U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15 (d) of the Securities Exchange
Act of 1934 For the quarterly period ended MARCH 31, 2000
[__] Transition report pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934 For the transition period from ______________ to
_____________.
Commission file number 0-29624
SCNV ACQUISITION CORP.
(Exact Name of Small Business Issuer as Specified in its Charter)
Delaware 90-0194786
(State or other Jurisdiction (I.R.S. Employer Identification No.)
of Incorporation or Organization)
Omer Industrial Park, P.O. Box 3026, Omer, Israel 84965
(Address of Principal Executive Offices)
(011) 972-7-690-0950
(Issuer's Telephone Number including area code)
- --------------------------------------------------------------------------------
(Former Name, Former Address and Former Fiscal Year,
If Changed Since Last Report)
Check whether the issuer: (1) filed all reports required to be filed by section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes _X_ No ___
As of May 22, 2000 there were 2,082,088 shares of the issuer's
Common Stock outstanding
------------------------
Transitional Small Business Disclosure Format (check one):
Yes ___ No _X_
<PAGE>
SCNV ACQUISITION CORP. AND SUBSIDIARIES
QUARTER ENDED MARCH 31, 2000
FORM 10-QSB
INDEX
Page
----
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheet as of March 31, 2000
(Unaudited)......................................................... 1
Consolidated Statements of Operations For the three and nine
months ended March 31, 2000 and,
1999 (Unaudited).................................................... 2
Consolidated Statement of Changes
in Stockholders' Equity for the nine months
ended March 31, 2000 (Unaudited).................................... 3
Consolidated Statements of Cash Flows For the nine months ended
March 31, 2000 and, 1999
(Unaudited)......................................................... 4
Notes to Unaudited Consolidated Financial Statements................ 5
Item 2. Management's Discussion and Analysis of Financial Condition
And Results of Operations .......................................... 7
Part II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds........................... 14
Item 6. Exhibits and Reports on Form 8-K.................................... 14
<PAGE>
SCNV ACQUISITION CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Unaudited)
<TABLE>
<CAPTION>
ASSETS March 31,
2000
-----------
<S> <C>
CURRENT ASSETS
Cash and cash equivalents $ 78,332
Trade receivables 18,725
Inventory 46,879
Other receivables and prepaid expenses 75,111
-----------
Total current assets 219,047
-----------
FIXED ASSETS
Cost 1,496,292
Less - accumulated depreciation 207,706
-----------
Total fixed assets 1,288,586
-----------
OTHER ASSETS 20,500
-----------
Total assets $ 1,528,133
===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term borrowings $ 739,198
Trade payables 57,416
Sundry payables and accrued expenses 289,545
-----------
Total current liabilities 1,086,159
-----------
LONG TERM LIABILITIES
Long term loan 200,000
Accrued severance pay 118,829
-----------
Total long term liabilities 318,829
-----------
Total liabilities 1,404,988
-----------
SHAREHOLDERS' EQUITY
Share capital
Preferred stock $.01 par value, 1,000,000 shares authorized;
none issued and outstanding --
Common stock $.01 par value, 10,000,000 shares authorized;
2,082,088 shares issued and outstanding 20,821
Additional paid-in-capital 7,517,333
Accumulated deficit (7,415,009)
-----------
Total shareholders' equity 123,145
-----------
Total liabilities and shareholders' equity $ 1,528,133
===========
</TABLE>
The accompanying notes are an integral part
of this consolidated balance sheet.
1
<PAGE>
SCNV ACQUISITION CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
For the three months ended For the nine months ended
March 31, March 31,
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
REVENUES
Sales $ 54,286 $ 43,905 $ 135,877 $ 51,070
Contract services -- -- -- 1,869
----------- ----------- ----------- -----------
Total revenues 54,286 43,905 135,877 52,939
----------- ----------- ----------- -----------
COSTS AND EXPENSES
Research and development costs $ 186,848 $ 215,587 $ 629,580 $ 517,655
Cost of merchandise purchased 41,958 37,930 94,845 45,073
Cost of contract services performed
by subcontractors -- -- -- 9,868
Marketing expenses 128,443 167,206 368,979 167,121
General and administrative expenses 193,443 144,426 667,477 439,375
----------- ----------- ----------- -----------
Total costs and expenses 550,693 565,149 1,760,882 1,179,092
----------- ----------- ----------- -----------
Loss before one-time charge (496,407) (416,776) (1,625,005) (1,126,153)
One-time charge of acquired research
and development in process -- -- -- (3,772,054)
----------- ----------- ----------- -----------
Operating Loss (496,407) (416,776) (1,625,005) (4,898,207)
FINANCING INCOME (EXPENSES) NET (38,408) 19,615 (49,742) 78,998
LOSS ON SALE OF FIXED ASSETS -- -- -- (836)
----------- ----------- ----------- -----------
Net loss $ (534,815) $ (397,161) $(1,674,747) $(4,820,045)
=========== =========== =========== ===========
Net loss per common share $ (0.26) $ (0.19) $ (0.80) $ (2.32)
=========== =========== =========== ===========
Weighted average number of common
shares outstanding, basic and diluted 2,082,088 2,082,088 2,082,088 2,082,088
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part
of this consolidated balance sheet.
2
<PAGE>
SCNV ACQUISITION CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES
IN SHAREHOLDERS' EQUITY
(Unaudited)
<TABLE>
<CAPTION>
Number of Share Additional Accumulated
Shares Capital Paid-In-Capital Deficit Total
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance as of July 1, 1999 2,082,088 $ 20,821 $ 7,517,333 (5,740,262) $ 1,797,892
Net Loss -- -- -- (1,674,747) (1,674,747)
----------- ----------- ----------- ----------- -----------
Balance as of March 31, 2000 2,082,088 $ 20,821 $ 7,517,333 $(7,415,009) $ 123,145
=========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part
of this consolidated balance sheet.
3
<PAGE>
SCNV ACQUISITION CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the nine For the nine
months ended months ended
March 31, March 31,
2000 1999
----------- -----------
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Net loss $(1,674,747) $(4,820,045)
Adjustments to reconcile net loss to net cash used in operating activities (203,769) 3,873,430
----------- -----------
Net cash used in operating activities (1,878,516) (946,615)
----------- -----------
CASH FLOW FROM INVESTING ACTIVITIES
Acquisition of subsidiary, net of cash acquired -- (49,699)
Investment in fixed assets (282,780) (385,753)
Short-term investments, net 1,127,166 (1,120,123)
Investment in other assets -- (30,000)
Proceeds from sale of fixed assets -- 12,680
----------- -----------
Net cash provide (used) in investing activities 844,386 (1,572,895)
----------- -----------
CASH FLOW FROM FINANCING ACTIVITIES
Share capital issuance -- 4,657,282
Short term borowings, net 587,300 (743,132)
----------- -----------
Net cash provided by financing activities 587,300 3,914,150
----------- -----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (446,830) 1,394,640
CASH AND CASH EQUIVALENTS AT BEGINNING OF THE PERIOD 525,162 --
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF THE PERIOD $ 78,332 $ 1,394,640
=========== ===========
ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH USED
IN OPERATING ACTIVITIES
Items not involving cash flows:
Depreciation $ 51,597 $ 24,639
Severance pay 4,500 77,918
Loss on sale of fixed assets -- 836
Acquired research and development in process -- 3,772,054
Changes in operating assets and liabilities:
Decrease (increase) in receivable and prepaid expenses 30,384 375,213
Increase in Inventory (16,284) (20,090)
Increase (decrease) in payables and accrued expenses (273,965) (357,140)
----------- -----------
$ (203,769) $ 3,873,430
=========== ===========
NON-CASH INVESTING AND FINANCING ACTIVITIES
Fair value of acquired assets and research and development in process $ -- $ 3,994,649
Less - liabilities assumed -- (1,067,369)
Less - shares issued as consideration for acquisition of subsidiary -- (2,873,280)
----------- -----------
Cash paid -- 54,000
Less cash acquired -- (4,301)
----------- -----------
$ -- $ 49,699
=========== ===========
</TABLE>
The accompanying notes are an integral part
of this consolidated balance sheet.
4
<PAGE>
SCNV ACQUISITION CORP. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
General
The financial statements as of and for the three and nine months ended March 31,
2000 and 1999 are unaudited; however in the opinion of management all
adjustments (consisting solely of normal recurring adjustments) necessary for a
fair presentation of the financial statements for the interim periods have been
made. The financial statements have been prepared in a manner consistent with
the 10-KSB filed for the fiscal years ended June 30, 1999 and 1998 and should be
read in connection with those financial statements. The unaudited consolidated
statement of operations is not necessarily indicative of the results of
operations for future periods.
Business
SCNV Acquisition Corp. (the "Company") was organized under the laws of the State
of Delaware on May 19, 1997 to acquire Solmecs Corporation N.V. and its wholly
owned subsidiary Solmecs (Israel) Ltd. ("Solmecs") and to select, develop and
commercially exploit proprietary technologies, in various stages of development,
invented primarily by scientists who have recently immigrated to Israel from,
and by scientists and institutions in, Russia and other countries that formerly
comprised the Soviet Union.
Initial Public Offering
On July 8, 1998 the Company consummated an Initial Public Offering (the "Public
Offering") in which 1,041,044 Units, comprised of 1,041,044 shares of Common
Stock and 1,041,044 redeemable Common Stock purchase warrants ("Warrants"), were
sold to the public at $5.75 per Unit. Each Warrant entitles the holder to
purchase one share of Common Stock at a price of $7.50, subject to adjustment in
certain circumstances, at any time until June 28, 2003. The net proceeds from
the Public Offering were approximately $4,600,000.
In addition, the Company sold to the Underwriter for an aggregate of $104,
warrants to purchase an additional 104,104 Units at an exercise price of 120% of
the IPO price per Unit ($6.90) ("Underwriter's Warrants"). The Underwriter's
Warrants are exercisable at any time until June 28, 2003.
Acquisition of Solmecs
Simultaneously with the consummation of the Public Offering the Company acquired
all of the issued and outstanding capital stock of Solmecs (the "Acquisition")
in consideration for 499,701 shares of the Company's common stock issued to
Bayou International Ltd. ("Bayou"), the parent of Solmecs. The Acquisition has
been accounted for as a purchase. The excess of purchase price over fair value
of assets acquired of $3,772,054 was reflected as acquired research and
development in process and fully expensed at the date of the Acquisition.
Solmecs, the operations of which are located in Israel, owns certain
technologies developed by it in the past. The technologies of Solmecs and
certain offshoots of such technologies are in various stages of
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<PAGE>
development and include technologies that have begun to be commercialized as
well as technologies that the Company believes will be ready for
commercialization in the near future.
Acquisition of Elecmatec
On May 18, 1999, the Company acquired approximately 90%, of which 35% was
purchased from a related party, of Elecmatec Electro-Magnetic Technologies Ltd.
("Elecmatec"), an Israeli company, for approximately $150,000, of which $50,000
was paid to existing stockholders and $100,000 was invested in Elecmatec equity.
In addition, the Company may pay up to $150,000 under certain circumstances. The
acquisition has been accounted for as a purchase. The excess of purchase price
over fair value of assets acquired of approximately $288,000 was reflected as
acquired research and development in process and fully expensed at the date of
the acquisition.
Going Concern
The Company has incurred substantial operating losses and at March 31, 2000, has
an accumulated deficit of approximately $7,415,000. The Company is not
generating sufficient revenues from its operations to fund its activities and
anticipates that it will continue to incur losses for some time. The Company is
continuing its efforts in research and development which will require
substantial additional expenditures. As such, the Company's ability to continue
as a going concern is dependent upon its ability to raise resources to finance
its operations. This fact raises substantial doubt about the Company's ability
to continue as a going concern. The accompanying financial statements do not
include any adjustments relative to the recoverability and classification of
recorded assets accounts and classification of liabilities that might be
necessary should the Company be unable to continue as a going concern.
The Company will attempt to finance its operations and capital expenditures by
receiving additional credit lines and bank loans. The Company is also
negotiating with potential investors/partners who would provide bridge financing
until the Company will begin to produce and sell its products. However, no
arrangements for such credit lines, bank lines or financings were entered into
as of May 22, 2000 and no assurances can be given that any such arrangements
will be entered into. If no such arrangements are made, the Company will likely
be required to suspend operations.
A loan in the amount of $500,000 has been received from a third party on March
26, 2000, repayable in March 2001. The loan bears an interest rate of 6% per
year. This loan was received in connection with a proposed equity financing of
subsidiaires of the Company by the lender. The lender has informed the Company
and the subsidiaries that it will not proceed with such equity financing. The
Company and the lender are negotiating a possible additional loan. No assurances
can be given that such additional loan will be made.
6
<PAGE>
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Safe Harbor Statement Under the Private Securities Litigation Reform Act of
1995: The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward-looking statements. Certain information included in this
Report contains statements that are forward-looking, such as statements relating
to plans for future activities. Such forward-looking information involves known
and unknown risks, uncertainties and other factors which may cause the actual
results, performance or achievements of the Company to be materially different
from any future results, performance or achievements expressed or implied by
such forward-looking statements made by or on behalf of the Company. These
risks, uncertainties and factors include, but are not limited to, those relating
to the Company's ability to continue as a going concern, uncertainties regarding
the Company's growth strategy, uncertainty of the availability of additional
financing, uncertainties regarding the Company's ability to fulfill its
commitments under the acquisition agreement relating to a subsidiary and to
commercialize the technology of such subsidiary, the ability to hire and retain
key personnel, uncertainty of feasibility of the Company's technologies and
product development, uncertainty of market acceptance of the Company's
technologies, relationships with and dependence on third-party equipment
manufacturers and suppliers, uncertainties relating to government and regulatory
policies and other political risks and other risks detailed in the Company's
filings with the Securities and Exchange Commission. The words "believe",
"expect", "anticipate", "intend" and "plan" and similar expressions identify
forward-looking statements. Readers are cautioned not to place undue reliance on
these forward-looking statements, which speak only as of the date the statement
was made.
General
The Company was organized in May 1997 to select, develop and commercially
exploit proprietary technologies, in various stages of development, invented
primarily by scientists who have recently immigrated to Israel from, and by
scientists and institutions in, Russia and other countries that formerly
comprised the Soviet Union. Since its inception, the Company has been engaged
principally in organizational activities, including developing a business plan,
matters directly related to the Public Offering and the acquisition of Solmecs
and the acquisition of identified technologies or manufacturing facilities for
certain technologies for further development, production and commercialization.
The Company is actively engaged in the commercial development of two
technologies previously identified by Solmecs, namely (i) advanced bi-facial
photovoltaic panels and (ii) monocrystals of silicon. In November 1998, Solmecs
acquired materials, equipment and engineering services in order to establish a
manufacturing facility in Israel for both one-sided and advanced bi-facial
photovoltaic panels. The Company anticipates that a commercial production
facility will be completed by the end of 2000. The Company, however, will
require additional funds, not currently available to the Company, to operate the
production facility and acquire raw materials for the production of commercial
quantities. If the Company is able to obtain such additional funds, on a timely
basis, it anticipates commercial production of photovoltaic panels
7
<PAGE>
during the 2000 fiscal year. During the 1999 fiscal year, the Company received
limited purchase orders for photovoltaic panels, which were filled by the
Company through its distribution arrangement with a Russian manufacturer.
Also in November 1998, Solmecs acquired equipment to be used in three production
facilities currently being set up for growing silicon monocrystals. Two of the
facilities are in operational conditions and are dedicated to tests production
of standard size silicon monocrystals with the qualities necessary for use in
both sophisticated electronics and photovoltaics. The third facility will be
modified for experimental production of silicon monocrystals utilizing LMMHD
technology. The Company did not produce any commercial silicon monocrystals
during the 1999 fiscal year.. The Company, however, will require additional
funds, not currently available to the Company, to operate the production
facilities and acquire the raw materials necessary to produce commercial
quantities. If the Company is able to obtain additional funds, on a timely
basis, it anticipates commercial production of standard size silicon
monocrystals by mid-2000. Development of LMMHD enhanced silicon monocrystals,
however, is still in the preliminary testing stage and the Company does not
anticipate that this technology will be ready for production of prototypes for
at least one year, and for production of commercial monocrystals for at least
two years. Further development of this technology will also require additional
funds not currently available to the Company.
In February 1999, the Company acquired world-wide rights (except for Israel) to
develop, produce, market and distribute advanced electronic pocket dictionaries
manufactured by an Israeli company. During fiscal 1999, the Company had limited
sales of the Hebrew/English and Russian/English dictionaries in the United
States. The Company is now focusing on the development of a Spanish/English
dictionary which is expected to be ready for commercial production in early
2000. The Company is negotiating promotional and marketing arrangements with two
marketing and distribution companies for promotion and distribution of the
dictionaries.
In May 1999, the Company acquired a 90.4% interest in Elecmatec, which employs
"micro-gravity" conditions to the production of alloys for use in production of
metal based products such as engine bearings for the automotive industry.
Elecmatec has completed the development and preliminary testing of its
manufacturing process. A third party has commenced construction of a facility in
Kiryat Gat, Israel, which it will lease to Elecmatec for the production of metal
alloys. Construction of such facility is dependent upon Elecmatec meeting its
obligation to provide certain financing which, in turn, is dependent on the
Company providing certain financing to Elecmatec. If such financing is obtained
on a timely basis, it is anticipated that the production facility will be
completed and operational for production of commercial quantities of alloy by
the end of 2000.
Completion of the research, development and commercialization of the Company's
technologies or any potential application of such technologies will require
significant additional effort, resources and time, including funding
substantially greater than the proceeds otherwise currently available to the
Company. Such research and development efforts remain subject to all of the
risks associated with the development of new products based on emerging and
innovative technologies, including, without limitation, unanticipated technical
or other problems and the
8
<PAGE>
possible insufficiency of the funds allocated to complete such development,
which could result in delay of research or development or substantial change or
abandonment of research and development activities.
To date, the Company has not generated significant revenues from its marketable
products. The Company does not expect to generate any meaningful revenues until
such time, if ever, as it successfully produces, markets and distributes its
commercial products on a broad scale or until it successfully commercializes or
sells proprietary rights relating to one or more of Solmecs' technologies
currently in development.
The Company has incurred substantial operating losses and at March 31, 2000, has
an accumulated deficit of approximately $7,415,000. The Company anticipates that
it will continue to incur losses for some time. The Company is continuing its
efforts in research and development which will require substantial additional
expenditures. As such, the Company is dependent upon its ability to raise
resources to finance operations. This fact raises substantial doubt that the
Company's ability to continue as a going concern.
The Company will attempt to finance its operations and capital expenditures by
receiving additional credit lines and bank loans. The Company is also
negotiating with potential investors/partners who would provide bridge financing
until the Company will begin to produce and sell its products. However, no
arrangements for such credit lines, bank lines or financings were entered into
as of May 22, 2000 and no assurances can be given that any such arrangements
will be entered into. If no such arrangements are made, the Company will likely
be required to suspend operations.
A loan in the amount of $500,000 has been received from a third party on March
26, 2000, repayable in March 2001. The loan bears an interest rate of 6% per
year. This loan was received in connection with a proposed equity financing of
subsidiaries of the Company by the lender. The lender has informed the Company
and the subsidiaires that it will not proceed with such equity financing. The
Company and the lender are negotiating a possible additional loan. No assurances
can be given that such additional loan will be made.
Results of Operations
The consolidated statement of operations and other financial and operating data
for the three and nine month periods ended March 31, 1999 and 2000 are derived
from the unaudited financial statements of the Company included elsewhere
herein.
9
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Three Months Ended March 31, 2000 Compared with Three Months Ended
March 31, 1999
Sales. Sales increased to $54,286 for the three months ended March 31, 2000
as compared to $43,905 for the three months ended March 31, 1999. The increase
was attributable to sales of silicon ingots (silicon cylinders, 150mm diameter,
700mm long from which are sliced waffers (disks)).
Contract Services. There were no contract services performed by the Company
for the three months ended March 31, 2000.
Total Revenues. Total revenues increased by $10,381 to $54,286 for the
three months ended March 31, 2000 compared to $43,905 for the three months ended
March 31, 1999. The increase is attributable to the increase in sales of
products stated herein.
Research and Development Costs. Research and development costs decreased by
$28,739 or 13% to $186,848 for the three months ended March 31, 2000, as
compared to $215,587 for the three months ended March31, 1999. The decrease is
mainly due to the completion of development of the new English-Spanish
electronic pocket dictionary.
Cost of Merchandise Purchased. Costs of merchandise purchased increased by
$4,028 to $41,958 for the three months ended March 31, 2000, as compared to
$37,930 for the three months ended March 31, 1999. The increase is attributable
to the increase in sales.
Marketing Expenses. Marketing expenses increased by $88,485 or 221%, to
$128,443 for the three months ended March 31, 2000, as compared to $39,958 for
the three months ended March 31, 1999. This increase is primarily attributable
to marketing trips to promote Solmecs' and Elecmatec's products abroad.
General and Administrative Expenses. General and administrative expenses
increased by $26,237 or 16%, to $193,443 for the three months ended March 31,
2000, as compared to $167,206 for the three months ended March 31, 1999. This
increase is primarily attributable to the costs and expenses associated with
seeking and negotiating with prospective third party investors.
Operating Loss. Operating loss increased by $79,631 to $496,407 for the
three months ended March 31, 2000, as compared to $416,776 for the three months
ended March 31, 1999. The increase in operating loss is primarily attributable
to the aforementioned increase in expenses.
Financing Income(Expenses),Net. Financing expenses were $38,408 for the
three months ended March 31, 2000, as compared to financing income of $19,615
for the three months ended March 31, 1999, primarily as a result of interest
paid by the Company on borowings in 2000 as compared to interest earned by the
Company on deposits in 1999.
Net Loss and Net Loss Per Share. As a result of the foregoing, net loss was
$534,815 ($0.26 per share) for the three months ended March 2000 as compared to
$397,161 ($0.19 per share) for the three months ended March 31, 1999.
10
<PAGE>
Nine Months Ended March 31, 2000 Compared with Nine Months Ended March 31, 1999
Sales. Sales increased to $135,877 for the nine months ended March 31, 2000
as compared to $51,070 for the nine months ended March 31, 1999. The increase
was attributable to sales of photovoltaic panels, silicon ingots (silicon
cylinders, 150mm diameter, 700mm long from which are sliced waffers (disks), and
sales of electronic pocket dictionaries in the United States.
Contract Services. There were no contract services performed by the Company
for the nine months ended March 31, 2000.
Total Revenues. Total revenues increased by $82,938 to $135,877 for the
nine months ended March 31, 2000 compared to $52,939 for the nine months ended
March 31, 1999. The increase is attributable to the increase in sales of
products stated herein.
Research and Development Costs. Research and development and costs
increased by $111,925 or 22% to $629,580 for the nine months ended March 31,
2000, as compared to $517,655 for the nine months ended March 31, 1999. The
increase is mainly due to the development of the new English-Spanish electronic
pocket dictionary and to the addition of qualified personal for the silicon
plant.
Cost of Merchandise Purchased. Costs of merchandise purchased increased by
$49,772 to $94,845 for the nine months ended March 31, 2000, as compared to
$45,073 for the nine months ended March 31, 1999. The increase is attributable
to the increase in sales of photovoltaic panels, silicon ingots and electronic
pocket dictionaries.
Marketing Expenses. Marketing expenses increased by $201,858 or 121%, to
$368,979 for the nine months ended March 31, 2000, as compared to $167,121 for
the nine months ended March 31, 1999. This increase is primarily attributable to
marketing trips to promote Solmecs' and Elecmatec's products abroad.
General and Administrative Expenses. General and administrative expenses
increased by $228,102 or 52%, to $667,477 for the nine months ended March 31,
2000, as compared to $439,375 for the nine months ended March 31, 1999. This
increase is primarily attributable to the costs and expenses due to the addition
of a new subsidiary-Elecmatec and the costs and expenses associated with seeking
and negotiating with prospective third party investors.
One-Time Charge of Acquired Research and Development In-Process. The
acquisition of Solmecs by the Company has been accounted for as a purchase and
the excess purchase price over fair value of assets acquired of $3,772,054 has
been reflected in the Company's consolidated statement of operations for the
nine month period ended March 31, 1999 as acquired research and development in
process. The Company has recorded a one-time charge for the write-off in full of
such research and development in process as of the date of the Acquisition.
Operating Loss. Operating Loss decreased by $3,273,202 to $1,625,005 for
the nine months ended March 31, 2000, as compared to $4,898,207 for the nine
months ended March 31, 1999. The decrease in operating loss is solely
attributable to the aforementioned.
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Financing Income(Expenses), Net. Financing expenses were $49,742 for the
nine months ended March 31, 2000, as compared to financing income of $78,998 for
the nine months ended March 31, 1999, primarily as a result of interest paid by
the Company on bank loans in 2000 as compared to interest earned by the Company
on deposits in 1999.
Net Loss and Net Loss Per Share. As a result of the foregoing, net loss was
$1,674,747($0.80 per share) for the nine months ended March 2000 as compared to
$4,820,045 ($2.32 per share) for the nine months ended March 31, 1999.
Liquidity and Capital Resources
At March 31, 2000, the Company had a working capital deficit of $867,112,
shareholders' equity of $123,145 and an accumulated deficit of $7,415,009.
In May 1999, the Company acquired a 90.4% interest in Elecmatec for an
acquisition price of $150,000. In addition, the Company has agreed to pay
$150,000 to current shareholders of Elecmatec, on a sliding-scale basis, in the
event Elecmatec obtains third-party debt or equity financing of at least
$500,000. The Company is also required, under certain circumstances, to pay
former shareholders of Elecmatec an amount equal to 10% of Elecmatec's net
income, up to an aggregate payment of $360,000.
The Company's capital requirements will be significant. The Company is dependent
upon the remaining proceeds of the Public Offering to finance the operations of
the Company, including the costs of market research and marketing activities,
continued research and development efforts, establishing manufacturing
capabilities and the acquisition of intellectual property rights. Completion of
the commercialization of the Company's technologies or any potential application
of such technologies including, without limitation, the technology of Elecmatec,
will require significant additional effort, resources and time including funding
substantially greater than the remaining proceeds of the Public Offering or
otherwise currently available to the Company. Moreover, the remaining proceeds
of the Public Offering will be insufficient to satisfy the scheduled projects,
requiring the Company to seek additional financing. The Company has no current
arrangements with respect to, or sources of, additional financing, and it is not
anticipated that existing shareholders will provide any portion of the Company's
future financing requirements. There can be no assurance that additional
financing will be available to the Company when needed, on commercially
reasonable terms, or at all.
Inflation
In recent years, until 1997, inflation in Israel has exceeded the devaluation of
the NIS against the dollar. The rate of inflation in Israel for the years 1995
and 1996, was 8.1% and 10.6%, respectively, while the devaluation of the NIS
against the dollar was 3.9% and 3.7%, respectively. This trend was reversed
during the years 1997 and 1998, as the rate of inflation in Israel was 7.0% and
8.6%, respectively, while the rate of devaluation of the NIS against the dollar
was 8.8% and 17.6%, respectively. In the first six months of 1999, Israel
experienced deflation at the rate of .37% as well as a devaluation of the dollar
against the NIS at the rate of 2%.
12
<PAGE>
Israel's economy has been subject to numerous destabilizing factors, including a
period of rampant inflation in the early to mid-1980's, low foreign exchange
reserves, fluctuations in world commodity prices, military conflicts and civil
unrest. In response to these problems, the Israeli Government has intervened in
various sectors of the economy, employing, among other means, fiscal and
monetary policies, import duties, foreign currency restrictions and controls of
wages, prices and foreign currency exchange rates. The Israeli Government
frequently has changed its policies in all these areas.
Year 2000
The Company has evaluated and updated its Information Technology ("IT") systems
to ensure that it will have the capability to manage and manipulate data in the
year 2000 and beyond. The Company's IT systems are substantially compliant with
Year 2000 requirements and no problems have been recorded up to date. Costs
incurred by the Company to date to implement its plans have not been material
13
<PAGE>
PART II - OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds
(d) On July 8, 1998 the Company consummated its initial public offering (the
"Public Offering") contemplated by its Registration Statement on Form SB-2
(file no. 333-43955) which was declared effective by the Securities and
Exchange Commission on June 29, 1998. A total of 1,197,200 Units were
registered for sale by the Company to the public and 1,041,444 Units were
sold to the public for gross proceeds of $5,986,003. Each Unit consisted of
one share of common stock, $.01 par value per share, of the Company (the
"Common Stock") and one Class A redeemable Common Stock purchase warrant
(the "Warrants"). The Common Stock and Warrants included in the Units were
registered in the Public Offering and became detachable and separately
transferable from the Units on September 29, 1998. In addition, 1,041,044
shares of Common Stock issuable upon exercise of the Warrants were
registered. The Warrants are exercisable between June 29, 1999 and June 28,
2003. In addition, 104,104 Units were registered pursuant to an option
granted to the Underwriter of the Public Offering.
Net proceeds from the Offering were approximately $4,600,000. On July 8,
1998 (the closing date of the Offering) the Company applied approximately
$391,000 of net proceeds toward the repayment of indebtedness of Solmecs to
a stockholder of the Company. The Company also repaid approximately
$110,000 owed to such stockholder for monies advanced for pre-offering
expenses. As of March 31, 2000 the Company has applied the balance of net
proceeds from the Offering as follows: (i) approximately $460,000 to market
research and marketing activities; (ii) approximately $1,200,000 to
research and development; (iii) approximately $60,000 to the repayment of a
short term, non interest bearing loan incurred after March 31, 1998; (iv)
approximately $182,000 to repayment of an existing credit line facility,
approximately $90,000 of which was incurred after March 31, 1998, and which
allows for future borrowing by the Company; (v) approximately $1,496,000
for the purchase of equipment and machinery; and (vi) approximately
$1,200,000 to working capital and general corporate purposes.
On July 8, 1998, contemporaneous with the consummation of the Public
Offering, the Company acquired, in a tax free stock-for-stock transaction,
all of the issued and outstanding capital stock of Solmecs Corporation
N.V., a Netherlands Antilles company and its wholly-owned subsidiary
Solmecs (Israel) Ltd. from Bayou International Ltd. ("Bayou") and issued to
Bayou 499,701 shares of unregistered Common Stock of the Company.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 27 - Financial Data Schedule
14
<PAGE>
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company during the nine month
period ended March 31, 2000.
15
<PAGE>
SCNV ACQUISITION CORP. AND SUBSIDIARIES
SIGNATURES
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized on the 22nd day of May 2000.
SCNV ACQUISITION CORP.
(Registrant)
/s/ Herman Branover
-------------------------------------
Professor Herman Branover
President and Chief Executive Officer
/s/ Jacline Bavli
-------------------------------------
Jacline Bavli
Chief Financial Officer
16
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S FINANCIAL STATEMENTS IN THIS REPORT ON FORM 10-QSB AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-END> MAR-31-2000
<CASH> 78,332
<SECURITIES> 0
<RECEIVABLES> 18,725
<ALLOWANCES> 0
<INVENTORY> 46,879
<CURRENT-ASSETS> 219,047
<PP&E> 1,496,292
<DEPRECIATION> 207,706
<TOTAL-ASSETS> 1,528,133
<CURRENT-LIABILITIES> 1,086,159
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0
0
<COMMON> 20,821
<OTHER-SE> 102,324
<TOTAL-LIABILITY-AND-EQUITY> 1,528,133
<SALES> 54,286
<TOTAL-REVENUES> 54,286
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 550,693
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 38,408
<INCOME-PRETAX> (534,815)
<INCOME-TAX> 0
<INCOME-CONTINUING> (534,815)
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<EPS-BASIC> (0.26)
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