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 September 30, 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 500, 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 September 30, 2000
----------------------------- ------------------------------------
Common Stock, $.001 par value 37,014,165
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TABLE OF CONTENTS
Heading Page
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PART I. FINANCIAL INFORMATION
<S> <C> <C>
Item 1. Financial Statements.................................................................. 3
Balance Sheets -- September 30, 2000 and
December 31, 1999............................................................... 4
Statements of Operations -- three and nine
months ended September 30, 2000 and 1999........................................ 6
Statements of Stockholders' Equity................................................ 7
Statements of Cash Flows -- three and nine
months ended September 30, 2000 and 1999........................................ 13
Notes to Financial Statements .................................................... 15
Item 2. Management's Discussion and Analysis and
Results of Operations............................................................. 17
PART II. OTHER INFORMATION
Item 1. Legal Proceedings..................................................................... 24
Item 2. Changes In Securities and Use of Proceeds............................................. 24
Item 3. Defaults Upon Senior Securities....................................................... 24
Item 4. Submission of Matters to a Vote of
Securities Holders.................................................................. 24
Item 5. Other Information..................................................................... 25
Item 6. Exhibits and Reports on Form 8-K...................................................... 25
SIGNATURES........................................................................ 26
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PART I
Item 1. Financial Statements
The following unaudited Financial Statements for the period ended
September 30, 2000, have been prepared by the Company.
VENTURE TECH, INC.
FINANCIAL STATEMENTS
September 30, 2000 and December 31, 1999
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VENTURETECH, INC.
(A Development Stage Company)
Consolidated Balance Sheets
ASSETS
------
September 30, December 31,
2000 1999
-------- --------
Unaudited)
CURRENT ASSETS
Cash $104,700 $ 17,944
Marketable securities 500,625 275,000
Accounts receivable - net 16,298 15,584
Note receivable -- 27,470
Prepaid expenses -- 74,413
License fees - current 31,500 50,000
-------- --------
Total Current Assets 653,123 460,411
-------- --------
PROPERTY AND EQUIPMENT 40,615 67,438
-------- --------
OTHER ASSETS
License fees 6,000 25,000
Note receivable 217,482 --
-------- --------
Total Other Assets 223,482 25,000
-------- --------
TOTAL ASSETS $917,220 $552,849
======== ========
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VENTURETECH, INC.
(A Development Stage Company)
Consolidated Balance Sheets (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
September 30, December 31,
2000 1999
----------- -----------
(Unaudited)
CURRENT LIABILITIES
<S> <C> <C>
Accounts payable and accrued expenses $ 138,917 $ 213,542
Reserve for legal fees 100,000 100,000
License fee payable 40,000 80,000
Notes payable - related party 365,137 --
----------- -----------
Total Current Liabilities 644,054 393,542
----------- -----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred stock; 20,000,000 shares authorized of
$0.001 par value, no shares issued and outstanding -- --
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 (7,101,320) (7,085,384)
----------- -----------
Total Stockholders' Equity 273,166 159,307
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 917,220 $ 552,849
=========== ===========
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<CAPTION>
VENTURETECH, INC.
(A Development Stage Company)
Consolidated Statements of Operations
(Unaudited)
From
Inception on
For the For the January 1,
Nine Months Ended Three Months Ended 1986 Through
September 30, September 30, September 30,
------------------------- ----------------------
2000 1999 2000 1999 2000
----------- ----------- ----------- ---------- -----------
REVENUE
<S> <C> <C> <C> <C> <C>
Sales $ 129,590 $ 9,526 $ 29,785 $ 9,526 $ 714,946
Cost of sales 41,897 3,669 10,989 3,669 52,129
----------- ----------- ----------- ---------- -----------
Gross Margin 87,693 5,857 18,796 5,857 662,817
----------- ----------- ----------- ---------- -----------
EXPENSES
Research and development -- -- -- -- 50,215
General and administrative 727,408 721,398 222,014 351,817 5,987,635
Depreciation and amortization 66,263 56,105 22,088 38,147 518,513
----------- ----------- ----------- ---------- -----------
Total Expenses 793,671 777,503 244,102 389,964 6,556,363
----------- ----------- ----------- ---------- -----------
LOSS FROM OPERATIONS (705,978) (771,646) (225,306) (384,107) (5,893,546)
----------- ----------- ----------- ---------- -----------
OTHER INCOME (EXPENSE)
Realized gain on
marketable securities 576,565 -- 29,426 -- 576,565
Unrealized gain
on marketable
securities 261,568 266,849 56,306 266,849 378,456
Net loss on disposal
of asset -- -- -- -- (1,400,000)
Interest expense (164,735) (426,965) (10,996) (64,494) (642,224)
Interest income 13,878 -- 5,876 -- 13,878
Dividend income 2,766 -- 300 -- 2,766
----------- ----------- ----------- ---------- -----------
Total Other Income (Expense) 690,042 (160,116) 80,912 202,355 (1,070,559)
----------- ----------- ----------- ---------- -----------
(LOSS) BEFORE LOSS FROM
DISCONTINUED OPERATIONS
AND PROVISION FOR INCOME TAX (15,936) (931,762) (144,394) (181,752) (6,964,105)
----------- ----------- ----------- ---------- -----------
LOSS FROM DISCONTINUED
OPERATIONS -- -- -- -- (137,215)
PROVISION FOR INCOME TAX -- -- -- -- --
----------- ----------- ----------- ---------- -----------
NET (LOSS) $ (15,936) $ (931,762) $ (144,394) $ (181,752) $(7,101,320)
=========== =========== =========== ========== ===========
BASIC (LOSS) PER SHARE $ (0.00) $ (0.03) $ (0.00) $ (0.01) --
=========== =========== =========== ========== ===========
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 37,014,165 31,613,845 37,014,165 31,613,845 --
=========== =========== =========== ========== ===========
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<CAPTION>
VENTURETECH, INC.
(A Development Stage Company)
Consolidated Statements of Stockholders' Equity
Deficit
Accumulated
Common Stock Additional During the
-------------------------- Paid-in Development
Shares Amount Capital Stage
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Balance, January 1, 1986 (inception) 278,692 $ 279 $ (279) $ --
Assessment of existing
shareholders to increase
paid-in capital -- -- 8,722 --
Net loss for the year ended
December 31, 1987 -- -- -- (8,722)
--------- --------- --------- ---------
Balance, December 31, 1987 278,692 279 8,443 (8,722)
Stock issued to an individual who became an officer and director for services
performed to acquire rights to Harvard Medical Project on July 13, 1988
recorded at predecessor cost of $0.00 per
share 1,188,889 1,189 (1,189) --
Stock issued to Spartan
Medical Corporation to
acquire rights to the Harvard
Medical Project on
November 1, 1988 recorded at
predecessor cost of $0.00 per
share 200,000 200 (200) --
Net loss for the year ended
December 31, 1988 -- -- -- (5,644)
--------- --------- --------- ---------
Balance, December 31, 1988 1,667,581 $ 1,668 $ 7,054 $ (14,366)
--------- --------- --------- ---------
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<CAPTION>
VENTURETECH, INC.
(A Development Stage Company)
Consolidated Statements of Stockholders' Equity (Continued)
Deficit
Accumulated
Common Stock Additional During the
-------------------------- Paid-in Development
Shares Amount Capital Stage
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Balance forward 1,667,581 $ 1,668 $ 7,054 $ (14,366)
Stock issued for services
at an average price of
$0.21 per share 61,667 62 12,638 --
Stock issued for cash in
private placements at an
average price of $2.48 98,005 98 242,502 --
Stock offering costs offset
against paid-in capital -- -- (93,687) --
Net loss for the year ended
December 31, 1989 -- -- -- (134,399)
--------- --------- --------- ---------
Balance, December 31, 1989 1,827,253 1,828 168,507 (148,765)
Stock issued for services
valued at $0.06 per share 19,301 19 1,140 --
Stock issued to an individual
for services valued at
$12.00 per share 1,667 1 19,999 --
Stock issued to individuals
for $3.92 per share 11,933 12 46,788 --
Net loss for the year ended
December 31, 1990 -- -- -- (174,522)
--------- --------- --------- ---------
Balance, December 31, 1990 1,860,154 $ 1,860 $ 236,434 $(323,287)
--------- --------- --------- ---------
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<CAPTION>
VENTURETECH, INC.
(A Development Stage Company)
Consolidated Statements of Stockholders' Equity (Continued)
Deficit
Accumulated
Common Stock Additional During the
-------------------------- Paid-in Development
Shares Amount Capital Stage
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Balance forward 1,860,154 $ 1,860 $ 236,434 $(323,287)
Stock issued to Ballater, Ltd. in
exchange for services recorded
at predecessor cost of $0.00 per share 100,000 100 (100) --
Net loss for the year ended
December 31, 1991 -- -- -- (2,457)
--------- --------- --------- ---------
Balance, December 31, 1991 1,960,154 1,960 236,334 (325,744)
Debt converted into additional
paid-in capital by Park Avenue, Inc. -- -- 45,750 --
Debt converted into additional
paid-in capital by stockholder -- -- 12,400 --
Net loss for the year ended
December 31, 1992 -- -- -- (1,981)
--------- --------- --------- ---------
Balance, December 31, 1992 1,960,154 1,960 294,484 (327,725)
Common stock issued in settlement
of debt at $0.012 per share 1,500,000 1,500 16,252 --
Net loss for the year ended
December 31, 1993 -- -- -- (15,200)
--------- --------- --------- ---------
Balance, December 31, 1993 3,460,154 3,460 310,736 (342,925)
Common stock issued for cash
at $0.50 per share 340,000 340 169,660 --
Stock issuance costs -- -- (67,500) --
Net loss for the year ended
December 31, 1994 -- -- -- (29,190)
--------- --------- --------- ---------
Balance, December 31, 1994 3,800,154 $ 3,800 $ 412,896 $(372,115)
--------- --------- --------- ---------
</TABLE>
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<CAPTION>
VENTURETECH, INC.
(A Development Stage Company)
Consolidated Statements of Stockholders' Equity (Continued)
Deficit
Accumulated
Common Stock Additional Stock During the
-------------------------- Paid-in Subscription Development
Shares Amount Capital Receivable Stage
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Balance forward 3,800,154 $ 3,800 $ 412,896 $ -- $ (372,115)
Common stock issued to
acquire Tessier Resources Ltd. 3,200,000 3,200 (80,856) -- --
Debt converted into additional
paid-in capital -- -- 10,417 -- --
Common stock issued in
settlement of debt at $1.70
per share 591,774 592 1,005,425 -- --
Net loss for the year ended
December 31, 1995 -- -- -- -- (1,037,235)
------------ ------------ ------------ ------------ ------------
Balance, December 31, 1995 7,591,928 7,592 1,347,882 -- (1,409,350)
Common stock issued in
settlement of debt at $1.70
per share 1,408,126 1,408 2,392,473 -- --
Common stock issued as a
partial conversion of the
convertible debenture at
$0.03 per share 2,300,000 2,300 66,700 -- --
Common stock issued for
cash at $10.00 per share 6,000,000 6,000 59,994,000 (60)000,000 --
Net loss for the year ended
December 31, 1996 -- -- -- -- (1,590,888)
------------ ------------ ------------ ------------ ------------
Balance, December 31, 1996 17,300,054 $ 17,300 $ 63,801,055 $(60,000,000) $ (3,000,238)
------------ ------------ ------------ ------------ ------------
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<CAPTION>
VENTURETECH, INC.
(A Development Stage Company)
Consolidated Statements of Stockholders' Equity (Continued)
Deficit
Accumulated
Common Stock Additional Stock During the
-------------------------- Paid-in Subscription Development
Shares Amount Capital Receivable Stage
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1996 17,300,054 $ 17,300 $ 63,801,055 $(60,000,000) $ (3,000,238)
Common stock issued as a
conversion of the convertible
debenture at $0.03 per share 3,533,333 3,533 102,467 -- --
Common stock issued as a full
exercise of the "A" warrants
associated with the convertible
debenture at $0.03 per share 5,833,333 5,834 169,166 -- --
Common stock issued as a partial
exercise of the "B" warrants
associated with the convertible
debenture at $0.03 per share 1,133,334 1,133 32,867 -- --
Cancellation of stock
subscription receivable (6,000,000) (6,000) (59,994,000) 60,000,000 --
Common stock issued in
settlement of debt
at $0.22 per share 3,495,000 3,495 765,321 -- --
Net loss for the year ended
December 31, 1997 -- -- -- -- (552,777)
------------ ------------ ------------ ------------ ------------
Balance, December 31, 1997 25,295,054 $ 25,295 $ 4,876,876 $ -- $ (3,553,015)
------------ ------------ ------------ ------------ ------------
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<CAPTION>
VENTURETECH, INC.
(A Development Stage Company)
Consolidated Statements of Stockholders' Equity (Continued)
Deficit
Accumulated
Common Stock Additional Stock During the
-------------------------- Paid-in Subscription Development
Shares Amount Capital Receivable Stage
---------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1997 25,295,054 $ 25,295 $ 4,876,876 $ -- $(3,553,015)
Common stock issued as a complete exercise
of the "B" warrants associated with
the convertible debenture at $0.03
per share 4,700,000 4,700 136,300 -- --
Common stock issued as a
partial exercise of warrants
for cash at $0.25 per share 35,000 35 8,715 -- --
Common stock issued in
settlement of debt at $0.45
per share 1,583,791 1,585 711,121 -- --
Net loss for the year ended
December 31, 1998 -- -- -- -- (2,081,671)
---------- ----------- ----------- ----------- -----------
Balance, December 31, 1998 31,613,845 31,615 5,733,012 -- (5,634,686
Issuance of debenture,
convertible at less than
market value -- -- 400,000 -- --
Common stock issued for
conversion of debenture at
$0.20 per share 5,000,000 5,000 995,000 -- --
Common stock issued for
exercise of warrants at
$0.20 per share 400,320 400 79,664 -- --
Net loss for the year ended
December 31, 1999 -- -- -- -- (1,450,698)
---------- ----------- ----------- ----------- -----------
Balance, December 31, 1999 37,014,165 37,015 7,207,676 -- (7,085,384)
Issuance of convertible
debenture at less than market
value (unaudited) -- -- 129,795 -- --
Net loss for the period ended
September 30, 2000
(unaudited) -- -- -- -- (15,936)
---------- ----------- ----------- ----------- -----------
Balance, September 30, 2000
(unaudited) 37,014,165 $ 37,015 $ 7,337,471 $ -- $(7,101,320)
========== =========== =========== =========== ===========
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<CAPTION>
VENTURETECH, INC.
(A Development Stage Company)
Consolidated Statements of Cash Flows
(Unaudited)
From
For the Inception on
Nine Months Ended January 1,
September 30, 1986 Through
-------------------------- September 30,
2000 1999 2000
----------- ----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C> <C>
Net income (loss) $ (15,936) $ (931,643) $(7,101,320)
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 129,795 400,000 529,795
Depreciation and amortization 66,264 56,105 518,514
Loss on sale of investments -- -- 20,390
Net loss on disposition of asset -- -- 1,400,000
Unrealized (gain) loss in marketable
securities (261,568) (266,849) (378,456)
(Gain) loss on marketable securities (576,565) -- (576,565)
Changes in assets and liabilities:
(Increase) decrease in accounts
receivables and other assets (116,313) (4,016) (239,805)
Increase (decrease) in accounts
payable and other current liabilities (114,626) 27,556 (1,310)
----------- ----------- -----------
Net Cash Used by Operating Activities (888,949) (718,847) (5,794,498)
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of investments (43,901) -- (422,214)
Sale of investments 656,409 -- 663,519
Purchase of fixed assets (1,940) -- (259,664)
Disposal of fixed assets -- -- 3,223
Purchase of license fees -- (130,000) (1,575,000)
----------- ----------- -----------
Net Cash Provided (Used) by Investing
Activities 610,568 (130,000) (1,590,136)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of convertible debenture -- -- 175,000
Conversion of debt to equity -- -- 75,902
Proceeds from notes payable 365,137 933,705 6,713,747
Payments on notes payable -- (20,000) --
Common stock issued for cash -- -- 515,963
Shareholder assessment -- -- 8,722
----------- ----------- -----------
Net Cash Provided by Financing Activities $ 365,137 $ 913,705 $ 7,489,334
----------- ----------- -----------
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<CAPTION>
VENTURETECH, INC.
(A Development Stage Company)
Consolidated Statements of Cash Flows (Continued)
(Unaudited)
From
For the Inception on
Nine Months Ended January 1,
September 30, 1986 Through
-------------------------- September 30,
2000 1999 2000
---------- ---------- ----------
<S> <C> <C> <C>
NET INCREASE (DECREASE)
IN CASH $ 86,756 $ 64,858 $ 104,700
CASH AT BEGINNING OF PERIOD 17,944 53,324 --
---------- ---------- ----------
CASH AT END OF PERIOD $ 104,700 $ 118,182 $ 104,700
========== ========== ==========
SUPPLEMENTAL CASH FLOW INFORMATION
CASH PAID FOR:
Interest $ -- $ 4,167 $ 6,667
Income taxes $ -- $ -- $ --
NON CASH FINANCING ACTIVITIES:
Conversion of debt into additional $ -- $ -- $ 75,902
Common stock issued in settlement $ -- $ -- $5,979,235
Conversion of debenture and warrants to
common stock $ -- $ 856,405 $ 525,526
Debenture and warrants issued at less
than market value $ 129,795 $ 400,000 $ 529,795
</TABLE>
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VENTURETECH, INC.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
September 30, 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 September 30, 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 September 30, 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 September 30, 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 it will need
$500,000 of additional funds for operations and expansion in 2001.
In the first quarter of 2000, the Company sold 95,000 of 200,000
shares of its marketable securities for proceeds of $622,243.
During the third quarter of 2000, the Company sold 6,000
additional shares of its marketable securities for proceeds of
$34,166.
NOTE 3 - MATERIAL ITEMS
The Company's license to operate in Antigua expired in July 2000.
However, E- Casinos' subsidiary continues to operate and intends
to become compliant with the laws of Antigua.
In April 2000, the Company entered into an agreement with APTECH
Limited (APTECH), whereby APTECH would provide development
services for a gaming education community portal. Each month
APTECH is to issue the Company an invoice for a value equivalent
to 50% of the value of expenses incurred in that month.
Additionally, APTECH would issue a demand notice for the remaining
50% to be paid in the form of equity shares from the Company. The
shares to be received by APTECH every month shall be issued by
VentureTech at the lower of either an average of the current
market values, as reported on NASDAQ, of its shares on the close
of the previous 5 trading days before the date of demand notice or
$1 per share. The shares are to be issued within 10 days from the
date of the demand notice.
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VENTURETECH, INC.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
September 30, 2000 and December 31, 1999
NOTE 3 - MATERIAL ITEMS (Continued)
In May 2000, the Company entered into an agreement with Wiremix
Media, Inc. (Wiremix), whereby Wiremix would assist with the
product development done by APTECH as well as the marketing of
Asiacasino.com. The Company's obligation is approximately $6,000
per month for an initial period of three months. Wiremix will
receive 50% of the invoices in form of equity shares from the
Company.
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Item 2. Management's Discussion and Analysis or Plan
of Operations
Overview
Venture Tech, Inc. (the "Company"), a development stage company, has
incurred losses from its inception through September 30, 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.
Management believes that a strategic follow-on to its Internet gaming
business is an initiative to develop and launch a family of websites, each of
which will appeal to a defined target market. Each of the websites is intended
to have a strong revenue model and feature proprietary or unique benefits for
members. Although future sites will be developed as independent business units,
they will have the ability to draw upon the Company's core team of professionals
in areas such as legal, accounting, finance, investor relations, technical and
marketing. Each prospective site will be developed with the potential for
multiple revenue streams. The Company anticipates that these websites will be
developed in 2000 and beyond. The number of different community sites built
under this strategy will be a function of available capital from investment and
revenue streams from predecessor sites.
Results of Operations
Three Months Ended September 30, 2000 ("Third Quarter of
2000") Compared With The Three Months Ended September 30,
1999 ("Third Quarter of 1999")
The Company began gaming operations for real money and first realized
revenues in July 1999. For the third quarter of 2000, the Company realized
revenues of $29,785. Revenues of $9,526 were recorded in third quarter of 1999,
reflecting only partial quarter operations. Cost of sales for the third quarter
of 2000 was $10,989, or 36.9% of revenues, compared to $3,669, or 38.5% for the
same period in 1999, resulting in gross margins of $18,796 and $5,857 for third
quarters 2000 and 1999, respectively. Cost of sales includes royalties incurred
on gambling activities and payable to Starnet Systems International Inc.
("SSII"), 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 may change depending on terms associated with the
Company's renewal of its gaming license with a licensing jurisdiction or change
in status to a sub-licensee.
The slower than expected growth in casino-generated revenues is
attributed to the Company's initial focus on the Asian market.
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level for the foreseeable future, but may change depending on terms associated
with the Company's renewal of its gaming license with a licensing jurisdiction
or change in status to a sub-licensee.
The slower than expected growth in casino-generated revenues is
attributed to the Company's initial focus on the Asian market. As a consequence
of repeated attempts by the United States Congress to prohibit Internet gambling
in the United States, which have been unsuccessful to date, the Company has
elected, in the interim, to focus primarily on international markets and on Asia
in particular. The Company's first casino offering, Asia Casino, was launched in
the latter half of 1999 in the English, Japanese, and Chinese languages. The
Company has subsequently redesigned portions of its gaming web site in response
to marketing feedback to improve cultural acceptance. The Company is also
concentrating on using appropriate marketing channels for optimum benefit. In
that regard, the Company has elected to cancel its strategic alliance agreement
with Able Wealth Investments Limited of Hong Kong for lack of productivity.
Also, the Company's gaming software supplier delayed implementation of its new
version of casino software, scheduled for the first quarter of 2000, which would
have made the Company's gaming offerings more appealing and competitive. In
addition, competitors have realized the potential of the Asian market and have
also begun to actively market their gaming services. The Company continues to
evaluate proposals for other international marketing jurisdictions with
prospective strategic partners, but can make no assurances that such agreements
will be forthcoming.
General and administrative expenses for the third quarter of 2000
decreased 36.9% to $222,014 from $351,817 for the comparable 1999 period. This
decrease is primarily due to the payment of approximately $175,000 in fees to a
public relations firm in the third quarter 1999 in connection with promoting the
Company to the investment community given that gaming operations had just
commenced and the Company's profile would likely be enhanced.
Depreciation and amortization for the third quarter of 2000 decreased
42.1% to $22,088 compared to the 1999 period. The decrease was primarily due to
the recognition of software and gaming license amortization that was initiated
in third quarter of 1999 with the commencement of on-line gaming operations.
The Company's loss from operations for the third quarter of 2000 was
reduced to $225,306 as compared to a loss of $384,107 for the 1999 period. The
reduction in third quarter loss from 1999 to 2000 is primarily attributed to an
out of the ordinary outlay resulting from a singular public relations campaign
expensed in third quarter 1999. There was no such effort carried out in the
comparable third quarter of 2000.
The Company earned interest and dividend income of $6,176 for the third
quarter of 2000 compared to $-0- for the comparable period in 1999. The 2000
interest and dividend income resulted from funds held in the Company's brokerage
and money market accounts. These funds were primarily the result of the sale of
marketable securities by the Company in first quarter 2000. The Company had
interest expense of $10,996 for the third quarter of 2000 compared to $64,494
for the same 1999 period.
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<PAGE>
Interest expense in third quarter of 1999 primarily
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 an additional $50,000 in interest
expense to reflect a revised debt conversion/warrant component of a convertible
debenture originally issued in first quarter 1999. The revised debenture was
convertible into shares of the Company's common stock at $0.20 per share, which
amounts to a $0.04 difference in the price of the stock at closing on the date
of issue. The $50,00 reflects the additional difference in fair market value of
the stock should the entire debenture and attached warrants be converted.
Previously, the Company had recorded $350,000 in interest expense to reflect the
terms of the original debenture. At September 30, 1999, $856,405 of the $1
million authorized had been converted into shares of common stock.
During the third quarter of 2000, the Company sold certain investment
securities and subsequently recorded a realized gain of $29,426 at the end of
the quarter on the sale. In addition, the Company also recorded an unrealized
gain of $56,306 on the marketable securities held by the Company as a result of
its previous conversion of a convertible debenture with Ocean Power Corporation
("PWRE") and the purchase of marketable securities of Asian Star development
("ASTV") in second quarter 2000. The aggregate amount of gain totaled $85,732.
In third quarter 1999, the Company recorded $266,849 in unrealized gain on its
marketable securities. PWRE has submitted its initial Form 10SB registration
statement, as well as a follow-on Amendment #1, to the Securities and Exchange
Commission ("SEC"). The Company reasonably believes that its PWRE shares will
continue to provide a viable source of capital for operations in 2000 and
beyond.
The Company reported a net loss of $144,394 for the third quarter of
2000 compared to a loss of $181,752 for the comparable 1999 period. While the
end results are reasonably similar, the two periods each had extraordinary
transactions that materially affected the bottom line. In the third quarter of
2000, the Company recorded a realized and unrealized gain on marketable
securities of $85,732 compared with $266,849 for the similar period in 1999. In
third quarter of 1999 the Company recorded interest expense of $64,494 on debt
and the issuance of a convertible debenture at less than market value. In the
similar period in 2000, the Company only recorded $10,996 in interest expense.
In addition, in the third quarter of 1999, the Company recorded an extraordinary
expense of approximately $175,000 in connection with a promotional campaign
initiated by the Company.
Nine Months Ended September 30, 2000 Compared With the Nine Months
Ended September 30, 1999.
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<PAGE>
For the first nine months of 2000, the Company had revenues of $129,590
compared with $9,526 for the first nine months of 1999, reflecting that gaming
operations for real money did not begin until the third quarter of 1999. Cost of
sales for the first nine months of 2000 was $41,897, or 32.3%, compared to
$3,669, or 38.5% for the same period in 1999, resulting in a gross margin of
$87,693 for the nine month period ended September 30, 2000 compared with $5,857
for the same period in 1999. In response to a anticipated decline in revenues
from second quarter to third quarter 2000, the Company has made modifications to
the design of its website to better entice prospective Chinese speaking players
to its gaming operations.
General and administrative expenses for the first nine months of 2000
increased slightly to $727,408 from $721,398 for the comparable 1999 period.
While the results are similar, factors impacting the two years are materially
different. 1999 expenses include material expenditures related to the promotion
of the Company to the investment community, whereas 2000 general and
administrative expenses are primarily attributable to expenditures associated
with nine full months of operation of the Company's on- line casino. As of
September 30, 1999, the Company's on-line casino had only been in operation for
less than three months. Factors contributing to the 2000 increase, above and
beyond the material promotional expenses in 1999, 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 nine months of 2000
increased 18.1% to $66,263 compared to the same 1999 period. The increase in
2000 was primarily due to the recognition in the period of software and gaming
license amortization that was only initiated in the latter half of 1999 with the
commencement of on- line gaming operations. The Company's loss from operations
for the first nine months of 2000 was $705,978 compared to a loss of $771,646
for the 1999 period. The decreased loss in 2000 is primarily attributed to the
recognition of gaming revenues for a full nine months versus less than 3 months
for the same period in 1999.
The Company earned interest and dividend income of $16,644 for the
first nine months of 2000 compared to $-0-for the comparable 1999 period. The
2000 interest and dividend income resulted from funds held in the Company's
brokerage and money market accounts. The Company had interest expense of
$164,735 for the first nine months of 2000 compared to $426,965 for the same
1999 period. Interest expense in 2000 primarily 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 in first quarter 2000 to
reflect the debt conversion /warrant component of a convertible debenture. At
September 30, 1999, the Company had recorded $400,000 in interest expense to
reflect the debt conversion/warrant component of a convertible debenture issued
in 1999. Aside from these convertible debenture transactions, interest on other
debt obligations amounted to $34,940 for the first nine months of 2000 compared
with $26,965 for the same period in 1999.
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<PAGE>
During the first nine months of 2000, the Company sold certain
investment securities realizing a gain of $576,565. There were no such
transactions during the first nine months of 1999. The Company also recorded
$261,568 in unrealized gain on marketable securities held by the Company during
the first nine months of 2000 compared with $266,849 for the same period in
1999.
The Company recorded a net loss of $15,936 for the first nine months of
2000 compared to a net loss of $931,762 for the first nine months of 1999. The
improvement in the 2000 profit position is primarily attributed to the realized
and unrealized gain on marketable securities held by the Company.
Net Operating Losses
The Company has accumulated approximately $7,101,320 of net operating
loss carryforwards as of September 30, 2000, that may be offset against future
taxable income through 2021 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 September 30, 2000, the Company
had working capital of $9,069 compared to $66,869 at December 31, 1999. The
decrease is primarily attributed to an increase in loss from operations, as well
as amortization of current licensing assets and the assumption of current debt
liability.
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<PAGE>
At September 30, 2000, the Company had a note receivable of
approximately $214,000 representing a secured note due from an unrelated
company. Also at September 30, 2000 the Company had $104,700 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 and funds advanced to the
Company at various times during the first nine months of 2000 by a third party.
As of September 30, 2000, the Company had total assets of $917,220 and
total stockholders' equity of $273,166 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 nine months of 2000 primarily due to
appreciation of the Company's investment in PWRE from year-end 1999.
For the nine months ended September 30, 2000, cash used by operating
activities increased to $888,949 compared to $718,847 for the comparable 1999
period. This 23.7% increase is primarily attributed to reductions 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 nine months of 2000, the Company realized cash
from investing activities of $610,568 compared to cash used of $130,000 in the
comparable 1999 period. The 2000 results are primarily due to the sale of
marketable securities. In addition, the Company realized cash from financing
activities of $365,137 in the first nine months of 2000, pursuant to advances
made against the issuance of a convertible debenture in 2000, compared to
$913,705 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. The Company received $324,488 of such funds 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 were converted in the first nine months of 2000.
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 issued to
repay $379,458 in previously advanced funds advanced to the Company during 1999
and supercedes a previous debenture issued in January 1999.
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<PAGE>
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 September 30, 2000 and
total shares issued pursuant to this debenture and attached warrants as of
September 30, 2000 are 5,400,320.
In 1999, in connection with the Company's license agreement with SSII,
the Company's subsidiary, EuroAsian 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 September 30, 2000, the Company has paid $60,000, leaving a
balance still owed of $60,000. The Company has also paid SSII $90,000 towards
its software technology license, leaving a balance owed of $10,000.
The Company's license to operate its gaming facilities under the
jurisdiction of Antigua expired in July 2000. EuroAsian E- Casinos intends to
come into compliance with the jurisdiction's licensing requirements by either
renewing its prior license or obtaining a sublicense from an existing Antiguan
licensee.
During the remainder of fiscal year 2000, the Company anticipates
meeting its cash and working capital needs primarily from the private sale of
its shares or 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 October 31, 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
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<PAGE>
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 SEC.
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
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<PAGE>
On Monday, September 25, 2000, pursuant to proper notice to
stockholders, the Company held its Annual Meeting of Stockholders at the
Company's principal offices in North Vancouver, B.C. At the Meeting, the
following incumbent directors were elected, by the indicated vote, to serve as
directors until the next Annual Meeting of Stockholders or until their
successors are elected and qualified.
Nominee For Against Abstain
------- ---------- --------- ---------
Kenneth F. Fitzpatrick 22,130,492 -0- 136,966
G. Michael Cartmel 22,130,492 200 136,966
Craig J. Bampton 22,130,492 2,200 136,966
Shareholders were also asked to ratify the appointment of H J &
Associates, LLP, formerly Jones, Jensen & Company, as independent auditors for
the Company's fiscal year ending December 31, 2000. The proposal carried by a
vote of 21,862,990 for, 345,250 against and 54,257 abstaining.
A proposal was made to amend the Articles of Incorporation to change
the Company's authorized capitalization by adding a new class consisting of
20,000,000 shares of preferred stock. The proposal carried by a vote of
9,953,205 for, 768,566 against, and 56,917 abstaining.
Shareholders were also asked to ratify the proposal to adopt the
Venture Tech, Inc. 2000 Stock Incentive Plan. The plan would provide for the
grant of equity based, long-term incentives to attract and retain key employees,
officers, directors and others who provide personal services of substantial
benefit or value to the Company. Under the Plan, the maximum number of shares of
common stock represented by grants of options is 3,000,000 shares. The proposal
carried by a vote of 10,020,357 for, 666,614 against, and 91,717 abstaining.
Other proposals made at the Meeting included the proposal to empower
the Board of Directors to proceed with certain acquisitions related to the
operation of a family entertainment center on terms to be determined and
approved by the Board. The proposal carried by a vote of 22,269,258 for, 0
against, and 0 abstaining.
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 September 30, 2000.
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<PAGE>
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: November 20, 2000 By: /S/ WILLIAM D. BAKER
----------------------
William D. Baker
Vice President and Chief
Executive Officer
Date: November 20, 2000 By: /S/ CRAIG J. BAMPTON
----------------------------
Craig J. Bampton
Vice President, Chief Financial
Officer, Principal Accounting
Officer and Director
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