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 December 31, 2003
[ ] 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.
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(Exact name of small business issuer as specified in its charter)
Nevada 84-0987840
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
28720 Canwood Street, Suite 207, Agoura Hills, California 91301
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(Address of principal executive offices)
Issuer's telephone number: (818) 879-6501
Not Applicable
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(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 [X] No [ ]
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 December 31, 2003, the Company had 2,032,226 shares of common
stock outstanding.
Documents incorporated by reference: None.
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ARIES VENTURES INC.
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Balance Sheets - December 31, 2003 (Unaudited) and
September 30, 2003
Condensed Statements of Operations (Unaudited) - Three Months
Ended December 31, 2003 and 2002
Condensed Statements of Cash Flows (Unaudited) - Three Months
Ended December 31, 2003 and 2002
Notes to Condensed Financial Statements (Unaudited) - Three
Months Ended December 31, 2003 and 2002
Item 2. Management's Discussion and Analysis or Plan of Operation
Item 3. Controls and Procedures
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
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Aries Ventures Inc.
Condensed Balance Sheets
December 31, September 30,
2003 2003
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(Unaudited)
ASSETS
CURRENT
Cash and cash equivalents $ 2,915,550 $ 4,345,513
Due from related party 11,246 26,894
Prepaid expenses and other
current assets 30,579 43,744
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2,957,375 4,416,151
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PROPERTY AND EQUIPMENT 27,363 27,244
Less: accumulated depreciation
and amortization (26,263) (26,136)
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1,100 1,108
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OTHER
Deposits 2,309 2,309
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$ 2,960,784 $ 4,419,568
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(continued)
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Aries Ventures Inc.
Condensed Balance Sheets (continued)
December 31, September 30,
2003 2003
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(Unaudited)
LIABILITIES
CURRENT
Accounts payable $ 61,796 $ 52,702
Accrued liabilities 8,561 30,288
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70,357 82,990
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COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Preferred stock, $0.01 par value
Authorized - 10,000,000 shares
Issued and outstanding - None - -
Common stock, $0.01 par value
Authorized - 50,000,000 shares
Issued -
3,311,981 shares at December 31,
2003 and September 30, 2003
Outstanding -
2,032,226 shares at December 31,
2003 and 3,311,981 shares at
September 30, 2003 33,120 33,120
Less: securities held in treasury
at December 31, 2003 -
1,279,755 shares of common
stock and 1,194,755 Class
A common stock purchase warrants,
at cost (1,343,743) -
Additional paid-in capital 1,800,859 1,800,859
Retained earnings 2,400,191 2,502,599
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2,890,427 4,336,578
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$ 2,960,784 $ 4,419,568
========== ==========
See accompanying notes to condensed financial statements.
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Aries Ventures Inc.
Condensed Statements of Operations (Unaudited)
Three Months Ended December 31,
-------------------------------
2003 2002
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REVENUES $ - $ -
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COSTS AND EXPENSES
General and
administrative 101,716 128,123
Legal fees 2,000 9,365
Depreciation and
amortization 127 98
Interest expense 263 247
Interest income (1,653) (5,948)
Other (income) expense (45) 6,896
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Net loss before
income taxes (102,408) (138,781)
State income taxes - 800
------- -------
NET LOSS $(102,408) $(139,581)
======= =======
LOSS PER COMMON SHARE -
BASIC AND DILUTED $(0.04) $(0.04)
==== ====
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING -
BASIC AND DILUTED 2,699,924 3,311,981
========= =========
See accompanying notes to condensed financial statements.
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Aries Ventures Inc.
Condensed Statements of Cash Flows (Unaudited)
Three Months Ended December 31,
-------------------------------
2003 2002
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OPERATING ACTIVITIES
Net loss $ (102,408) $ (139,581)
Adjustments to reconcile
net loss to net cash
used in operating
activities:
Depreciation and
amortization 127 98
Changes in operating
assets and
liabilities:
Decrease in:
Prepaid expenses
and other
current assets 13,165 13,795
Increase
(decrease) in:
Accounts payable 9,094 33,685
Accrued liabilities (21,727) (22,412)
--------- ---------
Net cash used in operating
activities (101,749) (114,415)
--------- ---------
INVESTING ACTIVITIES
Payments from related party 26,894 -
Increase in amounts due from
related party (11,246) (5,724)
Purchase of property and
equipment (119) -
--------- ---------
Net cash provided by
(used in) investing
activities 15,529 (5,724)
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(continued)
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Aries Ventures Inc.
Condensed Statements of Cash Flows (Unaudited) (continued)
Three Months Ended December 31,
-------------------------------
2003 2002
---- ----
FINANCING ACTIVITIES
Repurchase of treasury
securities $(1,343,743) $ -
--------- ---------
Net cash used in
financing activities (1,343,743) -
--------- ---------
CASH AND CASH EQUIVALENTS:
Net decrease (1,429,963) (120,139)
At beginning of period 4,345,513 4,768,749
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At end of period $ 2,915,550 $ 4,648,610
========= =========
See accompanying notes to condensed financial statements.
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Aries Ventures Inc.
Notes to Condensed Financial Statements (Unaudited)
Three Months Ended December 31, 2003 and 2002
1. Organization and Basis of Presentation
Basis of Presentation - The accompanying condensed financial statements include
the operations of Aries Ventures Inc., a Nevada corporation (the "Company"). The
condensed financial statements have been prepared in accordance with generally
accepted accounting principles in the United States.
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 December 31, 2003, the results of operations for the three months ended
December 31, 2003 and 2002, and cash flows for the three months ended December
31, 2003 and 2002. The balance sheet as of September 30, 2003 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, 2003, 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 ended December 31, 2003 are not
necessarily indicative of the results of operations to be expected for the full
fiscal year ending September 30, 2004.
Business - As of December 31, 2003, the Company had no business operations. The
Company is focused on maintaining the corporate entity and seeking a new
business opportunity. The acquisition of a new business opportunity may result
in a change in name and in control of the Company.
Income (Loss) Per Share - Basic income (loss) per share is calculated by
dividing net income (loss) by the weighted average number of common shares
outstanding during the period. Diluted income 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, 2003
and 2002 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 ended December 31, 2003 and 2002.
As of December 31, 2003, potentially dilutive securities consisted of
outstanding Series A common stock purchase warrants to acquire 2,056,226 shares
of common stock and stock options to acquire 353,318 shares of common stock.
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Stock-Based Compensation - The Company may periodically issue shares of common
stock for services rendered or for financing costs. Such shares are valued based
on the market price on the transaction date.
The Company may periodically issue stock options and warrants to employees and
non-employees in non-capital raising transactions for services and for financing
costs.
The Company has adopted Statement of Financial Accounting Standards ("SFAS") No.
123, "Accounting for Stock-Based Compensation", which establishes a fair value
method of accounting for stock-based compensation plans.
The provisions of SFAS No. 123 allow companies to either record an expense in
the financial statements to reflect the estimated fair value of stock options or
warrants to employees, or to continue to follow the intrinsic value method set
forth in Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees", but to disclose on an annual basis the pro forma effect on
net income (loss) and net income (loss) per common share had the fair value of
the stock options and warrants been recorded in the financial statements. SFAS
No. 123 was amended by SFAS No. 148, which now requires companies to disclose in
interim financial statements the pro forma effect on net income (loss) and net
income (loss) per common share of the estimated fair market value of stock
options or warrants issued to employees. The Company has elected to continue to
account for stock-based compensation plans utilizing the intrinsic value method.
Accordingly, compensation cost for stock options and warrants is measured as the
excess, if any, of the fair market price of the Company's common stock at the
date of grant above the amount an employee must pay to acquire the common stock.
In accordance with SFAS No. 123, the cost of stock options and warrants issued
to non-employees is measured at the grant date based on the fair value of the
award. The fair value of the stock-based award is determined using the
Black-Scholes option pricing model. The resulting amount is charged to expense
on the straight-line basis over the period in which the Company expects to
receive benefit, which is generally the vesting period.
Pro Forma Financial Disclosure - The fair value of stock options granted under
the Company's Employee Stock Option Plan and Management Incentive Stock Option
Plan on November 1, 2000 were estimated on the grant date using the
Black-Scholes option pricing model. Had such stock options been accounted for
pursuant to SFAS No. 123, the effect on the Company's results of operations
would have been as follows:
For the three months ended December 31, 2003 and 2002, the Company would have
recorded $1,662 and $5,031 as additional compensation expense, resulting in a
net loss of $104,070 and $144,612, respectively, and a net loss per common share
of $0.04 and $0.04, respectively.
2. Due from Related Entity
During the three months ended December 31, 2003 and 2002, the Company allocated
certain common corporate services aggregating $11,246 and $5,724, respectively,
to Resource Ventures, Inc. ("Resource"), a related entity with certain common
officers and directors. As of December 31, 2003 and September 30, 2003, amounts
due from Resource aggregated $11,246 and $26,894, respectively. During the three
months ended December 31, 2003 and 2002, Resource paid the Company $26,894 and
$0, respectively.
3. Stockholders' Equity
Effective November 17, 2003, the Company repurchased from an institutional
shareholder 1,279,755 shares of common stock and 1,194,755 Series A common stock
purchase warrants in a private transaction for an aggregate cash purchase price
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of $1,343,743. As a result of the exercise price of the Series A common stock
purchase warrants being substantially in excess of the fair market value of the
Company's common stock, all of the consideration was allocated to the common
shares. These securities have been classified as treasury securities and
recorded at cost as a reduction to stockholders' equity in the Company's
condensed balance sheet at December 31, 2003.
4. Recent Accounting Pronouncements
In April 2003, the Financial Accounting Standards Board ("FASB") issued SFAS No.
149, "Amendment of Statement 133 on Derivative Instruments and Hedging
Activities". SFAS No. 149 amends and clarifies under what circumstances a
contract with initial investments meets the characteristics of a derivative and
when a derivative contains a financing component. SFAS No. 149 is effective for
contracts entered into or modified after June 30, 2003. The adoption of SFAS No.
149 did not have a significant effect on the Company's financial statement
presentation or disclosures.
In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity". SFAS No. 150
establishes standards for how an issuer classifies and measures in its statement
of financial position certain financial instruments with characteristics of both
liabilities and equity. SFAS No. 150 requires that an issuer classify a
financial instrument that is within its scope as a liability (or an asset in
some circumstances) because that financial instrument embodies an obligation of
the issuer. SFAS No. 150 is effective for financial instruments entered into or
modified after May 31, 2003 and otherwise is effective at the beginning of the
first interim period beginning after June 15, 2003. SFAS No. 150 is to be
implemented by reporting the cumulative effect of a change in accounting
principle for financial instruments created before the issuance date of SFAS No.
150 and still existing at the beginning of the interim period of adoption.
Restatement is not permitted. The adoption of SFAS No. 150 did not have a
significant effect on the Company's financial statement presentation or
disclosures.
In January 2003, and as revised in December 2003, the FASB issued Interpretation
No. 46, "Consolidation of Variable Interest Entities" ("Interpretation No. 46"),
an interpretation of Accounting Research Bulletin ("ARB") No. 51", "Consolidated
Financial Statements". Interpretation No. 46 addresses consolidation by business
enterprises of variable interest entities, which have one or both of the
following characteristics: (i) the equity investment at risk is not sufficient
to permit the entity to finance its activities without additional subordinated
support from other parties, which is provided through another interest that will
absorb some or all of the expected losses of the entity; (ii) the equity
investors lack one or more of the following essential characteristics of a
controlling financial interest: the direct or indirect ability to make decisions
about the entity's activities through voting rights or similar rights; or the
obligation to absorb the expected losses of the entity if they occur, which
makes it possible for the entity to finance its activities; the right to receive
the expected residual returns of the entity if they occur, which is the
compensation for the risk of absorbing the expected losses.
Interpretation No. 46, as revised, also requires expanded disclosures by the
primary beneficiary (as defined) of a variable interest entity and by an
enterprise that holds a significant variable interest in a variable interest
entity but is not the primary beneficiary.
Interpretation No. 46, as revised, applies to small business issuers no later
than the end of the first reporting period that ends after December 15, 2004.
This effective date includes those entities to which Interpretation No. 46 had
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previously been applied. However, prior to the required application of
Interpretation No. 46, a public entity that is a small business issuer shall
apply Interpretation No. 46 to those entities that are considered to be
special-purpose entities no later than as of the end of the first reporting
period that ends after December 15, 2003.
Interpretation No. 46 may be applied prospectively with a cumulative-effect
adjustment as of the date on which it is first applied or by restating
previously issued financial statements for one or more years with a
cumulative-effect adjustment as of the beginning of the first year restated.
The implementation of the provisions of Interpretation No. 46 is not expected to
have a significant effect on the Company's consolidated financial statement
presentation or disclosures.
-11-
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 December 31,
2003 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 December 31, 2003 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 December 31, 2003, the Company had no business operations. The Company is
focused on maintaining the corporate entity and seeking a new business
opportunity. The acquisition of a new business opportunity may result in a
change in name and in control of the Company.
Critical Accounting Policies:
The Company prepared the financial statements in accordance with accounting
principles generally accepted in the United States. The preparation of these
financial statements requires the use of estimates and assumptions that affect
the reported amounts of assets and liabilities and the disclosure of contingent
assets and liabilities at the date of the financial statements and the reported
amount of revenues and expenses during the reporting period. Management
periodically evaluates the estimates and judgments made. Management bases its
estimates and judgments on historical experience and on various factors that are
believed to be reasonable under the circumstances. Actual results may differ
from these estimates as a result of different assumptions or conditions.
The following critical accounting policy affect the more significant judgments
and estimates used in the preparation of the Company's financial statements.
Income Taxes:
The Company records a valuation allowance to reduce its deferred tax assets to
the amount that is more likely than not to be realized. In the event the Company
was to determine that it would be able to realize its deferred tax assets in the
future in excess of its recorded amount, an adjustment to the deferred tax
assets would be credited to operations in the period such determination was
made. Likewise, should the Company determine that it would not be able to
realize all or part of its deferred tax assets in the future, an adjustment to
the deferred tax assets would be charged to operations in the period such
determination was made.
Results of Operations:
Three Months Ended December 31, 2003 and 2002:
General and Administrative. General and administrative expenses were $101,716
and $128,123 for the three months ended December 31, 2003 and 2002,
respectively. Significant components of general and administrative expenses
include management and directors' compensation, insurance costs, accounting fees
and office expenses. The decrease in expenses in 2003 as compared to 2002 was
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primarily a result of a decrease in accounting and filing fees.
Legal Fees. Legal fees were $2,000 and $9,365 for the three months ended
December 31, 2003 and 2002, respectively.
Depreciation and Amortization. Depreciation and amortization was $127 and $98
for the three months ended December 31, 2003 and 2002, respectively.
Interest Expense. Interest expense was $263 and $247 for the three months ended
December 31, 2003 and 2002, respectively.
Interest Income. Interest income was $1,653 and $5,948 for the three months
ended December 31, 2003 and 2002, respectively, as a result of reduced
interest-bearing cash balances during 2003 as compared to 2002.
Other (Income) Expense. Other income was $45 for the three months ended December
31, 2003, as compared to other expense was $6,896 for the three months ended
December 31, 2002.
Net Loss Before Income Taxes. Net loss before income taxes was $102,408 and
$138,781 for the three months ended December 31, 2003 and 2002, respectively.
State Income Taxes. State income taxes were $800 for the three months ended
December 31, 2002. The Company did not have any state income taxes for the three
months ended December 31, 2002.
Net Loss. Net loss was $102,408 and $139,581 for the three months ended December
31, 2003 and 2002, respectively.
Financial Condition - December 31, 2003:
Liquidity and Capital Resources:
Overview. The Company had cash and cash equivalents of $2,915,550 at December
31, 2003, as compared to $4,345,513 at September 30, 2003, a decrease of
$1,429,963.
The major component of the decrease in cash and cash equivalents during the
three months ended December 31, 2003 was the Company's repurchase of its
securities in November 2003 for $1,343,743.
The Company had working capital of $2,887,018 at December 31, 2003, as compared
to working capital of $4,333,161 at September 30, 2003.
Operating. The Company's operations utilized cash resources of $101,749 and
$114,415 during the three months ended December 31, 2003 and 2002, respectively.
As of December 31, 2003, the Company had no business operations. The Company is
focused on maintaining the corporate entity and seeking a new business
opportunity. The acquisition of a new business opportunity may result in a
change in name and in control of the Company.
The Company believes that its working capital resources are adequate to fund
anticipated costs and expenses at least for the remainder of the fiscal year
ending September 30, 2004.
Investing. During the three months ended December 31, 2003, net cash provided by
investing activities was $15,529, as compared to net cash used in investing
activities of $5,724 for the three months ended December 31, 2002.
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During the three months ended December 31, 2003 and 2002, the Company allocated
certain common corporate services aggregating $11,246 and $5,724, respectively,
to Resource Ventures, Inc. ("Resource"), a related entity with certain common
officers and directors. As of December 31, 2003 and September 30, 2003, amounts
due from Resource aggregated $11,246 and $26,894, respectively. During the three
months ended December 31, 2003 and 2002, Resource paid the Company $26,894 and
$0, respectively.
Financing. Effective November 17, 2003, the Company repurchased from an
institutional shareholder 1,279,755 shares of common stock and 1,194,755 Series
A common stock purchase warrants in a private transaction for an aggregate cash
purchase price of $1,343,743.
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ITEM 3. CONTROLS AND PROCEDURES
(a) Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are designed to ensure that information
required to be disclosed in the reports filed or submitted under the Exchange
Act of 1934 is recorded, processed, summarized and reported, within the time
periods specified in the rules and forms of the Securities and Exchange
Commission. Disclosure controls and procedures include, without limitation,
controls and procedures designed to ensure that information required to be
disclosed in the reports filed under the Exchange Act of 1934 is accumulated and
communicated to management, including its principal executive and financial
officers, as appropriate, to allow timely decisions regarding required
disclosure.
The Company carried out an evaluation, under the supervision and with the
participation of the Company's management, including its principal executive and
financial officer, of the effectiveness of the design and operation of the
Company's disclosure controls and procedures as of the end of the period covered
by this report. Based upon and as of the date of that evaluation, the Company's
principal executive and financial officer concluded that the Company's
disclosure controls and procedures are effective to ensure that information
required to be disclosed in the reports the Company files and submits under the
Exchange Act of 1934 is recorded, processed, summarized and reported within the
time periods specified in the Securities and Exchange Commission's rules and
forms.
(b) Changes in Internal Controls
There were no changes in the Company's internal controls or in other factors
that could have significantly affected those controls subsequent to the date of
the Company's most recent evaluation.
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PART II. OTHER INFORMATION
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 December 31, 2003:
On October 1, 2003, the Company filed a Current Report on Form 8-K to
file a press release announcing the extension of the expiration date
of the Company's Class A common stock purchase warrants to October 11,
2004.
On November 19, 2003, the Company filed a Current Report on Form 8-K
to report that it had repurchased from an institutional shareholder
1,279,755 common shares and 1,194,755 Class A common stock purchase
warrants in a private transaction for an aggregate cash purchase price
of $1,343,743.
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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/ ROBERT N. WEINGARTEN
DATE: February 12, 2004 By: ________________________
Robert N. Weingarten
President and Chief
Financial Officer
(Duly Authorized Officer
and Chief Financial
Officer)
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INDEX TO EXHIBITS
Exhibit
Number Description of Document
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31 Certification pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
32 Certification pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002
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