RESIN SYSTEMS INC

6-K 1 f3rdqtrstatements.htm RESIN SYSTEMS Q3 STATEMENTS RESIN SYSTEMS INC

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16 UNDER THE SECURITIES EXCHANGE ACT OF 1934

For the month of July 2003

Resin Systems Inc.

14604 – 115A Ave, Edmonton, AB T5M 3C5

[The registrant files or will file annual reports under cover of Form 20-F or Form 40-F]

Form 20-F [X] Form 40-F [ ]

[The registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934]

Yes [ ] No [X]

RESIN SYSTEMS INC.

THIRD QUARTER RESULTS

FOR THE QUARTER ENDED:

MAY 31, 2003

DATE OF REPORT:

July 25, 2003

NAME OF ISSUER:

RESIN SYSTEMS INC.

ADDRESS OF ISSUER:

14604 – 115 A AVENUE, EDMONTON, AB, CANADA, T5M 3C5

CONTACT NUMBERS OF ISSUER:

TELEPHONE: (780) 482 – 1953 FACSIMILE: (780) 452-8755

CONTACT PERSON:

GREG PENDURA

CONTACT POSITION:

PRESIDENT & C.E.O.

CONTACT TELEPHONE NUMBER:

(780) 482 – 1953

CONTACT EMAIL ADDRESS:

greg@resinsystemsinc.com or info@resinsystemsinc.com

WEBSITE ADDRESS:

www.resinsystemsinc.com

RESIN SYSTEMS INC.

CONSOLIDATED BALANCE SHEETS

(Canadian Dollars)


			2003 May 31 (Unaudited)		2002 August 31 Audited

ASSETS

Current assets:
	Cash and short term investments	$	1,344,326	$	518,581
	Accounts receivable (note 4)		121,761		238,886
	Receivable from NRC (note 5)		56,372		37,620
	Inventories		408,781		275,305
	Prepaid expenses and deposits		20,827		6,939
			1,952,067		1,077,331

Prepaid rent and security deposit (note 10)			7,192		7,192
Capital assets (note 6)			756,921		201,901
Intangible assets (note 7)			2,107,668		35,497

		$	4,823,848	$	1,321,921

LIABILITIES and SHAREHOLDERS’ EQUITY

Current liabilities:
	Payables and accruals	$	447,150	$	184,153
			447,150		184,153

Long-term payable to NRC			254,635		37,620

Shareholders’ equity:
	Share capital (note 8)		17,223,739		11,384,507
	Deficit		(13,101,676)		(10,284,359)
			4,122,063		1,100,148

Future operations (note1)
Commitments (note 10)
Subsequent events (note 11)

		$	4,823,848	$	1,321,921

See accompanying notes to consolidated financial statements.

On behalf of the Board:

Signed “Greg Pendura”		Signed “E. Douglas Grindstaff”
Director		Director

RESIN SYSTEMS INC.

Interim Consolidated Statements of Loss and Deficit

(Canadian Dollars)

Nine months ended May 31, 2003 and 2002 and the year ended August 31, 2002

			Three Months Ended				Nine Months Ended
			May 31, 2003 (Unaudited)		May 31, 2002 (Unaudited)		May 31, 2003 (Unaudited)		May 31, 2002 (Unaudited)	Year Ended August 31, 2002 (Audited)
Revenue		$	70,275	$	105,687	$	215,022	$	253,381	$	343,257
Expenses:
	Cost of sales		15,051		52,713		90,503		132,264		216,782
	Direct and product development		505,253		136,880		1,127,967		283,561		632,042
	Marketing and business development		155,011		47,019		354,980		248,484		314,168
	General and administrative		522,817		147,261		1,338,004		561,577		814,681
	Interest and other charges		17,712		10,988		37,424		23,566		9,093
	Amortization		52,058		16,456		83,461		39,654		62,438
			1,267,902		411,317		3,032,339		1,289,106		2,049,204
Loss before the undernoted			(1,197,627)		(305,630)		(2,817,317)		(1,035,725)		(1,705,947)
Gain (loss) on sale of capital assets			-		4		-		397		393
Writedown of capital and intangible assets			-		-		-		(12,414)		(12,414)

Net loss			(1,197,627)		(305,626)		(2,817,317)		(1,047,742)		(1,717,968)

Deficit, beginning of period			(11,904,049)		(9,308,507)		(10,284,359)		(8,566,391)		(8,566,391)

Deficit, end of year		$	(13,101,676)	$	(9,614,133)	$	(13,101,676)	$	(9,614,133)	$	(10,284,359)

Loss per common share		$	(0.04)	$	(0.02)	$	(0.10)	$	(0.06)	$	(0.09)

Weighted average number of common
shares outstanding			33,809,939		19,058,784		29,,059,582		18,096,456		19,088,533

See accompanying notes to consolidated financial statements.

RESIN SYSTEMS INC.

Interim Consolidated Statements of Cash Flows

(Canadian Dollars)

Nine months ended May 31, 2003 and 2002 and the year ended August 31, 2002

			Three Months Ended					Nine Months Ended
			May 31, 2003 (Unaudited)			May 31, 2002 (Unaudited)		May 31, 2003 (Unaudited)		May 31, 2002 (Unaudited)	Year Ended August 31, 2002 (Audited)
Cash provided by (used in):
Operating:
Net loss		$	(1,197,627)	$		(305,626)	$	(2,817,317)	$	(1,047,742)	$	(1,717,968)
Items which do not involve cash:
	Amortization		52,058			16,456		83,461		39,654		62,438
	Loss (gain) on sale of capital assets		-			(4)		-		(397)		(393)
	Write-down of capital and intangible assets		-			-		-		12,414		12,414
	Consulting services settled by reduction of
	share purchase loan		36,000			-		108,000		-		18,000
	Shares to be issued pursuant to ARC agreement		91,740			-		192,094		-		184,375
Change in non-cash operating working capital			306,077			(64,949)		214,006		(39,581)		(30,235)
			(711,752)		(354,123)			(2,219,756)		(1,035,652)		(1,471,369)
Financing:
Proceeds from issue of share capital, net of transaction costs			294,794			1,802,949		3,481,638		1,802,949		1,234,467
Reclassification of Notes payable			-			(846,724)		-		(314,497)		--
Proceeds from issue of notes payable			-			-		-		-		739,000
Repayment of notes payable			-			-		-		-		(200,000)
Increase in long-term debt to NRC			83,628			-		217,015		-		--
			378,422			956,225		3,698,653		1,488,452		1,723,467
Investing:
Purchase of capital assets			(549,063)			(25,131)		(633,521)		(47,405)		(82,150)
Prepaid rent and security deposit			-			-		-		29,808		29,808
Proceeds on sale of capital assets			-			3,271		2,345		112,200		110,629
Acquisition of intangible assets			(16,472)			(35,270)		(21,976)		(35,270)		(39,441)
			(565,535)			(57,130)		(653,152)		59,333		18,846
Increase (decrease) in cash			(898,865)			544,972		825,745		512,133		320,944

Cash and short-term investments, beginning of period			2,243,191			164,798		518,581		197,637		197,637

Cash and short-term investments, end of period		$	1,344,326	$		709,770	$	1,344,326	$	709,770	$	518,581

RESIN SYSTEMS INC.

Notes to Interim Consolidated Financial Statements

(Canadian Dollars)

(unaudited)

Nine months ended May 31, 2003 and year ended August 31, 2002

The unaudited interim financial statements for the third quarter ended May 31, 2003 should be read in conjunction with the consolidated financial statements for the year ended August 31, 2002. These interim financial statements conform in all material respects to the requirements of generally accepted accounting principles for interim financial statements.

Unless otherwise noted, these financial statements are prepared in accordance with the same accounting policies and methods as the consolidated financial statements for the year ended August 31, 2002.

1. Nature of operations and future operations:

The Company has completed the filing of Form 20F registration statement under The Exchange Act of 1934 and is now a full reporting foreign private issuer in the United States. The Company is also currently in discussions with OTC Bulletin Board market makers to facilitate sponsorship in the U.S. Market.

Future operations:

These financial statements have been prepared on a going concern basis in accordance with Canadian generally accepted accounting principles, which assumes the Company will realize its assets and discharge its liabilities and commitments in the normal course of business. The application of the going concern concept is dependent upon the ability of the Company to generate profitable operations and raise additional capital to support its ongoing development and operating activities. For the nine months ended May 31, 2003 and the year ended August 31, 2002, the Company reported a loss of $2,817,317 and $1,717,968 and has an accumulated deficit of $13,101,676 and $10,284,359 respectively. As at May 31, 2003 the Company has positive working capital of $1,504,917.

In fiscal 2002 the Company began the implementation of a revised business plan, which included a reduction of staff and closing of its U.S. office that was opened earlier in 2002. The Company also began to implement a new sales and marketing strategy and spent considerable time and resources refining process issues related to entering pultrusion production.

Also in fiscal 2002, the Company evaluated and pursued new financing alternatives, including signing agreements with the National Research Council (“NRC”) and the Alberta Research Council (“ARC”) to assist the Company in further development of various Version resin systems. Prior to entering into these agreements, the Company issued $739,000 in notes payable that were, under the terms of the notes, converted into equity upon execution of the NRC agreement. In addition, the Company completed a fully subscribed private placement that generated proceeds of $1,239,713.

RESIN SYSTEMS INC.

Notes to Interim Consolidated Financial Statements

(Canadian Dollars)

(unaudited)

Nine months ended May 31, 2003 and year ended August 31, 2002

1. Nature of operations and future operations, (continued):

Future operations, (continued):

During the nine months ended May 31, 2003 the Company completed a transaction for utility pole technology which is explained in note 7 and completed a private placement that provided the firm with gross proceeds of $3,000,000.

The ability of the Company to continue as a going concern and to realize the carrying value of its assets and discharge its liabilities when due is dependent on the successful completion of the actions taken or planned, which management believes will mitigate the adverse conditions and events that raise doubt about the validity of the “going concern” assumption used in preparing these financial statements.

These financial statements do not reflect any adjustments that would be necessary if the “going concern” assumptions were not appropriate because management is of the opinion that sufficient working capital will be obtained from operations, shareholders and other external financing sources to meet the Company’s liabilities and commitments as they become payable.

2. Change in Accounting Policy:

Effective September 1, 2002 the Company adopted the new Recommendations of the Canadian Institute of Chartered Accountants (“CICA”) with respect to the accounting of stock based compensation and other stock based payments. The new Recommendations are applied prospectively to all stock based payments to non-employees and to employee awards that are direct awards of stock, call for settlement in cash or other assets, or are stock appreciation rights that call for settlement by the issuance of equity instruments, granted on or after September 1, 2002.

Additionally, the Company has adopted the recommendations from the CICA with respect to accounting for and reporting of, Intangible assets. The Intangible asset recorded in the second quarter relates to the intellectual property acquired from Canzeal Enterprises Ltd. in January and is explained in the following note.

RESIN SYSTEMS INC.

Notes to Interim Consolidated Financial Statements

(Canadian Dollars)

(unaudited)

Nine months ended May 31, 2003 and year ended August 31, 2002

3. Significant Accounting policy:

(a) Stock Based Compensation:

The Company accounts for all stock based payments to non-employees and employee awards that are direct awards of stock, call for settlement in cash or other assets, or are stock appreciation rights that call for settlement by the issuance of equity instruments, granted on or after September 1, 2002, using the fair value based method. No compensation cost is recorded for all other stock based employee compensation awards, which are accounted for using the intrinsic value based method. Consideration paid by employees on the exercise of stock options is recorded as share capital. No stock based compensation was granted to employees subsequent to September 1, 2002, thus the Company has not disclosed the pro forma effect of accounting for these awards under the fair value based method.

Under the fair value based method, compensation cost attributable to awards to employees that are direct awards of stock, or stock appreciation rights that call for settlement by the issuance of equity instruments, is measured at fair value at the grant date and recognized over the vesting period. For awards that vest at the end of the vesting period, compensation cost is recognized on a straight line basis.

(b) Intangible Assets:

The Company records Intangible assets at the value of consideration given up to acquire the asset. In the case where the Company issues Common Shares in exchange for the asset, the Company records the Fair Value of the Common Shares issued as the value of the Intangible asset. Additionally, the Company determines at the time of purchase, the useful life of the asset acquired and amortizes the asset over the determined useful life. Annually the Company also reviews the asset and makes a determination as to whether the residual value of the asset is impaired. Should this determination conclude that there is a impairment the Company will write down the asset to the unimpaired value of the asset.

4 Accounts receivable:

The Company reports accounts receivable net of allowance for doubtful accounts. An estimation of the allowance for doubtful accounts is based upon management’s analysis of customer accounts and the likelihood of collecting each account based upon the age of the amount outstanding as it relates to specific invoices. Allowance for doubtful accounts, as at May 31, 2003 was $188,704 and August 31, 2002 was $124,203.

RESIN SYSTEMS INC.

Notes to Interim Consolidated Financial Statements

(Canadian Dollars)

(unaudited)

Nine months ended May 31, 2003 and year ended August 31, 2002

5 Receivable from NRC:

Pursuant to the agreement with the National Research Council (“NRC”) (consolidated financial statements for the year ended August 31^st, 2002, note 15 (b)), the Company has submitted its sixth and seventh claim totaling $56,372 and based upon previous experience has recorded the receivable and offsetting long-term liability. As at August 31^st, 2002 the Company presented two claims to the NRC totaling $37,620 which were subsequently paid in the first quarter.

6 Capital assets:

For the nine months ended May 31^st, 2003, the Company has purchased plant and computer and office equipment totaling $219,024. These purchases relate to the Company’s stated intention to establish a fully operational Canadian based manufacturing facility for the production and sale of composite utility poles.

Additionally, the Company has expended another $414,497 on utility pole production equipment which as at Balance Sheet date was under construction. The Company will commence amortizing this equipment when production of utility poles commences.

During the first quarter the Company sold computer software it was not using for proceeds of $2,345.

7 Intangible assets:

On January 7^th, 2003 the Company announced it had completed the transaction with Canzeal Enterprises Ltd. (“Canzeal”), to acquire the worldwide right, title and interest in and to all intellectual property assets of Canzeal relating to the design, manufacture and distribution of composite poles. In exchange for this intellectual property and associated rights the Company.

Pursuant to this agreement, the Company for a period of four years from the closing date, will pay Canzeal a royalty equal to 3.5% of the gross sales of composite poles manufactured by the Company using the intellectual property and rights mentioned above. Additionally, the Company will pay Canzeal one half of any royalties generated by the Company’s licensing of the property to a third party up to a maximum of 3.5% of gross sales.

RESIN SYSTEMS INC.

Notes to Interim Consolidated Financial Statements

(Canadian Dollars)

(unaudited)

Nine months ended May 31, 2003 and year ended August 31, 2002

7 Intangible assets, (continued):

The Company has valued the intellectual property using the fair value of the equity units as at the date the Company entered into negotiations with Canzeal owing to the fact that with the exception of certain details relating to taxation matters, the value of the intellectual property was established. For the nine months ended May 31^st, 2003 the Company has recorded the intellectual property at $2,057,500. Additionally, management of the Company has estimated the useful life of this intellectual property to be 10 years and will be amortizing it on a straight line basis with annual determinations as to any impairments to the intellectual property.

The Company will commence amortization of the intellectual property commencing commercial production of the composite utility poles.

8 Share capital:

(a) Authorized and issued shares:

Number of

shares Amount

Total issued and outstanding

August 31, 2002 33,713,085 $ 11,200,132

Shares issued pursuant to

ARC Agreement (see note 15 & 16

in the consolidated August 31, 2002

financial statements) 312,500 184,375

Balance August 31, 2002 34,025,585 11,384,507

Reduction of share subscription

receivable as per below -- 108,000

Shares issued for cash

net of transaction costs 6,000,000 2,894,577

Shares issued for intangible assets 3,000,000 1,680,000

Fair value of warrants issued

for intangible assets 377,500

Stock options exercised 500,000 185,000

Warrants exercised 5,000 3,000

Fair stock compensation (see note 8(b) below) -- 399,061

Total issued and outstanding

May 31, 2003 43,530,585 17,031,645

RESIN SYSTEMS INC.

Notes to Interim Consolidated Financial Statements

(Canadian Dollars)

(unaudited)

Nine months ended May 31, 2003 and year ended August 31, 2002

8. Share capital, (continued):

(a) Authorized and issued shares, (continued):

Number of

shares Amount

Total issued and outstanding

May 31, 2003 forward 43,530,585 17,031,645

Shares to be issued pursuant to

ARC Agreement see below at May

30, 2003 market price of $0.84 228,683 192,094

Balance May 31, 2003 43,759,268 17,223,739

During the nine months ended May 31, 2003, the promissory note from a director was reduced by $108,000 pursuant to the provisions of a consulting services agreement the Company entered in July, 2002 (note 8(a) Consolidated Financial Statements August 31, 2002). As at May 31, 2003, the balance outstanding of the promissory note was $67,540.

The Company has received during the nine months ended May 31^st, 2003 $192,094 in research and development work done by the Alberta Research Council (“ARC”). The agreement with the ARC states, the Company will issue the equivalent monetary value in Common Shares but only in installments of $125,000. The Company currently is preparing to issue shares pursuant to the agreement.

In addition to the Common Shares issued relating to the Canzeal intellectual property acquisition (see note 7), the Company completed a private placement consisting of 6,000,000 equity units at a price of $0.50 per unit. Each unit consists of one Common Share and one half of one Common Share warrant. Proceeds from this issue net of transaction costs were $2,894,577.

(b) Stock based compensation:

The Company recorded $399,061 in stock based compensation to consultants and advisors during the nine months ended. This compensation is based upon the Black-Scholes option pricing model. For the options granted in the period, to consultants and advisors the amount is based using the following assumptions:

Risk free interest rate 3.6%

Expected life of option 5 years

Expected volatility 120%

Expected dividends Nil

RESIN SYSTEMS INC.

Notes to Interim Consolidated Financial Statements

(Canadian Dollars)

(unaudited)

Nine months ended May 31, 2003 and year ended August 31, 2002

8. Share capital, (continued):

(b) Stock based compensation, (continued)

The Company granted stock options based upon the performance of the Company to an advisor and a consultant during the last nine months. The particulars of these options are: 1,000,000 and 150,000 options with exercise prices of $1.18 and $0.56 respectively, grant dates of January 6^th, 2003 and November 22^nd, 2002 respectively, and expiry dates of January 5^th, 2008 and November 21^st, 2007. Under the accounting policy noted above (note 2), the Company will record the fair value of the options upon completion of the performance specified in the option agreements. As at the Balance Sheet date the performance specified had not been completed and the Company has not recorded any expense related to these options.

Outstanding options

A summary of the status and changes in the Company’s outstanding stock options is presented below:

Number of Weighted average

share options exercise price

Outstanding, August 31, 2002 3,185,000 $ 0.36

Granted 2,300,000 0.85

Exercised (500,000) 0.37

Forfeited (25,000) 0.40

Outstanding, May 31, 2003 4,960,000 $ 0.59

RESIN SYSTEMS INC.

Notes to Interim Consolidated Financial Statements

(Canadian Dollars)

(unaudited)

Nine months ended May 31, 2003 and year ended August 31, 2002

8. Share capital, (continued):

Outstanding options

The following table summarizes information about the stock options outstanding as at May 31, 2003:

Weighted

average

Exercise Number years Exercisable at

price outstanding remaining May 31, 2003

$0.34 40,000 2.31 40,000

$0.34 30,000 2.34 30,000

$0.34 595,000 3.48 445,000

$0.40 250,000 1.84 250,000

$0.40 400,000 3.93 400,000

$0.40 935,000 3.98 803,750

$0.40 300,000 4.17 250,000

$0.50 70,000 3.68 17,500

$0.54 100,000 4.28 25,000

$0.55 180,000 4.51 --

$0.56 300,000 4.48 --

$0.57 600,000 4.55 --

$0.65 40,000 3.11 20,000

$0.89 50,000 0.87 --

$1.00 50,000 2.82 --

$1.11 20,000 4.68 --

$1.18 1,000,000 4.60 --

4,960,000 3.72 2,281,250

Options held by consultants and advisors:

Included in the outstanding stock option amounts above, are options that were granted to consultants, the details of which are outlined below.

Number of Weighted average

share options exercise price

Outstanding, August 31, 2002 615,000 $ 0.39

Granted 2,250,000 0.85

Exercised (250,000) 0.40

Outstanding, May 31, 2003 2,615,000 $ 0.78

RESIN SYSTEMS INC.

Notes to Interim Consolidated Financial Statements

(Canadian Dollars)

(unaudited)

Nine months ended May 31, 2003 and year ended August 31, 2002

8. Share capital, (continued):

(d) Warrants:

The Company issued 1,500,000 warrants relating to the Canzeal acquisition referred to in note 7 above. Each warrant entitles the holder to purchase one Common Share at an exercise price of $0.75 per share any time on or before January 6^th, 2004.

As noted in (a) above the Company issued 3,000,000 warrants as part of its private placement in January 2003. Each warrant entitles the holder to purchase one Common Share at an exercise price of $0.75 per share on or before January 7^th, 2004.

9. Segmented information:

The Company’s activities comprise one business segment.

10. Commitments

(a) Operating lease:

The Company has entered into an agreement to lease plant and office space for a period of five years commencing February 1, 2002, with one renewable option for another five years. The minimum rent payable for each of the next five years is as follows:

Year ended

Lease Payments

August 31, 2003 (3 months) $ 18,170

August 31, 2004 80,910

August 31, 2005 82,169

August 31, 2006 84,956

August 31, 2007 (5 months) 35,960

11. Subsequent events:

(a) Consulting Agreement:

On March 28, 2003 the Company has entered into an agreement to pursue investment and financing opportunities for a set monthly amount of $5,000 for an initial term of six months.

(b) Consulting Agreement:

The Company has engaged an international engineering firm to assist in the engineering of the Company’s composite utility poles. This firm has extensive experience in the composite industry and the Company has fulfilled the initial agreement as at May 31, 2003, but expects to continue with an ongoing relationship with the firm in the near future.