technologies. The
Company has several electrochemical technologies and is currently primarily
working on the development and commercialization of the Direct Methanol Fuel
Cell ("DMFC"), and the Nickel Zinc ("NiZn") technology.
Costs relating to the DMFC project are in large part supported by Alberta
Research Council Inc. ("ARC"). The Company expects to spend significant sums
upon expanding its battery testing capability. 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 licence fees develop.
Comparative Disclosure
During the quarter ended March 31, 2002, the Company was still a
development stage company and has yet to achieve significant revenues. Revenues
were approximately $25,000 and $50,000, respectively, for the three month and
six month periods ended March 31, 2002 and were entirely earned from research
and development services performed for and licensing fees from Ilion Technology
Corporation ("Ilion"). Pursuant to the terms of the Ilion License Agreement,
such revenues should continue at the minimum rate of $200,000 per annum through
March 2003. Ilion paid the Company the sum of $100,000 to satisfy the minimum
guaranteed royalty amount through March 31, 2001, such sum being designated as
ongoing research and development funding. Ilion has not paid sums in connection
with research and development funding through March 31, 2002 of approximately
$141,000 and the matter is currently under negotiation. The Company's revenue
respecting minimum guaranteed royalty amounts for the three month periods ended
March 31, 2002 and 2001, respectively, remained unchanged. The revenue for the
six month period ended March 31, 2002 of approximately $50,000 decreased by 45%
from approximately $91,000 and revenues for the three month period ended March
31, 2002 decreased by approximately $41,000 or 62% for the same periods in the
prior year as a result of the Company earning additional research and
development revenues in the prior period.
The Company's expenses in the quarters ended March 31, 2002 and 2001
totaled approximately $407,000 and $843,000, respectively, resulting in a
decrease of 52%. This decrease was primarily the result of the Company incurring
in the prior period noncash financing costs of approximately $487,000 relating
to the issuance of stock warrants to debenture holders and promoter in
connection with the extension of the maturity dates of such debentures. The
Company's expenses in the six month periods ended March 31, 2002 and 2001
totaled approximately $803,000 and $1,986,000, respectively, resulting in a
decrease of 60%. Such decrease is primarily the result of the Company incurring,
in the prior year's period, noncash compensatory charges of approximately
$851,000 relating to the issuance of stock warrants to debenture holders and
promoter in connection with the extension of the maturity dates of such
debentures and $200,000 in connection with the extension of the expiration dates
of options previously issued to employees and laboratory consultants.
Additionally, in that period, 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.
One of the most significant costs included in such values are the
Company's research and development costs. Research and development costs for the
three month and six month periods ended March 31, 2002 were approximately
$209,000 and $407,000, respectively. Compared to the research and development
costs for the same three month and six month periods in the prior year of
approximately $167,000 and $424,000, respectively, an increase of 25% and a
decrease of 4%, respectively. The 2002 values include approximately $52,000 for
the three month period and $110,000 for the six month period in noncash
compensatory charges based upon the research and development services performed
by ARC. The 2001 value includes noncash compensatory charges of approximately
$66,000 for the three and six month periods for the extension of the expiration
dates of options previously issued to laboratory consultants. Research and
development costs are expected to continue to increase as EVI continues to
develop its facilities, expertise and activities and continues to fund research
and development work undertaken in Calgary Alberta in the joint program with
ARC.
Professional fees for the three month and six month periods ended March
31, 2002 were approximately $93,000 and $181,000, respectively. Compared to
professional fees for the same three month and six month periods in the prior
year of approximately $66,000 and $207,000, respectively, resulted in an
increase of 41% and a decrease of 12%, respectively. The Company incurred
financial advisory fees of approximately $20,000 and $40,000, respectively, for
the three month and six month periods ended March 31, 2002, not incurred in the
prior year's periods. The net decrease in 2002 six month values is due to the
Company incurring less accounting and legal fees, offset by an increase in
financial advisory fees.
General and administrative expenses increased to $69,000 for the three
month period ended March 31, 2002 from $50,000 for the comparable period in the
prior year, an increase of approximately 38%, primarily the result of a bad debt
provision in the current year of approximately $25,000. Compared to the six
month period from the prior year, general and administrative expenses decreased
from approximately $247,000 to approximately $143,000 for the six month period
ended March 31, 2002, resulting in a decrease of 42%. Such net decrease in
general and administrative expenses resulted from the Company incurring in the
prior period noncash compensatory charges of approximately $134,000 for the
extension of the expiration dates of options previously issued to employees,
offset by a provision for bad debts in the current period of approximately
$51,000.
Interest and financing costs for the three month and six month periods
ended March 31, 2002 were approximately $5,000 and $10,000, respectively.
Interest and financing costs for the three month and six month periods ended
March 31, 2001 were approximately $532,000 and $1,054,000, respectively. In the
current year, the Company essentially incurred minimal interest and financing
costs. During the prior year, the Company incurred noncash financing costs of
approximately $487,000 and $851,000 during the three month and six month
periods, relating to the issuance of stock warrants to debenture holders and
promoter. Additionally, the Company incurred charges of approximately $70,000
during the three and six month periods in the prior year for common stock issued
to consultants for investment advisory services provided in connection with the
Company filing a preliminary prospectus for the sale of shares of common stock
in Canada. Furthermore, the Company accrued approximately $20,000 for interest
on the debentures previously issued.
Liquidity
At March 31, 2002, the Company had approximately $29,000 cash on hand
and a working capital deficiency of approximately $868,000. The Company
currently estimates it will have approximately $115,000 in monthly expenses and
$8,000 in monthly 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. The working capital deficiency of $868,000 at March 31, 2002,
includes approximately $503,000 owed to the Company's President and Chief
Executive Officer and to a company controlled by this individual. Approximately
$495,000 of such sum cannot be repaid, through August 22, 2002 out of the
proceeds of the August 2001 share offering.
It is of great importance that the Company successfully raise new
equity to cover its working capital requirements. The Company will attempt to
make a short-form prospectus filing in the Provinces of Alberta and British
Columbia in the very near future. Currently the Company is negotiating a short
term facility to provide working capital until the short-form prospectus filing
is completed. There can be no assurance, however, that these or any other
financings will be successful, and if they are 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 otherwise intended.
The Company has a joint research and development program with Alberta
Research Council Inc. pursuant to which a joint development program is in
progress in Alberta to create prototype fuel cells based upon the Company's
Direct Methanol Fuel Cell technology. The Company also has a long-standing
agreement with National Research Council of Canada ("NRC") and, while such
contract is currently under renegotiation, NRC has verbally indicated its
intention to support the DMFC initiative by allocating technical staff to the
project and providing other significant support. Such arrangements will
collectively, the Company anticipates, enhance the likelihood of any offering of
shares being successful.
PART II
OTHER INFORMATION
Item 1. Legal Proceedings.
The Company and its major shareholders announced on April 1, 2002 that
they had commenced an action in the Ontario Superior Court of Justice against
Northern Securities Inc., Vic Alboini and Stature Inc. claiming, among other
relief, damages for breach of contract, negligence and breach of fiduciary
duties in connection with EVI's private and public financings in 2000 and 2001
and trading activities by Northern Securities Inc. in EVI stock since August 23,
2001. The defendants have taken steps to defend against the lawsuit and to
counterclaim against the Company and others.
Item 2. Changes in Securities.
None.
Item 3. Defaults Upon Senior Securities.
None
Item 4. Submission of Matters to Vote of Security Holders.
On May 8, 2002, the shareholders of the Company approved the adoption
of the 2001 Share Option Plan in the form attached to the Management Information
Circular of the Company dated March 22, 2002. The shareholders also confirmed
the grant of 810,000 options as per detail set out in such Circular.
Item 5. Other Information.
None
Item 6. Exhibits and Reports on Form 8-K.
(a) None.
(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: May , 2002
ENERGY VISIONS INC.
/s/Peter F. Searle
Peter F. Searle
Vice President, Finance