<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
(Mark One)
X Quarterly report under Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended MARCH 31, 2000
----------------------------------
Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from ____________ to ______________
Commission File No. 0-277443
BLUE RIDGE ENERGY, INC.
- --------------------------------------------------------------------------------
(Exact Name of Small Business Issuer as Specified in Its Charter)
NEVADA 61-1306702
- ------------------------------- -------------------
(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
632 ADAMS STREET, SUITE 710, BOWLING GREEN, KY 42101
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices)
(270) 842-2421
- --------------------------------------------------------------------------------
(Issuer's Telephone Number, Including Area Code)
N/A
- --------------------------------------------------------------------------------
(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act 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
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: 5,809,794
---------------------------
<PAGE> 2
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FINANCIAL STATEMENTS OF REGISTRANT
<TABLE>
<CAPTION>
INDEX NUMBER
<S> <C>
Condensed Balance Sheets (Unaudited) as of March 31, 2000 and
December 31, 1999. 2-3
Condensed Statements of Income (Unaudited) for the three
months ended March 31, 2000 and 1999. 4
Condensed Statements of Cash Flows (Unaudited) for the three
months ended March 31, 2000 and 1999. 5
Notes to Condensed Financial Statements (Unaudited) 6-13
Report on Review by Independent Accountants
</TABLE>
The condensed financial statements of the Registrant included herein have been
prepared, without audit, pursuant to the rules and regulations of the Securities
and Exchange Commission. Although certain information normally included in
financial statements prepared in accordance with generally accepted accounting
principles has been condensed or omitted, the Registrant believes that the
disclosures are adequate to make the information presented not misleading. It is
suggested that these condensed financial statements be read in conjunction with
the financial statements and the notes thereto included in the Form 10-KSB of
the Registrant for its fiscal year ended December 31, 1999.
The condensed financial statements included herein reflect all adjustments
(consisting only of normal recurring accruals) which, in the opinion of
management, are necessary to present a fair statement of the results for the
interim periods.
The results for interim periods are not necessarily indicative of trends or of
results to be expected for a full year.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS 14-18
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 18
ITEM 2. CHANGES IN SECURITIES 18
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 18
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 18
ITEM 5. OTHER INFORMATION 18
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 18
1
<PAGE> 3
BLUE RIDGE ENERGY, INC.
CONDENSED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
---------- ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 205,785 $ 131,465
Accounts Receivable:
Managed Limited Partnerships 974,001 339,276
Trade and Other 130,845 74,275
Advances to Related Parties 711 627,304
---------- ----------
Total Current Assets 1,311,342 1,170,320
PROPERTY AND EQUIPMENT, NET 3,187,131 3,178,606
OTHER ASSETS, NET 20,536 10,810
---------- ----------
TOTAL ASSETS $4,519,009 $4,359,736
========== ==========
</TABLE>
The accompanying notes are an integral part
of these financial statements
2
<PAGE> 4
BLUE RIDGE ENERGY, INC.
CONDENSED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
----------- ------------
<S> <C> <C>
LIABILITIES AND
STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts Payable and Accrued Liabilities $ 34,112 $ 90,835
Current Portion Long Term Debt 110,231 110,231
---------- ----------
TOTAL CURRENT LIABILITIES 144,343 201,066
LONG TERM DEBT 361,628 418,511
DEFERRED INCOME TAX LIABILITY 199,137 150,139
---------- ----------
TOTAL LIABILITIES 705,108 769,716
COMMITMENTS AND CONTINGENCIES -- --
STOCKHOLDERS= EQUITY:
Preferred Stock, $0.001 par value; 5,000,000
shares authorized; 697,600 and 636,950 shares
issued and outstanding at March 31, 2000
and December 31, 1999, respectively 698 637
Common Stock, $0.005 par value; 20,000,000
shares authorized; 5,809,794 shares
issued and outstanding at March 31, 2000
and December 31, 1999, respectively 29,049 29,049
Additional Paid-In Capital 4,488,524 4,208,735
Accumulated Deficit (704,370) (648,401)
---------- ----------
TOTAL STOCKHOLDERS' EQUITY 3,813,901 3,590,020
---------- ----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $4,519,009 $4,359,736
========== ==========
</TABLE>
The accompanying notes are an integral part
of these financial statements.
3
<PAGE> 5
BLUE RIDGE ENERGY, INC.
CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
3 MONTHS ENDED
MARCH 31,
2000 1999
OPERATING REVENUES: ---------- ----------
<S> <C> <C>
Turnkey Contract Sales $ 860,612 $2,079,600
Management Fees 41,695 55,675
Reimbursed Costs 37,960 31,815
Drilling Services Sales 302,723 --
Oil and Gas Sales 68,845 6,705
---------- ----------
Total Operating Revenues 1,311,835 2,173,795
OPERATING COSTS AND
OTHER EXPENSES:
Turnkey Contract Costs 693,478 1,666,500
Drilling Services Costs 266,136 --
Lease Operating Costs 13,525 4,258
Depreciation, Depletion
and Amortization 36,000 3,032
Marketing Costs 20,730 156,265
General and Administrative Costs 124,152 23,116
---------- ----------
Total Operating Costs 1,154,021 1,853,171
---------- ----------
OPERATING INCOME 157,814 320,624
OTHER INCOME (EXPENSE):
Interest Income (Expense) (9,335) 25,590
---------- ----------
Total Other Income (9,335) 25,590
---------- ----------
INCOME BEFORE TAXES 148,479 346,214
Income Tax Provision (48,998) (114,240)
---------- ----------
NET INCOME $ 99,481 $ 231,974
========== ==========
EARNINGS (LOSS) PER
COMMON SHARE:
Basic $ (0.01) $ 0.03
Diluted $ (0.01) $ 0.03
---------- ----------
Weighted Average Common
Shares Outstanding 5,809,794 5,168,245
---------- ----------
</TABLE>
The accompanying notes are an integral part
of these financial statements.
4
<PAGE> 6
BLUE RIDGE ENERGY, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
3 MONTHS ENDED
MARCH 31,
2000 1999
--------- -----------
<S> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net Income (Loss) $ 99,481 $ 231,974
Adjustments to Reconcile Net Income to
Net Cash Flows from Operating Activities:
Depreciation, Depletion and Amortization 36,000 3,032
Increase (Decrease) in Deferred Taxes 48,998 114,240
Decrease (Increase) in Accounts Receivable (693,295) (403,128)
Increase (Decrease) in Accounts Payable
and Accrued Liabilities (56,723) (365,919)
--------- -----------
NET CASH PROVIDED (USED) BY
OPERATING ACTIVITIES (565,539) (419,801)
CASH FLOWS FROM
INVESTING ACTIVITIES:
Decrease (Increase) in Advances to Affiliate 626,593 1,092,696
Decrease (Increase) in Other Assets (9,726) 126,007
Purchase of Drilling Equipment -- (1,092,334)
Purchase of Oil and Gas Properties (44,525) (347,726)
--------- -----------
NET CASH PROVIDED (USED)BY
INVESTING ACTIVITIES 572,342 (221,357)
CASH FLOWS FROM
FINANCING ACTIVITIES:
Additions to Notes Payable -- 392,334
Payments of Notes Payable (56,883) (50,500)
Issuance of Preferred Stock 279,850 3,750
Retirement of Common Stock -- (15,000)
Payments of Preferred Stock Dividends (155,450) (69,556)
--------- -----------
NET CASH PROVIDED (USED)
BY FINANCING ACTIVITIES 67,517 261,028
--------- -----------
NET INCREASE (DECREASE) IN CASH 74,320 (380,130)
CASH AT BEGINNING OF PERIOD 131,465 480,952
--------- -----------
CASH AT END OF PERIOD $ 205,785 $ 100,822
========= ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash Paid for Interest $ 11,150 $ --
========= ===========
Cash Paid for Income Taxes $ -- $ --
========= ===========
</TABLE>
The accompanying notes are an integral part
of these financial statements.
5
<PAGE> 7
BLUE RIDGE ENERGY, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 2000 AND 1999
1. OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General
Blue Ridge Energy, Inc., (the Company), a Nevada corporation, was organized
in November, 1994, as Gem Source, Incorporated (Gem Source), and subsequently
changed the name of the Company to Blue Ridge Energy, Inc. in May, 1996. The
Company has offices at 632 Adams Street, Suite 710, Bowling Green, Kentucky,
42101
The Company is engaged in the oil and gas business primarily in Texas,
Kentucky, New Mexico and West Virginia. The Company sponsors oil and gas
drilling partnerships through which it raises money for the drilling of oil and
gas wells and participates for a 1% partnership interest as the managing general
partner of the oil and gas exploration partnerships. The Company also owns two
drilling rigs. These rigs are used to drill oil and gas wells for the sponsored
oil and gas drilling partnerships and also other non-affiliated oil and gas
companies. The rigs are operated on behalf of the Company by an affiliate, Blue
Ridge Group, Inc.
The Company also acquires direct working interest participation in oil and
gas properties. The participation includes both operated and non-operated
working interest in exploratory and development wells. These acquisitions are
funded by a combination of the profits earned from sponsoring oil and gas
drilling programs, the profit earned from contract drilling and from the
proceeds of private offerings of preferred stock.
The Company intends to maintain an active role in the oil and gas industry
as an operator of oil and gas wells, a sponsor of oil and gas drilling programs,
a participant in oil and gas programs, and as an independent producer of oil and
gas.
Accounting Policies
In the opinion of management, the accompanying unaudited financial
statements reflect all adjustments, consisting only of normal adjustments,
necessary to present fairly the financial position of Blue Ridge Energy, Inc.,
the results of operations for the three months ended March 31, 2000 and 1999,
and cash flows for the three months ended March 31, 2000 and 1999. The results
of operations for the three month periods ended March 31, 2000 should not
necessarily be taken as indicative of the results of operations that may be
expected for the entire year 2000. The financial information as of March 31,
2000 should be read in conjunction with the financial statements contained in
Blue Ridge Energy Inc.'s 10-KSB for 1999.
Principles of Consolidation
The accompanying financial statements include the accounts of Blue Ridge
Energy, Inc. and its investment in limited partnerships for which it acts as
managing general partner. As such, the Company has the sole and exclusive right
and power to manage and control the partnership. The Company accounts for its
investment in limited partnerships under the proportionate consolidation method.
Under this method, the Company's financial statements include its pro rata share
of assets and liabilities and revenues and expenses, respectively, of the
limited partnerships in which it participates. All material intercompany
accounts and transactions have been eliminated in consolidation.
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 the
6
<PAGE> 8
BLUE RIDGE ENERGY, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 2000 AND 1999
reported amounts of revenues and expenses during the reporting periods. Actual
results could differ from those estimates.
Drilling Operations
The Company follows the completed contract method of accounting for turnkey
drilling arrangements. Under this method, all income under turnkey drilling
contracts, expenses under turnkey drilling contracts, all direct costs, and
appropriate portions of indirect costs related to contracts in progress are
recognized as revenues and expenses in the period the contracts are
substantially complete. This accounting method has been utilized by the Company
based on the short term nature of the drilling contracts, i.e. 5-10 days.
Working Interests
Oil and gas revenue from working interests the Company owns are recognized
at the point of sale.
Managed Limited Partnerships
The Company sponsors privately offered limited partnerships for which it
serves as the Managing General Partner. The purpose of these partnerships is to
acquire and develop oil and gas leases. The partnerships enter into turnkey
drilling contracts with the Company to drill, complete and equip, if warranted,
the oil and gas leases. The Company receives direct compensation, reimbursement
of costs and expenses, and revenues related to turnkey drilling contracts. The
Company normally participates for 1% of the Limited Partnerships as the Managing
General Partner.
The Company follows the industry practice of pro rata consolidation of its
investments in these partnerships. Accordingly, the Company records on its
financial statements its pro rata share of the assets, liabilities, revenues and
expenses of each partnership. In connection with the sponsorship of oil and gas
partnerships, the Company receives a management fee of approximately 5% of the
capital contributions. Such fees are credited to income as earned.
Property and Equipment
Property and equipment (other than oil and gas) are stated at cost.
Depreciation is recognized on the straight line method, after considering
salvage value, over the estimated useful lives of the assets as follows:
Lives (years)
-------------
Machinery and Equipment 10
Autos and Trucks 5
Furniture and Fixtures 10
The Company follows the successful efforts method of accounting for oil and
gas producing activities. Under the successful efforts method of accounting,
costs which relate directly to the discovery of oil and gas reserves are
capitalized. These capitalized costs include;
(1) the costs of acquiring mineral interest in properties,
(2) costs to drill and equip exploratory wells that find proved
reserves,
(3) costs to drill and equip development wells and
(4) costs for support equipment and facilities used in oil and gas
producing activities.
These costs are depreciated, depleted or amortized on the unit of
productions method, based on estimates of recoverable proved developed oil and
gas reserves.
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.
7
<PAGE> 9
BLUE RIDGE ENERGY, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2000 AND 1999
The costs of acquiring unproved properties are capitalized as incurred and
carried until the property is reclassified as a producing oil and gas property,
or considered impaired. The Company annually assesses its unimproved properties
to determine whether they have been impaired. If the results of this assessment
indicate impairment, a loss is recognized by providing a valuation allowance.
When an unproved property is surrendered, the costs related thereto are charged
to the application valuation allowance, if adequate, or charged as a loss to
current operations.
The costs of drilling exploratory wells are capitalized as part of the
Company's uncompleted wells, equipment and facilities pending determination of
whether the well has found proved reserves. Once a determination is made, the
capitalized costs are either charged to expense or reclassification as part of
the costs of the Company's wells and related equipment. In the absence of a
determination as to whether the reserves that have been found can be classified
as proved, the costs of drilling such an exploratory well are not carried as an
asset for more than one year following completion of drilling. If after a year
has passed, the Company is unable to determine that proved reserves have been
found, the well is assumed to be impaired, and its costs are charged to expense.
Upon disposition or retirement of property and equipment other than oil and
gas properties, the cost and related accumulated depreciation are removed from
the accounts and the gain or loss thereon, if any, is credited or charged to
income. The Company recognizes the gain or loss on the sale of either a part of
a proved oil and gas property or of an entire proved oil and gas property
constituting a part of a field upon the sale or other disposition of such. The
unamortized cost of the property or group of properties, a part of which was
sold or otherwise disposed of, is apportioned to the interest sold and interest
retained on the basis of the fair value of those interests.
Impairment of Long-Lived Assets
The Company follows the provisions of SFAS 121 - "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of."
Consequently, the Company reviews its long-lived assets to be held and used,
including oil and gas properties accounted for under the successful efforts
method of accounting. Whenever events or circumstances indicate the carrying
value of those assets may not be recoverable, an impairment loss for proved
properties and capitalized exploration and development costs is recognized. The
Company assesses impairment of capitalized costs of proved oil and gas
properties by comparing net capitalized costs to undiscounted future net cash
flows on a field-by-field basis using expected prices. If an impairment is
indicated based on undiscounted expected future cash flows, then an impairment
is recognized to the extent that net capitalized costs exceed the estimated fair
value of the property. Fair value of the property is estimated by the company
using the present value of future cash flows discounted at 10%.
Earnings Per Common Share
The Company's basic earnings per common share ("Basic EPS") is based on the
weighted average number of common shares outstanding during the respective
periods. The income available to common shareholders is computed after
deducting dividends on the preferred stock. The convertible preferred stock
and outstanding stock warrants are considered anti-dilutive and therefore,
excluded from the earnings per share calculations.
8
<PAGE> 10
BLUE RIDGE ENERGY, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
The following is a reconciliation of the numerators and denominators used
in the calculation of Basic EPS for the 3 months ended March 31, 2000 and 1999:
3 Months
Basic EPS computation - 2000
- --------------------- ---------
Net Income $ 99,481
Less: Preferred Stock Dividends (155,450)
---------
Earnings Available to Common Stockholders $ (55,969)
=========
Dates Shares Fraction Weighted
Outstanding Outstanding of Period Average Shares
----------- ----------- --------- --------------
January 1 - March 31 5,809,794 100.0% 5,809,794
Weighted Average Shares 5,809,794
=========
3 Months
1999
----------
Basic EPS $ (0.01)
----------
3 Months
Basic EPS computation - 1999
- --------------------- ----------
Net Income $ 231,974
Less: Preferred Stock Dividends (69,556)
----------
Earnings Available to Common Stockholders $ 162,418
==========
Dates Shares Fraction Weighted
Outstanding Outstanding of Period Average Shares
----------- ----------- --------- --------------
January 1 - March 31 5,171,578 100.0% 5,171,578
February 1 - March 31 (5,000) 66.6% (3,333)
Weighted Average Shares 5,168,245
3 Months
1999
----------
Basic EPS $ 0.03
----------
Income Taxes
Income taxes are provided based on earnings reported for financial
statement purposes. The provision for income taxes differ from the amounts
currently payable because of temporary differences (primarily intangible
drilling costs) in the recognition of certain income and expense items for
financial reporting and tax reporting purposes.
Cash Equivalents
For purposes of reporting cash flows, cash includes cash on hand and cash
on deposit.
9
<PAGE> 11
BLUE RIDGE ENERGY, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
2. AFFILIATED OIL AND GAS PARTNERSHIPS
-----------------------------------
The Company provides turnkey drilling services for the various oil and gas
partnerships which it sponsors. Fees earned for these drilling services,
including the sale of leases to the partnerships, amounted to $860,612 and
$2,079,600 during the three months ended March 31, 2000 and 1999, respectively.
The Company receives a management fee from the partnerships for its services in
connection with the selection of the joint venture prospects and the initial
operations of the joint venture in addition to syndication fees for funds raised
directly by the Company. Management fees and syndication fees earned during the
three months ended March 31, 2000 and 1999 amounted to $41,695 and $55,675,
respectively.
In connection with the sponsorship of oil and gas partnerships, the Company
is reimbursed by the partnerships for certain operating and overhead costs
incurred on their behalf, including filing fees, legal fees, accounting fees,
printing costs and other miscellaneous expenses. These reimbursements totaled
$37,960 and $31,815 during the three months ended March 31, 2000 and 1999,
respectively.
Included in the Company's financial statements are contributions made to
the various Company sponsored oil and gas partnerships, less the applicable loss
generated by these partnerships relative to the Company's percentage ownership.
The Company has allocated, on a pro-rata basis the amounts associated with these
investments to the appropriate asset, liability, income and expense accounts.
3. RELATED PARTY TRANSACTIONS
--------------------------
Stock Transactions
As of March 31, 2000, there are 5,809,794 shares of common stock issued and
outstanding. A total of 3,126,893 shares are held by BRG and the remainder of
2,765,446 shares are held by approximately 600 shareholders, 40 of which are
original stockholders of the Company.
Advances from Related Parties
During 1998, the Company agreed with Blue Ridge Group, Inc. to acquire and
develop oil and gas properties and drilling equipment in the Appalachian Basin
of Kentucky. In order to facilitate the acquisition of these properties the
Company advanced approximately $1,300,000, bearing interest at 12% per annum, to
Blue Ridge Group, Inc. As of March 31, 1999 approximately $98,989 in interest
had been earned under this arrangement and the entire balance had been repaid
via the drilling of 10 gas wells and the purchase of drilling equipment.
Additionally, Blue Ridge Group, Inc. provides various management,
administrative, accounting and geological services for the Company at a rate of
$20,000 per month. Blue Ridge Energy also reimbursed Blue Ridge Group for direct
costs paid on its behalf. As of March 31, 2000 and 1999, approximately $0 was
due and payable to Blue Ridge Group under this arrangement.
10
<PAGE> 12
Report of Review by Independent Accountants
-------------------------------------------
To the Stockholderss and Directors of Blue Ridge Energy, Inc.
We have reviewed the accompanying condensed balance sheet of Blue Ridge
Energy, Inc., as of March 31, 2000, and the related condensed statements of
income for each of the three-month periods ended March 31, 2000 and 1999 and the
condensed statements of cash flows for the three-month periods ended March 31,
2000 and 1999. Such condensed financial statements and related disclosures have
been prepared in accordance with the required format and disclosures prescribed
by the SEC for Form 10-QSB. These 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 inquires 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 condensed interim financial statements for
them to be in conformity with generally accepted accounting principles.
We previously audited in accordance with generally accepted auditing
standards, the balance sheet as of December 31, 1999, and the related statements
of income, of stockholders' equity, and of cash flows for the year then ended
(not presented herein), and in our report dated March 24, 2000 we expressed an
unqualified opinion on those financial statements. In our opinion, the
information set forth in the accompanying condensed balance sheet as
of December 31, 1999, is fairly stated in all material respects, in relation to
the balance sheet from which it has been derived.
Looney, Samson & Associates, P.L.L.C.
Dallas, Texas
May 15, 2000
<PAGE> 13
BLUE RIDGE ENERGY, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
4. PROPERTY AND EQUIPMENT
----------------------
Property and equipment, stated at cost, consisted of the following at March
31, 2000 and 1999:
2000 1999
---------- ----------
Oil and Gas Properties $1,252,700 $ 905,455
Drilling Rigs and Equipment 2,105,774 1,092,334
Furniture and Fixtures 364 364
---------- ----------
3,358,838 1,998,153
Less Accumulated Depreciation 171,707 21,057
---------- ----------
$3,187,131 $1,977,096
========== ==========
Depreciation expense was $36,000 and $3,032 during the three months ended
March 31, 2000 and 1999, respectively.
During the first quarter of 1999 the Company consummated the purchase of an
Ingersoll Rand drilling rig and its ancillary equipment for approximately $1.35
million of which approximately $600 thousand was provided by long term debt. In
June, 1999 the Company consummated the purchase of another Ingersoll Rand
drilling rig from Blue Ridge Group, Inc. for approximately $750 thousand.
5. COMMITMENTS AND CONTINGENCIES
-----------------------------
Commitments
The Company has agreed to automatically convert all shares of preferred
stock outstanding effective as of the first day the Company's common stock is
publicly traded on any exchange or over-the-counter, or June 30, 2000,
whichever comes first.
Contingencies
The Company's drilling and oil and gas exploration and production
operations are subject to inherent risks, including blowouts, fire and
explosions which could result in personal injury or death, suspended drilling
operations, damage to or destruction of equipment, damage to producing
formations and pollution or other environmental hazards. As a protection
against these hazards, the Company maintains general liability insurance
coverage of approximately $5 million limited to $1 million per occurrence. The
Company believes it is adequately insured for public liability and property
damage to others with respect to its operations. However, such insurance may
not be sufficient to protect the Company against liability for all consequences
of well disasters, extensive fire damage, or damage to the environment. The
Company has never been fined or incurred liability for pollution or other
environmental damage in connection with its operations.
6. STOCKHOLDERS' EQUITY
--------------------
The Company is authorized to issue two classes of stock that are
designated, respectively, common and preferred stock. As of March 31, 2000, the
Company was authorized to issue 25,000,000 shares of stock -- 20,000,000 being
designated as common stock and 5,000,000 shares designated as preferred stock.
11
<PAGE> 14
BLUE RIDGE ENERGY, INC.
NOTES TO FINANCIAL STATEMENTS
Common Stock
The Company was organized in November, 1994, as a Nevada corporation under
the name of Gem Source, Incorporated (Gem Source) with an initial issuance of
1,000,000 shares of Common Stock with a par value of $0.001 per share. In 1995,
Gem Source had an offering of 1,633,000 shares under Rule 504, an exemption
under Regulation D from full registration with the SEC to bring the total
outstanding shares of common stock to 2,633,000.
As of March 31, 2000, there were 697,600 Series D Warrants issued and
outstanding, none of which had been exercised.
Series C Preferred Stock
During 1997, the Company authorized the issuance and sale of 400,000 shares
of Series C Preferred Stock ("Series C Stock") which has a par value of $0.001
per share at $6.00 per share. The Series C Stock bears a 12% per annum dividend
payable monthly. Each share of the Series C Stock shall be converted
automatically into two (2) shares of Common Stock effective when a registration
statement for the Common Stock is filed with the SEC or two years from issuance,
whichever occurs first.
In the event of any liquidation, dissolution or winding up of the Company,
either voluntary or involuntary, the holders of Series C Stock shall be entitled
to receive, prior and in preference to any distribution of any assets or surplus
funds of the Company to the holders of Common Stock, but subordinate to the
liquidation preference of the Series A Stock and the Series B Stock, the amount
of $6.00 per share plus all unpaid dividends on such share of each share of
Series C Stock then held by the shareholder.
At March 31, 2000 and 1999, there were -0- and 169,450, shares of Series C
Stock issued and outstanding , respectively.
Series D Preferred Stock
During 1998, the Company authorized the issuance and sale of 1,000,000
shares of Series D Preferred Stock ("Series D Stock") which has a par value of
$0.001 per share at $5.00 per share. The Series D Stock bears a 12% per annum
dividend payable monthly. In addition, the Company will issue one Common Stock
Warrant exercisable to purchase one share of the Company's Common Stock for
$1.00 with each share of Series D Stock sold. Each share of the Series D Stock
shall be converted automatically into one (1) share of Common Stock effective
when a registration statement for the Common Stock is filed with the SEC or two
years from issuance, whichever occurs first.
In the event of any liquidation, dissolution or winding up of the Company,
either voluntary or involuntary, the holders of Series D Stock shall be entitled
to receive, prior and in preference to any distribution of any assets or surplus
funds of the Company to the holders of Common Stock, but subordinate to the
liquidation preference of the Series A Stock, the Series B Stock and the Series
C Stock, the amount of $5.00 per share plus all unpaid dividends on such share
of each share of Series D Stock then held by the shareholder.
At March 31, 2000, there were 697,600 shares of Series D Stock issued
and outstanding.
12
<PAGE> 15
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995:
Statements, other than historical facts, contained in this report on Form
10KSB, including statements of estimated oil and gas production and reserves,
drilling plans, future cash flows, anticipated capital expenditures and
Management's strategies, plans and objectives, 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. Although
we believe that our forward looking statements are based on reasonable
assumptions, we caution that such statements are subject to a wide range of
risks and uncertainties incident to the exploration for, acquisition,
development and marketing of oil and gas; and we can give no assurance that our
estimates and expectations will be realized. Important factors that would cause
actual results to differ materially from the forward looking statements
include, but are not limited to, changes in production volumes, worldwide
demand, and commodity prices for petroleum natural resources; the timing and
extent of our success in discovering, acquiring, developing and producing oil
and gas reserves; risks incident to the drilling and operation of oil and gas
wells; future production and development costs; the effect of existing and
future laws, governmental regulations and the political and economic-climate of
the United States and foreign countries in which we may operate, if any; the
effect of hedging activities; and conditions in the capital markets. Other risk
factors are discussed elsewhere in Blue Ridge Energy's Form 10KSB.
RECENT DEVELOPMENTS:
On March 1, 2000, Mr. Edward L. Stille was appointed President and Chief
Executive Officer of BR Energy and Mr. Robert Burr resigned those two positions
while continuing as Chairman of the Board of Directors. A copy of Mr. Stille's
employment contract has been attached as Exhibit 10. Additionally, on April 4,
2000, the Board of Directors was expanded to include six (6) members and Mr.
Stille along with Mr. Russell L. Vera and Mr. Harry J. Peters were elected to
the Board of Directors. Mr. Vera will also function as Sr. Vice President-
Exploration and Development and Mr. Peters will also function as Sr. Vice
President- Sales and Marketing.
FINANCIAL OVERVIEW
RESULTS OF OPERATIONS:
THREE MONTHS ENDED MARCH 31, 2000 AND 1999:
BR Energy's net income decreased to $100 thousand during the first quarter
of 2000 as compared to $232 thousand for the same period in 1999, Earnings per
common share, which take into account cash dividends paid on preferred stock
decreased to $(0.01) per share during the first quarter of 2000 as compared to
$0.03 during the same period in 1999.
Operating Revenues:
Operating revenues totaled $1.3 million during the three months ended March
31, 2000 as compared to the $2.2 million recorded during the three months ended
March 31, 1999, This decrease was primarily related to a decreased activity
level in BR Energy's sponsorship of Limited Partnerships for the drilling and
development of oil and gas properties during 2000.
Direct Operating Costs:
Direct operating costs totaled $1.0 million during the three months ended
March 31, 2000, as compared to the $1.7 million experienced during the same
period in 1999. The changes in direct operating costs are directly and
proportionally related to the changes in operating revenues previously
discussed.
Other Operating Expenses:
Marketing expenses decreased 86.0% to $20 thousand during the first quarter
of 2000 from the $156 thousand experienced during this period in 1999 due to
the decreased activity in sponsoring Limited Partnerships previously discussed.
General and Administrative expenses increased 437% to $124 thousand during the
first quarter of 2000 as compared to $23 thousand during the same period in
1999, primarily as a result of legal and accounting fees related to SEC
reporting requirements and registration statements.
Other Income (Expense):
Other Income (Expense) decreased 136% to $(9) thousand in the first quarter
of 2000 from $26 thousand due to reductions in interest income as funds were
utilized for the purchase of two drilling rigs and development of oil and gas
properties.
13
<PAGE> 16
MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS
BALANCE SHEET REVIEW:
ASSETS:
BR Energy's current assets remained essentially the same at March 31, 2000
as at March 31, 1999. BR Energy's operations were the primary source of the
fluctuations in accounts receivable and in cash. Property and equipment
increased 60% to $3.2 million at March 31, 2000 as compared to $2.0 million at
March 31, 1999 due to the purchase of two drilling rigs and development of oil
and gas properties as previously discussed.
LIABILITIES:
BR Energy's current liabilities decreased 15% to $144 thousand at March 31,
2000 from $171 thousand at March 31, 1999 as equity funds were utilized in
reducing debt. During 1999, BR Energy incurred $587 thousand of long-term debt
associated with the purchase of the two drilling rigs previously discussed.
Effective January 1, 1996, BR Energy adopted provisions of the Statement of
Financial Accounting Standards No. 109 "Accounting for Income Taxes" which
requires the use of the "liability method" under which deferred tax assets and
liabilities are recognized for their estimated future tax consequences. At
March 31, 2000 and 1999 BR Energy had recognized deferred income tax
liabilities of $199 thousand and $178 thousand, respectively as a result of
this methodology.
STOCKHOLDERS' EQUITY:
Total capital invested in BR Energy for Common and Preferred Stock
increased 48% to $3.9 million at March 31, 2000 from $2.5 million at March 31,
1999, primarily as a result of the purchases of Preferred Stock by investors as
previously discussed.
Despite recording net income of $99 thousand, BR Energy's retained earnings
declined 75% to an accumulated deficit of $606 thousand at March 31, 2000 from
an accumulated deficit of $346 thousand at March 31, 1998 as the result of
payment of approximately $468 thousand of cash dividends to BR Energy's
Preferred Shareholders during 2000 and 1999.
CAPITAL RESOURCES AND LIQUIDITY:
Cash and cash equivalents totalled $205,785 at March 31, 2000, BR Energy
has relied upon net inflows of cash from equity transactions, supplemented by
net inflows of cash generated by its operating activities to fund the purchase
of assets and its expansion. Management intends to further growth with similar
equity transactions and cash flow from operations.
REVIEW BY INDEPENDENT ACCOUNTANTS
The "Independent Accountants' Report" included herein is not a "report" or
"part of a Registration Statement" prepared or certified by an independent
accountant within the meanings of Section 7 and 11 of the Securities Act of
1933, and the accountants' Section 11 liability does not extend to such report.
The accompanying condensed financial statements and related disclosures
(included in Part I item 1) have been reviewed by the Company's independent
accountants in accordance with standards established by the American Institute
of Certified Public Accountants. Their report on such review is included on
page 13.
14
<PAGE> 17
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There are no legal proceedings pending against BR Energy, Inc.
ITEM 2. CHANGES IN SECURITIES
During the first quarter of 2000, the Company issued 60,650 shares of
Series D Preferred Stock for a net consideration of $279,850 (net of brokerage
commissions and legal expenses of approximately $23,400).These Preferred
Securities were sold to accredited investors using Regulation D, Rule 506 as an
exemption from registration. See the notes to the accompanying condensed
financial statements for a description of the terms of conversion or exercise
of the securities and warrants.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable
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
A. Reports in Form 8-K:
None
B. Exhibits: The following exhibits are either attached hereto or
incorporated herein by response.
10 -- Employment Contract with Edward Stille.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
BLUE RIDGE ENERGY, INC.
Date May 15, 2000 By /s/ James T. Cook, Jr.
--------------------------------
James T. Cook, Jr.
Sr. Vice President-Finance & CFO
15
<PAGE> 1
Exhibit 10
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") dated as of _________________,
_________, is by and between Blue Ridge Energy, Inc., a Nevada corporation (the
"Company"), and Edward L. Stillie ("Employee").
WITNESSETH:
WHEREAS, Employee is employed as President of the company; and
WHEREAS, the Company and Employee wish to document certain terms of
employment of Employee in such capacity,
NOW, THEREFORE, in consideration the premises and mutual covenants
herein contained, the Company and Employee hereby agree as follows:
1. EMPLOYMENT AND TERM OF EMPLOYMENT. Subject to the terms and
conditions of this Agreement, the Company hereby agrees to
employ Employee, and Employee hereby agrees to serve as
President of the Company, for a period of three years
commencing on the date hereof, which period shall
automatically be extended for an additional year on each
anniversary of this Agreement thereafter (as so extended at
any time, for "Term of Employment") unless notice to the
contrary is given not less than 60 days prior to any
anniversary of this Agreement by either party to this
Agreement.
2. SCOPE OF EMPLOYMENT. During the Term of Employment (i)
Employee will serve as President with powers and
responsibilities of such position set forth in the bylaws of
the Company, and Employee will perform diligently to the best
of his ability those duties set forth therein and in this
Agreement in a manner that promotes the interests and the
goodwill of the Company. Primary among those duties is the
raising of capital from the broker/dealer community, private
individuals and institutional markets for public and/or
private funds. (ii) President will be part of management
recommendation to the shareholders to serve on the Board of
Directors during the term of his employment. (iii) The Company
at this time shall not require employee to relocate, however,
in the event company at their sole discretion determine it is
the best interest of the company for employee to relocate
company may require this at company expense. Employee will
maintain a residence within the local area of the company's
primary place of business.
3. COMPENSATION. During the Term of Employment, the Company shall
compensate Employee for his services hereunder in such amount
as shall be determined by the Board of Directors of the
Company from time to time, but such compensation shall not be
reduced at any time in contemplation of, related to, or as the
result of, a Change in Control, as defined in Section 7.
Compensation shall
<PAGE> 2
be determined separately in a supplemental compensation
agreement. Employees compensation shall be set out in the
attached Exhibit "A" which is hereby incorporated by
reference.
4. ADDITIONAL COMPENSATION AND BENEFITS. As additional
compensation for Employee's services under this Agreement,
during the Term of Employment the company agrees to provide
Employee with the following reimbursements and benefits:
(a) The Company shall reimburse Employee for reasonable
and necessary expenses incurred by Employee in
furtherance of the Company's business, including a
mileage allowance for all business-related travel on
a per-mile basis at a rate equivalent to that allowed
by the Internal Revenue Service, provided that such
expenses are incurred in accordance with the
Company's policies and upon presentation of
documentation in accordance with expense
reimbursement policies of the Company as they may
exist from time to time, and submission to the
Company of adequate documentation in accordance with
federal income tax regulations.
(b) Employee may participate in any non-cash benefits
provided by the Company to its employees as they may
exist from time to time. Such benefits shall include
leave or vacation time, medical and dental insurance,
life insurance, accidental death and dismemberment
insurance, retirement benefits and disability
benefits, as such benefits may hereafter be provided
by the Company in accordance with its policies in
force from time to time. In addition, in the event of
Employee's death during the Term of Employment, the
company shall make available to Employee's spouse, at
the expense of such spouse, medical and dental
insurance as provided by the terms and conditions of
the then existing medical and dental insurance
policies carried by the terms and conditions the then
existing medical and dental insurance policies
carried by the Company unless otherwise prohibited by
applicable law.
5. CONFIDENTIALITY.
(a) Employee recognizes that the Company's business
involves the handling of confidential information of
both the Company and the Company's affiliates and
subsidiaries and requires a confidential relationship
between the company, and its affiliates and
subsidiaries and the Company and Employee. The
Company's business requires the fullest practical
protection and confidential treatment of unique and
proprietary business and technical information,
including treatment of unique and proprietary
business and technical information, including but not
limited to inventions, trade secrets, patents,
proprietary and confidential data and knowledge of
both the Company's affiliates and subsidiaries and
the
<PAGE> 3
company (collectively, hereinafter called
"Confidential Information") which is conceived or
obtained by Employee in the course of his employment.
Accordingly, during and after termination of
employment by the company, Employee agrees: (i) to
prevent the disclosure to any third party of all such
Confidential Information; (ii) not to use for
Employee's own benefit any of the Company's
Confidential Information, and (iii) not to aid others
in the use of such Confidential Information in
competition with the Company or its affiliates and
subsidiaries. These obligations shall exist during
and after any termination of employment hereunder.
Notwithstanding anything else contained herein, the
term "Confidential Information:" shall not be deemed
to include any general knowledge, skills or
experience acquired by Employee or any knowledge or
information known to the public in general.
(b) Employee agrees that every item of confidential
Information referred to in this Section 5 which
relates to the Company's present business or which
arises or is contemplated to arise out of use of the
Company's time, facilities, personnel or funds prior
to Employee's termination, is the property of the
Company.
6. COVENANT NOT TO COMPETE.
(a) Subject to the provisions of this section, without
the express prior written consent of the Company,
Employee will not serve as an employee, officer,
director or consultant, or in any other similar
capacity or make investments (other than open market
investments in no more than five percent (5%) of the
outstanding stock of any publicly traded company) in
any firm, corporation, association or other entity
whose activities directly compete with the activities
of the Company where such employment may involve
assisting such competitor with such activities as the
Employee performed on behalf of the Company which
directly compete with those now existing or
contemplated as of this date.
(b) Subject to the provisions of this section, without
the express prior written consent of the Company,
Employee will not solicit, recruit or hire, or assist
any person, firm, corporation, association or other
entity in the solicitation, recruitment or hiring of
any person engaged by the Company as an employee,
officer, director or consultant.
(c) Employee's obligations under (a) of this section
shall continue in force only while employee is
receiving salary payments from the company after
termination. Employee's obligation under (b) of this
section shall continue in force for two years after
termination. If there has been a "Change in Control",
as defined below, then the provisions of (a) and (b)
of this section shall have no further force and
effect after the date that such change of control
occurs.
<PAGE> 4
7. TERMINATION.
(a) Either the Company or Employee may terminate
Employee's employment during the Term of Employment
upon 60 days' written notice. Such termination by the
company shall require the affirmative vote of a
majority of the members of the Board of Directors of
the Company then in office who have been or will have
been directors for the two-year period ending on the
date notice of the meeting or written consent to take
such action is first provided. In the case of
termination during the Term of Employment, except in
those circumstances covered by 7(b) or (c) below,
Employee shall continue to receive salary for six
months from the day he last worked on the Company's
behalf pursuant to this Agreement, plus continuation
at the Company's expense of such medical and dental
coverage as then in effect for the same six month
period. Notwithstanding the foregoing, Employee shall
not receive such compensation if the Company
terminates his employment for cause. "Cause" shall be
defined as (i) commission of fraud against the
Company, its subsidiaries, affiliates or customers,
(ii) willful refusal without proper legal cause,
after 30 days' advance written notice from the
Chairman of the Board of the Company and/or the Chief
Executive Officer of the Company, or, after a Change
in Control, from the Continuing Directors, to
faithfully and diligently perform Employee's duties
as directed in such notice or correct or terminate
those practices as described in such notice, all
within the context of a forty-hour per week schedule,
or (iii) breach of Section 5 of this Agreement.
During the first year of employment in the case of
termination, the six months salary & benefits would
continue pro-rated based on months employed.
(b) Change of Control
(1) In the event Employee's employment is
terminated by the Company, after, by, on
account of, or in connection with, a "Change
of Control," as defined below, or in the
event Employee resigns during the Term of
Employment hereunder following a "Change of
Control as defined, the Company (i) shall
pay Employee on his last day of employment
by the Company a lump sun equal to twelve
months' salary, plus an additional two
weeks' salary for every year of service to
the Company, (ii) continue at the Company's
expense such medical and dental coverage as
then in effect for the remainder of the Term
of Employment, and (iii) pay one year's
premium on the universal life and group term
life insurance policies carried on
Employee's life or any successor to, or
replacement of, such policies, together with
assignment (if possible under the terms
thereof) of such universal life policy to
Employee within one year following such
termination.
<PAGE> 5
(2) Change of control: "Change of control," for
purposes of this Agreement, shall be deemed
to have occurred upon the occurrence of any
one (or more) of the following events, other
that a transaction with another person
controlled by, or under common control with,
the Company:
(A) Any person, including a "group" as
defined in Section (3) (d) (3) of the
Securities Exchange Act of 1934, as
amended, becomes the beneficial owner of
shares of the voting stock of the Company
with respect to which 40% or more of the
total number of votes for the election of
the Board may be cast;
(B) As a result of, or in connection with,
any cash tender offer, exchange offer,
merger, or other business combination, sal
of assets or contested election, or
combination of the above, persons who were
directors of the Company immediately prior
to such event shall cease to constitute a
majority of the Board;
(C) The stock holders of the Company shall
approve an agreement providing either for
a transaction in which the company will
cease to be an independent publicly owned
corporation or for a sale or other
disposition of all or substantially all
the assets of the Company.
(c) In the event of termination due to Employee's death
or as a result of sickness or disability of a
permanent nature rendering Employee unable to perform
his duties hereunder for a period of six (6)
consecutive months ("Permanent Disability") during
the Term of Employment, the Company shall pay to
Employee or the estate of Employee, as applicable, in
the year of death or the year thereafter (i)
compensation which would otherwise be payable to
Employee (as determined by, and subject to the
restrictions of, Section 3 hereof) up to the end of
the month of his death or the end of the sixth (6th)
month after he becomes unable to perform his duties
hereunder, and (ii) any bonus payable to Employee
pursuant to Section 3 prorated up to the date of
death or disability.
8. GOVERNING LAW. This Agreement shall be governed by and
constructed under the laws of the State of Kentucky Venue and
jurisdiction of any action relating to this Agreement shall
lie in Bowling Green, Kentucky, Warren County.
9. ENTIRE AGREEMENT. This agreement constitutes the sole
agreement between the parties and supersedes any and all other
agreements, oral or written, relating to
<PAGE> 6
the subject matter covered by the Agreement with the exception
of certain Indemnity Agreements which may exist between the
company and Employee, and which remain in force independent of
this Agreement.
10. WAIVER. Any waiver or breach of any of the terms of this
Agreement shall not operate as a waiver of any other breach of
such terms or conditions, or any other terms or conditions,
nor shall any failure to enforce any provisions hereof operate
as a waiver of such provisions or any other provision hereof.
11. ASSIGNMENT. This Agreement is a personal employment contract
and the rights and interests of Employee hereunder may not be
sold, transferred, assigned or pledged.
12. SUCCESSORS. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective heirs,
representatives, successors and assigns.
<PAGE> 7
IN WITNESS WHEREOF, THE PARTIES HERETO AFFIXED THEIR SIGNATURES
HEREUNDER AS OF THE DATE FIRST ABOVE WRITTEN.
BLUE RIDGE ENERGY, INC.
BY
---------------------------
ROBERT D. BURR
TITLE: C.E.O. & CHAIRMAN
"EMPLOYEE"
------------------------------
NAME: EDWARD L. STILLIE
ADDRESS: 711 HAWKSBILL ISLAND DR.
SATELLITE BEACH, FLORIDA 32937
<PAGE> 8
COMPENSATION AGREEMENT
COMPENSATION AGREEMENT DATED _________________________ Between Blue Ridge
Energy, Inc., a Nevada Corporation (The Company), and Edward L. Stillie
(Employee)
Per our recent discussions, the following are the components of the compensation
agreement for President, Blue Ridge Energy, Inc.
1. Annual Salary - $180,000.00
2. Commission - 1% of Sales Identifies to Edward L. Stillie
3. National Override - .2% (20 Basis Points) of Blue Ridge Energy
capital raised by Edward L. Stillie, or Blue Ridge Energy
Marketing Dept., National or Regional Marketing Directors.
4. Blue Ridge Energy, Inc. Stock - Granted as per attached
performance schedule. Each year stock awarded will vary in
amount up or down based on capital raised.
CAPITAL RAISED SHARES SHARES AWARDED
YEAR 1 6,000,000 6/8 x 20,000 = 15,000
FEB 2001 8,000,000 8/8 x 20,000 = 20,000
10,000,000 10/8 x 20,000 = 25,000
YEAR 2 8,000,000 8/10 x 20,000 = 16,000
10,000,000 10/10 x 20,000 = 20,000
12,000,000 12/10 x 20,000 = 24,000
YEAR 3 10,000,000 10/12 x 20,000 = 16,666
12,000,000 12/12 x 20,000 = 20,000
14,000,000 14/12 x 20,000 = 23,333
YEAR 4 12,000,000 12/14 x 20,000 = 17,143
14,000,000 14/14 x 20,000 = 20,000
16,000,000 16/14 x 20,000 = 22,857
YEAR 5 14,000,000 14/16 x 20,000 = 17,500
16,000,000 16/16 x 20,000 = 20,000
18,000,000 18/16 x 20,000 = 22,500
5. Bonuses and or Salary Raises from Time to Time as Per the
Board of Directors.
<PAGE> 9
6. Vacation - Three (3) weeks paid vacation per year.
Four (4) weeks paid vacation per year after two
years of service.
BLUE RIDGE ENERGY, INC.
By
----------------------------
Robert D. Burr
Title: C.E.O. & CHAIRMAN
"EMPLOYEE"
-------------------------------
Name: Edward L. Stillie
Address: 711 Hawksbill Island Dr.
Satellite Beach, FL 32937
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<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 205,785
<SECURITIES> 0
<RECEIVABLES> 1,105,557
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<PP&E> 3,187,131
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0
698
<COMMON> 29,049
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<TOTAL-LIABILITY-AND-EQUITY> 4,519,009
<SALES> 1,311,835
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<CGS> 973,139
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