FORM 10-SB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL BUSINESS ISSUERS
Under Section 12(b) or (g) of the
Securities Exchange Act of 1934
ENERGY VENTURES INC.
(Name of Small Business Issuer in its charter)
Delaware
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
43 Fairmeadow Avenue, Toronto, Ontario, Canada M2P 1W8
(Address of principal executive offices) (Zip Code)
1-416-733-2736
(Issuer's Telephone Number)
1-416-733-8407
(Issuer's Fax Number)
Securities to be registered under Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
N/A N/A
Securities to be registered under Section 12(g) of the Act:
Common Stock, $0.0001 per share
(Title of Class)
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TABLE OF CONTENTS
PART I...................................................3
Item 1. Description of Business.....................3
Item 2. Management's Discussion and
Analysis and Plan of Operation.............16
Item 3. Description of Property....................21
Item 4. Security Ownership of Certain
Beneficial Owners and Management...........21
Item 5. Directors, Executive Officers,
Promoters and Control Persons..............23
Item 6. Executive Compensation.....................24
Item 7. Certain Relationships and
Related Transactions.......................28
Item 8. Description of Securities..................29
PART II.................................................30
Item 1. Market Price of and Dividends
on the Company's Common Equity
and Other Shareholder Matters..............30
Item 2. Legal Proceedings..........................31
Item 3. Changes in and Disagreements
with Accountants...........................31
Item 4. Recent Sales of Unregistered
Securities.................................31
Item 5. Indemnification of Directors
and Officers...............................32
PART F/S................................................33
Index to Financial Statements...................35
PART III................................................
Index to Exhibits...............................
SIGNATURES..............................................
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PART I.
Item 1. Description of Business.
(a) Background of Issuer
Energy Ventures Inc. ( the "Company" or "we"), a Delaware corporation,
was formed to develop proprietary technologies for use in the manufacture of
batteries. The Company's executive and principal office is located at 43
Fairmeadow Avenue, Toronto, Ontario, M2P 1W8, Canada. We also lease
approximately 4093 square feet of office and laboratory space in Building M-16,
1500 Montreal Road, Ottawa, Ontario K1A 0R6. As of April 1, 2000, we had ten
employees, seven of whom work out of the Ottawa location, and we anticipate
hiring at least three more research scientists during the first half of 2000.
The Company was originally organized as O.P.D. Acquisitions, Inc. on
June 24, 1996. On September 30, 1997, the Company entered into a share-for-share
exchange with Energy Ventures Inc. (Canada) ("EVI"), a corporation organized
under the laws of Ontario, Canada on November 19, 1996. As a result of the
exchange with EVI, the Company issued 1.2 shares of its common stock (or a total
of 10,088,400 shares) for each issued and outstanding share of EVI common stock.
At the time of this exchange, the Company (i) was not conducting any business,
(ii) had 385 shareholders, and (iii) had 149,179 shares of common stock issued
and outstanding, of which D. Wayne Hartford, the President, Chief Executive
Officer and Secretary of the Company, owned 120,000 shares. As a result of the
share-for-share exchange between EVI and the Company, EVI became a wholly owned
subsidiary of the Company and the Company amended its certificate of
incorporation on October 27, 1997 to change its name to Energy Ventures Inc. The
Company also owns 100% of the equity of another subsidiary, Energy Ventures
International Inc., a Barbados corporation. Any reference to the Company, unless
the context of the reference requires otherwise, is a reference to Energy
Ventures Inc., a Delaware corporation, and to its consolidated business and
operations. The Company has not been involved with any bankruptcy, receivership
or similar proceedings. Other than the share-for- share exchange with EVI, the
Company has not had any material reclassification, merger, consolidation, or
purchase or sale of a significant amount of assets not in the ordinary course of
business.
Special Note Regarding Forward-Looking Statements
Some of the statements under "Business of Issuer", "Current Projects",
"Plan of Operations" and elsewhere in this registration statement are
forward-looking statements that involve risks and uncertainties. These
forward-looking statements include statements about our plans, objectives,
expectations, intentions and assumptions and other statements contained herein
that are not statements of historical fact. You can identify these statements by
words such as "may", "will", "should", "estimates", "plans", "expects",
"believes", "intends" and similar expressions. We cannot guarantee future
results, levels of activity, performance or achievements. Our actual results and
the timing of certain events may differ significantly from the results discussed
in the forward-looking statements. You are cautioned not to place undue reliance
on any forward-looking statements.
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(b) Business of Issuer
The Company acts as a technology integrator to develop cost effective
materials and manufacturing processes for battery and fuel cell systems. Our
goals are to improve significantly battery and fuel cell performance and to
mitigate environmental and safety hazards. Towards those ends, the Company
conducts research and development programs of various energy systems targeted to
two principal markets:
1. Automotive companies, electronic manufacturers and suppliers of
communications and electrical services and their respective suppliers. The
Company seeks to improve the efficiency, life cycle, convenience and safety of
energy cells for these battery and potential fuel cell users.
2. Consumers of batteries concerned with the cost and environmental
impact of using primary batteries.
The Company also engages in electro-chemical energy research and
related product development through a series of strategic agreements with
researchers, manufacturers and corporate consumers of batteries and fuel cells.
The Company's principal business is the development and licensing or
sale of technology to improve electro-chemical cells designed to meet the
rapidly expanding market for reliable, safe, rechargeable energy systems. This
core interest has led us into many related aspects of energy cell development
ranging from the formulation of advanced battery materials and systems, to
manufacturing processes and the distribution of battery products.
THE INDUSTRY.
Battery Characteristics.
Batteries are energy storage devices that use a transformation of
higher energy state chemical materials into lower energy materials to release
electrical energy into a circuit. Primary batteries are not rechargeable and are
only able to convert chemical energy into electrical energy. Secondary batteries
are rechargeable and can use electrical energy to drive reversible chemical
reactions from a lower energy state to a higher energy state, allowing the
battery to release electrical energy repeatedly.
Every battery is made up of one or more cells, which are the basic
building blocks in the energy conversion and storage system. When batteries are
not charging or discharging they are said to be in an open circuit, that is, no
current is flowing through the electric circuit. Each cell has the open circuit
voltage potential of its particular electro-chemical system. For example:
Type Circuit Voltage
Lead Acid 2.1 volts
Nickel-Cadmium 1.2 volts
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Nickel-Metal Hydride 1.2 volts
Alkaline 1.5 volts
Nickel-Zinc 1.6 volts
Lithium Ion 3-4 volts
Zinc-Carbon 1.5 volts
The desired electric circuit voltage is reached by connecting cells in
series. For example, most automobiles made since the early 1950's have a nominal
12-volt system. The lead-acid batteries used in these vehicles have 6 cells with
2.1 volts per cell which are connected in series to produce 12.6 volts.
When batteries are discharging, the voltage is below open circuit with
higher discharge rates producing lower voltages. The lower voltage is due to
resistive losses within the battery, as well as kinetic losses (the energy
required to make the cell reactions occur). As an example, a discharging
lead-acid battery in an automobile ranges from just below 12.6 volts with only
the radio on, to as low as 6 volts when starting the engine in extremely cold
weather.
When batteries are charging the voltage is above open circuit. The
higher voltage is necessary to drive the recharge reactions while overcoming
internal resistive losses. Typical charge voltage in a 12-volt automobile system
ranges from 13.2 to 15.5 volts. Higher voltage is also required to drive the
recharge reactions at lower temperatures.
The Commercial Battery Market
The world battery and fuel cell market is divided into "large format"
systems (principally consisting of hydro load leveling, starting and electrical
vehicle systems) and "small format" systems (including the standard "AAA", "AA",
"C" and "D" cells). Small format batteries also include a wide variety of
specially formatted batteries for use in many applications including watches,
electronic devices, computers and telecommunications equipment. Large format
systems have been, by necessity, secondary or rechargeable cells while small
format systems have been dominated by primary or single use, disposable cells.
In the past few years the demand for small format, rechargeable cells
has grown at up to 40% per year, driven primarily by technological innovation.
This growth is, in large part, the result of the growth in electronic, computer
and telecommunication devices requiring higher quality and higher capacity
rechargeable batteries. A more recent drive has come from safety and
environmental concerns as regulatory authorities have begun to restrict battery
disposal processes and primary battery production to encourage greater use of
rechargeable batteries.
There is a significant conflict of economic interest between the
producers of small format primary batteries and the producers of small format
secondary batteries. Major manufacturers have invested heavily in building
plants and distribution channels for primary batteries, but until recently
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have not invested in secondary battery technology, being content to respond to
demand for rechargeable batteries rather than promoting them. The advent of
portable electronic and telecommunication devices has introduced Original
Equipment Manufacturers ("OEMs") into the battery cell market. OEMs require
higher quality batteries to power their products, and since the industry
practice is to supply batteries customized to the device, OEMs have become major
purchasers of batteries. To improve the economics of many devices, OEMs often
specify rechargeable batteries.
As a result of OEM requirements, available technology and increasing
regulation of primary batteries, we believe that the battery industry is
entering a phase of major restructuring. This restructuring will encompass
research, product development and major conversion of manufacturing and
distribution activities, in many cases involving secondary batteries.
There is no battery industry association that collects and collates
industry data on a worldwide scale, and data that does exist is partial in
nature and must be treated with some caution. It is estimated, however, that the
worldwide market for battery cells of all types is in excess of U.S.$30 billion
annually. Large format battery cells have annual sales estimated at U.S.$16
billion and small format cells have annual sales estimated at U.S.$14 billion.
The overall market for battery cells is estimated to be growing at 7% annually,
with the large format segment growing at 5% annually and the small format
segment at approximately 9% annually. Within the small format segment, the
market for primary batteries is growing marginally while the secondary battery
market is growing at about 25% annually and is currently estimated to be U.S.$5
billion.
Product Categories.
While there are many individual battery cell product types, they may be
logically grouped into the following categories:
Lead Acid (Large Format, Secondary)
The lead acid system has a nominal voltage of 2.1 volts per cell and is
most often seen in the familiar six cell, 12-volt car battery. The standard
version of this battery gets several hundred cycles (charge and discharge) when
only a small percentage of the power is used. It is designed to be constantly
"topped up" by the charging system in an automobile. Despite the fact that there
have been complaints about the size, weight and energy density of this system,
it has been in use in the automotive market for many years with very modest
changes and it will probably remain so for the foreseeable future. The lead acid
system, however, has been modified and improved for use in niche markets such as
golf carts, trolling motors and lawn mowers and there continues to be interest
in upgrading the system despite the existence of more modern energy systems.
Fuel Cells (Large Format, Secondary)
While fuel cells are a type of rechargeable battery, they differ from
typical rechargeable systems in that the anode material is replaced (refueled)
rather than recharged, and the cathode extracts oxygen from the air. Fuel cells
operate much like an engine with no moving parts and can continue to provide
electrical energy as long as they are fueled. Hydrogen is the typical cathode
material. Fuel cells have been developed and improved for more than thirty years
but the currently
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available technology cannot provide the performance that is expected from an
automobile at a viable cost. Furthermore, without the sanction of environmental
legislation, this type of system would be reserved for specialized applications,
such as the space program. Fuel cell technology has acquired a high profile,
however, as one of the most likely future power sources for electric vehicles
and is attracting significant research and investment funding.
Other large Format Secondary Systems
Several other large format battery systems such as flat plate Nickel
Cadmium, Nickel Hydroxide, Nickel Zinc, Zinc Bromide, Zinc Air and Sodium Sulfur
are also being considered by the battery industry. Although each of these
systems has certain positive technical characteristics, when the cost per unit
of energy, cycle life, self-discharge rate, availability, safety and
environmental impacts are considered, none of these systems is currently
commercially viable. Nickel Zinc, however, is the most promising in terms of
commercial viability in the near future.
LeClanche (Small Format, Primary)
The original, commercial, small format battery was the non-rechargeable
LeClanche cell or Zinc Carbon battery that was invented in about 1863 and
distributed by the LeClanche Company, which still operates in Switzerland. This
is the least expensive of all battery systems, is 1.5 volts per cell and is
marketed today under brand names such as Eveready Heavy Duty. The market for
this battery is estimated by the Company at U.S.$3 billion annually and is
growing at approximately 1% per year.
Alkaline (Small Format, Primary)
The non-rechargeable alkaline system or Zinc Manganese battery was
invented in the 1960's by Dr. Karl Kordesch, the primary consultant for the
Company's research and development efforts, when he was employed by Eveready
Battery Company Inc. This battery is also 1.5 volts, however, depending on its
use, has three or more times the energy of a Zinc Carbon cell, Eveready chose
not to market the product and several years later licensed the technology to the
Mallory Battery Company which launched the Duracell brand ( which is now also
the name of that company) with the claim that it had three times as much energy
as the LeClanche cell at twice the price. The launch was a success and Eveready
subsequently brought out "The Energizer" with little time remaining on the
original patents. This technology is now in the public domain and annual sales
of primary alkaline batteries are estimated at U.S.$6 billion with a growth rate
of 5% to 6% per year.
Other Small Format Primary Systems
There are several small cell systems such as Silver Zinc that are used
in button cells for watches and hearing aids. There are also several small
format Lithium battery cells that are used principally in camera applications.
The voltage of the cells in this category varies from 1.5 volts to over 4 volts,
depending on the application. This market niche has annual sales estimated at
U.S. $500 million, with growth at approximately 5% per year.
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Nickel Cadmium and Nickel Metal-Hydride (Small Format, Secondary)
The Nickel Cadmium ("NiCd") system was commercialized in 1910 and for
the next 80 years its sales accounted for more than 90% of the small format
rechargeable battery market. It is a relatively low energy battery with only 1.2
volts per cell and it has a significant rate of self-discharge. The
self-discharge problems are compounded by heat, with the result that in a warm
climate or the warm environment of an appliance, the NiCd battery can discharge
its energy without use in two or three months, and in fact, at temperatures in
excess of 45 degrees Centigrade (113 degrees Fahrenheit), it can discharge in
three or four days. The NiCd system also has a "memory effect" pursuant to which
partial discharges reduce the capacity of the battery. In spite of these
concerns, it has been the only practical battery system for OEMs, and most
consumers are aware of portable devices with the small transformer (black box)
that is plugged into a household electrical system to charge the batteries (for
example, portable drills, electric toothbrushes and video cameras).
In the mid-1980's, the manufacturers of NiCd batteries became very
concerned about pending legislation restricting the use of Cadmium, an extremely
toxic material, and began to look for a safer alternative. The result was the
Nickel Metal-Hydride ("NiMH") battery that has the same voltage, can be
manufactured on the same basic equipment and has more energy than a NiCd
battery. However, it also has twice the self-discharge of NiCd and costs
considerably more to manufacture. Neither the NiCd nor the NiMH system, however,
has been able to develop much of a consumer franchise due to these shortcomings,
and there are presently very few alternatives for OEMs.
The RAM(TM) cell (Small Format, Secondary)
The RAM(TM) cell is a rechargeable version of the primary Alkaline cell
and was developed by Dr. Karl Kordesch for Battery Technologies Inc., a company
created in 1986 by Dr. Kordesch and D. Wayne Hartford, the Company's President,
Chief Executive Officer, Secretary and Director. This technology is currently
being licensed around the world and is marketed in North America as
"Renewal(TM)" and "Pure Energy(TM)". This product also has 1.5 volts and costs
very little more to manufacture than an Alkaline primary battery, but it can
replace 50 or more of these primary batteries, depending on how it is used. The
current RAM(TM) battery has the potential to replace a large portion of the
Alkaline and Zinc Carbon primary battery markets, as well as the NiCd and NiMH
secondary markets. It has the lowest cost per unit of energy of any secondary
battery and does not have any significant self-discharge or "memory effect".
Lithium Ion (Small Format, Secondary)
Lithium is a very high energy material and as such, it has been a
preferred material for battery researchers for years. The fact that it has such
high energy, however, has made it very difficult to create a rechargeable system
that is completely safe. The Lithium Ion battery is normally manufactured with
Cobalt, which creates 3.3 volts. In spite of the fact that there have been some
industrial accidents attributed to this technology, the market is so in need of
high energy systems for expanding portable computer and cell phone applications
that this battery's annual market is estimated at U.S.$1.25 billion with an
annual growth rate of more than 20%.
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Other Small Format, Secondary Systems
The more dynamic area of battery research today is in the area of
secondary batteries and it is focused largely on the growing market for
batteries for digital phones, portable computers and other portable devices. A
good deal of the attention is focused on Lithium/Cobalt combination as a
high-energy product and Lithium Manganese as a slightly lower energy product
that is safer and considerably less expensive than other Lithium systems.
Development is also underway to improve electrolytes and separators in order to
produce higher voltage and make the systems safer. Another area of worldwide
interest is the Lithium Polymer battery, which has all the active materials,
contained in a polymer carrier. The interest in this product is in the
possibility of molding batteries into virtually any shape. Several companies
have promised to produce these batteries, but to date there are none that
currently provide the necessary performance.
The Nickel Zinc battery may well compete with the NiCd, NiMH and
RAM(TM) batteries as it is only slightly more expensive than the RAM(TM) battery
and can likely provide several hundred cycles at 1.6 volts, which make it ideal
for inexpensive applications that require many cycles but cannot absorb the cost
of the production of Lithium Ion batteries. The Zinc Bromine Hybrid system
holds promise as the least expensive rechargeable system for consumer OEM use,
particularly in third world countries. There are other Zinc based systems that
are being researched and analyzed with several other electrode materials.
All of these systems, and many others, are now being considered in
different sizes and shapes. In most instances, with the exception of
flashlights, which created the original battery application, cylindrical cells
waste approximately 30% of the space reserved for batteries. The use of flat
cells, much like miniature versions of car batteries, is currently growing
rapidly in OEM applications and, as a result, a consumer replacement market is
developing, particularly in Asia.
(c) Current Projects of the Issuer
We derive and expect to derive our revenues from cooperative research,
technology licensing and from the manufacturing and sale of battery and fuel
cells to OEMs and distributors. Our policy is to focus our research and
development efforts where we have, or can acquire, significant advantage from
existing research teams or proprietary knowledge. While we have in-house
research and development capability, some of our research and development
projects are conducted under collaborative agreements with research
institutions, universities, manufacturers and major consumers and distributors.
A summary of these projects follows:
Lithium Ion Batteries.
Lithium Ion batteries are used in portable computers, cell phones, and
similar applications. The annual market for Lithium Ion batteries is estimated
at approximately U.S.$1.25 billion, with an annual growth rate of more than 20%.
Lithium is a very high energy material and as such, it has been a preferred
material for battery manufacturers for years. This is so despite the fact that
its high energy has made it very difficult to create a rechargeable system that
is completely safe. Most rechargeable Lithium batteries contain a Lithium anode
and a polymer electrolyte. If a rechargeable Lithium battery suffers a short
circuit, the internal temperature rises quickly, and runaway reactions at the
Lithium anode have sometimes been known to cause this type of battery to combust
or explode. One safety
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measure attempted by battery manufacturers has been to use a thin microporous
separator between the electrodes to act as a safety switch that will shut down
battery cells at a certain temperature. If the temperature rises beyond the
melting point of the separator, the pores are supposed to close and cut off the
current flow, thereby shutting down the battery. Polyethylene has been used by
many battery manufacturers as a separator in Lithium batteries but because that
substance is mechanically weak, it can be susceptible to damage by the electrode
surfaces and occasionally, it will fail after several recharging cycles. We
believe, however, that the Lithium Ion battery is a good portable power system
for the market it serves, and we have undertaken the necessary research and
development effort to enhance its safety and rechargeability.
The National Research Council of Canada.
On March 1, 1997, EVI entered into an agreement with the National
Research Council of Canada ("NRC") pertaining to the development of (i) a less
costly rechargeable Lithium battery using Manganese in the system and (ii) an
improved separator that could shut down the battery safely in the event of a
malfunction. NRC, established in 1916, is an agency of the Federal Government of
Canada. It has a highly skilled work force of 3,000 employees, a network of
research institutes and technology centers and is the leading research
institution in Canada. NRC's activities in the area of batteries are conducted
by its Institute for Chemical Process and Environmental Technology ("ICPET"),
which employs 88 scientists and technicians and is based in Ottawa, Ontario.
The Lithium Ion research and development program showed early signs of
progress, and both EVI and NRC sought to expand their relationship into other
areas. The agreement with NRC provided that EVI would give NRC funding in the
amount of Cdn. $50,000 through August 31, 1998 and thereafter, provide minimum
and maximum amounts per year of Cdn. $100,000 and Cdn. $500,000, respectively,
through the period ending July 31, 2008 (the "Technical Collaboration Period").
The funds are to be used for ongoing research and development in Lithium Ion and
other energy material technologies. The funds will be disbursed by EVI to NRC
during each year of the Technical Collaboration Period pursuant to an Annual
Research Plan (the "Plan") to be agreed upon by both parties. The Plan will
include the objectives and funding requirements for the work to be undertaken by
NRC for the following year. NRC shall be responsible for the research and
development work contemplated by the Plan and shall provide research personnel
and resources at a price equal to 50% of NRC's standard billing rates. EVI has
the right to terminate its funding responsibilities upon six months' prior
notice. NRC may not terminate its responsibilities under the agreement prior to
the conclusion of the Technical Collaboration Period.
As part of the agreement, NRC granted EVI a non-exclusive license to
use NRC's Lithium Ion Base Technology for the research, development,
manufacturing and marketing of batteries (with the right to sublicense such
technology) and the exclusive right to use and/or license the Enhancements.
"Base Technology" means all rights, patents, applications, inventions, and
technical information owned by NRC which existed in March 1997 and relate to
Lithium Ion technology. "Enhancements" means any inventions, ideas, formulae,
designs or modifications developed by EVI and NRC during the Technical
Collaboration Period. EVI's license terminates on the expiration date of the
last patent pertaining to the Base Technology or the Enhancements, a period that
will terminate no earlier than 2013.
Other provisions of the agreement with NRC include the following:
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(i) during the Technical Collaboration Period, NRC may not grant any
further licenses or other rights to any third parties in connection with the
Base Technology;
(ii) when the Technical Collaboration Period ends, NRC may grant any
third party a license in connection with the Base Technology, except that no
party may be granted a license for any country respecting which EVI has funded
patent registration costs pertaining to the Base Technology; and
(iii) seven years and six months after the end of the Technical
Collaboration Period, NRC may license the Enhancements to third parties for use
in any country with the exception of countries covered by sublicenses previously
granted by EVI and which are still in effect.
In a program that commenced in 1997 and ended February 1999 and was
valued at Cdn. $1.6 million, Samsung Electronics Company ("Samsung") of South
Korea and NRC developed Lithium Ion technology and manufacturing methodology. In
exchange for this sponsorship, Samsung has a non-exclusive right to license and
sublicense the resulting technology enhancements for countries other than South
Korea, but in order to use the NRC Lithium Ion Base Technology, Samsung must
first obtain a license from EVI. For countries other than South Korea, EVI
retained the non-exclusive right to license and sublicense the resulting
technology enhancements.
NRC also agreed, subject to pre-existing obligations to third parties,
to offer first to EVI any opportunities which may arise through NRC respecting
battery related technology or other energy- related technologies developed at
ICPET.
During the Technical Collaboration Period, NRC is entitled (the "NRC
Entitlement") to a royalty (40% through July 31, 2000 and rate to be negotiated
thereafter) of net licensing revenues from the use of the Lithium Ion Base
Technology and Enhancements and a royalty of 2% of the sales value of Lithium
Ion products, should EVI manufacture such products. NRC will receive the NRC
Entitlement within ninety days of the end of each contract year after offset of
EVI's actual cash development funding for such contract year. If EVI should
terminate the Technical Collaboration Period, the NRC Entitlement will be at
full rate for 18 months, 80% of full rate for the next 18 months and will
continue to decline until it reduces to zero seven years and six months after
termination. Should NRC terminate the Technical Collaboration Period effective
July 31, 2008 or later, the NRC Entitlement shall be equal to one half of such
values.
In consideration for this license, EVI paid NRC, in addition to the
royalties specified above, a license fee of Cdn. $10,000. EVI also paid as
additional research and development funding, the sum of Cdn. $90,000. In
consideration of the overall alliance between EVI and NRC, the Company also has
issued to NRC, as research incentives, 200,000 shares of common stock of the
Company, of which it may sell 20,000 shares in any single year, so long as such
sale by NRC complies with all applicable United States securities laws, and
options to purchase of 20,000 additional shares of common stock of the Company,
which options are exercisable prior to December 31, 2001 at U.S.$2.25 per share.
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Pacific Lithium Limited
In October 1999, EVI entered into an option agreement with Pacific
Lithium Limited of Auckland, New Zealand ("PLL"), an international manufacturer
of advanced battery materials and a significant supplier of high quality
battery-specific Lithium carbonate to Japanese cathode and electrolyte
suppliers. Pursuant to the option agreement, PLL could acquire an exclusive
worldwide license (i) for the manufacture and sale of Lithium Ion cathode
material developed by EVI, and (ii) for the manufacture of Lithium Ion batteries
using those materials. During the option period, which expired March 31, 2000,
PLL paid EVI U.S. $172,065 in respect of a joint development program to take
EVI's Lithium Ion technology to commercial scale. The joint development program
actually commenced on August 9, 1999, prior to the execution of the option
agreement. Through the end of 1999 and the beginning of 2000, PLL set up pilot
manufacturing facilities. On March 23, 2000, PLL notified EVI that it was
exercising its option to acquire an exclusive worldwide license in accordance
with the option agreement, such license to be effective April 1, 2000. For
purposes of contributing to EVI's ongoing research and development in Lithium
Ion Technology, PLL will pay EVI royalties on sales of cathode materials or
cells using such cathode materials, and on sublicensing fees earned by PLL. To
maintain exclusivity, PLL will pay EVI a minimum royalty amount, a portion of
which can be satisfied through continued research and development funding.
Nickel Zinc Batteries.
Consumers are dissatisfied with the performance of small rechargeable
energy systems, each one of which has its particular shortcomings. The Nickel
Cadmium ("NiCd") battery, while considerably less expensive than Lithium Ion, is
still relatively expensive, has very poor energy density, discharges its energy
by itself when not in use after a few weeks of storage, and is extremely toxic.
The Nickel Metal-Hydride ("NiMH") battery was developed under the assumption
that NiCd would be banned eventually, but while it is less toxic, it is more
expensive and has twice the self- discharge problem. The result is that the NiMH
battery has had limited success but combined with the NiCd battery, the market
is still growing at the rate of 25% to 40% per year.
The concept of making a Nickel Zinc battery that would resolve some of
these problems has been considered for several years, but gassing in the system
has made it very difficult to seal the cells and been a major deterrent to their
wide-spread use. We are currently working to develop a Nickel Zinc system which
(i) has higher voltage and energy than NiCd or NiMH batteries, (ii) is less
expensive, (iii) is much less toxic than the NiCd product, and (iv) does not
have the gassing problems typical in Nickel Zinc reactions. Recent rounds of
testing have shown an improved cycle life (i.e., the number of times the battery
can be recharged) of 100 to 120 cycles in laboratory conditions. We believe that
the cycle life can be extended even further, perhaps to several hundred recharge
cycles, with improved separator technology. In September 1999, we filed a
Canadian patent application with respect to our rechargeable Nickel Zinc
technology.
On February 21, 2000, we entered into a joint development agreement
with Young Poong Corporation of South Korea ("Young Poong"). Young Poong is an
experienced battery producer and currently manufactures high quality alkaline
batteries in both rechargeable and non-rechargeable formats for the global
market. We expect this relationship with Young Poong to accelerate the
commercial development of our rechargeable Nickel Zinc battery system which is
targeted at existing NiCd and NiMH markets. The agreement requires Young Poong
to provide us with parts to make samples of Nickel Zinc AA and AAA batteries,
which samples will then be given to Young Poong
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for testing. Young Poong has the option, exercisable until August 21, 2000, to
obtain a manufacturing license from us based on such Nickel Zinc technology. If
Young Poong exercises the option to obtain the manufacturing license, we will
reduce our customary license fee by U.S.$500,000 and receive a 3% royalty on all
sales, subject to reduction over time based upon the achievement of certain
production volume targets.
If the gassing and separator problems can be solved, we believe that a
Nickel Zinc rechargeable battery would gain a significant share of the battery
market. We intend to actively pursue such a research and development program
which we hope, but cannot guarantee, will result in the successful design of a
Nickel Zinc rechargeable cell that can be simply manufactured on the same
equipment currently being used for the manufacture of all alkaline batteries,
and that will be available for commercial testing before the end of 2000.
Zinc Carbon Batteries.
The Zinc Carbon (standard AAA, AA, C and D) battery, also known as the
LeClanche battery, is the oldest, least expensive and most widely used in the
world and has undergone little innovation in over 100 years. The Zinc Carbon
battery has a significant market share in underdeveloped countries with the
result that several billion of these batteries are manufactured and discarded
annually. We are testing recharging systems that will permit this type of
battery to be converted to a rechargeable system, thereby providing significant
cost savings as well as achieving considerable reductions in waste and
environmental damage. The non-rechargeable Zinc Carbon battery, however, has a
separator which is only designed to function for the limited life of the
battery. Current laboratory samples will cycle approximately 25 times before the
separator fails. This level of rechargeability is commercially viable but, in
order to permit a Zinc Carbon battery to be rechargeable up to 100 cycles or
more, we must develop a new separator.
We have developed a type of hybrid system that uses the basic
manufacturing facilities and most of the same components and materials as the
normal Zinc Carbon battery and have succeeded in demonstrating a very effective
rechargeable battery. A hand production line has been set up at NRC to optimize
this system. The advantage of this battery is that we believe it will be the
least expensive rechargeable battery available and that it will replace billions
of thrown away batteries around the world. The system can use existing charging
systems developed for other rechargeable batteries but it can also be charged
with small bicycle generators or solar panels. In September 1999, we filed a
Canadian patent application in connection with our rechargeable Zinc-Carbon
Hybrid technology.
Industrial Research Assistance Program.
On March 20, 2000, we entered into an agreement with NRC under which we
will receive a repayable contribution from NRC's Industrial Research Assistance
Program ("IRAP") to further the Nickel Zinc and Zinc Carbon Bromine research, as
well as research relating to other battery products, and to advance our various
technologies towards efficient commercialization in an expeditious manner.
Pursuant to such agreement, NRC shall reimburse us, on a monthly basis through
March 31, 2001, for 85% of the actual salary costs (not including benefits),
estimated to be Cdn.$495,000, incurred for our staff working on these research
projects, with a maximum contribution equal to the lesser of 33% of the total
costs incurred in the performance of the work or Cdn.$495,000. We will repay NRC
for such contributions beginning on July 1, 2003 and continuing for every
calendar quarter thereafter up to
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and including April 1, 2006, by paying to NRC 1.7% of our gross revenues for the
quarter preceding such repayment. If these repayments total less than
Cdn.$495,000 by April 1, 2006, quarterly repayments shall continue until the NRC
contribution is fully repaid. The total amount repayable cannot exceed
Cdn.$742,500.
Copper Zinc and Electro-Permeable Material Technology.
In July 1999, we concluded an agreement with T & G Corporation ("T&G")
of Connecticut regarding T&G's proprietary technology for Electro-Permeable
Material ("EPM") materials and the use of copper zinc electrodes in batteries,
as well as other portable power technologies. T&G will be credited with an
initial investment of U.S.$500,000 respecting its contribution of the technology
and we will fund the research and development costs. T&G and we will share
equally in the net revenues of the joint venture, after deduction of direct
costs, and subject to the balancing of agreed expenditures by either party in
the development of the technology and the operation of the joint venture. The
balancing of investments will be achieved by allocating 75% of net revenue
disbursements of the joint venture to the party with the larger investment until
the investments are equal. During the twelve months period ending September 30,
2000, it is our plan to spend, or cause to be spent, approximately Cdn. $50,000
on research and development pertaining to Copper Zinc and EPM technology.
Alkaline and Direct Methanol Fuel Cells.
Fuel cells are electrochemical devices that enable the chemical energy
of fuels to be converted directly into electricity, thereby avoiding the
fundamental loss of efficiency and emission of pollutants associated with
combustion processes. Fuel cells offer the advantage of lower life-cycle
operating costs for fuel and maintenance plus any economic credits for being
much cleaner than combustion engines.
The Government of Canada, through NRC and other government agencies,
has expressed an interest in supporting initiatives to ensure that Canada
remains in the forefront of Fuel Cell related research. To that end, on October
22, 1998, in consideration of a prepayment of U.S.$450,000, consisting of
200,000 shares of the Company's common stock at the value of U.S.$2.25 per
share, we obtained a ten year lease of the fuel cell laboratory equipment and
related assets of Astris Energi Inc. and Astris Inc. (collectively, "Astris") of
Mississauga, Ontario, including a prototype operational alkaline fuel cell unit.
We have an option to purchase the leased assets for nominal consideration at the
end of the lease period in 2008.
The laboratory equipment and other assets were moved to NRC's research
campus in Ottawa, Ontario, and are being used in a new EVI laboratory dedicated
to fuel cell and battery research and development. Prototype fuel cells,
together with the engineering of the subassemblies, already exist and will
undergo exhaustive testing and optimization. We have also licensed Astris's
alkaline fuel cell technology for a ten year period to complement its existing
intellectual property and, in connection with products manufactured using this
technology and any related sublicense revenue, we have committed to pay Astris a
royalty of 2.5% for four years, and 2% for an additional six years
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thereafter, subject to a minimum annual royalty of Cdn.$10,000 and a maximum
aggregate royalty of Cdn.$5,000,000.
Most fuel cells operate on Hydrogen, necessitating the use of a bulky
and costly reformer to separate Hydrogen from the fuel source used. On December
7, 1999, we announced that, working in conjunction with Dr. Karl Kordesch, Dr.
Viktor Hacker and the Technical University of Graz, Austria, we had achieved a
major technological breakthrough in fuel cell design and had filed a Canadian
patent application with respect to Direct Methanol Fuel Cells ("DMFC"). A DMFC
oxidizes Methanol directly without the necessity of a reformer and without
expensive membranes or electrodes. We believe that a DMFC that operates on a
liquid fuel will lead to a more rapid commercialization of the technology for
transportation applications because it will both simplify the on-board system
requirements and utilize the existing petroleum infrastructure.
We believe we have exceptional in-house expertise in this area of fuel
cell technology, primarily because of our long-term relationship with Dr. Karl
Kordesch. Dr. Kordesch headed up the team that, in the late 1960's, developed a
Hydrogen fuel cell that powered a full size General Motors vehicle for a period
of up to three years. NASA has used Hydrogen powered fuel cells in the U.S.
space shuttle program. Dr. Kordesch has consulted with the joint German/French
space shuttle programs, and is also the author of the principal textbooks used
to teach the subject at universities around the world. He was the leader of the
Eveready research group that invented the single use alkaline battery technology
which is currently applied in such brand name batteries as Duracell and
Energizer, holds over 80 U.S. and several foreign patents, and is the inventor
of the rechargeable alkaline Manganese battery system known as RAM(TM).
Presently, he holds the title of Professor Emeritus at the Technical University
of Graz and has been a consultant of the Company since August 1998 in the areas
of Zinc Carbon Hybrids, fuel cells and other related battery technologies. In
return for these services, we entered into a new consulting agreement with Dr.
Kordesch on March 23, 2000, under which he and his associates received options
to purchase up to 50,000 shares of the Company's common stock at an option price
of US $.50 per share, exercisable until December 31, 2000 or thirty days after
the termination of the agreement. In addition, Dr. Kordesch and his associates
will bill us for services at a rate which we shall have pre-approved. The
agreement expires on December 31, 2003, and the services of Dr. Kordesch and his
associates as consultants are exclusive to the Company and all technological
enhancements which are achieved during the term of the agreement are the sole
and exclusive property of the Company.
Our in-house research and development staff, as well as the remainder
of our research team at NRC, will collaborate with Dr. Kordesch and his
associates on a DMFC development program that we are hopeful, but cannot
guarantee, will result in a prototype unit in the latter months of 2000 and
demonstration units in the first half of 2001. During the twelve months ending
on September 30, 2000, we plan to spend, or cause to be spent, approximately
Cdn.$600,000 on research and development pertaining to fuel cell technology.
Other Projects.
In June 1998, Dr. Klaus Tomantschger assigned to us a patent
application relating to technology which can be used to prevent the buildup of
Hydrogen gas in batteries. In consideration of the assignment of this patent
application by Dr. Tomantschger, we paid him Cdn.$2,500 and agreed to pay him
75% of the first Cdn. $400,000 of gross revenues received by us from the sale,
license or other use of the technology covered by the patent application. Any
further net revenues
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derived from the exploitation of technology covered by the patent application
would be divided equally between Dr. Tomantschger and us. For purposes of the
agreement between Dr. Tomantschger and us, the term "Net Revenues" means gross
revenues less all direct costs associated with the technology, provided that
direct costs in any fiscal quarter may not be more than 50% of the gross
revenues received by us during the same quarter from the exploitation of the
technology. As of April 1, 2000, there have been no revenues with respect to
this technology.
Item 2. Management's Discussion and Analysis and Plan of Operations.
The following discussion should be read in conjunction with the financial
statements and related notes which are included elsewhere in this registration
statement. Statements made below which are not historical facts are
forward-looking statements. Forward-looking statements involve a number of risks
and uncertainties including, but not limited to, general economic conditions and
our ability to successfully complete our research and development programs and
begin to license to third parties, or market on our own, the products which are
created as a result of such programs.
Plan of Operations.
Research and Development Strategy.
In addition to the alliance agreement with NRC, we have established an
advisory committee comprised of our officers, scientists, researchers,
engineers, managers, professionals and marketers to monitor and critique
research and development projects and to consider their financial and legal
implications. Priority is given to projects that can bring significant
improvements and products to the market within three years.
The members of this advisory committee are:
o Mr. Greg K. Anderson - Senior Vice President of Janssen-Ortho
Corporation
o Mr. Geoff Becker, C.A. - member of Shimmerman Penn Burns Becker LLP,
auditors to the Company
o Mr. W. Bruce Clark - member of Cassels Brock & Blackwell, solicitors
to EVI
o Mr. D. Wayne Hartford - President, Chief Executive Officer, Secretary
and Director of the Company
o Dr. Dan Johnson - Vice President of Research and Development at
Eveready (retired)
o Mr. Terrence B. Kimmel - Vice President and General Manager of the
Company
o Dr. Karl Kordesch - chief research and development consultant to the
Company
o Mr. Austin P. Page - consultant to the Company (retired)
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o Mr. Peter F. Searle, C.A. - Vice President - Finance and Director of
the Company
o Dr. Klaus Tomantschger - Vice President, Marketing, Sales and
Intellectual Property for Integran Technologies Inc.
o Mr. David J. Trudel - Marketing Director of the Company
Licensing, Joint Venture and Manufacturing Strategy.
We are developing a number of patent applications and hold the
marketing rights to several more. We intend to bring these patented programs to
a state of readiness for field testing with an alliance partner (or partners)
and then to license the intellectual property to the partner (or partners). A
similar pattern will be followed for new patents. In programs where intellectual
property is jointly developed, licensing and revenue sharing arrangements are
pre-determined.
A significant amount of research and development in the field of energy
cell development by others has, in the past, been done, we believe, without
sufficient regard to commercial realities, manufacturing challenges, field
conditions and environmental concerns. We believe that effective product
research and development must be undertaken in a realistic context and we intend
to pursue our research and development activity on a practical and market
specific basis.
In selected activities, where there are greater commercial values and
lower investment costs, we may choose to become a principal in the commercial
activity. These cases will include those in which we can be an equal in the
joint venture and can use its technical, manufacturing and marketing strengths
to add significant value to the venture.
As a portable power technology developer and integrator, we place
significant value in forming strategic commercial and technical alliances, even
in cases where the likelihood of earning actual revenues as a result of these
relationships remains more of a goal than a certainty. As an early stage
technology developer, we believe these alliances, whether memorialized by
detailed agreements or kept on an informal basis, to be critical to focusing our
in-house research, development and commercialization activities on real market
opportunities.
Since our formation, we have formed several commercial alliances that
we believe are strategic to our business but are nonetheless informal in
comparison to the relationships described elsewhere in this Statement. These
include the following:
o Eveready Battery Company ("Eveready") - Under a
confidentiality agreement between us, we have agreed to
discuss developments and market applications of our DMFC
technology as an exploratory step towards a program focused on
developing a DMFC to meet Eveready's needs.
o W. L. Gore & Associates, Inc. ("WLG") - Under a
confidentiality agreement between us, WLG has agreed to
provide us with membrane electrode assemblies for testing in
our DMFCs. We have an obligation to report to WLG on the
performance of these materials in the test program. We may
also choose to direct membrane development at WLG in order to
serve its specific technical requirements.
o Hibar Systems Limited ("Hibar") - We have had a long
relationship with Hibar, without any formal agreement between
us, in which Hibar has agreed to work with
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us to provide quotations regarding turnkey battery production
lines, and, if successful, to construct and commission these
production lines. We currently have one bid in the final
stages and two other opportunities in the quotation stage.
o Methanex Corp. ("Methanex") - Under a confidentiality
agreement between us, we are engaged in discussions to explore
the possibility of a joint development program between us
involving DMFCs.
We believe that these relationships have been developed and nurtured
because we share a vision for the future of the portable power industry with
each of these strategic allies. At the present time, and given the current stage
of these relationships, we cannot guarantee that any of these alliances will
actually result in either technological or manufacturing innovations leading to
the marketing or licensing of any particular product. We intend, however, to
continue to seek out and develop these alliances because we believe that doing
so is in the long term best interest of the Company and its shareholders.
Acquisitions.
We have no specific plans with respect to making any acquisitions at
this time. We are, however, aware of the desirability, under certain
circumstances, in achieving growth, synergistic effect and certain economies of
scale through the acquisition of strategic technological or manufacturing
entities in the portable power industry. We are committed, therefore, to giving
careful consideration to any such acquisition opportunities with which we may be
presented.
Agreement with Northern Securities Inc.
During the twelve months ending September 30, 2000, we anticipate that
our budget requirements will be between Cdn.$1,000,000 and Cdn.$1,200,000. To
assist us in raising the necessary capital to fund our operations, on February
25, 2000, we entered into an agreement with Northern Securities Inc. of Toronto
("NSI"), under which NSI will act as exclusive agent for the Company, on a best
efforts basis, in connection with a private placement of Cdn.$750,000 in
debentures (the "Stage 1 Offering"), and a private placement of between Cdn.$6
million and $10 million of warrants convertible into common shares (the "Stage 2
Offering"). NSI's right to act as agent for the Stage 2 Offering is contingent
upon its successful completion of the Stage 1 Offering. For a period of two
years from the date of completion of the Stage 2 Offering, NSI has a right of
first refusal to act as lead or co-lead manager of any public or private
placement of securities the Company may offer in Canada, and to act as managing
underwriter for the placement with a minimum 50% participation in the Offering.
For the same two year period, NSI has also been given the right to act as our
financial advisor in connection with any merger or acquisition we might pursue.
Stage 1 Offering
NSI is already in the process of attempting to sell, on our behalf,
Cdn.$750,000 principal amount of 10% unsecured debentures (the "Debentures") to
several accredited Canadian investors. Repayment of the principal amount of the
Debentures will be due six months after issue. We will remit to NSI the interest
payable on the Debentures, or Cdn. $37,500, which NSI will hold in escrow.
Purchasers of the Debentures will also receive 1 warrant for each Cdn. $1 of
principal amount of Debentures purchased. Each warrant entitles the holder to
purchase one of the Company's shares of Common Stock for Cdn.$2 at any time up
to three years after the closing date of the sale of the Debentures (the
"Debenture Closing Date").
NSI's fees for its services as agent in connection with the Stage 1
Offering include the following: 8% of the principal amount of the Debentures
sold, a non-refundable work fee of Cdn.$20,000, Cdn.$5,000 for acting as escrow
agent with respect to the withheld interest, and a
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Cdn.$4,000 expense allowance. NSI will also receive 75,000 warrants, each
warrant entitling NSI to purchase one of the Company's common shares for Cdn.$2
at any time up to three years after the Debenture Closing Date. All amounts
pertaining to NSI's fees are payable on the Debenture Closing Date. As a
guarantee of the Company's payment of the principal amount of the Debentures six
months after the Debenture Closing Date, D. Wayne Hartford, President, Chief
Executive Officer and Secretary of the Company, has pledged 1.5 million of his
common shares, on a non-recourse basis, which pledge will be reduced to 750,000
common shares upon the filing of this Form 10-SB with the Securities and
Exchange Commission ("SEC").
Stage 2 Offering
No later than six months following the Debenture Closing Date, NSI must
have used its best efforts to place a minimum of Cdn.$6 million and a maximum of
Cdn.$10 million worth of warrants ("Special Warrants"), each of which shall be
exercisable at no additional consideration to acquire one common share. The
selling price of the Special Warrants will be established at the time of the
Stage 2 Offering, depending on the market price of the Company's common shares
at that time. If NSI does not have firm commitments from qualified investors
prepared to purchase at least $750,000 of the Special Warrants no later than
four months after the Debenture Closing Date, we have the option to seek
alternative financing through another agent.
NSI's fees for its services as agent in connection with the Stage 2
Offering include the following: 8% of the gross proceeds of the Special Warrants
sold, a non-refundable work fee of Cdn.$25,000, and an expense allowance of
Cdn.$8,000. All amounts pertaining to NSI's fees are payable on the date the
sale of the Special Warrants is closed (the "Equity Closing Date"). If the Stage
2 Offering is not closed within 120 days of the Debenture Closing Date, NSI's
non-refundable work fee is capped at Cdn.$10,000. In addition, NSI shall receive
compensation warrants entitling it to acquire the number of options
("Compensation Options") that equal 10% of the number of common shares issuable
on the exercise of the Special Warrants pursuant to the Stage 2 Offering. Each
Compensation Option entitles NSI to purchase one common share at a price equal
to the issue price of the Special Warrants at any time prior to the third
anniversary of the Equity Closing Date. In exercising the Compensation Options,
whether in whole or in part, NSI may, at its sole discretion, in lieu of paying
the exercise price in cash, elect to receive that number of our common shares
which equals the quotient of the following formula:
X(FMV- $Y)/ FMV, where:
X = the number of Compensation Options exercised,
Y = the exercise price of the Compensation Options, and
FMV = the closing price of our common shares on the principal stock exchange or
quotation system on which our common shares are then listed or quoted for
trading on the trading day immediately prior to such election by NSI.
A further requirement of our agreement with NSI is that we register the
common shares underlying the Special Warrants within 120 days after the Equity
Closing Date and apply for their listing on a Canadian Exchange.
Market Strategy.
The size of the markets in which the products we are developing through
our research and development programs and strategic alliances would compete are
difficult to quantify. Industry reports reflect numbers of between U.S.$25
billion and $35 billion per year. These values reflect the
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size of both the battery and fuel cell markets. Primary and secondary battery
markets of over 500 OEMs are already served by several companies with strong
brand awareness. The fuel cell market is developing with several companies vying
to be first to bring their innovations to market. Industry figures are not only
difficult to obtain but often conflict. From the data that is available, it
appears that the overall worldwide battery market is in the order of U.S.$33
billion, with an annual growth rate of at least 7%. The large format market is
roughly U.S. $17 billion (dominated by automobile batteries) and is growing at
5% per year. The U.S.$16 billion small format primary market is growing at 8% to
9% while the secondary segment is roughly U.S.$7 billion and growing at a rate
of up to 25% per year.
We expect that over the next few years, industrialized nations will
experience significant demand for rechargeable batteries used to power
high-drain portable electronic devices. Prospects are also favorable in the
developing world, most notably East Asia, parts of Latin America and Russia.
Although prospects vary on a country-by-country basis, rising personal and
business incomes should broaden the market base for battery-powered products
throughout the third world. Markets for rechargeable batteries have better
growth prospects than dry cell types. This reflects the presence of certain key
growth areas on the rechargeable side, in particular Nickel metal hydride,
Lithium ion and, eventually Lithium polymer batteries used to run computers and
communications equipment.
Starting this fiscal year, and continuing during the years ahead, we
plan to implement a communications plan that will support our marketing efforts
in all of these potential portable power markets, covering all of our portable
power technologies. The plan includes techniques for raising the awareness of
our efforts with both potential customers and investors. Our website already
exists at http://energyvi.com and is already responsible for regular contacts
from potential alliance partners and customers. We expect to develop product
specification sheets for each of our products and introduce our technologies to
prospective licensees in this manner. We will provide batteries for testing to
our alliance partners, and to potential licensees, under confidentiality
arrangements. We also plan to work closely with OEMs to provide test batteries
so that we may then make the necessary market linkages between end users and
manufacturers.
In the last decade, many experts forecast that the electric vehicle
would have a major impact on the large format market, but that has not yet
happened. In the past few years, several systems have been announced, usually
with great fanfare, but the majority of these systems are either not
commercially viable or in the very early stages of development.
Fuel cells are a natural response to climate change issues and the need
to reduce fossil fuel combustion and consumption. Fuel cells are seen as a
replacement of, or as part of a hybrid system with, internal combustion engines.
We believe that fuel cells could create new markets for steel, electronics,
electrical and control industries, and other equipment suppliers throughout the
world. New technology in fuel cell development could provide tens of thousands
of high-quality jobs and reduce trade deficits throughout North America. Arthur
D. Little, the renowned consulting firm, projects that fuel cell sales could
reach U.S.$3 billion this year. If just 20% of all the cars presently on the
road used fuel cells as their primary energy source, we estimate that 800,000
jobs would be created.
A DMFC, using Methanol as the fuel supply, should gain relatively easy
market access, as there would be no requirement to build a Hydrogen distribution
infrastructure. Methanol, a liquid fuel, can be distributed from existing
gasoline fueling stations. Thus, if only 10% of automobiles used in the United
States alone contained a fuel cell as their power supply, the U.S. market would
grow to potentially U.S.$50 billion annually. Early market entry will go to
technologies that are low cost, efficient and have flexible applications.
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For fuel cells, our marketing strategy will encompass several
approaches. We will attempt to interest fuel cell companies in product
development and technology transfer relationships. We will also approach
potential large-scale users of the technology to support development and
commercialization. We hope, but we cannot guarantee, that our marketing
strategies regarding fuel cells will cause us to become a major factor in the
fuel cell manufacturing business within the next several years.
The most notable fact about the battery market is that all new
technologies to date have added to the total market share without diminishing
any of the business already in existence. The only batteries that have
disappeared from the market place have been legislated out of existence because
of safety or health concerns, rather than because the market place had no
further use for the product. New systems appear to simply attract new
applications and, in only a very few cases, retard the growth of existing
technologies. The fuel cell technologies that are currently being exploited will
create an entirely new market again, and it is likely that, eventually, fuel
cells will dwarf all other segments of the battery market place.
The claims that are made so frequently for new "miracle batteries" have
caused the market generally to become skeptical and confused. We are concerned
that the average customer does not have the ability to digest and evaluate all
of the various claims being made and that he therefore bootstraps onto the due
diligence done by others -- or simply follows the leaders, without regard to
true technological innovation. For these reasons, we need to take advantage of
high profile alliances with such strategic partners as NRC and PLL, among
others, to insure our credibility with OEMs and other high profile customers. We
intend to promote our relationships with these high profile companies and
organizations to increase our visibility in the industry overall, and to
maximize our ultimate market penetration.
Item 3. Description of Property.
As of September 30,1999, the Company's primary assets were:
(a) capital assets, leased from Astris in October 1998 and installed in
our Ottawa, Canada laboratory, comprising the machinery, equipment and related
fixtures that constitute a complete operating fuel cell laboratory. Such capital
assets were acquired as discussed on page 13 of this Statement; and
(b) our license and technology rights arising from the Alliance
Agreement executed as of March 1, 1997 between EVI and NRC, as discussed on page
9 of this Statement.
Item 4. Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth the number of and percentage of
outstanding shares of Common Stock beneficially owned by the Company's officers,
directors and those shareholders owning more than 5% of the Company's Common
Stock as at December 31, 1999, which is the most recent date for which such
information is available.
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Shares of
Name and Address Common Stock Percent of Class
-------------------------- -------------------- ----------------
D. Wayne Hartford 11,751,100 (1) (4) 87.44%
43 Fairmeadow Avenue
Toronto, Ontario,
M2P 1W8, Canada
Peter F. Searle 112,000 (2) less than 1%
11084 Sheppard Avenue E.
Scarborough, Ontario,
M1B 1G2, Canada
Terrance B. Kimmel 100,500 (3) less than 1%
1152 St. Moritz Court
Orleans, Ontario
K1C 2B3, Canada
All Officers and Directors
as a Group (three persons) 11,963,600 (5) 89.02%
(1) Includes shares owned by Bonita A. Hartford, Mr. D. Wayne Hartford's wife
and Bonhart Holdings Corporation, a corporation controlled by
Bonita A. Hartford and also shares owned by Hartford Investment
Corporation II, and Intertec Marketing Corp. both corporations controlled
by Mr. Hartford.
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(2) 12,000 shares were issued in the name of Margaret E. Searle, Mr. Searle's
wife. Includes options for 100,000 shares, exercisable within 60 days.
(3) Includes options for 100,000 shares exercisable within 60 days, and 500
shares beneficially owned by Collette V. Kimmel, Mr. Kimmel's wife.
(4) Includes options for 551,900 shares exercisable within 60 days, owned
beneficially and of record by Mr. Hartford.
(5) Includes 11,211,700 shares of Common Stock issued and outstanding, plus
the shares underlying the aggregate 751,900 options listed here as being
exercisable within 60 days.
Item 5. Directors, Executive Officers, Promoters and Control Persons.
The following sets forth certain information concerning the present
management of the Company:
Name Age Position with Company
------------------ --- -----------------------------------------
D. Wayne Hartford 54 President, Chief Executive Officer and
Secretary, and a Director
Peter F. Searle 61 Vice President, Finance and a Director
Terrance B. Kimmel 54 Vice President and General Manager of EVI
D. Wayne Hartford has been an Officer and Director of the Company since
1996. In 1986, Mr. Hartford co-founded Battery Technologies Inc. (BTI), a
battery research firm that developed and licensed rechargeable alkaline battery
technology world-wide. Mr. Hartford was the President and Chief Executive
Officer of BTI until the fall of 1996.
Peter F. Searle is a Chartered Accountant in both Canada and the U.K. He
has been an Officer and Director of the Company since 1997. Since 1987, he has
been the President of Postscript Financial Services Inc., a company that
provides financial consulting and accounting services in Canada. Between 1979
and 1984, he served as Vice-President Finance and from 1984 to 1987 served as
Senior Vice-President, Vice-President Finance and Secretary of Standard
Broadcasting Corporation Limited, a major Canadian public broadcasting company
with radio, television and cable television interests in Canada, the U.S. and
Europe.
Terrance B. Kimmel has been Vice President and General Manager of EVI
since August 1999. From 1990 until August 1999, Mr. Kimmel was head of Business
Development for the National Research Council ("NRC") Institute for Chemical
Process and Environmental Technology ("ICPET").
Page 23
<PAGE>
NRC is a Canadian government Crown Corporation undertaking scientific research
and development, and since 1997 has been a research and development alliance
partner of the Company.
Item 6. Executive Compensation.
The following table sets forth in summary form the compensation
received by (i) the Chief Executive Officer of the Company and (ii) by each
other executive officer of the Company who received in excess of U.S.$100,000
during the fiscal years ended September 30, 1998 and 1999.
<TABLE>
Other Annual Restricted Options
Name and Fiscal Salary Bonus Compensation Stock Awards Granted
Principal Position Year (1) (2) (3) (4)
------------------ ------ --------------------- -------- ------------ ------------ -------
<S> <C> <C> <C> <C> <C> <C>
D. Wayne Hartford,
President and Chief 1998 Cdn.$214,200 Cdn.$7,200 N/A N/A
Executive Officer 1999 Cdn.$214,200 Cdn.$7,200
Peter Searle, 1998 Less than Cdn.$80,000 Cdn.$1,088
Vice President 1999 Less than Cdn.$80,000 Cdn.$1,088
Terrance B. Kimmel 1999 Cdn.$ 16,667 Cdn.$ 937
Vice President of EVI
(1) The dollar value of base salary (cash and non-cash) received. Amounts
include the compensation paid by the Company's subsidiaries.
(2) The dollar value of bonus (cash and non-cash) received.
(3) Any other annual compensation not properly categorized as salary or bonus,
including perquisites and other personal benefits, securities or property.
Amounts in the table represents automobile allowances.
(4) Amounts reflect the value of the shares of the Company's Common Stock
issued as compensation for services.
</TABLE>
The table below shows the number of shares of the Company's Common
Stock owned by the officers listed above, and the value of those shares as of
December 31, 1999.
Page 24
<PAGE>
Name Shares Value
------------------ ---------- ---------------
D. Wayne Hartford 11,751,100 U.S.$14,101,320
Peter Searle 112,000 U.S.$134,400
Terrance B. Kimmel 100,500 U.S.$120,600
The following shows the amount which the Company expects to pay to its
executive officers during the fiscal year ending September 30, 2000, and the
time which the Company's executive officers plan to devote to the Company's
business.
Proposed Time to be Devoted
Name Compensation To Company's Business
D. Wayne Hartford Cdn. $214,200 100%
Peter F. Searle Cdn.$80,000 80%
Terrance B. Kimmel Cdn. $100,000 100%
At September 30, 1998 and September 30, 1999, the Company owed D. Wayne
Hartford U.S.$75,748 and U.S.$238,982, respectively, in connection with cash
advances made by Mr. Hartford to the Company for working capital purposes during
those periods. Similarly, the Company owed D.W. Hartford & Associates Inc.
("Associates"), an affiliate of Mr. Hartford, U.S.$45,865 at September 30, 1998
and U.S.$65,600 at September 30, 1999, for cash advances made by Associates to
the Company for working capital purposes during those periods.
The Board of Directors may increase the compensation paid to the
Company's officers depending upon the results of the Company's future
operations.
Employment Contracts.
The Company does not have written employment agreements with any of its
officers, other than Terrance B. Kimmel, which employment agreement was entered
into as of August 1, 1999. The agreement requires Mr. Kimmel to devote
substantially all of his time to being Vice President and General Manager of
Energy Ventures Inc. (Canada) ("EVI"), the Company's chief operating subsidiary,
for an annual salary of Cdn.$100,000. Mr. Kimmel also received options to
acquire 300,000 shares of the Company's Common Stock, exercisable at U.S.$1.50
per share. 100,000 options were exercisable immediately upon issue with an
expiration date of August 1, 2002, another 100,000 options are exercisable no
earlier than August 1, 2000, provided Mr. Kimmel is still an employee of EVI,
and expire on August 1, 2003, and a final 100,000 options are exercisable no
Page 25
<PAGE>
earlier than August 1, 2001, provided Mr. Kimmel is still an employee of EVI,
and expire on August 1, 2004.
Contracts with Subcontractors.
Dr. Karl Kordesch is a scientist who has conducted research primarily
in the area of electro- chemistry and rechargeable energy systems. Dr. Kordesch
was the leader of the Eveready research group that invented the single use
alkaline battery technology which is currently applied in such brand name
batteries as Duracell and Energizer as well as many others world-wide. He also
invented the rechargeable alkaline Manganese RAM(TM) battery system. Since 1986,
Dr. Kordesch has been the Vice-President of Advanced Research at Battery
Technologies Inc., and holds the title of Professor Emeritus at the Technical
University of Graz, Austria. Dr. Kordesch has authored and edited several
hundred books, technical papers and publications on a wide range of topics
related to electro- chemistry and holds over 80 U.S. patents as well as several
foreign patents. Recent activities of Dr. Kordesch and the research staff at the
University of Graz include research efforts in the areas of Nickel Zinc, the
Zinc Bromine Hybrid battery and Fuel Cells generally.
On March 23, 2000, we entered into a new consulting agreement with Dr.
Kordesch. In consideration of his consulting services to the Company, he and his
associates received options to purchase up to 50,000 shares of the Company's
Common Stock at an exercise price of U.S.$.50 per share, exercisable until
December 31, 2000 or thirty days after termination of the agreement. In
addition, Dr. Kordesch and his associates will bill the Company for services at
a rate which the Company will have pre-approved. The agreement expires on
December 31, 2003, and the services of Dr. Kordesch and his associates are
exclusive to the Company, and all technological enhancements which are achieved
during the term of the agreement are the sole and exclusive property of the
Company.
Options Granted During Fiscal Year Ending September 30, l999
In his employment agreement with the Company, entered into as of August
1, 1999 and discussed at p. 25 of this Statement, Terrance B. Kimmel was granted
300,000 options, in three tranches of 100,000, exercisable at $1.50 per share.
Option Exercises in Last Fiscal Year and Fiscal Year-End Values.
None.
Long Term Incentive Plans - Awards in Last Fiscal Year.
None.
Employee Pension, Profit Sharing or Other Retirement Plans.
The Company does not have a defined benefit, pension plan, profit
sharing or other retirement plan, although the Company may adopt one or more of
such plans in the future.
Compensation of Directors.
Page 26
<PAGE>
Standard Arrangements. The Company does not pay its directors for
attending meetings of the Board of Directors, although the Company expects to
adopt a director compensation policy in the future. The Company has no standard
arrangement pursuant to which directors of the Company are compensated for any
services provided as a director or for committee participation or special
assignments.
Except as disclosed elsewhere in this report no director of the Company
received any form of compensation from the Company during the year ended
September 30, 1999.
Non-Qualified Stock Option Plan.
The Company has a Non-Qualified Stock Option Plan which authorizes the
issuance of options to purchase up to 2,000,000 shares of the Company's Common
Stock. The Company's employees, directors, officers, consultants, service
providers and advisors are eligible to be granted options pursuant to the Plan,
provided however that bona fide services must be rendered by the consultants,
service providers or advisors and the services must not be in connection with
the offer or sale of securities in a capital-raising transaction. The option
exercise price is determined by the Board of Directors.
The Plan is administered by the Board of Directors. The Board of
Directors has the authority to interpret the provisions of the Plan and
supervise the administration of the Plan. In addition, the Board of Directors is
empowered to select those persons to whom options are to be granted, to
determine the number of shares subject to each grant of an option and to
determine when, and upon what conditions, shares or options granted under the
Plan will vest or otherwise be subject to forfeiture and cancellation.
In the discretion of the Board of Directors, any option granted
pursuant to the Plan may include installment exercise terms such that the option
becomes fully exercisable in a series of cumulating portions. The Board of
Directors may also accelerate the date upon which any option (or any part of any
options) is first exercisable.
The Board of Directors may at any time, and from time to time, amend,
terminate, or suspend the Plan in any manner it deems appropriate, provided that
such amendment, termination or suspension cannot adversely affect rights or
obligations with respect to shares or options previously granted.
As of December 31, 1999, the Company had issued Non-Qualified Stock
options to the persons and upon the terms shown below. Unless otherwise
indicated, all of the options are presently exercisable.
Shares Option
Subject Exercise
Option Holder Note to Options Price Expiration Date
--------------------- ---- ---------- ------- ---------------
Greg Anderson 50,000 $0.50 January 2, 2001
Duane Burke 5,100 $0.50 January 2, 2001
W. Bruce Clark 43,000 $0.50 January 2, 2001
Page 27
<PAGE>
D. Wayne Hartford 551,900 $0.50 January 2, 2001
Terrance B. Kimmel (2) 300,000 $1.50 August 1, 2004
Dr. Karl Kordesch 50,000 $0.50 January 2, 2001
Dr. Karl Kordesch (1) 25,000 $2.25 January 2, 2002
John Murray (1) 10,000 $2.25 January 2, 2002
Jiri Nor (1) 10,000 $2.25 January 2, 2002
Austin P. Page 50,000 $0.50 January 2, 2001
Peter F. Searle 100,000 $0.50 January 2, 2001
Dr. W. Taucher-Maunter (1) 2,500 $2.25 January 2, 2002
Dr. Klaus Tomantschger 50,000 $0.50 January 2, 2001
David J. Trudel 50,000 $0.50 January 2, 2001
(1) 65% of these Options are presently exercisable, and the remaining 35% of
the Options are exercisable after September 30, 2000.
(2) 1/3 of these Options are presently exercisable, 1/3 are exercisable after
August 1, 2000 and the remaining 1/3 of the Options are exercisable after
August 1, 2001.
Other Options.
Since inception, the Company has granted options for the purchase of
shares of its common stock to the persons, in the amounts and upon the terms
shown in the following table. These options were not granted pursuant to the
Company's Incentive or Non-Qualified stock option plans.
Shares Subject Option Expiration
Option Holder to Options Exercise Price Date
--------------------- -------------- -------------- -----------------
The National Research
Council of Canada 20,000 $2.25 December 31, 2001
Item 7. Certain Relationships and Related Transactions.
At the time of the share for share exchange described at page 3 of this
Statement, a majority of EVI's shares were owned by the Company's officers and
directors. The following table shows the shares of EVI which were issued in this
transaction to the Company's officers and directors in exchange for their shares
in EVI, the amount which such persons paid for their shares in EVI, and the
dates they acquired their shares in EVI.
Page 28
<PAGE>
<TABLE>
Shares of the Company's
Common Stock Acquired Cost of Shares Date of Payment
In Share Exchange In EVI for Shares in EVI
------------------------ ----------------------- -------------- -----------------
<S> <C> <C> <C>
D. Wayne Hartford (1) 9,601,200 Cdn. $ 100 11-21-96
Peter F. Searle (2) 12,000 Cdn. $5,000 07-31-97
(1) represents Cdn.$75 paid by D. Wayne Hartford for 6,001,000 shares of EVI's
common stock, Cdn.$12.50 paid by a corporation affiliated with Mr.
Hartford for 1,000,000 shares of EVI's common stock, and Cdn.$12.50 paid
by Bonita Ann Hartford, the wife of D. Wayne Hartford, for 1,000,000
shares of EVI's common stock.
(2) shares were issued in the name of Margaret E. Searle, Mr. Searle's wife.
</TABLE>
EVI has accrued fees to be charged to that corporation by D. W. Hartford &
Associates Inc., a corporation which is owned by D. Wayne Hartford and Bonita
Ann Hartford, his wife. EVI has not been able to pay such fees due to lack of
funds. At September 30, 1998, Cdn.$142,800 of such fees were accrued and
unpaid.At September 30, 1999, Cdn.$193,150 of such fees were accrued and unpaid.
Item 8. Description of Securities.
Common Stock
The Company is authorized to issue 50,000,000 shares of Common Stock
(the "Common Stock"). As of December 31, 1999 the Company had 12,687,579 shares
of Common Stock issued and outstanding. Holders of Common Stock are each
entitled to cast one vote for each share held of record on all matters presented
to shareholders. Cumulative voting is not allowed and the holders of a majority
of the outstanding Common Stock can elect all directors.
Holders of Common Stock are entitled to receive whatever dividends
the Board of Directors declares, out of funds legally available for payment of
dividends, and, in the event of liquidation, to share pro rata in any
distribution of the Company's assets after payment of liabilities. The Board of
Directors is not obligated to declare a dividend and it is not anticipated that
dividends will be paid in the foreseeable future.
Holders of Common Stock do not have preemptive rights to subscribe
to additional shares if issued by the Company. There are no conversion,
redemption, sinking fund or similar provisions regarding the Common Stock. All
of the outstanding shares of Common Stock are fully paid and non-assessable.
Preferred Stock
Page 29
<PAGE>
The Company is authorized to issue up to 5,000,000 shares of Preferred
Stock (the "Preferred Stock"). The Company's Articles of Incorporation provide
that the Board of Directors has the authority to divide the Preferred Stock into
series and, within the limitations provided by Delaware statute, to fix by
resolution the voting power, designations, preferences, and relative
participation, special rights, and the qualifications, limitations or
restrictions of the shares of any series. As the Board of Directors has
authority to establish the terms of, and to issue, the Preferred Stock without
shareholder approval, the Preferred Stock could be issued to defend against any
attempted takeover of the Company.
PART II
Item 1. Market Price of and Dividends on the Company's Common Equity and Other
Shareholder Matters.
As of September 30, 1999, there were approximately 385 registered
owners of the Company's Common Stock. The Company's Common Stock is traded on
the National Association of Securities Dealers OTC Bulletin Board. Set forth
below are the ranges of high and low trades for the periods indicated as
reported by the NASD. The trades reflect inter-dealer prices, without retail
mark-up, mark-down or commissions and may not necessarily represent actual
transactions. The Company's Common Stock began trading in March 1998.
Quarter Ending High Low
------------------ ----- -----
March 31, 1998 $2.50 $2.50
June 30, 1998 $2.75 $2.00
September 30, 1998 $3.25 $1.25
December 31, 1998 $4.00 $2.00
March 31, 1999 [no data available for this quarter]
June 30, 1999 $5.00 $1.00
September 30, 1999 $2.875 $0.50
December 31, 1999 $2.00 $0.75
The provisions in the Company's Articles of Incorporation relating to
the Company's Preferred Stock would allow the Company's directors to issue
Preferred Stock with rights to multiple votes per share and dividend rights
which would have priority over any dividends paid
Page 30
<PAGE>
with respect to the Company's Common Stock. No dividends have been declared with
respect to the Common Stock since the formation of the Company.
Item 2. Legal Proceedings.
None
Item 3. Changes in and Disagreements with Accountants.
Not applicable
Item 4. Recent Sales of Unregistered Securities.
The issuance of the shares of the Company's Common Stock to the former
shareholders of EVI in the share exchange described at page 3 of this Statement
was exempt from registration pursuant to Rule 504 of Regulation D, promulgated
pursuant to the Securities Act of 1933, as amended (the "Act"). No underwriters
were used and the Company did not pay any commissions in connection with the
issuance of these shares.
On March 2, 1999, the Company issued 200,000 shares of its Common
Stock to Astris as payment for a ten year lease of Astris's fuel cell laboratory
equipment and related assets.
On September 22, 1998, the Company issued 200,000 shares of its Common
Stock to the National Research Council of Canada ("NRC") as partial payment for
a technology license from NRC to EVI and future considerations.
The issuance of the shares of Common Stock to Astris and NRC was exempt
from registration pursuant to Section 4(2) of the Act. All of these shares were
acquired for investment purposes only and without a view to distribution. Both
Astris and NRC were fully informed about matters concerning the Company,
including its business, financial affairs and other matters and acquired the
securities for their own accounts. The shares issued to Astris and NRC are
"restricted" securities as defined in Rule 144 of the Securities Exchange Act of
1934, as amended (the "34 Act"). No underwriters were used and no commissions
were paid in connection with the issuance of these shares.
On May 5, 1999, the Company issued, pursuant to Rule 504 of Regulation
D, promulgated pursuant to the Act, 2,000,000 shares of its Common Stock to an
investor at 10 cents per share. These shares were exempt from registration
pursuant to Section 4(2) of the Act. All of those shares were acquired for
investment purposes only and without a view to distribution. The investors were
fully informed about matters concerning the Company, including its business,
financial affairs and other matters and acquired the securities for their own
accounts. The shares issued were restricted securities as defined in Rule 144 of
the 34 Act. Intertec Marketing Corp., a Barbados corporation which is 100% owned
by 584822 Ontario Limited, which company is 100% owned by D. Wayne Hartford, is
the beneficial owner of 1,000,000 of these shares of Common Stock, and 478,000
of these shares of Common Stock are owned by Bonhart Holdings Corporation, a
Barbados corporation which is 100% owned by Hartford Investments Corporation,
which is wholly-owned
Page 31
<PAGE>
by Bonita Ann Hartford, Mr. Hartford's spouse. No underwriters were used and no
commissions were paid in connection with the issuance of these shares.
Heller, Horowitz & Feit, P.C. ("HH&F"), a law firm located in New York,
is the Company's general counsel in regard to United States legal matters. HH&F
will receive from the Company on account of its fees 100,000 shares of the
Company's Common Stock. In addition, HH&F has been granted an option to purchase
200,000 shares of the Company's Common Stock at a price of $2.00 per share.
Item 5. Indemnification of Directors and Officers.
The Delaware Business Corporation Act and the Company's Bylaws provide
that the Company may indemnify any and all of its officers, directors, employees
or agents or former officers, directors, employees or agents, against expenses
actually and necessarily incurred by them, in connection with the defense of any
legal proceeding or threatened legal proceeding, except as to matters in which
those persons are determined not to have acted in good faith and in the best
interest of the Company. Insofar as indemnification for liabilities arising
under the Act may be permitted to directors, officers, or persons controlling
the Company pursuant to the foregoing provisions, the Company has been informed
that in the opinion of the SEC, such indemnification is against public policy as
expressed in the Act and is therefore unenforceable.
Page 32
<PAGE>
ENERGY VENTURES INC.
CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1999 , 1998 AND 1997
(Expressed in U.S. Dollars)
<PAGE>
ENERGY VENTURES INC.
SEPTEMBER 30, 1999 , 1998 AND 1997
INDEX
1 AUDITORS' REPORT
2 CONSOLIDATED BALANCE SHEETS
3 CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS
4 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
5 CONSOLIDATED STATEMENTS OF CASH FLOWS
6-14 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>
AUDITORS' REPORT
To the Board of Directors and Stockholders of
Energy Ventures Inc.:
We have audited the accompanying consolidated balance sheets of Energy Ventures
Inc. as at September 30, 1999 , 1998 and 1997 and the consolidated statements of
loss and comprehensive loss, stockholders' equity and cash flows for each of the
years in the three year period ended September 30, 1999. These financial
statements are the responsibility of the company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with United States generally accepted
auditing standards. Those standards require that we plan and perform an audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the company as at September 30,
1999 , 1998 and 1997 and the results of its operations and its cash flows for
each of the years in the three year period ended September 30, 1999 in
conformity with United States generally accepted accounting principles.
Shimmerman Penn Burns Becker, LLP
Chartered Accountants
Toronto, Canada
February 21, 2000
<PAGE>
ENERGY VENTURES INC.
CONSOLIDATED BALANCE SHEETS
AS AT SEPTEMBER 30, 1999 , 1998 AND 1997
(Expressed in U.S. Dollars)
Note 1999 1998 1997
---- ---- ---- ----
ASSETS
Current:
Cash $ - $ 2,772 $ 44,692
Accounts receivable 27,150 4,194 -
Refundable investment tax credits 2 113,486 19,300 -
Advances to related company - - 26,412
Prepaid expenses and sundry assets 14,376 4,482 37,393
-------- -------- -------
155,012 30,748 108,497
-------- -------- -------
Long term:
Capital assets 3 413,376 - -
Licence and technology costs 4 353,822 393,960 434,119
--------- -------- -------
767,198 393,960 434,119
--------- -------- -------
TOTAL ASSETS $922,210 $424,708 $542,616
========= ======== =======
LIABILITIES
Current:
Bank indebtedness $ 7,898 $ - $ -
Accounts payable and accrued liabilities 333,141 582,552 469,269
Advances from related company 5 65,600 45,865 -
Advances from director 6 238,982 75,748 -
Note payable - - 45,175
------- ------- ------
TOTAL LIABILITIES 645,621 704,165 514,444
------- ------- ------
STOCKHOLDERS' EQUITY
Capital stock 7 1,246,802 146,802 146,802
Additional paid in capital 8 165,481 165,481 165,481
Accumulated other comprehensive earnings (loss) (11,373) 8,204 -
------- ------- --------
1,400,910 320,487 312,283
Deficit (1,124,321)(599,944)(284,111)
------- ------- --------
276,589 (279,457) 28,172
------- ------- --------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 922,210 $424,708 $542,616
======= ======= ========
On Behalf of the Board: ____________________Director _________________Director
See accompanying notes
<PAGE>
ENERGY VENTURES INC.
CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS
YEARS ENDED SEPTEMBER 30, 1999 , 1998 AND 1997
(Expressed in U.S. Dollars)
Note 1999 1998 1997
---- ---- ---- ----
REVENUE $ 44,736 $ 71,587 $ 70,000
-------- -------- --------
EXPENSES
Technology expense 274,428 165,343 85,632
Administrative fees 86,623 88,878 81,721
Legal and audit 48,804 55,369 68,010
Amortization 44,000 - -
Professional fees 41,864 36,818 74,523
Office and general 26,715 28,039 18,870
Interest 19,622 - -
Occupancy costs 13,793 - -
Travel and promotion 13,264 12,973 25,355
-------- -------- --------
569,113 387,420 354,111
-------- -------- --------
NET LOSS (524,377) (315,833) (284,111)
OTHER COMPREHENSIVE EARNINGS
(LOSS)
Foreign currency translation adjustments (19,577) 8,204 -
-------- -------- --------
COMPREHENSIVE LOSS $(543,954) $(307,629) $(284,111)
======== ======== ========
NET LOSS PER SHARE 11 $ (0.046) $ (0.031) $ (0.028)
======== ======== ========
<PAGE>
ENERGY VENTURES INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED SEPTEMBER 30, 1999 , 1998 AND 1997
(Expressed in U.S. Dollars)
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Capital Stock Accumulated
------------------------ Additional other
Number paid comprehensive
Note of Shares Amount in capital Deficit earnings (loss) Total
---- --------- ------ ------------ ------- --------------- -----
BALANCE AS AT OCTOBER 1, 1996 1,491,336 $ - $ - $ - $ - $ -
Share consolidation 9 (1,342,157) - - - - -
Shares issued on exchange of ownership 9 10,088,400 146,802 - - - 146,802
Additional paid in capital 8 - - 165,481 - - 165,481
Net loss for the year - - - (284,111) - (284,111)
--------- ------- --------- -------- --------- --------
BALANCE AS AT SEPTEMBER 30, 1997 10,237,579 146,802 165,481 (284,111) - 28,172
Foreign exchange adjustment - - - - 8,204 8,204
Net loss for the year - - - (315,833) - (315,833)
--------- ------- ----------- --------- --------- ---------
BALANCE AS AT SEPTEMBER 30, 1998 10,237,579 146,802 165,481 (599,944) 8,204 (279,457)
Shares issued 7 2,400,000 1,100,000 - - - 1,100,000
Foreign exchange adjustment - - - - (19,577) (19,577)
Net loss for the year - - - (524,377) - (524,377)
--------- -------- ----------- --------- --------- ---------
BALANCE AS AT SEPTEMBER 30, 1999 12,637,579 $1,246,802 $165,481 $(1,124,321) $(11,373) $276,589
========= ======== =========== ========= ========= =========
</TABLE>
<PAGE>
ENERGY VENTURES INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED SEPTEMBER 30, 1999 , 1998 AND 1997
(Expressed in U.S. Dollars)
1999 1998 1997
---- ---- ----
CASH WAS PROVIDED BY (USED FOR):
OPERATING ACTIVITIES
Net loss $(524,377) $(315,833) $(284,111)
Items not affecting cash:
Amortization of capital assets 44,000 - -
Amortization of licence and technology costs 40,138 40,159 23,110
-------- ------- --------
(440,239) (275,674) (261,001)
Changes in non-cash working capital items relating to
operations:
Accounts receivable (22,956) (4,194) -
Refundable investment tax credits (94,186) (19,300) -
Prepaid expenses and sundry assets (9,894) 32,911 (37,393)
Accounts payable and accrued liabilities 200,589 113,283 19,269
-------- -------- --------
(366,686) (152,974) (279,125)
-------- -------- --------
FINANCING ACTIVITIES
Advances from (to) related company 19,735 72,277 (26,412)
Advances from director 163,234 75,748 -
Note payable - (45,175) 45,175
Issue of shares 200,000 - 146,802
Additional paid in capital - - 165,481
-------- -------- --------
382,969 102,850 331,046
-------- -------- --------
INVESTING ACTIVITIES
Net purchase of capital assets (7,376) - -
Acquisition of licence - - (7,229)
-------- -------- --------
(7,376) - (7,229)
-------- -------- -------
FOREIGN CURRENCY TRANSLATION ADJUSTMENTS (19,577) 8,204 -
-------- -------- -------
INCREASE (DECREASE) IN CASH (10,670) (41,920) 44,692
Cash at the beginning of the year 2,772 44,692 -
-------- -------- -------
CASH (BANK INDEBTEDNESS) AT THE END OF
THE YEAR $ (7,898) $ 2,772 $ 44,692
======== ====== =======
ADDITIONAL INFORMATION
Interest paid $ 19,622 $ - $ -
======== ======= ========
<PAGE>
ENERGY VENTURES INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1999 , 1998 AND 1997
(Expressed in U.S. Dollars)
1. ACCOUNTING POLICIES
(a) Principles of consolidation
These consolidated financial statements include the accounts of
the company and its wholly-owned subsidiaries, Energy Ventures
Inc. (Canada) and Energy Ventures International Inc., a Barbados
company.
(b) Change of name
The company changed its name from O.P.D. Acquisitions, Inc. to
Energy Ventures Inc. on September 29, 1997.
(c) Use of estimates
The preparation of the consolidated financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities at the date of the
consolidated financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
(d) Capital assets
Capital assets are stated at cost less accumulated amortization.
Amortization has been provided at the following annual rates:
Laboratory equipment - 10% straight line
Computer - 30% on the declining balance
(e) Licence and Technology costs
Pursuant to an alliance agreement with National Research Council
of Canada ("NRC") dated March 1, 1997, the company acquired a
licence to certain Lithium Ion ("LI") technology for $10,000
Canadian.
In addition, the company issued 200,000 common shares at an agreed
fair value of $2.25 per share in March 1999, as well as 20,000
options with an exercise price of $2.25 per share expiring
December 31, 2001, as consideration for the right to access other
technologies developed by the NRC.
<PAGE>
ENERGY VENTURES INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1999, 1998 AND 1997
(Expressed in U.S. Dollars)
1. ACCOUNTING POLICIES (continued)
(e) Licence and Technology costs (continued)
The licence and technology costs are amortized on a straight-line
basis over the term of the agreement.
Amortization of $40,138 (1998 - $40,159; 1997 - $23,110) has been
included in technology expense in the statements of loss.
(f) Foreign currency
The financial statements are expressed in U.S. dollars.
Current assets and liabilities denominated in Canadian dollars at
year end are converted into U.S. dollars at the rates of exchange
prevailing on that date. Transactions in Canadian dollars are
recorded in U.S. dollars at the average rate of exchange for the
operating period. Exchange gains and losses are reflected in the
statement of loss.
Exchange gains and losses resulting from the consolidation of
subsidiaries are reflected as other comprehensive income and are
included as a separate component of stockholders' equity.
2. REFUNDABLE INVESTMENT TAX CREDITS
Energy Ventures Inc. (Canada) has incurred research and development
expenditures for which it has estimated the amount of tax refunds
available from the Canadian federal and provincial authorities. This
estimate assumes that all claims will be duly filed within the prescribed
time limits. The actual amount receivable may vary due to a review by the
tax authorities of the technical and financial aspects of the claims.
3. CAPITAL ASSETS
Accumulated Net
Cost Amortization Book Value
Laboratory equipment $456,236 $ 43,658 $412,578
Computer 1,140 342 798
-------- --------- ---------
$457,376 $ 44,000 $413,376
======= ======= =======
<PAGE>
ENERGY VENTURES INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1999, 1998 AND 1997
(Expressed in U.S. Dollars)
4. LICENCE AND TECHNOLOGY COSTS
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
1999 1998 1997
---------------------- ------------------------- -----------------------
Net Net Net
Cost Book Value Cost Book Value Cost Book Value
---- ---------- ---- ---------- ---- ----------
Licence $ 7,229 $ 5,648 $ 7,229 $ 6,369 $ 7,229 $ 7,109
Technology costs 450,000 348,174 450,000 387,591 450,000 427,010
------- ------- ------- ------- ------- -------
$457,229 $353,822 $457,229 $393,960 $457,229 $434,119
======= ======= ======= ======= ======= =======
</TABLE>
5. ADVANCES FROM RELATED COMPANY
The advances are from a company controlled by the President and CEO of
Energy Ventures Inc. The advances bear interest at 7% per annum and have
no specific terms of repayment.
6. ADVANCES FROM DIRECTOR
The advances are from the President and CEO of the company. The advances
bear interest at 7% per annum and have no specific terms of repayment.
7. CAPITAL STOCK
(a) Authorized:
The company is authorized to issue 50,000,000 common shares and
5,000,000 preferred shares each with a par value of $0.0001 per
share.
(b) Issued:
<TABLE>
<S> <C> <C>
Number of
Shares Amount
Issued capital - September 30, 1998 10,237,579 $ 146,802
Issued for payment of laboratory equipment 200,000 450,000
Issued in satisfaction of debt related to acquisition
of licence and technology 200,000 450,000
Issued for cash 2,000,000 200,000
---------- -----------
12,637,579 $ 1,246,802
========== ==========
</TABLE>
<PAGE>
ENERGY VENTURES INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1999, 1998 AND 1997
(Expressed in U.S. Dollars)
7. CAPITAL STOCK (continued)
(c) Stock options:
The Company has a stock option plan for directors, officers and
service providers. The options may be exercised between the
exercise date and the expiry date.
The following options were outstanding on September 30, 1999:
<TABLE>
<S> <C> <C> <C>
Number of
Shares Exercise Price Exercise Date Expiry Date
1,150,000 $0.50 Sep. 30/1999 Jan. 2/2001
20,000 2.25 Jan. 5/1999 Dec.31/2001
30,875 2.25 Sep. 30/1999 Jan. 2/2002
16,625 2.25 Sep. 30/2000 Jan. 2/2002
100,000 1.50 Aug. 11/1999 Aug. 1/2002
100,000 1.50 Aug. 1/2000 Aug. 1/2003
100,000 1.50 Aug. 1/2001 Aug. 1/2004
1,517,500
</TABLE>
(d) Subsequent events
Subsequent to the year end, 50,000 of the $0.50 options have been
exercised and 200,000 were cancelled. In addition, 70,000 shares
were issued for $2 each in payment for research and development
services charged by one of the company's officers.
8. ADDITIONAL PAID IN CAPITAL
Pursuant to an alliance agreement between Energy Ventures Inc. (Canada)
and a battery technology company such party was to advance $361,402 to
Energy Ventures Inc. (Canada) and was to receive an option to acquire
19.99% of the common shares of the company. Subsequently, the amount to
be advanced was by agreement reduced to $165,481. The option was never
exercised and has expired. The receipt of $165,481 has been added to the
capital of the company.
<PAGE>
ENERGY VENTURES INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1999, 1998 AND 1997
(Expressed in U.S. Dollars)
9. EXCHANGE OF OWNERSHIP
On September 29, 1997, by an amendment to the Certificate of
Incorporation, the company's issued and outstanding common shares were
consolidated on the basis of 1 new common share for each 10 issued common
shares. There were 1,491,336 common shares prior to, and 149,179 common
shares after the consolidation. The amendment also authorized 50,000,000
common shares and amended the par value of each common share to $0.0001
per share.
On September 30, 1997, the company issued 10,088,400 common shares in
exchange for all of the 8,407,000 issued and outstanding common shares of
Energy Ventures Inc. (Canada).
Prior to the exchange of shares described above, the major shareholder of
Energy Ventures Inc. (Canada) was also a major shareholder of Energy
Ventures Inc. As there has not been a substantive change in the overall
ownership of these companies, this transaction is accounted for as
entities under common control and therefore the assets and liabilities of
each of the companies are included in these financial statements at their
net book value.
10. FINANCIAL INSTRUMENTS
The carrying value of the financial instruments approximates their fair
value due to the short term maturity of these instruments.
11. NET LOSS PER SHARE
Net loss per share is calculated on the basis of the weighted average
number of common shares outstanding for the period. Fully diluted loss
per share information has not been presented as the effect of potential
exercise of stock options would be anti-dilutive.
12. INCOME TAXES
Energy Ventures Inc. (Canada) has non-capital losses for Canadian income
tax purposes of approximately $1,425,000 Canadian (1998 - $815,000
Canadian; 1997 - $380,000 Canadian) available to be applied against
future taxable income. These losses expire between the years 2004-2006.
Energy Ventures Inc. (Canada) also has approximately $1,025,000 Canadian
(1998 - $60,000 Canadian; 1997 - Nil) of research and development
qualified expenditures available to be applied against future taxable
income which may be carried forward indefinitely.
There has been no provision for income taxes as the company has incurred
operating losses for which it is currently unable to recognize a benefit.
<PAGE>
ENERGY VENTURES INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1999, 1998 AND 1997
(Expressed in U.S. Dollars)
12. INCOME TAXES (continued)
A reconciliation of income taxes at the statutory income tax rates to net
income taxes included in the statement of loss is as follows:
1999 1998
---- ----
Benefit at Canadian statutory rate 44.6% 44.6%
Valuation allowance (44.6) (44.6)
------ -----
- % - %
====== =====
The company has recorded a valuation allowance for the entire amount of
the net deferred tax asset. The net deferred income tax asset is
comprised of the following at September 30, 1999:
CDN$
Net operating loss carryforwards $635,550
Unclaimed research and development expenditure pool 457,150
Refundable investment tax credit (46,000)
Capital assets included in research and development expenditures (284,000)
-------
762,700
Valuation allowance (762,700)
-------
Net deferred tax assets $ -
=======
13. RELATED PARTY TRANSACTIONS
(a) During the year, the company was charged $142,900 (1998 -
$146,400; 1997 - $134,827) for the management services of the
President and CEO by a corporation controlled by him. Accounts
payable includes $131,700 (1998 - $93,200; 1997 - Nil) payable to
this corporation.
(b) During the year, the company was charged $102,300 by one
of its officers for research and development services.
<PAGE>
ENERGY VENTURES INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1999, 1998 AND 1997
(Expressed in U.S. Dollars)
14. COMMITMENTS
(a) Lease
The company is committed to the following annual payments in
respect of the rental of premises:
2000 - $ 24,575
2001 - 24,575
2002 - 24,575
2003 - 24,575
2004 - 6,145
--------
$104,445
(b) National Research Council
Pursuant to the agreement between the company and NRC referred to
in note 1(e), NRC is entitled to receive 40% of net receipts for
licencing the LI technology as well as a royalty of 2% of net
sales of products manufactured by the company using the LI
technology.
The company has agreed to provide NRC with funding of a minimum of
$100,000 Canadian and a maximum of $500,000 Canadian each year for
purposes of ongoing research and development of the LI and other
technology. The NRC will contribute by providing research and
development resources at a preferred billing rate.
(c) Licence Agreement
On October 22, 1998, Energy Ventures Inc. (Canada) entered into a
licence agreement to use certain alkaline fuel cell technology.
Energy Ventures Inc. (Canada) paid $25,000 Canadian on execution
of the agreement with respect to first year royalties. Any sales
of product manufactured using such alkaline fuel cell technology
will be subject to a royalty of 2.5% during the first four years
and 2% during the next six years. There will be a minimum annual
royalty of $10,000 Canadian beginning January 1, 2000. The
obligation to pay royalties will cease on December 31, 2008 or
when the total royalties paid reach $5,000,000 Canadian.
<PAGE>
ENERGY VENTURES INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1999, 1998 AND 1997
(Expressed in U.S. Dollars)
15. INFORMATION ABOUT GEOGRAPHIC AREAS
1999
-------------------------------------------
Canada U.S. Barbados Total
------ ---- -------- -----
Identifiable assets:
Current $ 150,678 $ 3,391 $ 943 $ 155,012
Long term 767,198 - - 767,198
-------- --------- ----- --------
$ 917,876 $ 3,391 $ 943 $ 922,210
======== ========= ===== ========
Revenue $ 44,736 $ - $ - $ 44,736
Expenses 533,548 32,862 2,703 569,113
-------- -------- ----- --------
Net loss $(488,812) $(32,862) $ (2,703) $(524,377)
======== ======== ===== ========
1998
-------------------------------------------
Canada U.S. Barbados Total
------ ---- -------- -----
Identifiable assets:
Current $ 25,552 $ 2,500 $ 2,696 $ 30,748
Long term 393,960 - - 393,960
-------- ---------- ----- --------
$ 419,512 $ 2,500 $ 2,696 $ 424,708
======== ========= ===== ========
Revenue $ 21,587 $ - $ 50,000 $ 71,587
Expenses 333,696 15,892 37,832 387,420
-------- -------- ----- --------
Net earnings (loss) $(312,109) $(15,892) $ 12,168 $(315,833)
======== ======== ===== ========
<PAGE>
ENERGY VENTURES INC.
NOTES TO THE CONSOLDIATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1999, 1998 AND 1997
(Expressed in U.S. Dollars)
15. INFORMATION ABOUT GEOGRAPHIC AREAS (continued)
1997
-------------------------------------------
Canada U.S. Barbados Total
------ ---- -------- -----
Identifiable assets:
Current $ 76,245 $ - $ 32,252 $ 108,497
Long term 434,119 - - 434,119
-------- --------- ----- --------
$510,364 $ - $ 32,252 $ 542,616
======== ========= ===== ========
Revenue $ - $ - $ 70,000 $ 70,000
Expenses 299,799 - 54,312 354,111
-------- --------- ----- --------
Net earnings (loss) $(299,799) $ - $ 15,688 $(284,111)
======== ========= ===== ========
16. COMPARATIVE FIGURES
Certain of the comparative figures have been reclassified to conform to
the presentation adopted in the current year.
17. UNCERTAINTY DUE TO THE YEAR 2000 ISSUE
The Year 2000 Issue arises because many computerized systems use two
digits rather than four to identify a year. Date-sensitive systems may
recognize the year 2000 as 1900 or some other date, resulting in errors
when information using year 2000 dates is processed. In addition, similar
problems may arise in some systems which use certain dates in 1999 to
represent something other than a date. Although the change in date has
occurred, it is not possible to conclude that all aspects of the Year
2000 Issue that may affect the entity, including those related to
customers, suppliers, or other third parties, have been fully resolved.
<PAGE>
ENERGY VENTURES INC.
CONSOLIDATED BALANCE SHEET - UNAUDITED
AS AT MARCH 31, 2000
(Expressed in U.S. Dollars)
2000 1999
$ $
---------------- --------------
ASSETS
Current
Cash 0 4,426
Accounts receivable 493,065 19,872
Refundable investment tax credits 168,559 19,584
Prepaid expenses and sundry assets 108,481 16,284
---------------- --------------
770,105 60,166
Deferred
Capital assets 401,333 430,612
Licence and technology costs 333,873 374,026
---------------- --------------
735,206 804,638
---------------- --------------
1,505,311 864,804
================ ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current
Bank indebtedness 1,264 0
Accounts payable and accrued liabilities 449,065 297,893
Advances from related company 72,581 49,404
Advances from director 357,694 183,084
Debentures payable 515,535 0
---------------- --------------
1,396,139 530,381
Capital stock
12,757,579 (10,637,579) Common shares
of $0.0001 par value 1,411,802 1,046,802
Additional paid in capital 165,481 165,481
Accumulated other comprehensive
earnings (loss) (12,154) 2,575
---------------- --------------
1,565,129 1,214,858
Deficit (1,455,957) (880,435)
---------------- --------------
Stockholders' equity 109,172 334,423
---------------- --------------
1,505,311 864,804
================ ==============
<PAGE>
ENERGY VENTURES INC.
SIX MONTHS ENDED MARCH 31, 2000
CONSOLIDATED STATEMENT OF LOSS - UNAUDITED
(Expressed in U.S. Dollars)
2000 1999
$ $
---------------- --------------
REVENUE
Technology revenues 133,350 1,411
---------------- --------------
EXPENSES
Technology expense 173,453 138,172
Administration fees and salaries 48,227 42,918
Legal and audit 98,403 19,933
Amortization 44,938 39,926
Professional fees 38,784 21,346
Office and general 21,725 10,301
Financing fees and interest 12,594 6
Occupancy costs 14,667 4,156
Travel and promotion 12,195 5,144
---------------- --------------
464,986 281,902
---------------- --------------
NET LOSS FOR THE PERIOD 331,636 280,491
DEFICIT, BEGINNING OF PERIOD 1,124,321 599,944
---------------- --------------
DEFICIT, END OF PERIOD 1,455,957 880,435
================ ==============
LOSS PER SHARE $0.026 $0.026
================ ==============
CONSOLIDATED STATEMENT OF CASH FLOW - UNAUDITED
(Expressed in U.S. Dollars)
2000 1999
$ $
---------------- --------------
CASH WAS PROVIDED BY (USED FOR):
OPERATING ACTIVITIES
Net (loss) (331,636) (280,491)
Amortization 44,938 39,926
Net change in non-cash working capital
balances related to operations 16,366 137,577
---------------- --------------
(270,332) (102,988)
FINANCING ACTIVITIES
Issue of common shares 165,000 0
Advances from related company 6,981 3,539
Advances from director 118,712 107,336
---------------- --------------
290,693 110,875
INVESTING ACTIVITIES
Acquisition of capital assets (12,946) (604)
---------------- --------------
Foreign currency translation adjustments (781) (5,629)
---------------- --------------
CASH (OVERDRAFT) AT BEGINNING OF PERIOD (7,898) 2,772
---------------- --------------
CASH (OVERDRAFT) AT THE END OF PERIOD (1,264) 4,426
================ ==============
<PAGE>
PART III
Index to Exhibits*
Page
----
Exhibit 2.1 Articles of Incorporation of the Company,
as amended, and Bylaws
Exhibit 2.2 Articles of Incorporation of EVI, and Bylaws
Exhibit 2.3 Articles of Incorporation of Energy Ventures
International Inc., and Bylaws
Exhibit 3 Instruments Defining the Rights of Security Holders None
Exhibit 4 Subscription Agreement None
Exhibit 5 Voting Trust Agreement None
Exhibit 6 Material Contracts
Exhibit 6.1 Agreement with National Research Council of Canada
Exhibit 6.2 Agreement with Pacific Lithium Limited
(Confidentiality Requested)
Exhibit 6.3 Agreement with Young Poong
Exhibit 6.4 Agreements with Industrial Research Assistance Program
Exhibit 6.5 Agreements with Astris Energi Inc. and Astris Inc.
Exhibit 6.6 Agreement with T&G Corporation
Exhibit 6.7 Consulting Agreement with Dr. Kordesch and Kordesch
and Associates
Exhibit 6.8 Agreement with Northern Securities Inc.
Exhibit 6.9 Employment Agreement with Terrance B. Kimmel
Exhibit 7 Material Foreign Patents None
Exhibit 8 Plan of Acquisition, Reorganization, Arrangement,
Liquidation, etc. None
* All exhibits were previously filed except for Exhibit 6.2 which is filed
herewith.
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
Company caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
ENERGY VENTURES INC.
Date: June 28, 2000 By: /s/ D. Wayne Hartford
---------------------
D. Wayne Hartford
President and Chief Executive Officer
Date: June 28, 2000 By: /s/ Peter F. Searle
-------------------
Peter F. Searle
Vice President of Finance
