UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
__________________________________________________________________
(Mark one)
[XX] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
[ ] 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 Registrant as specified in its Charter)
NEVADA 87-0281240
- -------------------------------- ----------------------
(State or other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
4243 Dunwoody Club Drive, Suite 200 Atlanta, Georgia 30305
-------------------------------------------------------------------
(Address of Principal Executive Offices)
Issuer's Telephone Number including Area Code: (678) 731-0007 X 206
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 XX
NO
State the number of shares outstanding of each of the issuer's classes of
common equity as of the latest practicable date: 950,953 shares as of February
12, 2001.
Transitional Small Business Disclosure Format (check one): YES[ ] NO [XX]
BRAINWORKS VENTURES, INC.
Form 10-QSB for the Quarter ended September 30, 1997
Table of Contents
Part I - Financial Information Page
Item 1. Financial Statements 3
Item 2. Management's Discussion and Analysis or Plan of Operation 12
Part II - Other Information
Item 1. Legal Proceedings 13
Item 2. Changes in Securities 13
Item 3. Defaults Upon Senior Securities 13
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 14
EXPLANATORY NOTE
----------------
The financial data and other information contained in this report speak
as of the period covered by the report and do not adequately reflect the
current status of the Company. For current information regarding the Company,
please review the Company's current filings with the Securities and Exchange
Commission.
2
BRAINWORKS VENTURES, INC. AND SUBSIDIARY
(Formerly Auric Metals Corporation)
BALANCE SHEETS
September 30, 1997 and March 31, 1997
ASSETS
(Unaudited)
Sept. 30, 1997 March 31, 1997
-------------- --------------
CURRENT ASSETS:
Cash and cash equivalents $ 58,743 $ 26,103
Receivable from sales of investment 179,996 -
-------------- --------------
Total Current Assets 238,739 26,103
-------------- --------------
INVESTMENTS:
Marketable equity securities (Note 3) 95,500 92,010
Other investments (Note 3) 129,224 154,356
-------------- --------------
224,724 246,366
-------------- --------------
PROPERTY AND EQUIPMENT AT COST
Equipment 1,573 1,573
-------------- --------------
1,573 1,573
Accumulated depreciation (1,337) (1,180)
-------------- --------------
236 393
$ 463,699 $ 272,862
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accrued liabilities $ - $ 649
-------------- --------------
Total current liabilities - 649
-------------- --------------
STOCKHOLDERS' EQUITY:
Common stock, $0.01 par value; Authorized:
25,000,000 shares; Issued: 1,000,000 shares
(including treasury stock) 10,000 10,000
Additional paid-in capital 342,847 342,847
Unrealized loss on securities
available for sale (Note 3) (60,751) (64,241)
Accumulated earnings 181,578 (6,418)
Common stock in treasury at cost 15,511 shares (9,975) (9,975)
-------------- --------------
463,699 272,213
-------------- --------------
$ 463,699 $ 272,862
============== ==============
The accompanying notes are an integral part of these
consolidated financial statements.
3
BRAINWORKS VENTURES, INC. AND SUBSIDIARY
(Formerly Auric Metals Corporation)
UNAUDITED STATEMENTS OF CONSOLIDATED INCOME (LOSS)
For the Three Months Ended September 30, 1997 and 1996
For the Six Months Ended September 30, 1997 and 1996
Three Three Six Six
Months Months Months Months
1997 1996 1997 1996
------------ ------------ ------------ ------------
REVENUES:
Oil and gas sales $ 407 $ 492 $ 407 $ 492
Mineral royalty - - - -
Mineral lease - - - -
Interest income 1,002 - 2,004 -
Dividends - - - -
Gain on sale of securities 214,869 - 214,869 -
------------ ------------ ------------ ------------
216,278 492 217,280 492
------------ ------------ ------------ ------------
EXPENSES:
Mineral exploration - 3,614 - 3,614
Mineral claims leasing 6,639 2,900 6,639 2,900
Depreciation 79 78 157 157
Legal and accounting 3,847 4,478 5,347 5,978
Travel and lodging 8,029 2,455 8,029 2,455
Directors' fees 1,797 2,396 1,797 2,396
Office expense (Note 5) 2,000 6,000 2,000 8,000
General and Administrative 4,172 4,714 5,314 5,692
------------ ------------ ------------ ------------
26,563 26,635 29,283 31,192
------------ ------------ ------------ ------------
NET INCOME (LOSS) $ 189,715 $ (26,143) $ 187,997 $ (30,700)
============ ============ ============ ============
NET INCOME (LOSS) PER
COMMON SHARE $ 0.19 $ (0.03) $ 0.19 $ (0.03)
============ ============ ============ ============
NET INCOME (LOSS) PER
COMMON SHARE - ASSUMING
DILUTION $ 0.19 $ (0.03) $ 0.19 $ (0.03)
============ ============ ============ ============
Weighted average number of
shares outstanding
(excluding treasury stock) 984,489 984,489 984,489 984,489
============ ============ ============ ============
Weighted average number
of shares 984,489 984,489 984,489 984,489
Dilutive effect of options 13,442 - 13,442 -
------------ ------------ ------------ ------------
Diluted average number
of shares 997,931 984,489 997,931 984,489
============ ============ ============ ============
The accompanying notes are an integral part of these
consolidated financial statements.
4
BRAINWORKS VENTURES, INC. AND SUBSIDIARY
(Formerly Auric Metals Corporation)
UNAUDITED STATEMENTS OF CONSOLIDATED CASH FLOWS
Three Months Ended September 30, 1997 and 1996
September 30, September 30,
1997 1996
------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 187,996 $ (30,700)
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation, depletion, amortization
and valuation allowance 157 157
Increase (decrease) in accrued liabilities (649) (514)
Gain on sale of investment securities 214,869 -
------------- -------------
Total adjustments (215,361) (357)
------------- -------------
Net cash provided (used) by operating activities (27,365) (31,057)
CASH FLOWS FROM INVESTING ACTIVITIES:
Gross proceeds from sale of securities 60,004 -
------------- -------------
Net cash provided by investing activities 60,004 -
CASH FLOWS FROM FINANCING ACTIVITIES:
Loan proceeds - 10,000
------------- -------------
Net cash provided by financing activities - 10,000
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS 32,639 (21,057)
Cash and equivalents, beginning of period 26,103 29,261
------------- -------------
Cash and equivalents, end of period $ 58,742 $ 8,204
============= =============
The accompanying notes are an integral part of these
consolidated financial statements.
5
BRAINWORKS VENTURES, INC. AND SUBSIDIARY
(Formerly Auric Metals Corporation)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1997
(1) Operations:
----------
Brainworks Ventures, Inc., formerly Auric Metals Corporation (the
"Company"), was incorporated in Utah in May of 1969 to engage in mineral
exploration. In 1985, the Company became a Nevada corporation by merging with
a wholly-owned Nevada corporation created solely for the purpose of changing
the Company's state of domicile. In subsequent years, the Company has also
engaged in oil and gas exploration, development and production activities.
The Company holds working interests in various patented and unpatented mining
claims in the Tintic Mining District of Utah. The Company leases mining claims
near Elko, Nevada from Hillcrest Mining Company of Denver and has subleased
the claims to United States Steel Corporation. The Company presently holds a
working interest in one oil and gas well near Oklahoma City, Oklahoma which
provides nominal revenue.
(2) Significant Accounting Policies:
---------------------------------
Cash Equivalents:
- ----------------
For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with a maturity of three months to be
cash equivalents.
Principles of consolidation:
- ---------------------------
The consolidated financial statements include the accounts of Auric
Minerals Corporation. Intercompany accounts and transactions have been
eliminated in consolidation.
Investment securities
- ---------------------
Management determines the appropriate classification of investment
securities at the time they are acquired and evaluates the appropriateness of
such classification at each balance sheet date. Available-for-sale securities
consist of marketable equity securities not classified as trading securities.
Available-for-sale securities are stated at fair value, and unrealized holding
gains and losses, net of the related deferred tax effect, are reported as a
separate component of stockholders' equity.
Investment in unconsolidated affiliates:
- ---------------------------------------
Investments in affiliated companies in which ownership is 20% or more
are carried at the Company's original cost plus equity in earnings since date
of acquisition.
Investments in less than 20% owned affiliates are carried at cost or
estimated net realizable amounts, whichever is lower.
6
BRAINWORKS VENTURES, INC. AND SUBSIDIARY
(Formerly Auric Metals Corporation)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1997
(2) Significant Accounting Policies continued:
------------------------------------------
Mining:
- ------
Exploration and development expenditures are generally charged to
expenses as incurred until a decision is made to develop a mineral reserve.
Expenditures to bring new properties into production and major expenditures of
a nonrecurring nature are deferred and amortized ratable over production
benefitted. Expenditures for continuing development required to maintain
production are charged to expenses as incurred.
Depreciation:
- ------------
Equipment is recorded at cost and depreciated on a straight-line method
and declining balance method over a five year estimated useful life.
(3) Investments consist of the following at September 30, 1997:
Robbie claims investment
- ------------------------
The Company acquired a 25% interest in the "Robbie" gold prospect claims
owned by Hi-Tech Exploration at a cost of $3,567. The Company's President,
Mr. James F. Fouts is also an owner of a 25% interest in these claims.
LaFonda investment
- ------------------
The Company owned, as of September 30, 1997, 10,000 shares of the
common stock of Corporacion De La Fonda, Inc., or approximately 10% of that
company's outstanding shares. De La Fonda, Inc. is a New Mexico hotel
operation. Prior to 1984, the Company owned more than 20% of De La Fonda and
accounted for its investment by the equity method. Since 1983, the Company's
investment has been less than 20% and the cost method of accounting has been
used. The carrying value of the investment includes $102,648 of cumulative
undistributed earnings of La Fonda added to the investment under the equity
method. Income taxes have been recognized under the assumption that
undistributed earnings would eventually be distributed as dividends, thereby
qualifying for dividends-received deductions. If the undistributed earnings
are eventually received in taxable transactions other than as dividends, an
unrecognized tax of approximately $34,900 under current rates could result.
The Company's equity in the underlying net assets of La Fonda exceeds
the carrying value of the investment. Since the Company's President, Mr.
James F. Fouts, has positions, interests or shareholdings, in La Fonda, any
transaction between the Company and this entity cannot be deemed to be at
arm's length
7
BRAINWORKS VENTURES, INC. AND SUBSIDIARY
(Formerly Auric Metals Corporation)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1997
(3) Investments continued:
----------------------
Sept. 30,
1997
----------
Robbie claims investment $ 3,567
LaFonda investment 125,657
----------
Other investments $ 129,224
==========
Dynamic Oil Ltd.
- ---------------
Effective April 1, 1994, the Company adopted SFAS No. 115 on accounting
for certain investments in debt and equity securities. This new standard
requires that available-for-sale investments in securities that have readily
determinable fair values be measured at fair value in the balance sheet and
that unrealized holding gains and losses for these investments be reported in
a separate component of stockholders' equity until realized. At September 30,
1997 marketable investments classified as available for sale included the
following:
1997
----------------
Dynamic Oil Ltd. shares at cost $ 156,251
Gross unrealized holding loss 60,751
----------------
Dynamic Oil Ltd. at fair value $ 95,500
================
No sales of Dynamic Oil were made in 1997.
(4) Stock options:
-------------
Following is a summary of activity under all stock option plans for the
period ended September 30, 1997:
Number Option Price
of Shares Per Share Total
-------------- ------------- -------------
Balance at April 1, 1995 48,000 $ 0.60 $ 28,800
No activity - -
-------------- -------------
Balance at March 31, 1996 48,000 28,800
Expired (48,000) (28,800)
-------------- -------------
Balance at March 31, 1997 - -
Granted 60,000 0.65 39,000
-------------- -------------
Balance at September 30, 1997 60,000 0.65 $ 39,000
============== =============
8
BRAINWORKS VENTURES, INC. AND SUBSIDIARY
(Formerly Auric Metals Corporation)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1997
(4) Stock options - continued:
-------------------------
The Company has adopted FASB statement No. 123, "accounting for
Stock-Based Compensation" as of April 1, 1996. Statement 123 allows for the
Company to account for its stock option plans in accordance with APB Opinion
No. 25, "Accounting for Stock Issued to Employees" using the intrinsic value
method. In September 1997 the Company granted options to officers and
directors permitting each to purchase 15,000 shares at $0.65 per share.
Options expire in September 1999. Had compensation cost for the Company's
stock-based compensation plan (60,000 options granted to officers and
directors in 1997) been determined based on the fair value at the grant date
consistent with the method of FASB Statement 123, the Company's net income and
earnings per share would have been reduced to the proforma amounts indicated
below:
Six Months
Ended Sept. 30,
1997
--------------
Net income As reported $ 187,997
Pro forma $ 157,891
Primary earnings per share As reported $ .22
Pro forma $ .19
Fully diluted earnings per share As reported $ .21
Pro forma $ .18
The fair value of each option grant is estimated on the date using the
Black-Scholes option-pricing model, with the following weighted average
assumptions used for grants in fiscal year 1998: dividend yield of 0.0%,
expected average annual volatility of 102%, average annual risk-free interest
rate of 6.0%, and expected lives of three years.
(5) Related party transactions:
--------------------------
The amounts paid to officers and directors have not been, in any
sense, negotiated at arm's length. Payments of $2,000 were made during the
current fiscal year to The Fremont Corp., a corporation in which the Company's
president is principal shareholder. These payments, when made, are for office
use, bookkeeping and clerical services. Refer to Note (3) for additional
related party transactions related to the Robbie claims investment and the
LaFonda investment.
9
BRAINWORKS VENTURES, INC. AND SUBSIDIARY
(Formerly Auric Metals Corporation)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1997
(6) Federal and state income tax:
----------------------------
Effective April 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, Accounting for Income Taxes. The cumulative
effect of the change in accounting principle is immaterial. At September 30,
1997, the Company had, for federal tax reporting purposes, an operating loss
carryforward of approximately $73,000. This carryforward begins to expire in
2010. No benefit has been reported in the financial statements, however,
because the Company believes there is at least a 50% chance that the
carryforward will expire unused. Accordingly, the tax benefit of the loss
carryforward has been offset by a valuation allowance of the same amount.
(7) Commitments and contingencies:
-----------------------------
The Company is required to pay the Bureau of Land Management $100
annually on 29 leased mining claims for $2,900. Additionally the Company pays
Hi-Tech Exploration $3,567 annually for its 1/3 share of 107 leased BLM mining
claims. Rates are subject to change and failure to pay results in loss of
mining rights. The payments to BLM are in lieu of assessment work which was
required previously. The leases are cancelable annually upon notice to
lessor.
(8) Fair values of financial instruments:
------------------------------------
The amount reported in the financial statements for cash and cash
equivalents, marketable securities, and accrued liabilities approximates fair
market value. Fair market value of marketable securities was estimated using
quoted market prices. For the investment without quoted market prices, it was
not possible to estimate fair value without incurring significant costs.
Additional information is included in the footnote for the investment without
fair value disclosure.
10
BRAINWORKS VENTURES, INC. AND SUBSIDIARY
(Formerly Auric Metals Corporation)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1997
September 30, 1997
-----------------------------
Carrying Fair
Amount Value
--------------- -------------
Assets:
- -------
Cash and cash equivalents $ 58,743 $ 58,743
Account receivable 179,996 179,996
Marketable securities 95,500 95,500
Other investments:
Investment for which it is not
practicable to determine fair
market value: 125,657 -
Other investment 3,567 3,567
Liabilities:
- -----------
Accrued liabilities - -
The carrying amounts reported in the summary table, above, are shown in
the balance sheets using the same account titles and carrying amounts.
The fair value of a ten percent investment in common stock on an
untraded company (Corporacion De La Fonda, Inc.) is not disclosed, because it
was not practicable to estimate the fair value. The Company has received
dividends averaging $1.16 per share over the last five years.
11
Part I - Item 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
(1) Results of Operations
Brainworks Ventures, Inc., formerly Auric Metals Corporation (the
"Company"), is a Nevada Corporation, which was previously engaged until May,
2000, in the exploration, development and production of natural resource
properties primarily through participation with other parties in natural
resource joint ventures or other arrangements. Prior to May, 2000, 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 changed management, changed its business direction, and sold
certain assets, including an interest in La Fonda, and an interest in a
natural resource partnership. As a result of these transactions, the Company
no longer has any active natural resource properties.
As of September, 1997, the Company is not aware of any trends that have
or are reasonably likely to have a material impact on its liquidity, net
sales, revenues, or income from continuing operations. There have been no
events which have caused material changes from period to period in one or more
line items of the financial statements or any seasonal aspects that have had a
material effect on the financial condition or results of operation.
This report is being filed in an effort to bring the Company's quarterly
reports current for 1997 and 1998 and, therefore, the figures represented in
the accompanying financial statements do not necessarily reflect the Company's
financial condition at the present time. For the three months ended September
30, 1997 and 1996, the Company had revenues of $216,278 and $492,
respectively, expenses of $26,563 and $26,635, respectively, resulting in net
income of $189,715 and a net loss of $26,143, respectively. For the six
months ended September 30, 1997 and 1996, the Company had revenues of $217,280
and $492, respectively, expenses of $29,283 and $31,192, respectively,
resulting in net income of $187,997 and a net loss of $30,700, respectively.
(2) Liquidity and Capital Resources
The Company did not experience a material change in financial condition
during the quarter. At September 30, 1997, the Company had total assets of
$463,699, no current liabilities, and stockholders' equity of $463,699. As of
the year ended March 31, 1997, the Company had total assets of $272,862, total
current liabilities of $649 and stockholders' equity of $272,213. Current
assets as of September 30, 1997 consisted of cash and cash equivalents in the
amount of $58,743; receivable from sales of investment in the amount of
$179,996; marketable equity securities and other investments in the amount of
$224,724; and equipment in the amount of $1,573 less depreciation.
12
Part II - Other Information
Item 1 - Legal Proceedings
None.
Item 2 - Changes in Securities
None.
Item 3 - Defaults on Senior Securities
None.
Item 4 - Submission of Matters to a Vote of Security Holders
During the quarter ended September 30, 1997, the Company held no
regularly scheduled, called or special meetings of shareholders during the
reporting period, nor were any matters submitted to a vote of this Company's
security holders.
Item 5 - Other Information
During the calendar years 1997 and 1998, the Company filed annual
reports on Form 10-KSB, but failed to file quarterly reports on Form 10-QSB.
This report, along with other quarterly reports, are being filed in an effort
to bring the Company's quarterly reports current for 1997 and 1998.
Therefore, the figures represented in the accompanying financial statements do
not necessarily reflect the Company's financial condition at the present time.
In May, 2000, the Company changed management, changed its business
direction, and sold certain assets, including its subsidiary's interest in
Corporacion de La Fonda ("La Fonda"), to La Fonda, and an interest in a
natural resource partnership, to its former President. As a result of these
transactions, the Company no longer has any active natural resource
properties.
Item 6 - Exhibits and Reports on Form 8-K
None.
13
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
BRAINWORKS VENTURES, INC.
Date: February 12, 2001 By: /s/ Marc J. Schwartz
-------------------------------
Marc J. Schwartz
Vice President and Chief
Financial Officer