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 May 31, 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
incorporation or organization) Identification No.)
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 July 14, 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 - May 31, 1998 and August 31, 1997.............. 3
Statement of Operations - Quarter Ended and Nine Months Ended
May 31, 1998 and May 31, 1997................................. 4
Statement of Cash Flows - Nine Months Ended May 31, 1998
and May 31, 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
5/31/98 8/31/97
(UNAUDITED)
CURRENT ASSETS
Cash $ 303,829 $ 1,432,281
Accounts receivable -- 10,000
Other receivables 191,600 --
Deposits and prepaid expenses 76,449 4,196
----------- -----------
Total Current Assets 571,878 1,446,477
----------- -----------
PROPERTY AND EQUIPMENT, at cost
Furniture and equipment, net 61,159 28,540
Undeveloped oil and gas prospects 1,871,240 311,007
----------- -----------
1,932,399 339,547
----------- -----------
OTHER ASSETS, net 3,642 3,642
----------- -----------
$ 2,507,919 $ 1,789,666
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 11,365 $ 60,064
Accrued and other liabilities 723,120 10,184
----------- -----------
Total Current Liabilities 734,485 70,248
----------- -----------
Capital lease obligation 3,173 --
----------- -----------
Total Liabilities 737,658 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) (6,982) (57,825)
----------- -----------
1,770,261 1,719,418
----------- -----------
$ 2,507,919 $ 1,789,666
=========== ===========
3
<PAGE>
<TABLE>
<CAPTION>
PYR ENERGY CORPORATION
(A Development Stage Company)
STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Three Nine Nine
Months Months Months Months Inception
Ended Ended Ended Ended Through
5/31/98 5/31/97 5/31/98 5/31/97 5/31/98
REVENUES
<S> <C> <C> <C> <C> <C>
Consulting Fees $ -- $ 40,000 $ 10,000 $ 87,528 $ 127,528
Interest 5,174 -- 31,719 -- 37,315
Gain on asset sale -- -- 556,197 -- 556,197
----------- ----------- ----------- ----------- -----------
5,174 40,000 597,916 87,528 721,040
OPERATING EXPENSES
General and administrative 163,343 7,216 524,633 35,325 668,312
Interest -- -- 217 -- 568
Depreciation and amortization 6,223 253 15,983 334 17,034
----------- ----------- ----------- ----------- -----------
169,566 7,469 540,833 35,659 685,914
INCOME/(LOSS) BEFORE INCOME TAXES (164,392) 32,531 57,083 51,869 35,126
Income Taxes -- -- 6,240 -- 6,240
----------- ----------- ----------- ----------- -----------
(164,392) 32,531 50,843 51,869 28,886
INCOME APPLICABLE TO
PREDECESSOR LLC -- (32,531) -- (51,869) (35,868)
----------- ----------- ----------- ----------- -----------
NET INCOME/(LOSS)
$ (164,392) $ -- $ 50,843 $ -- $ (6,982)
=========== =========== =========== =========== ===========
NET INCOME/(LOSS)
PER COMMON SHARE $ (.018) $ .008 $ .006 $ .013 $ .005
=========== =========== =========== =========== ===========
COMMON SHARES OUTSTANDING 9,154,804 4,000,000 9,154,804 4,000,000 6,097,228
4
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PYR ENERGY CORPORATION
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
(UNAUDITED)
Cumulative
Nine Months Nine Months from Inception
Ended 5/31/98 Ended 5/31/97 to 5/31/98
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C> <C>
Net income (loss) $ 50,843 $ 51,869 $ 28,886
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 15,983 334 17,034
Changes in assets and liabilities
(Increase)/decrease in receivables (181,600) -- (191,600)
(Increase)/decrease in deposits and prepaids (72,253) (2,500) (76,449)
Increase/(decrease) in accounts payable (48,699) 1,628 11,365
Increase/(decrease) in accrued and other liabilities (2,564) (15,001) 7,620
Other -- (3,705) (3,750)
----------- ----------- -----------
Net cash provided/(used) by operating activities (794,577) 38,330 (763,091)
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of oil and gas interests 1,050,078 -- 1,050,078
Cash paid for furniture and equipment (48,602) (3,340) (78,085)
Cash paid for undeveloped oil and gas assets (1,338,632) -- (1,649,729)
----------- ----------- -----------
Net cash provided/(used) in investing activities (337,156) (3,340) (677,736)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Members capital contributions -- 4,000 64,000
Distributions to members -- (36,200) (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 (32,200) 1,744,656
----------- ----------- -----------
NET INCREASE/(DECREASE) IN CASH (1,128,452) 2,790 303,829
CASH, BEGINNING OF PERIODS 1,432,281 -- --
----------- ----------- -----------
CASH, END OF PERIODS $ 303,829 $ 2,790 $ 303,829
=========== =========== ===========
5
</TABLE>
<PAGE>
PYR ENERGY CORPORATION
(A Development Stage Company)
Notes to Financial Statements
May 31, 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 May 31, 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 May 31, 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 included 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 nine months and quarter ended May 31, 1998, the Company incurred
approximately $2,054,000 and $1,657,000 respectively, for acquisition of
acreage, direct geological and geophysical costs, drilling costs and other
related direct costs with respect to its identified exploration and exploitation
projects. During the quarter ended May 31, 1998, the Company commenced drilling
operations with an initial exploration well on its Mastiff prospect at East Lost
Hills in California. The Company has prepaid a total of $156,000 for its share
of the cost of this well. As of the date of this report, this well continues to
drill toward the total depth of 19,000 feet. The Company has had no revenues
from oil and gas production.
The Company currently anticipates that it will participate in the drilling
of two to four additional 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 such 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 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 was spud on
May 14, 1998 and is projected to reach its target depth of 19,000 feet by
mid-September. The Company currently owns an approximate 10.38% working
interest in this well. PYR and its partners control approximately 23,000
acres over this prospect.
School Road - On May 29, 1998, the Company signed a participation
agreement with Seneca Resources Corporation for the drilling of PYR's
Rainbow 'Stevens' exploration prospect in this area. Seneca, which is the
oil and gas subsidiary of National Fuel Gas Company, will operate. The
Rainbow exploration well is anticipated to spud in July, and is expected to
take 30 to 45 days to reach total depth of 12,500 feet. This well is being
8
<PAGE>
drilled to test multiple Upper Miocene, 'Stevens' sands in a combination
structural/stratigraphic feature defined by 3-D seismic data. Similar
'Stevens' sand reservoirs typically produce light oil (28 to 42 degree API
gravity) and associated natural gas. The Rainbow prospect is one of four
prospects identified and mapped by the Company from 3-D seismic data within
the School Road project. Although there can be no assurance, PYR and Seneca
may drill a second prospect around the end of calendar year 1998. PYR
retained an ultimate 40% working interest at School Road and as a result of
the agreement with Seneca, will have no obligation to fund any drilling or
completion costs toward the initial exploration well.
Southeast Maricopa - The Company has completed acquisition of
approximately 52 square miles of 3-D seismic data over its Southeast
Maricopa project. Western Geophysical acted as seismic contractor for the
data acquisition. The Company has prepaid a total of $662,500 toward the
total acquisition cost of $1,378,000. Permitting, location damages and
processing are expected to add as much as $300,000 to the total cost of
this project. The Company currently holds a 100% working interest and has
identified a number of prospect leads based on 2-D seismic data. The 3-D
seismic data is expected to further refine some of these leads into
drillable prospects. The Company may present this project to potential
industry partners in order to sell an appropriate portion in order to limit
or eliminate financial risk associated with exploratory drilling and to
potentially recapture some or all of the initial investment. The Company
projects drilling an initial exploratory test well here before the end of
calendar year 1998.
The Company has other projects identified in the Denver Basin of Colorado
and Nebraska, the Williston Basin of North Dakota and in the Big Horn Basin of
Wyoming and Montana. The Company is currently identifying specific areas to
begin leasing acreage with the intent of drilling at least one exploration well
as soon as appropriate funding (of which there is no assurance) has been
obtained. In addition, the Company continues to identify and evaluate
acquisition opportunities for exploration and exploitation opportunities.
The Company's cash balance at May 31, 1998 was $303,829. Also at May 31,
1998, the Company had outstanding warrants to issue 2,047,500 shares of its
common stock at $1.75 per share. These Warrants were to expire on June 30, 1998.
The Company has elected to extend the expiration date of these Warrants to July
31, 1998 and has adjusted the exercise price to $.85. 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. Although the Company currently has no
committed sources for funding of its capital expenditures, the Company continues
to seek additional sources of capital.
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 nine months ended May 31, 1998 compared with the nine months ended May
31, 1997
Operations during the nine months ended May 31, 1998 resulted in net income
of $51,869 compared to net income of $50,843 for the nine months ended May 31,
1997.
Partial Sale of Undeveloped Oil and Gas Property. During the nine months
ended May 31, 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.
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 nine months ended May 31, 1998 or
1997. The Company has not owned any proved reserves and had no oil or gas
production. The Company recorded $15,983 and $334 in depreciation expense
associated with capitalized office furniture and equipment during the nine
months ended May 31, 1998 and 1997, respectively.
General and Administrative Expense. The Company incurred $524,633 and
$35,325 in general and administrative expenses during the nine months ended May
31, 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 $87,528 from
consulting fees during the nine months ended May 31, 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 May 31, 1998 compared with the quarter ended May 31, 1997
Operations during the quarter ended May 31, 1998 resulted in a net loss of
($164,392) compared to net income of $32,531 for the quarter ended May 31, 1997.
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.
10
<PAGE>
Depreciation, Depletion and Amortization. The Company recorded no depletion
expense from oil and gas properties for the quarters ended May 31, 1998 or 1997.
The Company has not owned any proved reserves and had no oil or gas production.
The Company recorded $6,223and $253 in depreciation expense associated with
capitalized office furniture and equipment during the quarters ended May 31,
1998 and 1997, respectively.
General and Administrative Expense. The Company incurred $163,343 and
$7,216 in general and administrative expenses during the quarters ended May 31,
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 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 $40,000 from
consulting fees during the quarters ended May 31, 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.
(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
None
Item 6. Exhibits and Reports on Form 8-K
During the quarter ended May 31, 1998, the Registrant filed four
reports on Form 8-K:
A Form 8K was filed on March 4, 1998 reporting a press release
dated March 2, 1998,
A Form 8K was filed on March 25, 1998 reporting a press release
dated March 19, 1998,
A Form 8K was filed on April 27, 1998 reporting a press release
dated April 20, 1998 and
A Form 8K was filed on May 18, 1998 reporting a press release
dated May 15, 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 July 15, 1998
- ------------------------ and Chairman Of The Board
D. Scott Singdahlsen
/s/ Andrew P. Calerich Chief Financial Officer July 15, 1998
- ------------------------
Andrew P. Calerich
12
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> AUG-31-1998 AUG-31-1998
<PERIOD-START> MAR-01-1998 SEP-01-1997
<PERIOD-END> MAY-31-1998 MAY-31-1998
<CASH> 303,829 303,829
<SECURITIES> 0 0
<RECEIVABLES> 191,600 191,600
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 571,878 571,878
<PP&E> 1,932,399 1,932,399
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 2,507,919 2,507,919
<CURRENT-LIABILITIES> 734,485 734,485
<BONDS> 0 0
0 0
0 0
<COMMON> 9,155 9,155
<OTHER-SE> 1,761,106 1,761,106
<TOTAL-LIABILITY-AND-EQUITY> 2,507,919 2,507,919
<SALES> 0 0
<TOTAL-REVENUES> 5,174 597,916
<CGS> 0 0
<TOTAL-COSTS> 169,566 540,833
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> (164,392) 57,083
<INCOME-TAX> 0 6,240
<INCOME-CONTINUING> (164,392) 50,843
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (164,392) 50,843
<EPS-PRIMARY> (.018) .006
<EPS-DILUTED> (.018) .006
</TABLE>
