March 31, 2004 interim financial stateme
 
 
 
 
 
 



 





 

Consolidated Financial Statements
Third Quarter
March 31, 2004
(Unaudited)
(Expressed in Canadian Dollars)


 
 
 
 
 
     

 
 
 

 
 
 
 
EnerNorth Industries Inc.
 
 
 
Consolidated Balance Sheets
 
 
 
(Expressed in Canadian dollars)
 
 
 
 
 
March 31, 2004
June 30, 2003
 
   
(unaudited)  
   
(audited
)
 
   
 
   
 
 
 
   
 
   
 
 
 
   
 
   
 
 
ASSETS
   
 
   
 
 
Current
   
 
   
 
 
Cash and cash equivalents
 
$
2,615,162
 
$
6,729,283
 
Restricted cash
 
 
791,746
 
 
1,218,070
 
Marketable securities
   
521,039
   
176,804
 
Receivables
   
3,447,938
   
6,503,464
 
Inventories
   
650,136
   
713,835
 
Unbilled revenue
   
590,830
   
1,680,806
 
Due from co-venturer
   
1,388,019
   
461,150
 
Prepaid expenses
   
150,431
   
240,725
 
Investment
   
3,365,000
   
-
 

 
 
 
Total current assets
   
13,520,301
   
17,724,137
 
 
   
 
   
 
 
Oil and gas interests (net of accumulated
   
 
   
 
 
depletion)
   
5,386,218
   
4,444,038
 
Capital assets (net of accumulated
   
 
   
 
 
depreciation and amortization)
   
3,096,078
   
3,166,786
 
Investment
   
-
   
3,500,000
 

 
 
 
 
   
 
   
 
 
 
 
$
22,002,597
 
$
28,834,961
 

 
 
 
 
   
 
   
 
 
LIABILITIES AND SHAREHOLDERS' EQUITY
   
 
   
 
 
Current
   
 
   
 
 
Bank indebtedness
 
$
430,531
 
$
2,036,933
 
Accounts payable and accrued liabilities
   
3,774,237
   
5,747,414
 
Due to shareholder (Note 3b)
   
-
   
402,419
 
Current portion of long-term debt
   
158,309
   
158,309
 
Deferred revenue
   
396,984
   
2,399,086
 
Future income tax liability
   
302,900
   
302,900
 
Oakwell claim (Note 4)
   
8,050,000
   
5,900,000
 
Total current liabilities
   
13,112,961
   
16,947,061
 
 
   
 
   
 
 
Long-term debt
   
464,067
   
528,020
 
Site Restoration
   
114,274
   
106,274
 
Total liabilities
   
13,691,302
   
17,581,355
 

 
 
 
 
   
 
   
 
 
Shareholders' equity
   
 
   
 
 
Capital stock (Note 5)
   
43,339,132
   
43,339,132
 
Deficit
   
(35,027,837
)
 
(32,085,526
)
Total shareholders' equity
 
$
8,311,295
 
$
11,253,606
 

 
 
 
 
   
 
   
 
 
 
 
$
22,002,597
 
$
28,834,961
 

 
 
 
 
   
 
   
 
 
 
   
 
   
 
 
The accompanying notes to the financial statements are an integral part of these financial statements
   
 
   
 
 

 

 
     

 
 


 

 
 
 
 
 
 

 



 
 
 
 
 
 
EnerNorth Industries Inc.
 
 
 
 
 
Consolidated Statements of Loss and Deficit
 
 
 
 
 
(Unaudited)
 
 
 
 
 
(Expressed in Canadian dollars)
 
 
 
 
 
 
 
For the nine
For the three
 

 

month period
month period
 

 

ending March 31
ending March 31
 
   
2004
   
2003
   
2004
   
2003
 
 
   
 
   
 
   
 
   
 
 
 
   
 
   
 
   
 
   
 
 
Sales
 
$
24,554,491
 
$
18,007,207
 
$
7,731,978
 
$
2,983,333
 
Cost of sales (including
   
 
   
 
   
 
   
 
 
depreciation and depletion of
   
 
   
 
   
 
   
 
 
$472,352; 2003 - $315,088)
   
21,348,235
   
15,653,176
   
7,207,910
   
2,573,261
 

 
 
 
 
 
Gross profit
   
3,206,256
   
2,354,031
   
524,068
   
410,072
 

 
 
 
 
 
 
   
 
   
 
   
 
   
 
 
Administrative expenses
   
4,054,219
   
3,262,392
   
1,699,729
   
1,255,540
 
Amortization of capital assets
   
92,128
   
60,544
   
42,496
   
20,217
 
Interest
   
80,353
   
117,056
   
20,449
   
37,417
 
Interest on long-term debt
   
36,456
   
36,169
   
11,535
   
10,966
 

 
 
 
 
 
 
   
4,263,156
   
3,476,161
   
1,774,209
   
1,324,140
 

 
 
 
 
 
Loss before the following
   
(1,056,900
)
 
(1,122,130
)
 
(1,250,141
)
 
(914,068
)
 
   
 
   
 
   
 
   
 
 
Oakwell claim
   
(2,150,000
)
 
-
   
(547,000
)
 
-
 
Other income
   
264,589
   
144,195
   
36,718
   
42,389
 

 
 
 
 
 
 
   
 
   
 
   
 
   
 
 
Net loss before tax
   
($2,942,311
)
 
($977,935
)
 
($1,760,423
)
 
($871,679
)
 
   
 
   
 
   
 
   
 
 
Income taxes
   
 
   
 
   
 
   
 
 
Future
   
(160,018
)
 
-
   
(461,101
)
 
-
 
Utilization of loss carryforwards
   
160,018
   
-
   
461,101
   
-
 

 
 
 
 
 
-
         
-
   
-
   
-
 

 
 
 
 
 
 
   
 
   
 
   
 
   
 
 
Net loss
   
($2,942,311
)
 
($977,935
)
 
($1,760,423
)
 
($871,679
)
 
   
 
   
 
   
 
   
 
 
Deficit, beginning of period
   
(32,085,526
)
 
(24,038,050
)
 
(33,267,414
)
 
(24,144,306
)

 
 
 
 
 
Deficit, end of period
   
($35,027,837
)
 
($25,015,985
)
 
($35,027,837
)
 
($25,015,985
)

 
 
 
 
 
 
   
 
   
 
   
 
   
 
 
 
   
 
   
 
   
 
   
 
 
Net loss per Common Share
   
 
   
 
   
 
   
 
 
Net loss per share
   
($0.72
)
 
($0.24
)
 
($0.43
)
 
($0.21
)
Weighted average common shares
   
 
   
 
   
 
   
 
 
outstanding (thousands)
   
4,059
   
4,059
   
4,059
   
4,059
 
 
   
 
   
 
   
 
   
 
 
Fully Diluted net loss per Common Share
   
 
   
 
   
 
   
 
 
Net loss per share
   
antidilutive
   
antidilutive
   
antidilutive
   
antidilutive
 
 
   
 
   
 
   
 
   
 
 
The accompanying notes to the financial statements are an integral part of these financial statements         
 
 

 

 
     

 
 


 

 
 
 
 
 
 

 



 
 
 
 
 
 
EnerNorth Industries Inc.
 
 
 
 
 
Consolidated Statements of Cash Flows
 
 
 
 
 
(Unaudited)
 
 
 
 
 
(Expressed in Canadian dollars)
 
 
 
 
 

 



 
 
For the nine month period
For the three month period
 

 

ending March 31
ending March 31
 
   
2004
   
2003
   
2004
   
2003
 

 
 
 
 
 
 
   
 
   
 
   
 
   
 
 
 
   
 
   
 
   
 
   
 
 
Cash provided by (used in)
   
 
   
 
   
 
   
 
 
 
   
 
   
 
   
 
   
 
 
Operating activities
   
 
   
 
   
 
   
 
 
Net loss
   
($2,942,311
)
 
($977,935
)
 
($1,760,423
)
 
($871,679
)
Adjustments to reconcile net loss to
   
 
   
 
   
 
   
 
 
net cash provided by operating activities
   
 
   
 
   
 
   
 
 
Amortization and depletion
   
564,480
   
375,632
   
179,692
   
127,116
 
Oakwell claim
   
2,150,000
   
-
   
547,000
   
-
 
Unrealized foreign exchange
   
 
   
 
   
 
   
 
 
loss on investment
   
135,000
   
-
   
-
   
-
 
Gain on sale of marketable
   
 
   
 
   
 
   
 
 
securities
   
(14,628
)
 
(61,165
)
 
-
   
(970
)

 
 
 
 
 
 
   
(107,459
)
 
(663,468
)
 
(1,033,731
)
 
(745,533
)
Net change in non-cash working capital
   
 
   
 
   
 
   
 
 
Receivables
   
3,055,526
   
2,190,001
   
2,302,372
   
3,287,990
 
Inventories and unbilled revenue
   
1,153,675
   
1,548,499
   
(102,648
)
 
38,758
 
Prepaid expenses
   
90,294
   
(99,404
)
 
41,748
   
(45,459
)
Accounts payable and
   
 
   
 
   
 
   
 
 
accrued liabilities
   
(1,973,177
)
 
(2,555,841
)
 
(70,132
)
 
(1,930,513
)
Restricted cash
   
426,324
   
-
   
426,324
   
-
 
Deferred revenue
   
(2,002,102
)
 
-
   
(1,765,661
)
 
-
 

 
 
 
 
 
 
   
643,081
   
419,787
   
(201,728
)
 
605,243
 

 
 
 
 
 
 
   
 
   
 
   
 
   
 
 
Financing activities
   
 
   
 
   
 
   
 
 
Bank indebtedness
   
(1,606,402
)
 
(311,323
)
 
(582,890
)
 
(827,158
)
Repayment of long term debt
   
(85,439
)
 
(142,507
)
 
858
   
(47,133
)
Repayment to shareholders
   
(402,419
)
 
(315,927
)
 
-
   
(2,581
)
Issue of common shares
   
-
   
1,242,400
   
-
   
(745
)

 
 
 
 
 
 
   
(2,094,260
)
 
472,643
   
(582,032
)
 
(877,617
)

 
 
 
 
 
 
   
 
   
 
   
 
   
 
 
Investing activities
   
 
   
 
   
 
   
 
 
Purchase of capital assets
   
(136,867
)
 
(102,295
)
 
(82,616
)
 
(53,285
)
Oil and gas interests
   
(1,253,926
)
 
(204,712
)
 
(463,705
)
 
(166,407
)
Due from co-venturer
   
(942,542
)
 
(992,459
)
 
(329,771
)
 
(31,356
)
Marketable securities
   
(329,607
)
 
159,854
   
(31,500
)
 
(17,103
)

 
 
 
 
 
 
   
(2,662,942
)
 
(1,139,612
)
 
(907,592
)
 
(268,151
)

 
 
 
 
 
 
   
 
   
 
   
 
   
 
 
Increase (decrease) in cash
   
(4,114,121
)
 
(247,182
)
 
(1,691,352
)
 
(540,525
)
Cash, beginning of period
   
6,729,283
   
5,610,621
   
4,306,514
   
5,903,964
 

 
 
 
 
 
Cash, end of period
 
$
2,615,162
 
$
5,363,439
 
$
2,615,162
 
$
5,363,439
 

 
 
 
 
 
 
   
 
   
 
   
 
   
 
 
 
   
 
   
 
   
 
   
 
 
Cash, end of period consists of:
   
 
   
 
   
 
   
 
 
Cash
 
$
1,359,989
 
$
1,624,160
 
$
1,359,989
 
$
1,624,160
 
Money market funds
 
$
1,255,173
 
$
3,739,279
 
$
1,255,173
 
$
3,739,279
 
 
   
 
   
 
   
 
   
 
 
The accompanying notes to the financial statements are an integral part of these financial statements         
 
 

 

 
     

 
EnerNorth Industries Inc.
Notes to Unaudited Consolidated Financial Statements
For the Nine Month Period Ending March 31, 2004
(Expressed in Canadian Dollars)
 


1. Basis of Presentation

These unaudited interim consolidated financial statements have been prepared by management following the same accounting policies and methods of computation as the audited consolidated financial statements for the year ended June 30, 2003. These interim financial statements should be read in conjunction with the Company’s audited consolidated financial statements together with notes for the year ended June 30, 2003. The unaudited consolidated financial results for the nine month period ending March 31, 2004 and 2003 include the accounts of the Company and its wholly owned subsidiary M&M Engineering Limited, a Newfoundland and Labrador company, M&M’s wholly-owned subsidiary M&M Offshore Limited, a Newfoundland and Labrador company, 10915 Newfoundland Limited, 11123 Newfoundland Limited and the proportionate share of its interests in joint ventures whose business focus is construction, mechanical contracting and steel fabrication. Operating results for the nine months ended March 31, 2004 are not indicative of the results that may be expected for the full year ending June 30, 2004.
 
2. Segmented information
 

The Company's operations are separated into two distinct segments; the Industrial & Offshore Division, consisting of the consolidated operations of M&M Engineering Limited, a wholly owned subsidiary, and the Oil & Gas Division performing oil and gas exploration and production. M&M is an industrial contracting company performing fabrication and installation of process piping, installation of production equipment, steel tank erection, specialized welding services and industrial maintenance. Results for the nine month and three month periods ending March 31, 2004 and March 31, 2003 are presented in the Consolidated Statements of Segmented Information below:

 
 
 
 
 
 
For the nine months ending March 31, 2004
 
 
 
 
 

 



 
 
 
 
 
 
 
 
 
 
 
 
Industrial & Offshore 
   
Oil & Gas
   
Corporate
   
Total
 
   
 
 
 
 
 
   
 
   
 
   
 
   
 
 
Revenue
   
24,189,474
   
365,017
   
-
   
24,554,491
 
Interest expense
   
112,707
   
-
   
4,102
   
116,809
 
Amortization and depletion
   
244,734
   
319,746
   
-
   
564,480
 
Net earnings (loss)
   
835,677
   
45,271
   
(3,823,259
)
 
(2,942,311
)
Capital assets and
   
 
   
 
   
 
   
 
 
oil and gas interests
   
3,096,078
   
5,386,218
   
-
   
8,482,296
 
 
   
 
   
 
   
 
   
 
 
For the nine months ending March 31, 2003
   
 
   
 
   
 
   
 
 

 
 
 
 
 
 
   
 
   
 
   
 
   
 
 
Industrial & Offshore    
   
Oil & Gas
   
Corporate
   
Total
 
   
 
 
 
 
 
   
 
   
 
   
 
   
 
 
Revenue
   
17,534,660
   
472,547
   
-
   
18,007,207
 
Interest expense
   
149,505
   
-
   
3,720
   
153,225
 
Amortization and depletion
   
194,968
   
180,664
   
-
   
375,632
 
Net earnings (loss)
   
147,947
   
41,759
   
(1,167,641
)
 
(977,935
)
Capital assets and
   
 
   
 
   
 
   
 
 
oil and gas interests
   
2,766,627
   
4,424,126
   
-
   
7,190,753
 
 
   
 
   
 
   
 
   
 
 
For the three months ending March 31, 2004
   
 
   
 
   
 
   
 
 

 
 
 
 
 
 
   
 
   
 
   
 
   
 
 
Industrial & Offshore    
   
Oil & Gas
   
Corporate
   
Total
 
   
 
 
 
 
 
   
 
   
 
   
 
   
 
 
Revenue
   
7,624,867
   
107,111
   
-
   
7,731,978
 
Interest expense
   
31,524
   
-
   
460
   
31,984
 
Amortization and depletion
   
96,158
   
83,534
   
-
   
179,692
 
Net earnings (loss)
   
(420,291
)
 
179,792
   
(1,519,924
)
 
(1,760,423
)
 
   
 
   
 
   
 
   
 
 
For the three months ending March 31, 2003
   
 
   
 
   
 
   
 
 

 
 
 
 
 
 
   
 
   
 
   
 
   
 
 
Industrial & Offshore    
   
Oil & Gas
   
Corporate
   
Total
 
   
 
 
 
 
 
   
 
   
 
   
 
   
 
 
Revenue
   
2,775,600
   
207,733
   
-
   
2,983,333
 
Interest expense
   
47,556
   
-
   
827
   
48,383
 
Amortization and depletion
   
67,123
   
59,993
   
-
   
127,116
 
Net earnings (loss)
   
(451,465
)
 
68,416
   
(488,630
)
 
(871,679
)


 

 
     

 
 
EnerNorth Industries Inc.
Notes to Unaudited Consolidated Financial Statements
For the Nine month period ending March 31, 2004
(Expressed in Canadian Dollars)
 
3.    Related Party Transactions

    (a) During the nine month period ending March 31, 2004 a director of the Company was paid US$35,000 (approximately Cdn$45,868) under a nine month consulting agreement that commenced September 1, 2003.

    (b) During the nine month period ending March 31, 2004 the Company repaid $402,419 to a shareholder and a director of the Company.
     
    These transactions were in the normal course of business and were measured at the exchange amount.
 
4.    Subsequent Events


In April 2004 the Court of Appeal of the Republic of Singapore dismissed the Company's Appeal with costs. The Appeal was related to a Judgment against the Company dated October 16, 2003 in the amount of US$5.42 million plus certain legal costs. To date, the Company has accrued Cdn$8.1 million of costs related to this Judgment.

5.    Share Capital
 
(a)    Authorized and Issued:

Authorized:    
Unlimited number of Common 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, 2003
   
4,059,009
 
$
43,339,132
 

 
 
 
 
   
 
   
 
 

 
 
 
Balance, as at March 31, 2004
   
4,059,009
 
$
43,339,132
 

 
 
 
 
(b)    Common share purchase warrants outstanding consist of the following:

Exercise
Expiry
2004
2003
Price
Date
#
#
 
 
 




US$ 1.80
December 31, 2004
533,332
533,332




 
 
533,332
533,332




 
(c)    Common share purchase options outstanding consist of the following:

Exercise
Expiry
 
2004
2003
Price
Date
Holder
#
#





$12.00
June 14, 2005
Consultant
-
7,000





$18.90
January 8, 2006
Directors and employees
-
91,333





 
 
 
-
98,333