Quarterly Report for Small Business Issuers Subject
To the 1934 Act Report Requirements
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Quarter Ended March 31, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
Commission File Number 333-47699
FAN ENERGY INC.
--------------------------------------------
(Name of Small Business Issuer in its charter)
Nevada 77-0140428
--------------------------- -------------------
(State or other jurisdiction (IRS Employer
of incorporation) Identification No.)
1801 Broadway, Suite 720, Denver, Colorado 80202
- ------------------------------------------ --------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (602) 483-8848
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
As of May 11, 2000 the Registrant had outstanding 9,451,492 shares of common
stock, par value $.00l.
Transitional Small Business Disclosure Format (check one):
Yes [ ] No [X]
<PAGE>
FAN ENERGY INC.
FORM 10-QSB
MARCH 31, 2000
Table of Contents
Part I Financial Information
Item 1. Financial Statements
Balance Sheets as of December 31, 1999 and
March 31, 2000 3
Statements of Operations for the Three Months Ended
March 31, 1999 and 2000
and cumulative amounts from inception 4
Statements of Cash Flows for the Three Months Ended
March 31, 1999 and 2000
and cumulative amounts from inception 5
Notes to Financial Statements 6
Item 2. Management's Plan of Operation 7- 8
Part II
Item 1. Legal Proceedings 8
Item 2. Changes in Securities 8
Item 3. Defaults Upon Senior Securities 8
Item 4. Submission of Matters to a Vote of Security Holders 8
Item 5. Other Information 8
Item 6. Exhibits and Reports on Form 8-K 9
Signatures 9
2
<PAGE>
PART I
Item 1. Financial Statements
<TABLE>
<CAPTION>
FAN ENERGY INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
December 31, March 31,
1999 2000
------------ ---------
(Unaudited)
ASSETS
<S> <C> <C>
CURRENT ASSETS
Cash .................................................... $ 11,290 $ 29,877
Accounts receivable ..................................... 46,147 28,301
----------- -----------
Total Current Assets ................................. 57,437 58,178
OIL AND GAS PROPERTIES, net ............................... 327,589 290,739
----------- -----------
$ 385,026 $ 348,917
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable - trade ................................ $ 8,397 $ 13,541
- related .............................. 20,500 20,500
Note payable - bank ..................................... 20,000 --
----------- -----------
Total Current Liabilities ............................ 48,897 34,041
----------- -----------
STOCKHOLDERS' EQUITY
Preferred Stock, $.01 par value
Authorized - 5,000,000 shares
Issued - none ........................................ -- --
Common Stock, $.001 par value
Authorized - 95,000,000 shares
Issued and outstanding - 9,451,492 shares ............ 9,452 9,452
Additional paid-in capital ................................ 2,317,509 2,317,509
Deficit accumulated during the developmental stage ........ (2,091,332) (2,112,585)
Additional paid-in capital stock options .................. 100,500 100,500
----------- -----------
336,129 314,876
----------- -----------
$ 385,026 $ 348,917
=========== ===========
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
<TABLE>
<CAPTION>
FAN ENERGY INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
Three Months Ended Cumulative
March 31, Amounts from
-------------------- Jan. 1, 1997 to
1999 2000 March 31, 2000
---- ---- ---------------
<S> <C> <C> <C>
REVENUES
Oil and gas production ...................................... $ 20,662 $ 41,370 $ 194,202
----------- ----------- -----------
OPERATING EXPENSES
Lease operating expenses .................................... 1,208 1,650 33,281
Depreciation, depletion and amortization .................... 21,410 45,196 170,134
General and administrative .................................. 41,399 15,501 537,010
Impairment of oil and gas properties ........................ -- -- 1,557,702
Interest .................................................... -- 276 8,660
----------- ----------- -----------
64,017 62,623 2,306,787
----------- ----------- -----------
NET (LOSS) ....................................................... $ (43,355) $ (21,253) $ (2,112,585)
=========== =========== ===========
NET (LOSS) PER COMMON SHARE -
Basic and Diluted ........................................... $ (.004) $ (.002) $ (.28)
=========== =========== ===========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING -
Basic and Diluted ........................................... 10,051,704 9,451,492 7,431,318
=========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
<TABLE>
<CAPTION>
FAN ENERGY INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
Three Months Ended Cumulative
March 31, Amounts from
------------------------- Jan. 1, 1997 to
1999 2000 March 31, 2000
---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATNG ACTIVITIES
Net (loss) ..................................................... $ (43,355) $ (21,253) $(2,112,585)
Adjustments to reconcile net (loss) to net cash
provided (used) by operating activities
Depreciation, depletion and amortization ....................... 21,410 45,196 170,134
Impairment of oil and gas properties ........................... -- -- 1,557,702
Stock options .................................................. -- -- 102,832
Stock for services and payables ................................ -- -- 137,953
Forgiveness of payables by officer/director .................... -- -- 22,000
Changes in assets and liabilities
Increase in accounts payable ................................ 48,673 5,144 34,041
Decrease (increase) in accounts receivable .................. (19,454) 17,846 (28,301)
----------- ----------- -----------
Net Cash Provided (Used) by Operating Activities ............... 7,274 46,933 (116,224)
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Cash paid for oil and gas properties ........................... -- (8,346) (1,718,575)
----------- ----------- -----------
Net Cash (Used) in Investing Activities ........................ -- (8,346) (1,718,575)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from exercise of common stock warrants ................ -- -- 413,000
Proceeds from sale of common stock ............................. -- -- 1,500,000
Cash paid for offering costs ................................... -- -- (48,324)
Proceeds from short term borrowings ............................ -- -- 90,000
Repayment of short term borrowings ............................. -- (20,000) (90,000)
----------- ----------- -----------
Net Cash (Used) Provided by Financing Activities ............... -- (20,000) 1,864,676
----------- ----------- -----------
NET (DECREASE) INCREASE IN CASH ..................................... 7,274 18,587 29,877
CASH, BEGINNING OF PERIODS .......................................... 15,875 11,290 --
----------- ----------- -----------
CASH, END OF PERIODS ................................................ $ 23,149 $ 29,877 $ 29,877
=========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
FAN ENERGY INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 2000
The unaudited financial statements included herein were prepared from the
records of the Company in accordance with Generally Accepted Accounting
Principles and reflect all adjustments which are, in the opinion of management,
necessary to provide a fair statement of the results of operations and financial
position for the interim periods. Such financial statements generally conform to
the presentation reflected in the Company's Form 10-KSB filed with the
Securities and Exchange Commission for the year ended December 31, 1999. The
current interim period reported herein should be read in conjunction with the
Company's Form 10-KSB subject to independent audit at the end of the year.
The results of operations for the three months ended March 31, 2000 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 2000.
6
<PAGE>
Item 2. Management's Plan of Operations
In the following discussion we are providing an analysis of our financial
condition and the Plan of Operation during the next quarter and the balance of
the fiscal year. This discussion should be read in conjunction with our
financial statements and the notes thereto. Certain matters discussed below are
based on potential future circumstances and developments which we anticipate or
expect, but which cannot be assured. Such forward- looking statements include,
but are no limited to, our plans to conduct drilling operations, trends in the
results of our operations, anticipated rates of production, natural gas and oil
prices, operating expenses and our anticipated capital requirements and capital
resources. The actual results which we achieve in our operations could differ
materially from the matters discussed in the forward-looking statements.
We generated $ 41,370 of revenue in the first quarter of 2000 compared to $
20,662 in the first quarter of 1999. The revenues during the first quarter of
2000 and 1999 was from our interest in the Molluca Well in the Sacramento Basin
of central California. Our revenue during the first quarter of 2000 was from our
interest in 103,797 mcf produced at an average price of $ 2.15 per mcf. Our
revenue during the first quarter of 1999 was from our interest in 67,612 mcf
produced and sold at an average price of $ 1.65 per mcf. This producing natural
gas well in the Sacramental Basin of central California and our interest in the
surrounding unexplored acreage is being held for sale. Pending any sale of those
properties, we will continue to receive revenue from production from this well.
We hold an undivided net interest equal to approximately 20% in a 5,760
acre prospect located in Sweetwater County, Wyoming. Two exploratory wells have
been drilled on the prospect, with the first well completed as an apparent oil
producer and the second as a marginally productive natural gas well. Both wells
were shut-in for the winter months of 1999 and early 2000 because of the
weather. The operator of the well, Fancher Oil LLC, expects additional wells to
be drilling on this prospect in 2000 and thereafter. Because of our limited
financial resources, it is likely that we will farm-out all or a portion of our
interest in these properties for development by others, with the expectation
that we would receive a reduced interest in future wells, and most of our share
of drilling and development expenses would be paid by other participants.
We had general and administrative expenses of $ 15,501 in the first
quarter, compared to $ 41,399 in the prior year. We decided not to pay
management fees and reimbursement for office space to Fancher Oil Company and
Arizona Corporate Management during 2000 until we are able to reasonably afford
their services. Our expenses were significantly less during the first three
months of 2000 as payments were made to consultants on an as- needed basis only.
At March 31, 2000, the Company had $ 29,877 in cash, compared to $11,290 at
December 31, 1999.
During 1999, we obtained a $ 150,000 line of credit which was secured by
the personal guarantee of our President. The loan was used to repay amounts owed
to Fancher Oil, LLC and other accounts payable and to fund some operating
expenses. The principal balance owed on the loan at December 31, 1999 was $
20,000 and was paid off during the first quarter of this year.
The Company will need to raise additional financing over the next twelve
months to continue drilling and pay its general and administrative expenses. In
May 2000, the Company expects to commence a public offering of a minimum of
400,000 units, up to a maximum of 3.0 million unit at $0.10 per unit. The
offering has not commenced as of the date of this report.
7
<PAGE>
Each unit will include one share of common stock and one warrant for one
share. In 2000, the Company extended to October 31, 2000, the expiration date
for outstanding warrants pursuant to which holders may purchase up to 1,180,000
shares of common stock at $.15 per share. The Company anticipates that at least
a portion of outstanding warrants will be exercised by warrant holders. If all
outstanding warrants are exercised, of which there is no assurance, the Company
would receive a total of $ 177,000 by October 31, 2000, the date of expiration.
No assurances can be made as to whether any of the warrants will be exercised.
The Company did not raise any money from the sale of securities during the last
15 months.
Unless a substantial portion of the outstanding warrants are exercised or
at least the minimum offering in the anticipated offering is completed or we
sell our interests in the Bali and Fiji prospects, we do not believe that our
available cash will be sufficient to pay all of our anticipated general and
administrative expenses, capital lease costs and anticipated drilling expenses
over the next 12 months. As a result we may be unable to participate in drilling
any additional exploratory or development wells on the Horsethief Canyon
prospect or other nearby prospects. If we are able to raise additional capital
we will use the proceeds to pay our ongoing operating expenses and to
participate in additional drilling. To fund the anticipated near term capital
shortfall, we may accept loans from management or other affiliates, in addition
to the line of credit referred to above. Assuming sufficient capital resources
become available, we will continue to seek to acquire interests in other oil or
natural gas properties.
We do not have any employees and instead we use consultants for matters
pertaining to drilling, property evaluations and administration. We do not
presently contemplate hiring employees during the next 12 months.
Year 2000 Considerations. Because we are a small company and use computer
systems and applications owned by our consultants, we did not incur any material
costs in remediating potential Year 2000 problems. Our consultants have
confirmed to us that Year 2000 issues on their systems were detected and
remediated. We do not believe that Y2K issues affected others in the oil and gas
industry with whom we may have operating agreements or other arrangements, such
as oil or gas purchasers, pipeline operators, drilling contractors, governmental
agencies or others. Problems experienced by such other entities could adversely
affect our business.
PART II Other Information
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
8
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
Exhibit 27 - Financial Data Schedule
During the quarter ended March 31, 2000, the Registrant did not file
any reports on Form 8-K.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant has
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
FAN ENERGY INC.
Signatures Title Date
- ---------- ----- ----
/s/ George H. Fancher, Jr. Chief Operating Officer; May 15, 2000
- -------------------------- and Chairman of the Board
George H. Fancher, Jr.
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
QUARTER ENDED MARCH 31, 2000
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 29,877
<SECURITIES> 0
<RECEIVABLES> 28,301
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 58,178
<PP&E> 2,018,575
<DEPRECIATION> 1,727,836
<TOTAL-ASSETS> 348,917
<CURRENT-LIABILITIES> 34,041
<BONDS> 0
0
0
<COMMON> 9,452
<OTHER-SE> 305,424
<TOTAL-LIABILITY-AND-EQUITY> 348,917
<SALES> 41,370
<TOTAL-REVENUES> 41,370
<CGS> 0
<TOTAL-COSTS> 1,650
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 276
<INCOME-PRETAX> (21,253)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (21,253)
<EPS-BASIC> (.002)
<EPS-DILUTED> (.002)
</TABLE>
