1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
(Mark one)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2000
TRANSITION REPORT UNDER SECTION 13 OR 15 (D) OF THE
[ ] EXCHANGE ACT OF 1934 For the transition period from to
------- -------
Commission File Number: 0-6334
BRAINWORKS VENTURES, INC.
(Exact name of small business issuer as specified in its charter)
NEVADA 87-0281240
(State of Incorporation) (IRS Employer ID Number)
4243 DUNWOODY CLUB DRIVE, SUITE 200, ATLANTA, GEORGIA 30305
(Address of principal executive offices)
(678) 731-0007 X 206
(Issuer's telephone number, Including area code)
AURIC METALS CORPORATION
(Former name, former address and former fiscal year, if changed since
last report)
--------------------------
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 (or such
shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days. YES [X]
NO [ ]
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: 954,548 shares as of
November 17, 2000.
Transitional Small Business Disclosure Format (check one): Yes No [X]
2
BRAINWORKS VENTURES, INC.
INDEX TO FORM 10-QSB
FOR THE THREE AND SIX MONTHS ENDED SEPTEMBER 30, 2000
PART I - FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS PAGE
Condensed Consolidated Balance Sheet of Brainworks Ventures, Inc.
and Subsidiary as of September 30, 2000.........................................................3
Condensed Consolidated Statements of Income of Brainworks Ventures, Inc.
and Subsidiary for the Three Months and Six Months Ended
September 30, 2000 and September 30, 1999.......................................................4
Condensed Consolidated Statements of Cash Flows
of Brainworks Ventures, Inc. and Subsidiary for the
Six Months Ended September 30, 2000 and September 30, 1999......................................5
Notes to Condensed Consolidated Financial Statements............................................6
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF OPERATION.........................7
PART II - OTHER INFORMATION
ITEM 2 CHANGES IN SECURITIES AND USE OF PROCEEDS..........................................8
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K ..................................................8
SIGNATURES ...................................................................................8
2
3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BRAINWORKS VENTURES, INC. AND SUBSIDIARY
Consolidated Balance Sheet
September 30, 2000
ASSETS
Cash and equivalents $ 1,347,000
Investments 205,000
-----------
Total assets $ 1,552,000
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 59,000
Income taxes payable 323,000
-----------
Total liabilities 382,000
-----------
STOCKHOLDERS' EQUITY
Common stock, $0.01 par value;
authorized: 25,000,000 shares $ 10,000
Additional paid-in capital 2,743,000
Deferred compensation (672,000)
Treasury stock, 46,405 shares at cost (212,000)
Retained earnings (deficit) (699,000)
-----------
Total stockholder equity 1,170,000
-----------
Total liabilities and stockholders equity $ 1,552,000
===========
See accompanying notes to condensed consolidated financial statements.
3
4
BRAINWORKS VENTURES, INC. AND SUBSIDIARY
Consolidated Statements Of Income
For The Three And Six Month Periods Ended
Three months Six months
ended September 30, ended September 30,
--------------------------------- ---------------------------------
2000 1999 2000 1999
INCOME ----------- ----------- ----------- -----------
Interest and other income $ 11,000 $ 2,000 $ 12,000 $ 4,000
Dividends 10,000 10,000
Realized gain/(loss) on sale of
securities, net
(19,000) 1,120,000
----------- ----------- ----------- -----------
(8,000) 2,000 1,142,000 14,000
----------- ----------- ----------- -----------
EXPENSES:
Lease expense 3,000
General and administrative expense 110,000 295,000 33,000
Non-cash compensation charge 194,000 28,000 1,521,000
----------- ----------- -----------
304,000 28,000 1,816,000 36,000
----------- ----------- ----------- -----------
NET LOSS BEFORE INCOME TAXES (312,000) (26,000) (674,000) (22,000)
Provision for income taxes 330,000
----------- ----------- ----------- -----------
NET LOSS $ (312,000) $ (26,000) $(1,004,000) $ (22,000)
=========== =========== =========== ===========
NET LOSS PER COMMON SHARE-
basic and diluted $ (0.33) $ (0.03) $ (1.03) $ (0.02)
=========== =========== =========== ===========
Weighted average number of shares-
outstanding, basic and diluted 954,000 981,000 977,000 984,000
=========== =========== =========== ===========
See accompanying notes to condensed consolidated financial statements.
4
5
BRAINWORKS VENTURES, INC. AND SUBSIDIARY
Consolidated Statement Of Cash Flows
For The Six Month Period Ended
September 30, September 30,
2000 1999
------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(1,004,000) $ (22,000)
Adjustments to reconcile net income to net cash
provided by operating activities:
Gain on sale of securities (1,120,000)
Non-cash compensation charge 1,521,000
Income taxes payable 316,000 19,000
Accounts payable and accrued payables 59,000
----------- -----------
Net cash (used in) operating activities (228,000) (3,000)
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from the sale of investments 1,524,000
Purchase of investments (205,000) (67,000)
----------- -----------
Net cash provided by (used in) investing activities 1,319,000 (67,000)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the sale of treasury stock 8,000
Purchase of treasury stock (2,000)
-----------
Net cash provided by (used in) financing activities 8,000 (2,000)
----------- -----------
NET INCREASE (DECREASE) IN CASH AND 1,099,000 (72,000)
EQUIVALENTS
Cash and equivalents, beginning of period 248,000 203,000
----------- -----------
Cash and equivalents, end of period $ 1,347,000 $ 131,000
=========== ===========
See accompanying notes to consolidated financial statements.
5
6
BRAINWORKS VENTURES, INC. AND SUBSIDIARY
Notes To Condensed Consolidated Financial Statements
September 30, 2000
THE COMPANY AND BASIS OF PRESENTATION
Brainworks Ventures, Inc. (the "Company") is a Nevada corporation which
was previously engaged in the exploration, development and production of natural
resource properties primarily through participation with other parties in
natural resource joint ventures or other arrangements. The Company held
interests in certain natural resource properties, and the Company's wholly owned
subsidiary, Auric Minerals Corporation (the "Subsidiary"), held a minority
interest in Corporacion de La Fonda ("La Fonda") which owns and operates a hotel
in Santa Fe, New Mexico.
In May 2000, the Company nominated new directors to the board and hired
new executive officers. With the election of new officers and directors, the
business strategy of the Company was changed to developing, investing in and
operating internet and other technology companies primarily in the Southeastern
United States. In line with this new strategy, the Subsidiary sold its holdings
in La Fonda back to La Fonda and, in addition, the Company sold certain other
equity securities and a twenty-five percent (25%) interest in a partnership to
its former President. As a result of these transactions, the Company does not
currently have any active natural resource projects.
The accompanying unaudited, consolidated, condensed financial
statements include the accounts of the Company and the Subsidiary. All
intercompany balances and transactions have been eliminated. The accompanying
unaudited, consolidated, condensed financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information in accordance with the instructions to Form 10-QSB. Accordingly,
they do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the opinion
of management, all adjustments (consisting of normally recurring accruals)
considered for fair presentation have been included. Operating results for the
three-month period ended September 30, 2000 are not necessarily indicative of
the results that may be expected for the year ended March 31, 2001. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the Company's 2000 Annual Report on Form 10-KSB.
In June, 2000 the Company entered into an agreement with James Fouts,
former President of the Company, whereby Mr. Fouts agreed to return 50,000
shares of the Company's common stock to the Company for cancellation. In
addition, he has agreed to provide certain limited administrative support to the
Company. As of the date of this Form 10-Q, Mr. Fouts has not delivered 3,600 of
the agreed 50,000 shares to the Company for cancellation.
NET LOSS PER SHARE
Net loss per share for the three and six month periods ended September
30, 2000 and September 30, 1999 is computed based on the weighted average number
of common shares outstanding. Common shares issuable upon the exercise of
options are not included in the calculation of the net loss per share because
their effect would be antidilutive.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Certain statements contained in this Quarterly Report on Form 10-QSB
are "forward-looking statements," within the meaning of the Private Securities
Litigation Reform Act of 1995, and are thus prospective in nature. Such
forward-looking statements reflect management's beliefs and assumptions and are
based on information currently available to management. The forward-looking
statements involve known and unknown risks, uncertainties and other factors that
may cause actual results, performance or achievements of Brainworks Ventures,
Inc. to differ materially from those expressed or implied in such statements.
There can be no assurance that such factors or other factors will not affect the
accuracy of such forward-looking statements
6
7
LIQUIDITY AND CAPITAL RESOURCES
Current assets as of September 30, 2000 of $1,347,000 represents an
increase in total assets of $1,099,000 from the March 31, 2000 fiscal year end
and an increase in current assets of $1,215,554 from the comparable period ended
September 30, 1999. Current assets as of September 30, 2000 consist of cash and
cash equivalents in the amount of $1,347,000. Total assets as of September 30,
2000 of $1,552,000 represents an increase in total assets of $976,000 from the
March 31, 2000 fiscal year end and an increase in current assets of $1,079,090
from the comparable period ended September 30, 1999. These increases in current
assets and total assets were primarily due to the sale by the Subsidiary of it
remaining holdings in La Fonda.
The Company is currently seeking suitable investment opportunities in
technology companies. The Company believes it has adequate capital and liquidity
at the present time to make such investments, unless the Company should enter
into a transaction requiring substantial capital, and to sustain its operations
for the next six months. The Company is currently seeking additional capital.
During the quarter ended September 30, 2000, the Company liquidated
marketable securities previously held by it and received $88,692.60 in cash
therefor.
In July, 2000 the Company invested in two Atlanta area technology
companies. The Company invested $100,000 in Mostchoice.com, Inc., an on-line
financial services company that provides insurance and financial planning
services via the internet, and in return the Company received 100,000 shares of
common stock in Mostchoice.com, Inc. and a warrant to purchase 100,000 shares of
such common stock. The Company also invested $105,000 in Agentware, Inc., a
corporation that develops internet infrastructure software that enables content
syndication solutions, and in return the Company received 150,000 shares of
common stock in Agentware, Inc.
RESULTS OF OPERATIONS
For the three months ended September 30, 2000 and September 30, 1999,
the Company recorded revenues of ($8,000) and $2,000, respectively, and expenses
of $304,000 and $28,000, respectively, resulting in a net loss before provision
of income taxes of $312,000 and $26,000, respectively.
For the six months ended September 30, 2000 and September 30, 1999, the
Company recorded revenues of $1,142,000 and $14,000, respectively, and expenses
of $1,816,000 and $36,000, respectively, resulting in a net loss before the
provision of income taxes for such period of $674,000 and $22,000, respectively.
This increase in revenue of $1,128,000 is due principally to the gain on sale of
the Subsidiary's holdings in La Fonda.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
(3)(i) Certificate of Amendment to Articles of Incorporation......9
(27) Financial Data Schedule (for SEC use only)................10
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during the
quarter ended September 30, 2000.
7
8
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
BRAINWORKS VENTURES, INC.
By: /s/ Marc J. Schwartz
---------------------------------
Marc J. Schwartz
Vice President/Treasurer
Dated: November 20, 2000
8