<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of The Securities Exchange
Act of 1934
For the quarterly period ended June 30, 1998
[ ] Transition Report Under Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the transition period from _____ to _____
Commission File Number 0-25136
KINETIC VENTURES, LTD
(Name of Small Business Issuer as specified in its charter)
DELAWARE 33-0464753
- -------------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1095 Pender Street, Suite 850, Vancouver, British Columbia V6E 2M6
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number, (604) 689-1428
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Check whether the issuer (1) has filed all reports required by Section 13
or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 [ ]
There were 39,933,733 shares of the issuer's Common Stock outstanding as of
July 27, 1998.
This Form 10-QSB consists of 10 pages and no exhibits.
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KINETIC VENTURES LTD.
NOTES TO FINANCIAL STATEMENTS
For the Period Ending June 30, 1998
(Unaudited)
1. Summary of Significant Accounting Policies:
BASIS OF PRESENTATION:
Although unaudited, the interim financial statements in this report reflect
all adjustments, consisting of normal recurring accruals, which are, in the
opinion of management, necessary for a fair statement of financial
position, results of operations and cash flows for the interim periods
covered and of the financial condition of the Company at the interim
balance sheet dates. The results of operations for the interim periods
presented are not necessarily indicative of the results expected for the
entire year.
The year-end balance sheet information was derived from audited financial
statements, but does not include all disclosures required by generally
accepted accounting principles. These financial statements should be read
in conjunction with the Company's audited financial statements and notes
thereto included in the Company's Annual Report on Form 10-KSB for the year
ended December 31, 1997.
The Company has experienced recurring losses from operations and has an
accumulated deficit of $15,953,216 at June 30, 1998. These matters raise
substantial doubt about the Company's ability to continue as a going
concern.
PROPOSED BUSINESS PLANS:
As of June 30, 1998, the Company has no active business operations.
Management intends to attempt to seek to have the Company enter into
further business operations. Management is currently reviewing various
alternatives relating to further business activities for the Company, but
no specific business activities have been identified and no agreements or
agreements in principle have been entered into whereby the Company will
again be engaged in any business activities. In addition, management has
made no decision as to any specific industries or geographical areas where
any such future business activities may be undertaken. Although management
believes that its future business activities will be the result of the
acquisition of an existing business, there can be no assurance with respect
thereto and the Company may become engaged in such activities through other
means. Management may seek to raise additional capital to enable it to
become engaged in further business activities to finance an acquisition of
an existing business or it may effectuate the acquisition through a merger,
consolidation or other issuance of shares of the Company's common stock.
<PAGE>
KINETIC VENTURES LTD.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
For the Period Ending June 30, 1998
(Unaudited)
There can be no assurance that the Company will be successful in effecting
the acquisition of any further business operations. In addition, there can
be no assurance that the terms of such acquisition may not be dilutive to
the Company's existing stockholders or that such terms will be advantageous
to the Company. There can be no assurance that the Company will be
successful in its attempts to enter into any further business activities.
Until such time as the Company is successful in entering into further
business activities, it should be expected that the Company will not
realize any material revenues.
2. Note Payable:
Note payable consists of the following:
<TABLE>
<CAPTION>
(Unaudited)
June 30, December 31,
1998 1997
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<S> <C> <C>
Note payable due on demand, and
non-interest bearing $0 $139,000
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</TABLE>
3. Income Taxes:
At December 31, 1997, the Company had net operating loss carryforwards for
federal and state purposes of approximately $15,300,000 and $6,130,000
respectively. In addition, the Company had research and experimentation
credit carryforwards for federal and state purposes of approximately
$323,000 and $139,000, respectively. The federal credit carryforward
expires beginning in 2006. The utilitzation of net operating losses and
credit carryforwards may be limited under the provisions of Internal
Revenue Code Section 382 when a change of ownership occurs.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
On March 20, 1997 the Company completed the sale, pursuant to a Stock
Purchase and Option Agreement dated July 17, 1995, of substantially all
its assets to Ballard Medical Products ("Ballard"). Reference should be
made to the Company's Annual Report on Form 10-KSB for the year ended
December 31, 1997 for a description of the transaction and the Company's
future business plans. As a result of the disposition of the Company's
assets, and until such time, if ever, that the Company enters into
further business operations, the Company will not realize any sales and
does not expect to incur any related expenses.
The following discussion should be read in conjunction with the
Financial Statements and Notes thereto appearing elsewhere in this
Quarterly Report on Form 10-QSB. In addition the Company desires to
take advantage of certain provisions of the Private Securities
Litigation Reform Act of 1995 that provide a "safe harbor" for forward
looking statements made by or on behalf of the Company. Except for the
historical information contained herein, the matters discussed herein
are forward looking statements, the accuracy of which is necessarily
subject to risks and uncertainties. Specifically, the Company wishes to
alert readers that the information set forth in "Item 1. Description of
Business -Proposed Business Plans," and the Company's intentions and
efforts to enter into further business activities contained herein and
in the Company's Annual Report on Form 10-KSB for the year ended
December 31, 1997 are forward looking statements. Various factors,
including the inability of management to identify, locate and acquire in
a timely manner future business activities, among other matters
discussed in this Report, may adversely affect the Company's ability to
remain in existence. Failure to locate further business activities
could lead to the dissolution of the Company.
Until the Company is successful in entering into further business
activities, it can be expected that its revenues will be nominal.
<PAGE>
NET SALES
Net Sales decreased to $Nil for the three months and the six months ended
June 30, 1998 as compared to $Nil for the three months and $345,450 for the
six months ended June 30, 1997, a year to date decrease of 100%. The sale
of the Company's assets which was completed on March 20, 1997 resulted in
there being no sales activity in the current year.
GROSS PROFIT
Gross Profit decreased to $Nil for the three months and the six months
ended June 30, 1998 as compared to $Nil for the three months and $91,477
for the six months ended June 30, 1997 a year to date decrease of 100%.
The sale of the Company's assets which was completed on March 20, 1997
resulted in there being no sales activity in the current year.
RESEARCH AND DEVELOPMENT
Research and Development expenses represent the Company's investment in the
advancement of less invasive technology in the fields of neuro and vascular
surgery. These expenses decreased to $Nil for the three months and the six
months ended June 30, 1998 as compared to $Nil for the three months and
$110,919 for the six months ended June 30, 1997, a year to date decrease of
100%. This decrease was due to a decrease in personnel and related benefit
costs and a reduced spending in expenses related to the Company's vascular
products including clinical and regulatory submissions. No such expenses
were incurred subsequent to March 20, 1997.
SALES AND MARKETING EXPENSES
Sales and Marketing expenses were $Nil for the three months and the six
months ended June 30, 1998 as compared to $Nil for the three months and
$315,137 for the six months ended June 30, 1997, a year to date decrease of
100%. This decrease was the result of the discontinuance of these
activities after the sale of the Company's assets in March, 1997.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses were $14,519 for the three months and
$21,565 for the six months ended June 30, 1998 as compared to $31,563 for
the three months and $241,090 for the six months ended June 30, 1997, a
decrease of 54% and 91% respectively. The decrease for the three months
and year to date was due to the sale of the Company's business on March 20,
1997.
<PAGE>
NET INCOME (LOSS)
Net loss was $15,426 for the three months and $22,472 for the six months
ended June 30, 1998. Net loss was $35,055 for the three months and net
income was $1,190,584 for the six months ended June 30, 1997, a decrease of
$19,629 and $1,213,056 respectively. The prior year income is primarily
attributable to the gain on sale of the Company's assets.
LIQUIDITY AND CAPITAL RESOURCES
Working capital was a deficit of $18,209 at June 30, 1998 as compared to
working capital deficiency of $163,755 at June 30, 1997 or an decrease of
$145,546. The Company's cash resources at June 30, 1998 were minimal.
The Company had, at June 30, 1998, no commitments for any other credit
facilities such as revolving loans or lines of credit that could provide
additional working capital.
<PAGE>
PART II - OTHER INFORMATION
ITEMS 1,2,3,4, AND 5 ARE NOT APPLICABLE AND HAVE BEEN OMITTED.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) No exhibits have been filed with this Report.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
KINETIC VENTURES LTD.
DATED: JULY 27, 1998 BY: /S/ BRIAN BAYLEY
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BRIAN BAYLEY, PRESIDENT
(PRINCIPAL EXECUTIVE OFFICER)
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
KINETIC VENTURES LTD.
Balance Sheets
<TABLE>
<CAPTION>
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June 30, December 31,
1998 1997
- --------------------------------------------------------------------------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash $ 838 179,228
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Total Assets $ 838 179,228
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- --------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 19,047 13,412
Note payable - 139,000
Income tax payable - 22,553
- --------------------------------------------------------------------------------
19,047 174,965
Shareholders' deficit:
Common stock, $0.001 par value, 39,934 39,934
40,000,000 shares authorized;39,933,733 shares
outstanding
Additional paid in capital 15,895,073 15,895,073
Accumulated deficit (15,953,216) (15,930,744)
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(18,209) 4,263
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$ 838 179,228
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</TABLE>
The accompanying notes are in integral part of the financial statements.
<PAGE>
KINETIC VENTURES LTD.
Statements of Income (Loss)
For the six months and three months ended June 30, 1998 and 1997
(Unaudited)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Three months ended Six months ended
June 30 June 30
1998 1997 1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sales $ - - - 345,450
Cost of goods sold - - - 253,974
- --------------------------------------------------------------------------------
- - - 91,476
- --------------------------------------------------------------------------------
Operating expenses:
Research and development - - - 110,919
Sales and marketing - - - 315,137
General and administrative 14,519 31,563 21,565 241,090
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14,519 31,563 21,565 667,146
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Other income (expense):
Interest expense, net - (3,492) - (72,105)
Gain on sale of assets - - - 1,828,338
Other - - - 13,021
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- (3,492) - 1,769,254
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Net income (loss) before
provision for
income taxes (14,519) (35,055) (21,565) 1,193,584
Provision for state income
taxes (907) - (907) (3,000)
- --------------------------------------------------------------------------------
Net income (loss) $ (15,426) (35,055) (22,472) 1,190,584
- --------------------------------------------------------------------------------
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Net income (loss) per common
share $ - - - 0.12
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Weighted average number of
common shares outstanding 39,933,733 9,933,733 39,933,733 9,933,733
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- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are in integral part of the financial statements.
<PAGE>
KINETIC VENTURES LTD.
Statements of Cash Flows
For the six months ended June 30, 1998 and 1997
(UNAUDITED)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) for the period $ (22,472) 1,190,584
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Adjustments to reconcile net income (loss) to net
cash used by operating activities:
Net effect from sale of assets to Ballard - (1,828,338)
Depreciation and amortization - 25,283
Decrease in accounts receivable - 182,982
Decrease in inventory - 59,074
Decrease in prepaid expenses - 11,695
Increase in accounts payable and accrued
liabilities 5,635 78,195
Decrease in note payable (139,000) -
Decrease in income tax payable (22,553) -
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(155,918) (1,471,109)
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Net cash used by operating activities (178,390) (280,525)
Cash provided by financing activities:
Net proceeds from notes payable - 180,000
Payments & current maturities of capital lease - (321)
obligations
Redemption of preferred stock - (2,281)
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- 177,398
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Decrease in cash (178,390) (103,127)
Cash, beginning of period 179,228 105,204
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Cash, end of period $ 838 2,077
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</TABLE>
The accompanying notes are in integral part of the financial statements.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AND STATEMENT OF OPERATIONS FOUND IN THE COMPANY'S 10QSB FOR THE
YEAR-TO-DATE AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 838
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 838
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 838
<CURRENT-LIABILITIES> 19,047
<BONDS> 0
0
0
<COMMON> 39,934
<OTHER-SE> (58,143)
<TOTAL-LIABILITY-AND-EQUITY> 838
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 21,565
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 21,565
<INCOME-TAX> 907
<INCOME-CONTINUING> 22,472
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 22,472
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
