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, 2003
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 November15, 2003: 695,897
Enercorp, Inc.
Form 10-QSB Filing for the Third Quarter Ended September 30, 2003
INDEX
Page Number
---------------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Statements of Assets and Liabilities
September 30, 2003 (Unaudited) and June 30, 2003 3
Schedule of Investments September 30, 2003 (Unaudited)
And June 30, 2003 4-7
Statements of Operations (Unaudited) for the Three
Months Ended September 30, 2003 and 2002 8
Statements of Cash Flows (Unaudited) for the Three
Months Ended September 30, 2003 and 2002 9
Notes to Financial Statements 10
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 11-13
Item 3 Controls and Procedures. 13
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 14
Item 2. Changes in Securities 14
Item 3. Defaults Upon Senior Securities 14
Item 4. Submission of Matters to a Vote of Security Holders 14
Item 5. Exhibits and Reports on Form 8-K 14
Signature Page 15
Certification pursuant to 18 USC, Section 1350, as adopted
pursuant to Sections 302 and 906 of the Sarbanes-Oxley
Act of 2002 16-17
-2-
Enercorp, Inc.
Statements of Assets and Liabilities
September 30 June 30
2003(Unaudited) 2003
----------------- ---------
ASSETS
Investments, at fair value, cost of
$1,231,638And $1,231,638 at September 30,
2003 and June 30, 2003 $ 1,086,196 $900,644
Cash 1,395 618
Furniture and fixtures, net of accumulated
depreciation of $12,437 at September 30, 2003
and 12,437 at June 30, 2003 respectively. -0- -0-
Other assets -0- -0-
------------ ----------
$ 1,087,591 $901,262
============ ==========
LIABILITIES AND NET ASSETS
Liabilities
Note payable-Related Party $ 49,150 $39,950
Note payable-Wen Group 30,000 30,000
Accounts payable and accrued liabilities 11,943 16,142
Interest Payable-related party 5,992 4,899
Accrued management fees-related party 57,500 50,000
Accrued salaries payable 145,000 120,000
---------- ----------
299,585 260,991
---------- ----------
Net assets
Common stock, no par value: 10,000,000
shares authorized, 695,897 shares issued
and outstanding at September 30, 2003 and
June 30, 2003 1,888,251 1,888,251
Preferred stock, no par value: 1,000,000
shares authorized, -0- issued and
outstanding -0- -0-
Accumulated deficit (954,803) (916,985)
Unrealized net loss on investments, net of
deferred income taxes at September 30,2003 and
June 30, 2003 (145,442) (330,994)
--------- ---------
788,006 640,272
--------- ---------
$1,087,591 $901,262
=========== =========
See notes to financial statements
-3-
Enercorp, Inc.
Schedule of Investments
September 30, 2003(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 0.0635
111 111
Site Dev. 10,000,000 0.0635 106,477
635,000 (190,500) 444,500
Ajay Sports, Golf & Casual 294,118 0.005 600,000
1,471 1,471
Furniture
Manufacturer 16,667 0.005 37,500
83 83
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
424,972 (84,994) 339,978
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
1,811,675 (725,494) 1,086,181
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
See notes to financial statements
-4-
Unaffiliated Companies
Common Stocks-Public Market Method of Valuation
Vitro Diagnostics 300 .05 1,500
15 15
Proconnextions, Inc.-Sports Memorabilia a 191,610 19,161
-
---------------
--------------------------
Total All Companies $1,231,638
$1,811,690 (725,494) $1,086,196
=============
===================================
a No public market for this security
b Subject to Rule 144
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, 2003
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 0.037
65 65
Site Dev. 10,000,000 0.037 106,477
370,000 (111,000) 259,000
Ajay Sports, Golf & Casual 294,118 0.005 600,000
1,471 1,471
Furniture
Manufacturer 16,667 0.005 37,500
83 83
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
424,972 (89,994) 339,978
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
1,546,629 (645,994) 900,634
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
See notes to financial statements
-6-
Unaffiliated Companies
Common Stocks-Public Market Method of Valuation
Vitro Diagnostics 300 .06 1,500
9 9
Proconnextions, Inc.-Sports Memorabilia a 191,610 19,161
-
---------------
--------------------------
Total All Companies $1,231,638
$1,546,638 (645,994) 900,643
=============
===================================
a No public market for this security
b Subject to Rule 144
See notes to financial statements
-7-
Enercorp, Inc.
Statements of Operations
(Unaudited)
For the three Months
Ended September 30
2003 2002
--------- ----------
REVENUES
Miscellaneous Income $-0- $-0-
-------- ---------
-0- -0-
EXPENSES
Officer salaries 25,000 30,000
Legal, accounting and other professional
Fees 3,050 1,714
Management fees related 7,500 7,500
Interest expense - other 1,094 681
Other general and administrative expenses 1,173 273
------- --------
37,817 40,167
Net gain (loss) from operations
before taxes (37,817) (40,167)
Income taxes -0- -0-
--------- ---------
Net gain (loss) from operations
after taxes (37,817) (40,167)
--------- ---------
Net unrealized gain (loss) on investments
before Taxes 185,552 (312,267)
Income taxes -0- -0-
--------- --------
Net unrealized gain (loss) on
investment after taxes 185,552 (312,267)
--------- ---------
Increase (decrease) in net assets
resulting from operations $147,735 $(352,434)
======== =========
Increase (decrease) in net assets
per share $ 0.21 $(0.51
======== =========
See notes to financial statements
-8-
Enercorp, Inc.
Statements of Cash Flows
(Unaudited)
For Three Months Ended September 30
2003 2002
-------- ------------
Cash flows from operating activities
Increase (decrease) in net assets $147,735 $(352,434)
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation -0- -0-
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 (185,552) 312,267
(Increase) Decrease in other assets -0- -0-
Increase (Decrease) in accounts payable
and accrued expenses 29,395 39,159
Increase (Decrease) in deferred taxes -0- -0-
-------- --------
Total adjustments (156,157) 351,426
--------- --------
Net cash (used) by operating activities (8,422) (1,009)
-------- -------
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 9,200 -0-
-------- -------
Net cash provided (used) by financing
activities (9,200) -0-
-------- --------
Increase (Decrease) in cash 777 (1,009)
Cash, beginning of period 618 1,123
-------- --------
Cash, end of period $ 1,395 $114
Supplemental disclosures of cash flow
information:
Interest paid $ -0- $ -0-
=========== =========
Taxes Paid $ -0- $ -0-
=========== =========
See notes to financial statements
-9-
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, 2003 are not
necessarily indicative of the results that may be expected for the year ending
June 30, 2004. 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,
2003.
Note 2: Investments-Related Party
-------------------------
Investments consist of holdings of securities in publicly and privately held
companies. 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.
CompuSonics Video Corporation "CPVD" is one of the biggest investees of the
Registrant. 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 NAFTA market TreeSoft software used in electrical
engineering. The Registrant owns 10,001,751 shares of CPVD, which were trading
at $0.0635 per share at September 30, 2003. The Registrant is taking a 30%
discount from the total FMV of this investment, which reflects an accurate
representation of the fair value of the investment in the statement of assets
and liabilities.
One of the Registrant's investees is Ajay Sports, Inc (" Ajay"). Through its
operating subsidiaries, including Pro Golf, Ajay is a franchisor of retail golf
stores. The Registrant owns 310,785 shares of common stock of Ajay, which were
trading at $0.005 per share at September 30, 2003, and 2,000 shares of
preferred stock of Ajay valued at $0.019 per share at September 30, 2003.
-10-
One of the Registrant's other current investee is Pro Golf International, Inc.
(PGI) a majority-owned subsidiary of Ajay Sports, Inc., which 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 franchiser of Pro Golf Discount Retail Stores. Fair Market Value of
PGI investment was $424,972 at September 30, 2003.The Registrant took a (20)%
discount based on marketability, liquidity and the progress of PGI and its
wholly owned subsidiary Pro Golf of America, Inc. ("PGoA"), reducing the Net
Fair Value to $339,987.
ProGolf. Com, Inc. 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 ProGolf.com Internet site. The Board of
Directors has valued the investment for 300,000 shares of PG.Com at $750,000
After careful deliberation, however, the Board of Directors has agreed that
Enercorp, Inc will continue to take a (60)% reduction in reserves, equaling
$450,000 discount. The Registrant is using the total value of $300,000
($1/share) for this position.
Note 3: Capital Stock Transactions
--------------------------
There were no capital stock transactions during quarter ended September 30,
2003.
Note 4: Related party transactions
--------------------------
CompuSonics Video Corporation ("CPVD") is one of the largest investees of the
Registrant Enercorp, Inc. and also a related party. Thomas W. Itin, former
Chairman, President and CEO of the Registrant, holds the position of Chairman
and CEO in CPVD. Mr. Itin may be deemed a 17% beneficial ownership in CPVD.
Ajay Sports, Inc is a related party with the Registrant Enercorp, Inc.
Thomas W. Itin, former Chairman, President, and CEO of the Registrant, 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 with the Registrant
Enercorp, Inc. Thomas W. Itin former Chairman, President, and CEO of the
Registrant, holds the position of Chairman and CEO in PGI, a 91% owned
subsidiary of Ajay Sports, Inc. Thomas W. Itin has a controlling interest by
reason of attribution in Pro Golf International, Inc.
ProGolf.com, Inc is a related party with the Registrant Enercorp, Inc.
Thomas W. Itin, former Chairman, President, and CEO of the Registrant, holds
the position of Chairman and CEO in ProGolf.com, Inc, an 85% owned subsidiary
of Pro Golf International, Inc. Thomas W. Itin has a controlling interest by
reason of attribution in ProGolf.com, Inc.
The Registrant Enercorp, Inc. has a Note Payable of $49,150 to Dearborn Wheels,
Inc. The Note was issued on December 6, 2001 at 10% interest rate per annum,
and was renewed on September 10, 2003. The Note is due after 180 days. The
terms were approved by the independent directors of the Registrant Enercorp,
Inc. As of September 30, 2003, balance of interest payable on this Note is
$5,992.
The Registrant Enercorp, Inc. is accruing $2,500 per month in Management fees
Due to Acrodyne Corporation. As of September 30, 2003, balance of accrued fees
due to Acrodyne Corporation was $ 57,500.
The Registrant accrued $25,000 salary for this quarter due to Thomas W. Itin,
former president. Balance of accrued salaries at the end of this quarter is $
145,000.
-11-
Note 5: Note payable Wen Group.
-----------------------
The Registrant has outstanding the $30,000 promissory note to Wen Group. The
note was issued on December 12, 2001 and is not bearing any interest. The note
is due in full one hundred eighty days from the date of issuance.
Note 6: Board of Directors Changes.
--------------------------
Effective September 14, 2003 the following changes occurred in the Board of
Directors: Thomas W. Itin offered his resignation from all positions in the
Registrant. James C. Sargent was elected to the Board of Directors and to the
position of the Chairman and CEO of the Registrant. Jeffrey E. Rautio was
elected to the position of President and COO of the Registrant.
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 its credit lines.
The only change in the Registrant's financial condition for the three-month
period ending September 30, 2003, is the increase in investments value. This
change is mainly due to increase in market value of the common stock of
CompuSonics Video Corporation. The value of CompuSonics Video Corporation stock
significantly increased from $0.037 per share at June 30, 2003 to $0.0635 per
share at September 30, 2003. Total net fair market value of CompuSonics Video
common stock at September 30, 2003 was $444,500.
Liquidity and Capital Resources.
-------------------------------
The Registrant has an issued and outstanding 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 validity of the Wen Group claim is under review.
Currently the Registrant's liquidity resources are provided from the borrowings
from a third party, Dearborn Wheels, Inc.
The Registrant's current plan includes bringing in other investors, borrowing
against collateral or selling a portion of its holdings.
Material Changes in Results of Operations:
-----------------------------------------
-Three-month period ended September 30, 2003.
-12-
The Registrant's revenues were $0 and $0 for the quarter ended September 30,
2003 and 2002, respectively. There was no sale of investments, no consulting
services provided to other parties, no dividend or interest income paid or
incurred from other parties for this quarter.
The Registrant recorded $25,000 of officer salaries for the quarter ended
September 30, 2003 compared to officer salaries of $30,000 for the quarter
ended September 30, 2002. Salary is due to Thomas W. Itin, former president of
the Registrant. Mr. Itin resigned on September 14, 2003 from all his duties in
the Registrant. This explains the decrease in accrued salary for this quarter.
The salary is accrued based upon an employment agreement between the Registrant
and Thomas W. Itin the terms of which were negotiated and approved by the
Registrant's independent Directors.
The Registrant's legal, accounting and other professional fees were $3,050 and
$1,014 for the quarter ended September 30, 2003 and 2002 respectively. The
change is mainly due to changes in accounting fees.
The Registrant's interest expense was $1,094 and $681 for the quarter ended
September 30, 2003 and 2002 respectively. The change is due to the increase in
the principal of a note payable to a related party; therefore there is an
increase in interest expense for this year compared to the previous year.
The Registrant recorded general and administrative expenses of $1,173 for this
quarter ended September 30, 2003 compared to general and administrative
expenses of $273 for the quarter ended September 30, 2002. This change is
mainly due to the $993 insurance expense for the Fidelity Bond for this
quarter. General and administrative expenses include travel, telephone and
other miscellaneous expenses.
The Registrant recorded an unrealized gain on investments of $185,552 for the
quarter ended September 30, 2003 compared to a loss of $ 312,267 for the
quarter ended September 30, 2002. This gain was mainly due to the changes in
fair market value of the Registrant's investment in the publicly traded
companies, CompuSonics Video Corporation and Ajay Sports, Inc.
Management's present plan for raising capital is to liquidate some of its
holdings, sell privately, some restricted preferred or common stock pursuant to
the requirements of Rule 144, and/or borrow funds. Monies owed to Dearborn
Wheels and Thomas W. Itin is not being paid at this time.
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 Registrant's Management of the
effectiveness of the design and operation of the Registrant's disclosure
controls and procedures pursuant to Exchange Act Rule 13a-14. Management
concluded that the internal controls and procedures are sufficiently effective.
-13-
b) Changes in Internal Controls
----------------------------
There were no significant changes in the Registrant'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
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
Form 8-K was filed on September 29, 2003 - Resignation of
Thomas W. Itin from all positions he held in the Company and
election of James C. Sargent as Chairman and CEO and Jeffrey
E. Rautio as President and COO of the Company.
-14-
Enercorp, Inc.
--------------
Form 10-QSB
For the Quarter Ended September 30, 2003
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/Jeffrey Rautio
-----------------
Jeffrey Rautio
President
Date: November 19, 2003
-15-
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 "Registrant")
on Form 10-QSB for the quarter ended September 30, 2003 the ("Report"), as
filed with the Securities and Exchange Commission on the date hereof, we,
Jeffrey Rautio, Chief Operating Officer and Majlinda Xhuti, Chief Financial
Officer of the Registrant, 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.
-16-
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):
(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/ Jeffrey Rautio
---------------------
Chief Operating Officer
/s/ Majlinda Xhuti
-------------------
Chief Financial Officer
Dated: November 19 , 2003
-17-