UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarter ended September 30, 2002
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES
ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
Commission File Number: 0-9083
Enercorp, Inc.
(Exact name of Registrant as specified in its Charter)
Colorado 84-0768802
-------------------------------- ------------------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
32751 Middlebelt Road, Suite B
Farmington Hills, Michigan 48334
----------------------------------- -------------------
(Address of principal executive offices) (Zip Code)
(248) 851-5651
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
---- -----
Number of shares of common stock outstanding at January 30, 2002 : 695,897
Enercorp, Inc.
Form 10-QSB Filing for the First Quarter Ended September 30, 2002
INDEX
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Page Number
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Statements of Assets and Liabilities
September 30, 2002 (Unaudited) and June 30, 2002 3
Schedule of Investments September 30, 2002 (Unaudited)
And June 30, 2002 4-6
Statements of Operations (Unaudited) for the Three
Months Ended September 30, 2002 and 2001 7
Statements of Cash Flows (Unaudited) for the Three
Months Ended September 30, 2002 and 2001 8
Notes to Financial Statements 9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10-11
Item 3 Controls and Procedures. 11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 12
Item 2. Changes in Securities 12
Item 3. Defaults Upon Senior Securities 12
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 5. Exhibits and Reports on Form 8-K 12
Signature Page 13
Certification pursuant to 18 USC, Section 1350, as
Adopted pursuant to Sections 302 and 906 of the
Sarbanes-Oxley Act of 2002 14-15
2
Enercorp, Inc.
Statements of Assets and Liabilities
September 30 June 30
2002(Unaudited) 2002
-------------- -----------
ASSETS
Investments, at fair value, cost of $1,231,638
And $1,231,638 at September 30,
2002 and June 30,2002 $ 733,576 $1,045,842
Cash 114 1,123
Furniture and fixtures, net of accumulated
depreciation of $11,736 at Sept. 30, 2002
and 11,736 at June 30, 2002 respectively 0 0
Other assets 0 0
--------- ---------
$ 733,690 $ 1,046,965
=========== ===========
LIABILITIES AND NET ASSETS
Liabilities
Note payable-Related Party $ 27,000 $27,000
Note payable-Wen Group 30,000 30,000
Accounts payable and accrued liabilities 13,527 12,549
Accounts Payable-Related Party 61,034 22,853
---------- ----------
131,562 92,403
---------- ----------
Net assets
Common stock, no par value: 10,000,000
shares authorized, 695,897 shares issued
and outstanding at September 30, 2002 and
June 30, 2002 1,888,251 1,888,251
Preferred stock, no par value: 1,000,000
shares authorized, -0- issued and
outstanding -0- -0-
Accumulated deficit (788,060) (747,893)
Unrealized net loss on investments, net of
deferred income taxes at September 30, and
June 30, 2002 (498,062) (185,796)
---------- -----------
602,129 954,562
--------- ----------
$ 733,690 $ 1,046,965
========== ===========
See notes to financial statements
3
Enercorp, Inc.
Schedule of Investments
September 30, 2002(Unaudited)
Affiliated Description Expir. No. of Share Cost
Fair Mkt Net Fair
Companies of Business Date Restrictions Shares Price Equity
Value Discount Market Value
Common Stocks-Public Market Method of Valuation
-----------------------------------------------
CompuSonics Video
Corp Digital Video
Product & Web 1,751 0.01
18 18
Site Dev. 10,000,000 0.01 106,477
100,000 (30,000) 70,000
Ajay Sports, Golf & Casual 294,118 0.019 600,000
5,588 5,588
Furniture
Manufacturer 16,667 0.019 37,500
317 317
Preferred Stocks-Public Market Method of Valuation
--------------------------------------------------
Ajay Sports, Golf & Casual 2,000 0.019 20,000
38 38
Furniture Manufacturer
Common Stocks-Board Appraisal Method of Valuation
-------------------------------------------------
Pro Golf Franchisor of a & b 7,450 195,000
447,000 (89,400) 357,600
Intern'l Retail Golf Stores
ProGolf.com, Web Sales of a & b 300,000 2.5 252,000
750,000 (450,000) 300,000
Inc. Golf Equipment
--------------
--------------------------------------
Subtotal $1,210,977
1,302,960 (569,400) 733,560
Warrants and Stock Options-Board Appraisal Method of Valuation
==============================================================
CompuSonics Digital Video
Video Product
Corporation 300,000
Williams Manuf. Of Sensors &
Controls, Control Systems
Inc. 08/04/04 b 25,000
05/03/05 b 25,000
09/13/06 b 50,000
03/12/06 b 50,000
10/02/08 b 50,000
4
Unaffiliated Companies
Common Stocks-Public Market Method of Valuation
-----------------------------------------------
Vitrio Diagnostics 300 .05 1,500
15 15
Proconnextions, Inc.-Sports Memor'blia a 191,610 - 19,161
-
-----------------------------
-----------------------------------------
Total All Companies $1,231,638
$1,302,975 (569,400) 733,575
==============
===================================
a No public market for this security
b Subject to Rule 144
See notes to financial statements
5
Enercorp, Inc.
Schedule of Investments
June 30, 2002
,
Affiliated Description No. of Share Cost Fair Mkt
Net Fair
Companies of Business Restrictions Shares Price Equity Value
Discount Market Value
Common Stocks-Public Market Method of Valuation
------------------------------------------------
CompuSonics Video
Corp Digital Video
Product & Web 1,751 96
96
10,000,000 $0.055 106,477 550,000
(165,000) 385,000
Ajay Sports, Golf & Casual 294,118 $0.055 600,000 2,941
2,941
Furniture
Manufacturer 16,667 $0.01 37,500 167
167
Preferred Stocks-Public Market Method of Valuation
==================================================
Ajay Sports, Golf & Casual 2,000 20,000 20
20
Common Stocks-Board Appraisal Method of Valuation
-------------------------------------------------
Pro Golf Franchisor of a & b 7,450 195,000 447,000
(89,400) 357,600
Intern'l Retail Golf Stores
ProGolf.com, Web Sales of b 300,000 2.5 252,000 750,000
(450,000) 300,000
Inc. Golf Equipment
---------------------
Subtotal $1,210,977 1,750,224
(694,400) 1,045,824
Unaffiliated Companies
Common Stocks-Public Market Method of Valuation
-----------------------------------------------
Vitrio Diagnostics 300 1,500 170
170
Proconnextions, Inc.-Sports Memor'blia 191,610 19,161
--------------------
-----------------------
Total All Companies $1,231,638 $1,750,242 $(694,400) $1,045,842
=========================
=======================
a No public market for this security
b Subject to Rule 144
See notes to financial statements
6
Enercorp, Inc.
Statements of Operations
(Unaudited)
For the three Months ended,
Sept 30,2002 Sept 30,2001
-------------- ------------
REVENUES
Interest Income $ -0- $ -0-
Interest income from related entities -0- -0-
Consulting fees from related companies -0- -0-
Net realized gain on sale of investments -0- -0-
Divided income form affiliated company -0- -0-
Miscellaneous Income -0- 2,175
--------- ---------
-0- 2,175
--------- ---------
EXPENSES
Salaries - officer 30,000 -0-
Bonus expense - officer -0- -0-
Directors' fees -0- -0-
Staff salaries -0- -0-
Legal, accounting and other professional
Fees 1,714 4,202
Management fees-Related party 7,500 -0-
Interest expense - other 681 50
Bad debt expense -0- -0-
Other general and administrative expenses 273 669
--------- ----------
40,167 4,921
--------- ----------
Net gain (loss) from operations
before taxes (40,167) (2,746)
Income taxes -0- -0-
--------- ----------
Net gain (loss) from operations
after taxes (40,167) (2,746)
---------- ----------
Net unrealized gain (loss) on investments
Before Taxes (312,267) (97,691)
Income taxes -0- -0-
---------- ----------
Net unrealized gain (loss) on
investment after taxes (312,267) (97,691)
----------- ----------
Increase (decrease) in net assets
resulting from operations $(352,434) $ (100,437)
========== ============
Increase (decrease) in net assets
per share $ (0.51) $ (0.14)
========= =============
See notes to financial statements
7
Enercorp, Inc.
Statements of Cash Flows
(Unaudited)
For Three Months Ended September 30
2002 2001
--------- ---------
Cash flows from operating activities
Increase (decrease) in net assets $(352,434) $(100,437)
Adjustments to reconcile net income to net
Cash provided by operating activities:
Depreciation -0- 233
Bad debt provision on notes receivable
and interest net of write offs -0- -0-
Gain on sale of investments -0- -0-
(Gain) Loss on sale of fixed assets -0- -0-
Unrealized (gain) loss on
Investments 312,267 97,691
(Increase) Decrease in other assets -0- -0-
Increase (Decrease) in accounts payable
and accrued expenses 39,159 8,987
Increase (Decrease) in deferred taxes -0- -0-
Total adjustments 351,426 106,912
----------- -----------
Net cash (used) by operating activities (1,009) 6,474
---------- --------
Cash flows from investing activities:
Purchase of investments -0- -0-
---------- ---------
Net cash provided (used) by investing
Activities -0- -0-
------------ --------
Cash flows from financing activities:
Proceeds from notes payable -0- 1,500
Net cash provided by investing activities -0- -0-
--------- --------
Net cash provided by investing
Activities 1,500
-------- ----------
Increase (Decrease) in cash (1,009) 7,975
Cash, beginning of period 1,123 342
--------- ----------
Cash, end of period $ 114 $ 8,317
========= =========
Supplemental disclosures of cash flow
information:
Interest paid $ -0- $ 34
=========== =========
Taxes Paid $ -0- $ -0-
=========== ===========
See notes to financial statements
8
Notes to Financial Statements
Note 1. Financial Statements
--------------------
The accompanying interim unaudited condensed financial statements have been
prepared in accordance with the instructions to Form 10-QSB and do not include
all the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of the
management, all adjustments (consisting of normal recurring adjustments)
considered necessary for a fair presentation have been included, and the
disclosures are adequate to make the information presented not misleading.
Operating results for the three months ended September 30, 2002 are not
necessarily indicative of the results that may be expected for the year
ending June 30, 2003. These statements should be read in conjunction with
the financial statements and notes thereto included in the Annual 10-K Report
(filed with the Securities and Exchange Commission) for the year ended
June 30, 2002
Note 2: Investments
-----------
The Registrant holds its principal common stock investments in CompuSonics
Video Corporation (10,001,751 shares), Ajay Sports, Inc. (310,785 common and
2,000 preferred shares), ProGolf.com (300,000 common shares) and Pro Golf
International, Inc. (7,450 shares), and continues to hold 200,000 warrants in
Williams Controls, Inc., which are fully vested at the time of this filing.
Note 3: Capital Stock Transactions
--------------------------
There was no capital stock transactions during quarter ended September 30,2002.
On September 14, 2001, the Registrant entered into a Subscription Agreement
with Jack Wen, authorized agent for an investing group of qualified
individuals which included Jack Wen ("Wen Group"). Under this Subscription
Agreement, on September 26, 2001 upon the first payment, the Wen Group was to
purchase 240,000 shares of common stock of the Registrant, representing
approximately 26.4% of the Registrant's common stock issued and outstanding
following the transaction. These shares were to be purchased for $1.25 per
share, the book value at that time, with aggregate gross proceeds of $300,000
paid to the Registrant.
Under the Subscription Agreement, the Wen Group was committed to make
additional equity investments in the Registrant of $3,000,000 for the purchase
of 2,000,000 shares at $1.50 per share, with $1,000,000 being invested on or
before November 5, 2001 as the second payment; and, in the third payment,
$2000,000,000 was to be invested at $1.50 per share on or before February 5,
2002. Prior to this transaction, no single shareholder or shareholder group
owned more than 10% of the Registrant's issued and outstanding common stock.
However, this transaction was not completed. The deal was rescinded, and the
stock was never issued.
9
Note 4: Board of Director Changes .
--------------------------
After the Subscription agreement between the Wen Group and the Registrant was
rescinded on November 26, 2001 by a mutual agreement, a request was submitted
for resignations from the Wen Group officers and directors. Resignations to
be requested included Jack Wen as Chairman, Director, President, CEO and COO,
Don Johnson as CFO and Treasurer, George Burmann as Director, and Paul Feng
as Vice President of Marketing. Thomas W. Itin was elected to fill offices
left vacant, with the exception of Vice President of Marketing, due to
resignations by members of the Wen Group.
The new directors, Mr. Salvatore M. Parlatore and Dr. Jeffrey E. Ratio were
elected on October 16, 2002. They will serve until their successors be duly
elected and qualified.
Note 5: Related Party Transactions.
----------------------------
The Registrant has Note Payable to Dearborn Wheels Corporation in which the
Chairman' spouse is the president. The note was issued on December 6, 2001 at
10% interest rate per annum, and is renewed on March 6, 2002. The note is due
after 180 days. The terms were approved by the independent director.
The Company is accruing $2,500 per month in management fees, due to Acrodyne
Corporation, a company in which the President has a majority interest and is
also President.
The Company is also accruing $30,000 salary owed to Mr. Itin, CEO as officer
salaries.
Item 2. Management's Discussion and Analysis of Financial Condition / Results
of Operations
---------------------------------------------------------------------
Material Changes in Financial Condition:
---------------------------------------
The Registrant's liquidity is affected primarily by the business success,
securities prices and marketability of its investee companies and by the amount
and timing of new or incremental investments it makes, as well as the
availability of borrowing under the credit line.
The Registrant's investment value decreased with $ 352,434 for this quarter.
This is due to the changes in the value of investments held in CompuSonics
Video Corporation and Ajay Sports, Inc.
The Company accrued for this quarter $30,000 in officer salaries owed to the
CEO of the company. The Registrant is also accruing $2,500 monthly management
fees owed to Acrodyne Corporation. The accrued expenses will be paid as soon
as the company has sufficient liquidity resources.
The Registrant is still holding the promissory note of $30,000 to Wen Group.
There are no general terms as to how the $30,000 note will be paid or how the
Registrant intends to raise the funds for repayment or how to fund current
operations. The Registrant's current plan is to bring in other investors,
borrow against collateral or sell a portion of its holdings.
10
Material Changes in Results of Operations:
-----------------------------------------
The Registrant's revenues were $0 and $2,175 for the first quarter ended
September 30, 2002 and 2001, respectively. The changes in revenues were
mainly due to the lack of operations. There was no sale of investment, no
consulting services provided to other parties, no dividend or interest income
from other parties for this quarter.
The Registrant interest expenses were $ 681 and $ 50 for the quarter ended Sep.
2002 and 2001 respectively. The change is due to a new note payable to a
related party, therefore there is a increase in interest expense for this
quarter compared to the previous quarter.
The Registrant's legal and accounting fees decreased from $ 4,202 to $1,714 for
this quarter. The change is due to the decrease in legal fees.
The Registrant recorded general and administrative expenses of $ 273 for this
quarter ended September 30, 2002 compare to general and administrative expenses
of $ 669 the quarter ended September 30, 2001. This change is due to the
decrease in company's activity related to such expenses. General and
administrative expenses include travel, telephone and other miscellaneous
expenses.
The Registrant recorded an unrealized Loss on investments of $(312,267) for the
first quarter ended September 30, 2002 compared to a loss of $(97,691) for the
first quarter ended September 30, 2001. This is mainly due to the changes in
the fair market value of the Registrant's investment in the publicly traded
companies CompuSonics Video Corporation and Ajay Sports, Inc. Also the
Registrant is taking higher discount rates for this quarter for its investment
in ProGolf International, ProGolf. Com and CompuSonics Video Corporation. The
Board of Directors after careful deliberation decided that the new discount
rates are more reasonable and fair. ( See schedule of investment, page 5)
Item 3. Controls and Procedures.
-----------------------
a) Evaluation of Disclosure Controls and Procedures.
Within the 90 days prior to the date of this report Enercorp, Inc. carried out
an evaluation, under supervision of the Company's management of the
effectiveness of the design and operation of the Company's disclosure controls
and procedures pursuant to Exchange Act Rule 13a-14. The management concluded
that the internal controls and procedures are effective.
b) Changes in Internal Controls
There were no significant changes in the Company's internal controls or in
other factors that could significantly affect these internal controls
subsequent to the date of the most recent evaluation.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
None
Item 2. Changes in Securities
----------------------
None
11
Item 3. Defaults Upon Senior Securities
-------------------------------
None
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
None
Item 5. Exhibits and Reports on Form 8-K
--------------------------------
A) Exhibits
None
B) Form 8-K
None
12
Enercorp, Inc.
Form 10-QSB
For the First Quarter Ended September 30, 2002
Signature Page
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Enercorp, Inc.
---------------
(Registrant)
By: /s/Thomas W. Itin
-------------------
Thomas W. Itin
President
Date: February 12, 2003
13
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 Quarterly Report of Enercorp, Inc. (the "Company")
on Form 10-QSB for the quarter ended September 30, 2002 (the "Report"), as
filed with the Securities and Exchange Commission on the date hereof, we,
Thomas W. Itin, 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:
1. The Report referenced above has been read and reviewed by the
Undersigned.
2. The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934.
3. The information contained in the Report fairly presents, in all material
respects, the financial condition and result of operations of the
Company.
4. 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.
5. 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.
6. We acknowledge that the Chief Executive Officer and Chief Financial
Officer:
A. are responsible for establishing and maintaining "disclosure controls
and procedures" for the Company;
B. 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;
C. have evaluated the effectiveness of the Company's disclosure controls
and procedures within 90 days of the date of the Report; and
D. have presented in the Report our conclusions about the effectiveness
of the disclosure controls and procedures based on the required
evaluation.
E. 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):
14
(i) 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
(ii) any fraud, whether or not material, that involves management or
other employees who have a significant role in the issuer's
internal controls; and
F. 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.
/s/ Thomas W. Itin
-----------------
Chief Executive Officer
/s/ Majlinda Xhuti
----------------------
Chief Financial Officer
Dated: February 12, 2003
15