UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarter ended March 31, 2001
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE
SECURITIES ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
Commission File Number: 0-9083
Enercorp, Inc.
(Exact name of Registrant as specified in its Charter)
Colorado 84-0768802
--------------------------- -----------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
32751 Middlebelt Road, Suite B
Farmington Hills, Michigan 48334
-------------------------------------- --------------------------
(Address of principal executive offices) (Zip Code)
(248) 851-5651
------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has 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, and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Number of shares of common stock outstanding at May 15, 2001:
695,897
Enercorp, Inc.
Form 10-Q Filing for the Third Quarter Ended March 31, 2001
INDEX
Page
Number
----------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements 3
Statements of Assets and Liabilities
March 31, 2001 (Unaudited) and June 30, 2000 4
Schedule of Investments (Unaudited)
March 31, 2001 5-6
Schedule of Investments June 30, 2000 7-8
Statements of Operations (Unaudited) for the Three and Nine
Months Ended March 31, 2001 and 2000 9
Statements of Cash Flows (Unaudited) for the Nine Months
Ended March 31, 2001 and 2000 10
Notes to Financial Statements 11
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 11-13
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 2. Changes in Securities 13
Item 3. Defaults Upon Senior Securities 13
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 14
Signature Page 15
2
Enercorp, Inc.
Part I. FINANCIAL INFORMATION
-----------------------
Item 1. Financial Statements
The accompanying interim unaudited condensed financial statements
have been prepared in accordance with the instructions to Form 10-Q
and do not include all the information and footnotes required by
generally accepted accounting principles for complete financial
statements. In the opinion of the management, all adjustments
(consisting of normal recurring adjustments) considered necessary
for a fair presentation have been included, and the disclosures
are adequate to make the information presented not misleading.
Operating results for the nine months ended March 31, 2001 are not
necessarily indicative of the results that may be expected for the
year ending June 30, 2001. These statements should be read in conjunction
with the financial statements and notes thereto included in the
Annual 10-K Report (filed with the Securities and Exchange Commission)
for the year ended June 30, 2000.
3
Enercorp, Inc.
Statements of Assets and Liabilities
------------------------------------
March 31, June 30,
2001 2000
---------- ---------
ASSETS
Investments, at fair value, cost
Of $1,231,638 and $2,204,888 at
March 31, 2001 and June 30, 2000 respectively $ 629,489 $3,873,815
Cash 2,160 23,844
Accounts receivable - related party 17,848 17,848
Accrued interest receivable - net allowance for
Uncollectible interest receivable of $21,735 and
$20,264 at March, 2001 and June 2000 respectively - 6,105
Notes receivable - related parties, net of allowance
For uncollectible notes receivable of $27,776 at
March 31, 2001 and $27,776 at June 30, 2000 - 3,086
Furniture and fixtures, net of accumulated
Depreciation of $11,035 at March 31, 2001
and $9,633 at June 30, 2000 respectively 1,401 2,804
Other assets 678 1,318
--------- -------
$ 651,576 $3,928,820
========= =========
LIABILITIES AND NET ASSETS
Liabilities
Note payable - bank - 2,141,649
Note payable - Other - 36,000
Accounts payable and accrued liabilities 10,638 25,127
Deferred tax liability 0
--------- ---------
10,638 2,202,776
--------- ----------
Net Assets
Common stock, no par value: 10,000,000 shares
Authorized, 695,897 shares issued and
Outstanding at March 31, 1001 and June 30, 2000
Respectively 1,888,251 1,888,251
Preferred stock, no par value: 1,000,000 shares
Authorized, -0- issued and outstanding - -
Accumulated Deficit (849,896) (1,268,084)
Unrealized net gain on investments, net of
Deferred income taxes of $1,498,000 and
$1,498,000 at March 31, 2001 and June 30
2000, respectively (397,417) 1,105,877
--------- ----------
640,938 1,726,044
--------- ---------
$ 651,576 $3,928,820
=========== ===========
4
Enercorp, Inc.
Schedule of Investments
March 31, 2001
Company Description Expiration Restrictions Number of Cost Fair
Of Date as to Resale Shares and/or Value
Business Owned Equity
AFFILIATED COMPANIES
Common Stocks -Public Market
Method of Valuation
CompuSonics Video Digital Video Product
Corporation * Website 1,751 $ - 28
Development (i) 10,000,000 106,477 160,000
Ajay Sports, Inc. * Golf and Casual
Furniture (e)(h) 294,118 600,000 20,5885
(e)(h) 16,667 37,500 1,167
Preferred Stocks - Public Market
Method of Valuation
Ajay Sports, Inc.* Golf and Casual
Furniture 2,000 20,000 500
Warrants and stock Options - Board
Appraisal Method of Valuation (d)
CompuSonics Video Digital Video Product
Corporation * and Website (c) - -
Development
Williams Controls, Inc. * Manufacturer of
Sensors and Control
Systems 08/04/04 (c) 25,000
05/03/05 (c) 25,000
09/13/06 (c) 50,000
03/12/08 (c) 50,000
10/02/08 (c)(f) 50,000
Common Stocks-Board Appraisal Method of Valuation
Pro Golf International, Inc. Franchisor of
Retail Golf
Stores 7,450 447,000 447,000
1,210,977 629,283
(continued)
See notes to financial statements
5
Enercorp, Inc.
Schedule of Investments
March 31, 2001
Enercorp, Inc.
Schedule of Investments
Company Description Expiration Restrictions Number of Cost Fair
Of Date as to Resale Shares and/or Value
Business Owned Equity
UNAFFILIATED COMPANIES
Common Stocks - Public
Market Method of Valuation
Vitro Diagnostics Diagnostic Test
Kits Sports 300 1,500 206
Common Stocks - Non-Public
Market
Proconnextions, Inc. Sports Memorabilia
Marketing (a)(d) 191,610 19,161 0
Sub-total Unaffiliated 20,661 206
------- --------
Total - All $1,231,638 $629,489
(a) Non-public company whose securities are privately owned.
(b) May be sold under the provisions of Rule 144 of the Securities Act of
1933 after a holding period which expires in the month indicated
(c) No public market for this security exists
(d) The fair value of restricted securities is determined in good faith by
the Company's Board of Directors, which may a variety of factors,
including recent and historical prices of these securities, recent
transactions completed by the other factors that the Board believes
are applicable.
(e) Options 75% vested and will vest at 25% additional on 10/02/01.
(g) Reflects 1-for-6 reverse stock split effective August 14, 1998.
(h) In august, 1999, Immune Response completed a 1-for-100 reverse stock
split and also completed a 1-for-3 reverse split in January, 2000.
(i) Reflects a per share value lower than the closing price of $0.065 per
Share on March 31, 2001, to be used until the Registrant has completed
its review of transfer restrictions which may be related to these
shares which could affect the Registrant's ability to readily dispose
of them.
*This entity is considered an affiliated company since the Company
owns more than 5% but less than 25% of the Investee company's
outstanding common stock. Because of this, the Company would be
affected by a sales imitation of one percent of the investee's
outstanding common stock during any three-month period, or the
average of the last four weeks' trading volume, whichever is greater.
See notes to financial statements
6
1
Enercorp, Inc.
Schedule of Investments
June 30, 2000
Company Description Expiration Restrictions Number of Cost Fair
Of Date as to Resale Shares and/or Value
Business Owned Equity
AFFILIATED COMPANIES
Common Stocks -Public Market
Method of Valuation
CompuSonics Video Digital Video Product
Corporation * Website 1,751 $ - 72
Development (i) 10,000,000 106,477 414,000
Williams Controls, Inc.* Manufacturer of (e) 200,000 30,000 353,286
Sensor and control (e) 850,000 127,500 1,501.466
Systems (e) 330,000 412,500 582,922
(e) 30,000 108,750 62,993
(3) 50,000 124,000 88,322
(e) 150,000 61,500 264,965
(e) 42,329 100,000 74,771
Ajay Sports, Inc. * Golf and Casual
Furniture (e)(h) 294,118 600,000 74,435
(e)(h) 16,667 37,500 4,218
Common Stocks - Cost Method of
Valuation
Pro Golf International
Inc. Franchisor of retail (a)(d)
Golf Stores 7,450 447,000 447,000
Preferred Stocks - Public Market
Method of Valuation
Ajay Sports, Inc.* Golf and Casual
Furniture 2,000 20,000 1,575
Warrants and stock Options - Board
Appraisal Method of Valuation (d)
CompuSonics Video Digital Video Product
Corporation * and Website
Development (c) 300,000 - -
Williams Controls, Inc.* Manufacturer of 08/04/04 (c) 25,000 - -
Sensor and 05/03/05 (c) 25,000 - -
Control systems 09/13/06 (c) 50,000 - -
03/12/08 (c)(j) 50,000 - -
10/02/08 (c)(f) 50,000 - -
------- --------
2,176,227 3,860,025
See notes to financial statements
7
Enercorp, Inc.
Schedule of Investments
June 30, 2000
Enercorp, Inc.
Schedule of Investments
Company Description Expiration Restrictions Number of Cost Fair
Of Date as to Resale Shares and/or Value
Business Owned Equity
UNAFFILIATED COMPANIES
Common Stocks - Public
Market Method of Valuation
Immune Response, Inc. Holding Co. (h) 7,000 1,050 7,877
Vitro Diagnostics Diagnostic Test
Kits Sports
Memorabilia 300 1,500 1,106
Proconnextions, Inc. Marketing (a) 191,610 1,500 1,125
Sub-total Unaffiliated 21,711 13,792
------- --------
Total - All $2,197,938 $3,873,817
(a) Non-public company whose securities are privately owned.
(b) May be sold under the provisions of Rule 144 of the Securities Act of 1933
after a holding period which expires in the month indicated
(c) No public market for this security exists
(d) The fair value of restricted securities is determined in good faith by the
Company's Board of Directors, which may a variety of factors, including
Recent and historical prices of these securities, recent transactions
completed by the other factors that the Board believes are applicable.
(e) Pledged as collateral against a line of credit with Comerica Bank.
(f) Options 50% vested and will vest at 25% additional on 10/02/00 10/02/01
consecutively
(g) Reflects 1-for-6 reverse stock split effective August 14, 1998
(h) In August, 1999, Immune Response completed a 10-fo-100 reverse split and
also completed a 1-fo4-3 reverse split in January, 2000.
(i) Reflects a per share value lower than the closing price of $0.065 per
share on March 31, 1000, to be used until the transfer agents has
completed its review of Transfer restrictions which may be related to
these shares which could affect the Registrant's ability to readily
dispose of them.
(j) Options are 75% vested and will vest the final 25% on 03/12/01
*This entity is considered an affiliated company since the Company owns
more than 5% but less than 25% of the outstanding common stock.
Because of this, the Company would be affected by a sales limitation
of one percent of the outstanding common stock during any three-month
period, or the average of the last four weeks' trading volume.
See notes to financial statements
8
Enercorp, Inc.
Statement of Operations
(unaudited)
For the Three For the Nine
Months Ended Months Ended
March 31, March 31,
2001 2000 2001 2000
------------------- ----------------
REVENUES
Interest income 0 161 1,640 161
Interest income from related
Entities 0 1,715 0 28,442
Consulting fees from
Related companies 0 16,000 0 16,000
Net realized gain on sale of
Investments 1,465,720 456,624 1,474,184 456,624
--------- -------- ---------- --------
1,465,720 474,500 1,475,824 502,227
EXPENSES
Salaries - officer 78,500 21,750 78,500 65,250
Directors Fees 0 0 1,000
Bonus 0 0 0
Legal, accounting and other 3,350 2,949 10,762 18,438
Professional fees
Interest expense - other 49,046 54,015 165,297 164,051
Bad debt expense 9,355 727 10,825 6,827
Other general and administrative
Expenses 9,140 11,292 17,519 29,162
------- -------- -------- -------
149,391 90,733 282,903 248,728
Net income (loss) from operations
Before taxes 1,316,329 383,767 1,192,920 217,499
Income taxes (447,552) (119,000) (405,593) (69,000)
-------- -------- ------- ---------
Net income (loss) from
operations after taxes 868,777 264,767 787,327 148,499
Net unrealized gain (loss) on
Investments before taxes 141,737 (482,972) 141,737 (2,490,274)
Income Taxes (48,191 ) 165,000 (48,191) 847,000
------- --------- --------- ----------
Net unrealized gain (loss) on 93,546 (317,972) 93,546 (1,643,274)
Investments after taxes
Income Tax Deferred 916,469 916,469
-------- -------- -------- ---------
Increase (decrease) in net $ 45,854 $ (53,205) $(35,595)$(1,494,775)
assets
Increase in net assets per
Share $ (0.07) $ (0.08) $ (0.05) $ (2.15)
9
Enercorp, Inc.
Statements of Cash Flows
(Unaudited)
For the Nine Months
Ended March 31,
2001 2000
-------- ----------
Cash Flows from operating activities:
Increase (decrease) in net assets $ (35,595) $(1,494,775)
----------- ------------
Adjustments to reconcile net income
To net provided by operating
Activities:
Depreciation 1,402 1,402
Bad debt provision on notes
Receivable and Interest net
Of write-off's 10,825 6,827
Gain on sale of investments (1,474,184) (456,624)
(Increase) decrease in unrealized
gain on investments 2,158,715 2,490,274
(Increase) decrease in accounts
receivable - related party (6,104) (11,842)
(Increase) decrease in interest
receivable 0 (2,442)
(Increase) decrease in other assets 640 (22)
Increase (decrease) in accounts
Payable & accrued expenses (14,776) 8,508
(Decrease) in deferred taxes (774,728) (778,000)
--------- ---------
Total Adjustments (98,200) 1,258,081
-------- ----------
Net cash (used) by operating activities ( 133,796) (236,694)
--------- ---------
Cash flows from investing activities:
Purchase of Investments 0 (27,000)
Proceeds from Sale of Investments 2,440,484 489,899
Payments from notes receivable 0 0
---------- ---------
Net cash provided by investing activities 2,440,484 462,899
---------- ---------
Cash Flows from financing activities
Payments to notes payable (2,328,372) (358,000)
Proceeds from notes payable 0 176,400
--------- ---------
Net cash provided by financing activities (2,328,372) (181,600)
--------- ---------
Increase in cash ( 21,683) 44,605
Cash, beginning of period $ 23,843 $ 16,907
---------- ---------
Cash, end of period $ 2,160 $ 61,512
=========== =========
Supplemental disclosures of cash flow
Interest paid $ 165,297 $ 164,051
=========== =========
10
Notes to Financial Statements
Note 1: Investments
On March 7, 2001, the Registrant sold 1,077,800 shares of the common
stock it held in its largest investee, Williams Controls, Inc., and on
March 12, 2001 the Registrant sold an additional 574,529 shares of
Williams Controls, Inc., for a total of 1,652,329 shares, representing
all the shares of Williams Controls, Inc. common stock owned by the
Registrant at the time of this filing. These shares were acquired
by the Registrant in transactions between April 1991 and August 1998.
The shares were sold in open market transactions through an unaffiliated
broker. Upon settlement of the trades, the Registrant received total
net proceeds of approximately $2,424,800. These proceeds were used to
pay off the Company's demand loan from a bank with a balance of
$2,141,649 plus accrued interest, and make payments of or toward other
debt obligations and payables that the Company had outstanding. The
Registrant continues to hold its other principal common stock investments
in CompuSonics Video Corporation (10,001,751 shares), Ajay Sports, Inc.
(310,785 common and 2,000 preferred shares) and Pro Golf International,
Inc. (7,450 shares, and continues to hold 200,000 warrants in Williams
Controls, Inc., which are fully vested at the time of this filing.
11
Item 2. Management's Discussion and Analysis of Financial Condition/Results
of Operations.
Material Changes in Financial Condition:
------------------------------------------
The Registrant's liquidity is affected primarily by the business success,
securities prices and marketability of its investee companies and by the
amount and timing of new or incremental investments it makes, as well as
the availability of borrowing under the credit line.
In July 2000, the Registrant renewed its line of credit from Comerica
Bank ("Comerica") under which it may borrow up to $2,250,000 at 3/4%
over Comerica's prime lending rate. The collateral for this line of
credit was 1,652,329 shares of Williams Controls common stock owned
by the Registrant and 310,785 shares of the common stock of Ajay Sports,
Inc. ("Ajay") owned by the Registrant. The Registrant was out of compliance
with the terms of the loan agreement from December 1999 until March 2001.
Under the terms of the demand loan, the bank had the right to demand
immediate payment of the loan by the Registrant at any time. The bank
had disallowed any further advances against the credit line until the loan
was brought back into formula, either through loan paydown or through the
providing of additional collateral acceptable to the bank. In early March
2001, the loan remained out of compliance and, based on discussions
management had with the bank, the Registrant believed that the bank would
make demand for payment of the entire loan amount and all accrued unpaid
interest on March 31, 2001 or shortly thereafter if the March 31, 2001
interest payment was not made. The Registrant lacked the liquidity to
continue paying monthly interest payments, absent sales of portfolio
securities. Therefore, between March 7, 2001 and March 12, 2001, the
Registrant sold 1,652,329 shares of the common stock it held in its largest
investee, Williams Controls, Inc. representing all the shares of Williams
Controls, Inc. common stock owned by the Registrant. Upon settlement of
the trades, the Registrant received total net proceeds of approximately
$2,424,800. These proceeds were used to pay off the Company's demand loan
from the bank with a balance of $2,141,649 plus accrued interest, and make
payments toward other debt obligations and payables that the Company had
outstanding, including repayment of loans made by its president to the
Registrant. The balance of the Registrant's note payable to Comerica as
of March 31, 2001 was $0.
Due to the lack of working capital prior to February 28, 2001, the
President of the Registrant had made loans to the Registrant to cover
the Registrant's short term working capital needs since May 31, 2000.
These loans were evidenced by a promissory note and were payable on
demand. As of March 22, 2001, the note payable to the Registrant's
president was $187,000 and had accrued interest of $7,960. Upon the
sale of the Williams Controls, Inc. common stock, this full principal
of the promissory note and $2,000 of the $7,960 of accrued interest
on the note were repaid to the Registrant's president.
12
Material Changes in Results of Operations:
---------------------------------------------
The Registrant's revenues were $996,910 and $474,500 for the third quarter
ended March 31, 2001 and 2000, respectively. The change in revenues for
the quarter, compared with the prior year's quarter, was due to the sale
of investments.
The Registrant recorded an unrealized gain on investments of $369,689 for
the third quarter ended March 31, 2001 compared to a loss of $317,972 for
the third quarter ended March 31, 2000. This is mainly due to the changes
in fair market value of the Registrant's investment in CompuSonics
Video Corporation, Ajay Sports.
Part II. OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
Robert R. Hebard has resigned as an officer of the Registrant
effective April 30, 2001 and as a director of the Company
effective May 1, 1001. Effective May 2, 1001, the Board
appointed Thomas W. Itin as director, Chairman of the Board,
Chief Executive Officer and President. Mr. Itin is a significant
stockholder of the Registrant.
On April 2, 2001, the registrant received 300,000 shares
of ProGolf.com.
13
Item 6. Exhibits and Reports on Form 8-K
A) Exhibits
None
B) Form 8-K
A Form 8-K dated March 7, 2001 was filed on March 22,
2001 by the Registrant reporting, under Item 2, the sale
of all of the Registrant's common shares of Williams
Controls, Inc., then its largest investee.
14
Enercorp, Inc.
Form 10-Q
For the Third Quarter Ended March 31, 2001
Signature Page
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.
Enercorp, Inc.
---------------------------
(Registrant)
By:/s/ Thomas W. Itin
---------------------------------
Thomas W. Itin
President and Chief Executive Officer
Date: May 30, 2001
15
EXHIBIT 27
ARTICLE 5 FDS for ENC
CIK 0000313116
NAME Enercorp, Inc.
MULTIPLIER 1
CURRENCY US Dollar
PERIOD-TYPE 9-MOS
FISCAL-YEAR-END JUN-30-2001
PERIOD-START JUL-1-2000
PERIOD-END MAR-31-2001
EXCHANGE-RATE 1
CASH 2,160
SECURITIES 629,489
RECEIVABLES 17,848
ALLOWANCES 0
INVENTORY 0
CURRENT-ASSETS 649,497
PP&E 12,436
DEPRECIATION 11,035
TOTAL-ASSETS 651,576
CURRENT-LIABILITIES 10,638
BONDS 0
PREFERRED-MANDATORY 0
PREFERRED 0
COMMON 1,888,251
OTHER-SE (1,247,313)
TOTAL-LIABILITY-AND-EQUITY 651,576
SALES 0
TOTAL-REVENUES 1,475,824
CGS 0
TOTAL-COSTS 117,606
OTHER-EXPENSES 0
LOSS-PROVISION 0
INTEREST-EXPENSE 165,297
INCOME-PRETAX 1,192,920
INCOME-TAX (405,493)
INCOME-CONTINUING 0
DISCONTINUED 0
EXTRAORDINARY 0
CHANGES 0
NET-INCOME 787,327
EPS-BASIC 0.00
EPS-DILUTED 0.00