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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of The Securities Exchange
Act of 1934
For the quarterly period ended March 31, 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
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(Name of Small Business Issuer as specified in its charter)
Delaware 33-0464753
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(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
May 5, 1998.
This Form 10-QSB consists of 9 pages and no exhibits.
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
KINETIC VENTURES LTD.
Balance Sheets
<TABLE>
<CAPTION>
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March 31, December 31,
1998 1997
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(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash $ 2,122 179,228
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Total Assets $ 2,122 179,228
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 4,905 13,412
Note payable - 139,000
Income tax payable - 22,553
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4,905 174,965
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 (15,937,790) (15,930,744)
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(2,783) 4,263
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Total Liabilities and Shareholders' Equity $ 2,122 179,228
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</TABLE>
The accompanying notes are in integral part of the financial statements.
2
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KINETIC VENTURES LTD.
Consolidated Statements of Income (Loss)
For the three months ended March 31, 1998 and 1997
(Unaudited)
<TABLE>
<CAPTION>
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1998 1997
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<S> <C> <C>
Sales $ - 345,450
Cost of goods sold - 253,973
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- 91,477
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Operating expenses:
Research and development - 110,919
Sales and marketing - 315,137
General and administrative 7,046 209,527
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7,046 635,583
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Other income (expense):
Interest expense, net - (68,614)
Gain on sale of assets - 1,828,338
Other - 13,021
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- 1,772,745
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Net income (loss) before provision
for income taxes (7,046) 1,228,639
Provision for state income taxes - 3,000
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Net income (loss) $ (7,046) 1,225,639
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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
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</TABLE>
The accompanying notes are in integral part of the financial statements.
3
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KINETIC VENTURES LTD.
Consolidated Statements of Cash Flows
For the three months ended March 31, 1998 and 1997
(UNAUDITED)
<TABLE>
<CAPTION>
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1998 1997
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<S> <C> <C>
Cash flows from operating activities:
Net income (loss) for the period $ (7,046) 1,225,639
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 (decrease) in accounts payable and accrued
liabilities (170,060) (46,185)
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Net cash used by operating activities (177,106) (369,850)
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Cash provided by investing activities:
Increase in deposits - (4,310)
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Cash provided by financing activities:
Net proceeds from issuance of notes payable - 280,000
Payments & current maturities of capital lease obligations - (321)
Redemption of preferred stock - (2,281)
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- 277,398
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Net decrease in cash (177,106) (96,762)
Cash, beginning of period 179,228 105,204
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Cash, end of period $ 2,122 8,442
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</TABLE>
The accompanying notes are in integral part of the financial statements.
4
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KINETIC VENTURES LTD.
NOTES TO FINANCIAL STATEMENTS
For the Period Ending March 31, 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 $15,937,790 at March 31, 1998. These matters raise
substantial doubt about the Company's ability to continue as a going
concern.
PROPOSED BUSINESS PLANS:
As of March 31, 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.
5
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KINETIC VENTURES LTD.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
For the Period Ending March 31, 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. Notes Payable:
Notes payable consist of the following:
<TABLE>
<CAPTION>
(Unaudited)
March 31, 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.
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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.
NET SALES
Net Sales decreased to $Nil for the three months ended March 31, 1998 as
compared to $345,450 for the three months ended March 31, 1997, a 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 ended March 31, 1998 as
compared to $91,477 for the three months ended March 31, 1997 a 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.
7
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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 ended March 31,
1998 as compared to $110,919 for the three months ended March 31, 1997, a
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 ended March 31, 1998
as compared to $315,137 for the three months ended March 31, 1997, a 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 $7,046 for the three months ended March
31, 1998 as compared to $209,527 for the three months ended March 31, 1997, a
decrease of 97%. The decrease for the three months was due to the sale of the
Company's business on March 20, 1997.
NET INCOME (LOSS)
Net loss was $7,046 for the three months ended March 31, 1998. Net income was
$1,225,639 for the three months ended March 31, 1997, a decrease of $1,232,685.
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 $2,783 at March 31, 1998 as compared to working
capital deficiency of $125,700 at March 31, 1997 or an increase of $122,917.
The Company's cash resources at March 31, 1998 were minimal.
The Company had, at March 31, 1998, no commitments for any other credit
facilities such as revolving loans or lines of credit that could provide
additional working capital.
8
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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: MAY 5, 1998 By: /s/ BRIAN BAYLEY
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Brian Bayley, President
(Principal Executive Officer)
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<TABLE> <S> <C>
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<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND CONSOLIDATED STATEMENT OF OPERATIONS FOUND IN THE
COMPANY'S FORM 10QSB FOR THE YEAR-TO-DATE AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 2,122
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,122
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,122
<CURRENT-LIABILITIES> 4,905
<BONDS> 0
0
0
<COMMON> 39,934
<OTHER-SE> (42,717)
<TOTAL-LIABILITY-AND-EQUITY> 2,122
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 7,046
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 7,046
<INCOME-TAX> 0
<INCOME-CONTINUING> 7,046
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,046
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
