10QSB 1 arie6300210q.txt ARIES VENTURES, INC. - 10QSB - 06-30-2002 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES ACT OF 1934 For the quarterly period ended June 30, 2002 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES ACT OF 1934 For the transition period from ________ to _________ Commission file number: 0-14136 Aries Ventures Inc. ---------------------------------------------------------------- (Exact name of small business issuer as specified in its charter) Nevada 84-0987840 ------------------------------- ---------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 28720 Canwood Street, Suite 207, Agoura Hills, California 91301 --------------------------------------------------------------- (Address of principal executive offices) Issuer's telephone number: (818) 879-6501 Not Applicable --------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report.) Check whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [ ] No [X] Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes [X] No [ ] As of June 30, 2002, the Company had 3,594,177 shares of common stock issued and outstanding. Documents incorporated by reference: None. -1- Aries Ventures Inc. INDEX PART I. FINANCIAL INFORMATION Item 1. Financial Statements Condensed Balance Sheets - June 30, 2002 (Unaudited) and September 30, 2001 Condensed Statements of Operations (Unaudited) - Three Months and Nine Months Ended June 30, 2002 and 2001 Condensed Statements of Comprehensive Loss (Unaudited) - Three Months and Nine Months Ended June 30, 2002 and 2001 Condensed Statements of Cash Flows (Unaudited) - Nine Months Ended June 30, 2002 and 2001 Notes to Condensed Financial Statements (Unaudited) - Three Months and Nine Months Ended June 30, 2002 and 2001 Item 2. Management's Discussion and Analysis or Plan of Operation PART II. OTHER INFORMATION Item 1. Legal Proceedings Item 6. Exhibits and Reports on Form 8-K SIGNATURES -2- Aries Ventures Inc. Condensed Balance Sheets
June 30, September 30, 2002 2001 ---------- ---------- (Unaudited) ASSETS CURRENT Cash and cash equivalents $ 115,707 $ 68,616 Marketable securities 24,000 24,000 Due from Resource Ventures, Inc. 45,865 77,393 Prepaid expenses and other current assets 63,468 43,378 ---------- ---------- 249,040 213,387 ---------- ---------- PROPERTY AND EQUIPMENT 25,844 25,844 Less: accumulated depreciation and amortization (25,364) (17,856) ---------- ---------- 480 7,988 ---------- ---------- OTHER Deposits 2,309 2,309 ---------- ---------- $ 251,829 $ 223,684 ========== ==========
(continued) -3- Aries Ventures Inc. Condensed Balance Sheets (continued)
June 30, September 30, 2002 2001 ---------- ---------- (Unaudited) LIABILITIES CURRENT Accounts payable $ 54,195 $ 163,801 Accrued liabilities 94,516 22,039 Notes payable 500,000 - ---------- ---------- 648,711 185,840 ---------- ---------- COMMITMENTS AND CONTINGENCIES SHAREHOLDERS' EQUITY (DEFICIENCY) Preferred stock, $0.01 par value Authorized - 10,000,000 shares Issued and outstanding - None - - Common stock, $0.01 par value Authorized - 50,000,000 shares Issued and outstanding - 3,594,177 shares at June 30, 2002 and 3,533,177 shares at September 30, 2001 35,942 35,332 Additional paid-in capital 2,014,904 2,013,684 Accumulated deficit (2,447,728) (2,011,172) ---------- ---------- (396,882) 37,844 ---------- ---------- $ 251,829 $ 223,684 ========== ==========
See accompanying notes to condensed financial statements. -4- Aries Ventures Inc. Condensed Statements of Operations (Unaudited)
Three Months Ended June 30, --------------------------- 2002 2001 ---- ---- REVENUES $ - $ - ------- ------- COSTS AND EXPENSES General and administrative 125,542 113,164 Legal fees 10,435 16,669 Depreciation and amortization 1,533 2,987 Loss on disposition and write-down of Marketable Securities - 3,000 Interest expense 15,420 667 Interest income (588) (1,938) Other expense 470 - ------- ------- NET LOSS $(152,812) $(134,549) ======= ======= LOSS PER COMMON SHARE - BASIC AND DILUTED $(0.04) $(0.04) ==== ==== WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - BASIC AND DILUTED 3,594,177 3,533,177 ========= =========
See accompanying notes to condensed financial statements. -5- Aries Ventures Inc. Condensed Statements of Comprehensive Loss (Unaudited)
Three Months Ended June 30, --------------------------- 2002 2001 ---- ---- NET LOSS $(152,812) $(134,549) Other comprehensive income (loss) - - ------- ------- COMPREHENSIVE LOSS $(152,812) $(134,549) ======= =======
See accompanying notes to condensed financial statements. -6- Aries Ventures Inc. Condensed Statements of Operations (Unaudited)
Nine Months Ended June 30, -------------------------- 2002 2001 ---- ---- REVENUES $ - $ - ------- ------- COSTS AND EXPENSES General and administrative 349,506 392,906 Legal fees 36,301 77,121 Depreciation and amortization 7,507 8,961 Loss on disposition and write-down of marketable securities - 307,274 Interest expense 43,272 4,011 Interest income (3,777) (24,364) Other expense 3,747 5,589 ------- ------- NET LOSS $(436,556) $(771,498) ======= ======= LOSS PER COMMON SHARE - BASIC AND DILUTED $(0.12) $(0.22) ==== ==== WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - BASIC AND DILUTED 3,587,399 3,533,177 ========= =========
See accompanying notes to condensed financial statements. -7- Aries Ventures Inc. Condensed Statements of Comprehensive Loss (Unaudited)
Nine Months Ended June 30, -------------------------- 2002 2001 ---- ---- NET LOSS $(436,556) $(771,498) Other comprehensive income (loss): Reclassification adjustment for unrealized gain included in net loss - (169,800) ------- ------- COMPREHENSIVE LOSS $(436,556) $(941,298) ======= =======
See accompanying notes to condensed financial statements. -8- Aries Ventures Inc. Condensed Statements of Cash Flows (Unaudited)
Nine Months Ended June 30, -------------------------- 2002 2001 ---- ---- OPERATING ACTIVITIES Net loss $(436,556) $(771,498) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 7,507 8,962 Loss on disposition and write-down of marketable securities - 307,274 Common stock issued for services 1,830 - Changes in operating assets and liabilities: (Increase) decrease in: Receivables - 22,920 Prepaid expenses and other current assets (20,090) 28,171 Decrease in other assets - 6,935 Increase (decrease) in: Accounts payable (109,605) (86,103) Accrued liabilities 72,477 13,207 ------- ------- Net cash used in operating activities (484,437) (470,132) ------- -------
(continued) -9- Aries Ventures Inc. Condensed Statements of Cash Flows (Unaudited) (continued)
Nine Months Ended June 30, -------------------------- 2002 2001 ---- ---- INVESTING ACTIVITIES Payments from Resource Ventures, Inc. $ 77,393 $ 226,244 Increase in amount due from Resource Ventures, Inc. (45,865) (72,967) Proceeds from disposition of marketable securities - 49,476 ------- ------- Net cash provided by investing activities 31,528 202,753 ------- ------- FINANCING ACTIVITIES Decrease in common stock repurchase obligation - (48,909) Proceeds from notes payable 500,000 - ------- ------- Net cash provided by (used in) financing activities 500,000 (48,909) ------- ------- CASH AND CASH EQUIVALENTS: Net increase (decrease) 47,091 (316,288) At beginning of period 68,616 488,783 ------- ------- At end of period $ 115,707 $ 172,495 ======= =======
See accompanying notes to condensed financial statements. -10- Aries Ventures Inc. Notes to Condensed Financial Statements (Unaudited) Three Months and Nine Months Ended June 30, 2002 and 2001 1. Organization and Basis of Presentation Basis of Presentation - The accompanying condensed financial statements include the operations of Aries Ventures Inc., a Nevada corporation ("Aries" or the "Company"), the successor to Casmyn Corp., a Colorado corporation ("Casmyn"). The condensed financial statements have been prepared in accordance with generally accepted accounting principles in the United States. Comments - The accompanying interim condensed financial statements are unaudited, but in the opinion of management of the Company, contain all adjustments, which include normal recurring adjustments, necessary to present fairly the financial position at June 30, 2002, the results of operations for the three months and nine months ended June 30, 2002 and 2001, comprehensive loss for the three months and nine months ended June 30, 2002 and 2001, and cash flows for the nine months ended June 30, 2002 and 2001. The balance sheet as of September 30, 2001 is derived from the Company's audited financial statements. Certain information and footnote disclosures normally included in financial statements that have been prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission, although management of the Company believes that the disclosures contained in these financial statements are adequate to make the information presented therein not misleading. For further information, refer to the financial statements and the notes thereto included in the Company's Annual Report on Form 10-KSB for the fiscal year ended September 30, 2001, as filed with the Securities and Exchange Commission. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The results of operations for the three months and nine months ended June 30, 2002 is not necessarily indicative of the results of operations to be expected for the full fiscal year ending September 30, 2002. Business - The Company currently has no business operations. The Company's efforts are focused on seeking a new business opportunity, seeking recovery from its litigation and claims against former management and certain other entities (see Note 3), and maintaining the corporate entity. The acquisition of a new business opportunity may result in a change in name and in control of the Company. -11- Restructuring and Recapitalization - When new management was appointed on October 1, 1998, the Company had a shareholders' deficiency of approximately $(21,600,000). Between October 1998 and September 2002, as a result of new management's successful efforts to restructure and recapitalize the Company and to pursue various legal claims, the Company's shareholders' equity increased by over $26,000,000, to approximately $4,700,000 at September 30, 2002, which consists primarily of cash (see Note 3). In addition, shareholders of record on July 1, 2000 received an identical equity interest in the Company's former mineral assets, consisting primarily of the Zimbabwe gold mining properties, through the spin-off of the Company's former Nevada subsidiary. Reclassification - Certain prior period amounts have been reclassified to conform to the current year presentation. Loss Per Share - Basic loss per share is calculated by dividing net loss by the weighted average number of common shares outstanding during the period. Diluted loss per share is calculated assuming the issuance of common shares, if dilutive, resulting from the exercise of stock options and warrants. These potentially dilutive securities were not included in the calculation of loss per share for the three months ended December 31, 2001 and 2000 because the Company incurred a loss during such periods and thus their effect would have been anti-dilutive. Accordingly, basic and diluted loss per share are the same for the three months and nine months ended June 30, 2002 and 2001. Reverse Stock Split - All common share and per share amounts presented herein reflect the 1-for-500 reverse split of outstanding shares of common stock effective April 11, 2000. 2. Notes Payable During October 2001, the Company borrowed $500,000 pursuant to unsecured notes payable, with interest at 12% per annum, both principal and interest payable on September 30, 2002. The lender also received 85,000 Class A common stock purchase warrants that had been originally issued to an affiliate of the Company. The Company was obligated to pay the notes from the net proceeds received by the Company from the settlement of its legal claims against other parties that aggregated in excess of $500,000. During August 2002, the notes were paid in full, with interest. Since the exercise price of the Series A common stock purchase warrants was substantially in excess of the market value of the underlying common stock, the warrants had nominal intrinsic value, and therefore no accounting value was ascribed to the warrants for financial statement purposes. 3. Legal Proceedings In conjunction with the Company's bankruptcy proceedings, the Company initiated litigation in courts in the United States, Canada and the Bahamas against various members of former management and other persons and entities. The Company also asserted claims against certain professional firms that had previously provided legal and accounting services to the Company under the auspices of former management. -12- During September 2002, the Company concluded legal settlements with respect to all litigation and claims that it had been pursuing in various jurisdictions against the Company's former officers, directors, auditors and legal counsel. These legal settlements provided for aggregate lump-sum cash payments to the Company of approximately $6,900,000, which resulted in net payments of approximately $5,700,000, after deduction for contingency legal fees and other related expenses. The completion of the legal settlements terminated all litigation and claims that the Company has been asserting against all of the settling defendants. During February 2002, the Company settled all outstanding debts and claims that it had against WaterPur International, Inc. ("WaterPur") in exchange for 1,000,000 shares of WaterPur common stock and warrants to purchase 250,000 shares of WaterPur common stock, exercisable for a period of three years at $1.00 per share. The Company has not ascribed any value to such securities because no fair market value was ascertainable and the previous investments in WaterPur were written off in prior years as the Company deemed such investments impaired. In conjunction with this settlement, the acquisitions previously effected by WaterPur on May 10, 1999 were rescinded, and WaterPur acquired Aquentium, Inc., an investment and holding company incorporated in the state of Nevada, in a reverse merger transaction. 4. Due from Resource Ventures, Inc. Effective July 1, 2000, pursuant to an order of the Bankruptcy Court, the Company spun-off and distributed to its shareholders all of the common stock of Resource Ventures, Inc., a Nevada corporation ("Resource"), the Company's former wholly-owned subsidiary, which is engaged in gold mining activities in Zimbabwe (a country in southern Africa). During the nine months ended June 30, 2002 and 2001, the Company allocated certain common corporate services to Resource aggregating $45,865 and $72,967, respectively. As of June 30, 2002 and September 30, 2001, amounts due from Resource aggregated $45,865 and $77,393, respectively. During May 2002, Resource paid the Company the September 30, 2001 balance due of $77,393. 5. Issuance of Securities Effective November 1, 2001, the Company issued 61,000 shares of its common stock to three individuals for services, including 50,000 shares to the Company's President for arranging the $500,000 loan (see Note 2). During the nine months ended June 30, 2002, the Company recorded general and administrative expense of $1,830 with respect to the issuance of such shares, based on their market value of $0.03 per share on November 1, 2001. -13- ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION Cautionary Statement Pursuant to Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995: This Quarterly Report on Form 10-QSB for the quarterly period ended June 30, 2002 contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, including statements that include the words "believes", "expects", "anticipates", or similar expressions. These forward-looking statements include, but are not limited to, statements concerning the Company's expectations regarding its working capital requirements, financing requirements, business prospects, and other statements of expectations, beliefs, future plans and strategies, anticipated events or trends, and similar expressions concerning matters that are not historical facts. The forward-looking statements in this Quarterly Report on Form 10-QSB for the quarterly period ended June 30, 2002 involve known and unknown risks, uncertainties and other factors that could cause the actual results, performance or achievements of the Company to differ materially from those expressed in or implied by the forward-looking statements contained herein. General Overview: As of June 30, 2002, the Company had no business operations. The Company's efforts are focused on seeking a new business opportunity, seeking recovery from its litigation and claims against former management and certain other entities (which effort was successfully concluded in September 2002), and maintaining the corporate entity. The acquisition of a new business opportunity may result in a change in name and in control of the Company. Restructuring and Recapitalization: When new management was appointed on October 1, 1998, the Company had a shareholders' deficiency of approximately $(21,600,000). Between October 1998 and September 2002, as a result of new management's successful efforts to restructure and recapitalize the Company and to pursue various legal claims, the Company's shareholders' equity increased by over $26,000,000, to approximately $4,700,000 at September 30, 2002, which consists primarily of cash. In addition, shareholders of record on July 1, 2000 received an identical equity interest in the Company's former mineral assets, consisting primarily of the Zimbabwe gold mining properties, through the spin-off of the Company's former Nevada subsidiary. Results of Operations: Three Months Ended June 30, 2002 and 2001: General and Administrative. General and administrative expenses were $125,542 and $113,164 for the three months ended June 30, 2002 and 2001, respectively. Significant components of general and administrative expenses include management and directors' compensation, accounting fees, insurance costs, travel and -14- offices expenses. These costs were incurred to maintain the corporate structure, pursue legal claims and restructure the Company. Legal Fees. Legal fees were $10,435 and $16,669 for the three months ended June 30, 2002 and 2001, respectively, reflecting efforts to restructure the Company and investigate and evaluate potential legal claims. Depreciation and Amortization. Depreciation and amortization was $1,533 and $2,987 for the three months ended June 30, 2002 and 2001, respectively. Loss on Disposition and Write-Down of Marketable Securities. The Company recorded a loss of $3,000 with respect to the disposition and write-down of marketable securities during the three months ended June 30, 2001. Interest Expense. Interest expense was $15,420 and $667 for the three months ended June 30, 2002 and 2001, respectively. The increase in interest expense in 2002 as compared to 2001 was a result of the $500,000 notes payable financing completed in October 2001. Interest Income. Interest income was $588 and $1,938 for the three months ended June 30, 2002 and 2001, respectively. Other Expense. Other expense was $470 for the three months ended June 30, 2002. Net Loss. The net loss was $152,812 and $134,549 for the three months ended June 30, 2002 and 2001, respectively. Nine Months Ended June 30, 2002 and 2001: General and Administrative. General and administrative expenses were $349,506 and $392,906 for the nine months ended June 30, 2002 and 2001, respectively. Significant components of general and administrative expenses include management and directors' compensation, accounting fees, insurance costs, travel and offices expenses. These costs were incurred to maintain the corporate structure, pursue legal claims and restructure the Company. The reduction in expenses in 2002 as compared to 2001 reflects reduced accounting costs, shareholders' expenses, insurance costs and office expenses. Legal Fees. Legal fees were $36,301 and $77,121 for the nine months ended June 30, 2002 and 2001, respectively, reflecting efforts to restructure the Company and investigate and evaluate potential legal claims. Depreciation and Amortization. Depreciation and amortization was $7,507 and $8,961 for the nine months ended June 30, 2002 and 2001, respectively. Loss on Disposition and Write-Down of Marketable Securities. The Company recorded a loss of $307,274 with respect to the disposition and write-down of marketable securities during the nine months ended June 30, 2001. -15- Interest Expense. Interest expense was $43,272 and $4,011 for the nine months ended June 30, 2002 and 2001, respectively. The increase in interest expense in 2002 as compared to 2001 was a result of the $500,000 notes payable financing completed in October 2001. Interest Income. Interest income was $3,777 and $24,364 for the nine months ended June 30, 2002 and 2001, respectively. Other Expense. Other expense was $3,747 and $5,589 for the nine months ended June 30, 2002 and 2001, respectively. Net Loss. The net loss was $436,556 and $771,498 for the nine months ended June 30, 2002 and 2001, respectively. Financial Condition - June 30, 2002: Liquidity and Capital Resources: Overview. The Company had cash and cash equivalents of $115,707 at June 30, 2002, as compared to $68,616 at September 30, 2001, an increase of $47,091. As of June 30, 2002, the Company had a working capital deficit of $399,671, as compared to working capital of $27,547 at September 30, 2001, reflecting current ratios of 0.4:1 and 1.1:1, respectively. The working capital deficit of $399,671 at June 30, 2002 included notes payable of $500,000, which were paid in August 2002. Operating. The Company's operations utilized cash resources of $484,437 and $470,132 during the nine months ended June 30, 2002 and 2001, respectively. As of June 30, 2002, the Company had no business operations. The Company's efforts are focused on seeking a new business opportunity, seeking recovery from its litigation and claims against former management and certain other entities (which effort was successfully concluded in September 2002), and maintaining the corporate entity. The Company anticipates that its working capital resources are adequate to fund anticipated costs and expenses during the remainder of the fiscal year ending September 30, 2002. Investing. During the nine months ended June 30, 2002, net cash provided by investing activities was $31,528, consisting of the repayment of amounts allocated to Resource Ventures, Inc. of $77,393, net of an increase in the amount due from Resource Ventures, Inc. of $45,865. During the nine months ended June 30, 2001, net cash provided by investing activities was $202,753, consisting of the proceeds from the disposition of marketable securities of $49,476 and the repayment of amounts advanced or allocated to Resource Ventures, Inc. of $226,244, net of an increase in the amount due from Resource Ventures, Inc. of $72,967. Financing. During October 2001, the Company borrowed $500,000 pursuant to unsecured notes payable, with interest at 12% per annum, both principal and interest payable on September 30, 2002. The lender also received 85,000 Class A common stock purchase warrants that had been originally issued to an affiliate -16- of the Company. The Company was obligated to pay the notes from the net proceeds received by the Company from the settlement of its legal claims against other parties that aggregated in excess of $500,000. During August 2002, the notes were paid in full, with interest. Since the exercise price of the Series A common stock purchase warrants was substantially in excess of the market value of the underlying common stock, the warrants had nominal intrinsic value, and therefore no accounting value was ascribed to the warrants for financial statement purposes. During the nine months ended June 30, 2001, the Company's common stock repurchase obligation decreased by $48,909. -17- PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS In conjunction with the Company's bankruptcy proceedings, the Company initiated litigation in courts in the United States, Canada and the Bahamas against various members of former management and other persons and entities. The Company also asserted claims against certain professional firms that had previously provided legal and accounting services to the Company under the auspices of former management. During September 2002, the Company concluded legal settlements with respect to all litigation and claims that it had been pursuing in various jurisdictions against the Company's former officers, directors, auditors and legal counsel. These legal settlements provided for aggregate lump-sum cash payments to the Company of approximately $6,900,000, which resulted in net payments of approximately $5,700,000, after deduction for contingency legal fees and other related expenses. The completion of the legal settlements terminated all litigation and claims that the Company has been asserting against all of the settling defendants. During February 2002, the Company settled all outstanding debts and claims that it had against WaterPur International, Inc. ("WaterPur") in exchange for 1,000,000 shares of WaterPur common stock and warrants to purchase 250,000 shares of WaterPur common stock, exercisable for a period of three years at $1.00 per share. The Company has not ascribed any value to such securities because no fair market value was ascertainable and the previous investments in WaterPur were written off in prior years as the Company deemed such investments impaired. In conjunction with this settlement, the acquisitions previously effected by WaterPur on May 10, 1999 were rescinded, and WaterPur acquired Aquentium, Inc., an investment and holding company incorporated in the state of Nevada, in a reverse merger transaction. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits A list of exhibits required to be filed as part of this report is set forth in the Index to Exhibits, which immediately precedes such exhibits, and is incorporated herein by reference. (b) Reports on Form 8-K Three Months Ended June 30, 2002: None -18- SIGNATURES Pursuant to the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ARIES VENTURES INC. ------------------------ (Registrant) /s/ MARK S. ZUCKER DATE: December 23, 2002 By: ________________________ Mark S. Zucker Chairman of the Board of Directors /s/ ROBERT N. WEINGARTEN DATE: December 23, 2002 By: ________________________ Robert N. Weingarten President and Chief Financial Officer -19- INDEX TO EXHIBITS Exhibit Number Description of Document ------ ----------------------- 99.1 Certification - Section 906 of the Sarbanes-Oxley Act of 2002 -20-