U.S. Securities And Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended February 28, 1998
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from __________________ to _________________
Commission File No. 0-20879
PYR ENERGY CORPORATION
---------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Delaware 95-4580642
- ----------------------------- -----------------------------------
(State or jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1675 Broadway, Suite 1150, Denver, CO 80202
- --------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code (303) 825-3748
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes X No
----- -----
(APPLICABLE ONLY TO CORPORATE REGISTRANTS)
The number of shares outstanding of each of the issuer's classes of common
equity as of April 17, 1998 is as follows:
$.001 Par Value Common Stock 9,154,804
---------
<PAGE>
PYR ENERGY CORPORATION
FORM 10-QSB
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.......................................... 3
Balance Sheet - February 28, 1998 and August 31, 1997......... 3
Statement of Operations - Quarter Ended and Six Months Ended
February 28, 1998 and February 28, 1997 ...................... 4
Statement of Cash Flows - Six Months Ended February 28, 1998
and February 28, 1997......................................... 5
Notes to Financial Statements................................. 6
Summary of Significant Accounting Policies.................... 6
Item 2. Management's Discussion and Analysis or Plan of Operation..... 8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings............................................. 12
Item 2. Changes in Securities......................................... 12
Item 3. Defaults Upon Senior Securities............................... 12
Item 4. Submission of Matters to a Vote of Security Holders........... 12
Item 5. Other Information............................................. 12
Item 6. Exhibits and Reports on Form 8-K.............................. 12
Signatures............................................................. 12
2
<PAGE>
PART I
ITEM 1. FINANCIAL STATEMENTS
PYR ENERGY CORPORATION
(A Development Stage Company)
BALANCE SHEETS
ASSETS
2/28/98 8/31/97
----------- -----------
(UNAUDITED)
CURRENT ASSETS
Cash $ 1,080,963 $ 1,432,281
Accounts receivable -- 10,000
Other receivables 393,047 --
Deposits and prepaid expenses 21,678 4,196
----------- -----------
Total Current Assets 1,495,688 1,446,477
----------- -----------
PROPERTY AND EQUIPMENT, at cost
Furniture and equipment, net 67,381 28,540
Undeveloped oil and gas prospects 414,051 311,007
----------- -----------
481,432 339,547
----------- -----------
OTHER ASSETS, net 3,642 3,642
----------- -----------
$ 1,980,762 $ 1,789,666
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 35,209 $ 60,064
Accrued and other liabilities 7,620 10,184
----------- -----------
Total Current Liabilities 42,829 70,248
----------- -----------
Capital lease obligation 3,281 --
----------- -----------
Total Liabilities 46,110 70,248
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock, $.001 par value
Authorized 30,000,000 shares
Issued and outstanding - 9,154,804 shares 9,155 9,155
Capital in excess of par value 1,768,088 1,768,088
Retained earnings/(accumulated deficit) 157,409 (57,825)
----------- -----------
1,934,652 1,719,418
----------- -----------
$ 1,980,762 $ 1,789,666
=========== ===========
3
<PAGE>
<TABLE>
<CAPTION>
PYR ENERGY CORPORATION
(A Development Stage Company)
STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Three Six Six
Months Months Months Months Inception
Ended Ended Ended Ended Through
2/28/98 2/28/97 2/28/98 2/28/97 2/28/98
--------- --------- --------- --------- ---------
REVENUES
<S> <C> <C> <C> <C> <C>
Consulting Fees $ -- $ 32,528 $ 10,000 $ 47,528 $ 127,528
Interest 10,806 -- 26,545 -- 32,141
Gain on asset sale 556,197 -- 556,197 -- 556,197
--------- --------- --------- --------- ---------
567,003 32,528 592,742 47,528 715,866
OPERATING EXPENSES
General and administrative 173,373 17,740 361,290 28,109 504,969
Interest 217 -- 217 -- 568
Depreciation and amortization 6,427 81 9,760 81 10,811
--------- --------- --------- --------- ---------
180,017 17,821 371,267 28,190 516,348
NET INCOME BEFORE INCOME TAXES 386,986 14,707 221,475 19,338 199,518
Income Taxes 6,240 -- 6,240 -- 6,240
380,746 14,707 215,235 19,338 193,278
INCOME APPLICABLE TO
PREDECESSOR LLC -- (14,707) -- (19,338) (35,868)
--------- --------- --------- --------- ---------
NET INCOME $ 380,746 $ -- $ 215,235 $ -- $ 157,410
========= ========= ========= ========= =========
NET INCOME PER COMMON SHARE $ .042 $ .004 $ .024 $ .005 $ .028
========= ========= ========= ========= =========
4
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PYR ENERGY CORPORATION
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
(UNAUDITED)
Cumulative
Six Months Six Months from Inception
Ended 2/28/98 Ended 2/28/97 to 2/28/98
------------- ------------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C> <C>
Net income (loss) $ 215,235 $ 19,338 $ 193,278
Adjustments to reconcile net income (loss) to net
cash provided by operating activities
Gain on sale of assets (556,197) (556,197)
Depreciation and amortization 9,760 81 10,811
Changes in assets and liabilities
(Increase)/decrease in receivables (383,047) -- (393,047)
(Increase)/decrease in deposits and prepaids (17,482) (525) (21,678)
Increase/(decrease) in accounts payable (24,855) -- 35,209
Increase/(decrease) in accrued and other liabilities (2,564) -- 7,620
Other -- (3,705) (3,750)
----------- ----------- -----------
Net cash provided/(used) by operating activities (759,150) 15,189 (727,754)
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of oil and gas interests 850,078 -- 850,078
Cash paid for furniture and equipment (48,602) (1,450) (78,085)
Cash paid for undeveloped oil and gas properties (396,925) -- (707,932)
----------- ----------- -----------
Net cash provided/(used) in investing activities 404,551 (1,450) 64,061
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Members capital contributions -- 4,000 64,000
Distributions to members -- (12,200) (66,000)
Net proceeds from capital lease obligation 3,281 -- 3,281
Cash from short-term borrowings -- -- 285,000
Repayments of short-term borrowings -- -- (285,000)
Proceeds from sale of common stock -- -- 2,023,750
Cash paid for offering costs -- -- (280,711)
Cash received upon recapitalization and merger -- -- 336
----------- ----------- -----------
Net cash (used) provided by financing activities 3,281 (8,200) 1,744,656
----------- ----------- -----------
NET INCREASE/(DECREASE) IN CASH (351,318) 5,539 1,080,963
CASH, BEGINNING OF PERIODS 1,432,281 -- --
----------- ----------- -----------
CASH, END OF PERIODS $ 1,080,963 $ 5,539 $ 1,080,963
=========== =========== ===========
</TABLE>
5
<PAGE>
PYR ENERGY CORPORATION
(A Development Stage Company)
Notes to Financial Statements
February 28, 1998
The accompanying interim financial statements of PYR Energy Corporation (the
"Company") are unaudited. In the opinion of management, the interim data
includes all adjustments, consisting only of normal recurring adjustments,
necessary for a fair presentation of the results for the interim period.
The financial statements included herein have been prepared by the Company
pursuant to the rules and regulations of the Securities and Exchange Commission.
Certain information and footnote disclosure normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations.
Management believes the disclosures made are adequate to make the information
not misleading and recommends that these condensed financial statements be read
in conjunction with the financial statements and notes included in the Company's
Form 10-KSB as of August 31, 1997.
PYR Energy Corporation (formerly known as Mar Ventures Inc. ("Mar")) was
incorporated under the laws of the State of Delaware on March 27, 1996. Mar had
been a public company which had no significant operations as of July 31, 1997.
On August 6, 1997 Mar acquired all the interests in PYR Energy LLC ("PYR LLC")
(a Colorado Limited Liability Company organized on May 31, 1996), a development
stage company as defined by Statement of Financial Accounting Standards (SFAS)
No. 7. PYR LLC, an independent oil and gas exploration company, had been engaged
in the acquisition of oil and gas properties for exploration and exploitation in
the Rocky Mountain region and California. As of August 6, 1997 PYR LLC had
acquired only non-producing leases and acreage and no exploration had been
commenced on the properties. Upon completion of the acquisition of PYR LLC by
Mar, PYR LLC ceased to exist as a separate entity. Mar remained as the legal
surviving entity and, effective November 12, 1997, Mar changed its name to PYR
Energy Corporation.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES - 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 and disclosure of contingent assets and liabilities at the date
of the financial statements and reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
CASH EQUIVALENTS - For purposes of reporting cash flows, the Company
considers as cash equivalents all highly liquid investments with a maturity
of three months or less at the time of purchase. At February 28, 1998,
there were no cash equivalents.
6
<PAGE>
PROPERTY AND EQUIPMENT - Furniture and equipment is recorded at cost.
Depreciation is provided by use of the straight-line method over the
estimated useful lives of the related assets of three to five years.
Expenditures for replacements, renewals, and betterments are
capitalized. Maintenance and repairs are charged to operations as incurred.
OIL AND GAS PROPERTIES - The Company follows the full cost method to
account for its oil and gas exploration and development activities. Under
the full cost method, all costs incurred which are directly related to oil
and gas exploration and development are capitalized and subjected to
depreciation and depletion. Depletable costs also include estimates of
future development costs of proved reserves. Costs related to undeveloped
oil and gas properties may be excluded from depletable costs until such
properties are evaluated as either proved or unproved. The net capitalized
costs are subject to a ceiling limitation. Gains or losses upon disposition
of oil and gas properties are treated as adjustments to capitalized costs,
unless the disposition represents a significant portion of the Company's
proved reserves. A separate cost center is maintained for expenditures
applicable to each country in which the Company conducts exploration and/or
production activities.
Undeveloped oil and gas properties consists primarily of leases and
acreage acquired by the Company for its exploration and development
activities. The cost of these non-producing leases is recorded at the lower
of cost or fair market value.
The Company has adopted SFAS No. 121 "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed of" which
requires that long-lived assets to be held and used be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. The adoption of SFAS
121 has not had an impact on the Company's financial statements, as the
Company has determined that no impairment loss through February 28, 1998
need to be recognized for applicable assets of continuing operations.
ORGANIZATION COSTS - Costs related to the organization of the Company have
been capitalized and are being amortized over a period of five years.
INCOME TAXES - The Company has adopted the provisions of SFAS No. 109,
"Accounting for Income Taxes". SFAS 109 requires recognition of deferred
tax liabilities and assets for the expected future tax consequences of
events that have been inclu ded in the financial statements or tax returns.
Under this method, deferred tax liabilities and assets are determined based
on the difference between the financial statement and tax basis of assets
and liabilities using enacted tax rates in effect for the year in which the
differences are expected to reverse.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The Company is an independent oil and gas exploration company whose
strategic focus is the application of advanced seismic imaging and
computer-aided exploration technologies in the systematic search for commercial
hydrocarbon reserves, primarily in the onshore western United States. The
Company attempts to leverage its technical experience and expertise with 3-D
seismic to identify exploration and exploitation projects with significant
potential economic return. The Company intends to participate in selected
exploration projects as a non-operating, working interest owner, sharing both
risk and rewards with its partners. The Company has and will continue to pursue
exploration opportunities in regions where the Company believes significant
opportunity for discovery of oil and gas exists. By reducing drilling risk
through 3-D seismic technology, the Company seeks to improve the expected return
on investment in its oil and gas exploration projects.
During the six months and quarter ended February 28, 1998, the Company
incurred approximately $397,000 and $258,000, respectively for acquisition of
acreage and related direct costs with respect to its identified exploration and
exploitation projects. The Company undertook no drilling and had no revenues
from oil and gas production during this period.
The Company currently anticipates that it will participate in the drilling
of one to four exploratory wells during the next twelve months, although the
number of wells may increase as additional projects are added to the Company's
portfolio. However, there can be no assurance that any su ch wells will be
drilled and if drilled that any of these wells will be successful.
The Company currently has three active projects in the Southern San Joaquin
Basin of California:
East Lost Hills - The Company has signed a joint operating agreement
with seven established US and Canadian oil and gas exploration companies to
participate in the drilling of a deep wildcat well to evaluate the
Company's Mastiff prospect at East Lost Hills. The Mastiff well is e
xpected to spud early in the second calendar quarter of 1998 and is
projected to take three to four months to drill to its target depth of
18,500 feet. As part of the agreement, the industry partners have paid the
Company a cash consideration and the Company will retain a carried 6.5%
working interest through the tanks in this initial well. The Company
currently owns an additional 3.8% working interest for which its share of
drilling costs is expected to be approximately $156,000. The Company may
elect to sell additional portions of its working interest or may elect to
add to its current working interest in the future.
School Road - The Company expects to commence drilling its first
exploratory well on its School Road project in the second quarter of
calendar 1998. The total 100% dry hole cost of this well is projected to be
about $850,000. Completion costs are projected at an additional $500 ,000.
It is anticipated that this well will take approximately 45 to 60 days to
drill. The Company currently holds a 100% working interest and is
presenting this project to potential industry partners in order to sell a
significant portion of its working interest and thereby limit its financial
expenditures for the cost of the well. The Company may drill a second
exploratory well on this project late in calendar 1998. The costs for the
second well are anticipated to be similar to the first exp loratory well.
8
<PAGE>
Southeast Maricopa - The Company has commenced acquisition of 3-D
seismic data in its Southeast Maricopa project. Cash commitments of as much
as $1,700,000 will be required to fund the 3-D seismic permitting, data
acquisition and location damages. The Company also currently holds a 100%
working interest in this project and is presenting this project to
potential industry partners in order to sell a significant portion of its
working interest and thereby limit or eliminate its financial expenditures
for the cost of the 3-D seismic project. The Company intends to drill an
initial exploratory test well here in late calendar 1998.
The Company has other projects identified in the Denver Basin of Colorado
and Nebraska and in the Big Horn Basin of Wyoming and Montana. There is
currently no plan for drilling activity in these projects during the next 12
months. In addition, the Company continues to identify and evalua te acquisition
opportunities for exploration and exploitation opportunities.
In connection with the implementation of its exploration, exploitation and
potential development program, the Company may use a portion of its existing
cash resources to expand its technical and support staff. As a result, the
Company anticipates that its general and administrative expenses may increase
during the next 12 months. Further, the Company anticipates incurring additional
legal, administrative and accounting costs in future periods as a result of
being a public company.
The Company's cash balance at February 28, 1998 was $1,080,963. The Company
has outstanding warrants to issue 2,047,500 shares of its common stock at $1.75
per share. These Warrants were to expire on April 15, 1998. The Company has
elected to extend the expiration date of these Warrants to June 30, 1998. To the
extent that these warrants expire without being exercised, the Company may be
limited in its ability to continue to fund its exploration and exploitation
activities until additional financing is available. The Company continues to
seek additional sources of capital. To the extent sufficient funding is
available and depending on the level of industry partner participation in the
Company=s exploration projects, capital expenditures for the next 12 months
could be as much as $5,750,000. The Company currently has no committed sources
for funding of these capital expenditures.
The Company has no outstanding long-term debt and although it has no
current plan to do so, it may incur long-term debt in the future in order to
fund development of oil and gas producing properties.
9
<PAGE>
Results of Operations
The six months ended February 28, 1998 compared with the six months ended
February 28, 1997
Operations during the six months ended February 28, 1998 resulted in a net
income of $215,435 compared to net income of $19,338 for the six months ended
February 28, 1997.
Partial Sale of Undeveloped Oil and Gas Property. During the six months
ended February 28, 1998, the Company sold a portion of its East Lost Hills
project to industry partners for a total of $850,078 resulting in a net gain
from the sale of $556,197. The Company has retained a working in terest in this
project.
Oil and Gas Revenues and Expenses. The Company has not owned any producing
or proved oil and gas properties. Accordingly, no oil and gas revenues or
expenses have been recorded by the Company.
Depreciation, Depletion and Amortization. The Company recorded no depletion
expense from oil and gas properties for the six months ended February 28, 1998
or 1997. The Company has not owned any proved reserves and had no oil or gas
production. The Company recorded nominal depreciation e xpense associated with
capitalized office furniture and equipment during the quarters ended February
28, 1998 and 1997.
General and Administrative Expense. The Company incurred $361,290 and
$28,109 in general and administrative expenses during the six months ended
February 28, 1998 and 1997, respectively. The increase results from incurring
costs associated with the hiring of technical personnel, leasing of office
space, legal and accounting costs relating to the Company's transition to a
public company and other costs associated with administering and pursuing the
development of the Company's exploration and exploitation plan.
Consulting Fee Revenue. The Company generated $10,000 and $47,428 from
consulting fees during the six months ended February 28, 1998 and 1997,
respectively. These revenues are considered to be ancillary to the Company=s
focus of generating revenues from oil and gas production. These revenues have
ceased and are not expected to occur in the future.
The quarter ended February 28, 1998 compared with the quarter ended
February 28, 1997
Operations during the quarter ended February 28, 1998 resulted in a net
income of $380,746 compared to net income of $14,707 for the quarter ended
February 28, 1997.
Partial Sale of Oil and Gas Property. During the quarter ended February 28,
1998, the Company sold a portion of its East Lost Hills project to industry
partners for a total of $850,078 resulting in a net gain from the sale of
$556,197. The Company has retained a working interest in this project.
10
<PAGE>
Oil and Gas Revenues and Expenses. The Company has not owned any producing
or proved oil and gas properties. Accordingly, no oil and gas revenues or
expenses have been recorded by the Company.
Depreciation, Depletion and Amortization. The Company recorded no depletion
expense from oil and gas properties for the quarters ended February 28, 1998 or
1997. The Company has not owned any proved reserves and had no oil or gas
production. The Company recorded nominal depreciation exp ense associated with
capitalized office furniture and equipment during the quarters ended February
28, 1998 and 1997.
General and Administrative Expense. The Company incurred $173,373 and
$17,740 in general and administrative expenses during the quarters ended
February 28, 1998 and 1997, respectively. The increase results from incurring
costs associated with the hiring of technical personnel, leasing of office
space, and legal and accounting costs relating to the Company's transition to a
public company and other costs associated with administering and pursuing the
development of the Company's exploration and exploitation plan.
Consulting Fee Revenue. The Company generated $0 and $32,528 from
consulting fees during the quarters ended February 28, 1998 and 1997,
respectively. These revenues are considered to be ancillary to the Company's
focus of generating revenues from oil and gas production. These revenues h ave
ceased and are not expected to occur in the future.
(Intentionally left blank)
11
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
The Company has extended its Class "B" $1.75 Warrants from April 15, 1998
to June 30, 1998
Item 6. Exhibits and Reports on Form 8-K
During the quarter ended February 28, 1998, the Registrant filed three
reports on Form 8-K reporting events occurring on January 19, 1998, January
21, 1998 and January 30, 1998.
SIGNATURES
----------
In accordance with the requirements of the Exchange Act, the registrant has
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
PYR ENERGY CORPORATION
Signatures Title Date
---------- ----- ----
/s/ D. Scott Singdahlsen Chief Executive Officer; President April 20, 1998
- -------------------------- and Chairman Of The Board
D. Scott Singdahlsen
/s/ Andrew P. Calerich Chief Financial Officer April 20, 1998
- --------------------------
Andrew P. Calerich
12
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> AUG-31-1998 AUG-31-1998
<PERIOD-START> DEC-01-1997 SEP-01-1997
<PERIOD-END> FEB-28-1998 FEB-28-1998
<CASH> 1,080,963 1,080,963
<SECURITIES> 0 0
<RECEIVABLES> 393,047 393,047
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 1,495,688 1,495,688
<PP&E> 481,432 481,432
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 1,980,762 1,980,762
<CURRENT-LIABILITIES> 42,829 42,829
<BONDS> 0 0
0 0
0 0
<COMMON> 9,155 9,155
<OTHER-SE> 1,925,497 1,925,497
<TOTAL-LIABILITY-AND-EQUITY> 1,980,762 1,980,762
<SALES> 0 0
<TOTAL-REVENUES> 567,003 592,742
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 180,017 371,267
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> 386,986 221,475
<INCOME-TAX> 6,240 6,240
<INCOME-CONTINUING> 380,746 215,235
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 380,746 215,235
<EPS-PRIMARY> .042 .024
<EPS-DILUTED> .042 .024
</TABLE>
