QUARTERLY REPORT FOR SMALL BUSINESS ISSUERS SUBJECT
TO THE 1934 ACT REPORTING REQUIREMENTS
FORM 10-QSB/A
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
/x/ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 2000
/ / TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from _________ to _________
0-24493
-------
Commission File No.
CAMBRIDGE ENERGY CORPORATION
----------------------------
(Exact name of registrant as specified in its charter)
Nevada 59-3380009
------ ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
215. South Riverside Drive, Suite 12, Cocoa, Florida 32922
----------------------------------------------------------
(Address of principal executive offices)
Registrant's telephone number, including area code: (321) 636-6165
Check whether the issuer (1) has 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 _____
The Registrant has 12,289,755 shares of common stock, par value $0.0001 per
share issued and outstanding as of June 30, 2000.
Traditional Small Business Disclosure Format
Yes [ x ] No [ ]
<PAGE>
Cambridge Energy Corporation
and Subsidiaries
Table of Contents
PART I - FINANCIAL INFORMATION
Page No.
Item 1. Cambridge Energy Corporation Financial Statements 2 - 14
(Unaudited)
Balance Sheet as of June 30, 2000
Statement of Operations for the three
months ended June 30, 2000 and 1999
Statement of Cash Flows for the three
months ended June 30, 2000 and 1999
Notes to Financial Statements
Item 2. Management's Discussion and Analysis 15 - 17
PART II - OTHER INFORMATION 17
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 None
SIGNATURE PAGE 18
1
<PAGE>
PART 1 - FINANCIAL INFORMATION:
TURNER, STONE & COMPANY
12700 Park Central Drive
Suite 1610
Dallas, Texas 75251
Independent Accountant's Report
Board of Directors and Stockholders
Cambridge Energy Corporation
and subsidiaries
Cocoa, Florida
We have reviewed the accompanying consolidated balance sheet of Cambridge Energy
Corporation and subsidiaries as of June 30, 2000 and the related statement of
operations stockholders' equity and cash flows for the three months then ended.
These consolidated financial statements are the responsibility of the Company's
management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying June 30, 2000 consolidated financial statements for
them to be in conformity with generally accepted accounting principles.
/s/ Ed Turner
----------------------------
Certified Public Accountants
September 8, 2000
2
<PAGE>
<TABLE>
<CAPTION>
CAMBRIDGE ENERGY CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 2000
<S> <C>
2000
----
ASSETS
------
Current assets:
Cash $ 36,097
Accounts receivable, trade 1,133,606
Inventory, material and supplies 216,617
Prepaid expenses 990,744
--------------
Total current assets 2,377,064
--------------
Property and Equipment, net of $136,170
of accumulated depreciation 1,040,601
--------------
Oil and gas properties (successful efforts method):
Oil interests, proved properties, net of $44,841
of accumulated depletion 4,435,821
Support equipment, at cost, net of $24,828
of accumulated depreciation 8,427
--------------
4,444,248
--------------
$ 7,861,913
==============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Accounts payable, trade $ 1,754,092
Advances for drilling contracts 2,613,825
Funds held for future distribution 175,194
Taxes payable 69,788
Accrued expenses 364,327
Loans from shareholders 336,350
--------------
Total current liabilities 5,313,576
--------------
Long-term liabilities
Property Mortgage 234,867
Notes payable 948,000
--------------
Total long-term liabilities 1,182,867
--------------
Stockholders' equity (deficit):
Preferred stock, $.0001 par value, 25,000,000 shares
authorized, 159,500 shares issued and outstanding
of various series of convertible redeemable,
$470,461 aggregate liguidation value 16
Common stock, $ .0001 par value, 50,000,000
shares authorized, 12,289,755 shares issued
and outstanding 1,229
Paid in capital in excess of par 4,240,829
Accumulated deficit ( 2,840,771)
Treasury stock, at cost, 89,582 shares ( 35,833)
---------------
1,365,470
---------------
$ 7,861,913
===============
The accompanying notes are an integral part of the financial statements.
3
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CAMBRIDGE ENERGY CORPORATION
AND SUBSIDIAIRES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
FOR THE THREE MONTHS ENDED
JUNE 30, 2000 and 1999
<S> <C>
2000 1999
---- ----
Revenues:
Oil and gas sales, net of royalties $ 596,961 $ 266,752
Lease operating and other income - 8,449
Other income 113 4,106
-------------- --------------
597,074 279,307
-------------- --------------
Operating expenses:
Production costs 193,752 186,048
Exploration costs - 39,113
Marketing expense - -
General and administrative 335,833 121,062
Depletion 7,356 3,441
Depreciation 23,690 8,057
-------------- --------------
560,631 357,721
-------------- --------------
Interest expense - 12,156
-------------- --------------
Net income (loss) $ 36,443 $( 90,570)
============== ==============
Net gain (loss) per share $ .003 $( .01)
============== ==============
Gain (loss) per share from operations $ .003 $( .01)
============== ==============
The accompanying notes are an integral part of the financial statements.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
CAMBRIDGE ENERGY CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FROM INCEPTION THROUGH JUNE 30, 2000
Accumulated Other
Preferred Stock Common Stock Add'l Paid Accumulated Comprehensive Treasury Stock
Shares Amount Shares Amount In Capital Deficit Loss Amount Total
------- ------ ---------- ------- ---------- --------- ------------- -------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at March 31,1997 - - 1,200,000 $ 120 $ 114,875 $( 9,529) $ - $ - $ 105,466
Issuance of common stock
to repay stockholder
advances - - 5,184,786 $ 518 $ 25,406 $ 25,924
Issuance of common stock
for cash,net of $47,858
of offering costs - - 1,941,000 $ 194 $ 728,773 $ 728,967
Issuance of common stock
for services - - 15,000 $ 2 $ 17,498 $ 17,500
Unrealized loss in
marketable securities ( 40,500) $( 40,500)
Net loss (976,031) (976,031)
-------- ------- --------- ------- ---------- ---------- ---------- ------------ -----------
Balance at March 31,1998 - $ - 8,340,746 $ 834 $ 886,552 $(985,560) $( 40,500) $ - $(138,674)
Issuance of preferred
stock for cash 134,000 $ 13 334,987 335,000
Issuance of common stock
for cash 406,223 41 314,959 315,000
Issuance of common stock
for services 252,000 25 214,525 214,550
Issuance of common stock
for purchase of
subsidiaries 2,635,768 264 2,126,937 2,127,201
Reacquired shares held
in treasury ( 23,341) ( 23,341)
Unrealized loss in
marketable securities ( 5,775) ( 5,775)
Dividends on preferred
stock ( 5,452) ( 5,452)
Net loss (1,264,547) ( 1,264,547)
-------- ------- --------- ------- ---------- ------------ ---------- ------------ -----------
Balance at March 31,1999 134,000 $ 13 11,634,827 $ 1,164 $3,877,960 $(2,255,559) $( 46,275) $( 23,341) $ 1,553,962
Issuance of preferred
stock for cash 35,500 $ 4 116,559 116,563
Repurchase of preferred
stock for cash (10,000) ( 1) (24,999) ( 25,000)
Issuance of common stock
for cash 156,000 15 85,953 85,968
Reacquired shares held
in treasury ( 12,492) ( 12,492)
Reclassification adjustment
for unrealized appreciation ( 46,275) 46,275 -
Dividends on preferred
stock ( 32,622) (32,622)
Net loss (533,306) (533,306)
-------- ------- --------- ------- ---------- ------------ ---------- ------------ -----------
Balance at March 31,2000 159,500 $ 16 11,790,827 $ 1,179 $4,055,473 $(2,867,762) $ - $( 35,833) $ 1,153,073
Issuance of common stock
for services 498,928 50 185,356 185,406
Dividends on preferred
stock ( 9,452) ( 9,452)
Net loss ( 36,443) (36,443)
-------- ------- --------- ------- ---------- ------------ ---------- ------------ -----------
Balance at June 30, 2000 159,500 $ 16 12,289,755 $ 1,229 $4,240,829 $(2,840,771) $ - $( 35,833) $ 1,365,470
The accompanying notes are an integral part of the financial statements.
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
CAMBRIDGE ENERGY CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED
JUNE 30, 2000 AND 1999
2000 1999
---- ----
<S> <C> <C>
Cash flows from operating activities:
Oil and gas sales received $ 394,145 $ 274,776
Interest received - 286
Cash paid to employees ( 32,179) -
Cash paid to suppliers (393,534) (541,317)
Interest paid ( 36,443) ( 12,157)
Income taxes paid - -
---------------- ---------------
Net cash used in operating activities ( 68,011) (278,412)
Cash flows from investing activities:
Purchase of property and equipment ( 2,275)
---------------- ---------------
Net cash used in investing activities ( 2,275)
Cash flows from financing activities:
Repayment of shareholders advances (464,181) -
Sale of stock, Preferred - 50,000
Payment of Notes Payable - ( 5,718)
Shareholders loan - 21,000
Treasury stock purchase - ( 12,492)
Proceeds of note payable 445,000 275,000
---------------- ---------------
Net cash provided by financing activities ( 19,181) 327,790
---------------- ---------------
Net change in cash ( 87,192) 47,101
---------------- ---------------
Cash at beginning of period 123,289 33,211
---------------- ---------------
Cash at end of period $ 36,097 $ 80,312
================ ===============
The accompanying notes are an integral part of the financial statements.
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
CAMBRIDGE ENERGY CORPORATION
AND SUBSIDIARES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED
JUNE 30, 2000 AND 1999
Reconciliation of Net Loss to Net Cash
Used in Operating Activities
<S> <C> <C>
2000 1999
---- ----
Net income (loss) $ 36,443 $ ( 90,570)
---------------- ----------------
Adjustment to reconcile net loss
to net cash used in operating
activities:
Depletion 7,358 3,442
Depreciation 23,690 10,454
(Increase) decrease in accounts receivable, trade (202,929) ( 14,247)
(Increase) decrease in prepaid expenses ( 10,164) (654,492)
(Increase) decrease in pre acquisition - 64,649
Increase (decrease) in accounts payable, trade (583,638) 44,171
Increase (decrease) in drilling advances 312,616 338,970
Increase (decrease) in accrued expenses 17,143 32,303
Increase (decrease) in royalty interest payable 76,276 ( 13,093)
Increase (decrease) in taxes payable 69,788 -
Common stock issued for services 185,406 -
---------------- ----------------
Total adjustments (104,454) (187,843)
--------------- ----------------
Net cash used in operating activities $ ( 68,011) $ (278,413)
================ ================
Supplemental Schedule of Non-Cash Investing and Financing Activities
Issuance of common stock in exchange for
marketable equity securities $ - $ -
Purchase of support equipment
in exchange for account payable $ - $ -
The accompanying notes are an integral part of the financial statements.
</TABLE>
7
<PAGE>
CAMBRIDGE ENERGY CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and business
-------------------------
Cambridge Energy Corporation (the Company) was incorporated in the state of
Nevada on April 9, 1996. The Company is an independent oil and gas company
engaged in the exploration and development of domestic and foreign oil and gas
properties. It presently owns oil well properties located in Louisiana and oil
and gas properties in Indonesia. The Company also manufactures certain wellhead
control devices (Note 9). Oil produced is sold to various crude oil purchaser in
the Louisiana market and to the Indonesian government in the Indonesian market.
Business combinations
---------------------
The Company acquired its two subsidiary corporations in transactions
accounted for as purchases. In both transactions, the purchase price was
allocated to the fair values of the assets acquired with no portion of the
purchase price allocated to goodwill.
The Company acquired 100% of the outstanding common stock of Triton
Wellhead & Manufacturing, Inc. (TWM), a U.S. corporation, on September 30, 1998
in exchange for 762,354 common stock shares valued at $.64 per share, $5,000
cash, the issuance of a $95,000 note payable and the assumption of $366,944 of
liabilities.The accompanying consolidated statement of operations and
comprehensive income include TWM's results of operations subsequent to September
30, 1998.
The Company acquired 100% of the outstanding common stock of Intermega
Energy Pte, Ltd. (IEP), a Singapore corporation, on January 4, 1999 in exchange
for 1,873,414 common stock shares valued at $.875 per share and $500,000 cash,
which has not yet been paid (Note 5). IEP owns oil properties in Indonesia. The
accompanying consolidated financial statement of operations and comprehensive
income include IEP's results of operations subsequent to January 4, 1999.
Principles of consolidation
---------------------------
The accompanying consolidated financial statements include the general
accounts of the Company and its wholly owned subsidiaries, Triton Wellhead and
Manufacturing, Inc. (TWM) and Intermega Energy PTE, Ltd. (IEP). All intercompany
transactions and accounts have been eliminated in the consolidation and each
subsidiary corporation has a fiscal year end of March 31.
Method of accounting for oil and gas properties
-----------------------------------------------
The Company uses the successful efforts method of accounting for oil and
gas producing activities, as set forth in the Statement of Financial Accounting
Standards No. 19, as amended. Costs to acquire mineral interests in oil and gas
properties, to drill and equip exploratory wells that find proved reserves, and
to drill and equip development wells are capitalized. Costs to drill exploratory
wells that do not find proved reserves, geological and geophysical costs and
costs of carrying and retaining unproved properties are expensed as incurred.
8
<PAGE>
CAMBRIDGE ENERGY CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Unproved oil and gas properties that are individually significant are
periodically assessed for impairment of value, and a loss is recognized at the
time of impairment by providing a valuation allowance. Other unproved properties
are amortized based on the Company's experience of successful drilling and
average holding period. Capitalized costs of producing oil and gas properties,
after considering estimated dismantlement and abandonment costs and estimated
salvage values, are depreciated and depleted by the unit-of-production method.
Support equipment and other property and equipment are carried at cost and
depreciated over their estimated useful lives.
On sale or retirement of a complete unit of a proved property, the cost and
related accumulated depreciation, depletion, and amortization are eliminated
from the property accounts, and the resultant gain or loss is recognized. On
retirement or sale of a partial unit of proved property, the cost is charged to
accumulated depreciation, depletion, and amortization with a resulting gain or
loss recognized in income.
On sale of an entire interest in an unproved property for cash or cash
equivalent, gain or loss on the sale is recognized, taking into consideration
the amount of any recorded impairment if the property has been assessed
individually. If a partial interest in an unproved property is sold, the amount
received is treated as a reduction of the cost of the interest retained.
Inventories
-----------
Inventories are carried at the lower of cost (specific identification) or
net realizable value and include materials and supplies related to the Company's
oil and gas support equipment.
Property and equipment
----------------------
Property and equipment are stated at cost less accumulated depreciation.
Depreciation of property and equipment are being provided by accelerated methods
for financial and tax reporting purposes over estimated useful lives of five to
seven years.
Management 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 the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Cash Flow
---------
For purposes of the statement of cash flows, cash includes demand deposits
and time deposits with maturities of less than three months. None of the
Company's cash is restricted.
2. PREFERRED STOCK
To date the Company issued a total of 134,000 shares of its Series A and
Series B preferred stock for $2.50 cash per share. Other than in liquidation and
redemption at the holders' option, the preferences attached to these series are
identical. The shares have a par value of $.0001 and pay an 8.0% per annum
non-cumulative dividend payable quarterly. The shares are convertible into
common stock at the holders options anytime within 18 months from the date of
issue at a conversion price of $1.50 per common share. The shares are redeemable
by the Company within 12 months from the date of issue at a per share redemption
9
<PAGE>
CAMBRIDGE ENERGY CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
price of $2.50. The holders of the Series A shares can require redemption at the
same price anytime during a period beginning 12 months from the date of issue
and ending 14 months from such date. The holders of the Series B shares can also
require redemption at the same price anytime during a period beginning six
months from the date of issue and ending 12 months from such date.
The Company also issued 15,000 shares of its class B convertible preferred
stock for $1.00 cash per share. The shares have a par value of $.0001 and pay an
8.0% per annum non-cumulative dividend. The shares are convertible into common
stock at the holder's option anytime prior to April 1, 2000 at a conversion
price of $2.50 per common share. The shares are redeemable by the Company after
April 1, 2000 at a per share redemption price of $2.50 plus accrued dividends.
In addition, the Company issued 500 shares of its Class B Convertible
Redeemable preferred shares. The shares have a value of $.0001 and pay 10% per
annum payable semiannually. Each share is convertible into 100 common stock
shares at the holder's option anytime after the completion of the offering. The
shares are redeemable by the Company 12 months after the date of issue but only
after the common stock market price is greater than $2.00 per share for 20
consecutive days at a conversion price of 105% of the issue price.
In liquidation, the holders of the various series are entitled to receive
an amount equal to their purchase price of the shares plus declared but unpaid
dividends. Series A holders have liquidation preference over the Series B
holders, Series B holders have liquidation preference over Class A holders,
Class A holders have liquidation preference over Class B holders and the holders
of all series have liquidation preference over the common stockholders.
At June 30, 2000, accrued dividends payable related to these shares totaled
$30,080.
3. COMMITMENTS AND CONTINGENCIES
Leases
------
The Company's home office facilities are currently being provided without
charge by a corporation owned by the Company's president. The fair rental value
of this space provided is not material. The Company's Singapore offices are
currently leased on a month to month basis from a corporation owned by another
of the Company's stockholders.
At June 30, 2000, the Company was not obligated under any noncancelable
operating or capital lease agreements.
Employment and related agreements
---------------------------------
In October 1998, the Company entered into a consulting and share repurchase
agreement with a former officer. The agreement provides for an initial $50,000
payment and monthly payments of $5,000 until such time as a total of $400,000
has been paid under the agreement. The former officer will return to the Company
250,000 common stock shares for each $100,000 of fees paid to him under the
agreement.
4. INCOME TAXES
The Company uses the accrual method of accounting for tax reporting
purposes. At the fiscal year end, March 31, 2000, the Company had a net
operating loss carryforwards for financial and tax reporting purposes of
approximately $2,840,000 which expire through the year 2014.
10
<PAGE>
CAMBRIDGE ENERGY CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Deferred income taxes are recognized for the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the tax bases of those assets and liabilities that will
result in taxable or deductible amounts in future years.
8. NOTES PAYABLE
To date the Company has borrowed $523,000 through the issuance of notes.
The notes are due at various dates through December 2000, bear interest at 8.5%
to 10.0% and are unsecured.
11
<PAGE>
CAMBRIDGE ENERGY CORPORATION
SUPPLEMENTARY INFORMATION REGARDING
OIL AND GAS PRODUCING ACTIVITIES
FOR THE YEARS ENDED MARCH 31, 2000 AND MARCH 31, 1999
UNAUDITED
The following supplementary oil and gas information is provided in
accordance with Statement of Financial Accounting Standards No. 69, Disclosures
about Oil and Gas Producing Activities (SFAS 69). The Company has properties in
two reportable geographic areas, oil and gas properties in southern Louisiana
and oil properties in Indonesia.
1. CAPITALIZED COSTS RELATING TO OIL AND GAS PRODUCING ACTIVITIES
<TABLE>
<CAPTION>
<S> <C> <C>
2000 1999
---- ----
Proved oil and gas properties $ 4,489,592 $ 4,456,284
Unproved oil and gas properties - -
Support equipment, proved properties 33,255 31,966
------------- -------------
4,522,847 4,488,250
Accumulated depreciation and
depletion 57,193 28,381
------------- -------------
Net capitalized costs $ 4,465,654 $ 4,459,869
============= =============
2. COSTS INCURRED IN OIL AND GAS PRODUCING ACTIVITIES FOR ABOVE REFERENCED
PERIODS
2000 1999
---- ----
Acquisition of proven properties, including $ 28,474 $ 4,264,456
$4,213,565 for properties in Indonesia
Exploration costs $ 8,459 $ 140,771
Development costs $ - $ -
3. RESULTS OF OPERATIONS FOR OIL AND GAS PRODUCING ACTIVITIES FOR THE ABOVE
REFERENCED PERIODS
2000 1999
---- ----
Oil and gas sales $ 1,614,780 $ 529,305
Lease operating income 23,534 32,721
Production costs 1,142,717 102,794
Exploration expenses 8,459 140,771
Depreciation and depletion 102,922 19,332
Income tax expense - -
Results of operations for oil ------------- -------------
and gas producing activities
(excluding corporate overhead
and financing costs) $ 384,216 $ 299,129
============= =============
</TABLE>
4. RESERVE QUANTITY INFORMATION
The following estimates of proved developed reserve quantities are
estimates only, and do not purport to reflect realizable values or fair market
value of the Company's reserves. They are presented in accordance with the
guidelines established by the S.E.C. and disclosure requirements promulgated by
SFAS 69. The Company emphasizes the reserve estimates are inherently imprecise
and that estimates of new discoveries are more imprecise than those of currently
producing oil and gas properties. Accordingly, these estimates are expected to
change as future information becomes available. All of the following reserve
information relates to the Company's reserves located in southern Louisiana
except for the 15,790,000 barrels of Indonesian oil reserves acquired during the
year ended March 31, 1999 (Note 1).
12
<PAGE>
CAMBRIDGE ENERGY CORPORATION
SUPPLEMENTARY INFORMATION REGARDING
OIL AND GAS PRODUCING ACTIVITIES
FOR THE YEARS ENDED MARCH 31, 2000 AND MARCH 31, 1999
UNAUDITED
Proved reserves are estimated reserves of crude oil (including condensate
and natural gas liquids) and natural gas that geological and engineering data
demonstrate with reasonable certainty to be recoverable in future years from
known reservoirs under existing economic and operating conditions. Proved
developed reserves are those expected to be recovered through existing wells,
equipment, and operating method. The Company's proved developed and undeveloped
reserves and changes in them during the periods are as follows.
Oil Gas
(BBLS) (MCF)
------ -----
Reserves at March 31, 1998 3,144,450 29,136,140
Purchase of minerals in place 10,215,867 -
Revision of previous estimates 765,800 47,758,910
Production ( 28,327) ( 82,300)
------------ ------------
Reserves at March 31, 1999 14,097,790 76,812,750
Revisions of previous estimates 5,046,318 1,521,611
Production ( 62,808) ( 31,231)
------------ ------------
Reserves at March 31, 2000 19,081,300 78,303,130
============ ============
5. STANDARDIZED MEASURES OF DISCOUNTED FUTURE NET CASH FLOWS AND CHANGES THEREIN
RELATING TO PROVED OIL AND GAS RESERVES AT THE ABOVE REFERENCED DATE
The standardized measure of discounted future net cash flows is computed by
applying year-end prices of oil and gas, estimated at $18.00 U.S. and $24.74
Indonesia per barrel and $2.30 U.S. only per MMBTU, respectively, (with
consideration of price changes only to the extent provided by contractual
arrangements) to the estimated future production of proved oil and gas reserves,
less estimated future expenditures (based on year-end costs) to be incurred in
developing and producing the proved reserves, less estimated future income tax
expenses (based on year-end statutory tax rates, with consideration of future
tax rates already legislated) to be incurred on pretax net cash flows less basis
of the properties and available credits, and assuming continuation of existing
economic conditions. The estimated future net cash flows are then discounted
using a rate of 10 percent a year to reflect the estimated timing of the future
cash flows.
<TABLE>
<CAPTION>
STANDARDIZED MEASURE OF DISCOUNTED FUTURE
NET CASH FLOW AT MARCH 31, 2000 AND 1999
2000 1999
---- ----
<S> <C> <C> <C> <C>
Foreign Domestic Foreign Domestic
------- -------- ------- --------
Future cash inflows $ 292,115,000 $ 240,986,249 $ 172,200,000 $ 181,311,731
Future production costs ( 76,902,400) ( 28,918,350) ( 20,664,000) ( 21,757,408)
Future development costs ( 17,326,200) ( 14,459,175) ( 10,332,000) ( 10,878,704)
Future income tax expenses ( 78,871,050) ( 65,066,287) ( 46,494,000) ( 48,954,167)
---------------- ---------------- ----------------- ----------------
Future net cash flows 119,015,350 132,542,437 94,710,000 99,721,452
10% annual discount for
estimated timing of
cash flows ( 59,614,789) ( 64,945,794) ( 46,407,900) ( 48,863,512)
---------------- ---------------- ----------------- ----------------
Standardized measure of
discounted future net cash
flows relating to proved
oil and gas reserves $ 59,400,561 $ 67,596,643 $ 48,302,100 $ 50,857,940
================ ================ ================= ================
</TABLE>
13
<PAGE>
CAMBRIDGE ENERGY CORPORATION
SUPPLEMENTARY INFORMATION REGARDING
OIL AND GAS PRODUCING ACTIVITIES
FOR THE YEARS ENDED MARCH 31, 2000 AND MARCH 31, 1999
UNAUDITED
RECONCILIATION OF CHANGES IN THE STANDARDIZED
MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS
DURING THE ABOVE REFERENCED PERIOD
<TABLE>
<CAPTION>
<S> <C> <C>
Beginning of period $ 99,160,040 $ 7,161,940
Sales of oil and gas produced ( 1,614,780) ( 529,305)
Net changes in prices and production costs ( 1,142,717) ( 102,794)
Development costs incurred ( 8,489) ( 140,771)
Revisions of previous quantity estimates 30,603,150 44,468,670
Net changes from purchase of minerals
in place - 48,302,300
---------------- ------------------
End of period $ 126,997,204 $ 99,160,040
================ ==================
</TABLE>
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
The Company is engaged in the exploration and development oil and natural
gas reserves through the acquisition and development of properties primarily
with proven reserves. The Company's ability to grow shareholder value through
growth of assets, earnings and cash flows is dependent on its ability to acquire
and develop commercial quantities of oil and natural gas that can be produced
and marketed at a profit. Product prices, primarily crude oil, dropped
significantly during the Company's previous fiscal year. This drop has adversely
affected the revenues and cash flow of the company as well as most companies in
the industry resulting in the reduction of exploration and development budgets
of major oil companies and independents, causing reduction or elimination of new
ventures, work force reductions and reorganizations. Such changes resulted in a
decrease in the ability of the Company to solicit industry partners to
participate in projects undertaken by Cambridge Energy Corporation on a promoted
basis. They have resulted in some delays by partners in making partner
contributions, thus putting additional demands on the Company's cash flow. Even
though prices have recovered to much higher levels, the reversal of the negative
affects on the Company have taken a longer period then expected.
Company management has continued to pursue the initial elements of its
growth strategies including:
1. To actively pursue acquisition of significant producing properties
with development potential which can be exploited with lower cost and
with lower risk than unproven prospects;
2. The selection, engineering review and rework of workover prospects on
existing properties to maximize production from existing assets;
3. To continue to solicit institutional and industry partners for
promoted transactions as well as increasing equity and long financing
to support this expanded level of projects and operations;
4. To significantly add to the company's technical capabilities through
the selective addition of technical personnel and the development and
acquisition of advanced reservoir and engineering software.
Management believes that this plan will position the Company to take
advantage of opportunities that it expects to occur in the industry. While
management believes that it has worked toward the successful completion of this
plan, there can be no assurance that the intended results will be achieved or
that funds will be available to accomplish the plan.
15
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Results of Operations
---------------------
Three months ended June 30, 2000 compared to three months ended June 30, 1999
The Company recorded a gain of $36,443 for the quarter ended June 30, 2000
up from a loss of $90,570 for the quarter ended June 30, 1999. Revenues
increased to $597,074 over $279,307 the previous year due to the increase in the
price of oil and gas. General and Administrative expenses increased to $335,833
over $121,062 for the previous year.
Oil and Gas production for the quarter compared to the same period last
year was as follows:
Quarter Ended
June 30,
2000 1999
---- ----
Gas Production (Mcf) 5,665 10,044
Oil Production (bbls) 22,502 16,894
Average Price of Gas (per mcf) $2.54 $2.04
Average Price of Oil (per bbls) $25.90 $15.32
Due to industry conditions and resulting delays in partner contributions,
the Company's drilling program proceeded at a slower pace than expected through
the engineering phase and the Company expects to have drilling operations
underway during the third quarter of the current fiscal year. The Company
expects to increase its acquisition activity during the current fiscal year.
Liquidity
---------
The Company expects to finance its future acquisition, development and
exploration activities through cash flow from operating activities, various
means of corporate and project finance and through the issuance of additional
securities. In addition, the Company expects to continue to subsidize drilling
activities through the sale of participation to industry partners on a promoted
basis, whereby the Company's working interests in reserves and production are
greater than its proportionate share capital costs.
To date the Company has raised additional capital in the amount of $425,000
through private sale of preferred shares. Based on acquisitions currently in
negotiation, the Company expects to undertake the placement of a significant
financial institution credit facility or other structured debt facility during
the coming fiscal year. This would provide additional funding for expansion to
be consistent with the Company growth strategy. Although management believes
that this will be accomplished during the current fiscal year, there can be no
assurance that such a facility will be forthcoming or that sufficient funds will
be available to meet the requirements of the Company's growth strategy.
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Material Commitments for Capital Expenditures
---------------------------------------------
The Company has made no additional material commitments through June 30,
2000. Each drilling and/or rework project is stand-alone and although the
Company is in constant discussion with prospective working interest partners on
each potential project, commitments for the actual drilling or rework and site
preparation operations are generally not made for each project until the Company
has received the funds from its working interest partners and the funds for its
portion of the working interest are in place. The leases the Company holds are
renewable annually unless "held by production". If the leased property has a
producing well that is providing royalty payments to the leaseholders, then
annual lease payments and renewals are not required. Cambridge Energy strives to
accomplish the drilling or rework planned for each property within the year
first leased. When that does not occur, management reviews the potential of each
property as its leases which have come up for renewal and makes a decision
whether or not to renew each lease in light of the Company's business planning
at that time.
The Company has committed to provide $500,000 in cash, plus $250,000 for
the repurchase of certain shares associated with the transaction to finalize the
payment for the purchase of the Indonesian production now under contract, which
was due on or before January 4, 1999. The transaction was closed with the
exchange of stock between the Company and the owners of the company that owned
the production. Although the certain monies have been paid on behalf of the
transaction, the Company is obligated to pay additional amounts to the sellers
as a part of the transaction. The Company has under negotiation several
facilities to provide these funds however, it does not have a commitment in
place and there is no assurance when a commitment will be forthcoming.
PART II - OTHER INFORMATION
Items 1 through 6 of Part II were not applicable during this quarter.
"SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995 Statements contained in this document which are not historical fact are
forward-looking statements based upon management's current expectations that are
subject to risks and uncertainties that could cause actual results to differ
materially from those set forth in or implied by forward-looking statements.
These risks are described in the Company's Form 10-KSB for the fiscal year ended
March 31, 2000 filed with the Securities and Exchange Commission.
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Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing and has duly caused this registration statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Cocoa, State of Florida, on October 23, 2000.
CAMBRIDGE ENERGY CORPORATION
by: /s/ Perry D. West
--------------------------------------
Perry D. West, Chief Executive Officer
18
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