SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] Quarterly report pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the quarterly period ended June 30, 2000
[ ] Transition report under Section 13 or 15(d) of the Exchange Act
Commission file number 0-30285
ENERGY VENTURES INC.
(Exact name of small business issuer as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
(IRS Employer Identification No.)
43 Fairmeadow Avenue, Toronto, Ontario, Canada M2P 1W8
(Address of principal executive offices)(Zip Code)
(416) 733-2736
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months, and (2) has been
subject to such filing requirements for the past 90 days.
Yes [ ] No [X]
As of August 10, 2000, the Registrant had 12,957,579 shares of its Common Stock
outstanding.
Transitional Small Business Disclosure Format: Yes [ ] No [X]
<PAGE>
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements.
<PAGE>
Energy Ventures Inc.
(Unaudited)
(Expressed in US Dollars)
Condensed Balance Sheets
<TABLE>
<S> <C> <C>
June 30, September 30,
ASSETS 2000 1999
(unaudited) ----
-----------
CURRENT ASSETS
Cash and Short Term Deposits $ 227,431 $ -
Accounts Receivable 38,192 27,150
Refundable Investment Tax Credits 108,328 113,486
Prepaids Expenses 72,173 14,376
----- -----
TOTAL CURRENT ASSETS 446,124 155,012
------- -------
LONG TERM ASSETS
Capital Assets 436,893 413,376
License and technology costs 323,834 353,822
------ ------
TOTAL LONG TERM ASSETS 760,727 767,198
------- -------
TOTAL ASSETS $1,206,851 $ 922,210
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Bank Indebtedness - $ 7,898
Accounts payable and accrued liabilities $480,463 333,141
Advances from related company 54,340 65,600
Advances from director 201,989 238,982
Debentures payable 506,826 -
------ ------
TOTAL CURRENT LIABILITIES 1,243,618 645,621
------- ------
STOCKHOLDERS' EQUITY (DEFICIT)
Preferred stock - par value $0.0001
(authorized - 5,000,000 shares; issued and
outstanding - 0 shares) - -
Common stock - $0.0001 par value (authorized -
50,000,000 shares; issued and outstanding -
12,957,579 and 12,637,579 shares) 1,601,802 1,246,802
Additional paid-in capital 690,856 165,481
Deferred Compensation Charges (525,375) -
Accumulated other comprehensive earnings (loss) (3,525) (11,373)
------ --------
TOTAL EQUITY 1,763,758 1,400,910
---------
Deficit (1,800,525) (1,124,321)
---------- ----------
Stockholders' Equity (36,767) 276,589
------- -------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 1,206,851 922,210
=========
</TABLE>
See notes to condensed financial statements.
<PAGE>
Energy Ventures Inc.
Condensed Statements of Operations
(unaudited)
(Expressed in US Dollars)
<TABLE>
<S> <C> <C> <C> <C>
Three months ended June 30, Nine months ended June 30,
--------------------------- --------------------------
2000 1999 2000 1999
---- ---- ---- ----
REVENUES $ 66,675 $6,612 $200,025 $ 8,023
EXPENSES
Technology Expense 107,126 54,800 359,079 192,972
Administration Fees & Salaries 17,749 22,289 65,976 65,207
Legal and Audit 84,499 306 182,902 20,239
Amortization 27,892 21,257 72,830 61,183
Professional Fees 4,634 7,338 43,418 28,684
Office and General 21,840 4,451 43,565 14,752
Financing Fees & Interest 51,120 - 63,714 6
Occupancy Cost 7,137 6,018 21,804 10,174
Travel and Promotion 10,746 3,318 22,941 8,462
------ ----- ------ -----
TOTAL EXPENSES 332,743 119,777 876,229 401,679
NET LOSS (266,068) (113,165) (676,204) (393,656)
NET LOSS PER SHARE OF COMMON STOCK-
BASIC AND DILUTED $(0.021) $(0.053)
================ ============
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 12,814,356 12,782,583
================ ============
</TABLE>
See notes to condensed financial statements.
<PAGE>
Energy Ventures Inc.
Condensed Statements of Cash Flows
(unaudited)
(Expressed in US Dollars)
<TABLE>
<S> <C> <C>
Nine months ended June 30,
----------------------------
2000 1999
---- ----
OPERATING ACTIVITIES
Net loss $(676,204) $ (393,656)
Items not affecting cash:
Legal Expense 131,019 -
Amortization 72,830 61,183
Net change in non-cash working capital
balances related to operations 92,621 (47,348)
-------- ------
Net cash used by operations (379,734) (379,821)
INVESTING ACTIVITIES
Capital Asset purchases (66,359) (2,647)
------ -------
FINANCING ACTIVITIES
Issuance of common stock 215,000 200,000
Advances from related company (11,260) (1,970)
Advances from director (36,993) 199,536
Debentures payable 506,826 -
------- -------
Net cash from financing activities 673,573 397,566
NET INCREASE IN CASH 227,480 15,098
FOREIGN CURRENCY TRANSLATION ADJUSTMENTS 7,849 (17,041)
CASH (BANK INDEBTEDNESS) AT BEGINNING OF PERIOD (7,898) 2,772
------ -----
CASH AT END OF PERIOD 227,431 829
========== =======
Interest Paid $ 28,589 $ 6
</TABLE>
See notes to condensed financial statements.
<PAGE>
ENERGY VENTURES INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
June 30, 2000
(unaudited)
1. Basis Of Presentation:
The interim financial statements are unaudited, but in the opinion of
management reflect all adjustments necessary for a fair presentation of
results of such periods. All such adjustments are of a normal recurring
nature. The results of operations for any interim period are not
necessarily indicative of results for a full fiscal year.
The condensed balance sheet as of September 30, 1999, is derived from the
audited financial statements but does not include all disclosures required
by generally accepted accounting principles. The notes accompanying the
financial statements in the Company's Registration Statement on Form 10-SB
for the year ended September 30, 1999, include accounting policies and
additional information pertinent to an understanding of both the September
30, 1999, condensed balance sheet and the interim financial statements. The
information has not changed substantially except as a result of normal
transactions in the nine months ended June 30, 2000, and as discussed in
the following notes.
2. Stock Transactions:
During the three months ended June 30, 2000, the Company issued 200,000
shares of common stock for $140,000 of legal services and issued 100,000
shares to a director and officer upon the exercise of stock options.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
The following discussion should be read in conjunction with
the financial statements and related notes which are included under Item 1.
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, our
ability to complete development and then market our products, competitive
factors and other risk factors as stated in other of our public filings with the
Securities and Exchange Commission.
This report is for the three and nine month interim period
ended June 30, 2000. The reader is directed to the Company's earlier Form 10-SB
filings for more information about the Company. Accordingly, this section will
primarily discuss the Company's position as of the filing date hereof.
Overview
Energy Ventures Inc. (hereafter, the "Company" or "EVI") was
formed in November 1996, to research, develop and commercialize rechargeable
battery technologies. The Company has four core battery technologies - 1)
Lithium Ion ("LI") (now licensed to Pacific Lithium Limited ("PLL") of New
Zealand), 2) Nickel Zinc ("NiZn"), 3) Zinc Carbon Bromine ("ZnCBr") and 4) the
Direct Methanol Fuel Cell ("DMFC"), which technology was acquired in October
1999. The company is currently working on the development and optimization of
the latter three technologies with the highest priority being directed towards
the Direct Methanol Fuel Cell.
The Company's major focus is upon two areas - the research and
development of the Company's Direct Methanol Fuel Cell Technology and the
Pre-Commercialization of the company's Nickel Zinc and Carbon-Zinc Bromine
technologies. Costs re the latter project are in large part supported by
Industrial Research Assistance Program through the Pre-Commercialization
contribution agreement executed in March 2000. The Company recently accelerated
its DMFC activity by arranging with Sammer Power Systems, Inc. of New Jersey and
Sammer Engineering Gmbh of Austria to provide demonstration single cells and a
three cell DMFC cell stack using the Company's DMFC technology. Both are
expected to be available for demonstration by December 31, 2000. The company
expects to spend significant sums upon expanding its battery testing capability
and has purchased and is refurbishing a pilot battery production line to further
expand its facilities at the Ottawa laboratory. While there can be no assurance
that our business plan for the next year will be successful, the R&D programs,
strategic alliances and targeted financing planned for the Company are expected
to support the Company's activities until significant income streams of
royalties and license fees develop.
Comparative Disclosure
During the quarter ended June 30, 2000, the Company was still
a development stage company and has yet to achieve significant revenues.
Revenues, in the quarter to June 30, 2000 and in the nine months then ended
($66,675 and $200,025, respectively) were entirely earned from licensing fees
from PLL. Pursuant to the terms of the License Agreement, such revenues should
continue at the minimum rate of $100,000 per annum through March 2002. We expect
<PAGE>
revenues from PLL to increase once PLL commences selling LI cathode materials
and LI batteries containing such materials thereby generating additional
royalties for the Company. Other revenue sources will not result until the
Company successfully completes the commercialization of its other technologies
and is able successfully to license them to battery manufacturers. These revenue
figures are significantly higher than for the comparative three and nine month
periods in 1999 ($6,612 and $8,023, respectively) due entirely to the fact that
the PLL Agreement was not in effect during these comparative periods in 1999.
The Company's expenses in the quarter ended June 30, 2000 and
in the nine months then ended totaled $332,743 and $876,229, respectively. Of
those totals, the most significant are the Company's technology expenses i.e.
expenses related to the research and development cost of the company's battery
technologies ($107,126 and $359,079, respectively, for the three and nine month
periods ended June 30, 2000). These expenses essentially doubled from the
comparable periods in 1999 which reflects the Company's continued focus on
developing its products and expanding its product line.
Expenses other than technology costs have remained relatively
static over the last two years with the exception of legal costs. Legal costs in
fiscal year 2000 are substantially higher than in prior years ($77,953 in the
quarter and $169,308 year to date) primarily related to securities law matters
arising from the Company's registration with the Securities and Exchange
Commission and required compliance with the federal securities laws. Technology
expenses almost doubled in 1998 and increased again by approximately 66% in
1999. Technology expenses are expected to increase in 2000 by approximately 90%
as EVI continues to develop its facilities, expertise and activities and
continues to fund research and development work undertaken on its behalf by
National Research Council of Canada.
The Company increased its laboratory staffing in April 2000 by
hiring four additional employees and further increased laboratory staffing can
be expected in the future, provided sufficient funding can be obtained. During
the quarter, the Company also spent approximately $53,000 to acquire battery
test equipment, a pilot battery manufacturing line that will be refurbished, and
increased computer facilities at its Ottawa plant.
In the quarter ended June 30, 2000 the Company accrued
US$12,825 for the interest payable upon Cdn. $750,000 of 10% debentures issued
March 30, 2000 and due September 30, 2000 and incurred US$35,125 in financing
costs relative to such financing.
Liquidity
As of July 31, 2000, the Company had US$135,312 cash on hand.
The Company currently has approximately US$100,000 in monthly expenses and
$8,000 in revenues. Accordingly, the Company believes it has sufficient cash to
continue its current operations until late September 2000.
Since its inception, the activities of the Company have been
supported from the personal resources of its President and Chief Executive
Officer. The Company is in need of new capital to support its growth and
technology research and development costs. The Company also must repay Cdn.
$750,000 of short term 10% debentures on September 30, 2000 (approximately
US$507,000). The Company does not currently have sufficient resources to make
<PAGE>
this payment. EVI is currently, through Northern Securities Inc. of Toronto,
seeking new capital in the range of US$4,000,000 toUS$6,750,000. However, there
be no assurance that this or any other financing will be successful and if it is
not successful the Company's research and development activities will have to be
reduced and will certainly not accelerate to the extent they otherwise would.
Should that financing not be successful, the President and Chief Executive
Officer intends to continue personally supporting the Company on a limited basis
with loans.
PART II
OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 2. Changes in Securities.
During the quarter ended June 30, 2000, the Company issued 100,000
restricted shares to its legal counsel in payment of legal services performed,
and to be performed, in the amount of $140,000. The Company also issued 100,000
shares upon the exercise of stock options to an officer and director.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to Vote of Security Holders.
None.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
(a) 6.4.1 Agreement with Industrial Research Assistance Program
27 Financial Data Schedule
(b) None.
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant
caused this Report to be signed on its behalf by the undersigned thereto duly
authorized.
Date: August 18, 2000
ENERGY VENTURES INC.
/s/D. Wayne Hartford
---------------------
D. Wayne Hartford
Chief Executive Officer
/s/Peter F. Searle
---------------------
Peter F. Searle
Vice President, Finance
