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 March 31, 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 October 01, 2002: 695,897
Enercorp, Inc.
Form 10-QSB Filing for the Third Quarter Ended March 31, 2002
INDEX
Page Number
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements 3
Statements of Assets and Liabilities
March 31, 2002 (Unaudited) and June 30, 2001 3
Schedule of Investments March 31, 2002( Unaudited)
And June 30, 2001 4-6
Statements of Operations (Unaudited) for Three and Nine
Months Ended March 31, 2002 and 2001 7
Statements of Cash Flows (Unaudited) for the Nine
Months Ended March 31, 2002 and 2001 8
Notes to Financial Statements 9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 11
Item 2. Changes in Securities 11
Item 3. Defaults Upon Senior Securities 11
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 5. Other Information 12
Item 6. Exhibits and Reports on Form 8-K 12
Signature Page 13
2
Enercorp, Inc.
Part I. FINANCIAL INFORMATION
Item 1: Financial Statements
Enercorp, Inc.
Statements of Assets and Liabilities
March 31, June 30,
2002(Unaudited) 2001
--------------- ---------
ASSETS
Investments, at fair value, cost of $1,231,638
and $1,231,638 at March 31,
2002 and June 30, 2001 $ 893,646 $ 984,214
Cash 2,347 342
Furniture and fixtures, net of accumulated
depreciation of $12,203 and 11,503 at
March 31, 2002 and June 30, 2001 respectively 233 933
Other assets 0 0
----------- -------
$ 896,226 $ 985,489
=========== =========
LIABILITIES AND NET ASSETS
Liabilities
Note payable related party $ 27,000 $ 0
Note payable - Wen 30,000 0
Accounts payable and accrued liabilities 16,309 44,634
Accrued management fees 12,500 10,000
Deferred tax liability 0 0
--------- --------
85,809 54,634
---------- --------
Net assets
Common stock, no par value: 10,000,000
shares authorized, 695,897 shares issued
and outstanding at March 31, 2002 and
June 30, 2001 respectively 1,888,251 1,888,251
Preferred stock, no par value: 1,000,000
shares authorized, -0- issued and outstanding 0 0
Accumulated deficit (739,672) (709,802)
Unrealized net loss on investments, net of
deferred income taxes at March 31, 2002
and June 30, 2001 respectively
(338,162) (247,594)
--------- --------
810,417 930,855
--------- --------
$ 896,226 $ 985,489
========== ===========
See notes to financial statement
3
Enercorp, Inc.
Schedule of Investments
March 31, 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 0.021
37 37
Site Dev. 10,000,000 0.021 106,477
210,000 (100,000) 110,000
Ajay Sports, Golf & Casual 294,118 0.020 600,000
5,882 5,882
Furniture
Manufacturer 16,667 0.020 37,500
333 333
Preferred Stocks-Public Market Method of Valuation
--------------------------------------------------
Ajay Sports, Golf & Casual 2,000 0.020 20,000
40 40
Furniture Manufacturer
Common Stocks-Board Appraisal Method of Valuation
-------------------------------------------------
Pro Golf Franchisor of a & b 7,450 195,000
447,000 (44,700) 402,300
Intern'l Retail Golf Stores
ProGolf.com, Web Sales of a & b 300,000 2.5 252,000
750,000 (375,000) 375,000
Inc. Golf Equipment
Subtotal $1,210,977
1,413,292 (519,700) 893,592
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 .18 1,500
54 54
Proconnextions, Inc.-Sports Memor'blia a 191,610 19,161
-
Total All Companies $1,231,638
$1,413,346 (519,700) 893,646
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, 2001
,
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 28
28
10,000,000 $0.03 106,477 300,000
(100,000) 200,000
Ajay Sports, Golf & Casual 294,118 $0.02 600,000 5,882
5,882
Furniture
Manufacturer 16,667 $0.02 37,500 333
333
Preferred Stocks-Public Market Method of Valuation
==================================================
Ajay Sports, Golf & Casual 2,000 20,000 500
500
Common Stocks-Board Appraisal Method of Valuation
-------------------------------------------------
Pro Golf Franchisor of a & b 7,450 195,000 447,000
(44,700) 402,300
Intern'l Retail Golf Stores
ProGolf.com, Web Sales of b 300,000 2.5 252,000 750,000
(375,000) 375,000
Inc. Golf Equipment
Subtotal $1,210,977 1,503,744
(519,700) 984,044
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 $1,503,914
$(519,700) $984,214
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 Three For Nine
Months ended Months ended,
March. 31, March. 31,
2002 2001 2002 2001
---------- --------- --------- --------
REVENUES
Interest Income from related
Entities $ 0 $ 0 $ 0 $ 1,640
Net realized gain on sale of
Investments 0 1,465,720 0 1,474,184
Miscellaneous income 0 0 3,875 0
-------- ---------- ------- ----------
0 1,465,720 3,875 1,475,824
-------- --------- ------- ---------
EXPENSES
Salaries - officer 0 78,500 0 79,500
Legal, accounting and other
Professional fees 1,627 3,350 6,260 10,762
Management fees related party 7,500 22,500
Interest expense - other 666 49,046 939 165,297
Bad debt expense 0 9,355 0 10,825
Other general and administrative
expenses 338 9,140 4,047 17,519
--------- ---------- ------- ---------
10,131 149,392 33,746 283,903
--------- ---------- ------- ---------
Net gain (loss) from operations
before taxes (10,131) 1,316,328 (29,871) 1,191,920
Income taxes 0 (447,552) 0 (405,593)
--------- ---------- ------- ----------
Net gain (loss) from operations
after taxes (10,131) 868,776 (29,871) 786,327
--------- ---------- -------- ---------
Net unrealized gain (loss) on
Investments before Taxes (139,718) 141,737 (90,568) 141,737
Income taxes 0 (48,191) 0 (48,191)
-------- --------- ------- --------
Net unrealized gain (loss) on
investment after taxes (139,718) 93,546 (90,568) 93,546
-------- --------- ------- ---------
Increase (decrease) in net
assets resulting from
operations $ (149,849) $ 962,322 $(120,439) $ 879,873
============ ========== ======== =========
Increase (decrease) in net
assets per share $ (0.22) $ 1.38 $ (0.17) $ 1.26
=========== ========= ========= =========
See notes to financial statements
7
Enercorp, Inc.
Statements of Cash Flow
(Unaudited)
For the Nine Months
Ended March 31,
2002 2001
---------- -----------
Cash flows from operating activities
Increase (decrease in net assets) $ (120,439) $879,873
Adjustments to reconcile net income to
Net cash provided by operating
activities:
Depreciation 700 1,402
Bad debt provision on notes receivable
and interest net of write offs 0 10,825
Gain on sale of investments 0 (1,474,184)
Unrealized (gain) loss on
Investments 90,568 (141,776)
(Increase) decrease in unrealized
gain on investments 2,158,715
(Increase) decrease in accounts
receivable - related party (6,104)
(Increase) decrease in accounts
receivable
(Increase) Decrease in other assets 0 640
Increase (Decrease) in accounts payable
and accrued expenses (25,824) (14,776)
Increase (Decrease) in deferred taxes 0 (774,728)
--------- -----------
Total adjustments 65,444 (239,947)
---------- -----------
Net cash (used) by operating activities (54,995) 639,926
---------- ----------
Cash flows from investing activities:
Purchase of investments 0 0
Proceeds from sale of investments 2,440,484
Payment from notes receivable 0
-------- ---------
Net cash provided (used) by investing
Activities 0 2,440,484
-------- ----------
Cash flows from financing activities:
Proceeds from notes payables 57,000 (2,328,372)
Net cash provided by investing
Activities 0 0
-------- ----------
Net cash provided (used) by financing
Activities 57,000 (2,328,372)
-------- -----------
Increase (Decrease) in cash 2,005 752,038
Cash, beginning of period 342 23,843
-------- -----------
Cash, end of period $ 2,347 $ 775,881
========== ============
Supplemental disclosures of cash
flow information:
Interest paid $ 87 $ 165,297
=========== ===========
Taxes paid $ 0 $ 0
=========== ===========
See notes to financial statements
8
Notes to Financial Statements
Note 1. Interim 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 nine months ended March 31, 2002 are not necessarily
indicative of the results that may be expected for the year ending June 30,
2002. 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, 2001.
Note 2: Investments
-----------
On March 7, 2001, the Registrant sold 1,077,800 shares of the common stock it
held in its largest investee, Williams Controls, Inc., and on March 12, 2001
the Registrant sold an additional 574,529 shares of Williams Controls, Inc.,
for a total of 1,652,329 shares, representing all the shares of Williams
Controls, Inc. common stock owned by the Registrant at the time of this
filing. These shares were acquired by the Registrant in transactions between
April 1991 and August 1998. The shares were sold in open market transactions
through an unaffiliated broker. Upon settlement of the trades, the Registrant
received total net proceeds of approximately $2,424,800. These proceeds were
used to pay off the Company's demand loan from a bank with a balance of
$2,141,649 plus accrued interest, and make payments of or toward other debt
obligations and payables that the Company had outstanding. The Registrant
continues to hold its other principal common stock investments in CompuSonics
Video Corporation (10,001,751 shares), Ajay Sports, Inc. (310,785 common and
2,000 preferred shares), 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
--------------------------
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
9
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.
Note 4: Board of Director Changes Subsequently Rescinded.
------------------------------------------------
Upon the Registrant's receipt of $300,000 on September 26, 2001, the
following changes in the Board of Directors and officers of the Registrant
were effected. Under terms of the Subscription Agreement, in addition to
Directors Thomas W. Itin and H. Samuel Greenawalt, Jack Wen and George Burmann
of the Wen Group were elected to serve as Directors and, additionally, Jack
Wen was elected Chairman of the Board, Chief Executive Officer and President
and Don Johnson of the Wen Group was elected Treasurer and Chief Financial
Officer.
Upon receipt of the first payment of $300,000 from the Wen Group under the
Subscription Agreement, Jack Wen requested that $240,000 be invested in TIDE,
a PRC company headquartered in Shanghai. This investment was completed.
However, upon the recession the $240,000 investment was returned to the Wen
group, therefore the investment in TIDE has not been and is not reflected in
financial statements.
Note 5
Footnote: Note payable related party
------------------------------------
The Registrant has a $ 27,000 Note Payable to Dearborn Wheel Inc. The interest
on the note is 10% per annum. The note is due on March 06, 2002.
Note 6
Footnote: Note payable
----------------------
The Registrant has a $ 30,000 Note Payable to Yueh Yun Chang with no interest.
The principal with no interest is due on Jun 12, 2002.
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.
10
The Registrant received $300,000 for the sale of 240,000 shares of the
Company's common stock, with commitments for future funding in November 2001
of $1,000,000 and in February of 2002 of $2,000,000, as a result of the
Subscription Agreement with the Wen Group. As a condition of the Subscription
Agreement, $240,000 of the $300,000 was invested at the request of the Wen
Group in a PRC company, TIDE, leaving the Registrant with a total of $60,000
cash on hand remaining from the Wen Group's initial investment.
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.
Material Changes in Results of Operations:
------------------------------------------
The Registrant interest expenses were $ 666 and $ 49,046 for the quarter ended
March. 2002 and 2001 respectively. The change is due to the payment of
Company's demand loan to a bank, therefore, there was no interest expense paid
for the quarter ended March. 2002.
The Registrant recorded general and administrative expenses of $ 338 for this
quarter ended March. 2002 compare to general and administrative expenses of $
9,140 the quarter ended March. 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 $ 139,718 for
the third quarter ended March, 2002 compared to a gain of $ 141,737 for the
third quarter ended March 31, 2001. This is mainly due to the changes in
investment portfolio and fair market value of the Registrant's investment in
the publicly traded companies CompuSonics Video Corporation and Ajay Sports,
Inc.
Part II. OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
11
Item 5. Other Information
------------------
In early November of 2001, the Wen Group informed Registrant that the second
and third payments under the Subscription Agreement would not be forthcoming
and the Registrant accepted that conclusion. On November 26, 2001, a
Settlement Agreement was signed by the Registrant, Jack Wen, and the
investment group that Jack Wen represented to vacate the Subscription
Agreement signed on September 14, 2001. In a Settlement Agreement signed and
put into effect by Registrant and the Wen Group, funds paid in by the Wen
Group were returned less any expenses incurred by the Registrant and less the
$240,000 investment into the PRC company, TIDE. The common stock that was
part of the September 14, 2001 Subscription Agreement was not issued. The
September 14, 2001 Subscription Agreement was rescinded. A payment of $30,000
less expenses of $2,174.50 of the Registrant was returned to the Wen Group and
a note for the remaining $30,000 was executed by the Registrant subject to
certain conditions.
In a meeting of the Board of Directors of Registrant, it was resolved that the
Subscription Agreement of September 14, 2001 be declared null and void, and
that a request be 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. Further,
during this meeting, 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.
Item 6. Exhibits and Reports on Form 8-K
A) Exhibits
None
B) Form 8-K
None
12
Enercorp, Inc.
Form 10-Q
For the Third Quarter Ended March 31, 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: October 8, 2002
13