UNITED STATES
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 Quarter Ended March 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 1-15679
VENTURE TECH, INC.
(Exact name of small business issuer as specified in its charter)
Idaho 87-0462258
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1055 West 14th Street, Suite 400, North Vancouver, B.C. V7P 3P2
(Address of principal executive offices)
Registrant's telephone no., including area code: (604) 990-9889
Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the past 12 months (or for 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
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date.
Class Outstanding as of March 31, 2000
Common Stock, $.001 par value 37,014,165
TABLE OF CONTENTS
Heading Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements . . . . . . . . . . . . . . . . . . . 3
Balance Sheets -- March 31, 2000 and
December 31, 1999 . . . . . . . . . . . . . . . . . . 4
Statements of Operations -- three months ended
March 31, 2000 and 1998 . . . . . . . . . . . . . . . 6
Statements of Cash Flows -- three months ended
March 31, 2000 and 1998 . . . . . . . . . . . . . . . 7
Notes to Financial Statements . . . . . . . . . . . . . 9
Item 2. Management's Discussion and Analysis and
Results of Operations . . . . . . . . . . . . . . . . 10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . 14
Item 2. Changes In Securities and Use of Proceeds. . . . . . . . . 15
Item 3. Defaults Upon Senior Securities. . . . . . . . . . . . . . 15
Item 4. Submission of Matters to a Vote of
Securities Holders. . . . . . . . . . . . . . . . . . 15
Item 5. Other Information. . . . . . . . . . . . . . . . . . . . . 15
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . 15
SIGNATURES. . . . . . . . . . . . . . . . . . . . . . . 16
PART I
Item 1. Financial Statements
The following unaudited Financial Statements for the period
ended March 31, 2000, have been prepared by the Company.
VENTURE TECH, INC.
FINANCIAL STATEMENTS
March 31, 2000 and December 31, 1999
VENTURETECH, INC.
(A Development Stage Company)
Consolidated Balance Sheets
ASSETS
March 31, December 31,
2000 1999
(Unaudited)
CURRENT ASSETS
Cash $ 443,754 $ 17,944
Marketable securities 787,500 275,000
Accounts receivable - net 12,824 15,584
Note receivable 185,757 27,470
Prepaid expenses 40,000 74,413
License fees - current 43,833 50,000
Total Current Assets 1,513,668 460,411
PROPERTY AND EQUIPMENT 59,284 67,438
OTHER ASSETS
License fees 18,667 25,000
Total Other Assets 18,667 25,000
TOTAL ASSETS $ 1,591,619 $ 552,849
VENTURETECH, INC.
(A Development Stage Company)
Consolidated Balance Sheets (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
March 31, December 31,
2000 1999
(Unaudited)
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 67,891 $ 213,542
Reserve for legal fees 100,000 100,000
License fee payable 60,000 80,000
Notes payable - related party 324,488 -
Total Current Liabilities 552,379 393,542
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock; 100,000,000 shares authorized
of $0.001 par value, 37,014,165 shares issued
and outstanding 37,015 37,015
Additional paid-in capital 7,337,471 7,207,676
Deficit accumulated during the development stage (6,335,246) (7,085,384)
Total Stockholders' Equity 1,039,240 159,307
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,591,619 $ 552,849
<PAGE>
VENTURETECH, INC.
(A Development Stage Company)
Consolidated Statements of Operations
(Unaudited)
From
Inception on
January 1,
For the Three Months Ended 1986 Through
March 31, March 31,
2000 1999 2000
REVENUE
Sales $ 52,052 $ - $ 637,408
Cost of sales 16,904 - 27,136
Gross Margin 35,148 - 610,272
EXPENSES
Research and development - - 50,215
General and administrative 260,566 138,260 5,520,793
Depreciation and amortization 22,088 8,979 474,338
Total Expenses 282,654 147,239 6,045,346
LOSS FROM OPERATIONS (247,506) (147,239) (5,435,074)
OTHER INCOME (EXPENSE)
Realized gain on marketable
securities 547,139 - 547,139
Unrealized gain on marketable
securities 587,603 - 704,491
Net loss on disposal of asset - - (1,400,000)
Interest expense (140,015) (97) (617,504)
Interest income 2,069 - 2,069
Dividend income 848 - 848
Total Other Income (Expense) 997,644 (97) (762,957)
INCOME (LOSS) BEFORE LOSS FROM
DISCONTINUED OPERATIONS
AND PROVISION FOR INCOME TAX 750,138 (147,336) (6,198,031)
LOSS FROM DISCONTINUED OPERATIONS - - (137,215)
PROVISION FOR INCOME TAX - - -
NET INCOME (LOSS) $ 750,138 $ (147,336) $ (6,335,246)
BASIC INCOME (LOSS) PER SHARE $ 0.02 $ (0.00)
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 37,014,165 31,613,845
VENTURETECH, INC.
(A Development Stage Company)
Consolidated Statements of Cash Flows
(Unaudited)
From
Inception on
January 1,
For the Three Months Ended 1986 Through
March 31, March 31,
2000 1999 2000
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 750,138 $ (147,336) $(6,335,246)
Adjustments to reconcile net (loss) to
net cash used by operating activities:
Common stock issued for services - - 34,259
Debentures and warrants issued at
less than market value 129,795 - 529,795
Depreciation and amortization 22,088 8,979 474,338
Loss on sale of investments - - 20,390
Net loss on disposition of asset - - 1,400,000
Unrealized gain in marketable securities (587,603) - (704,491)
Gain on marketable securities (547,140) - (547,140)
Changes in assets and liabilities:
(Increase) decrease in accounts
receivables and other assets (121,113) - (244,605)
Increase (decrease) in accounts
payable and other current liabilities (165,651) (8,140) (52,335)
Net Cash Used by Operating Activities (519,486) (146,497) (5,425,035)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of investments - - (378,313)
Sale of investments 622,243 - 629,353
Purchase of fixed assets (1,435) - (259,159)
Disposal of fixed assets - - 3,223
Purchase of license fees - (25,000) (1,575,000)
Net Cash Provided (Used) by Investing
Activities 620,808 (25,000) (1,579,896)
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of convertible debenture - - 175,000
Conversion of debt to equity - - 75,902
Proceeds from notes payable 324,488 263,909 6,673,098
Common stock issued for cash - - 515,963
Shareholder assessment - - 8,722
Net Cash Provided by
Financing Activities $ 324,488 $ 263,909 $ 7,448,685
VENTURETECH, INC.
(A Development Stage Company)
Consolidated Statements of Cash Flows (Continued)
(Unaudited)
From
Inception on
January 1,
For the Three Months Ended 1986 Through
March 31, March 31,
2000 1999 2000
NET INCREASE (DECREASE)
IN CASH $ 425,810 $ 92,412 $ 443,754
CASH AT BEGINNING OF PERIOD 17,944 53,324 -
CASH AT END OF PERIOD $ 443,754 $ 145,736 $ 443,754
SUPPLEMENTAL CASH FLOW INFORMATION
CASH PAID FOR:
Interest $ - $ - $ 6,667
Income taxes $ - $ - $ -
NON CASH FINANCING ACTIVITIES:
Conversion of debt into additional
paid-in capital $ - $ - $ 75,902
Common stock issued in settlement
of debt $ - $ - $ 5,979,235
Conversion of debenture and warrants
to common stock $ - $ - $ 525,526
Debenture and warrants issued at
less than market value $ 129,795 $ - $ 529,795
VENTURETECH, INC.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
March 31, 2000 and December 31, 1999
NOTE 1 - CONDENSED FINANCIAL STATEMENTS
The accompanying consolidated financial statements have
been prepared by the Company without audit. In the opinion
of management, all adjustments (which include only normal
recurring adjustments) necessary to present fairly the
financial position, results of operations and cash flows at
March 31, 2000 and 1999 and for all periods presented have
been made.
Certain information and footnote disclosures normally
included in consolidated financial statements prepared in
accordance with generally accepted accounting principles
have been condensed or omitted. It is suggested that these
condensed consolidated financial statements be read in
conjunction with the financial statements and notes thereto
included in the Company's December 31, 1999 audited
consolidated financial statements. The result of
operations for periods ended March 31, 2000 and 1999 are
not necessarily indicative of the operating results for the
full years.
NOTE 2 - GOING CONCERN
The Company's financial statements are prepared using
generally accepted accounting principles applicable to a
going concern which contemplates the realization of assets
and liquidation of liabilities in the normal course of
business. The Company has incurred losses from its
inception through March 31, 2000. The Company does not
have an established source of revenues sufficient to cover
its operating costs and to allow it to continue as a going
concern. It is the intent of the Company to seek
additional financing through private placements of its
common stock. This will be accomplished through the use of
convertible debentures. Management believes the funds will
more likely than not be successfully raised, but there can
be no assurance of this. Additionally, the Company intends
to use the marketable securities as additional cash flow.
The Company expects that operations will increase in 2000,
and will start to provide cash flows from operations and
expansion. The Company expects that it will need
$1,000,000 to $2,000,000 of additional funds for operations
and expansion in 2000. In the first quarter of 2000, the
Company sold 95,000 of 200,000 shares of its marketable
securities for net proceeds of $622,243.
Item 2. Management's Discussion and Analysis or Plan
of Operations
Overview
Venture Tech, Inc. (the "Company") is a development stage
company and has incurred losses from its inception through
March 31, 2000. Since 1995, the Company has engaged in the
development, acquisition and licensing of certain computer based
technology designed to ultimately offer a full range of casino-
style gaming, entertainment, information and financial transaction
services over the worldwide Internet. The Company further intends
to leverage its anticipated client base of Internet gaming players
to the more expansive world of electronic commerce ("e-commerce")
for purchase of more basic commodities and services.
Results of Operations
The Company first began gaming operations for real money and
realized revenues in the latter half of 1999. For the three month
period ended March 31, 2000 ("first quarter of 2000"), the Company
had revenues of $52,052. No revenues were realized in the first
quarter of 1999. Cost of sales for the first quarter of 2000 was
$16,904, or 32.5% of revenues, compared to $-0- for the 1999
period, resulting in a gross margin of $35,148. Cost of sales
includes royalties, payable to Starnet Systems International Inc.
("SSII"), incurred on gambling activities and bank discount fees
incurred by the Company for the acceptance of credit cards. Cost
of sales are expected to remain at this percentage level for the
foreseeable future, but as casino volume increases, the percentage
of royalty payment will likely decrease per a negotiated schedule
with SSII.
General and administrative expenses for the first quarter of
2000 increased 88% to $260,566 from $138,260 for the comparable
period in 1999. This increase is primarily attributed to
commencement of the Company's on-line casino in July 1999. Factors
contributing to the increase include the addition of staff and
consultants in support of casino operations, an increase in office
expense in support of added personnel, inclusion of amortization
expense for the Company's gaming and software licenses, legal and
professional fees, and promotional expenses related to the
acquisition of prospective players for the Company's website.
Depreciation and amortization for the first quarter of 2000
increased to $22,088 (146%) compared to the 1999 period. The
increase was primarily due to the recognition in the quarter of
software license amortization that was initiated in the latter half
of 1999 with the commencement of on-line gaming operations. The
Company's loss from operations for the first quarter of 2000 was
$247,506 compared to a loss of $147,239 for the 1999 period. The
increased loss is primarily attributed to the increase in general
and administrative expenses due to commencement of the Company's
on-line casino.
The Company had interest expense of $140,015 for the first
quarter of 2000 compared to $97 for the same 1999 periods.
Interest expense in 2000 resulted from payment of interest on
monies advanced to the Company in the form of a convertible
debenture and the issuance of debentures and warrants at less than
market value. The Company recorded $129,795 in interest expense to
reflect the debt conversion / warrant component of the convertible
debenture. The debenture is convertible into shares of the
Company's common stock at $0.15 per share, which amounts to a
$0.0375 difference in the price of the stock at closing on the date
of issue. The $129,795 reflects the difference in fair market
value of the stock should the entire debenture and attached
warrants be converted. There were no conversions of the debenture
during the first quarter of 2000.
During the first quarter 2000, the Company sold certain
investment securities realizing a gain of $547,139. During this
same period the Company also recorded $587,603 in unrealized gain
on marketable securities held by the Company.
The Company's reported a net profit of $750,138 for the first
quarter of 2000 compared to a net loss of $147,336 for the first
quarter of 1999. The 2000 profit is attributed to the realized and
unrealized gains on marketable securities held by the Company.
Net Operating Losses
The Company has accumulated approximately $6,200,000 of net
operating loss carryforwards as of March 31, 2000, that may be
offset against future taxable income through 2020 when the
carryforwards expire. The use of these losses to reduce future
income taxes will depend on the generation of sufficient taxable
income prior to the expiration of the net operating loss
carryforwards. In the event of certain changes in control of the
Company, there will be an annual limitation on the amount of net
operating loss carryforwards which can be used. No tax benefit has
been reported in the financial statements, because the Company
believes there is a 50% or greater chance the carryforwards will
expire unused. Accordingly, the potential tax benefits of the loss
carryforwards is offset by valuation allowance of the same amount.
Liquidity and Capital Resource
Historically, the Company's working capital needs have been
satisfied primarily through the Company's private placement of
securities and through other debt instruments, such as convertible
debentures. The Company reasonably expects to continue to do so in
the future. At March 31, 2000, the Company had working capital of
$961,289 compared to $66,869 at December 31, 1999. The increase is
primarily attributed to the Company's minority interest in Ocean
Power Corporation ("Ocean Power"), accounted for at a fair market
value of $787,500 at March 31, 2000, compared to $275,000 at
December 31, 1999. At March 31, 2000, the Company had a note
receivable of $185,757 representing an unsecured note due from an
unrelated company. Also at December 31, 1999, the Company had
$443,754 in cash compared to $17,944 at December 31, 1999. The
increase in cash is attributed to the Company's sale of investment
securities owned by it.
As of March 31, 2000, the Company had total assets of
$1,591,619 and total stockholders' equity of $1,039,240 compared
with total assets of $552,849 and total stockholders' equity of
$159,307 at December 31, 1999. Assets and stockholders' equity
increased in the first quarter of 2000 primarily due to
appreciation of the Company's investment in Ocean Power.
During 1999, the Company converted a certain debenture into
200,000 shares of Ocean Power common stock. During the first
quarter of 2000, the Company sold 95,000 Ocean Power shares at an
approximate average price of $6.50 per share and received net
proceeds of $622,243. As of March 31, 2000, the Company had
expended approximately $275,000 of the net proceeds for general
operating expenses including, but not limited to, license fee
payments, salaries, consultant fees, professional fees, marketing,
rent and utilities. The Company anticipates that it may sell
additional shares during 2000 and use the proceeds for general
operating expenses.
For the three months ended March 31, 2000, cash used by
operating activities increased to $519,486 compared to $146,497 for
the comparable 1999 period. This 255% increase is primarily
attributed to a $165,651 reduction in accounts payable, payment of
periodic license fees, advances made to an unrelated company
pursuant to a secured note receivable and an increase in general
and administrative expenses.
Also during the first quarter of 2000, the Company realized
cash from investing activities of $620,808 compared to cash used of
$25,000 in the 1999 period. The 2000 results are due to the sale
of marketable securities. In addition, the Company realized cash
from financing activities of $324,488 pursuant to advances made
against the issuance of a convertible debenture in first quarter of
2000 compared to $263,909 in similar advances made during the
comparable 1999 period.
In January 2000, the company authorized a convertible
debenture for up to $500,000 to repay funds advanced to the Company
by Enterprise Capital, Inc. The debenture only applied to funds
received by the Company through April 3, 2000. $324,488 of such
funds were received by the Company during the qualifying period.
The debenture carries an interest rate of 12% per annum and
provides for a two year conversion period in which the debenture
holder may convert advanced funds into shares of the Company's
common stock at $0.15 per share. Each converted share includes the
right to purchase an additional share of common stock at $0.15 per
share for a five year period commencing from the date of original
conversion. No shares have been converted to date.
In September 1999, the Company authorized a convertible
debenture for up to $1,000,0000 to repay funds advanced to the
Company by Enterprise Capital, Inc., in conjunction with VanAus
Investments Ltd. The debenture was to repay funds advanced to the
Company during 1999 and supercedes a previous debenture issued in
January 1999, and $379,458 in previously advanced funds. The
debenture carried an interest rate of 10% and provides for a two
year conversion period in which the debenture holder may convert
advanced funds into shares of the Company's common stock at the
conversion price of $.20 per share. Each converted share includes
the right to purchase an additional share of common stock at $.20
per share for a five year period commencing from the date of
original conversion. At December 31, 1999 the Company converted
the balance of the debenture into common stock as well as $80,064
of the attached warrants. There were no warrant conversions in the
quarter ended March 31, 2000 and total shares issued pursuant to
this debenture and attached warrants as of March 31, 2000 are
5,400,320.
In 1999, in connection with the Company's license agreement
with SSII, the Company's subsidiary, E-Casinos International Ltd.,
was granted a virtual casino gaming license from the government of
Antigua. SSII agreed to advance funds for the gaming license in
return for installment payments totaling $120,000. As of March 31,
2000, the Company has paid $60,000, leaving a balance still owed of
$60,000. The Company has also paid SSII $70,000 towards its
software technology license, leaving a balance owed of $30,000.
During the remainder of fiscal year 2000, the Company
anticipates meeting its cash and working capital needs primarily
from the proceeds of the sale of its shares through private
placements or similar convertible instruments and revenues
generated from operations.
Effect of Inflation
In the opinion of management, inflation has not had a material
effect on the operations of the Company.
Year 2000
The Year 2000 issue results from a computer industry-wide
practice of representing years with only two digits instead of
four. Beginning in the year 2000, date code fields need to accept
four digit entries to distinguish twenty-first century dates from
twentieth century dates (2000 or 1900). As a result, computer
systems and/or software used by many companies needed to be
upgraded to comply with such Year 2000 requirements. Through April
30, 2000, the Company has not experienced any significant problems
associated with the Year 2000 issue nor has it been made aware of
or experienced date related problems with any third-party software.
Although it appears that the Year 2000 issue will not have a
significant adverse effect on the Company, it continues to monitor
the Year 2000 compliance of its internal systems. Undetected
errors in its internal systems that may be discovered in the future
could have a material adverse effect on its business, operating
results or financial condition.
Risk Factors and Cautionary Statements
This report contains certain forward-looking statements. The
Company wishes to advise readers that actual results may differ
substantially from such forward-looking statements. Forward-
looking statements involve risks and uncertainties that could cause
actual results to differ materially from those expressed in or
implied by the statements, including, but not limited to, the
following: the possible success of the Company's websites, the
effect of future legislation on the Internet gaming business, the
ability of the Company to fund its current and future projects and
its ability to meet its cash and working capital needs, and other
risks detailed in the Company's periodic report filings with the
Securities and Exchange Commission.
PART II
Item 1. Legal Proceedings
There are presently no material pending legal proceedings to
which the Company or any of its subsidiaries is a party or to which
any of its property is subject and, to the best of its knowledge,
no such actions against the Company are contemplated or threatened.
In 1998, the Company took a reserve of $100,000 on its books
against any possible litigation arising out of the termination of
its licensing agreement with Casino World Holdings (CWH). Based on
the opinion of legal counsel, the Company reasonably believes that
it would be successful in any litigation brought by CWH and that
any claims that may be brought by CWH are without merit. The
Company may elect to litigate against CWH in the future to recover
its prior investment, but has no immediate plans to do so.
Item 2. Changes In Securities and Use of Proceeds
This Item is not applicable to the Company.
Item 3. Defaults Upon Senior Securities
This Item is not applicable to the Company.
Item 4. Submission of Matters to a Vote of Security Holders
This Item is not applicable to the Company.
Item 5. Other Information
This Item is not applicable to the Company.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 27 - Financial Data Schedules
(b) Reports on Form 8-K
No report on Form 8-K was filed by the Company during the
three month period ended March 31, 2000.
SIGNATURES
In accordance with the requirements of the Securities Exchange
Act of 1934, the Registrant caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
VENTURE TECH, INC.
Date: May 22, 2000 BY: /S/ William D. Baker
William D. Baker
Vice President and Chief
Executive Officer
Date: May 22, 2000 BY: /S/ Craig J. Bampton
Craig J. Bampton
Vice President, Chief Financial
Officer, Principal Accounting
Officer and Director
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL
INFORMATION EXTRACTED FROM THE VENTURE TECH, INC.
FINANCIAL STATEMENTS FOR THE PERIOD ENDED MARCH 31,
2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-1-2000
<PERIOD-END> MAR-31-2000
<CASH> 443,754
<SECURITIES> 787,500
<RECEIVABLES> 18,515
<ALLOWANCES> 5,691
<INVENTORY> 0
<CURRENT-ASSETS> 1,513,668
<PP&E> 207,837
<DEPRECIATION> 148,553
<TOTAL-ASSETS> 1,591,619
<CURRENT-LIABILITIES> 552,379
<BONDS> 0
0
0
<COMMON> 37,015
<OTHER-SE> 7,207,676
<TOTAL-LIABILITY-AND-EQUITY> 1,591,619
<SALES> 52,052
<TOTAL-REVENUES> 52,052
<CGS> 16,904
<TOTAL-COSTS> 282,654
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,069
<INCOME-PRETAX> 879,933
<INCOME-TAX> 0
<INCOME-CONTINUING> 879,933
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 879,933
<EPS-BASIC> .02
<EPS-DILUTED> .02
</TABLE>
