ENERGY POWER SYSTEMS LIMITED
Consolidated Financial Statements
December 31, 2001
(Unaudited)
(Expressed in Canadian Dollars)
Energy Power Systems Limited
Consolidated Balance Sheet
(Expressed in Canadian dollars)
Dec 31, 2001 June 30, 2001
(unaudited) (audited)
ASSETS
Current
Cash $3,846,062 $1,242,621
Marketable securities 363,924 221,213
Receivables 6,541,782 4,331,086
Due from co-venturer 557,321 208,652
Inventories and work in progress 1,902,051 1,039,853
Prepaid expenses 105,522 67,329
Investments 3,500,000 3,500,000
Future income tax asset 235,000 235,000
Total current assets 17,051,662 10,845,754
Oil and gas interests 2,997,924 2,017,493
Capital assets 3,011,268 3,268,096
Future income tax asset 862,749 862,000
Goodwill 1,926,199 2,056,832
$25,849,802 $19,050,175
LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Bank indebtedness $908,087 $829,001
Accounts payable and accrued
liabilities 5,476,660 4,200,868
Due to shareholders 513,888 1,162,403
Current portion of long-term debt 182,151 182,151
Future income tax liability 266,000 266,000
Total current liabilities 7,346,786 6,640,423
Due to shareholders, July 31, 2001 350,000 350,000
Long-term debt 600,329 646,311
Future income tax liability 56,000 56,000
Total liabilities 8,353,115 7,692,734
Shareholders' equity
Capital stock 38,185,900 32,207,289
Deficit (20,689,213) (20,849,848)
Total shareholders' equity $17,496,687 $11,357,441
$25,849,802 $19,050,175
The accompanying notes to the financial statements are an
integral part of these financial statements
Energy Power Systems Limited
Consolidated Statement of Earnings and Deficit
(Unaudited)
(Expressed in Canadian dollars)
For the six month period For the three month period
ending December 31 ending December 31
2001 2000 2001 2000
Sales $14,351,432 $12,788,990 $8,810,871 $8,265,023
Cost of sales (including
depreciation and depletion of
$125,669; 2000 - $106,926)12,473,356 11,363,999 7,933,115 7,532,491
Gross profit 1,878,076 1,424,991 877,756 732,532
Administrative expenses 1,210,579 1,070,145 765,056 384,057
Amortization of goodwill 130,629 130,629 65,315 65,315
Amortization of capital assets81,639 75,530 41,829 39,473
Interest and bank charges 42,576 43,138 10,561 13,266
Interest on long-term debt 32,471 48,925 15,045 24,135
1,497,894 1,368,367 897,806 526,246
Earnings (loss) before
the following 380,182 56,624 (20,050) 206,286
Write down of inactive
capital assets (231,251) - (231,251) -
Other income 11,704 35,626 1,917 33,898
Net earnings (loss) from
Continuing Operations $160,635 $92,250 ($249,384) $240,184
Discontinued Operations - 55,354 - 144,304
Net earnings (loss) $160,635 $147,604 ($249,384) $384,488
Deficit, beginning of period(20,849,848)(17,214,932) (20,439,829)(17,451,816)
Deficit, end of period ($20,689,213)($17,067,328) ($20,689,213)($17,067,328)
Net earnings (loss) from Continuing Operations per Common Share
Net earnings (loss) per share $0.02 $0.02 ($0.04) $0.06
Weighted average common shares
outstanding (thousands) 7,120 3,832 7,120 3,832
Fully Diluted net earnings (loss) from Continuing Operations per Common Share
Net earnings (loss) per share $0.02 $0.02 ($0.03) $0.06
Weighted average fully diluted shares
outstanding (thousands) 7,883 3,832 7,883 3,832
The accompanying notes to the financial statements are an integral
part of these financial statements
Energy Power Systems Limited
Consolidated Statement of Cash Flows
(Unaudited)
(Expressed in Canadian dollars)
For the six month period For the three month period
ending December 31 ending December 31
2001 2000 2001 2000
Operating activities
Net earnings (loss) from
continuing operations $160,635 $92,250 ($249,384) $240,184
Adjustments to reconcile net earnings (loss)
to net cash provided by operating activities
Amortization of goodwill 130,629 130,629 65,315 65,315
Amortization of capital assets 207,308 182,456 105,911 93,355
(Gain) loss on sale of
capital assets (8,254) 1,977 (8,254) 1,977
Unrealized foreign exchange loss - 332,000 - 332,000
Write down of marketable securities83,181 - 83,181 -
Write down of inactive capital assets231,251 - 231,251 -
Future income tax asset (749) - (4) -
804,001 739,312 228,016 732,831
Net change in non-cash working capital
Receivables (2,210,696) (236,395) (1,720,806) (537,656)
Inventories and work in progress (862,198) 690,175 120,256 1,473,419
Due from co-venturer (348,669) (459,176) (73,511) (131,090)
Prepaid expenses (38,193) (5,763) (3,181) (35,162)
Accounts payable & accrued
liabilities 1,275,792 (732,082) 1,018,958 (585,825)
Cash (used in) provided by
continuing operations (1,379,963) (3,929) (430,268) 916,517
Cash provided by discontinued
operations - 55,354 - 144,304
Cash provided by (used in)
operating activities (1,379,963) 51,425 (430,268) 1,060,821
Financing activities
Advances (repayment) of bank
indebtedness 79,086 (279,315) (507,512) (943,939)
Repayment of long term debt, net (113,761) (137,343) (61,276) (73,850)
Payments to related parties, net - (733,165) - (702,190)
Repayment to shareholders (648,515)(1,218,479) (648,692) (618,479)
Issue of common shares 5,978,611 800,000 5,155,365 800,000
Cash provided by (used in)
financing activities 5,295,421 (1,568,302) 3,937,885 (1,538,458)
Investing activities
Purchase of capital assets (88,990) (153,512) (61,228) (72,906)
Proceeds from sale of capital assets 12,000 12,500 12,000 12,500
Recovery of other assets - 1,629,462 - 1,629,462
Purchase of oil and gas interests(1,009,139) - (893,201) -
Marketable securities (225,888) - (67,483) -
Cash provided by (used in)
investing activities (1,312,017) 1,488,450 (1,009,912) 1,569,056
Net increase (decrease) in cash 2,603,441 (28,427) 2,497,705 1,091,419
Cash, beginning of period 1,242,621 1,771,047 1,348,357 651,201
Cash, end of period $3,846,062$1,742,620 $3,846,062 $1,742,620
The accompanying notes to the financial statements are an integral
part of these financial statements
Energy Power Systems Limited
Consolidated Statement of Segmented Information
(Unaudited) (Expressed in Canadian Dollars)
For the six months ending December 31, 2001
Engineering
& Offshore Oil & Gas Corporate Total
Revenue 14,099,725 251,707 - 14,351,432
EBITDA 837,653 94,849 (127,632) 804,870
Amortization & depletion 309,229 28,708 - 337,937
Segment operating margin 528,424 66,141 (127,632) 466,933
Write down of inactive capital
assets 231,251 - - 231,251
Interest and income taxes 70,762 - 4,285 75,047
Net earnings from continuing
operations 226,411 66,141 (131,917) 160,635
Capital assets and Oil & Gas
Interests 3,011,268 2,997,924 - 6,009,192
For the six months ending December 31, 2000
Engineering
& Offshore Oil & Gas Corporate Total
Revenue 12,788,990 - - 12,788,990
EBITDA 452,585 - 44,813 497,398
Amortization 313,085 - - 313,085
Segment operating margin 139,500 - 44,813 184,313
Interest and income taxes 91,070 - 993 92,063
Net earnings from continuing
operations 48,430 - 43,820 92,250
Capital assets 4,936,035 - - 4,936,035
For the three months ending December 31, 2001
Engineering
& Offshore Oil & Gas Corporate Total
Revenue 8,697,501 113,370 - 8,810,871
EBITDA 312,916 42,566 (176,783) 178,699
Amortization & depletion 156,872 14,354 - 171,226
Segment operating margin 156,044 28,212 (176,783) 7,473
Write down of inactive capital
assets 231,251 - - 231,251
Interest and income taxes 21,820 - 3,786 25,606
Net earnings from continuing
operations (97,027) 28,212 (180,569) (249,384)
For the three months ending December 31, 2000
Engineering
& Offshore Oil & Gas Corporate Total
Revenue 8,265,023 - - 8,265,023
EBITDA 240,951 - 195,304 436,255
Amortization 158,670 - - 158,670
Segment operating margin 82,281 - 195,304 277,585
Interest and income taxes 37,174 - 227 37,401
Net earnings from continuing
operations 45,107 - 195,077 240,184
The accompanying notes to the financial statements are an integral
part of these financial statements
Energy Power Systems Limited
Notes to Unaudited Consolidated Financial Statements
For the Six Month Period Ending December 31, 2001 (Canadian
Dollars)
1. Basis of Presentation
These unaudited interim consolidated financial statements have
been prepared following the same accounting policies and
methods of computation as the consolidated financial
statements for the year ended June 30, 2001. These interim
financial statements should be read in conjunction with the
Company's consolidated financial statements together with
notes for the year ended June 30, 2001.
2. Segmented information
The Company's operations are separated into two distinct
segments; the engineering and offshore division, consisting of
the operations of M&M, and the oil and gas division performing
oil and gas exploration and production. M&M is an engineering
and construction company, performing installation, erection,
welding, maintenance and ancillary fabrication services.
3. Discontinued operations
Effective June 30, 2001 the Company adopted a formal plan to
dispose of its power segment of business (the "Power
Division"). The Company intends to exercise its option under
the terms of the Revised VBC Agreement to cause VBC to
purchase the Company's equity shares in the Konaseema EPS
Oakwell Power Limited and has adopted a formal plan of
disposition of its interest in the Karnataka Project.
4. Subsequent Events
(a) Subsequent to the period ending December 31, 2001
800,000 preferred shares were converted into 640,000 common
shares and 640,000 purchase warrants which were exercised at
$1.50 per share.
(b) Subsequent to the period ending December 31, 2001 5,000
options were exercised at a price of $1.50 per share and
20,000 options were exercised at a price of $4.00 per share.
5. Share Capital
(a) Authorized and Issued:
Authorized:
Unlimited number of Common Shares, without par value
Unlimited number of Class B Special Shares, without par
value
Unlimited number of Class A Preference Shares, Series I
Unlimited number of Class A Preference Shares, Series II
Issued
Common shares
# Consideration
Balance, as at June 30, 2001 6,273,419 $31,007,289
Issued pursuant to exercise of options 179,000 433,500
Issued pursuant to private placement 707,726 4,265,111
Issued pursuant to conversion of
preferred shares 320,000 400,000
Issued pursuant to exercise of warrants 1,320,000 1,280,000
Balance, as at December 31, 2001 7,288,419 $37,385,900
Preference shares
Balance, as at June 30, 2001 1,200,000 $1,200,000
Converted into common shares 400,000 (400,000)
Balance, as at December 31, 2001 800,000 $800,000
Total stated capital as at December 31, 2001 - $38,185,900
(b) Common share purchase warrants outstanding consist of the
following:
Exercise Expiry 2001 2000
Price Date # #
$8.00 March 9, 2002 22,917 222,917
$9.60 October 4, 2002 96,000 96,000
$0.52 December 28, 2002 - 1,000,000
$0.80 January 16, 2003 - 1,000,000
US$4.45 May 9, 2002 35,000 -
US$4.45 May 16, 2002 35,000 -
388,917 2,318,917
(c) Common share purchase options outstanding consist of the
following:
Exercise Expiry 2001 2000
Price Date Holder # #
$14.00 October 1, 2004 Employee - 62,500
$20.00 October 1, 2004 Employees & director - 26,875
$12.00 August 15, 2001 Employee - 2,500
$12.00 February 15, 2001 Director - 2,500
$1.50 February 6, 2005 Directors and employees 5,000 -
$4.00 June 14, 2005 Directors and consultants 66,000 -
$6.30 January 8, 2006 Directors and employees 322,500 -
393,500 94,375