-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HarFuoyMrdpMtdS/nJ6wM5KlqHzpJX1aAExn791pnPXk4NVCpb9vQC87gLhUCe2O OKPwuV+KYDNsVVlfpyf5dA== /in/edgar/work/20000811/0001013762-00-000147/0001013762-00-000147.txt : 20000921 0001013762-00-000147.hdr.sgml : 20000921 ACCESSION NUMBER: 0001013762-00-000147 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20000811 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TALISMAN ENTERPRISE INC CENTRAL INDEX KEY: 0001076831 STANDARD INDUSTRIAL CLASSIFICATION: [3690 ] IRS NUMBER: 000000000 STATE OF INCORPORATION: A6 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 001-15509 FILM NUMBER: 692714 BUSINESS ADDRESS: STREET 1: 2330 SOUTHFIELD RD STREET 2: UNIT 3-4 CITY: MISSISSAUGA ONTARIO STATE: A6 BUSINESS PHONE: 9058263995 MAIL ADDRESS: STREET 1: 2330 SOUTH, FIELD ROAD STREET 2: MISSISSAUGA, ONTARIO 10QSB 1 0001.txt C:\MYFILES\TALISMAN\JUNE10Q.FIN UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB (Mark One) [x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2000 [ ] TRANSITION REPORT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period from _______________ TO _______________. 333-83123 (Commission File Numbers) TALISMAN ENTERPRISES INC. (Exact name of registrant as specified in its charter)
ONTARIO 3600 (State or other jurisdiction of (Primary Standard Industrial incorporation or organization) Classification Code Number)
2330 Southfield Road, Unit 3-4 Mississauga, Ontario Canada L5N 2W8 (Address of principal executive offices) (905) 826-3995 (Registrants' telephone number, including area code) Not Applicable (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the Registrants (1) have 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 (or for such shorter period that the Registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days. YES [ X ] NO[ ] As of June 30, 2000, 3,035,187 shares of Common Stock, par value $.001 per share, of Talisman Enterprises Inc. were issued and outstanding. PART I FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS Consolidated Financial Statements of TALISMAN ENTERPRISES INC. Three MONTHS ended June 30, 2000 - Unaudited
TABLE OF CONTENTS Consolidated Balance Sheets as at June 30, 2000 and December 31, 1999 3 Consolidated Statements of Loss and Deficit for the three and six months ended June 30, 2000 and June 4 30,1999 Consolidated Statements of Cash Flows for the three and six months ended June 30, 2000 and June 30,1999 5 Notes to Consolidated Financial Statements 6-7
Talisman Enterprises Inc. Incorporated under the laws of Ontario CONSOLIDATED BALANCE SHEET [in U.S. dollars and prepared in accordance with accounting principles generally accepted in the United States]
Unaudited Audited June 30, December 31, 2000 1999 $ $ - ------------------------------------------------------------------------------------------------------------------- ASSETS Current Cash 322,806 16,557 Accounts receivable 293,619 400,672 Inventories [note 2] 1,315,323 1,035,006 Prepaid expenses 78,227 511,193 Deferred financing costs 52,021 366,505 - ------------------------------------------------------------------------------------------------------------------ Total current assets 2,061,996 2,329,933 - ------------------------------------------------------------------------------------------------------------------ Capital assets 3,354,652 3,430,218 - ------------------------------------------------------------------------------------------------------------------ 5,416,648 5,760,151 - ------------------------------------------------------------------------------------------------------------------ LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY) Current Bank operating line -- 539,872 Accounts payable and accrued liabilities 522,693 1,622,594 Note payable -- 358,003 Convertible promissory note -- 5,073,135 Current portion of long-term debt 127,195 130,368 - ------------------------------------------------------------------------------------------------------------------ Total current liabilities 649,888 7,723,972 - ------------------------------------------------------------------------------------------------------------------ Long-term debt 243,385 314,640 Deferred income tax liability 448,895 491,111 Shareholders' equity (deficiency) Share capital 12,708,133 4,277,540 Warrants 101,463 101,463 Contributed surplus 284,233 284,233 Deficit (8,680,240) (7,279,842) Accumulated other comprehensive loss (339,109) (152,966) - ------------------------------------------------------------------------------------------------------------------ Total shareholders' equity (deficiency) 4,074,480 (2,769,572) - ------------------------------------------------------------------------------------------------------------------ 5,416,648 5,760,151 - ------------------------------------------------------------------------------------------------------------------
See accompanying notes On behalf of the Board: Director Director Talisman Enterprises Inc. CONSOLIDATED STATEMENT OF LOSS AND DEFICIT [in U.S. dollars and prepared in accordance with accounting principles generally accepted in the United States] Unaudited
Three months Three months Six months Six months ended ended ended ended June 30, June 30, June 30, June 30, 2000 1999 2000 1999 $ $ $ $ - ------------------------------------------------------------------------------------------------------------------- Revenues 221,979 41,840 335,226 70,688 Operating expenses [exclusive of amortization shown separately below] 534,646 383,079 732,886 639,566 - ------------------------------------------------------------------------------------------------------------------ Gross profit (312,667) (341,239) (397,660) (568,878) - ------------------------------------------------------------------------------------------------------------------ Expenses Selling, general and administrative 386,758 547,499 779,717 872,648 Amortization 120,202 291,699 222,128 370,003 Interest and bank charges 6,123 96,134 31,415 105,133 - ------------------------------------------------------------------------------------------------------------------ 513,083 935,332 1,033,260 1,347,784 - ------------------------------------------------------------------------------------------------------------------ Loss before income taxes (825,750) (1,276,571) (1,430,920) (1,916,662) Income taxes - deferred (15,123) (14,695) (30,522) (28,990) - ------------------------------------------------------------------------------------------------------------------ Loss for the period (810,627) (1,261,876) (1,400,398) (1,887,672) Deficit, beginning of period (7,869,613) (3,864,778) (7,279,842) (3,238,982) - ------------------------------------------------------------------------------------------------------------------ Deficit, end of period (8,680,240) (5,126,654) (8,680,240) (5,126,654) - ------------------------------------------------------------------------------------------------------------------ Loss per share (0.27) (1.22) (0.52) (1.83) - -------------------------------------------------------------------------------------------------------------------
See accompanying notes Talisman Enterprises Inc. CONSOLIDATED STATEMENT OF CASH FLOWS [in U.S. dollars and prepared in accordance with accounting principles generally accepted in the United States] Unaudited
Three months Three months Six months Six months ended ended ended ended June 30, June 30, June 30, June 30, 2000 1999 2000 1999 $ $ $ $ - ------------------------------------------------------------------------------------------------------------------- OPERATING ACTIVITIES Loss for the period (810,627) (1,261,876) (1,400,398) (1,887,672) Charges to income not affecting cash Amortization of capital assets 120,202 291,699 222,128 370,003 Deferred income taxes (15,123) (14,695) (30,522) (28,990) Change in non-cash working capital items (136,468) (371,231) (855,318) (1,003,634) - ------------------------------------------------------------------------------------------------------------------ Cash used in operating activities (842,016) (1,356,103) (2,064,110) (2,550,293) - ------------------------------------------------------------------------------------------------------------------ INVESTING ACTIVITY Purchase of capital assets (63,660) (453,535) (216,983) (676,211) - ------------------------------------------------------------------------------------------------------------------ FINANCING ACTIVITIES Issue of convertible promissory note -- 2,478,628 -- 5,174,473 Deferred financing costs -- (322,222) -- (797,677) Repayment of long-term debt (31,780) (25,510) (64,140) (153,588) Increase in note payable -- -- -- -- Issue of common shares -- -- 3,299,956 -- Bank operating line -- 19,695 (531,223) (335,833) - ------------------------------------------------------------------------------------------------------------------ Cash provided by (used in) - ------------------------------------------------------------------------------------------------------------------ financing activities (31,780) 2,150,591 2,704,593 3,887,375 - ------------------------------------------------------------------------------------------------------------------ Effect of exchange rate changes on cash (28,914) (47,251) (117,251) (15,348) - ------------------------------------------------------------------------------------------------------------------- Increase (decrease) in cash during the period (966,370) 293,702 306,249 645,523 Cash, beginning of period 1,289,176 368,522 16,557 16,701 - ------------------------------------------------------------------------------------------------------------------ Cash, end of period 322,806 662,224 322,806 662,224 - ------------------------------------------------------------------------------------------------------------------ NON-CASH FINANCING ACTIVITIES Conversion of promissory note -- -- (5,073,135) -- Conversion of note payables -- -- (356,349) -- Deferred financing costs -- -- 299,022 -- - ------------------------------------------------------------------------------------------------------------------- -- -- (5,130,462) -- - ------------------------------------------------------------------------------------------------------------------- SUPPLEMENTARY INFORMATION Cash interest paid 16,082 19,459 32,665 36,815 Cash income taxes paid -- -- -- -- See accompanying notes
Talisman Enterprises Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS [in U.S. dollars and prepared in accordance with accounting principles generally accepted in the United States] Unaudited June 30, 2000 1. BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information in the United States and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the six months period ended June 30, 2000 are not necessarily indicative of the results that are expected for the year ending December 31, 2000. For further information, refer to the consolidated financial statements and footnotes included in the Talisman Enterprises Inc. annual report on Form 10-KSB for the year ended December 31, 1999. For purposes of these consolidated financial statements, the company has adopted the U.S. dollar as the reporting currency. This improves investors' ability to compare the company's results with those of most other publicly traded businesses in the industry. These consolidated financial statements have been translated from Canadian dollars to U.S. dollars by translating assets and liabilities at the rate in effect at the respective balance sheet date and revenues and expenses at the average rate for the period. Any resulting foreign exchange gains or losses are recorded in accumulated other comprehensive loss. 2. NATURE OF OPERATIONS Talisman Enterprises Inc. is a company incorporated to primarily produce premium private label alkaline batteries. The consolidated financial statements have been prepared by management in accordance with accounting principles generally accepted in the United States on a going concern basis, which contemplates the realization of assets and the discharge of liabilities in the normal course of business for the foreseeable future. The company has incurred significant losses and negative cash flow from operations and has an accumulated deficit of $8,680,240 at June 30, 2000 [December 31, 1999 - $7,279,842]. The company's ability to continue as a going concern is in substantial doubt and is dependent upon achieving a profitable level of operations and, if necessary, obtaining additional financing. Management of the company has undertaken steps as part of a plan to improve operations with the goal of sustaining company operations for the next twelve months and beyond. These steps include (i) focusing sales and marketing on specific markets and customers and (ii) controlling overhead and expenses. There can be no assurance the company can attain profitable operations in the future. These consolidated financial statements do not give effect to any adjustments which would be necessary should the company be unable to continue as a going concern and therefore, be required to realize its assets and discharge its liabilities in other than the normal course of business and at amounts different from those reflected in the accompanying consolidated financial statements. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS [in U.S. dollars and prepared in accordance with accounting principles generally accepted in the United States] Unaudited
3. INVENTORIES June 30, December 31, 2000 1999 $ $ - ------------------------------------------------------------------------------------------------------------------- Raw materials and packaging 388,146 316,829 Finished goods 927,177 718,177 - ------------------------------------------------------------------------------------------------------------------ 1,315,323 1,035,006 - ------------------------------------------------------------------------------------------------------------------
4. LOSS PER SHARE The calculation of loss per common share is based on the reported net loss divided by the weighted average number of shares outstanding during the period. The weighted average number of common shares outstanding for the three months ended June 30, 2000 was 3,035,187 and six months ended June 30, 2000 was 2,705,250, [three and six months ended June 30, 1999 - 1,034,324]. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations The statements contained in this Report that are not historical are forward-looking statements, including statements regarding the Company's expectations, intentions, beliefs or strategies regarding the future. Forward- looking statements include the Company's statements regarding liquidity, anticipated cash needs and availability and anticipated expense levels. All forward-looking statements included in this Report are based on information available to the Company on the date hereof, and the Company assumes no obligation to update any such forward-looking statement. It is important to note that the Company's actual results could differ materially from those in such forward-looking statements. Additionally, the following discussion and analysis should be read in conjunction with the Financial Statements and notes thereto appearing elsewhere in this Report. The discussion is based upon such financial statements which have been prepared in accordance with U.S. Generally Accepted Accounting Principles and are presented in United States dollars ($). General Talisman was incorporated in July 1978 and for almost 20 years carried on business as a junior mineral exploration company in the Province of Ontario, Canada. In September 1997, Talisman (then known as Firesand Resources Ltd.) entered into a share exchange agreement with Talisman International Inc. pursuant to which Talisman acquired all of the issued and outstanding shares of common stock of Talisman International in exchange for shares of Talisman. Upon completion of the share exchange, Firesand Resources Ltd. changed its name to its current name, Talisman Enterprises Inc. The share exchange was accounted for as a reverse takeover and accordingly, the results of Talisman (formerly constituted as Firesand) have been included with those of Talisman International from the date of the share exchange. Talisman, through our wholly-owned operating subsidiary, Talisman International Inc., manufacturers high-quality AA size disposable alkaline batteries for private label sale by retailers. We are currently, to our knowledge, the only North American-based battery manufacturer that focuses primarily on the private label market. Our objective is to leverage our unique strategic position to build market share in the private label battery market and capitalize on the significant growth in private label battery sales in North America. Results of Operations Three month period ended June 30, 2000 and June 30, 1999 Revenues Revenues for the three month period ended June 30, 2000 increased $180,139 to $221,979, a 431% increase over revenues of $41,840 during the three months period ended June 30, 1999. The sales increase was attributable to greater than prior year sales from Amcon, CVP, Harris Teeter and Navarro Pharmacy. Operating Expenses and Gross Margins Operating expenses for the three month period ended June 30, 2000 increased $151,567 to $534,646, a 40% increase from operating expenses of $383,079 during the three months period ended June 30, 1999. The increase in operating expenses was attributable to increases in variable overhead spending in relation to the growth in sales. Gross margins, as a percentage of revenues improved to (141%) for the three month period ended June 30, 2000, as compared to (816%) for the three month period ended June 30, 1999. The improvement was attributable to the increase in sales and a less than proportionate increase in variable overhead spending relative to the sales improvement. Selling, General and Administrative Expense Selling, general and administrative expense for the three month period ended June 30, 2000 decreased $160,741 to $386,758, a 29% decrease over selling, general and administrative expenses of $547,499 during the three months period ended June 30, 1999. The decrease is primarily attributable to one time costs, recorded in the prior year, covering relocation costs for the CEO and severance costs for the VP Sales - Canada, along with the elimination of the executive bonus program in 2000. Amortization Expense Amortization expense for the three month period ended June 30, 2000 decreased $171,497 to $120,202, a 59% decrease from amortization expense of $291,699 during the three months period ended June 30, 1999. The decrease in amortization expense is due to the fact that the three month period ended June 30, 1999 included amortization of deferred financing costs related to the 1999 private placement. Interest Expense and Other Financing Charges Interest expense and other financing charges for the three month period ended June 30, 2000 decreased $90,011 to $6,123, a 94% decrease from interest expense and other financing charges of $96,134 during the three month period ended June 30, 1999. The decrease in interest expense and other financing charges was primarily attributable to the following: o during the three month period ended June 30, 1999, the company recorded a one time commencement fee in connection with the initiation of the revolving loan process with GE Capital Canada; and o during the three month period ended June 30, 1999, the company incurred interest expenses in connection with the revolver loan that it had with CIBC. Foreign Exchange For the three months ended June 30, 2000, Talisman had a foreign exchange gain of approximately $21,747, which was included in the results from operations of gains on U.S. sales/receivables and funds on deposit, offset by losses on U.S. purchase/payables from U.S. dollar suppliers. During the three months ended June 30, 1999, Talisman experienced a foreign exchange gain of $20,876. Currently, a majority of revenues from sales are in U.S. dollars and a majority of expenses from goods purchased for resale are purchased in U.S. dollars. Since Talisman is based in Ontario, Canada, approximately 80% of Talisman's combined operational and selling, general and administrative expenses for the period ended June 30, 2000, were incurred in Canadian dollars. Variations in the value of the Canadian dollar, as compared to the value of the U.S. dollar, could adversely effect Talisman's results. Stock Based Compensation We account for our stock options and warrants under APB Opinion 25. If Talisman was required to account for the stock options and warrants using the fair value method, the pro forma net loss for the three months ended June 30, 2000 would be ($830,832). The pro forma loss per share for the three months ended June 30, 2000 would be $(0.27). Such amounts represent the fair value of options and warrants at the time they vested. Since some of the options vest over a period of time there will be future charges to income with respect to the options granted in 1999 of $254,593 over the next 7 years. There were no employee stock options or warrants issued in the three months ended June 30, 2000. Inflation Talisman has experienced minimal impact from inflation and changing prices on its net sales and on its income from continuing operations for the periods it has been engaged in business. Liquidity And Capital Resources For the three month period ended June 30, 2000, the Company's cash position decreased by $966,370 from $1,289,176 to $322,806. The principal uses of cash were $842,016 that was used for operating activities, $63,660 that was used to purchase capital assets and $31,780 that was used to pay down the Company's borrowing facility. Talisman has financing facilities in place with General Electric Capital Canada Inc., which currently consist of (1) a Cdn.$940,800 term loan; (2) a revolving credit line of up to Cdn.$7,500,000, and (3) a "capex" loan of up to Cdn.$2,059,200. The term loan is due and payable on or before June 30, 2002. Interest charged on the General Electric Capital facilities is, (i) with respect to funds advanced in Canadian dollars, calculated at the average rate per annum established by the Royal Bank of Canada at its discount rate for 30-day Canadian bankers acceptances plus 4.0% per year, and (ii) with respect to funds advanced in U.S. dollars, the latest rate for 30-day dealer placed commercial paper, which normally is published in the "Money Rates" section of the Wall Street Journal. Furthermore, all indebtedness of Talisman under the General Electric Capital facilities is secured by Talisman's assets. Except for the existing financing arrangements with General Electric Capital Canada Inc., Talisman has no other current arrangements in place with respect to financing. If additional financing arrangements are not obtained, we may be unable to fully fund our operations, pursue our business strategy, take advantage of new opportunities, develop or enhance our products, or respond to competitive pressures and financial or marketing hurdles. Such inability could have a materially adverse effect on Talisman's business, operating results and financial condition. Moreover, the estimated cost of the proposed expansion of our production and marketing activities is subject to numerous uncertainties, including the problems, expenses, difficulties, complications and delays, many of which are beyond our control, frequently encountered in connection with the establishment and development of new business activities, and may be affected by the competitive environment in which we are operating. Accordingly, there can be no assurance that we will complete the proposed expansion of our production and marketing activities described herein. PART II ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits Exhibit 27: Financial Data Schedule (b) Reports on Form 8-K The Company did not file any reports on Form 8-K during the three month period ended June 30, 2000. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused the project to be signed on its behalf by the undersigned thereto duly authorized. TALISMAN ENTERPRISES INC. August 10, 2000 By: /s/ Thomas O'Dowd Thomas O'Dowd Chief Financial Officer EX-27 2 0002.txt A:\MYFILES\TALISMAN\FDS.FIN
5 Exhibit 27 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED JUNE 30, 2000. 3-MOS dec-31-1999 jun-30-2000 322,806 0 293,619 (25,376) 1,315,323 2,061,996 3,354,652 (748,158) 5,416,648 649,888 0 0 0 11,021,050 2,072,779 5,416,648 221,979 221,979 534,646 534,646 506,960 0 6,123 (825,750) (15,123) 0 0 0 0 (810,627) (0.27) (0.27)
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