UNITED STATES

UNITED STATES


SECURITIES AND EXCHANGE COMMISSION

Washington, DC  20549


FORM 10-K


X              ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE

--------           SECURITIES EXCHANGE ACT OF 1934, as amended (the “Act”)


FOR THE FISCAL YEAR ENDED: June 30, 2005

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE


-------           SECURITIES EXCHANGE ACT OF 1934, as amended


FOR THE TRANSITION PERIOD FROM  ________TO ________

Commission File Number: 0-9083


Enercorp, Inc.

(Exact name of Company as specified in its charter)


Colorado                                                      84-0768802

(State or other jurisdiction of                      (IRS Employer

incorporation or organization)       Identification Number)


37735 Enterprise Ct, Suite 600-B

Farmington Hills, Michigan                                      48331

(Address of principal executive offices)             (Zip Code)


Company's telephone number, including area code: (248) 994-0099


Securities registered pursuant to Section 12(b) of the Act:

None

Securities registered pursuant to Section 12(g) of the Act:


Common Stock, No Par Value

(Title of Class)


Indicate by check mark whether the Company (1) has filed all reports to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, during the preceding 12 months (or for such shorter period that the Company was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days:              Yes   X        No        

Indicate by a check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Company's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K:    X      

As of September 28, 2005 there were 695,897 shares of common stock issued and outstanding and the aggregate market value of the common stock (based upon the average of the bid and asked prices of these shares on the over-the-counter market of the Company) held by non-affiliates was approximately 208,000.


Table of Contents

 

Forward-Looking Statements

In addition to historical information, this Annual Report on Form 10-K contains forward-looking statements that involve risks and uncertainties that could cause our actual results to differ materially. Factors that might cause or contribute to such differences include, but are not limited to, those discussed in the section entitled “Management’s Discussion and Analysis of Financial Position and Results of Operations.” When used in this report, the words “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates” and similar expressions are generally intended to identify forward-looking statements. You should not place undue reliance on these forward-looking statements, which reflect our opinions only as of the date of this Annual Report. We undertake no obligation to publicly release any revisions to the forward-looking statements after the date of this document. You should carefully review the risk factors described in other documents we file from time to time with the Securities and Exchange Commission, including the Quarterly Reports on Form 10-Q to be filed by us in fiscal year 2006, which runs from July 1, 2005 to June 30, 2006.

PART I

Item 1. Business

Enercorp, Inc. (the "Company" or "Company") is a closed-end, non-diversified Investment Company under the Investment Company Act of 1940, as amended (the "Investment Company Act"). The Company was incorporated under the laws of the State of Colorado on June 30, 1978.  The Company elected to become a business development company under the Investment Company Act on June 30, 1982.  A business development company is a type of investment company that generally must maintain 70% of its assets in new, financially troubled or otherwise qualified companies and offers significant managerial assistance to such companies.  The Company presently has four investee companies to which it provides management assistance.  Business development companies are not subject to the full extent of regulation under the Investment Company Act of 1940, as amended.  (See "Regulation-Business Development Companies" below).  The Company is primarily engaged in the business of investing in, and providing managerial assistance to developing companies, which, in its opinion, have significant potential for growth.  The Company's investment objective is to achieve long-term capital appreciation, rather than current income, on its investments. Currently, the Company's investment activity is limited by its working capital.  There is no assurance that the Company's objective will be achieved.

Investment Decisions and Policies

The Company's investment decisions are made by its Management in accordance with policies approved by its Board of Directors.  The Company is not a registered investment advisor nor does it operate pursuant to a written investment advisory agreement that must be approved periodically by stockholders.  The Company relies solely upon its Management, particularly its Officers, on a day-to-day basis, and also on the experience of its directors in making investment decisions.

Consistent with its objective of long-term capital appreciation, the Company consults with its investees with respect to obtaining capital and offers managerial assistance to selected businesses that, in the opinion of the Company's Management, have a significant potential for growth.

In addition to acquiring investment positions in new and developing companies, the Company also may occasionally invest in more mature privately and publicly-owned companies, some of which may be experiencing financial difficulties, but which, the Company believes, have potential for further development or revitalization, and which, in the long-term, could experience growth and achieve profitability.


Should its working capital position allow it to do so, the Company plans to take advantage of other opportunities to maintain and create independent companies with a significant potential for growth.  The Company's priorities for the future will be to attempt to (1) maximize the value and liquidity of its present investees, (2) increase its cash flow and intermediate term value through the acquisition of securities or assets of more established companies, and (3) make new higher risk investments in new and developing companies.

The Company has no fixed policy as to the business or industry group in which it may invest or as to the amount or type of securities or assets that it may acquire.  To date, the Company has made investments primarily in new and developing companies, the securities of which had no established public market.  Most of these companies initially were unable to obtain significant capital on reasonable terms from conventional sources.   The Company endeavors to assist its investee companies and their management teams in devising realistic business strategies and obtaining necessary financing.

The Company believes that it will be most likely to succeed in its investment strategies if its investee companies have strong management teams. Generally, the Company focuses as much or more on finding and supporting business executives who have the ability, entrepreneurial motivation and experience required to build independent companies with a significant potential for growth, as it does on identifying, selecting and financing investment opportunities based on promising ideas, products or marketing strategies.  Consistent with this belief, the Company's managerial assistance often is provided in ways designed to build strong, independent management rather than simply providing management services.  For example, the Company encourages its investee companies to afford their management teams opportunities for meaningful equity participation and assists them in planning means to accomplish this result.  The Company also assists in arranging financing, provides from time to time guaranties and occasionally provides limited financing of such investee companies in order to assist management of its investee companies to achieve their goals with limited supervision from the Company.

The Company has never paid cash dividends nor does it have any present intent to do so. The Company's future dividend policy is to make limited in kind distributions to its stockholders of its larger investment positions if and when its Board of Directors deems such distributions appropriate.  The Company, to date, has not made any distributions of its investment portfolio, nor does it have any immediate plans to do so.

Business development is by nature a high-risk activity that often results in substantial losses.  The companies, in which the Company invests and will invest, especially in the early stages of an investment but to some extent with established investees, often lack effective management, face operating problems and have incurred substantial losses.  Potential investees include established businesses which may be experiencing severe financial or operating difficulties or may, in the opinion of their management, be managed ineffectively and yet have the potential for substantial growth or for reorganization into separate independent companies.

The Company will attempt to reduce the level of its investment risks through one or more of the following factors:

•

carefully investigating potential investees;

•

financing only what it believes to be practical business opportunities, as contrasted to research projects;

•

selecting effective, entrepreneurial management for its investees;

•

providing managerial assistance and support to investees in areas, where the need is apparent;

•

obtaining, alone or with others, actual or working control of its investees;

•

supporting the investees in obtaining necessary financing, and, where feasible, arranging major contracts, joint ventures or mergers and acquisitions; and

•

where possible, maintaining sufficient capital resources to make follow-on investments where necessary, appropriate and feasible.

As a business development company, the Company is subject to the provisions of Sections 55 through 65 of the Investment Company Act of 1940, as amended, and certain additional provisions of that Act made applicable to business development companies by Section 59 of that Act.  Under these regulations, the Company's investment policies are defined and subject to certain limitations.  See "Regulation-Business Development Companies."  Furthermore, under Section 58 of that Act, the Company may not withdraw its election to be so regulated without the consent of a majority of its issued and outstanding voting securities holders.

The Company has no fixed policy as to any particular business or industry group in which it may invest or as to the amount or type of securities or assets that it may acquire.  The Company has in the past, and may continue in the future to invest in assets that are not qualifying assets as defined by Section 55 of the Investment Company Act; however, no such additional assets have been identified as of June 30, 2005, and the Company does not intend to fall below the 70% requirement as set forth in Section 55 of that Act.

The Company endeavors to achieve its objectives in accordance with the following general policies:

•

The Company acquires securities through negotiated private placement transactions directly from the investee company, its affiliates, or third parties, or through open market transactions.  

•

The Company attempts to acquire, if possible and consistent with the Company's capital resources, a large or controlling interest in its investees through purchases of equity securities, including warrants, options, and other rights to acquire such securities combined, if appropriate, with debt securities, including demand notes, term loans and guarantees, or debt instruments or preferred stock, convertible into, or with warrants to purchase additional equity securities.

•

The Company may make additional or "follow-on" investments in its investees, when appropriate to sustain the investees or to enhance or protect the Company's existing investment.

•

The Company will determine the length of time it will retain its investment by evaluating the facts and circumstances of each investee and the Company’s relationship with each investee.  The Company generally will retain its investments for a relatively long period, sometimes as long as many years, with the result that its rate of portfolio turnover is low.  Investments are retained until, in the sole opinion of the Company, the investee company has a demonstrated record of successful operations and there is a meaningful public market for its securities which reflects the investment value the Company sought (or such a market can be readily established) or until the Company, in its sole discretion, decides that its investment is not likely to result in future long-term capital appreciation.  


At the time of sale of the Company's portfolio securities, there may not be a market of sufficient stability to allow the Company to sell its entire position, potentially resulting in the Company not being able to sell such securities at prevailing market prices or at the prices at which the Company may have valued its position in the investee's securities.

Valuation-Policy Guidelines

The Company's Board of Directors is responsible for the valuation of the Company's assets in accordance with its approved guidelines.  The Company's Board of Directors is responsible for (1) recommending overall valuation guidelines and (2) the valuation of the specific investments.

There is a range of values, which are reasonable for an investment at any particular time.  Fair value is generally defined as the price at which the investment in question could change hands, assuming that both parties to the transaction are under no unusual pressure to buy or sell and both have reasonable knowledge of all the relevant facts.  To increase objectivity in valuing the securities, the Company uses external measures of value such as public markets or significant third-party transactions whenever possible.  Neither a long-term workout value nor an immediate liquidation value is used, and no increment of value is included for changes, which may take place in the future. Certain members of the Company's Board of Directors may hold minor positions in some of the Company’s investee companies and certain members of the Board of Directors may hold officer or director positions with some of the Company's investee companies.

Valuations assume that, in the ordinary course of its business, the Company will eventually sell its position in the public market or may distribute its larger positions to its stockholders.  Accordingly, no premiums are placed on investments to reflect the ability of the Company to sell block positions or control of companies, either by itself or in conjunction with other investors.  In fact, in certain circumstances, the Company may have to sell the securities it owns of its investees in the open market at discounts to market prices at the time of sale, due to the large position it may hold relative to the average daily trading volume.

The Company uses four basic methods of valuation for its investments and there are variations within each of these methods.  The Company's Board of Directors, in its sole discretion, has determined that the Company's four basic valuation methods constitute fair value.  As an investee evolves, its progress may sometime require changes in the Company's method of valuing the investee's securities.  The Company's investment is separated into its component parts (such as debt, preferred stock, common stock or warrants), and each component is valued separately to arrive at a total value.  The Company believes that a mixture of valuation methods is often essential to represent a fair value of the Company's investment position in any particular investee.  For example, one method may be appropriate for the equity securities of a company while another method may be appropriate for the senior securities of the same company.  In various instances of valuation, the Board of Directors of the Company may modify the valuation methods mentioned below based on the Board of Directors best judgment at any particular time.

The Cost Method values an investment based on its original cost to the Company, adjusted for the amortization of original issue discount, accrued interest and certain capitalized expenditures of the Company.  While the cost method is the simplest method of valuation, it is often the most unreliable because it is applied in the early stages of an investee’s development and is often not directly tied to objective measurements.  All investments are carried at cost until significant positive or adverse events subsequent to the date of the original investment warrant a change to another method.  Some examples of such events are: (1) a major recapitalization; (2) a major refinancing; (3) a significant third-party transaction; (4) the development of a meaningful public market for the investee's common stock; and (5) material positive or adverse changes in the investee's business.

The Appraisal Method is used to value an investment position based upon a careful analysis of the best available outside information when there is no established public or private market in the investee company's securities and it is no longer appropriate to use the cost method.  Comparisons are made using factors (such as earnings, sales or net worth) that influence the market value of similar public companies or that are used in the pricing of private transactions of comparable companies.  Major discounts, usually 50%, are taken when private companies are appraised by comparing private company to similar public companies.  Liquidation value may be used when an investee company is performing substantially below plan and its continuation as an operating entity is in doubt.  Under the appraisal method, the differences among companies in terms of the source and type of revenues, quality of earnings, and capital structure are carefully considered.

An appraisal method value can be defined as the price at which the investment in question could change hands, assuming that both parties to the transaction are under no unusual pressure to buy or to sell, and both have reasonable knowledge of all the relevant facts.  In the case of start-up companies where the entire assets may consist of only one or more of the following:  (1) a marketing plan, (2) management or (3) a pilot operation, an evaluation may be established by capitalizing the amount of the investment that could reasonably be obtained for a predetermined percentage of the ownership in the particular company.  Valuations under the appraisal method are considered to be more subjective than the cost, public market or private market methods.

The Private Market Method uses third-party transactions (actual or proposed) in the investee’s securities as the basis for valuation.  This method is considered to be an objective measure of value since it depends upon the judgment of a sophisticated, independent investor.  Actual firm offers are used as well as historical transactions, provided that any offer used was seriously considered and well documented.

The public market method is the preferred method of valuation when there is an established public market for the investee's securities, since that market provides the most objective basis for valuation.  In determining whether the public market is sufficiently established for valuation purposes, the Company examines the trading volumes, the number of stockholders and the number of market makers.  Under the public market method, as well as under the other valuation methods, the Company may discount investment positions that are subject to significant legal, contractual or practical restrictions.   When an investee's securities are valued under the Public Market Method, Common Stock equivalents such as presently exercisable warrants or options are valued based on the difference between the exercise price and the market value, subject to management and board discretion, of the underlying common stock.  Although the Company believes that a public market could be created for the options and warrants of certain of its investees, thereby possibly increasing the value of these rights above their arbitrage value, the Company did not reflect this possibility in its valuation.

Investments

Ajay Sports, Inc (“Ajay”):

Through its operating subsidiaries, including Pro Golf, Ajay is a franchisor of retail golf stores. President of the Company, Mr. Rautio is also member of the Board of Directors of Ajay.

CompuSonics Video Corporation ("CPVD"):

CPVD is in the business of marketing and distribution of several engineering software products. Mr. Parlatore, director of the Company is also a member of the Board of Directors of CPVD.

Pro Golf International, Inc. (PGI):

PGI is a majority-owned subsidiary of Ajay Sports, Inc., which was formed during 1999, and owns 100 % of the issued and outstanding common stock of Pro Golf of America, Inc. (PGoA) and a majority of the common stock of ProGolf.Com, Inc. (PG.com).   PGoA is the franchiser of Pro Golf Discount Retail Stores.

ProGolf. Com, Inc. (“PG.com”):

PG.com is a Company formed to assist in directing traffic to its franchise stores and to sell golf equipment and other golf-related products and services over the Internet. It is anticipated that traditional sales and distribution methods will be enhanced by the ProGolf.com Internet site. PG.com is a majority owned subsidiary of PGI.

Management of the Company devoted time and resources to providing significant managerial assistance to its investees in varying degrees, during the fiscal year ended June 30, 2005. The Company received no compensation for such contribution.

Regulation - Business Development Companies

The following is a summary description of the Investment Company Act of 1940, as amended, as applied to business development companies.  This description is qualified in its entirety by reference to the full text of the Act and the rules promulgated thereunder by the Securities and Exchange Commission (the "SEC").

The Small Business Investment Incentive Act of 1980 became law on October 21, 1980.  This law modified the provisions of the Investment Company Act of 1940, as amended, that are applicable to a company, such as the Company, which elects to be treated as a "business development company."  The Company elected to be treated as a business development company on June 30, 1982.  The Company may not withdraw its election without first obtaining the approval of a majority of its issued and outstanding voting securities.

A business development company must be operated for the purpose of investing in the securities of certain present and former "eligible portfolio companies" and certain bankrupt or insolvent companies and must make available significant managerial assistance to its investee companies.  An eligible portfolio company generally is a United States company that is not an investment company (except for wholly-owned SBIC's licensed by the  Small Business Administration) and (1) does not have a class of securities included in the Federal Reserve Board's over-the-counter margin list, (2) is actively controlled by the business development company and has an affiliate of the business development company on its board of directors, or (3) meets such other criteria as may be established by the SEC.  Control, under the Investment Company Act of 1940, as amended, is presumed to exist where the business development company, and its affiliates or related parties, own 25% or more of the issued and outstanding voting securities of the investee.

The Investment Company Act of 1940, as amended, prohibits or restricts the Company from investing in certain types of companies, such as brokerage firms, insurance companies, investment banking firms and investment companies.  Moreover, the Investment Company Act of 1940, as amended, limits the type of assets that the Company may acquire to "qualifying assets" and certain assets necessary for its operations (such as office furniture, equipment and facilities) if, at the time of the acquisition, less than 70% of the value of the Company's assets consists of qualifying assets.  The effect of this regulation is to require that at least  70% of a business development company's assets be maintained in qualifying assets.  Qualifying assets include: (1) securities of companies that were eligible portfolio companies at the time the Company acquired their securities; (2) securities of bankrupt or insolvent companies that are not otherwise eligible portfolio companies; (3) securities acquired as follow-on investments in companies that were eligible at the time of the Company's initial acquisition of their securities but are no longer eligible, provided that the Company has maintained a substantial portion of its initial investment in those companies; (4) securities received in exchange for or distributed on or with respect to any of the foregoing; and (5) cash items, government securities and high-quality, short-term debt.  The Investment Company Act of 1940, as amended, also places restrictions on the nature of the transactions in which, and the persons from whom, securities can be purchased in order for the securities to be considered to be qualifying assets.  The Company believes as of June 30, 2004, that more than 90% of its assets would be considered qualifying assets.

The Company is permitted by the Investment Company Act of 1940, as amended, under specified conditions, to issue multiple classes of senior debt and a single class of preferred stock, if its asset coverage, as defined in the Investment Company Act of 1940, as amended, is at least 200% after the issuance of the debt or the preferred stock.  The Company currently has no policy regarding issuing of multiple classes of senior debt or a class of preferred stock.

The Company may issue, in limited amounts, warrants, options and rights to purchase its securities to its directors, officers and employees (and provide loans to such persons for the exercise thereof) in connection with an executive compensation plan, if certain conditions are met.  These conditions include the authorization of such issuance by a majority of the Company's voting securities (as defined below) and the approval by a majority of the independent members of the Board of Directors and by a majority of the Directors who have no financial interest in the transaction.  The issuance of options, warrants or rights to Directors who are not also Officers requires the prior approval of the SEC.

As defined in the Investment Company Act of 1940, as amended, the term "majority of the Company's issued and outstanding voting securities" means the vote of (a) 67% or more of the Company's issued and outstanding common stock present at a meeting, if the holders of more than 50% of the issued and outstanding common stock are present or represented by proxy, or (b) more than 50% of the Company's issued and outstanding common stock, whichever is less.

The Company may sell its securities at a price that is below the prevailing net asset value per share, only upon the approval of the policy by the holders of a majority of its issued and outstanding voting securities, including a majority of the voting securities held by non-affiliated persons, at its last Annual Meeting or within one year prior to the transaction.  In addition, the Company may repurchase its Common Stock, subject to the restrictions of the Investment Company Act of 1940, as amended.  

In accordance with the Investment Company Act of 1940, as amended, a majority of the members of the Company's Board of Directors must not be "interested persons" of the Company, as that term is defined in the Investment Company Act of 1940, as amended.  Generally,  "interested persons" of the Company include all affiliated persons of the Company and members of their immediate families, any "interested person" of an underwriter or of an "investment advisor" to the Company, any person who has acted as legal counsel to the Company within the last two fiscal years, or any broker or dealer, or affiliate or a broker or dealer.

Most of the transactions involving the Company and its affiliates (as well as affiliates of those affiliates) which were prohibited without the prior approval of the SEC under the Investment Company Act of 1940, as amended, prior to its amendment by the Small Business Investment Incentive Act now require the prior approval of a majority of the Company's independent Directors and a majority of the Directors having no financial interest in the transactions.  The effect of this Amendment is that the Company may engage in certain affiliated transactions that would be prohibited, absent prior SEC approval in the case of investment companies, which are not business development companies.  However, transactions involving certain closely affiliated persons of the Company, including its Directors, Officers and employees, still require the prior approval of the SEC.  In general, "affiliated persons" of a person include: (a) any person who owns, controls or holds with power to vote, more than five percent of the Company's issued and outstanding Common Stock, (b) any Director, Executive Officer or General Partner of that person, (c) any person who directly or indirectly controls, is controlled by, or is under common control with that person, and (d) any person five percent or more of whose outstanding voting securities are directly or indirectly owned, controlled or held with power to vote, by such other person.  Such persons generally must obtain the prior approval of a majority of the Company's independent directors and, in some situations, the prior approval of the SEC, before engaging in certain transactions involving the Company or any company controlled by the Company.  In accordance with the Investment Company Act of 1940, as amended, a majority of the members of the Company's Board of Directors are not interested persons as defined in the Act of 1940, as amended.  The Investment Company Act generally does not restrict transactions between the Company and its investee companies.

Finally, notwithstanding restrictions imposed under Federal Securities Laws, it is anticipated that the Company will acquire securities of investee companies pursuant to stock purchase agreements or other agreements that may further limit the Company's ability to distribute, sell or transfer such securities.  And as a practical matter, even if such transfers are legally or contractually permissible, there may be no market, or a very limited market, for such securities.  Economic conditions may also make the price and terms of a sale or transfer transactions unattractive.  

Other Securities Law Considerations

In addition to the above-described provisions of the Investment Company Act of 1940, as amended, there are a number of other provisions of the Federal Securities Laws that affect the Company's operations.  For example, restrictions imposed by the Federal Securities Laws, in addition to possible contractual provisions, may adversely affect the ability of the Company to sell or otherwise to distribute or dispose of its portfolio securities.

Most if not all securities which the Company acquires as venture capital investments will be "restricted securities" within the meaning of the Securities Act of 1933 ("Securities Act") and will not be permitted to be resold without compliance with the Securities Act of 1933, as amended.  Thus, the Company will not be permitted to resell portfolio securities unless a registration statement has been declared effective by the SEC with respect to such securities or the Company is able to rely on an available exemption from such registration requirements.  In most cases the Company will endeavor to obtain from its investee companies "registration rights," pursuant to which the Company will be able to demand that an investee company register the securities owned by the Company at the expense of the investee company.   Even if the investee company bears this expense, however, the registration of any securities owned by the Company is likely to be a time-consuming process, and the Company always bears the risk, because of these delays, that it will be unable to resell such securities, or that it will not be able to obtain an attractive price for such securities.  

At times the Company will not register portfolio securities for sale but will seek to sell and sometimes seek an exemption from registration.  The most likely exemption available to the Company is section 4(1) of the Securities Act of 1933, as amended, which, in effect, exempts sales of securities not involving a public distribution of the securities.  This exemption will likely be available to permit a private sale of portfolio securities, and in some cases a public sale, if the provisions of Rule 144 under the Securities Act of 1933, as amended, are complied with.  Among other things, Rule 144 generally requires that securities be sold in "broker transactions," and imposes a one-year holding period prior to any resale of restricted securities.

The Company may elect to distribute in-kind securities of investee companies to its stockholders.  Prior to any such distribution, the Company expects that it will need to file, or cause the issuers of such distributed securities, to file, a registration statement or, in the alternative, an information statement, which when declared effective by the SEC, will permit the distribution of such securities and also permit distributee stockholders of the Company to sell such distributed securities.

Federal Income Tax Matters

For federal and state income tax purposes, the Company is taxed at regular corporate rates on ordinary income and realized gain.  It is not entitled to the special tax treatment available to more regulated investment companies, although the Company plans to conduct its affairs, if possible, to minimize or eliminate federal and state income taxes.   Distributions of cash or property by the Company to its stockholders will be taxable as ordinary income only to the extent that the Company has current or accumulated earnings and profits.

The "alternative tax" rate at which corporations are taxed on long-term capital gains is up to 35% pursuant to the Tax Reform Act of 1986 (the "Tax Reform Act").  A corporation generally may offset capital loss only against capital gain.  Generally, if the Company realizes a net capital loss for any taxable year, it can carry back such net capital loss only against capital gain.  Such a net capital loss for any taxable year can generally be carried back to each of the three preceding taxable years, and then any unused portion thereof may be carried over into the subsequent taxable years for a period of five years.

Future Distributions

The Company does not currently intend to pay cash dividends.  The Company's current dividend policy is to make in-kind distributions of its larger investment positions to its stockholders when the Company's Board of Directors deems such distributions appropriate.  Because the Company does not intend to make cash distributions, stockholders would need to sell securities distributed in-kind, when and if distributed, in order to realize a return on their investment.

An in-kind distribution will be made only when, in the judgment of the Company's Board of Directors, it is in the best interest of the Company's stockholders to do so.  The Board of Directors will review, among other things, the investment quality and marketability of the securities considered for distribution; the impact of a distribution of the investee's securities on the investee's customers, joint venture associates, other investors, financial institutions and management; tax consequences and the market effects of an initial or broader distribution of such securities.  Securities of the Company's larger investment positions in more mature investee companies with established public markets are most likely to be considered for distribution. It is possible that the Company may make an in-kind distribution of securities that are substantially liquid irrespective of the distributee's stockholder rights to sell such securities.  Any such in-kind distribution would require stockholder approval only if the distribution represents substantially all of the Company's assets.  It is possible that the Company may make an in-kind distribution of securities that have appreciated or depreciated from the time of purchase depending upon the particular distribution.  The Company has not established a policy as to the frequency or size of distributions and indeed there can be no assurance that any distributions will be made.  To date, no such distributions have been made and the Company is not considering doing so, but the Company may consider doing so in the future.

Managerial Assistance

The Company believes that providing managerial assistance to its investees is critical to its business development activities.  "Making available significant managerial assistance" as defined in the Investment Company Act of 1940, as amended, with respect to a business development company such as the Company means (a) any arrangement whereby a business development company, through its directors, officers, employees or general partners, offers to provide, and, if accepted, does so provide, significant guidance and counsel concerning the management, operations, or business objectives and policies of a portfolio company; or (b) the exercise by a business development company of a controlling influence over the management or policies of a portfolio company by the business development company acting individually or as a part of a group acting together which controls such portfolio company.  The Company is required by the Investment Company Act of 1940, as amended, to make significant managerial assistance available at least with respect to investee companies that the Company treated as qualifying assets for purposes of the 70% test.  The nature, timing and amount of managerial assistance provided by the Company varies depending upon the particular requirements of each investee company.

The Company may be involved with its investees in recruiting management, product planning, marketing and advertising and the development of financial plans, operating strategies and corporate goals.  In this connection, the Company may assist clients in developing and utilizing accounting procedures to record efficiently and accurately, transactions in books of account which will facilitate asset and cost control and the ready determination of results of operations.  The Company may also seek capital for its investees from other potential investors and occasionally subordinates its own investment to those of other investors.  Where possible, the Company may introduce its investees to potential suppliers, customers and joint venture partners and assists its investees in establishing relationships with commercial and investment bankers and other professionals, including management consultants, recruiters, legal counsel and independent accountants.  The Company also assists with joint ventures, acquisitions and mergers.

In connection with its managerial assistance, the Company may be represented by one or more of its Officers or Directors who are members of the Board of Directors of an investee.  As an investment matures and the investee develops management depth and experience, the Company's role will become progressively less active.  However, when the Company owns or, on a pro forma basis, could acquire a substantial proportion of a more mature investee company's equity, the Company remains active in, and will frequently be involved in, the planning of major transactions by the investee.  The Company's goal is to assist each investee company in establishing its own independent and effective board of directors and management.

Competition

The Company is subject to substantial competition from business development companies, venture capital firms, new product development companies, marketing companies and diversified manufacturers, most of whom are larger than is the Company and have significantly larger net worth, financial and personnel resources than does Company.  In addition, the Company competes with companies and individuals engaged in the business of providing management consulting services.

Employees

As of June 30, 2005 the Company had no employees.

Item 2.  Properties

The Company subleases office space from a stockholder of the Company. The Company occupies an office and shares a common area with such stockholder.  The Company believes that the lease rate paid for this space represents current market rates.  The sublease is on a month-to-month basis.

Item 3.  Legal Proceedings

Currently the Company is not involved in any legal proceedings. The legal case Burmann vs. Enercorp, Inc was settled early June, 2005. The Company was also a plaintiff in the legal case: First Equity Corporation, CompuSonics Video Corporation, and Enercorp, Inc vs. Target Holding B. V,a partnership(“Target A”), Target Holding B.V, a consummated Netherlands business entity (“Target B”), Senol Halfar, Dietgard Adrian, George Burmann, Dana Burmann, H.J Gullug, Halfar Consulting, and Gunnallen Financial, Inc. Effective July 1, 2005 Enercorp agreed to be dismissed as a co-plaintiff in that case

Item 4.    Submission of Matters to a Vote of Security Holders

On February 1, 2005 Enercorp held its 2004 Annual Meeting of Shareholders at its corporate headquarters in Farmington Hills, Michigan. Enercorp’s management prevailed in the proxy solicitation initiated by George Burmann, a 6.5% Shareholder from Florida.. (See Report on Form 8-K filed on February 2, 2005.)    

The following proposals were submitted to a vote of security holders.

•

Proposal 1: to elect three Directors to serve until the next Annual Meeting of Shareholders and until their successors have been elected and qualified.

•

Proposal 2:  to ratify the appointment of JL Stephan & Co. P.C. as the independent registered auditors of the Company for the fiscal year ended June 30, 2005. (Passage of this Proposal requires the affirmative vote of the majority of the Company’s issued and outstanding shares entitled to vote on this Proposal.) ( See the report in the form 8-K filed on Aug. 30, 2005)

•

Proposal 3: to amend its Articles of Incorporation to reduce the voting requirement for approval of certain actions from two-thirds to a majority of the Common Stock and Preferred Stock entitled to vote on the action.  (Passage of this Proposal requires the affirmative vote of two-thirds of the Company’s issued and outstanding shares entitled to vote on this Proposal.)

•

Proposal 4: to authorize the Company to change the nature of its business and withdraw its status as a Business Development Company under the Investment Company Act of 1940, as amended.  (Passage of this Proposal requires the affirmative vote of the majority of the Company’s issued and outstanding shares entitled to vote on this Proposal.)

•

Proposal 5: Such other business as may properly come before the Meeting, or any adjournment or adjournments thereof.

Shareholders approved Proposal 1. Reelected to the Board of Directors were James C. Sargent, an attorney and former U. S. Securities and Exchange (SEC) Commissioner and former Regional Administrator of the New York Regional Office of the SEC; Dr. Jeffrey E. Rautio of Livonia MI; and Salvatore M. Parlatore, MBA, Brand Manager, Whirlpool Corp. and a resident of Stevensville MI. These directors will serve the Company until their successors are duly elected and qualified.

Shareholders ratified appointment of Enercorp’s independent auditors (Proposal 2), and disapproved amending the Company’s Articles of Incorporation to require 50 percent shareholder approval for certain actions (Proposal 3).  Shareholders also denied Management’s request to withdraw from regulations as a Business Development Company (BDC) (Proposal 4).  

PART II

Item 5.  Market for the Company's Common Equity and Related Stockholder Matters

Market Information

The Company's common stock is traded has been the Over-The-Counter (OTC) market, through the OTC electronic bulletin board. The ranges of the high and low bid quotations as published by the OTC electronic bulletin board for the periods from September 30, 2002 through June 30, 2005, are as set forth below.  The "OTC" electronic bulletin board pricing information reflects inter-dealer prices, without retail mark-up or mark-down or commissions and may not necessarily represent actual transactions.

                                                  

  HIGH BID  LOW BID


Fiscal 2003-Quarters Ended:

  

September 30, 2002

$0.50

$0.35

December 31, 2002

$0.12

$0.05

March 31, 2003

$0.05

$0.05

June 30, 2003

$0.25

$0.10

Fiscal 2004– Quarters Ended:

  

September 30, 2003

$0.38

$0.38

December 31, 2003

$0.42

$0.35

March 31, 2004

$0.90

$0.20

June 30, 2004

$0.30

$0.20

   

Fiscal 2005– Quarters Ended:

  

September 30, 2004

$0.30

$0.30

December 31, 2004

$0.30

$0.30

March 31, 2005

$0.33

$0.30

June 30, 2005

$0.30

$0.30

Holders

The approximate number of record holders of the Company's common stock as of June 30, 2005 was approximately 1,332. This number does not include beneficial owners whose shares are held on account in "street name" by banks or brokerage firms.

Dividends

The Company has paid no dividends on its common stock within the past five years, and has no intention to pay cash dividends in the future.  

Sales of Securities subsequently rescinded.

The Company issued to various accredited investors 369,318 shares of 6% Cumulative Convertible Preferred Stock, Par Value $0.88/share, on August 2, 2004.The Company received $325,000 for the newly issued Legended Preferred shares. The Legended Preferred shares were sold at a price of $0.88/per share, convertible one for one to Common stock equal to the latest NAV (Net asset Value) per common share at day’s end, June 30, 2004. The proceeds from this funding were used to pay off the majority of the Company’s then outstanding liabilities, pay the cost of the shareholder meeting, and provide working capital.

The Company committed to the new investors to entitle them with the voting rights in recognition for the capital they had invested in the Company. Unable to do so, the Company’s Board of Directors in accordance with the investing parties, decided to convert the recently issued securities into the secure debt totaling $325,000.  (See disclosure in the preceding Forms 10Q)

Item 6. Selected Financial Data

 

2005

2004

2003

2002

2001

Working capital

 $      34,672

 $     613,071

  $     640,272

   $     954,562

  $     930,855

Cash

0

417

618

1,123

342

Total investments

470,584

946,164

900,644

1,045,842

984,214

Total assets

470,584

946,581

901,262

1,046,965

985,489

Total liabilities

435,912

333,509

260,989

92,403

54,634

Shareholders equity

34,672

613,071

640,272

954,562

930,855

Operating revenue

1,311

992

1,310

4,455

1,475,824

Legal, accounting and other professional fees

77,876

12,417

16,336

7,392

29,224

Management fees

40,000

30,000

30,000

30,000

0

Officer wages

0

25,000

120,000

0

78,500

Interest expense

21,413

5,001

3,355

1,612

173,773

Total other gen'l & admin. expenses

6,056

1,294

712

3,543

20,187

Net Gain (Loss) from operation before taxes

(533,013)

(91,881)

(169,093)

(38,092)

1,128,112

Income taxes

0

0

0

0

569,830

Unrealized gain(loss) from investments

(45,386)

64,681

(145,199)

61,798

(1,353,471)

Increase (Decrease) in net assets resulting from operations

(578,399)

(27,200)

(314,292)

23,706

(795,189)

Increase (Decrease) in net assets per share

 $       (0.83)

 $         (0.04)

 $         (0.45)

   $         0.03

 $         (1.14)


Item 7. Management's Discussion and Analysis of Financial Condition and  Results of Operations

Capital Resources and Liquidity.

Currently, the Company's investment activity and operations are restricted by its limited working capital position.  Capital required for the Company's investment activities, if available, would be generated from new investments, the sale of portfolio securities or from additional offerings of the Company's restricted and legended common stock, of which there can be no assurance of any success in any of such efforts. The ability of the Company to sell restricted portfolio held securities is dependent on market conditions over which the Company has no control.  The Company had no material commitments for capital expenditures, as of June 30, 2005.

Total assets for the fiscal year ending June 30, 2005 amount to $470,573. Net assets as of June 30, 2005 were $34,672. For the years ended June 30, 2005, 2004 and 2003, the Company's cash flow was dependent primarily upon the certain loans made to the Company by related parties.   

The Company'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, along with its ability to borrow funds and make sales of its portfolio securities, when, and to the extent, the Board of Directors decides such sales are appropriate or necessary.

Recently Enacted Pronouncements

The following are new accounting standards and interpretations that may be applicable in the future to the Company:

SFAS No. 123(R), "Share-Based Payment", which is a replacement to SFAS No. 123 “Accounting for Stock Based Compensation” and supersedes APB Opinion No. 25, “Accounting for Stock Issued to Employees”, was issued in December 2004.  The revisions are intended to provide investors and other users of financial statements with more complete and neutral financial information by requiring that the compensation cost relating to share-based payment transactions be recognized in financial statements. That cost will be measured based on the fair value of the equity or liability instruments issued. SFAS No. 123(R) covers a wide range of share-based compensation arrangements including share options, restricted share plans, performance-based awards, share appreciation rights, and employee share purchase plans. SFAS No. 123, as originally issued in 1995, established a preferable fair-value-based method of accounting for share-based payment transactions with employees. However, that Statement permitted entities the option of continuing to apply the guidance in APB Opinion No. 25, as long as the footnotes to financial statements disclosed what net income would have been had the preferable fair-value-based method been used. Publicly traded entities (other than those filing as small business issuers) will be required to apply SFAS No. 123(R) as of the first annual reporting period that begins after June 15, 2005. The Company is currently evaluating the financial statement impact of the adoption of SFAS No. 123(R).

SFAS No. 154, “Accounting Changes and Error Corrections – replacement of APB Opinion No. 20 and FASB Statement No. 3,” (SFAS No. 154) was issued in May 2005. SFAS No. 154 changes the accounting for and reporting of a change in accounting principle by requiring retrospective application to prior periods’ financial statements of changes in accounting principle unless impracticable. SFAS No. 154 is effective for accounting changes made in fiscal years beginning after December 15, 2005. We do not expect the adoption of SFAS No. 154 to have a material impact on our results of operations, financial position or cash flows.

Material Changes in Financial Condition

On June 30, 2005 the total net fair market value of investments was $470,573 compared to $946,164 and $900,643 on June 30, 2004 and 2003, respectively. The decrease is mainly due to decrease in fair market value of CPVD common stock, which traded at $0.009, $0.052 and $0.037 respectively on June 30, 2005, 2004 and 2003. Also, the other investments in PGI and PG.com have slightly decreased during the past year affecting total portfolio value. Another cause for the decrease in total portfolio value is the sale of some investments in December 2004, totaling fair value amount of $41,000.     

The liabilities increased by $72,520 for the fiscal year 2004 compared to fiscal year 2003 and by $102,392 for the fiscal year 2005, compared to fiscal year 2004.

The change for fiscal year 2004 is caused by the $25,000 increase in accrued officer salary, the $15,000 increase in face value of note payable owed to Dearborn Wheels, Inc, the $30,000 increase in management fees owed to Acrodyne Corporation, and the $5,002 increase in the interest payable on the note payable to Dearborn Wheels, Inc. The accounts payable decreased by $2,482 for the year 2004 compared to the fiscal year 2003. As a result of these changes, the total net asset value decreased by $27,201 for the year ended June 30, 2004.

The change for fiscal year 2005 is mainly due to the conversion of the preferred stock cancelled and subsequently converted to debt in the amount of $325,000. This increase in debt in the form of notes payable caused the increase in interest accrued on these notes. Interest accrued on the notes increased by $11,514 for the fiscal year 2005, compared to fiscal year 2004. Meanwhile, the notes payable to related parties decreased by 30,950, and accrued management fees also decreased by $57,500 for the fiscal year 2005, compared to fiscal year 2004.           

The Company is past due on the repayment of the Note payable to Wen Group. This Note has a face value of $30,000, bears no interest and was due June 2002. The validity of this note is being contested. The $325,000 notes payable rising from the conversion of preferred stock to secured debt are short term notes, however, the creditors related to these notes have not demanded any payments on either the notes, or the interest accrued on the notes. These investors are willing to extend the terms of the notes, or converting the notes to equity. Discussions have occurred between the Company and these creditors related to such matter, and a satisfactory result is expected in the near future.           

The Company’s current plan is to bring in other investors, borrow funds secured by collateral or sell a portion of its security holdings.

Results of Operations  

The Company had total revenues of $1,311, $ 992 and $1,310 for the fiscal years ended June 30, 2005, 2004, and 2003, as a result of some refunds, and the write off of some accounts payable.

The Company’s net loss from operations for the fiscal year 2005 was $533,013 compared to $91,881 and $169,093 of net loss from operations for fiscal years 2004 and 2003, respectively.

The increase in net operating loss for this year is mainly due to the increase in legal and professional fees caused by the proxy contest initiated by a 6.5 % shareholder in 2004, and the realized loss of $380,194 recognized on the sale of a small portion of the portfolio investments in December 2004.

The Company recorded $77,876 and $12,417 in legal, accounting and other professional fees for 2005 and 2004, respectively. Management fees for 2005 were $40,000 compared to $30,000 for 2004. The increase in management fees is due to new management assistance needed during the proxy contest, which was the main cause for the increase in other operating expense, such as travel, contingency, and other general and administrative expenses. The Company spent $3,285 in travel, $5,500 in settlement contingency, and $6,056 in other general and administrative expenses, compared to $0, $0, and $1,294 of respective expenses incurred during fiscal year 2004.

Unrealized loss on investments was $45,386 for 2005, compared to $64,681 of gain recorded for 2004. This change is due to the same factors as described in the first paragraph under “Material Changes in Financial Condition”.

The $77,212 decrease in the net operating loss for fiscal year 2004 compared to 2003 is mainly due to the decrease in accrued salary expense.

The Company spent $10,102 and $12,562 in accounting fees for the fiscal year 2004 and 2003 respectively. The Company recorded $5,001 and $3,355 of interest expense on the note payable to Quorum Capital, (former Dearborn Wheels, Inc.) for the fiscal year 2004 and 2003, respectively.

The increase in the interest expense is due to the increase in the principal amount of the underlying note.   

The Company recorded an unrealized gain on investments of $ 64,681 for the fiscal year ended 2004 compared to an unrealized loss on investments of $145,199 for the fiscal year 2003.  The change for the years indicated is largely the result of the increase in market value of the common stock of the largest investee of the Company, CompuSonics Video Corporation.

The Company recorded a realized loss of $19,161 on the write off of the Proconnextions, Inc investment for the year 2004, compared to a realized loss of $0 for the year 2003. This investment was worthless.  

Enercorp does not have any long-term contractual obligations. Enercorp has only one short-term contractual obligation related to a monthly $2,500 of management fees payable to Acrodyne Corporation. Terms and conditions of such agreement with Acrodyne are subject to the Board of Directors periodical review.         


Item 8.    Financial Statements and Supplementary Data

Financial statements and supporting schedules reporting supplementary financial information is attached hereto, made a part hereof, and are listed in Item 13 of Part IV of this Form 10-K.

Item 9    

Changes in and Disagreements with Accountants on Accounting and Financial  Disclosure

Not applicable.

Item 9a.   Controls and procedures

•

Evaluation of Controls and Procedures

Company’s Chief Excecutive Officer and Chief Financial officer have performed an evaluation of the Company’s disclosure controls and procedures, as that term is defined in Rules 13a-15(e) and 15d-15(e) of the Securities and Exchange Act of 1934, as amended (the “ Exchange Act”), as of the end of the period covered by the report and each has concluded that such disclosure controls and procedures are effective to ensure that the information required to be disclosed in our periodic reports filed under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified by the Securities and Exchange Commission’s rules and regulations.

•

Changes in Internal Controls

There have been no changes in the Company’s internal control over financial reporting (as such term defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal year ended June 30, 2005 to which this report relates that have materially affected, or are reasonably likely to affect, the Company’s internal control over financial reporting.

Item 9b.   Other information

None

PART III

Item 10.   Directors, Executive Officers and Treasurer of the Company

Identification of Directors and Executive Officers

Name

 

Position with the Company

 

Age            

 

 Commencement Date  

James C. Sargent

 

Director/Chairman/CEO

89

 

9/16/2003

Jeffrey E. Rautio

 

Director                   

 

44

 

10/16/2002

Salvatore M.Parlatore

 

Director  

 

31

 

10/16/2002

There were no arrangements or understandings between or among any of the above Officers and Directors pursuant to which any one of such persons was elected to any such office or position.  All Directors were elected at the last Annual Meeting of the Company Shareholders to serve Company until their successors are duly elected and qualified.  

Significant Employees

Not applicable

Family Relationships

None

Business Experience

James Cunningham Sargent, Sr., born 1916 in New Haven, Connecticut, graduated from the Taft School in June 1935, attended the University of Virginia earning a B.A. degree in 1938 and an LLB Degree in 1940.  From 1942 to 1946, he served in the US Air Force from a Private to a Captain serving for two years in Australia, New Guinea and the Philippines.  Admitted to practice law in New York State in 1940, he was admitted to practice law in the District of Columbia in 1961.  From 1940 to 1951, he served as an associate with Clark & Baldwin, as a trial attorney for Consolidated Edison Company of New York, as a law assistant with the Appellate Division of the Supreme Court of the State of New York and as an Assistant Attorney General of the State of New York.  In 1951, he became an associate and then partner of Spence & Hotchkiss, a law firm in New York City.  In November 1955, he was sworn in as the Regional Administrator of the New York office of the United States Securities and Exchange Commission where he served until June 1956 when he was sworn in as a Commissioner of the United States Securities and Exchange Commission, an appointment by President Eisenhower, with the advice and consent of the US Senate.  Following his service with the SEC, Mr. Sargent returned to New York City, where he became a partner in firms specializing in securities law.  He remained a partner of Whitman & Ransom until November 1995.  He then became counsel to Opton Handler Gottlieb Feiler and Katz until March 1997.  Mr. Sargent continues to practice law.

Jeffrey E. Rautio, O.D. Optometry, has been a Director of Refractive Services at the Beitman Laser Eye Institute since 2000.  He has also been affiliated with WorldWide Tee Time, LLC, since 1998.  From 1987-1999, he served as Senior Staff Optometrist at the Henry Ford Hospital and as Team Optometrist for the Detroit Lions, Inc. from 1991-1999.  From 1999-2000, he was a Director of Optometry at Oculus Laser Vision Correction & Advanced Vision Centers of Derma Vogue.  In 1981, Dr. Rautio completed an A.A.S. degree (Associate in Applied Science) at Ferris State University, Big Rapids-MI and, in May 1986, he was awarded the O.D. degree (Doctor of Optometry) by that university.   

Salvatore M. Parlatore was co-founder, Director of Operations and Director of Strategy, from 1997 – 2001 for Nexiv, Inc., a “startup” website, hosting and Internet services company. From 1997-1999, he was Senior Project Manager with Webstyles, LLC.   Earlier he was retained or employed by Gettys Group, Inc. 1996-1997 as a management consultant, where he specialized in commercial real estate evaluations and renovations nationally, particularly hotel projects.  A summer 2002 internship at Whirlpool provided experience as an Associate Brand Manager. A native of Southampton, Long Island, Mr. Parlatore attended Brentwood College School, Vancouver Island, Canada then later earned a BS in Business Administration in 1996 at Cornell U., Ithaca - NY.   He earned a MBA degree in May 2003 majoring in marketing and information technology at the University of Illinois, Urbana-Champaign.

Involvement in Certain Legal Proceedings

Currently the Company is not involved in any legal proceedings. The legal case Burmann vs. Enercorp, Inc was settled early June, 2005.

The Company was also a plaintiff in the legal case:  First Equity Corporation, CompuSonics Video Corporation, and Enercorp, Inc vs. Target Holding B. V,a partnership(“Target A”), Target Holding B.V, a consummated Netherlands business entity (“Target B”), Senol Halfar, Dietgard Adrian, George Burmann, Dana Burmann, H.J Gullug, Halfar Consulting, and Gunnallen Financial, Inc.

Effective July 1, 2005 Enercorp agreed to be dismissed as a co-plaintiff in that case.

Promoters and Control Persons

None

 Section 16(a)  Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires executive officers and directors, and persons who beneficially own more than ten percent of the Company's common stock to file with the Securities and Exchange Commission initial reports of ownership on Form 3, reports of changes in ownership on Form 4 and annual statements of changes in ownership on Form 5.  Executive officers, directors and greater than ten percent beneficial owners are required under the regulations related to Section 16 to furnish the Company with a copy of each report filed.

Based solely upon a review of the copies of the reports received by the Company during the fiscal year ended June 30, 2005, and written representations of the persons required to file said reports, the Company believes that all reports were filed and done so on a timely basis.


Item 11.     Executive Compensation

Summary Compensation Table

The following table sets forth information regarding compensation paid to the Company's Chief executive officer for the two years ending June 30, 2005, 2004 and 2003. No other person who is currently an executive officer of the Company earned compensation exceeding $100,000 during any of those years.

                                                                 Annual Compensation (in dollars)                 Awards

                                                                                                                                    Securities

                                                                                                          Other Annual    Underlying

Name and Principal Position    Year          Salary          Bonus    Compensation  Stock Options


None                                              2005               $0       -0-             -0-                        -0-

Thomas W Itin,   President,           2004      $25,000       -0-             -0-                        -0-

Chief Executive Officer &              2003    $120,000       -0-             -0-                        -0-

 Treasurer.                              

Option/SAR Grant Table

No stock options or stock appreciation rights were granted during the fiscal year ended June 30, 2005.

Aggregated Option/SAR Exercises and Fiscal Year-End Option/SAR Value Table

No stock options were exercised during the fiscal year ended June 30, 2005.

Compensation of Directors

The Company has an arrangement with its disinterested non-employee Directors to pay them a fee of $500 for each regular and non-scheduled Board of Directors meeting attended, either in person or by telephone.   

Item 12.

Security Ownership of Certain Beneficial Owners and Management

Set forth below is information as to each person known by the Company to be the beneficial owner of more than five percent of the Common Stock, the Company's Directors and named Executive Officers, individually, and Executive Officers and Directors as a group, as of September 19, 2005.

 

Amount and Nature

  

Name and Address of               

of Beneficial                    

  

Beneficial Owner                  

Ownership Of Class               

 

Percent

    

Vasant Chheda                       

50,000

 

7.20%

7 Highland Place

   

Great Neck, NY  11020

   
    

Charles Maginnis

60,000

 

8.60%

c/o Corporate Securities Group, Inc.

(1)(2)

  

7600 Southland Blvd., Suite 101

   

Orlando, FL 32809

   
    

George Burmann

45,500

 

6.50%

c/o Corporate Securities Group, Inc.

(1)(2)

  

7600 Southland Blvd., Suite 101

   

Orlando, FL 32809

   
    

(1)

Based upon information contained in the Schedule 13D and amendments thereto filed with the Securities and Exchange Commission.

(2)

Common Stock.

Item 13.    Certain Relationships and Related Transactions

CompuSonics Video Corporation (“CPVD”) is one of the largest investees of the Company.  Salvatore Parlatore, Director of the Company, and Thomas W. Itin, former Chairman, of the Company, are currently members of the Board of Directors of CPVD. Mr. Itin also holds the position of Chairman of CPVD.

Ajay Sports, Inc is a related party with the Company. Thomas W. Itin, former Chairman of the Company, holds the position of Chairman in Ajay Sports, Inc. Thomas W. Itin has a controlling interest in Ajay Sports, Inc.

Pro Golf International, Inc (“PGI”) is a related party to the Company. Thomas W. Itin former Chairman of the Company, holds the position of Chairman and CEO in PGI, a controlling subsidiary of Ajay Sports, Inc. Thomas W. Itin owns a controlling interest by reason of attribution in PGI.

ProGolf.com, “PG. com” is a related party with the Company Enercorp, Inc. Thomas W. Itin, former Chairman of the Company, holds the position of Chairman and CEO in PG.com, a controlling subsidiary of PGI. Thomas W. Itin has a controlling interest by reason of attribution in PG.com.

The Company owes $2,500 per month in Management fees to Acrodyne Corporation, a company in which the Company’s former President has an interest.


Item 14.   Principal Accounting Fees and Services

Fees for services performed by J.L. Stephan Co, PC for the years ended June 30, 2005 and 2004 are:

 

2005

2004

Audit

5,500

5,800

Audit Related

2,082

4,302

Taxes

-

-

Other

-

-


Fees paid to the auditors were approved by the Audit Committee of Enercorp. UHY, LLP fees will be disclosed in the next year’s 10K. (See the 8-K report filed on Aug.30, 2005)  

PART IV

Item 15.    Exhibits, Financial Statements Schedules and Reports on Form 8-K

The following documents are filed as part of this report immediately following the signature page, or are incorporated herein by reference

(1)   Financial Statements

 

Report of Independent Registered  Public Accounting Firm

F-1

Report of Independent Registered  Public Accounting Firm

F-2

Statements of Assets and Liabilities as of June 30, 2005 and 2004

F-3

Schedule of Investments as of June 30, 2005 and 2004

F-4-F6

Statements of Changes in Stockholders' Equity for each of the years in the three-year period ended June 30, 2005.

F7

Statements of Operations for each of the years in the three-year period ended June 30, 2005

F8

Statements of Cash Flows for each of the years in the three-year period ended June 30, 2005

F9

Notes to Financial Statements

F10-F16

(2)   Certification pursuant to 18 USC, Section 1350, as adopted pursuant to sections 302 and 906 of the Sarbanes-Oxley Act of 2002.

F17-F18

(3)   Exhibits:

 

3.1* Amended and Restated Articles of Incorporation as Filed with the Secretary of State, State of Colorado, April 2, 1996   

 

3.2** Bylaws

 

*Incorporated by reference from Exhibit 10.1 to the Company's Form 10-K for the fiscal year ended June 30, 1989.

**Incorporated by reference from Exhibits 3.1 and 3.2 to the Company's Form 10-K for the fiscal year ended June 30, 1981.

(4)   Reports on Form 8-K.

None

(5)   Required exhibits are incorporated by reference.



F-#


SIGNATURES


Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


ENERCORP, INC.

(Company)

By  /s/ James C. Sargent, President

           James C. Sargent, President

Date:   September 28, 2005          

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Report has been signed below by the following persons on behalf of the Company and in the capacities specified  and on the dates indicated.

Date: September 28, 2005                

/s/ James C. Sargent, Director

     James C. Sargent, Director

Date: September 28, 2005     

/s/ Jeffrey E. Rautio, Director

     Jeffrey E. Rautio, Director

Date: September 28, 2005

/s/ Salvatore M. Parlatore, Director

     Salvatore M. Parlatore, Director


F-#



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM




Board of Directors

Enercorp, Inc.:


We have audited the accompanying statement of assets and liabilities and schedule of investments of Enercorp, Inc. as of June 30, 2005, and the related statement of operations, changes in stockholders’ equity and other comprehensive loss, and cash flows for the year then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.


We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.


In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Enercorp, Inc. as of June 30, 2005, and the results of their operations and their cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.






/s/ UHY LLP

Southfield, Michigan

August 22, 2005




F-#



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



To the Board of Directors

of Enercorp, Inc.


We have audited the accompanying statement of assets and liabilities of Enercorp, Inc., including the schedule of investments, as of June 30, 2004, and the related statements of changes in stockholders’ equity, operations and cash flows for the years ended June 30, 2004 and 2003.  These financial statements are the responsibility of the Company’s management.  Our responsibility is to express an opinion on these financial statements based on our audits.


We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.  Our procedures included confirmation of securities owned as of June 30, 2004 by correspondence with the custodian and brokers.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.


In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Enercorp, Inc. as of June 30, 2004 and the results of its operations and its cash flows for the years ended June 30, 2004 and 2003 in conformity with accounting principles generally accepted in the United States of America.




/s/    J L Stephan Co., PC

J L Stephan Co., PC

Traverse City, Michigan


September 15, 2004

 



F-#




Enercorp, Inc.
Statements of Assets and Liabilities

ASSETS

 

June 30, 2005

 

June 30, 2004

        
   

Investments, at fair value, cost of $782,282 and $1,212,477 at June 30, 2005 and 2004, respectively

$

470,584

$

946,164

   

Cash

 

-

 

417

     

470,584

 

946,581

LIABILITIES AND NET ASSETS

    

Liabilities

    
  

Note payable

 

355,000

 

30,000

  

Note related-party

 

24,000

 

54,950

  

Accounts payable and accrued liabilities

 

12,999

 

13,660

  

Officer salary payable

 

0

 

145,000

  

Accrued management fees-related party

 

22,500

 

80,000

  

Interest payable – other

 

20,818

 

-

  

Interest payable – related party

 

595

 

9,899

     

435,912

 

333,509

Net assets

    
  

Common stock, no par value: 10,000,000 shares authorized, 695,897

   
   

shares issued and outstanding at June 30, 2005 and 2004.

 

1,888,251

 

1,888,251

  

Preferred stock, no par value:  1,000,000 shares authorized, -0- issued.

   
  

Accumulated deficit

 

(1,541,880)

 

(1,008,866)

  

Unrealized net loss on investments, net of deferred income taxes

    
   

at June 30, 2005 and 2004, respectively

 

(311,699)

 

(266,314)

     

34,672

 

613,071

    

$

470,584

$

946,581

        



                        See notes to financial statements



F-#






Enercorp, Inc.
Schedule of Investments

June 30, 2005

  

Expiration

 

No of

Share

 

Fair Market

 

Net Fair

Affiliated Companies

Description of Business

Date

Restrictions

shares

Price

Cost/Equity

Value

Discount

Market Value

Common Stocks-Public Market Method of Valuation

        

CompuSonics Video

Digital Video Product &

  

1,751

0.009

$            -

$           16

$          -

$               16

 

Web Site Development

  

9,500,000

0.009

101,650

85,500

(25,650)

59,850

Ajay Sports Inc.

Golf & Casual Furniture

 

 

94,118

0.040

191,907

3,765

 

3,765

   

 

16,667

0.040

37,500

667

 

667

Preferred Stocks-Public Market Method of Valuation

        

Ajay Sports Inc.

Golf & Casual Furniture

  

1,000

0.097

10,000

97

 

97

Common Stocks-Board Appraisal Method of Valuation

        

Pro Golf International

Franchisor of Retail Golf Stores

a & b

71,733

3.000

187,725

215,199

(43,040)

172,159

Pro Golf. Com

Web Sales of Golf Equip

 

a & b

300,000

1.560

252,000

468,000

(234,000)

234,000

 

Subtotal

    

780,782

773,244

(302,690)

470,554

Warrants and stock Options - Board Appraisal Method of Valuation

      

Williams Controls, Inc.

Manufacturer of sensors & control systems

03/12/08

b

50,000

     
          

Unaffiliated Companies

        

Common Stocks-Public Market Method of Valuation

    

 

   

Vitro Diagnostics

Diagnostic test kits

  

300

0.100

1,500

30

 

30

 

 

 

 

 

 

 

0

 

 

 

Total All Companies

 

 

 

 

$ 782,282

$ 773,274

$(302,690)

$    470,584

         

 

(a)  No public market for this security

        

(b)  Subject to Rule 144

        

See notes to financial statements



Enercorp, Inc.
Schedule of Investments

June 30, 2004



  

Expiration

 

Share

 

Fair Market

 

Net Fair

Affiliated Companies

Description of Business

Date

Restrictions

No of Shares

Price

Cost/Equity

Value

Discount

Market Value

Common Stocks-Public Market Method of Valuation

        

CompuSonics Video

Digital Video Product &

  

               1,751

0.053

$            -

    $           92

    $          -

        $            92

 

Web Site Development

  

      10,000,000

0.053

       106,477

        525,000

      (157,500)

             367,500

Ajay Sports Inc.

Golf & Casual Furniture

 

 

           294,118

0.050

       600,000

          14,706

 

               14,706

   

 

             16,667

0.050

         37,500

               833

 

                    833

Preferred Stocks-Public Market Method of Valuation

        

Ajay Sports Inc.

Golf & Casual Furniture

  

               2,000

0.050

         20,000

               100

 

                    100

Common Stocks-Board Appraisal Method of Valuation

        

Pro Golf International

Franchisor of Retail Golf Stores

a & b

             74,500

 

       195,000

        366,148

        (73,230)

             292,918

Pro Golf. Com

Web Sales of Golf Equip

 

a & b

           300,000

1.800

       252,000

        540,000

      (270,000)

             270,000

 

Subtotal

 

 

 

 

    1,210,977

     1,446,879

      (500,730)

             946,149

Warrants and stock Options - Board Appraisal Method of Valuation

       

Williams Controls, Inc.

Manufacturer of sensors &

        
 

control systems

03/12/08

b

             50,000

     

Unaffiliated Companies

         

Common Stocks-Public Market Method of Valuation

    

   

   

Vitro Diagnostics

Diagnostic test kits

 

 

                  300

0.050

           1,500

                 15

 

                      15

 

Total All Companies

 

 

 

 

   $ 1,212,477

    $ 1,446,894

      $ (500,730)

       $      946,164

(a)  No public market for this security

        

(b)  Subject to Rule 144

         


See notes to financial statements




Enercorp, Inc
Statements of Changes in Stockholder's Equity and Other Comprehensive Loss

For the years ended June 30, 2005, June 30, 2004 and June 30, 2003






       
     

Other

 

Common Stock

 

Accumulated

 

Comprehensive

 

Shares

 

Amount

 

Deficit

 

Loss

 

Total

          

Balance at June 30, 2002

695,897

 

$ 1,888,251

 

$ (747,892)

 

$(185,796)

 

$ 954,562

Increase in Common Stock

0

 

0

 

--

 

--

 

0

Net loss

--

 

--

 

(169,093)

 

--

 

(169,093)

Unrealized loss on investments,

        

  Net of taxes

--

 

--

 

--

 

(145,199)

 

(145,199)

Balance at June 30, 2003

695,897

 

   1,888,251

 

      (916,985)

 

 (330,995)

 

   640,271

Increase in Common Stock

0

 

0

 

--

 

--

 

0

Net loss

--

 

--

 

(91,881)

 

--

 

(91,881)

Unrealized gain on investments,

        

  Net of taxes

--

 

--

 

--

 

64,681

 

64,681

Balance at June 30, 2004

695,897

 

1,888,251

 

(1,008,866)

 

(266,314)

 

613,071

Increase in Common Stock

0

 

0

 

--

 

--

 

0

Net loss

--

 

--

 

(533,014)

 

--

 

(533,014)

Adjustment for loss on investments realized and included in net loss

     

    380,194

 

   380,194

Unrealized loss on investments,

        

  net of taxes

--

 

--

 

--

 

(425,579)

 

(425,579)

Balance at June 30, 2005

695,897

 

   $1,888,251

 

  $(1,541,880)

 

$(311,699)

 

  $ 34,672



See notes to financial statements




Enercorp, Inc.
Statements of Operations

For the years ended June 30, 2005, June 30, 2004 and June 30, 2003


REVENUES

June 30

 2005

 

June 30

 2004

 

June 30

 2003

 

Miscellaneous income

$

1,311

$

992

$

1,310

   

1,311

 

992

 

1,310

EXPENSES

     
 

Compensation of officers

 

0

 

25,000

 

120,000

 

Legal, accounting and other professional fees

 

77,876

 

12,417

 

16,336

 

Management fees

 

40,000

 

30,000

 

30,000

 

Interest expense

 

21,413

 

5,001

 

3,355

 

Travel expense

 

3,285

 

0

 

0

 

Contingency

 

5,500

 

0

 

0

 

Other general and administrative expenses

 

6,056

 

1,294

 

712

   

154,130

 

73,712

 

170,403

 

Realized Loss on Investments

 

(380,194)

 

(19,161)

 

0

 

Net loss from operations before taxes

 

(533,013)

 

(91,881)

 

(169,093)

 

Income taxes

 

0

 

0

 

0

 

Net loss from operations after taxes

 

(533,013)

 

(91,881)

 

(169,093)

 

Net change in unrealized gain (loss) on investments before taxes

 

(45,386)

 

64,681

 

(145,199)

 

Income taxes

 

0

 

0

 

0

 

Net change in unrealized gain (loss) on investment after taxes

 

(45,386)

 

64,681

 

(145,199)

 

Decrease in net assets resulting from operations

$

(578,399)

$

(27,200)

$

(314,292)

 

Decrease in net assets per share

$

(0.83)

$

(0.04)

$

(0.45)

        


 

See notes to financial statements



Enercorp, Inc.
Statement of Cash Flows

For the years ended June 30, 2005, June 30, 2004 and June 30, 2003


     

June 30 2005

 

June 30 2004

 

June 30 2003

Cash flows from operating activities:

      
  

Decrease in net assets

$

(578,399)

$

(27,200)

$

(314,292)

Adjustments to reconcile net decrease in       net assets to net cash used in operating

      

 activities:

      
  

Loss on sale of investments

 

380,194

 

-

 

-

  

Loss on write offs of  investments

 

-

 

19,160

 

0

  

Unrealized (gain) loss on investments

 

45,386

 

(64,681)

 

145,199

  

Increase (decrease) in accounts payable and accrued expenses

 

(191,647)

 

57,520

 

155,638

  

Total adjustments

  

233,933

 

11,999

 

300,837

Net cash used by operating activities

 

(344,466)

 

(15,201)

 

(13,455)

Cash flows from investing activities:

      
  

Sale  of investments

 

50,000

 

-

 

-

Net cash provided by investing activities

 

50,000

 

-

 

-

Cash flows from financing activities:

      
  

Proceeds from notes payable

 

349,000

 

15,000

 

12,950

  

Payments of  notes payable

 

(54,951)

 

-

 

-

Net cash provided by financing activities

 

294,049

 

15,000

 

12,950

Net decrease in cash

 

(417)

 

(201)

 

(505)

Cash, beginning of period

 

417

 

618

 

1,123

Cash, end of period

 

$

-

$

417

$

618

          



See notes to financial statements



Note 1.  Summary of Significant Accounting Policies

Business History

Enercorp, Inc. (the "Company") was incorporated under the laws of the State of Colorado on June 30, 1978.  During the fiscal year ended June 30, 1982, the Company elected to become a "Business Development Company" (BDC) as that term is defined in the Small Business Investment Incentive Act of 1980, which Act is an amendment to the Investment Company Act of 1940, as amended.  This change resulted in the Company becoming a specialized type of Investment Company.  

Investment Valuation

The investment valuation method adopted in 1982 provides for the Company's Board of Directors to be responsible for the valuation of the Company’s investments (and all other assets) based on recommendations of a Valuation Committee of the Board, comprised of the independent, disinterested Directors of the Company.  In the development of the Company's valuation methods, factors that affect the value of investees' securities, such as significant escrow provisions, trading volume and significant business changes are taken into account.  These investments are carried at fair value using the following four basic methods of valuation:

•

Cost - The cost method is based on the original cost to the Company adjusted for amortization of original issue discounts and accrued interest for certain capitalized expenditures made by the Corporation.  Such method is to be applied in the early stages of an investee's development until significant positive or adverse events subsequent to the date of the original investment require a change to another method.

•

 

Private market - The private market method uses actual or proposed third party transactions in the investee's securities as a basis for valuation, utilizing actual firm offers, as well as historical transactions, provided that any offer used is seriously considered and well documented by the investee.

•

Public market - The public market method is the preferred method of valuation when there is an established public market for the investee's securities.  In determining whether the public market method is sufficiently established for valuation purposes, the corporation is directed to examine the trading volume, the number of shareholders and the number of market makers in the investee's securities, along with the trend in trading volume as compared to the Company's proportionate share of the investee's securities.  If the security is restricted, the value is discounted at an appropriate rate.


•

Appraisal - The appraisal method is used to value an investment position after analysis of the best available outside information where there is no established public or private market method which has restrictions as to their resale as denoted in the schedule of investments are also considered to be restricted securities.

All portfolio securities valued by the cost, private market and appraisal methods are considered to be restricted as to their disposition. In addition, certain securities valued by the public market method which have restrictions as to their resale as denoted in the schedule of investments are also considered to be restricted securities.

Statement of Cash Flows

Consistent with the reporting requirements of a BDC, cash and cash equivalents consist only of demand deposits in banks and cash on hand.   Financial statement account categories such as investments and notes receivable, which relate to the Company's activity as a BDC, are included as operating activities in the statement of cash flows.

Securities Transactions

Purchases and sales of securities transactions are accounted for on the trade date, which is the date the securities are purchased or sold.  The value of securities sold is reported on the first-in first-out basis for financial statement presentation.

Revenue Recognition

Due to the uncertainty of collection, the Company recognizes all types of consulting fee revenues from portfolio companies as cash is received.   All other revenues are recognized on the accrual basis.

Net Assets per Share

In accordance with the fair value accounting method used by regulated investment companies, net assets (total stockholders' equity) per share at June 30, 2005 and 2004, respectively was $0.05 and $0.88 per share based on 695,897 shares outstanding at June 30, 2005 and 2004.

Note 2.  Investments-Related Parties

Investments consist of holdings of securities in publicly and privately held companies. CompuConics Video Corporation “CPVD” is one of the biggest investees of the Company. CPVD is a publicly held corporation, which specializes in licensing its patented technology related to audio and video analog-to-digital signal compression. CPVD is currently searching new business opportunities in presenting into the North America Free Trade Agreement (“NAFTA”) market TreeSoft CRM software. The Company owns 9,501,751 shares of CPVD, which were trading at $0.009 per share as of June 30, 2005. The Company is taking a 30% discount from the total FMV of this investment due to its marketability and liquidity. Mr. Parlatore, director of the Company is also a member of the Board of Directors of CPVD.

Through its operating subsidiaries Ajay Sports, Inc (Ajay) is a franchisor of retail golf stores. Enercorp owns 110,785 shares of common stock of Ajay, and 1,000 shares of preferred stock which were trading at $0.04 per share and $0.097 per share as of June 30, 2005, respectively.  Mr. Rautio, director of the company is a member of the Board of Directors of Ajay.       

Pro Golf International, Inc. (PGI) a majority-owned subsidiary of Ajay was formed during 1999, and owns 100 % of the issued and outstanding stock of Pro Golf of America, Inc. (PGOA) and a majority of the stock of ProGolf.Com, Inc. (PG.com).  PGOA is the franchisor of Pro Golf Discount Retail Stores. Fair Market Value of 71,733 shares of the PGI investment was $215,199 as June 30, 2005. Enercorp took a 20% discount based on marketability, liquidity and the progress of PGI and its wholly owned subsidiary PGOA, reducing the net fair value to $172,159.

PG.com is a Company formed to help direct traffic to its franchise stores and to sell golf equipment and other golf-related products and services over the Internet. It is anticipated that traditional sales and distribution methods will be enhanced by the PG.com Internet site.

The Board of Directors has valued the investment for 300,000 shares of PG.Com at $468,000

Enercorp is taking a 50% discount using the total net value of $234,000 for this position.

Note 3.  Notes payable

The $325,000 notes payable rising from the conversion of preferred stock to secured debt are short term notes at 7% interest. The creditors related to these notes have not demanded any payments on either the notes, or the interest accrued on the notes. These investors are willing to extend the terms of the notes, or converting the notes to equity. Discussions have occurred between the Company and these creditors related to such matter, and a satisfactory result is expected in the near future. Balance of interest payable on these notes was $20,818 as of June 30, 2005.    

The Company has a Note Payable to Wen Group in the face amount of $ 30,000 with no interest. No payments have been made on this note. The Company is questioning the validity of this note.

Note 4.  Related Party Transactions

•

Notes payable –Related Party

The Company owes $10,000 to Quorum Capital, Inc (former Dearborn Wheels, Inc), and $14,000 to TICO, as of June 30, 2005. These notes accrue 7% interest per annum, and are due on December 31, 2005, and January 22, 2006, respectively. Interest payable on these notes was $595 at June 30, 2005.  

•

Accounts Payable-Related Parties

Accrued Management Fees due to related parties were $22,500 and $80,000 as of June 30, 2005 and 2004, respectively.  Related Party management fees included in the statements of operations for the years ended June 30, 2005 and 2004 was $30,000. The Company paid $80,000 in management fees to Acrodyne Corporation in August 2004.

The Company had $25,000 salary payable to Thomas W. Itin (former president of the Company) as of June 30, 2004, which was paid during fiscal year 2005.  The terms and conditions of Mr. Itin’s employment agreement were approved by the Company’s independent directors.

Note 5.  Income Taxes

The Company adopted, effective July 1, 1992, a Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting For Income Taxes", issued in February 1992.  Under the liability method specified by SFAS 109, deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities as measured by the enacted tax rates which will be in effect when these differences reverse.  Deferred tax expense is the result of changes in deferred tax assets and liabilities. The Company’s  tax expense for the fiscal years discussed in this report is 0.  

The components of the deferred tax assets and liabilities at June 30, 2005 and 2004 consist of the following:

 

June 30, 2005

 

June 30, 2004

Unrealized loss on investments

$ 106,000

 

$  90,000

Capital loss carryover                                    

129,000

 

0

Accrued officer wages                                             

0

 

8,500

Allowance for notes receivable                          

0

 

0

Net operating loss carry over                        

357,000

 

255,270

Valuation Allowance                                           

(592,000)

 

(353,770)

         Total net deferred tax assets

$         -

 

$         -

At June 30, 2005 the Company has net operating losses carry forward available to offset future taxable income of approximately $1,049,000 that expires during various years starting June 30, 2018.

Note 6: Summary of Quarterly Financial Data (Unaudited)

The following quarterly financial information for fiscal years 2005 and 2004 is unaudited; however, in the opinion of management, all adjustments necessary to a fair statement of the results of operations for the interim period have been included.

 

Revenues

Expenses

Net Income

Unrealized Gain/(Loss) on investments

Gain/Loss from sale of investments or write offs

Increase/(Decrease) in net assets per share

Fiscal 2005 – Quarters :

      

September 30, 2004

 $              -

 $     41,992

 $   (41,992)

 $           (91,826)

 $                     -

 $                  (0.19)

December 31, 2004

                 -

53,162

(433,356)

168,964

(380,194)

                     (0.38)

March 31, 2005

                 -

31,331

(31,331)

(74,327)

                       -

                     (0.15)

June 30, 2005

1,311

27,645

(26,334)

(48,197)

                       -

                     (0.11)

Fiscal 2004 – Quarters :

      

September 30, 2003

                 -

37,817

(37,817)

185,552

                       -

                       0.22

December 31, 2003

                 -

13,876

(13,876)

(59,180)

                       -

                     (0.11)

March 31, 2004

773

10,899

(29,287)

(13,998)

(19,161)

                     (0.09)

June 30, 2004

 $         219

 $     11,120

 $   (10,901)

$            (47,693)

 $                     -

 $                  (0.06)


Note 7:  Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires Management to make estimates and assumptions that affect certain reported amounts and disclosures.  Accordingly, actual results could differ from those estimates.

Note 8:  Capital Stock Transactions

The Company issued to various accredited investors 369,318 shares of 6% Cumulative Convertible Preferred Stock, Par Value $0.88/share, for the total proceeds of $325,000 on August 2, 2004.  The Legended Preferred shares were sold at a price of $0.88/per share, convertible one for one to Common stock equal to the latest NAV (Net asset Value) per common share at day’s end, June 30, 2004. The proceeds from this funding were used to pay off the majority of the Company’s then outstanding liabilities, pay the cost of the shareholder meeting, and provide working capital.

The Company committed to the new investors to entitle them with the voting rights in recognition for the capital they had invested in the Company. Unable to do so, the Company’s Board of Directors in accordance with the investing parties, decided to convert the recently issued securities into the secure debt totaling $325,000.  (See disclosure in the preceding Forms 10Q)

Note 9:  Legal Proceedings

Currently the Company is not involved in any legal proceedings. The legal case Burmann vs. Enercorp, Inc was settled early June, 2005. The Company was also a plaintiff in the legal case:  First Equity Corporation, CompuSonics Video Corporation, and Enercorp, Inc vs. Target Holding B. V,a partnership(“Target A”), Target Holding B.V, a consummated Netherlands business entity (“Target B”), Senol Halfar, Dietgard Adrian, George Burmann, Dana Burmann, H.J Gullug, Halfar Consulting, and Gunnallen Financial, Inc. Effective July 1, 2005 Enercorp agreed to be dismissed as a co-plaintiff in that case.


Note 10:  Recently Enacted Pronouncements

The following are new accounting standards and interpretations that may be applicable in the future to the Company:

SFAS No. 123(R), "Share-Based Payment", which is a replacement to SFAS No. 123 “Accounting for Stock Based Compensation” and supersedes APB Opinion No. 25, “Accounting for Stock Issued to Employees”, was issued in December 2004.  The revisions are intended to provide investors and other users of financial statements with more complete and neutral financial information by requiring that the compensation cost relating to share-based payment transactions be recognized in financial statements. That cost will be measured based on the fair value of the equity or liability instruments issued. SFAS No. 123(R) covers a wide range of share-based compensation arrangements including share options, restricted share plans, performance-based awards, share appreciation rights, and employee share purchase plans. SFAS No. 123, as originally issued in 1995, established a preferable fair-value-based method of accounting for share-based payment transactions with employees. However, that Statement permitted entities the option of continuing to apply the guidance in APB Opinion No. 25, as long as the footnotes to financial statements disclosed what net income would have been had the preferable fair-value-based method been used. Publicly traded entities (other than those filing as small business issuers) will be required to apply SFAS No. 123(R) as of the first annual reporting period that begins after June 15, 2005. The Company is currently evaluating the financial statement impact of the adoption of SFAS No. 123(R).

SFAS No. 154, “Accounting Changes and Error Corrections – replacement of APB Opinion No. 20 and FASB Statement No. 3,” (SFAS No. 154) was issued in May 2005. SFAS No. 154 changes the accounting for and reporting of a change in accounting principle by requiring retrospective application to prior periods’ financial statements of changes in accounting principle unless impracticable. SFAS No. 154 is effective for accounting changes made in fiscal years beginning after December 15, 2005. We do not expect the adoption of SFAS No. 154 to have a material impact on our results of operations, financial position or cash flows.








Certification pursuant to 18 USC, Section 1350, as adopted pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002

In connection with the year end Report of Enercorp, Inc. (the "Company") on Form 10-K for the fiscal years ended June 30, 2003, 2004 and 2005 (the "Report"), as filed with the Securities and Exchange Commission on the date hereof, we, James C. Sargent, Chief Executive Officer and Majlinda Xhuti, Chief Financial Officer of the Company, certify to the best of our knowledge, pursuant to 18 USC 1350, as adopted pursuant to Sec.302 and promulgated as 18 USC 1350 pursuant to Sec.906 of the Sarbanes-Oxley  Act  of  2002,  that:

•

The Report referenced above has been read and reviewed by the undersigned.

•

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934.

•

The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

•

Based upon our knowledge, the Report referenced above does not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which such statements were made, not misleading.

•

Based upon our knowledge, the financial statements, and other such financial information included in the Report, fairly present in all material respects the financial condition and results of operations of the Company as of, and for, the periods presented in the Report.

•

We acknowledge that the Chief Executive Officer and Chief Financial Officer:

•

are responsible for establishing and maintaining "disclosure controls and procedures"  for the Company;

•

have designed such disclosure controls and procedures to ensure that material information is made known to us, particularly during the period in which the Report was being prepared;

•

have evaluated the effectiveness of the Company's disclosure controls and procedures  as of the date of the Report;  and

•

have presented in the Report our conclusions about the effectiveness of the disclosure controls and procedures based on the required evaluation.

•

have disclosed to the issuer's auditors and to the audit committee of the Board  of  Directors of the Company (or persons fulfilling the equivalent function):

•

all significant deficiencies in the design or operation of internal controls which could adversely affect the Company's ability to record, process, summarize, and report  financial data and have identified for the Company's auditors any material weaknesses in internal controls; and

•

any fraud, whether or not material, that involves management or other employees  who have a significant role in the issuer's internal controls; and

•

have indicated in the Report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.




By:  /s/ James C. Sargent

James C. Sargent

President, Chief Excecutive Officer



By:  /s/ Majlinda Xhuti

Majlinda Xhuti

Chief Financial Officer




Dated:  September 28, 2005