<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______ to _______
Commission file number: 0-22349
INTELLIREADY, INC. (f/k/a) PAN WESTERN ENERGY CORPORATION
(Exact name of registrant as specified in charter)
Oklahoma 73-1130486
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1390 South Potomac, Suite 136 Aurora, Colorado 80012
(Address of principal executive offices) (Zip Code)
(303) 755-2400
Registrants' telephone number, including area code
Former Address
1850 South Boulder Avenue, Tulsa, Oklahoma, 74119
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 past 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 [ ]
As of September 30, 2000, 4,024,303 shares of the Registrants Common Stock,
$0.01 par value, were outstanding.
<PAGE> 2
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Cautionary Statement Regarding Forward-Looking Statements. In the
interest of providing the Company's shareholders with certain information
regarding the Company, including management's assessment of the Company's future
plans and operations, certain statements set forth in this Form 10QSB contain or
are based on the Company's projections or estimates of revenue, income, earnings
per share and other financial items or relate to management's future plans and
objectives or to the Company's future economic and financial performance. All
such statements, other than statements of historical fact, contained in this
Form 10QSB "Item 2 Management's Discussion at Analysis of Financial Condition
and Results of Operating" and "Item 7. subsequent Events" generally are
accompanied by words such as "anticipate," "believe," "intend," "estimate,"
"project" or "expect" or similar statements. Such statements are
"forward-looking statements" within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended, and are made pursuant to and in reliance on the safe harbor
provisions of such sections.
Although any forward-looking statements contained in this Form 10QSB or
otherwise expressed by or on behalf of the Company are, to the knowledge and in
the judgment of the officers and directors of the Company, reasonable and
expected to prove true, management is not able to predict the future with
certainty and no assurance can be given that such statements will prove true,
management is not able to predict the future with certainty and no assurance can
be given that such statements will prove correct. Forward-looking statements
involve known and unknown risks and uncertainties which may cause the Company's
actual performance and financial results in future periods to differ materially
from any projection, estimate or forecasted result. These risks and
uncertainties include, among other things: general economic and business
conditions; industry conditions and trends; volatility of prices; product supply
and demand; market competition; risks inherent in the Company's operations;
imprecision of reserve estimates; the Company's ability to replace and expand
its business; the Company's ability to generate sufficient cash flow from
operations to meet its current and future obligations; the Company's ability to
access and terms of external sources of debt and equity capital; such other
risks and uncertainties described from time to time in the Company's periodic
reports and filings with the Securities and Exchange Commission. These and other
risks are described elsewhere in this Form 10QSB and will be described from time
to time in the Company's future filings with the Securities and Exchange
Commission. Accordingly, shareholders and potential investors are cautioned that
certain events or circumstances could cause actual results to differ materially
from those projected, estimated or predicted. In addition. Forward-looking
statements are based on management's knowledge and judgment as of the date of
this Form 10QSB, and the Company does not intend to update any forward-looking
statements to reflect events occurring or circumstances existing hereafter.
<PAGE> 3
TABLE OF CONTENTS
Item 1.
Consolidated Balance Sheets (Unaudited) as of September 30, 2000 and as
of December 31, 1999
Consolidated Statement of Operations (Unaudited) for the three and nine
months ended September 30, 2000 and September 30, 1999
Consolidated Statement of Changes in Stockholders' Equity
(Deficiency)(Unaudited) for the nine months ended September 30, 2000
Consolidated Statements of Cash Flows (Unaudited) for the nine months
ended September 30, 2000 and September 30, 1999
Notes to Unaudited Consolidated Financial Statements for the nine
months ended September 30, 2000 and September 30, 1999
Item 2.
Management's Discussion and Analysis of Financial Condition and Results
of Operations
Part II. Other Information
<PAGE> 4
ITEM 1. FINANCIAL STATEMENTS
PAN WESTERN ENERGY CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
Sept. 30 December 31,
2000 1999
ASSETS (Unaudited) Audited
<S> <C> <C>
Current Assets:
Cash $ 12,454 $ 63,052
Restricted cash 230,999 137,584
Receivables
Trade net of allowance of $139,698 at 12/31/99
And $0 at 9/30/2000 -- 326,167
Due from stockholder -- 28,272
Prepaid expenses and other assets 15,000 106,595
Assets held for sale -- 237,214
------------ ------------
Total current assets 258,453 898,884
------------ ------------
Property and Equipment:
Oil and gas properties (successful efforts method) -- 8,200,792
Other property and equipment -- 113,592
------------ ------------
-- 8,314,384
Less accumulated depreciation and depletion -- 2,642,284
------------ ------------
Net property and equipment -- 5,672,100
------------ ------------
Other long term assets, net of accumulated amortization 10,000 --
------------ ------------
Total Assets $ 258,453 $ 6,570,984
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 69,149 $ 857,850
Undistributed oil and gas revenues -- 195,768
Due to affiliated partnerships -- 25,590
Due to stockholder 15,945
Accrued liabilities -- 128,234
Current portion of long term obligations -- 8,427,917
------------ ------------
Total current liabilities 69,149 9,651,304
Net profits overriding royalty -- 500,193
------------ ------------
Total liabilities 69,149 10,151,497
------------ ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY (DEFICIENCY):
Preferred stock ($.05 par value; authorized 25,000,000
shares, no shares issued or outstanding) -- --
Common stock ($.01 par value; authorized 25,000,000 shares
issued 4,703,123 shares at 12/31/1999 and 5,105,553 shares at 51,055 47,031
9/30/2000
Additional paid in capital 2,226,347 1,999,372
Accumulated deficit (1,869,116) (5,407,934)
Treasury stock (1,081,250 shares of common stock) (218,982) (218,982)
------------ ------------
Total stockholders' equity (deficiency) 189,304 (3,580,513)
------------ ------------
Total Liabilities and Stockholders' Equity (Deficiency) $ 258,453 $ 6,570,984
============ ============
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
<PAGE> 5
PAN WESTERN ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Sept. 30 Nine Months Ended Sept. 30
---------------------------- ----------------------------
2000 1999 2000 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Other Income (Expense)
Loss from rental operations, net $ (727) $ (4,019) $ (4,860) $ (15,204)
Gain on sale of assets, net 43,839 50,330
------------
Interest income 1,475
Interest expense (71,690) (219,260) (555,922) (613,233)
------------ ------------ ------------ ------------
Loss on Continued Operations $ (28,578) $ (223,279) $ (510,452) $ (626,962)
------------ ------------ ------------ ------------
Discontinued Operations:
Revenue:
Oil and gas sales $ 267,970 $ 424,056 $ 1,224,708 $ 963,582
Operating income 37,492 16,411 70,092 50,074
------------ ------------ ------------ ------------
$ 305,462 $ 440,467 $ 1,294,800 $ 1,013,656
Operating Expenses:
Lease operating $ 31,231 $ 152,798 $ 246,063 $ 461,267
Salaries and wages 63,909 94,127 195,026 301,527
Depreciation, depletion and amortization 91,585 169,357 545,694 485,456
General and administrative 200,853 99,568 374,653 325,957
------------ ------------ ------------ ------------
$ 387,578 $ 515,850 $ 1,361,436 $ 1,574,207
Gain on Forgiveness of Debt $ 4,115,906 -- $ 4,115,906 --
Income (Loss) on discontinued operations $ 4,033,790 $ (75,383) $ 4,049,270 $ (560,551)
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Net Income (Loss) $ 4,005,212 $ (298,662) $ 3,538,818 $ (1,187,513)
============ ============ ============ ============
Net Income (Loss) per share $ 1.03 $ (0.08) $ 0.95 $ (0.33)
============ ============ ============ ============
Weighted Average Common Shares 3,888,702 3,621,873 3,711,465 3,621,873
------------ ------------ ------------ ------------
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
<PAGE> 6
PAN WESTERN ENERGY CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
Additional Total
Common Stock Paid-in Accumulated Treasury Stockholders'
# of Share Par Value Capital Deficit Stock Equity (Deficiency)
-------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Balances, December 31, 1999 4,703,123 $ 47,031 $ 1,999,372 $ (5,407,934) $ (218,982) $ (3,580,513)
Issuance of Stock 402,430 4,024 226,975 230,999
Net Income 3,528,818 3,538,818
-------------- -------------- -------------- -------------- -------------- --------------
Balances, September 30, 2000 5,105,553 $ 51,055 $ 2,226,347 $ (1,869,116) $ (218,982) $ 58,531
============== ============== ============== ============== ============== ==============
</TABLE>
<PAGE> 7
PAN WESTERN ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Nine Months
Ended Sept. 30 Ended Sept. 30
2000 1999
--------------- ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $ 3,538,818 $ (1,187,513)
Adjustments to reconcile net income (loss) to net cash -- --
Used in operating activities -- --
Depreciation, depletion and amortization 545,694 485,456
Amortization of debt discount 283,230 72,887
Gain on disposal of assets, net (50,330) --
Gain on forgiveness of debt (4,115,906) --
Decrease in receivables 324,743 77,949
Increase in due from stockholder -- (4,011)
(Increase) decrease in prepaid expenses and other assets 87,048 (765)
(Increase) decrease in other long-term assets (10,000) 28,233
Increase (decrease) in accounts payable (698,587) 79,670
Increase in due to stockholder 50,633 --
Increase (decrease) in due to affiliated partnerships (13,590) 10,510
Decrease in accrued liabilities (119,434) (27,083)
Decrease in undistributed gas revenues (195,768) (58,406)
--------------- ---------------
Net cash used in operating activities $ (373,449) $ (522,713)
CASH FLOWS FROM INVESTING ACTIVITIES -- --
Capital expenditures -- $ (989,291)
Purchase of certificate of deposit -- (1,475)
Proceeds from the disposal of other property and equipment 281,500 --
--------------- ---------------
Proceeds provided by (used in) investing activities $ 281,500 $ (990,766)
CASH FLOWS FROM FINANCING ACTIVITIES: -- --
Proceeds from long-term debt $ 54,698 $ 1,655,014
Repayment of long-term debt (250,931) (227,596)
Decrease in restricted cash (93,415) 127,424
Proceeds from the sale of common stock 230,999
--------------- ---------------
Net cash provided by financing activities 41,351 1,554,842
NET INCREASE (DECREASE) IN CASH $ (50,598) $ 41,364
CASH, BEGINNING OF PERIOD $ 63,052 $ 5,863
CASH, END OF PERIOD $ 12,454 $ 47,227
=============== ===============
SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid $ 548,734 $ 535,962
=============== ===============
Income Taxes paid -- --
=============== ===============
</TABLE>
<PAGE> 8
PAN WESTERN ENERGY CORPORATION
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(1) Basis of Presentation. The consolidated financial statements included in
this report have been prepared by Pan Western Energy Corporation (the "Company")
pursuant to the rules and regulations of the Securities and Exchange Commission
for interim reporting and include all normal and recurring adjustments which
are, in the opinion of management, necessary for a fair presentation. These
financial statements have not been audited by an independent accountant.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with accounting principles generally
accepted in the United States of America have been condensed or omitted pursuant
to such rules and regulations for interim reporting. The Company believes that
the disclosures are adequate to make the information presented not misleading.
However, these financial statements should be read in conjunction with the
Company's audited financial statements and notes thereto for the years ended
December 31, 1999 and 1998. The financial data for the interim periods presented
may not necessarily reflect the results to be anticipated for the complete year.
(2) Business Developments. During the nine months ended September 30, 2000, the
Company generated net income of $3,538,818 however, the Company incurred a net
loss of $577,088 before the inclusion of income generated by the settlement of
the Company's debts as described below. At September 30, 2000, the Company had a
working capital of $189,304, and stockholders' equity of $189,304 after taking
into account all of the transactions described below. During the years ended
December 31, 1999 and 1998, the Company incurred net losses $1,550,838 and
$2,317,394, respectively, and in 1999 and 1998 had operating cash flow
deficiencies of $629,369 and $89,642, respectively. At December 31, 1999 and
1998, the Company had working capital deficits of $8,752,420 and $760,976,
respectively and stockholders' deficiency of $3,580,513 and $2,029,675,
respectively.
During the fourth quarter of 1999, the Company retained Albrecth &
Associates, Inc. to dispose of the Company's oil and gas properties. No offer to
purchase the properties was received prior to December 31, 1999 that was
sufficient to pay the Company's secured and unsecured creditors and efforts to
sell the properties were discontinued.
Operating results have negatively impacted the Company's liquidity to
the extent capital resources for development of existing properties were
unavailable and resulted in the Company's inability to make scheduled debt
payments. As a result on June 14, 2000, the Company entered into a series of
agreements for the settlement of debt. The Company initially executed an
agreement with its major lender, Triassic Energy Partners, L.P. ("Triassic"),
transferring substantially all of the Company's oil and gas properties to
Devonian Energy Partners, L.P. (Devonian") in lieu of a foreclosure proceeding.
The oil and gas properties transferred to Devonian served as collateral for the
repayment of approximately $8.9 million (including amounts advanced to pay
unsecured creditors as discussed below) of non-recourse secured debt owed to
Triassic by the Company. This debt was assumed by Devonian and the Company was
released from its debt obligation to Triassic. The Company realized a gain of
approximately 3.95 million on forgiveness of the Triassic debt. Further, as part
of the transaction, Triassic agreed to advance up to $590,000 to the Company
under the existing credit facility to pay unsecured creditors. In addition,
Cambrian Capital Partners, L.P. ("Cambrian") agreed to purchase from the Company
the greater of 402,430 shares or 10% of the Company's outstanding common stock
for $10,000. However, if the Company settled all outstanding unsecured
liabilities by August 31, 2000, and completed a merger with another corporation
before December 31, 2000, Cambrian will pay the Company additional consideration
for this stock equal to the lesser of $240,000 or the $590,000 made available by
Triassic under the credit facility less the payments made to the unsecured
creditors. The effective date of all of the transactions described above was
July 31, 2000. As of September 30, 2000, the Company had settled all of the
outstanding unsecured liabilities and had issued 402,430 shares of the Company's
common stock to an escrow account for the benefit of Cambrian in exchange for
$10,000 which was received by the Company as called for in the agreement. The
Company had also received $220,998.68 in additional consideration from Cambrian.
This cash was restricted and could only be kept by the Company if a merger with
IntelliReady, Inc. was completed. On October 4, 2000, the merger transaction
with IntelliReady, Inc. as described below, was completed.
In July 2000, IntelliReady, Inc. and the Company initiated discussions
concerning a possible merger of the Company and IntelliReady, Inc. IntelliReady,
Inc. is a structured wiring company that provides home and commercial automation
services to its clients. Pursuant to the proposed terms of the merger which
include, among other provisions, that the Company owns certain assets at the
closing date, IntelliReady, Inc. will merge into a newly created, wholly owned
subsidiary of the Company. As a result of the transaction, IntelliReady, Inc.
stockholders acquired approximately 96% of the Company's outstanding common
stock. The Company's board of directors approved the merger on August 29, 2000.
Although this transaction was scheduled to close by August 31, 2000 and that
date was not formally extended, the transaction was completed on October 4,
2000. As a part of that transaction, the Company's President agreed to forgive
certain debts that were owed to him and entities owned by him.
On May 15, 2000, the Company entered into a contract to sell the office
building owned by the Company and used as its corporate headquarters. The
contract for the building stipulates a sales price of $275,000 less a 6%
commission to be paid to the real estate agent handling the sale. The first
mortgage holder filed foreclosure action due to non-payment of principal and
interest when due. The closing on the sale of the building took place on
September 17, 2000. The Company realized no proceeds from the sale after
<PAGE> 9
repayment of the first and second mortgages, aggregating approximately $240,000,
and the expenses of the sale. At December 31, 1999, the net carrying value of
the office building is presented as an asset held for sale in the accompanying
balance sheet.
The Company's common stock was delisted from the Over-the Counter
Bulletin Board ("OTC:BB") on May 15, 2000 because of the Company's failure to
comply with certain OTC:BB and Securities and Exchange Commission reporting
requirements. The Company has since complied with those reporting requirements
and is in the process of taking the steps necessary to relist its common stock
on the OTC:BB.
(3) Loss per common share. Net loss per common share for the periods presented
has been computed based upon the weighted average number of shares outstanding
of 3,711,465 and 3,621,873 for the nine months ended September 30, 2000 and
1999, respectively and 3,888,702 and 3,621,873 for the three months ended
September 30, 2000 and 1999, respectively.
Outstanding stock options and warrants have not been included in the
calculation for the three and nine month periods ended September 30, 2000 and
September 30, 1999 since their effect on net income (loss) per share is
antidilutive.
(4) Commitments and Contingencies. The Company is involved in litigation
primarily related to claims by unsecured creditors and a foreclosure action
filed by the first mortgage holder on the Company's office building. The
proceeds the Company received from the September 7, 2000 sale of its office
building were adequate to repay the outstanding mortgages on that facility.
Further, management believes that the one remaining suit filed by unsecured
creditors will be settled for amounts which, when aggregated with payments made
to the remaining unsecured creditors will not exceed the $590,000 advance
available under the Triassic credit facility.
The Company has executed employment agreements with certain executive
officers, which expire on the later of specified dates in the year 2000 or the
date to which the agreement has been extended; or, in the case of the Company's
president, as long as the president guarantees the Company's debt. Under the
terms of these agreements, the executives will receive annual salaries
aggregating $202,000. In addition, the Company's president will receive
incentive compensation equal to 10% of the Company's annual pre-tax income in
excess of $150,000. The other executive officers will share in a bonus pool
equal to 10% of the Company's net income in excess of $100,000. In the event of
the executives' termination without cause, as defined in the agreements, the
company must pay them these amounts for the remaining term of the agreements.
The Company's president agreed to terminate his employment contract and forfeit
his options as a condition of the merger agreement with IntelliReady, Inc. As a
result the president's employment agreement was not listed on the schedule of
contracts accompanying the merger agreement.
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
PURCHASE OF OIL AND GAS PROPERTIES.
The Company did not make any acquisitions of oil and gas properties
during the quarter or nine months ended September 30, 2000.
RESULTS OF OPERATIONS.
The Company follows the "successful efforts" method of accounting for
its oil and gas properties whereby costs of productive wells and productive
leases are capitalized and depleted on a unit-of-production basis over the life
of the remaining proved reserves. Depletion of capitalized costs is provided on
a well by well basis. Exploratory drilling costs, including the cost of
stratigraphic test wells, are initially capitalized, but charged to expense if
and when the well is determined to be unsuccessful.
The factors which most significantly affect the Company's results of
operations are (i) the sale prices of crude oil and natural gas, (ii) the level
of oil and gas sales, (iii) the level of lease operating expenses, (iv) the
level of exploratory activities, and (v) the level of interest rates on
borrowings. Total sales volumes and the level of borrowings are significantly
impacted by the degree of success the Company experiences in its efforts to
acquire oil and gas properties and its ability to maintain or increase
production from existing oil and gas properties through development and
enhancement activities. The following table reflects the average prices received
and the amounts produced by the Company for the periods presented.
As discussed in Note 2 to The Unaudited Consolidated Financial
Statements for the Nine Months Ended September 30, 2000 the agreement whereby
the Company transferred all of it's oil and gas properties to Devonian Energy
Partners, L.P. in lieu of a foreclosure proceeding was effective July 31, 2000.
The information presented for the three and nine months ended September 30, 2000
only includes oil and gas activity until July 31, 2000 and is therefore not
entirely comparable to the information presented for the three and nine months
ended September 30, 1999.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
2000 1999 2000 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Average price:
Oil (per Bbl) $ 29.25 $ 18.10 $ 26.36 $ 14.04
Gas (per Med) $ 2.25 $ 1.83 $ 2.32 $ 1.58
Production:
Oil (Bbl) 1,938 8,966 15,222 32,396
Gas (Mef) 93,437 43,210 354,825 357,489
</TABLE>
THREE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 1999.
During the quarter ended September 30, 2000, the Company completed
several of the transactions described in Note 2 to The Unaudited Consolidated
Financial Statements for the Nine Months Ended September 30, 2000.
The Company reached settlements with all but one of its unsecured
creditors and received approximately $220,999, the remaining balance from the
agreed upon $590,000 advance from Triassic. This amount was recorded as
additional consideration for the 402,430 shares of the Company's common stock
purchased by Cambrian for $10,000. Also, on July 31, 2000, the Company
transferred all of its' oil and gas properties to Devonian Partners, L.P. in
exchange for the extinguishments of the debt owed to Triassic.
As a result of the above transactions the Company recorded income from
the forgiveness of debt in the approximate amount of $4,115,906.
In addition, the Company closed the sale of the office building owned
by the Company. The Company received no proceeds after payment of the first and
second mortgages, aggregating approximately $240,000 and after paying the costs
of the sale, however, the Company did recognize a gain on the sale of
approximately $43,870.
The net loss of the Company decreased by $4,303,874 from a loss of
$298,662 experienced for the third quarter ended September 30, 1999 to a profit
of $4,005,212 for the third quarter ended September 30, 2000. The change from a
loss to a profit was primarily attributable to the income generated from the
settlement of the Company's debts which amounted to $4,115,906, and the
<PAGE> 11
income generated from the sale of the office building owned by the Company which
amounted to $43,830. Both of these transactions are discussed in Note 2 to The
Unaudited Consolidated Financial Statements for the Nine Months Ended September
30, 2000. Oil and gas revenues, lease operating expense, depreciation, depletion
and amortization expense, and interest expense were all substantially reduced as
the Company transferred all of its oil and gas assets to Devonian Energy
Partners, L.P. on July 31, 2000. These reductions were coupled with an increase
of $21,081, an increase of $51,565 in general and administrative expenses and a
decrease of $28,052 in salaries and wages expense.
Oil and gas sales were $267,970 for the third quarter of 2000 as
compared to $424,056 for the third quarter of 1999. The amount for the three
months ended September 30, 2000 only includes one month of production revenue as
the transfer of all of the Company's oil and gas assets was effective July, 31,
2000. Oil production for the third quarter of 2000, which includes only one
month of production as explained above, was 1,938 barrels as compared to 6,503
barrels for the entire third quarter of 1999 while the average price received by
the Company for its oil production increased from $18.10 during the third
quarter of 1999 to $29.25 during the month of July, 2000. Gas production for the
third quarter of 2000, which includes only one month of production, was 93,437
Mcf as compared to 143,210 Mcf for the entire third quarter of 1999. The average
price for gas received by the Company during the month of July, 2000 was $2.25
as compared to $1.83 received during the three months ended September 30, 1999.
If a comparison was made only for the month of July, 1999 and 2000 oil and gas
sales were $140,282 and $267,970, respectively, oil production was 3,441 barrels
and 1938 barrels, respectively, gas production was 47,176 Mcf and 93,437 Mcf,
respectively, oil prices per barrel were $16.45 and $29.95, respectively and gas
prices per Mcf were $1.77 and $2.25, respectively. The gas production for July,
2000 includes a prior period adjustment of 56,126 Mcf and the oil and gas
revenue for the month of July, 2000 includes a prior period adjustment of
$110,343.
Operating income increased by $21,081 during the three months ended
September 30, 2000 to $37,492 as compared to $16,411 experienced during the
three months ended September 30, 1999. This increase is primarily attributable
to the income derived from writing off $31,803 of other accounts payable on
which there had been no collection efforts for several years.
Due to the fact that the Company transferred all of its' oil and gas
properties to Devonian on July 31, 2000, lease operating expenses, including
production taxes, for the three months ended September 30, 2000 decreased
$121,567 to $31,231 from $152,798 experienced during the quarter ended September
30, 1999. Production taxes decreased $9,401 from $28,695 experienced during the
quarter ended September 30, 1999 to $19,294 experienced during the quarter ended
June 30, 2000 due to the transfer of the Company's oil and gas properties which
took place on July 31, 2000. Other lease operating expense decreased by $112,166
from $124,103 during the third quarter ended September 30, 1999 to $11,937
experienced during the third quarter ended September 30, 2000. This decrease is
primarily attributable to the transaction where the Company transferred all of
its' oil and gas assets to Devonian on July 31, 2000.
Depreciation, depletion and amortization declined to $91,585 for the
three month period ended September 30, 2000 as compared to $169,357 during the
three month period ended September 30, 1999. This decrease is attributable
solely to the transaction whereby the Company transferred all of its oil and gas
assets to Devonian on July 31, 2000.
Salaries and wages expense decreased by $30,218 from $94,127 during the
third quarter ended September 30, 1999 to $63,909 during the quarter ended
September 30, 2000. The decrease is attributable to having three fewer employees
during the quarter ended September 30, 2000
General and administrative expenses increased by $101,285 from $99,568
during the quarter ended September 30, 1999 to $200,853 during the quarter ended
September 30, 2000. The increase in these expenses is primarily attributable to
expenses related to the transactions detailed in Note 2 to the Unaudited
Consolidated Financial Statements for the Nine Months Ended September 30, 2000.
Expenses in this category which experienced significant decreases included meals
and entertainment expense which declined by $5,780, and telephone and
communications expense which decreased by $1,765, and transportation expense
which decreased by $4,067. Expenses in this category which experienced increases
as compared to the third quarter of 1999 include accounting and audit which
increased by $40,370, property tax penalties which increased by $21,758, legal
expense which increased by $30,417, professional services expense which
increased by $12,918 and travel expense which increased by $3,897.
Other income (expense) increased from an expense of $223,279
experienced during the quarter ended September 30, 1999 to expenses of $28,578
during the quarter ended September 30, 2000. Major changes in items included in
other income and expense were as follows. Interest expense for the quarter ended
September 30, 2000 amounted to $71,690 as compared to $219,260 for the quarter
ended September 30, 1999. The decreased interest expense is a result of the
transaction which was effective July 31, 2000 whereby the Company transferred
all of its' oil and gas properties to Devonian Energy Partners L.P. The Company
realized a gain of $43,830 on the sale of the office building which it owned
during the quarter ended September 30, 2000. The Company had no asset sales
during the three months ended September 30, 1999.
<PAGE> 12
NINE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1999.
As discussed above, during the quarter ended September 30, 2000, the
Company completed several of the transactions described in Note 2 to The
Unaudited Consolidated Financial Statements for the Nine Months Ended September
30, 2000.
The Company reached settlements with its' unsecured creditors and
received approximately $220,999, the remaining balance from the agreed upon
$590,000 advance, from Triassic. This amount was recorded as additional
consideration for the 402,430 shares of the Company's common stock purchased by
Cambrian for $10,000. Also, on July 31, 2000, the Company transferred all of
its' oil and gas properties to Devonian Partners, L.P. in exchange for the
extinguishments of the debt owed to Triassic.
As a result of the above transactions the Company recorded income from
the settlement of debt in the approximate amount of $4,115,906.
In addition, the Company closed the sale of the office building owned
by the Company. The Company received no proceeds after repayment of the first
and second mortgages, aggregating approximately $240,000 and payment of the
costs of the sale however, the Company did recognize a gain on the sale of
approximately $43,870.
The net loss of the Company decreased by $4,726,331 from a loss of
$1,187,513 experienced for the nine months ended September 30, 1999 to a profit
of $3,538,818 for the nine months ended September 30, 2000. The decreased loss
experienced is due entirely to the income recognized from the settlement of the
Company's debts and the sale of the office building owned by the Company as
described above.
Oil and gas sales were $1,224,708 for the nine months ended
September 30, 2000 as compared to $963,582 for the first nine months of 1999.
The amount for the nine months ended September 30, 2000 includes only seven
months of production revenue as the transfer of all of the Company's oil and gas
properties to Devonian was effective July 31, 2000. The increase in revenues was
attributable to substantially higher prices for both oil and gas production. Oil
production for the first nine months of 2000, which includes only seven months
of production, as explained above, was 15,222 barrels as compared to 32,396
barrels for the entire nine months ended September 30, 1999. The average price
received by the Company for its oil production increased from $14.04 during the
nine months ended September 30, 1999 to $26.36 during the seven months in which
the Company held the properties during the nine months ended September 30, 2000.
Gas production for the nine months ended September 30, 2000, which also includes
only seven months of production, was 354,825 Mcf as compared to 357,489 Mcf for
the entire nine months ended September 30, 1999 while the average price for this
production increased to $2.32 during the nine months ended September 30, 2000
from $1.58 received during the nine months ended September 30, 1999. If a
comparison was made for only the first seven months of 1999 and 2000, oil and
gas sales were $735,588 and $1,224,708, respectively, oil production was 26,871
barrels and 15,222 barrels, respectively, gas production was 261,455 Mcf and
354,825 Mcf, respectively, oil prices per barrel were $12.99 and $26.36,
respectively and gas prices per Mcf were $1.48 and $2.32 respectively. The gas
production for the nine months ended September 30, 2000 includes a prior period
adjustment of 56,126 Mcf and the oil and gas revenue includes an adjustment of
$110,343.
Operating income increased by $20,018 during the nine months ended
September 30, 2000 to $70,092 as compared to $50,074 during the nine months
ended September 30, 1999. This income is primarily attributable to the income
derived from the write off of other accounts payable on which there had been no
collection action for several years.
Because the Company transferred all of its oil and gas properties to
Devonian effective July 31, 2000, lease operating expenses, including production
taxes, for the nine months ended September 30, 2000 decreased $215,204 to
$246,063 from $461,267 experienced during the none months ended September 30,
1999. Production taxes increased by $24,304 from $61,168 experienced during the
nine months ended September 30, 1999 to $85,472 experienced during the nine
months ended September 30, 2000. Other lease operating expense decreased by
$239,508 from $400,099 during the nine months ended September 30, 1999 to
$160,591 experienced during the nine months ended September 30, 2000. This
decrease is primarily attributable to the transaction where the Company
transferred all of its oil and gas properties to Devonian on July 31, 2000.
Depreciation, depletion and amortization increased to $545,694 for the
nine-month period ended September 30, 2000 as compared to $485,456 during the
nine-month period ended September 30, 1999 even though the nine months ended
September 30, 2000 only includes depreciation on the oil and gas properties for
seven months. This increase is primarily due to depletion expense being
calculated on an increased depletion rate as compared to the depletion rate
utilized during 1999.
Salaries and wages expense decreased by $106,501 from $301,527 during
the nine months ended September 30, 1999 to $195,026 during the nine months
ended September 30, 2000. The decrease is attributable to having three less
employees during the nine months ended September 30, 2000.
General and administrative expenses increased by $48,696 from $325,957
during the nine months ended September 30, 1999 to $374,653 during the nine
months ended September 30, 2000. The increase in these expenses is primarily
attributable to expenses related to the transactions detailed in Note 2 to The
Unaudited Consolidated Financial Statements for the Nine Months Ended September
30, 2000. Expenses which experienced increases during the nine months ended
September 30, 2000 as compared to the
<PAGE> 13
nine months ended September 30, 1999 include accounting and audit expense which
increased by $18,123, legal fees which increased by $77,548, professional
services which increased by $12,355, ad valorem taxes which increased by $5,292
and property tax penalties which increased by $21,758. Expenses which
experienced significant decreases during the nine months ended September 1999 as
compared to the nine months ended September 30, 2000 were expenses which were
impacted by the reduction of three employees which took place in October, 1999.
These include dues and subscriptions which declined $1,806, insurance expense,
including health expense which declined $3,003, postage expense which declined
$2,183, printing and copying expense which declined $5,295 communications
expense which declined $17,266, transportation expense which declined $6,814,
and travel expense which declined $20,547.
Other income (expense) increased from an expense of $626,962
experienced during the nine months ended September 30, 1999 to income of
$3,474,681 during the nine months ended September 30, 2000. The Company
experienced a reduced loss from rental operations as the Company was able to
rent a floor of the office building that it owned during the nine months ended
September 30, 2000. This space was vacant for most of the caparable period of
1999. Interest expense for the nine months ended September 30, 2000 amounted to
$613,233 as compared to $555,922 for the nine months ended September 30, 2000.
This decrease is a result of the transaction whereby the Company transferred all
of its oil and gas properties to Devonian Energy Partners L.P. which was
effective July 31, 2000. The Company realized a gain on the sale of the office
building it owned in the amount of $43,830 and a gain on the sale of some pipe
in the amount of $6,500 for the nine months ended September 30, 2000. The
Company had no gain or loss on the sale of assets during the nine months ended
September 30, 1999. In addition, the Company realized income from the settlement
of its unsecured and secured debt in the amount of $4,115,906 during the nine
months ended September 30, 2000.
CAPITAL RESOURCES AND LIQUIDITY.
The Company's capital requirements related primarily to the development
of oil and gas properties. In general, because the Company's oil and gas
reserves are depleted by production, the success of its business strategy was
dependent upon a continuous acquisition and exploration and development program
that was significantly impaired as a result of the Company's inability to secure
capital needed for acquisitions and development. As of September 30, 2000, the
Company had a working capital deficit of $184,944 as compared to a working
capital deficit of $8,752,420 as of December 31, 1999. During the nine-month
period ended September 30, 2000 the Company experienced a decrease in cash of
$50,598. The Company had no total long and short-term debt, including the net
profits overriding royalty, as of September 30, 2000 due the transactions which
took place during the third quarter ended September 30, 2000 as compared to
$8,398,763 as of September 30, 1999 and $8,928,110 as of December 31, 1999. See
Note 2 to The Unaudited Consolidated Financial Statements for the Nine Months
Ended September 30, 2000.
PART II. OTHER INFORMATION.
Item I. Legal Proceedings.
During 1999, the Company was a party to various legal proceedings
including claims resulting from non-payment of unsecured creditors. In spite of
cost cutting measures including personnel and salary reductions, the Company was
unable to consistently pay a portion of its operating expenses which was the
direct result of record low oil and natural gas prices during all or portions of
calendar years 1997, 1998 and 1999. At this time, the Company has or is in the
process of settling legal proceedings resulting from non-payment of unsecured
creditors claims (also see Note 2 to The Unaudited Consolidated Financial
Statements for the Nine Months Ended September 30, 2000). To management's
knowledge, no further legal proceedings from unsecured creditors are
contemplated. In addition, the Company was a party to a foreclosure action on
the real estate it owned and occupied as its corporate headquarters. A contract
for the sale of the building was entered into with an unrelated third party and
the closing took place on September 7, 2000. The Company realized no proceeds
from the sale after repayment of the first and second mortgages and the expenses
of the sale.
No director, officer or affiliate of the Company, no owner of record or
beneficial owner of more than five percent of the securities of the Company, or
any associate of any such director, officer or security holder, nor stockholders
of IntelliReady is a party adverse to the Company or has a material interest
adverse to the Company in reference to the various legal proceedings.
ITEM 2. Changes In Securities
The Company's common stock was delisted from the Over-the Counter:
Bulletin Board ("OTC:BB") on May 15, 2000 because of the Company's failure to
comply with Rule 15c2-11. The Company is in the process of taking the steps
necessary to get its common stock listed again on OTC:BB.
Item 3. Defaults Upon Senior Securities.
Not applicable.
<PAGE> 14
Item 4. Submission of Matters to a Vote of Security Holders.
No matter was submitted during the second quarter ended June 30, 2000
to a vote of the security holders.
Item 5. IntelliReady, Inc.
Transaction. In July of 2000, IntelliReady, Inc. approached the Company
concerning a possible merger of the Company and IntelliReady, Inc. IntelliReady,
Inc. is a structured wiring company that provides home and commercial automation
services to its clients. IntelliReady, Inc. currently operates in the Denver
Metropolitan Area but expects to expand its operation into an additional
metropolitan market by the end of calendar year 2000. IntelliReady, Inc. has
recently raised $2,130,324 in equity through a Regulation D, Rule 506 offering
pursuant to the Securities Act of 1933. IntelliReady, Inc. intends to use the
proceeds of the offering to rapidly expand its operations to include providing
bundled digital services and to open offices in several additional cities.
Pursuant to the proposed terms of the merger, which include, among other
provisions, that the Company owns certain assets at the closing date,
IntelliReady, Inc. will merge into a newly created, wholly owned subsidiary of
the Company in exchange for approximately 95% of the Company's common stock. The
Company's board of directors approved the merger on August 29, 2000. Although
this transaction was scheduled to close by August 31, 2000 and that date was not
formally extended, the Company and IntelliReady, Inc. are continuing to effect a
merger of the two companies. This transaction was completed on October 4, 2000.
The following table sets forth the summary proforma financial statements of the
companies as of December 31, 1999 and September 30, 2000 as if the operations of
the two companies had been combined at those times.
<TABLE>
<CAPTION>
PROFORMA AT PROFORMA
9/30/00 12/31/99
CURRENT ASSETS:
------------- -------------
<S> <C> <C>
Current Assets 852,531 954,422
OTHER ASSETS
------------- -------------
Other Assets 290,114 5,706,543
------------- -------------
TOTAL ASSETS Total Assets 1,142,652 6,660,965
============= =============
CURRENT LIABILITIES:
------------- -------------
Current Liabilities 243,070 10,249,355
OTHER LIABILITIES
------------- -------------
Other Liabilities 596,618 511,077
Total Liabilities 839,688 10,760,432
STOCKHOLDER'S EQUITY (DEFICIT):
------------- -------------
Stockholder's Equity (deficit) 302,964 (4,099,467)
------------- -------------
Liabilities and Stockholder's Equity 1,142,652 6,660,965
============= =============
DIFFERENCE ASSETS-LIABILITIES-EQUITY
Revenues $ 1,665,934 $ 1,973,414
Cost of Sales 2,117,190 2,485,665
------------- -------------
Operating Income (Loss) (451,256) (512-251)
Interest 580,579 946,254
Other income (Loss) (63,819) 34,438
Gain on Forgiveness of Debt 4,115,906
Taxes
------------- -------------
NET LOSS $ 3,147,890 $ (1,492,943)
============= ============
</TABLE>
<PAGE> 15
Non-renewal of Amoco License. Because of the Company's inability to generate
sufficient cash flows to sustain its operations at pre-1999 levels, the Company
elected not to renew its licensing arrangement with Amoco. This decision was
made in part based on the Company's inability to secure the capital necessary to
implement the technology covered by the licensing agreement.
Item 6 Exhibits and Reports on Form 8-K
(a) Exhibits
27 Financial Data Schedule
(b) Reports on Form 8-K
<PAGE> 16
Signatures
In accordance with the requirements of the Securities Exchange Act of
1934, the registrant has duty caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
PAN WESTERN ENERGY CORPORATION
(Registrant)
Date: November 20, 2000 /s/ THOMAS J. WIENS
-----------------------------
Thomas J. Wiens
Chairman
(Principal Executive Officer)
<PAGE> 17
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
27 Financial Data Schedule
</TABLE>
