SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB/A
GENERAL FORM FOR REGISTRATION OF SECURITIES
AMENDMENT NO. 1
Pursuant to Section 12(g) of
The Securities Exchange Act of 1934
SYNERGY TECHNOLOGIES CORPORATION
(Exact name of registrant as specified in its charter)
Colorado 84-1379164
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
Suite 210, 214
11th Ave. S.E., Calgary,
Alberta Canada T2G 0X8
(Address of principal executive offices) (Zip Code)
(888) 378-6633
Registrant's telephone number, including area code
Securities to be registered pursuant to 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:
None None
Securities to be registered pursuant to Section 12(g) of the Act:
Title of class
Common: 50,000,000 Shares of Common Stock
TABLE OF CONTENTS
PART I
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations............................ 1
PART F/S
SYNERGY TECHNOLOGIES CORPORATION
Consolidated Financial Statements (Management prepared)
Six Month Period ended June 30, 1999
Index
Consolidated Balance Sheet . . . . . . . . . . . . . . . .
Consolidated Statement of Operations and Deficit. . . . . .
Consolidated Statement of Changes in Shareholders Equity. .
Consolidated Statement of Cash Flows. . . . . . . . . . . .
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND CHANGES IN FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The Registrant has no ongoing primary income source at this
time. Capital from equity issues or borrowings is required to
fund future operations.
During the period ended December 31, 1997, the Registrant
raised $33,000.00 from its initial placement of common stock. Stone
Canyon Colorado, the Registrant's wholly owned subsidiary, had debt
on its balance sheet of $453,916 which was due and payable to Stone
Canyon Canada prior to the acquisition of Stone Canyon Colorado by
the Registrant. Subject to the share exchange agreement between
the Registrant and Stone Canyon Colorado, the Registrant exchanged
a total of 2,901,007 shares of its common stock on a one for one
basis with Stone Canyon Colorado. In addition, the Registrant
retired the loan payable by Stone Canyon Colorado to Stone Canyon
Canada through the issue of 4,539,162 shares of common stock at the
time of the acquisition.
During the year ended December 31, 1998, the Registrant raised
$175,000 from equity private placements and issued a total of
10,000,000 shares of common stock at a deemed value of $0.10 per
share ($1,000,000) subject to the terms of a share exchange
agreement between the Registrant and Laxarco, whereby the
Registrant acquired 75% of the issued and outstanding shares of
Carbon, the holder of a 100% interest in and to a patented and
proprietary gas-to-liquids technology. Subsequent to the year
ended December 31, 1998, and during the six month period ended June
30, 1999 the Registrant raised an additional $750,000 from equity
private placements completed under a Regulation D, Rule 504
offering and $42,000 in relation to the exercise of warrants
attached to the placements. During the six month period ended June
30, 1999 the Company executed a further agreement with Laxarco to
acquire the remaining 25% of the issued and outstanding shares of
Carbon whereby the Company has allocated for issue an additional
3,000,000 common shares at a deemed value of $0.10 per share.
In addition, the Registrant entered into an agreement with
Stone Canyon Canada, an Alberta corporation and an affiliate of
the Registrant, whereby Stone Canyon Canada is required to fund
the design and construction of a 4 bbl per day demonstration
facility to test SynGen Technologies' patented GTL process in
return for the Canadian licensing and marketing rights to the
technology. To December 31, 1998, the Registrant and its
subsidiaries had expended a total of $437,435 in relation to the
development of the GTL Technology and have invoiced Stone Canyon
Canada for reimbursement of applicable expenses totaling $370,799
(inclusive of a surcharge of 2.5% on all applicable charges for
management of the accounts) in respect of the 4 bbl/day
demonstration facility. To December 31, 1998, the Registrant had
received a total of $88,448 in reduction of this account
receivable. All amounts invoiced to Stone Canyon Canada to
December 31, 1998, have been recorded on the financial statements
as project income.
During the six months ended June 30, 1999, Stone Canyon
Canada and the Registrant continued to expend funds on the
development of the GTL Technology. Under the terms of the
agreement, Stone Canyon Canada is invoiced directly by suppliers
for all expenses in relation to the 4 bbl/day demonstration
facility. However, as at June 30, 1999, receivables due from
Stone Canyon Canada in relation to the demonstration facility had
increased by $6,216 from December 31, 1998. Subsequent to the
year ended December 31, 1998, and during the six months ended
June 30, 1999 the Registrant expended an additional $41,364 on
development of the GTL Technology.
Subsequent to the year ended December 31, 1998, and pursuant
to the acquisition of Lanisco Holdings Limited effective January
6, 1999, the Registrant entered into an option agreement dated
January 8, 1999 with Texas T Petroleum Ltd., a Colorado
corporation, whereby the Registrant received payment of $100,000
in consideration for the granting of an option to Texas T
Petroleum Ltd. whereby Texas T Petroleum would expend an
additional $100,000 towards the re-construction of a heavy oil
upgrading pilot plant in Orleans France, to earn the right to
negotiate to acquire a 50% interest in and to the heavy oil
upgrading technology. The option consideration ($200,000)
received was recorded as income on the Registrant's financial
statements to June 30, 1999. The Registrant expended option
funds received to acquire 1,000,000 Units of Texas T Petroleum
Ltd. at $0.10 per Unit effective January 8, 1999 which amount is
recorded as an investment on the balance sheet to June 30, 1999.
As of June 30, 1999 the Registrant and its subsidiaries had
expended a total of $181,999 on development of the CPJ
Technology. As at the six month period ended June 30, 1999, a
total of $45,802, over and above the $200,000 advanced to the
Company to fulfill the terms of the January 8, 1999 option
agreement, had been received from Texas T Petroleum Ltd. in
respect of development of the CPJ Technology. .
Results of Operations
During its initial period of operations ended December 31,
1997, the Registrant purchased certain exploration oil and gas
leases at a total cost of $458,080. These leases were
development prospects and no revenue was generated during this
initial period. The Registrant also expended a total of $67,016
in general and administrative costs to the period ended December
31, 1997. The majority of the administrative costs were paid to
computer consultants and former directors of the Registrant in
relation to the initial project of the Registrant involving the
provision to ATM customers of a solution for automated teller
machines and electronic transfer processing.
During the year ended December 31, 1997, the Registrant
expended approximately $99,962 on exploratory drilling on two of
the US leases which were subsequently declared dry holes. During
the most recently completed fiscal year, the Registrant was
invoiced a total of $229,859 for drilling and completion charges
on development of a Canadian lease. The Registrant expended
$90,427 during the fiscal year ended December 31, 1998 in
relation to such invoices. The Registrant made a further
reduction to the amount outstanding in relation to these invoices
of $20,000 to June 30, 1999. No funds have been expended on the
further development of the Registrant's oil and gas leases to the
six months ended June 30, 1999.
In May 1998, the Registrant acquired a seventy-five percent
(75%) interest in Carbon, a Cyprus corporation, through a share
exchange agreement which resulted in the Registrant issuing a
total of 10 million shares of common stock at a deemed value of
$0.10 per share. In June 1999, the Registrant acquired the
remaining twenty-five percent (25%) of Carbon in exchange for the
issue of an additional 3 million shares of common stock at a
deemed value of $0.10 per share. The total of 13 million shares
issued in connection with the acquisition of Carbon are currently
being held in escrow pending the Technologies being proven to be
commercially viable. Neither of the two technologies currently
under development by the Registrant and its subsidiaries SynGen
Technologies Limited and Carbon, have been proven commercially
viable as yet. All or a portion of the 13 million shares issued
for the acquisition of the two technologies are subject to
verification of commercial viability.
Subsequent to the acquisition and up to the six months ended
June 30, 1999, the Registrant had expended $478,799 on research
and development related to the gas-to-liquids technology. It is
expected that significant expenditures will be incurred during
the next nine to twelve months to prove the efficacy of the gas-
to-liquids technology. All expenses related to the development
of the 4 bbl per day demonstration facility will be incurred by
Stone Canyon Canada in return for the Canadian marketing and
licensing rights to the gas-to-liquids technology. The
Registrant anticipates the cost for the design, engineering and
construction of such facility to be approximately US$2 million.
However, the Registrant will continue to be responsible for, and
need to locate funding to the meet the costs of ongoing
development of the gas-to-liquids technology.
The Registrant and Texas T Petroleum Ltd. have entered into
a series of transactions whereby Texas T will fund a significant
portion of the costs associated with the development of the CPJ
Technology. The Registrant intends to transform its current 1/2
bbl per day upgrading facility into a 500-1,000 bbl per day unit.
The cost of engineering and developing the "scale up" of the
current unit to a 500-1,000 bbl per day unit is anticipated to be
$500,000 and the cost of constructing such a facility will be
approximately $2-3 million.
The Registrant's arrangements with Texas T have allowed it
to bring the CPJ Technology to its current level of development
and will meet a significant portion of the costs described in the
preceding paragraph. In total, Texas T is obligated to provide
the Registrant (or its subsidiaries or assigns) with US$1 million
in cash and 3 million units of Texas T. Each Texas T unit
consists of one (1) share of common stock and a warrant to
purchase one (1) share of common stock; 1 million of the warrants
are priced at US$0.50 per share and the other 2 million warrants
are priced at US$1.00 per share.
The foregoing arrangements were the result of verbal and
written agreements between the Registrant and Texas T. on January
8, 1999, the Registrant granted Texas T the option to acquire
fifty percent (50%) of the Registrant's interest in the CPJ
Technology. In exchange for such option, Texas T paid US$100,000
towards the development of the CPJ Technology and a subsidiary of
the Registrant acquired 1 million Units of Texas T, with each
Unit priced at $0.10. The Registrant and Texas T then executed a
share exchange agreement dated as of June 26, 1999, whereby Texas
T was granted the right to acquire from the Registrant fifty
percent (50%) of the issued and organized shares of Carbon (which
at that time was owned 100% by the Registrant) and thereby a 50%
interest in and to the proprietary CPJ Process. The
consideration for such interest is an additional US$900,000 and 2
million Texas T Units. The shares of Carbon to be transferred to
Texas T under such agreement, as well as the 2 million Texas T
Units, are currently being held in escrow pending fulfillment of
Texas T's $900,000 funding obligation.
The Registrant expects additional development costs, once
Texas T has fulfilled its obligation, of approximately $1.5-$2.5
million which will be divided equally among the two shareholders
of Carbon (i.e. the Registrant and Texas T). The Registrant
expects to be funded by potential licensees, joint venture
partners and/or other financing vehicles.
Cash Flows
The Registrant and its subsidiaries have achieved no net
income from operations in either 1997 or 1998. Income was
generated to the year ended December 31, 1998 by the
reimbursement of GTL project expenses by Stone Canyon Canada
totaling $370,799 of which $88,448 has been received. An
additional invoice of $6,216 has been forwarded to Stone Canyon
Canada as at June 30, 1999 to bring the total amount of the
receivable outstanding to $288,567 as at June 30, 1999. In
addition, the Registrant received $200,000 in option
consideration to June 30, 1999 from Texas T Petroleum Ltd. in
relation to agreements reached January 8, 1999 in respect of the
development of the CPJ Process and a further $461 in consulting
fees. The Registrant and its subsidiaries do not expect to
generate project revenues during the remainder of the current
fiscal year to December 31, 1999. Therefore, the Registrant and
its subsidiaries are dependent upon private placements, loans
and/or joint venture arrangements, such as the separate
agreements recently negotiated with Stone Canyon Canada and
Texas T Petroleum Ltd. to fund future operations until it
develops sufficient revenue from its assets. Current budgets
project revenues to commence in the year 2000.
If such sources of funds are not located, the Registrant
will not be able to meet its objectives and may be forced to sell
assets.
Changes in Financial Position
During 1997, the Registrant's current and long term assets
increased by approximately $487,000 primarily as a result of the
acquisition of certain oil and gas properties by Stone Canyon
Colorado, the Registrant's wholly owned subsidiary acquired as a
result of a share exchange effective November 24, 1997. At the
year ended December 31, 1997 liabilities totaled approximately
$38,000 and consisted of outstanding accounts due to creditors.
During 1998, the Registrant's assets increased by
approximately $1.3 million primarily due to the acquisition of
75% of Carbon through the issue of 10 million shares at a deemed
value of $0.10 per share ($1,000,000). Current assets increased
primarily as a result of an increase in accounts receivable of
$282,351 reflecting income realized from the invoicing of
project expenses with respect to the GTL Technology to a third
party for reimbursement. While the balance sheet reflects a
reduction in the Oil Lease Acquisition account as a result of
$171,019 in lease development costs expended during the previous
period being expensed through the operating accounts, the
Registrant was invoiced $229,859 (and expended a total of $90,427
with respect to such invoice) on development of its Alberta,
Canada leases to the year ended December 31, 1998. To the six
months ended June, 1999 the Registrant's assets increased further
with the addition of $200,000 in option consideration received
and invested in the acquisition of share capital and the
expenditure of $181,999 on development of the CPJ Process and
$41,364 on the development of the GTL Technology. The Company
also made some minor leasehold improvements for a total of $8,062
to June 30, 1999
Current liabilities at December 31, 1998 amounted to
$834,965 and consisted primarily of loans payable with respect to
funds advanced for general working capital by various related and
un-related parties, and outstanding accounts due to creditors of
the Registrant and its subsidiaries. Of the outstanding loans
payable at December 31, 1998, $156,500 was due to a related party
with a director and officer in common to the Registrant and its
subsidiaries; $116,396 was due to various unrelated, arm's length
parties and $67,309 was due to a Colorado corporation in respect
of a refundable deposit received in respect of the development of
the GTL Technology. Of the outstanding accounts due to
creditors, there remained upaid a total of $153,838 in respect of
project expenses for the development of the GTL Technology.
(This amount is also reflected on the balance sheet as an account
receivable due from Stone Canyon Canada in respect of their
September 30, 1998 agreement to fund all project expenses in
relation to the development of the GTL Technology and
construction of the 4 bbl per day demonstration facility.) The
remaining balance in accounts payable of $340,922 reflects
amounts due to approximately 30 creditors for various aspects of
the general operations of the Registrant and its subsidiaries
including management services, consulting services, investor
relations activities, advertising and promotion, secretarial
services, office expense, rent, legal, accounting and transfer
services and various other general fees and charges. To the
subsequent period ended June 30, 1999, the Registrant's
liabilities decreased as a result of the payment of certain
creditors' outstanding loans and acquisition by those creditors
of common shares in the aggregate amount of $411,311, however,
accounts payable increased slightly with the addition of
engineering, equipment and consulting expenditures in relation to
the forward progress of both the GTL and Heavy Oil upgrading
technologies.
Shareholders equity at December 31, 1997 was approximately
$449,000 inclusive of a loss from operations of $67,016. As of
December 31, 1998 the shareholders equity had increased to
$918,059 inclusive of an accumulated loss from operations of
$772,854. Total issued and outstanding share capital as of the
year ended December 31, 1997 was 9,989,669 common shares as
compared to a total of 20,332,526 common shares as of December
31, 1998. As at the subsequent six month period ended June 30,
1999, total issued and outstanding share capital was 21,874,526
common shares with total shareholders' equity increasing to
$1,945,526, inclusive of a net loss from six month of operations
totaling $64,533.
The Registrant will require additional equity loans to meet
its primary business goal of bringing its development
technologies to the market.
Comparison of Results of Operations for the Fiscal Periods ended
December 31, 1997 and 1998 and subsequent six month period ended June 30, 1999.
The Registrant had no operating revenues to the year ended
December 31, 1997. For the year ended December 31, 1998 the
Registrant realized revenues from project expenses reimbursed in
respect of the development of the GTL Technology of $370,799 and
an additional $200,461 in option and consulting consideration to
the six months ended June 30, 1999.
The Registrant incurred operating losses of $67,016 in 1997
and accumulated losses of $772,854 in 1998, which resulted in
losses per share of $0.02 and $0.05 respectively. There was an
additional loss of $64,533 to the six month period ended June 30,
1999. The Registrant anticipates the fiscal year ended December
31, 1999 will continue to reflect losses and minimal revenues.
Current budgets and project time lines project revenues from
licensing fees as a result of the marketing of one or both of the
Registrant's development technologies will be generated during
the year ending December 31, 2000.
Liquidity
The Registrant expects that its need for liquidity will
increase in 1999 and 2000 in anticipation of expending funds to
develop its heavy oil upgrading and gas-to-liquids technologies.
Short Term
On a short term basis the Registrant does not generate any
revenue to cover operations. The Registrant will continue to be
dependent on equity funds raised, joint venture arrangements
and/or loan proceeds to meet current and recurring liabilities,
general working capital and technology development expenses until
such time as the Registrant is generating net annual revenues.
The Registrant's current liabilities of $834,965 exceeded
current assets of $309,253 as at the year ended December 31, 1998
by $525,712. A total of $353,000 of the current liabilities was
owed to various individuals with respect to funding the ongoing
development of the technology and general working capital. These
individuals agreed to subscribe for equity placements during the
first quarter of fiscal 1999. As at June 30, 1999 current
liabilities were reduced and exceeded current assets by
$274,516. Certain amounts totaling $45,802 presently included in
the current liabilities as accrued liability as at the six months
ended June 30, 1999 will be re-allocated to the technology
development accounts upon receipt of total funds of $900,000,
fulfilling the terms of a June 26, 1999 agreement.
Long Term
Presently on a long term basis, the Registrant has no fixed
assets. Asset value will be dependant on the successful
development of the two proprietary technologies and proof of
their commercial viability.
As mentioned above the Registrant does not presently
generate any ongoing revenue. It is anticipated that operations
will have minimal net cash flow to the fiscal year ended December
31, 1999. The Registrant will remain reliant on the successful
development and marketing of the heavy oil upgrading process and
gas-to-liquids process for possibility of future income.
Capital Resources
The primary capital resources of the Registrant are its
stock which may be illiquid because of resale restrictions and/or
as a result of unproven development technologies encompassing the
major assets of the Registrant.
As of the date of this filing the Registrant and its
subsidiaries had material commitments within the next year of
approximately $3 million. These commitments are either to
finance and/or to arrange to have financed, continuing research
and development relating to its technology. Certain of these
committed expenditures have been financed by divestiture of
certain marketing and licensing rights and/or sale of an interest
in and to one or both of the Registrant's proprietary processes.
SYNERGY TECHNOLOGIES CORPORATION
Consolidated Balance Sheet
For the Six Month period ended June 30, 1999
ASSETS
Current
Cash $ 3,727
Receivables (Note 3) 306,837
Receivable - related parties (Note 4) 4,058
Prepaid expenses 5,605
320,227
Oil lease acquisition and development costs (Note 7)
516,332
Technology acquisition (Note 8) 1,588,739
Leasehold improvements and software 8,062
Other asset - Organisation Costs, net 6,909
Investments (Note 8) 100,000
2,220,042
TOTAL ASSETS $ 2,540,269
LIABILITIES
Current
Accounts payable and accrued expenses (Note 5(b))
$ 515,897
Loans payable (Note 5(a)) 78,846
594,743
STOCKHOLDERS' EQUITY
Common stock,
$0.002 par value 100,000,000 shares authorized,
21,874,526 shares issued $ 49,749
Additional paid in capital 2,733,164
Accumulated deficit (837,387)
TOTAL STOCKHOLDERS' EQUITY 1,945,526
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,540,269
Approved by the Directors: /s/ Cameron Haworth /s/ Jacquie Danforth
Director Director
SYNERGY TECHNOLOGIES CORPORATION
Consolidated Statement of Operations and Deficit
For the Six Month period ended June 30, 1999
Revenue
Option and other income $ 200,461
General and administrative expenses
Accounting $ 12,099
Advertising 4,335
Amortization/Depreciation 70
Bank charges and interest 1,090
Consulting 50,249
Exchange (3,056)
Filing, membership and conference fees 2,251
Investor relations 56,672
Lease and equipment rentals 1,356
Legal fees 37,231
Management fees 39,000
Office expense 16,596
Rent 7,578
Secretarial 1,916
Telephone 4,803
Transfer agent 2,198
Translation fees 2,538
Travel and promotion 28,068
Total expense $ 264,994
Net Income(Loss) for period $ (64,533)
Deficit, beginning of year $ (772,854)
Deficit, end of period $ (837,387)
SYNERGY TECHNOLOGIES CORPORATION
Consolidated Statement of Changes in Stockholders' Deficit
For the Six Month period ended June 30, 1999
<TABLE>
<S> <C> <C> <C> <C> <C>
Common Stock Additional Paid Accumulated Total
Par Value $0.002 in Capital Deficit Stockholder's
Equity (Deficit)
Shares Amount
Balances
12/3/198 20,332,526 $40,666 $1,650,247 $(772,854) $918,059
Common Stock
Issued $0.50 per
share 2/10/99 86,000 172 42,828 ----- 43,000
Common Stock
Issued $0.50 per
share 2/17/99 1,059,314 2,119 527,538 ----- 529,657
Common Stock
Issued $0.50 per
share 3/31/99 45,000 90 22,410 ----- 22,500
Common stock
Issued $0.50 per
share 4/7/99 309,686 618 154,225 ----- 154,843
Common stock
issued $1.00 per
share 4/30/99 42,000 84 41,916 ----- 42,000
Common stock reserved
but not yet issued
Deemed value $0.10
per share 3,000,000 6,000 294,000 ----- 300,000
Nett Gain Period
ended 6/30/99 ----- ----- ----- (64,533) (64,533)
Balances
June 30, 1999 24,874,526 $ 49,749 $ 2,733,164 $ (837,387)$ 1,945,526
</TABLE>
SYNERGY TECHNOLOGIES CORPORATION
Consolidated Statement of Cash Flows
For the Six Month period ended June 30, 1999
Cash provided by (used for) operating activities
Loss for the period $ (64,533)
Changes in non-cash working capital:
Net change in receivables $ (17,797)
Net change in payables 21,137
Minority Interest (2,514)
Organization costs (6,000)
Net change in prepaid expenses (3,856)
$ (9,030)
Cash provided by financing activities
Issuance of shares $ 1,092,000
Loan proceeds & other liabilities (261,359)
$ 830,641
Cash used for investing activities
Acquisition of petroleum and natural gas interests $ (138,845)
Technology Development Costs (520,850)
Leasehold and software acquisition 8,062
Acquisition of shares (100,000)
$ (767,757)
Increase (Decrease) in cash $ (10,679)
Cash, beginning of year $ 14,406
Cash, end of period $ 3,727
1. Summary of Significant Accounting Policies
General
Synergy Technologies Corporation (formerly Automated Transfer
Systems Corporation), was incorporated in Colorado on February
10, 1997. On November 24, 1997 the Company merged with Stone
Canyon Resources, Inc., another Colorado corporation. Prior to
the merger Automated Transfer Systems Corporation had no
operations. Prior to the merger Stone Canyon had 2,901,007
shares of common stock outstanding and Automated Transfer Systems
had 2,549,500 shares of common stock outstanding. In the merger
Stone Canyon shareholders traded each of their 2,901,007 shares
for one share in Automated Transfer Systems. Also in the merger
Automated Transfer Systems sold 4,539,162 new shares of its
common stock to extinguish $453,916 of the debt of Stone Canyon
Resources, Inc. At the end of the merger there were 9,989,669
shares outstanding. The former creditor of Stone Canyon
Resources, Inc. became the controlling party in the Company,
owning more than 60% of the Company's outstanding stock. Synergy
Technologies Corporation and its wholly owned subsidiary, Stone
Canyon Resources, Inc. acquired development lease land with
certain mineral rights and expended funds to exploit these oil
and gas resources. Synergy Technologies and its 100% owned
subsidiary, Carbon Resources Limited have acquired a patented and
proprietary technology for the conversion of gas to liquids.
Carbon Resources Limited and its wholly owned subsidiary, Lanisco
Holdings Limited have acquired a patented and proprietary
technology for the upgrading of heavy oil. Synergy, Carbon and
Lansico have expended funds on the continuing research and
development of these proprietary technologies to prove their
commercial application, establish market recognition and generate
licensing and royalty revenues through exploitation of the
processes.
Basis of Presentation
These consolidated financial statements include the accounts of
the Company and its subsidiaries, as follows:
(i) Stone Canyon Resources Inc., a Colorado corporation
formed on November 6, 1996, which completed a share exchange
agreement with Automated Transfer Systems Corporation effective
November 24, 1997. Under the terms of the agreement, Stone
Canyon Resources Inc. became a wholly owned subsidiary of the
Company.
(ii) Carbon Resources Limited, a Cyprus corporation, formed
on April 28 1998, which completed a share exchange agreement
with Automated Transfer Systems Corporation effective June 2,
1998. Under the terms of the agreement, Carbon Resources Limited
became a 75% owned subsidiary of the Company. On June 25, 1999,
Synergy Technologies Corporation negotiated the acquisition of
the remaining twenty-five percent (25%) of the shares of Carbon
Resources Limited and Carbon Resources Limited became a wholly
owned subsidiary of Synergy Technologies Corporation. On June
26, 1999, Synergy Technologies Corporation executed a share
exchange agreement with Texas T Petroleum Ltd., a Colorado
corporation whereby Texas T Petroleum Ltd. has the right to
acquire a 50% in the shares of Carbon. These financial
statements presently include 100% of the accounts and records of
Carbon Resources Ltd. and will continue to reflect a 100%
interest until such time as Texas T Petroleum Ltd. fulfills its
obligations to earn 50% of the shares of Carbon.
(iii) Lanisco Holdings Limited, a Cyprus corporation, formed
on September 7, 1998, and acquired by Carbon Resources Limited,
to become a wholly owned subsidiary effective January 6, 1999
SynGen Technologies Limited., a Cyprus corporation, formed on
June 25, 1999, as a wholly owned subsidiary, to which Synergy
Technologies transferred its 100% interest in the gas-to-liquids
technology from Carbon Resources Limited The Company reports revenue
and expenses using the accrual method of accounting for financial
and tax reporting purposes. All reported amounts are in US dollars.
Use of Estimates
Management uses estimates and assumptions in preparing these
financial statements in accordance with generally accepted
accounting principles. Those estimates and assumptions affect
the reported amounts of assets and liabilities, the disclosure of
contingent assets and liabilities, and the reported revenues and
expenses.
Development Stage Company
The Company meets the guidelines of SFAS No. 7 and as such is
classified as a development stage company.
Pro Forma Compensation Expense
The Company accounts for costs of stock-based compensation in
accordance with APB No. 25, "Accounting for Stock Based
Compensation" instead of the fair value based method in SFAS No.
123. No stock options have been issued. Accordingly, no pro
forma compensation expense is reported in these financial
statements.
Petroleum and Natural Gas Interests
The Company follows the full cost method of accounting for its
petroleum and natural gas interests whereby all costs in excess
of recoveries related to the exploration for and the development
of petroleum and natural gas reserves are capitalized until such
time as the cost centre to which they relate has commercial
production, is sold or abandoned. Under this method of
accounting, gain or loss on the sale of a property or group of
properties is only recognized when such sale significantly alters
the relationship between capitalized costs and proved reserves
attributable to a cost centre. Management has determined each
country to be a cost centre.
The total costs capitalized within each cost centre evaluated at
year end prices, net of accumulated depletion, is limited to the
value of future net revenues, less related administrative and
financing costs, for the estimated production of proved petroleum
and natural gas reserves plus the cost of properties not being
amortized due to their stage of development plus the lower of
cost or estimated fair market value of unproved properties which
are included in the pool of costs being depleted.
Depletion of costs capitalized on producing properties is
calculated based on the portion of proved reserves produced
during the year. Reserves and production of petroleum and
natural gas are calculated after royalties and are converted to
equivalent units of energy as determined by engineering studies.
All other costs other than those relating to properties with
unproven reserves are subject to depletion.
Foreign Currency Translation
The Company translates its assets and liabilities at the exchange
rate prevailing at the balance sheet date. Revenues and expenses
are translated at the average exchange rate for the year.
Foreign exchange gains and losses are deferred and shown
separately in shareholder's equity. At June 30, 1999 net gains
and losses have been immaterial and are not shown separately.
Property and Equipment
Property and equipment, when acquired, are stated at historical
cost.
Depreciation, Amortization and Capitalization
The Company records depreciation and amortization, when
appropriate, using both straight-line and declining balance
methods over the estimated useful life of the assets (five to
seven years).
Expenditures for maintenance and repairs are charged to expense
as incurred. Additions, major renewals and replacements that
increase the property's useful life are capitalized. Property
sold or retired, together with the related accumulated
depreciation, is removed from the appropriate accounts and the
resultant gain or loss is included in net income.
Income Taxes
The company accounts for its income taxes in accordance with
Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes". Under Statement 109, a liability method is
used whereby deferred tax assets and liabilities are determined
based on temporary differences between basis used for financial
reporting and income tax reporting purposes. Income taxes are
provided based on tax rates in effect at the time such temporary
differences are expected to reverse. A valuation allowance is
provided for certain deferred tax assets if it is more likely than not,
that the Company will not realize the tax assets through future operations.
Fair Value of Financial Instruments
1. Financial accounting Standards Statement No. 107, "Disclosures
About Fair Value of Financial Instruments", requires the company
to disclose, when reasonably attainable, the fair market
values of its assets and liabilities which are deemed to be
financial instruments. The Company's financial instruments
consist primarily of cash and certain investments.
Per Share Information
The Company computes per share information by dividing the net
loss for the period presented by the weighted average number of
shares outstanding during such period.
2. Provision for Income Taxes
The provision for income taxes for the period ended June 30, 1999,
represents the minimum state income tax expense of the Company,
which is not considered significant.
3. Receivables
The receivables as stated on the consolidated Balance Sheet
consist of the following accounts:
Receivable from Stone Canyon Resources Ltd., a company
incorporated pursuant to the laws of the Province of Alberta, and
an affiliate of Synergy Technologies Corporation. On September
30, 1998, Synergy Technologies entered into an agreement with
Stone Canyon Resources Ltd. ("Stone-Canada"), whereby Stone
Canada committed to fund the design and construction of a 4 bbl
per day demonstration facility in the Province of Alberta in
exchange for the Canadian marketing and licensing rights to
Synergy's proprietary Gas to Liquids technology. The amount
recorded as a receivable on the Balance Sheet includes project
development costs chargeable to the 4 bbl per day demonstration
facility. The account bears no interest and is subject to no
specific terms of repayment.
$ 288,567
GST Receivable. Certain expenses for services rendered and
supplies acquired in Canada are subject to a federal Goods and
Services Tax of 7% which is refundable to the Company at fiscal
year end. This amount is refunded to the Company upon filing of
a GST return in Canada.
$ 17,887
Other Receivables.- A small receivable for office work
contracted out due and payable from Texas T Resources Inc.
$ 383
TOTAL RECEIVABLES: $ 306,837
4. Receivables - Related Parties
This receivable is due from shareholders and bears no interest
and is not subject to any specific terms of repayment.
5. Accounts Payable and Loans Payable
(a) Loans payable of $78,846 as reported on the consolidated
Balance Sheet reflect amounts advanced to Synergy Technologies
and its subsidiaries from various arms length corporations for
general working capital. These amounts bear no interest and have
no stated terms of repayment. This amount includes $45,802.
advanced by Texas T Petroleum Ltd. under the terms of the June
26, 1999 agreement.
(b) Other liabilities of $30,900 included in accounts payable
reflect amounts advanced from Texas T Petroleum Ltd. in respect
to development of the GTL Technology.
6. Commitments and Contingencies
Operating Leases
Stone Canyon Resources Inc., a wholly owned subsidiary of Synergy
Technologies corporation, is required to remit annual lease
rentals in order to keep its development oil and gas leases
current. To date the Company is current in its remittance of the
requisite lease rentals.
Stone Canyon Resources Inc., a wholly owned subsidiary of Synergy
Technologies Corporation, has been advised by the operator of
certain oil and gas leases located in Johnston County, Wyoming
that the leases must be drilled by July 1, 1999 in order to
fulfill the terms of an original acquisition agreement
surrounding the purchase of the leases or the leases will revert
to the original holder. The Company is in dispute with the
operator regarding representations it made in connection with the
acquisition of this project and does not intend to commence
drilling of the leases. (See Note 6 Litigation)
Minimum lease payments on annually renewable oil leases amount to
$1,857 for each of the five next years.
Litigation
The company has recently been named a Defendant in a legal action
brought forth by a group of founding shareholders in respect of a
stop transfer the company has placed on their shares and the
Company's decision not to drill certain leases acquired from
these founding shareholders. The action was commenced following
Synergy's review of certain oil and gas leases acquired by its
wholly owned subsidiary, Stone Canyon Resources Inc., which
raised several issues of concern.
Upon completion of the review the company determined that it may
not have received valid consideration for the amounts paid to and
subsequently the shares issued to certain founding shareholders
in return for these development leases. The Company placed a
stop transfer on all shares issued to the founding shareholders
pending a legal determination as to valid consideration. Bataa
Oil Inc., its affiliated companies and employees as well as
Richard and Anita Knight (the "Plaintiffs") have commenced action
against Synergy Technologies, Stone Canyon Resources Inc. (a
wholly owned subsidiary) and Stone Canyon Resources Ltd. (an
affiliated corporation) for the release of their shares. The
Plaintiffs have claimed breach of contract and breach of
fiduciary duty. The Company intends to respond to this action
and will vigorously defend the litigation. The Company may
commence legal action against those shareholders and certain
other founding shareholders to recover all costs of the lease
acquisitions and the return of any shares issued to the founders.
Subsequent to the period, the Company received notice of a demand
for arbitration from the American Arbitration Association which
was initiated by NACC. NACC is seeking damages of 325,000 shares
of the Company's stock, attorneys fees and punitive damages. The
Company denies all allegations made by NACC in this claim and
intends to vigorously defend this arbitration.
Licensing and Consulting Agreements
Synergy Technologies Corporation paid and/or accrued a total of
$30,000 in management fees to CMJ Consulting Ltd., and Alberta
company of which Ms. Danforth is a common director,
secretary-treasurer and a one-third shareholder, subject to a
management contract.
Stone Canyon Resources Inc. (a wholly owned subsidiary of
Synergy), paid and/or accrued to Ms. Jacqueline Danforth,
director and secretary-treasurer, $1,500 for services rendered
subject to a consulting agreement over the period from January 1,
1999 to June 30, 1999.
Stone Canyon Resources Inc. (a wholly owned subsidiary of Synergy
Technologies Corporation), paid and/or accrued to CMJ Consulting
Ltd., an Alberta company of which Ms. Danforth is a common
director, secretary-treasurer and a one-third shareholder, $9,000
in management fees pursuant to a management contract.
Effective September 30, 1998, Synergy Technologies entered into
an agreement with Stone Canyon Resources Ltd. ("Stone-Canada"),
whereby Stone-Canada committed to fund the design and
construction of a 4 bbl per day demonstration facility in the
Province of Alberta in exchange for the Canadian marketing and
licensing rights to Synergy's proprietary Gas to Liquids
technology. (See Note 3 Receivables)
7. Oil And Gas Leases 1999
U.S.A.
50% interest in Meadow Deep, Wyoming
and D-Sand, Colorado, prospects 287,060
15% interest in Rose Creek and Sage Creek prospects,
Wyoming (dry hole costs written off) 0
5% interest in Hell's Canyon prospect, Wyoming
(dry hole costs written off) 0
Canada
33.57% BPO interest in Wilson Creek prospect, Alberta,
drilling and casing expense to date 229,272
516,332
During the period Stone Canyon Resources Inc. and Synergy
Technologies corporation executed an agreement with Revival
Resources Ltd. to acquire their 22.38% APO interest in the
Wilson Creek Prospect as well as their respective interest in certain
other development leases located in the Province of Alberta.
Under the terms of the agreement, Synergy Technologies
Corporation will issue a total of 63,801 shares of common stock
at a deemed value of $33,895 in full and final payment for the
leases. As of the date of this report the shares had been
allocated but not yet issued.
8. Technology Agreements
On May 5, 1998, Synergy Technologies Corporation (formerly
Automated Transfer Systems Corporation) entered into a share
exchange agreement with Laxarco Holding Limited whereby Synergy
acquired 75% of the issued and outstanding shares of Carbon
Resources Limited, a company incorporated pursuant to the laws of
the Republic of Cyprus and holder of a 100% interest in and to a
gas to liquids technology, in exchange for the issuance of
10,000,000 shares of Synergy Technologies Corporation. The
shares were issued at a deemed value of $0.10 per share and
pursuant to the share exchange agreement have been placed in
escrow to be released upon the successful development of the gas
to liquids technology. Under the terms of the agreement Laxarco
Holding Limited granted to Synergy Technologies an irrevocable
voting power of attorney until the 10,000,000 shares are released
from escrow. The Share Exchange received shareholder approval on
June 5, 1998.
On January 6, 1999, Carbon Resources Limited, a 75% owned
subsidiary of the Company, acquired the shares of Lanisco
Holdings Limited, a company incorporated in the Republic of
Cyprus, which holds the rights to a proprietary technology for
the upgrading of heavy oil.
Effective January 8, 1999, Synergy Technologies Corporation
reached a verbal agreement with Texas T Petroleum, Ltd., a
Colorado oil and gas corporation, whereby Lanisco Holdings
Limited would acquire 1,000,000 units of common shares of Texas T
Petroleum, Ltd., each unit consisting of one share and one share
purchase warrant entitling Synergy to purchase one additional
share of Texas T Petroleum Ltd. at $0.50 per share within three
years from January 8, 1999. Texas T Petroleum Ltd. committed to
expend $100,000 towards the reconstruction of the 1/2 bbl per day
heavy oil upgrading pilot plant to be constructed in Orleans,
France.
Effective June 25, 1999, the Company acquired the remaining 25% of
the shares of Carbon Resources Ltd. for the issuance of 3,000,000
shares of the Company at a deemed price of $0.10 per share. The
shares have been allocated and are included in these statements
as reserved for issuance.
Effective June 26, 1999, Synergy Technologies Corporation
executed a share exchange agreement with Texas T Petroleum Ltd.,
a Colorado corporation, whereby Texas T Petroleum Ltd. has the
right to acquire fifty percent (50%) of the issued and organised
shares of Carbon Resources Limited in exchange for the issuance
of 2,000,000 Units of Texas T Petroleum, each Unit consisting of
one share and one share purchase warrant entitling Synergy to
purchase one additional share of Texas T Petroleum Ltd. at $1.00
per share within two years from June 26, 1999, and the payment of
$900,000 to Carbon resources for the development of the heavy oil
technology.
Technology
Issuance of 10,000,000 shares at $0.10 per share $1,000,000
Allocation of 3,000,000 shares at $0.10 per share for the
remaining shares of Carbon Resources Ltd. 300,000
Acquisition of 5,000 shares of Carbon Resources Limited (10,058)
GTL development 116,798
Heavy Oil development 181,999
$1,588,739
9. Name Change
On February 12, 1999, Automated Transfer Systems Corporation
filed a Certificate of Amendment with the Department of State of
The State of Colorado changing its name to Synergy Technologies
Corporation. The name change was accepted by the State of
Colorado on March 2, 1999.
10. Subsequent Events - Nil
The foregoing consolidated unaudited financial statements of the
Company for the period ending June 30, 1999, include all
adjustments which in the opinion of management are necessary in
order to make the financial statements not misleading.
Pursuant to the requirements of Section 12 of the Securities
Exchange Act of 1934, the registrant has duly caused this report
to be signed on its behalf by the undersigned, hereunto duly
authorized.
DATED: August 16, 1999.
SYNERGY TECHNOLOGIES CORPORATION
By: /S/ Cameron Haworth
Name: Cameron Haworth
Title: President
Directors:
/S/ Cameron Haworth
/S/ Jacqueline R. Danforth
