SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
Quarterly Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act
of 1934
For the quarter ended March 31, 2000
Commission File No. 0-24684
LONE WOLF ENERGY, INC.
(Name of small business issuer in its charter)
Colorado
(State or other jurisdiction of Incorporation or Organization)
73-1550360
(IRS Employer Identification Number )
2400 NW 30th, #814
0klahoma City, Oklahoma 73112
(405) 946-4850
(Address, including zip code and telephone number, including area
Code of registrant's executive offices)
K&S VENTURES, INC.
(Former Name of Registrant)
Securities registered under Section 12 (b) of the Exchange Act: none
Securities registered under Section 12 (g)
of the Exchange Act:
Common Stock, $0.001 par value
(Title of class)
Check whether the issuer (1) filed all reports required to be filed 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 [ ]
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: As of March 31, 2000 there were
15,670,000 shares of the Company's common stock issued and outstanding.
Documents Incorporated by Reference: None
<PAGE>
PART 1. - FINANCIAL INFORMATION
Item 1. Financial Statements
a. The following financial statements include all adjustments , which in the
opinion of management are necessary to make the financial statements not
misleading.
LONE WOLF ENERGY, INC.
(A Development Stage Company)
BALANCE SHEETS
March 31, 1999 AND 1998
(Unaudited)
March 31, December 31,
2000 1999
-----------------------
ASSETS
Current Assets
Cash 10,676 108,472
Accounts receivable 131,341 --
Inventory 159,430 --
Note receivable 1,000,000 --
Current portion of long-term note receivable -- 72,169
Other current assets 1,950 4,681
-----------------------
Total current assets 1,303,397 185,322
Long Term Assets
Note receivable -net of current portion -- 564,148
Investments 24,375 24,375
-----------------------
TOTAL ASSETS 1,327,772 773,845
=======================
The accompanying notes are an integral part of the Financial Statements
2
<PAGE>
<TABLE>
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable 22,634 4,257
Current portion of long-term debt -- 56,464
Notes payable 165,000 100,000
Accrued expenses on contract sale 393,900 --
Accrued income taxes 271,000 --
Other current liabilities -- 2,521
---------- ----------
Total current liabilities 852,534 163,242
Long term debt-net of current portion -- 409,633
Other liabilities
Deposits -- 24,000
Deferred revenue -- 160,449
-------------------------------
Total Liabilities 852,534 757,324
-------------------------------
Stockholders' Equity
Preferred Stock, $0.001 par value, 20,000,000 shares authorized,
No shares issued and outstanding -- --
Common Stock, $0.001 par value, 100,000,000 shares authorized,
15,670,000 shares issued and outstanding at March 31, 2000 and
11,670,000 shares issued and outstanding at December 31, 1998 15,670 11,670
Additional Paid in Capital 81,941 45,941
Unrealized Gain/(Loss) on Available for Sale Securities (7,969) (7,969)
Retained Earnings (Deficit) 385,596 (33,121)
-------------------------------
Total stockholders' equity 475,238 16,521
-------------------------------
TOTAL LIABILITIES' AND STOCKHOLDERS' EQUITY 1,327,772 773,845
===============================
</TABLE>
3
<PAGE>
(A Development Stage Company)
STATEMENTS OF OPERATIONS
For the three months ended March 31, 2000 and 1999
(Unaudited)
Three Months
Ended
---------------------------
March 31, March 31,
2000 1999
Revenue
EP Sales 14,915 --
Equipment financing 25,173 --
Gain on sale of equipment financed 155,278 --
Sale of equipment financing contract 1,000,000 --
---------------------------
1,195,366 --
---------------------------
Cost of Sales
EP Costs 8,708 --
Equipment financing 12,089 --
Sale of financing contract 421,799 --
---------------------------
442,596 --
---------------------------
Gross Profit 752,770 --
---------------------------
Operating Expenses
Rent 1,050 --
Advertising 4,625 --
Insurance 295 --
Legal -- 22,000
Accounting -- --
Consulting 49,000 3,000
Transfer Agent 452 375
Telephone 1,943 745
Office 3,408 --
Travel 642 --
Public Relations 175 --
Filing Fees 504 --
Interest 640 --
Miscellaneous 319 12
---------------------------
Total Expenses 63,053 26,132
---------------------------
Net Income(Loss) before income taxes 689,717 (26,132)
Provision for income taxes 271,000 --
---------------------------
Net Income(Loss) 418,717 (26,132)
---------------------------
Weighted Average Shares Outstanding 13,170,000 11,170,000
---------------------------
Income(Loss) Per Share $0.03 $0.00
---------------------------
The accompanying notes are an integral part of the Financial Statements
4
<PAGE>
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
For the three months ended March 31, 2000 and 1999
(Unaudited)
<TABLE>
<CAPTION>
March 31, 2000 March 31, 1999
------------------------------
<S> <C> <C>
Operating Activities:
Net Income(Loss) 418,717 (26,132)
Change in accounts receivable (131,341) --
Change in inventory (159,430) --
Change in notes receivable (363,683) --
Change in other current assets 2,731 --
Change in accounts payable 18,377 --
Change in other current liabilities (2,521) --
Change in notes payable (401,097) --
Change in accrued expenses 393,900 --
Change in accrued income income taxes 271,000 --
Change in deposits (24,000) --
Change in deferred revenue (160,449) --
------------------------
Cash Used In Operating Activities (137,796) (232)
------------------------
Financing Activities:
Common stock issued for services rendered 40,000 --
------------------------
Cash provided by financing activities 40,000 --
------------------------
Investing Activities -- --
------------------------
Change in Cash (97,796) (232)
Cash at Beginning of Period 108,472 282
------------------------
Cash at End of Period 10,676 50
------------------------
The accompanying notes are an integral part of the Financial Statements
</TABLE>
5
<PAGE>
LONE WOLF ENERGY, INC.
A Development Stage Company
(Formerly K&S Ventures, Inc.)
NOTES TO FINANCIAL STATEMENTS
For the three months ended March 31, 2000 and 1999
1. SIGNIFICANT ACCOUNTING POLICIES
Organization
Lone Wolf Energy, Inc. (formerly K&S Ventures, Inc.) was incorporated on
March 4, 1991 in the state of Colorado. In February 1999 the Company signed a
Master Sales Agreement with Eagle Capital, Inc. (OTCBB: ECIC) to sell
specialized equipment used in producing patented IMSI blocks for mortarless dry
stack construction. The agreement called for the Company to provide ten mobile
block plants and five portable Q-Bond plants over the next three years. In
February 2000 the company terminated the Master Sales Agreement and sold the
equipment it was financing under that agreement. Under the terms of the
termination and sale of the equipment being finance the Company is to receive
$1,625,000 of which $500,000 had been received as of March 31, 2000. The company
will no longer be in the equipment business but has entered into contracts to
engage in the telecommunications and Internet businesses.
Basis of Accounting
Assets, liabilities, equity, revenue and expenses are recorded under the
accrual method of accounting in conformity with generally accepted accounting
principles.
Cash and cash equivalents
The Company considers all cash and marketable securities as cash
equivalents.
Income Taxes
For the years prior to 1997, the Company was taxed under the provisions of
Subchapter S of the Internal Revenue Code. Under the provisions of the Code, all
losses or taxable income flowed to the stockholders of the Company. In January
1997, the Company's standing as a Subchapter S corporation, as defined by the
Internal Revenue Code, was changed because of the purchase of common stock
during 1997 by a corporate shareholder. Beginning with the year ended December
31, 1997, the Company will be considered a "C" corporation for income tax
purposes.
Fiscal Year End
The Company's fiscal year end is December 31.
Earnings (Loss) per Share
Primary income (loss) per share is calculated by dividing net income (loss)
by the weighted average shares of common stock of the Company outstanding during
the period .
Use of Estimates
The preparation of financial statements in conformity with generally
accepted principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported revenues and expenses during the reporting
period. Actual results could differ from those estimates.
6
<PAGE>
2. STOCKHOLDERS' EQUITY
Issuance of Common Stock
During the first quarter of 2000, 4,000,000 shares were issued at $0.01 per
share for services rendered to certain officers of the Company.
3. INCOME TAXES
Income taxes reflect a combined federal and state tax rate of approximately
40% after a loss carry-forward of approximately $13,000 from 1999.
4. EARNINGS (LOSS) PER SHARE
Common Shares Outstanding 15,670,000
Effect of using weighted average common and
Common equivalent shares outstanding 2,000,000
----------
Weighted average common shares outstanding 13,670,000
----------
5. NOTES RECEIVABLE
In April 1999 the Company entered into a master agreement with Eagle
Capital International, Ltd. ("ECIC"). The terms of the agreement called for
ECIC to pay $12,000 per month for a period of seven (7) years. In February
ECIC terminated the agreement by purchasing the first unit sold under the
agreement for $625,000. . As of the balance sheet date they had paid
$500,000 and subsequent to the balance sheet date another $50,000 was paid
with the balance due in June 2000. In addition they agreed to pay
$1,000,000 to terminate thee master sales agreement. This amount is due
under a note with interest payments payable monthly at 12% per annum
beginning April 1, 2000 and the note becoming due in full on July 30, 2000.
6. INVESTMENTS
The company's investments at March 31, 2000 and December 31, 2000 consisted
of available-for sale marketable securities of Eagle Capital International, Ltd.
Common stock carried at market value.
7. NOTES PAYABLE
The Company had a note payable at December 31, 1999 with a lending
institution for an original amount of $500,000 bearing interest at 8.75% per
annum with a payment of $7,900 for seven (7) years. This note was paid of in the
first quarter of 2000. The lending institution has an option to purchase 500,000
thousand shares of the Company's common stock for $.15 per share as a result of
this loan. In addition the Company also agreed to pay a shareholder 600,000
shares of common stock for guarantying the note.
The notes at March 31 are short-term notes payable to individuals.
8. STOCK OPTIONS
In March 2000 the Company issued an option to it's business consulting and
marketing to group to purchase 1,250,000 shares of it's common stock at $0.02
per share.
7
<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operation
The following discussion should be read in conjunction with the
accompanying financial statements.
Equipment Sales; Discontinuation of Equipment Sales. During 1999 and
through February 2000, the Company's only business activity was pursuant to a
Master Equipment Sales Agreement between the Company, as seller, and Eagle
Capital, Inc. (OTCBB:ECIC). The Master Equipment Sales Agreement, signed in
February 1999, obligated the Company to sell ten mobile block plants and five
portable Q-Bond plants (used in producing patented IMSI blocks for mortarless
dry stack construction) over the following three years. In April 1999 Eagle
ordered the first plant and made payments on the first plant through March 2000.
Payments during 1999 in connection with the first plant were $120,893. Payments
through March 31, 2000 were $25,173 and are reflected as equipment financing
revenues in the accompanying financial statements. The gain on sale of equipment
in the financial statements is the profit from the sale of the first plant.
In February 2000, the Company and Eagle Capital agreed to terminate the
Master Equipment Sales Agreement. Pursuant to the agreement to terminate, Eagle
Capital executed and delivered a promissory note for termination charges in the
amount of $1 million. The principal of the note is payable on July 30, 2000. Of
the Company's total revenue reflected in the accompanying financial statements
for the period ended March 31, 2000, $1,180,451 is from operations arising under
the Master Equipment Sales Agreement and all of the Company's net income for the
period is related to those operations. Since the Master Equipment Sales
Agreement has been terminated, none of the revenue or income arising under the
Master Equipment Sales Agreement can be indicative of future operations. In
addition, the Company has terminated this line of business and will not receive
revenue or income from this line of business in the future.
Acquisitions; New Lines of Business. Since March 2000, the Company has
entered into agreements for various acquisitions for new lines of business. Each
acquisition is or will be operated as a separate subsidiary or business unit, as
follows:
EP Distributing Co. In March 2000 the Company purchased the assets of EP
Distributing Company for $120,000 in cash and stock. The assets are currently
operated as a division of the Company.
The division sells nutritional products (with its primary line being
Earths' Pharmacy products) and plans to broker sales of medical supplies.
Revenues and cost of sales for the division are separately shown in the
accompanying financial statements. Operating expenses allocated to the division
in the financial statements are $9,633, with the division incurring a loss of
$3,426 in the month it was operated by the Company.
8
<PAGE>
The Company's immediate plans are to identify key products of the division
and develop an aggressive marketing plan for the products. The ability of the
division to become profitable will depend on marketing its nutritional products
to a broad base of customers. The Company believes it has sufficient internal
funds to finance the operations of the division for the next twelve months. The
Company does not currently plan any material research and development expenses
or any material purchases of plant and equipment for the division in the next
twelve months. Currently, there is one employee assigned to the division.
Additional employees will be added as needed.
Zenex Communications, Inc. On May 5, 2000, the Company entered into an
agreement to acquire Zenex Communications, Inc. conditioned upon regulatory
approval. The Company will issue 15,550,000 shares of its Common Stock as the
purchase price for this acquisition. When the acquisition is completed, Zenex
will be operated as a subsidiary of the Company.
Zenex is a switch-based provider of telephone services with revenues in
excess of $1.25 million in the first quarter of 2000. When the acquisition is
completed, the Company plans that Zenex will continue its current operations and
expects that Zenex will generate sufficient revenue to sustain its own
operations during the next twelve months. The Company does not currently plan
any material research and development expenses or any material purchases of
plant and equipment in the next twelve months. Zenex has 11 full-time employees.
Additional employees will be added if needed.
Churchlink.com, Inc. On May 11, 2000, the Company acquired Churchlink.com,
Inc. for a purchase price of 100,000 shares of the Company's Common Stock (with
an additional 400,000 shares to be issued if certain performance goals are met).
Churchlink is operating as a subsidiary of the Company.
Churchlink is an online communications hub for churches and their members.
Churchlink is currently conducting beta tests with selected churches and
updating its software and plans a national rollout of its product before the end
of September 2000. The Company projects that Churchlink will need approximately
$500,000 to $1,000,000 to test and launch its product. The Company is currently
negotiating financing for such costs with external sources. Included in such
costs is a minimal amount of costs for additional research and development and
additional equipment. Churchlink has one full-time employee. It is anticipated
five full-time employees will be added in the near future and additional
employees will be added if needed.
Other. The Company's immediate plan of operation is to focus on the
operations of the foregoing acquisitions and assimilate them into the Company's
operations. Except as discussed above, the Company has no current plans for
capital expenditures or research and development. The Company currently has two
full-time employees (other than those noted above) and has no plans to add
additional employees except as noted above.
Forward Looking Statements. The discussion in this Item 2 contains a number
of forward-looking statements, all of which are based on current expectations.
These statements are not intended to be forecasts of future financial or other
performance. Actual results and operations may differ materially from those in
the forward-looking statements.
9
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Not Applicable
Item 2. Change in Securities
Not Applicable
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
Not Applicable
Item 6. Exhibits and Reports on Form 8-K
Exhibits
None
Reports on Form 8-K
The Company filed an 8-K on March 2, 2000 announcing the termination of its
Master Sales Agreement with Eagle Capital.
10
<PAGE>
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.
LONE WOLF ENERGY, INC.
/s/ Douglas A. Newman
-----------------------------------
By: Douglas A. Newman, Sec,y
Date: May 9, 2000
11
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 10,676
<SECURITIES> 24,375
<RECEIVABLES> 1,131,341
<ALLOWANCES> 0
<INVENTORY> 159,430
<CURRENT-ASSETS> 1,303,397
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,327,772
<CURRENT-LIABILITIES> 852,534
<BONDS> 0
0
0
<COMMON> 15,670
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 1,327,772
<SALES> 40,088
<TOTAL-REVENUES> 1,195,366
<CGS> 20,797
<TOTAL-COSTS> 442,596
<OTHER-EXPENSES> 63,053
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 689,717
<INCOME-TAX> 271,000
<INCOME-CONTINUING> 56,846
<DISCONTINUED> 168,362
<EXTRAORDINARY> 578,201
<CHANGES> 0
<NET-INCOME> 418,717
<EPS-BASIC> .03
<EPS-DILUTED> .03
</TABLE>
