U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 2054
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 OF 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to _________
Commission file number 0-26721
SYNERGY TECHNOLOGIES CORPORATION
(Exact name of small business issuer
as specified in its charter)
COLORADO 84-1379164
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
335 25th Street, S.E., Calgary, Alberta Canada T2A 7H8
(403) 269-2274
(Issuer's telephone number)
NOT APPLICABLE
(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
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the last practicable date:
13,640,142 Shares of Common Stock, $0.002 par value, as of May 8, 2000. (See
Notes 7 and 9 to the accompanying Unaudited Financial Statements)
Transitional Small Business Disclosure Format (check one):
Yes No _X_
ITEM 1. FINANCIAL STATEMENTS
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions for Form 10-QSB and Rule
10-01 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments considered necessary for a fair presentation have been included.
All such adjustments are of a normal recurring nature. Operating results for
the three month periods ended March 31, 2000 and 1999 are not necessarily
indicative of the results that may be expected for the year ending December
31, 2000. For further information, refer to the consolidated financial
statements and footnotes thereto included in the Company=s Annual Report on
Form 10-KSB for the year ended December 31, 1999.
The following documents are filed as a part of this report:
SYNERGY TECHNOLOGIES CORPORATION
Consolidated Financial Statements (Management Prepared)
Three Month Period ended March 31, 2000
(INDEX TO FINANCIAL STATEMENTS)
Page
Financial Statements:
Consolidated Balance Sheet - March 31, 2000 1
Consolidated Statements of Operations -
For the Periods Ended March 31, 2000 and 1999 2
Consolidated Statement of Cash Flows 3
Notes to Consolidated Financial Statements 4
SYNERGY TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
(A Development Stage Company)
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
MARCH 31, 2000
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ASSETS
2000
Current Assets
Cash $ 161,412
Receivables 71,755
Receivables - related parties 432,330
Prepaid Expenses 25,987
Total Current Assets 691,484
Investments 100,000
Office equipment and computers
net of accumulated depreciation of $261 4,694
Total Assets $ 796,178
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable - trade $ 582,069
Accrued expenses 113,316
Loans payable 396,789
Shareholders' deposits 200,000
Total Current Liabilities 1,292,174
Stockholders' Equity (Deficit)
Common stock, $0.002 par value;100,000,000
shares authorized, 13,626,142 shares
issued and outstanding 27,254
Additional paid-in capital 3,342,318
Unearned compensation (183,562)
Accumulated deficit (3,682,006)
Total Stockholders' Equity (Deficit) (495,996)
Total Liabilities and Stockholders' Equity $ 796,178
Commitments and Contingencies - Note 9
</TABLE>
<PAGE>
SYNERGY TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATION
(UNAUDITED)
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For the Three Months Ended Cumulative Period
March 31 from November 7,
2000 1999 1996 (Date of
Inception) to
March 31, 2000
Revenue
Option income $ - $ 100,000 $ 200,000
Consulting income - 454 8,927
- 100,454 208,927
Expenses
General and administrative 309,847 170,188 1,710,785
Stock option compensation 435,438 - 435,438
Technology development 178,335 169,715 1,022,500
Dry well expenses - 551,095 722,210
Total Expenses 923,620 890,998 3,890,933
Gain (Loss) for Period (923,620) (790,544) (3,682,006)
Provision for Income Tax - - -
Net Income (Loss) $ (923,620) $ (790,544) $ (3,682,006)
Basic and Diluted Gain (Loss)
per Common Share $ (0.07) $ (0.07) $ (0.45)
Weighted Average Number
of Common Shares Used
in Calculation $12,663,149 $10,896,429 $ 8,169,956
</TABLE>
<PAGE>
SYNERGY TECHNOLOGIES CORPORATION
AND SUBSIDARIES
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOW
(UNAUDITED)
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For the Three Months Ended Cumulative Period
March 31 from November 7,
1996 (Date of
Inception) to March
2000 1999 31, 2000
Cash From Operating Activities
Net Loss $ (923,620) $ (790,544) $ (3,682,006)
Adjustment to reconcile net loss to
net cash from operations
Dry well expense - 551,095 722,210
Depreciation - - 595
Amortization of unearned
compensation 435,438 - 435,438
Issuance of shares for services 7,822 - 7,822
Exchange rate loss(gain) 2,257 (5,347) 6,343
Loss on disposition of assets - 1,333 1,333
Changes in assets and liabilities
Accounts receivable (50,471) (15,818) (71,755)
Prepaid expenses and deposits (2,075) (47,460) (26,001)
Accounts receivable -
related parties (316,335) 72,479 (392,322)
Accounts payable (75,183) 60,458 1,101,542
Accrued expenses 80,483 32,833 113,316
Net Cash Flows From Operating
Activities $ (841,684) $ (140,971) $ (1,783,485)
Cash From Investing Activities
Acquisition of oil and gas
properties - (175,011) (688,188)
Acquisition of property and
equipment (2,849) - (6,622)
Acquisition of equity security - (100,000) (100,000)
Net Cash Flows from Investing Activities (2,849) (275,011) (794,810)
Cash From Financing Activities
Proceeds from (payments to)
notes payable
- related parties (13,143) (295,743) 558,916
Proceeds from (payments to)
notes payable 301,263 339,650 623,624
Proceeds from investor deposits 200,000 - 402,500
Sales of Common Stock 517,000 393,236 1,161,010
Net Cash Flows From Financing
Activities 1,005,120 437,143 2,746,050
Effect of Exchange Rate
Changes on Cash (2,257) 5,347 (6,343)
Net Change in Cash 158,330 26,508 161,412
Cash at Beginning of Period 3,082 13,912 -
Cash at End of Period $ 161,412 $ 40,420 $ 161,412
</TABLE>
<PAGE>
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Interim Consolidated Financial Statements - The accompanying condensed
consolidated financial statements are un-audited. In the opinion of management,
all necessary adjustments (which include only normal recurring adjustments) have
been made to present fairly the financial position, results of operations and
cash flows for the periods presented. Certain information and note disclosure
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted. It is suggested
that these condensed consolidated financial statements be read in conjunction
with the financial statements and notes thereto included in the December 31,
1999 annual report on Form 10-KSB. The results of operations for the three
month period ended March 31, 2000 are not necessarily indicative of the
operating results to be expected for the full year.
Nature of Operations - Synergy Technologies Corporation (formerly Automated
Transfer Systems Corporation) ("Synergy" or "the Company"), was incorporated
in Colorado on February 10, 1997. Stone Canyon Resources, Inc. ("Stone Canyon")
was incorporated in Colorado on November 7, 1996. Stone Canyon's operations
began in 1997 and it became a wholly owned subsidiary of the Company on November
24, 1997. Both companies were involved in acquiring and developing mineral,
oil and gas resources, and technologies related to those resources. The
Company's other wholly owned subsidiaries, Carbon Resources Limited, Lanisco
Holdings Limited and Syngen Technologies Limited, are Cyprus companies and were
organized on April 10, 1998, September 7, 1998 and May 13, 1999, respectively.
These companies have been involved in the proving of technology through
research and development since their inception.
Reorganization - On October 24, 1997, Synergy entered into a reorganization
agreement with Stone Canyon. As a result of the reorganization, the Stone
Canyon shareholders became shareholders of the Company whereby each share of
Stone Canyon stock was exchanged for one share of Synergy stock. A total of
2,901,007 shares were approved for exchange by the Company. Of such amount
all but 7,143 shares have been exchanged.
The reorganization agreement has been considered the reorganization of Stone
Canyon and the acquisition of Synergy in a purchase business combination. Prior
to the reorganization, Synergy had substantially no net assets and no ongoing
business; therefore, the 2,549,500 shares of common stock outstanding at the
date of the reorganization were recorded at $0. The reorganization was not
deemed to be the acquisition of a business; accordingly no pro forma information
is presented. For legal purposes, and per the reorganization agreement, Stone
Canyon is considered a wholly owned subsidiary of Synergy.
Prior to the reorganization, Stone Canyon owed $453,916 to a related entity. In
the reorganization, 4,539,160 shares of common stock were issued at $0.10 per
share in full satisfaction of the debt.
Acquisitions - As further discussed in Note 9, Synergy entered into an
agreement to acquire a 75% interest in Carbon Resources Limited ("Carbon"), a
subsidiary of Laxarco Holding Limited ("Laxarco"), in May 1998 and entered into
an agreement for the remaining 25% in June 1999, for 10,000,000 and 3,000,000
shares of Synergy, respectively. Pursuant to these agreements, the shares of
Carbon and the shares of Synergy were placed into escrow.
In January 1999, Carbon, through its wholly owned subsidiary, Lanisco Holdings
Ltd. ("Lanisco"), obtained the right to acquire the patents for a heavy oil
upgrading technology ("CPJ"). The patents for this technology were placed in
trust subject to certain research and development expenditures and the payment
of certain royalties to the inventor.
As at June 1999, Carbon held the rights to a gas-to-liquids ("GTL") technology
and Lanisco held the option to acquire the patents for the CPJ technology.
Synergy organized Syngen Technologies Limited ("Syngen") in June 1999 and
transferred the GTL technology from Carbon to Syngen and the shares of Carbon
were released from escrow in exchange for the placement of the Syngen shares
into escrow. Upon release of the Carbon shares from escrow, Carbon and Lanisco
became wholly owned subsidiaries of Synergy. The acquisition of Carbon and
Lanisco has been recorded on the financial statements as a purchase with no
value attributed to the net assets. The Syngen shares remain in escrow and the
patents to the CPJ technology remain in trust. Synergy, Stone Canyon Resources
Ltd. ("Stone Canada"), a related company, and Texas T Petroleum Ltd. ("Texas T")
have been funding the research and development carried out by Syngen, Carbon and
Lanisco. Carbon and Lanisco incurred losses in 1998 from research and
development activity. Synergy has recognized all of the losses of Carbon and
Lanisco in its 1999 and 1998 statements of operations, with no offset to
minority interest. All of the research and development activity for both years
has been recorded in the consolidation. The Syngen shares are held in escrow
for Laxarco and the CPJ patents are held under the trust agreement. Syngen's
GTL research and development activity has been recorded as an expense in the
consolidated financial statements. If the GTL technology is not proven, the
shares of Syngen will be released from escrow to Laxarco. In that event, the
research and development costs will become a receivable to Synergy from Syngen.
It is undeterminable at this time whether such a receivable would be
collectible. If the GTL technology is proven then the shares of Syngen will be
released from escrow to Synergy. The 13,000,000 shares of Synergy will be
released from escrow to Laxarco on the occurrence of the following: 10,000,000
shares will be released upon the viability of either the GTL technology or the
CPJ technology, whichever occurs first. The remaining 3,000,000 shares will
be released upon the viability of the second technology (either CPJ or GTL).
Should neither technology prove viable then the shares of Synergy will be
returned to treasury.
Principals of Consolidation - The accompanying consolidated financial statements
include the accounts and transactions of Stone Canyon for all periods presented,
and the accounts and transactions of Synergy from October 24, 1997, and the
accounts and transactions of Carbon and Lanisco and the activities of Syngen
from their inception. Intercompany accounts and transactions have been
eliminated in consolidation.
Use of Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Business Condition - The accompanying financial statements have been prepared in
conformity with generally accepted accounting principles, which contemplates
continuation of Synergy as a going concern. However, Synergy has had no
significant income and has had negative cash flows from operating activities
during the years ended December 31, 1999 and 1998 and the quarters ended March
31, 2000 and 1999 and cumulative from inception through March 31, 2000, which
conditions raise substantial doubt about Synergy's ability to continue as a
going concern. Synergy's continued existence is dependent upon its ability to
obtain additional financing. The Company will continue to raise funds from the
public and private markets and through arrangements with certain related and
unrelated companies with which it is negotiating mutually beneficial agreements
for the use of the technologies. However, there is no assurance that additional
financing will be realized.
Development Stage Enterprise - Since inception, the Company has spent most of
its efforts raising capital and financing the research and development of
certain technologies; however, it has not yet had sales sufficient to sustain
operations and has relied upon cash flows from financing activities (primarily
debt and equity issuances) to sustain operations. Therefore, the Company is
considered to be in the development stage.
Technology Development - The amount reported on the Consolidated Statements of
Operations for the cumulative period from November 7, 1996 (date of inception)
to March 31, 2000 reflects expenditures on the development of the technologies,
net of certain GTL development costs charged to Stone Canada at the end of
fiscal 1998 and 1999 for reimbursement under the terms of a letter agreement
between the Company and Stone Canada executed in September 1998 (Note 2(II)).
The cumulative amount reported to March 31, 2000 is net of expenditures of
$426,917.
Financial Instruments - The amounts reported as cash, receivables, accounts
payable, and accrued liabilities are considered to be reasonable approximations
of their fair values. The fair value estimates presented herein were based on
market information available to management at the time of preparation of the
financial statements. For the purpose of the statement of cash flows, cash and
cash equivalents are defined as demand deposits as well as other funds with
original maturities of three months or less.
Foreign Currency Translation - Exchange gains and losses from holding foreign
currencies and having liabilities paid in foreign currencies are included in the
results of operations.
Property and Equipment - Property and equipment are reported at cost. Minor
repairs, enhancements, and maintenance costs are expensed when incurred.
Depreciation is computed using the straight-line and accelerated methods over
the estimated useful lives of the assets. No depreciation has been recorded for
the three months ended March 31, 2000. Major categories of property and
equipment and estimated useful lives are as follows:
Estimated
Useful Life
Furniture and fixtures 3-7 years
Computer equipment 5 years
Basic and Diluted Loss Per Share - Basic loss per common share is computed by
dividing net loss by the number of common shares outstanding during the period.
Diluted loss per share is calculated to give effect to potentially issuable
common shares except during loss periods when those potentially issuable common
shares would decrease the loss per share.
Restatement of Prior Financial Statements - The previously issued December 31,
1999 and 1998 financial statements were restated to consolidate Carbon and its
wholly owned subsidiary, Lansico. Carbon is consolidated due to the releasing
of the Carbon shares from escrow as further explained in Note 9, "Carbon
Resources Limited", at which time Carbon became a wholly owned subsidiary.
Also, the activities of Syngen have been included in the financial statements
based on the Company and related parties having funded Syngen since its
inception. The Company and related parties may not benefit from that activity
until, and unless, certain technology is proven commercially viable. As further
described in Notes 1 & 9, the shares of Syngen are in escrow pending the outcome
of the research and development.
NOTE 2-RELATED PARTY TRANSACTIONS
(I) During the three month period ended March 31, 2000, the Company and its
subsidiaries were charged a total of $45,656 in consulting fees by Glidarc
Technologies Inc. (a Texas corporation) for process management services. An
officer of Glidarc Technologies is also a director of Carbon Resources Limited,
a private Cyprus corporation. During the three months ended March 31, 2000 an
amount of $190,720 for services rendered which remained due and payable to
Glidarc Technologies at December 31, 1999, was settled for 304,898 shares of
common stock of the Company. An amount of $45,656 remained due and payable
to Glidarc at March 31, 2000.
(II) In September 1998 Stone Canada and Synergy Technologies entered into a
letter agreement under which Stone Canada agreed to fund the development of a
4-bbl/day gas to liquids demonstration facility under development in return for
the Canadian marketing and licensing rights to the technology. Pursuant to this
agreement, from the period September 30, 1998 to the period ended December 31,
1999, invoices totaling $426,917 had been issued to Stone Canada for
reimbursement of all costs incurred by the Company or its subsidiaries in
respect of the development of the 4-bbl/day facility.
During the quarter ended March 31, 2000 Synergy Technologies Corporation
advanced a total of $388,870 to Stone Canada with respect to the development of
the 4-bbl/day-demonstration facility. As at March 31, 2000, $432,330 in
consolidated receivables remained due from Stone Canada.
NOTE 5- LOANS PAYABLE
Loans payable of $396,789 as of March 31, 2000 reflect an amount of $303,565
payable to Texas T Petroleum, a partner in the development of the CPJ process,
and various other unrelated payables totaling $93,224.
NOTE 7 - COMMON STOCK
In November 1998, the Company commenced a private placement of its common stock
under Rule 504 of Regulation D at $0.50 per Unit. Each Unit consisted of one
share of common stock and one stock warrant exercisable at any time two (2)
years from the date of issue at $1.00 per share for each warrant exercised.
The Company completed this offering of 1,500,000 Units in April 1999 for a
total value of $750,00. The Company issued 957,000 Units for cash of $478,500,
138,000 Units as compensation for services valued at $69,000, and 405,000 Units
as conversion of debt from investor deposits in the amount of $202,500. No
commission fees or other selling expenses were paid. Subsequent to year end,
the Company offered to certain subscribers under the aforementioned Rule 504
private placement the option of canceling the warrant portion of the subscribed
for Units and participating in an offering of new Units made pursuant to
Regulation S promulgated by the Securities and Exchange Commission under the
Securities Act of 1933 ("Regulation S"), with each Unit consisting of a share of
common stock and a warrant to purchase an additional share for $3.50,
exercisable at any time two (2) years from the time of subscription. The
Company has agreed to keep the offering open until either fully subscribed or
April 2001 which would be the expiration date of the warrants under the Rule 504
private placement. The price of these new Units is $1.00, which is the
same price as the share purchase warrants that have been cancelled. On January
19, 2000, 100,000 of these new Units were subscribed for. Subsequent to the
period ended March 31, 2000, the Company accepted this subscription.
In December 1999, the Company commenced a private placement of its common stock
pursuant to Regulation S promulgated by the Securities and Exchange Commission
under the Securities Act of 1933 ("Regulation S") at $0.50 per Unit, each Unit
consisting of one share of common stock and one warrant exercisable for a period
of one year from the date of issuance at $1.00 per share. In January 2000,
10,000 Units were sold for total proceeds of $5,000.
On January 14, 2000, a Financing and Security Agreement was entered into by and
among Stone Canyon Resources Ltd. ("Stone Canada") and the Company
(collectively the "Borrowers") and James E. Nielson and Wood River Trust
(collectively the "Lenders"), in regard to a loan in the amount of $300,000.00
for allocation towards development of the 4 bbl per day SYNGEN demonstration
plant. Stone Canada has agreed to hold in trust an equal amount of funds
receivable by way of a refund from Natural Resources Canada as collateral for a
period of ninety (90) days following the initial start up of the SYNGEN
demonstration plant, at which time the Lenders may choose either (i) to convert
the loaned amount into 600,000 Units of Synergy Technologies, at which time an
amount of $300,000. would be released to Synergy from the Stone Canada trust as
consideration for the units or (ii) a release of the funds held in trust in an
amount equal to the principal balance and all accrued interest therein, with any
additional trust funds to be released to Stone Canyon. Each Unit would consist
of one share of common stock and one warrant to purchase an addition share of
common stock for $1.00 per share.
On January 14, 2000, a second Financing and Security Agreement was entered into
by and among Stone Canada and the Company (collectively the "Borrowers") and
Caribbean Overseas Investments Ltd. (the "Lender") with the same terms as the
above-described financing agreement, except for the loan amount which is $50,000
and convertible into 100,000 Units.
On January 19, 2000, the Company commenced a private placement of shares of its
common stock pursuant to Regulation S. Subsequent to the period ended March 31,
2000, the Company accepted subscriptions to this offering for the sale of
100,000 shares at $1.00 per share.
On January 5, 2000 the Company approved the Year 2000 Employees Stock Award
Plan, which authorized awards of up to 1,500,000 shares of common stock. As of
March 31, 2000 a total of 1,114,815 shares were issued under the plan as
compensation for bonafide services actually rendered.
The warrants issued in connection with the private placements undertaken in the
fiscal years ended December 31, 1999 and 1998 are exercisable at $1.00 per
share, and expire within two years from the date of issue. To the three month
period ended March 31, 2000, the Company issued shares of common stock for cash
proceeds of $412,000, or $1.00 per share upon the exercise of warrants.
The following table summarizes the warrants to purchase common stock issued and
outstanding:
Warrants outstanding at December 31, 1999: 1,863,000
Warrants exercised at $1.00 per share (412,000)
Warrants issued/(cancelled) See above (1,264,000)
Warrants outstanding at March 31, 2000 187,000
As further discussed in Note 9, "Contingent Agreements with Certain Companies",
a total of 13,000,000 shares of the Company's common stock under two stock
exchange agreements with a Cyprus corporation have been placed into escrow
pending the outcome of the technologies reaching "commercial viability" as
determined by an independent party. As of March 31, 2000, the shares were still
in escrow pending the outcome of this uncertainty.
Stock Options
(a) On January 5, 2000, the Company approved the 1998 Directors and Employees
Stock Option and Stock Award Plan, which authorized options to purchase 900,000
shares of common stock. The Company's shareholders previously approved the
granting of these options on June 5, 1999. During the three month period ended
March 31, 2000, options to purchase 400,000 shares were granted to directors,
options to purchase 250,000 shares were granted to employees, and options to
purchase 250,000 shares were granted to third parties as compensation for
services.
(b) On January 5, 2000 the Company also approved the 1999 Directors and
Employees Stock Option and Stock Award Plan which authorized options to
purchase 1,000,000 shares of common stock. The Company's shareholders
previously approved the granting of these options on June 30, 1999. During the
three month period ended March 31, 2000, options to purchase 160,000
common shares were granted to employees and options to purchase 210,000 were
granted to third parties as compensation for services.
(c) On January 5, 2000, the Company approved the 1999 Directors and Advisory
Board Members Stock Option Plan, pursuant to which the Company can grant options
to members of the Company's board of directors and advisory board to purchase up
to 1,100,000 shares of common stock. At such time, the Company also authorized
grants of 350,000 options to directors and 500,000 options to advisory board
members under this plan.
(d) On February 23, 2000, the Company granted stock options to purchase
100,000 shares of common stock at $2.25 per share to a third party as
consideration for the use of certain property. The options vested immediately
and expire February 22, 2003. The options granted were valued at their fair
value of $171,000.
Pursuant to notes a, b and c above during the three month period ended March 31,
2000, a total of 1,160,000 options to purchase common shares at $1.00 per share
were granted to various employees and directors under the plans described above.
These options expire January 2, 2010. The vesting period has not yet been
determined.
Further, the Company granted stock options to purchase 960,000 shares of common
stock at $1.00 per share to third parties as compensation for services. Of the
options granted, 460,000 options have been treated as being vested immediately.
This vesting may be amended on subsequent statements. The options expire January
2, 2010. 500,000 of the options vest according to a schedule over two
years and January 13, 2005. The options granted were valued at their fair value
of $381,400 on the grant date, which amount will be recognized by the Company as
the options vest. The fair value of the options was determined by using the
Black-Scholes option-pricing model with the following assumptions: dividend
yield of 0.0%, weighted average expected volatility of 169%, weighted average
risk-free interest rate of 5.6% and expected life of 1 year.
A summary of the status of the Company's stock options as of March 31, 2000 and
changes during the three month period then ended are presented below:
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March 31, 2000
Shares Weighted Average
Exercise Price
Outstanding at beginning of year - $ -
Granted 2,220,000 1.06
Outstanding at end of period 2,120,000 1.06
Options exercisable at
end of period 1,820,000 1.07
Weighted average fair value of
options granted during the
year $ 0.40
</TABLE>
The following table summarizes information about stock options outstanding at
March 31, 2000:
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Options Outstanding Options Exercisable
Weighted
Range of Number Outstanding Average Weighted Number Weighted
Exercise at 3.31.2000 Remaining Average Exercisable Average
Prices Contractual Life Exercise Price at 3.31.2000 Exercise Price
$1.00 -
$2.25 2,120,000 8.7 years $1.06 1,820,000 $1.07
</TABLE>
The Company measures compensation to employees under stock-based options and
plans using the intrinsic value method prescribed in Accounting Principles Board
Opinion 25, Accounting for Stock Issued to Employees, and related
interpretations. Compensation for options to outside directors is measured using
the fair value method set forth under Statement of Financial Accounting
Standards No. 123, Accounting for Stock-Based Compensation. There was no Stock-
based compensation charged to operations during the three months ended March 31,
2000 from options granted to employees and to outside directors, respectively.
Had compensation cost for the Company's options granted to employees been
determined based on the fair value at the grant dates consistent with the
alternative method set forth under Statement of Financial Accounting Standards
No. 123, net loss and loss per share would have increased to the pro forma
amounts indicated below:
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Cumulative from
Date of Inception through
For the three months ended March 31 March 31., 2000
2000 1999
Net loss:
As reported $ 923,620 790,544 $ 3,682,006
Pro forma 1,213,620 - 3,972,006
Basic and diluted loss per share:
As reported $ 0.07 0.07 $ 0.45
Pro forma 0.10 - 0.49
</TABLE>
NOTE 8-COMMITMENTS AND CONTINGENCIES
Litigation -
Bataa Oil, Inc.
During 1996, Stone Canyon purchased interests in certain leasehold properties.
Through December 31, 1997, Stone Canyon paid $458,080 for acquisition costs and
development costs associated with such interests. Such amount was paid to Bataa
Oil, Inc., by the founding shareholders of Stone Canyon and Stone Canyon paid
such amount to the founding shareholders. Bataa Oil, Inc. also served as
operator of each lease. Prior to the merger with the Company, Stone Canyon
issued a total of 1,700,000 shares of its common stock to certain founders of
Stone Canyon, including 411,842 shares to Bataa and its designees and 63,910
shares to Richard and Anita Knight, as part of the consideration for such
properties. Such shares were exchanged for an equal number of shares of the
Company as part of a share exchange agreement executed in November 1997 between
the Company, Stone Colorado and Stone Canada.
Stone Canyon and the Company contend that Bataa represented to Stone Canyon
and/or its affiliates that the price for these properties was set at the price
paid by Bataa for the same. Stone Canyon and the Company have since learned
that Bataa's costs for these properties were far less than the amount charged.
The Company has questioned the form of legal title taken for the properties as
well as adequate documentation and disclosure of all underlying obligations,
liabilities and arrangements relating to the properties between Bataa Oil, Inc.
and the vendors. The Company has also learned that some of these leases have
been forfeited due to a failure to meet a drilling obligation imposed by one
of the vendors. Stone Canyon was not appraised of such obligation prior to the
acquisition of its interest in the leases. The Company has been advised by
legal counsel that the issuance of the shares to Bataa Oil and its designees was
without the kind, amount or form of consideration as authorized by the Board of
Directors and could therefore be deemed to be an invalid issuance. In order to
protect the interests of all shareholders, the Company has placed a "stop
transfer" with the transfer company against the founders shares, including
411,842 shares of its common stock owned by Bataa Oil and its designees and
63,910 shares owned by Richard and Anita Knight.
As a result of this dispute, Bataa, Richard and Anita Knight and certain others,
filed a complaint in the District Court, County of Denver, in the State of
Colorado against the Company, its wholly-owned subsidiary, Stone Canyon and
Stone Canada, which was previously the Company's sole controlling shareholder.
The original complaint asserted only one claim (Breach of Fiduciary Duty and
mandatory injunction) against the Company to compel it to remove restrictive
legends from the plaintiffs shares of the Company's common stock. The
plaintiffs have amended their complaint twice, and as a result, have named
additional defendants to this lawsuit, including members of the Company's Board
of Directors, the Company's transfer agent (Holladay Stock Transfer Inc.),
founding shareholders of Stone Canyon and other individuals. The plaintiffs
second complaint also includes causes of action for conversion, civil
conspiracy and unjust enrichment. The Company's Answer and Counterclaims denied
all material allegations, asserted numerous affirmative defenses and asserted
counterclaims against Plaintiffs Bataa Oil, David Calvin and/or Richard and
Anita Knight for an accounting, fraud, intentional misrepresentation, breach of
fiduciary duty, damages and punitive damages.
The Company disputes the allegations made by the plaintiffs, claims they are
untrue and is vigorously defending this lawsuit.
On January 27, 2000, the Company and Texas T Resources, Inc., a Canadian
corporation, filed an action in Boulder County District Court, Colorado, (Case
No. 2000 CV 131) against Bataa Oil, its owner Mr. David Calvin and other
individuals, asserting claims for defamation (Libel or Slander Per Se and Libel
or Slander Per Quod), civil conspiracy, international interference with
prospective business or economic advantage, injunction and punitive damages.
With regards to the Company, these claims are based on events that occurred
primarily in December 1999, in which the named Defendants, acting on their own
behalf or on behalf of Bataa Oil, Inc., made several false and defamatory
statements concerning the Company and/or individuals identified by them as
"principals" of Synergy to market analysts, government agencies, elected
officials and private entities such as the NASD. The Company believes the
purpose of these statements were in general to interfere with and damage the
business of the Company and in particular to convince at least one market
analyst to reverse his "buy" recommendation to a "sell" recommendation on
Synergy stock.
The Company sought and received a Temporary Restraining Order against Defendant
David J. Calvin and Defendant Bataa Oil, Inc., as well as, by applicable rule,
anyone acting on behalf of Bataa Oil, Inc. to stop any further publication of
such false and defamatory statements. By stipulation between the parties and
subsequent Order of the Court, such Temporary Restraining Order became a
Preliminary Injunction which will remain in effect until the trial in this
matter.
Licensing and Consulting Agreements - Effective September 30, 1998, Synergy
Technologies entered into an agreement with 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.
NOTE 9- CONTINGENT AGREEMENTS WITH CERTAIN COMPANIES
The Company has entered into certain agreements which are contingent upon
certain technology reaching commercial viability. The financial accounting
effect of these agreements have not been recorded pending the outcome of the
contingency. A summary of the agreements with the various companies follows:
Carbon Resources Limited - Carbon Resources Limited ("Carbon") is a private
Cyprus corporation, a wholly owned subsidiary of Synergy Technologies, and the
100% shareholder of Lanisco Holdings Limited (a private Cyprus corporation),
which holds the rights to acquire the CPJ Process, a proprietary and patented
technology for the upgrading of heavy crudes to conventional light oils.
On May 1, 1998 Carbon and Laxarco Holdings Ltd. ("Laxarco") (the sole
shareholder of Carbon) entered into agreements granting Carbon the rights to
acquire the patented SYNGEN technology contingent upon Carbon fulfilling certain
terms and conditions outlined in a technology transfer agreement. On May 5,
1998, Carbon and Laxarco entered into a share exchange agreement with Synergy
Technologies Corporation and Stone Canyon Resources Ltd., (its then major
shareholder), granting Synergy Technologies the rights to acquire 75% of the
issued shares of Carbon (and thereby a 75% interest in the SYNGEN technology).
Under the exchange agreement, Synergy would exchange 10,000,000 shares of common
stock for 75% of the shares of Carbon. The share exchange was contingent upon
Synergy Technologies assuming the terms and conditions agreed to by Carbon in
the original technology transfer agreement. 3,750 common shares of Carbon (75%
of the issued shares) and 10,000,000 shares of Synergy Technologies Corporation
were placed in escrow subject to the terms of the agreement.
On January 6, 1999, Carbon acquired all issued and outstanding shares of
Lanisco Holdings Limited, making Lanisco a wholly owned subsidiary, which held
the rights to a second patent pending technology, the CPJ process, subject to
funding commitments.
On January 8, 1999, Synergy Technologies reached a verbal agreement with Texas T
Petroleum Ltd., a Colorado oil and gas corporation, ("Texas T Petroleum"),
whereby Texas T Petroleum received an option to negotiate the acquisition of up
to 50% of the shares of Carbon in exchange for the payment of $100,000 cash and
the expenditure of an additional $100,000 towards development of the CPJ
technology. Synergy advanced $100,000 of such funds to Lanisco for the purchase
of 1,000,000 Units of Texas T Petroleum. Each Unit is comprised of one (1)
share of common stock and one stock warrant to acquire an additional share for
a period of three years from the date of issue at $1.00 per share.
Effective June 25, 1999, Carbon, Laxarco Holding and Synergy Technologies agreed
to amend the original share exchange agreement and Synergy Technologies was
granted the right to acquire the remaining 25% of the shares of Carbon. Under
the exchange agreement, Synergy would exchange 3,000,000 shares of common stock
for the remaining 1,250 shares of Carbon. The 3,000,000 shares of the Company
and 1,250 shares of Carbon were placed with the escrow agent.
To facilitate an agreement with respect to the CPJ process, Carbon, Laxarco
Holding and Synergy Technologies agreed to amend the original share exchange
agreements to transfer the SYNGEN technology from Carbon to a newly incorporated
subsidiary of Synergy Technologies. Effective June 25, 1999 Synergy Technologies
incorporated Syngen Technologies Limited and the SYNGEN technology was
transferred from Carbon to Syngen. The shares of Syngen, the newly incorporated
subsidiary, were placed in escrow subject to the terms of the original
technology transfer agreement executed between Carbon and Laxarco. The shares
of Carbon were released from escrow and Carbon became a wholly-owned subsidiary
of Synergy Technologies. The CPJ technology is held in escrow subject to funding
and development commitments by Lanisco.
On June 26, 1999, Synergy Technologies executed a share exchange agreement with
Texas T Petroleum whereby Texas T Petroleum will acquire fifty percent (50%) of
the issued and organized shares of Carbon in exchange for the issuance of
2,000,000 Units of Texas T Petroleum, each Unit consisting of one share of
common stock and one stock warrant entitling the holder to purchase one (1)
additional share of Texas T Petroleum at $1.00 per share within two years of
June 26, 1999, and the payment of $900,000 by Texas T for the development of
the CPJ technology. The 2,000,000 Units of Texas T Petroleum and 5,000 shares
of Carbon are reserved for issue upon fulfillment by Texas T Petroleum of the
terms of the agreement.
During the course of fiscal 1999, Carbon has continued to develop the CPJ
technology held by its wholly owned subsidiary, Lanisco Holdings Limited,
under the financial support of Texas T Petroleum Ltd. Carbon intends to carry-on
with development of the CPJ Process in co-operation with Lanisco Holdings and
Texas T Petroleum during fiscal 2000.
Syngen Technologies Limited- Syngen Technologies Limited ("Syngen") incorporated
June 25, 1999 is a private Cyprus corporation and a 100% owned subsidiary of
Synergy Technologies Corporation contingent upon the terms of two share exchange
agreements dated May 5, 1998 and June 25, 1999, respectively.
Syngen holds the rights to a proprietary and patented technology called "SYNGEN"
which converts natural gas to synthesis gas. (See Carbon Resources Limited
above, paragraph 6.) The shares of Syngen remain in trust with an escrow agent
until the fulfillment of the terms and conditions of the agreements. Should
Synergy Technologies fail to fulfill the terms and conditions of the agreements,
the shares of Syngen (and therefore the SYNGEN technology), would revert to the
original holders and the shares of Synergy Technologies Corporation in trust
with the escrow agent would be returned to treasury.
Lanisco Holdings Limited and Texas T Petroleum, Ltd. - Lanisco Holdings Limited
("Lanisco"), is a private Cyprus Corporation and a 100% owned subsidiary of
Carbon Resources Limited (a private Cyprus corporation). Lanisco holds the
rights to acquire proprietary and patented technology called "CPJ" which
converts so called heavy oils into lighter oils.
Lanisco entered into agreements January 6, 1999 whereby it was granted the
rights to acquire the CPJ technology from the Inventor, in return for expending
$1,000,000 to commercialize the technology, and payment of a royalty of 65% of
the net proceeds received from any license fees, royalties or any such other
revenues earned until payment of a total of $1,000,000 to the Inventor, at
which time the royalty would revert to 35% of any net proceeds received from any
revenue generated by the technology. (Net proceeds to be defined as gross
revenues less reasonable operating expenses including R&D expenses).
Two further agreements entered into in January 1999 and June 1999, between
Synergy Technologies (the 100% shareholder of Carbon Resources Limited) and
Texas T Petroleum granted Texas T Petroleum the right to acquire 50% of the
shares of Carbon (and thereby acquire a 50% interest in the CPJ technology).
Please refer to Carbon Resources Limited above, paragraphs 4 and 7 for a
detailed explanation of these agreements.
At December 31, 1999, Lanisco, Carbon and Texas T Petroleum worked in
co-operation to re-construct the 1/2 bbl/day pilot CPJ unit at laboratory
facilities in Calgary, Alberta to permit testing of various heavy crude samples
for potential licensees.
In addition, Lanisco, Carbon Resources and Texas T Petroleum have commissioned
and received a detailed cost estimate for the construction of a 100 bbl/day
pilot unit expected to commence construction in the Province of Alberta in
fiscal year 2000.
Lanisco intends to generate annual revenues through the licensing of the CPJ
technology to a variety of international corporations and host countries, and by
the generation of royalty revenues from operational CPJ facilities.
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND CHANGES IN FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Statements included in Management's Discussion and Analysis of Financial
Conditions and Results of Operations which are not historical in nature are
intended to be, and are hereby identified as, "forward looking statements" for
purposes of the "Safe Harbor" Statement under the Private Securities Litigation
Reform Act of 1995. The Company cautions readers that forward looking
statements are subject to certain risks and uncertainties that could cause
actual results to differ materially from those indicated in the forward looking
statements.
In connection with the Company's audit of its financial statements for the
period ended December 31, 1999, the Company's financial statements for the
periods ended prior to 1999 were restated to exclude certain contracts for the
acquisition of two proprietary and patented technologies due to the fact that
the issuance of shares in connection with such acquisitions are contingent upon
third parties verification that the Company's technologies have reached specific
levels of commercial viability. As a result, previously recorded assets and
liabilities associated with the technologies have also been excluded from the
financial statements. See Note 9 to the Unaudited Financial Statements included
herewith for a discussion of these contingent agreements.
The Company's business is the development of technologies related to the oil
and gas industry. Capital from equity issues or borrowings or partnering with
industry is necessary to fund the Company=s future technology and operations
development. Therefore the financial statements included in this report for the
periods ended March 31, 2000 and 1999 are not necessarily indicative of the
Company's future operations.
Plan of Operation
The Company, as of March 31, 2000, had limited cash resources. The Company
needs to raise additional funds to meet its cash requirements for the next
twelve (12) months. The Company intends to raise such funds from the sale of
equity securities through private placements, borrowings, government grants and
partnering with industry in the development of its technologies.
The Company has advanced funds during the last fiscal quarter to its
subsidiaries, Carbon Resources Limited., Lanisco Holdings Limited, and Syngen
Technologies Limited, to fund research and development on its patented and
proprietary heavy oil upgrading technology known as the "CPJ Technology" and its
patented and proprietary gas-to-liquids technology referred to as the "SYNGEN
Technology". SynGen Technologies Limited will become a wholly-owned subsidiary
of the Company upon the SYNGEN Technology becoming commercially viable. The
amounts advanced were for (a) the design, development and marketing of a 2
barrel per day CPJ unit in Calgary, Alberta to test client oils; and (b) the
design, development and marketing of a 4 barrel per day demonstration facility
in the Province of Alberta utilizing the SYNGEN Technology. See below "-Results
of Operation".
The Company has completed installation of its 2 barrel per day CPJ Technology
test unit in its laboratory in Calgary. In April 2000, it commenced testing
heavy oil samples in the CPJ Technology test unit and will move to testing
client samples after completing its own internal testing to optimize operating
conditions. The Company expects that $500,000 will be expended during the next
twelve (12) months towards the operation and testing of the 2 barrel per day CPJ
demonstration unit. The Company also expects to receive one-half of such amount
from its CPJ Technology joint venture partner.
During the fiscal year 2000, the Company intends to begin the detailed
engineering and construction of a 100 barrel per day heavy oil pilot plant. The
total cost of this pilot plant is approximated at $5 million. The Company and
its joint venture partner will look to potential users of the technology and
government grants and/or loans to assist in funding the costs of construction of
this pilot plant.
The Company has completed the construction of its 4 barrel per day SYNGEN
demonstration plant and expects to complete installation by June 1, 2000. The
Company will then conduct various tests of the demonstration plant for
approximately one (1) month. The Company is also building a Fischer-Tropsch
system, which will be installed next to the SYNGEN demonstration plant to create
a gas-to-liquids system. The Company and its partners expect to expend $1.9
million on the construction of the Fischer-Tropsch system and operation of the
completed 4 barrel per day gas-to-liquids demonstration plant during the next
twelve (12) months.
During the next twelve (12) months, the Company expects to complete the
detailed engineering and commence construction of a 500 barrel per day SYNGEN
reactor at the estimated cost of $1.5 million, to be placed at a site to be
determined.
The Company expects that the total number of people employed by the
Company and its subsidiaries will increase as the above-described pilot plants
and demonstration units are completed and are in operation.
Liquidity
Cash flows from continued operations during the period ended March 31, 2000
and 1999 reflect new cash used of $(841,684) and $(140,971) respectively, while
cash flows provided by investing activities for the same periods were $(2,849)
and $(275,011) and cash flows used by financing activities were $1,005,120
and $437,143, respectively.
At March 31, 2000 and 1999, the Company had working capital deficit of $600,690
and $(510,200), respectively. If the Company generates an operating loss for
the year 2000 comparable to the loss incurred for 1999, its working capital
could be negatively impacted. However, the Company anticipates funding from
potential users of the technology, in conjunction with its financings, will
generate sufficient capital to meet operating expenses. If the Company's
operating expenses for fiscal year 2000 are significantly greater than that of
fiscal year 1999, and the Company is unable to complete further financings or to
find partners for its technologies, then the Company will not have sufficient
funds to meet its cash and operating expense requirements.
Assets
As at March 31, 2000 the Company had total assets of $796,178 compared to
total assets of $504,433 at March 31, 1999. This represents an increase of
$291,745, which is attributable both to an increase in cash and an increase
in related and unrelated accounts receivable. Total assets as at March 31,
2000 consist of $161,412 cash, related party receivables of $432,330, other
receivables of $71,755, prepaid expenses of $25,987, investments totalling
$100,000 and office equipment of $4,694.
Results of Operations
As of the date of this filing the Company has limited sources of income. During
the quarter ended March 31, 2000, the Company relied primarily upon the sale of
stock to pay its operating expenses. See "Part II, Item 2. Changes in
Securities" below. The Company also relied upon funds from its technology
funding partners to pay for most of the research and development costs incurred
during this quarter. See the last paragraph of this Section below. Management
expects to earn some income from testing of heavy oil samples for clients,
however these fees will be minimal as compared to the funds which will be
required for the ongoing development of the Company's technologies.
The Company has a joint venture partner for the CPJ Technology who is obligated
to fund $1,000,000 towards the development of the Technology to earn its fifty
percent 50% interest therein. This funding commitment has been met to date
with $276,173 remaining to fulfill the obligation. The joint venture partner is
committed to funding fifty percent (50%) of the ongoing development costs of the
CPJ Technology after earning its fifty percent (50%) interest. The Company must
be able to raise additional funds for development of both technologies by way of
borrowings, equity financings, licensing agreements or joint ventures to
continue to fund the development of its' technologies.
The Company's net operating loss for the first quarter of the year 2000
increased by 16.8% due to an increase in the Company's general and
administrative expenses associated with increased personnel and research and
development activities by its subsidiaries. The Company had dry-well expenses
in the first quarter of 1999 of $551,095 with no such expenses in the first
quarter of this fiscal year. However, the Company did incur in the first
quarter of this fiscal year a one-time accounting charge of $435,438 associated
with the granting of stock options to members of its advisory board and non-
employees. See Note 7 to the Unaudited Financial Statements included herewith.
The Company's net loss from continuing operations during this quarter was
$923,620, compared to a loss of $790,544 for the same quarter in the preceding
year.
The Company's operating expenses (other than the one-time accounting charge)
were comprised primarily of general and administrative expenses of $309,847 and
technology development of $178,335. While the Company's total expenses for the
first quarter of year 2000 increase by only 3.7% from the same quarter last
year, general and administrative expenses for the same periods increased by 82%.
The Company's present business does not generate sufficient revenues to cover
its operating expenses. The Company may not be able to continue unless it can
raise additional funds or source industry partners.
As of March 31, 2000, a total of $3,281,102 has been expended in the
development of the Company=s two proprietary and patented technologies by the
Company, its subsidiaries and its joint venture partners. Of the total amount
expended, Texas T Petroleum Ltd., the Company's joint venture partner in the CPJ
technology has advanced $723,827 and $2,258,601.91 has been advanced by Stone
Canyon Resources Ltd., a related corporation, for the SYNGEN technology, which
amount includes a loan in the amount of $388,870 from the Company.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Boulder County Litigation
On January 27, 2000, the Company and Texas T Resources, Inc., a Canadian
corporation, filed an action in Boulder County District Court, Colorado, (Case
No. 2000 CV 131) against Bataa Oil, its owner Mr. David Calvin and other
individuals, asserting claims for defamation (Libel or Slander Per Se and Libel
or Slander Per Quod), civil conspiracy, international interference with
prospective business or economic advantage, injunction and punitive damages.
With regards to the Company, these claims are based on events that occurred
primarily in December 1999, in which the named Defendants, acting on their own
behalf or on behalf or Bataa Oil, Inc., made several false and defamatory
statements concerning the Company and/or individuals identified by them as
"principals" of Synergy to market analysts, government agencies, elected
officials and private entities such as the NASD. The purpose of these
statements were in general to interfere with and damage the business of the
Company and in particular to convince at least one market analyst to reverse
his "buy" recommendation to a "sell" recommendation on Synergy stock.
The Company sought and received a Temporary Restraining Order against
Defendant David J. Calvin and Defendant Bataa oil, Inc., as well as, by
applicable rule, anyone acting on behalf of Bataa Oil, Inc. to stop any further
publication of such false and defamatory statements. By stipulation between the
parties and subsequent Order of the Court, that Temporary Restraining Order
became a Preliminary Injunction which will remain in effect until the trial
in this matter.
The Company intends to vigorously pursue this litigation. No trial date has
been set for this matter.
ITEM 2. CHANGES IN SECURITIES
In January 2000, the Company sold 10,000 units in an offering conducted
pursuant to Regulation S, promulgated by the SEC under the 1933 Act ("Regulation
S"), which commenced in December 1999. Each unit consisted of one share of
common stock and a warrant to purchase another share of common stock for $1.00
per share. The Company received proceeds of $5,000 from this offering. No
commission fees or other selling expenses were paid.
On January 19, 2000, the Company commenced a private placement of shares of its
common stock pursuant to Regulation S. Subsequent to the period ended March 31,
2000, the Company accepted subscriptions to this offering for the sale of
100,000 shares at $1.00 US per share. No commission fees or other selling
expenses were paid.
On January 19, 2000, the Company commenced a private placement of its Units
pursuant to Regulation S. Each Unit consisted of one (1) share of common stock
and one (1) warrant to purchase an additional share of common stock for $3.50
per share, exercisable any time prior to one (1) year from effective date of
the subscription. The Company realized proceeds from this offering of $100,000
on the sale of 100,000 Units at $1.00 US per Unit. No commission fees or other
selling expenses were paid. The Company expects to close this offering during
the second fiscal quarter of 2000.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable
ITEM 5. OTHER INFORMATION
On March 28, 2000, the Company extended an employment offer to its
president, Mr. Cameron Haworth. Such offer includes annual salary of $140,000
CDN ($95,367.85 US based on an average exchange rate of $1.468 CDN to $1.00
US as of March 20, 2000.)
Mr. Haworth, who had previously devoted time to the Company on a part-time
basis, is now a full-time employee of the Company.
In January 2000, the Company moved into its new headquarters at 335 25th
Street, S.E., Calgary, Canada T2A 7H8. The Company subleases office space and
laboratory space at this location from Capital Reserve Canada Limited, an
Alberta corporation, at the rate of $12,500.00 per month. The Company
subleases 4,345 square feet of office space and 3,950 square feet of laboratory
space. These facilities, in addition to providing office space for its officers
and staff, also provides needed laboratory space for the Company=s research and
development activities on its technologies. No written lease agreement has been
entered into as of the date of the filing of this report.
On February 23, 2000, the Company entered into an agreement with Beau
Canada Exploration Ltd. for placement of the Company's 4 barrel-per-day pilot
plant at Beau Canada's gas plant in Bantry, Alberta, Canada. In exchange for
Beau Canada's agreement to allow the Company to install and operate the pilot
plant at this site, the Company has granted to Beau Canada the option to
purchase up to 100,000 shares of the Company's common stock at the price of
$2.25 per share.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
a) EXHIBIT INDEX
<TABLE>
<S> <C> <C>
Index
Number Description Reference
2.1 Articles of Incorporation filed with the Secretary of
State February 10, 1997. *
2.2 Articles of Exchange by and between Automated
Transfer Systems, Inc. and Stone Canyon Resources, Inc. filed
with the Secretary of State November 24, 1997 *
2.3 Amendment to the Articles of Incorporation filed
with the Secretary of State March 2, 1999. *
3.1 Specimen Certificate of Common Stock par value $0.002
per share *
6.1 Assignment of Technology Agreement by and between Laxarco
Holding Limited and Carbon Resources Limited dated May 1, 1998 *
6.2 Share Exchange Agreement by and among Laxarco Holding Limited,
Carbon Resources Limited, the Company and Stone Canyon Resources,
Ltd. dated May 5, 1998 *
6.3 Escrow Agreement by and between the Company and Laxarco
Holding Limited dated May 16, 1998 *
6.4 Agreement for Investor Relations Services and Compensation
by and between Lance W. Bauerlein and the Company dated August
20, 1998. *
6.5 Assignment of Technology by and between Pierre Jorgensen
and Lanasco Holdings, a subsidiary of the Company, dated January
6, 1999. *
6.6 Agreement by and between the Company and Eisenberg
Communications effective February 16, 1999. *
6.7 Agreement of Purchase and Sale by and between Revival
Resources Ltd., Stone Canyon Resources, Inc. and the Company
dated March 22, 1999. *
6.8 Option letter agreement between Laxarco Holding Ltd.,
Texas T Petroleum and the Company dated June 25, 1999. *
6.9 Amendment No. 1 to the Assignment of Technology agreement
by and between Laxarco Holding Limited and Carbon Resources Limited
dated June 25, 1999. *
6.10 Amendment No. 1 to the Share Exchange Agreement by and
between Laxarco Limited, Carbon Resources Limited, the Company
and Stone Canyon Resources Ltd. dated June 25, 1999. *
6.11 Amended and Restated Escrow Agreement by and among the
Company and Laxarco Holding Limited dated June 25, 1999. *
6.12 Share Exchange Agreement by and between Laxarco Holding
Limited, Carbon Resources Limited and the Company
dated June 25, 1999. *
6.13 Share Exchange Agreement between Texas T Petroleum Ltd
and the Company dated June 25, 1999. *
7.1 French Patent Application No. 97-10989: A CZERNICHOWSKI,
P. CZERNICHOWSKI "Assistance Electrique D'Oxydation Partelle
d'Hydrocarbures Legers Par L'Oxygene". Filing
Date: 01.09.97 ; accepted on October 20, 1997. *
7.2 Notice of Recordation of Assignment Document,
United States Patent and Trademark Office, serial
number 09144318, recordation dated 08/31/1998,
with Assignement of Assinor's Interest, assigning to
Laxarco Holding Limited all rights in French Patent
Application No. 97-10989. *
7.3 French Patent Application No. 97-00364: A
CZERNICHOWSKI, P. CZERNICHOWSKI, "Conversion D'Hydrocarbures
Assistee par Les Arcs Electrirques Gissants En Presence
De La Vapeur D'Eau Et/ou De Gaz Carbonique". Filing Date:
13.01.97; this patent will be issued effective May 5, 2000. *
7.4 Notice of Recordation of Assignment Document,
United States Patent and Trademark Office, serial
number 09005647, recordation dated10/19/1998,
with Assignement of Assignor's Interest, assigning to
Laxarco Holding Limited all rights in French Patent
Application No. 97-00364. *
7.5 French Patent Application No. 981283: P
JORGENSEN, "Conversion profonde jumelant la
demetallisation et la conversion de bruts, residus ou
huiles lourdes en liquides legers, a l'aide de composes
oxygens purs ou impurs (H20, CO2, CO accompangnes de H2, N2
SH2 etc)". Filing date 16.10.98. *
7.6 USA and PCT Patent Applications Nos. US5371-
00100 and PCT/US98/00393: A CZERNICHOWSKI, P. CZERNICHOWSKI,
"Conversion of hydrocarbons assisted by gliding
electric arcs in the presence of water vapor and/or
carbon dioxide". Filing date: 12.01.98. This patent
was issued on November 30, 1999. **
7.7 USA and PCT Patent Applications Nos US5407-00500 and
PCT/US98M8027: A CZERNICHOWSKI, P. CZERNICHOWSKI,
"Electrically assisted partial oxidation of light
hydrocarbons by oxygen". Filing Date: 23.08.98.
This patent was issued on December 28, 1999. **
27 Financial Data Schedule Filed herewith
</TABLE>
*These documents are incorporated by reference to the Company's Registration
Statements on Form 10-SB filed on July 15, 1999.
**These documents are incorporated by reference to the Company's Annual Report
on Form 10-KSB/A (Amendment No. 1), for the period ending December 31, 1999.
(b) REPORTS ON FORM 8-K:
The Company reported on a Form 8-K, dated February 28, 2000, the change of the
Company's principal accountants from Sarna & Co. to Hansen Barnett & Maxwell.
Such Form 8-K was amended on April 13, 2000, to include, as an exhibit thereto,
a copy of a letter from Sarna & Co. confirming that it agrees with the
statements made by the Company in its original Form 8-K.
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.
SYNERGY TECHNOLOGIES CORPORATION
(Registrant)
Date: May 19, 2000
By:/s/ Cameron Haworth
Tile: President
By:/s/ Jacqueline Danforth
Title: Secretary
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS FINANCIAL DATA SCHEDULE INCLUDES DATA FROM THE ACCOMPANYING UNAUDITED
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 161,142
<SECURITIES> 0
<RECEIVABLES> 504,085
<ALLOWANCES> 0
<INVENTORY> 0
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0
0
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</TABLE>
