SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-KSB
ANNUAL REPORT UNDER SECTION 13 or 15(d) of
the Securities Exchange Act of 1934
For the fiscal year ended March 31, 1997 Commission file number 0-9336
STANDARD ENERGY CORPORATION
(Exact name of registrant as specified in its charter)
Utah 87-0338149
(State or other jurisdiction of (I.R.S.Employer Identification No.)
incorporation or organization)
363 Bearcat Drive
Salt Lake City, Utah 84115
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (801) 364-9000
(a) Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
None None
(b) Securities registered pursuant to Section 12(g) of the Act:
Title of each class Name of each exchange on which registered
Common Stock Nasdaq OTC Bulletin Board
par value $0.01 per share OTCBB: STDE
Indicate by check mark whether the registrant (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 aggregate market value of the voting stock held by non-affiliates
of the Registrant was approximately $5,269,101, based on the market price
of $0.17 per share and based upon 30,994,714 shares held by non-affiliates
at March 31, 1997.
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date. The registrant
has two classes of stock authorized. They are the $0.01 per share par value
common stock and the $0.01 per share par value preferred stock. As of June
26, 1997, there were 104,082,974 shares of the $0.01 per share par value
common stock outstanding. As of June 26, 1997, there were no preferred
shares issued.
(c) Narrative Description of Business.
Oil and Gas Lease Sales
Standard Energy Corporation's ("the Company") principal business is,
and historically has been, the acquisition of unproven oil and gas
leaseholds, primarily with the intent of reselling such leaseholds to third
parties. Historically, the Company has acquired primarily federal oil and
gas leaseholds through the BLM's revised Simultaneous leasing program
(SIMO). The Company also obtains leases through purchases in competitive
bidding programs offered by various state agencies, principally the State
of Utah.
The Company evaluates the geologic potential of the leases, which it
proposes to acquire, based primarily upon geologic information available
through the Company's wholly-owned subsidiary, Petroleum Investment Company
("PIC"). The Company's President, Dean W. Rowell, is materially involved in
such evaluations which are based, among other factors, upon the results of
prior exploratory and developmental activities on adjacent and contiguous
properties, current lease sale trends and Mr.Rowell's 35-year experience
in the oil and gas business.
The Company, which is known within the industry as a buyer and seller
of leases, typically is approached by a potential buyer for one or more of
its leasehold interests. Negotiations generally ensue and a dollar price
and retained royalty interest is agreed upon and a sale concludes.
The Company had limited participation in the BLM's leasing program
from 1986 through the year ended March 31, 1997, except through its
participation agreements with certain unrelated third parties on a limited
basis. The Company presently has limited funds available to participate in
the revised BLM leasing program.The Company believes that the deposit
feature of the revised leasing program has made Company participation in
the leasing program very difficult as the deposit feature penalizes many of
the less capitalized participants in the leasing program and provides a
substantial advantage to leasing program participants which have greater
financial resources than the Company. (See Management's Discussion and
Analysis of Financial Condition and Results of Operations)
The location and gross and net acreage of the Company's inventory of
oil and gas leaseholds at March 31, 1997 was approximately as follows:
Location Gross Acres Net Acres
Utah 7,918 7,918
Wyoming 6,738 4,799
Montana 4,442 2,961
Total 19,098 15,678
A gross acre is an acre in which the Company owns a working interest.
Net acres are calculated by gross acres multiplied by the percentage of
working interest owned.
The above chart does not include the Company's interest in unrelated
third-party leasehold acquisitions and leasehold sales. Third-party
leasehold inventory remained at about 80,000 net acres during fiscal year
1996, ended March 31, 1997, and into fiscal 1998. During the year ended
March 31, 1997, the Company's ability to acquire leaseholds has continued
to be adversely affected. (See Management's Discussion and Analysis of
Financial Condition and Results of Operations)
Management has adopted a policy of periodically evaluating each of
the leaseholds held by the Company to determine whether the current market
value of a leasehold justifies making additional rental payments with
respect thereto.Based upon such evaluation, the Company abandons (writes
off) those leaseholds for which it does not wish to continue making rental
payments.The amount of acreage abandoned and sold by the Company in each
of the last two fiscal years has caused the Company's balance of inventory
to decline over the course of such period, primarily due to the downturn in
the domestic oil industry.No independent appraisals are obtained by the
Company on leases purchased, nor is there an independent committee of the
Board of Directors which evaluates any of such leases.
At the year ended March 31, 1997, the Company maintained it's
leasehold inventory at approximately 80,000 net acres through its
participation with third-party participants. Because the Company has no
financial basis in such leaseholds, the Company's financial statements and
the foregoing acreage charts do not reflect the acquisition of such newly
acquired leaseholds. As third-party leasehold sales take place, revenue is
recorded under line item "Sales of oil and gas leasehold interest".
The Company's policy is to acquire and hold leaseholds in inventory
for a period generally not longer than five years in order to maximize the
gain to the Company on such leasehold costs. The Company does not advertise
for the sale of leases owned by it, but rather believes that most of its
leasehold purchasers become aware of the Company's leaseholds through an
examination of BLM records or other means.During the Company's two fiscal
years ended March 31, 1997 and 1996, revenues from the sale of oil and gas
leasehold interests, and the percentage of the Company's consolidated
revenues during such period represented by such revenues were zero for both
years, reflecting the depth of the downturn in the domestic oil industry.
(See Consolidated Financial Statements)
The Company's oil and gas leasehold inventory remained at
approximately 80,000 net acres at the year ended March 31, 1997, including
leaseholds acquired under the third-party agreements.Although its leasing
activity was reduced substantially due to the sharp decline in exploration
activities during the last five fiscal years, the Company believes it can
continue its present lines of business, including the purchase and sale of
newly acquired oil and gas leaseholds.
The Company retains a royalty interest, ranging from 1% to 6%, in
substantially all of the leaseholds which it has resold.Since 1981, the
Company has not received any substantial earnings from retained royalty
interests in resold leaseholds.The majority of the leases acquired by the
Company are leaseholds granted by the BLM subject to a 12-1/2% gross
royalty interest in favor of the federal government.
The majority of the Company's inventory of undeveloped leases are
subject to the jurisdiction of the BLM, with the balance being leased from
agencies of various Rocky Mountain states.As a result of the advance lease
deposits required under the revised leasing program and the Company's
current working capital difficulties, it may be expected that the
percentage of leases acquired in the future from such states may increase.
BLM leaseholds granted under the old program are leased by the federal
government at an annual rental of $1.00 per acre on all leases acquired
prior to January 1, 1988, $1.50 per acre on all leases acquired after such
date, and $2.00 per acre for leases acquired and held for more than five
years under the revised leasing program format.
The majority of the Company's BLM leasehold inventory of net acreage
at March 31, 1997 consists of BLM leaseholds granted after January 1, 1994,
and generally have an initial term of ten years, which may be extended for
an additional two years if during the initial term such leasehold is
"improved" by the commencement of drilling activities thereupon.Aggregate
rentals paid by the Company during the years ended March 31, 1997 and 1996
for all oil and gas properties leased by it were approximately $16,000 and
$6,000, respectively.The Company retains the right to reacquire the lease
if the purchaser fails to make rental payments due to the BLM on leases
sold to unrelated third-parties by the Company.
The Revised BLM Oil and Gas Leasing Program
The federal government's leasing program is administered pursuant to
the Minerals Leasing Act of 1920, as amended.Under such Act, properties
are made available to the public by means of a competitive bidding system.
Properties receiving no bid are assigned to the revised SIMO program.In
the revised SIMO program, applicants filing for a given leasehold by a set
date are deemed to have filed "simultaneously" with other applicants and
thus are eligible to participate in the drawing.Under the revised format
of the SIMO program, applicants are required to deposit the first year
rental payments for each property applied for at the time of filing an
application.Funds advanced to the BLM as deposits do not bear interest.
During fiscal 1997, the BLM took approximately 50 days, from the date
funds were required to be deposited, to process refunds of deposits with
respect to unawarded leases, which permitted participants to "rollover"
their refunds into payments of advance deposits in the subsequent SIMO
program drawing period.However, there can be no assurances as to how long
the BLM will take to refund such deposits in the future.
The BLM has on several previous occasions since 1920 suspended and/or
modified the BLM leasing program.No assurances can be given that the
revised leasing program will not be subsequently eliminated, modified or
suspended, or that the Company will be able to actively participate in or
derive profits from the revised leasing program.
Geological Information Services
The Company, through its wholly-owned subsidiary, PIC, provides a
variety of geologic lease evaluation services.PIC makes available to
subscribers monthly reports containing information which evaluate leases
offered in the BLM's revised leasing program.Such information includes
comprehensive geologic data, recommendations and reports with respect to
leaseholds offered in the revised leasing program, including PIC's
evaluation of the production prospects of such leaseholds and, frequently,
an estimated resale value for such leaseholds, the names of selected
participants, results of auction sales and drawings, and other
information.In addition to such monthly reports, PIC also sells
information with respect to individual oil and gas properties throughout
the Rocky Mountain area.
The geologic and other information which PIC makes available through
its reporting services is obtained from different sources, including PIC's
internal files which contain well and land oil and gas exploration data on
a historical basis in the nine-state area comprising the Rocky Mountain
region.Such data is interpreted and summarized by PIC's part-time in-house
geologists and landmen.
PIC, through a wholly-owned subsidiary, also provides oil and gas
mapping services with respect to properties located throughout the Rocky
Mountain region.PIC prepares base survey and geologic maps on various
scales, reflecting significant oil and gas well drilling activity in a
particular area.
During the Company's two fiscal years ended March 31, 1997 and 1996,
revenues contributed to the Company's consolidated revenues by PIC were
approximately $14,000 and $15,000, respectively.The decrease in revenue
contributed by PIC for such fiscal periods, as compared to prior fiscal
years, was the result of the 1986 worldwide crude oil price collapse.As
the result of such price collapse, PIC terminated the services of several
employees, including four geologists. (See Management's Discussion and
Analysis of Financial Condition and Results of Operations)
Oil and Gas Exploration and Production
The Company's oil and gas exploration and production operations are
presently insignificant and no reserve information is available.
Competition
The Company experiences substantial competition in its business of
buying and selling oil and gas leaseholds.The Company's competitors
include oil companies, as well as numerous independent operators, many of
whom have substantially greater resources than the Company and its
affiliates.The revised BLM leasing program, and in particular, the feature
which requires advance deposit of annual lease rentals at the time of
applying for such leases, has the effect of favoring companies with
financial resources greater than the Company's and its affiliates'.
With respect to its geologic information services, the Company
experiences competition from individual operators who advise as to the
geologic potential of properties listed for lease under the revised BLM
leasing program and other oil and gas properties, as well as from
publishers of newsletters providing certain information similar to that
which the Company makes available to its subscribers.The Company believes
itself to be a factor in the geologic information services industry in the
Rocky Mountain States, premised upon the quality and volume of its land
records, the number of subscribers to its publications and the extremely
limited number of competitors, comprised mostly of individuals, offering
similar, but what Management believes to be less complete services to the
general public.
The Company's competitors in oil and gas exploration, development and
production include major oil companies, numerous independent oil and gas
companies, individual proprietors and drilling programs.Many of such
competitors possess greater financial resources than those available to the
Company.
Employees
As of June 26, 1997, the Company had three employees, including two
executive officers and one part time employee.In addition, the Company's
practice in connection with the revised leasing program is to contract with
geologists and landmen to assist the Company in the preparation of its
geologic information reports as needed.None of the Company's employees are
represented by a union or subject to a collective bargaining agreement and
the Company has never experienced a work stoppage. The Company believes its
employee relations to be good.
(d) Biomass.
As of June 26, 1997, the Company owned 5,252,556 shares of Biomass
International, Inc.("Biomass"), representing approximately 15% of the
presently issued and outstanding shares of Biomass, a publicly-held Utah
corporation.The market value of said shares were $0.02 bid and $0.08 asked
at March 31, 1997. At such date, the Company had invested approximately
$4.1 million in Biomass' proprietary Biomass Technology, all of which was
expensed for accounting purposes as opposed to capitalizing it.Because of
such accounting practice the Company's entire 5,252,556 common share
ownership of Biomass is shown on the Company's financial statements at a
zero basis, which has resulted in a much lower statement of assets,
together with a much lower statement of net worth than would ordinarily be
expected. (See Certain Business Relationships)
The Biomass Technology
The Biomass Technology is a proprietary chemical process which has
been designed to convert the cellulosic (plant) portion of forest,
agricultural and municipal sold waste ("MSW") materials, principally, into
glucose and certain other base sugars, which have a wide range of
commercial applications, and lignin, a coal-like aromatic substance which
is a usable fuel.The Biomass Technology has been designed to be a
continuous, acid hydrolysis process based on a proprietary combination of
time, heat and catalytic agents. (See Certain Business Relationships)
(e) Financial Information about Foreign and Domestic Operations and Export
Sales.
Inapplicable.
Item 2.PROPERTIES
The Company's executive offices are located in a 4,000 square
foot building. The premises are leased from a non-affiliated party, at an
annual rental of approximately $16,000, on a month-to-month basis.Such
space is shared with Trachyte Oil Company and Biomass, both affiliates of
the Company.Management is of the opinion that such cost is comparable to
or below normal rates in the area and believes that such facilities are
adequate for the Company needs in the proximate future.
The location and gross and net acreage of the Company's inventory of
oil and gas leaseholds at March 31, 1997 was approximately as follows:
Location Gross Acres Net Acres
Utah 7,918 7,918
Wyoming 6,738 4,799
Montana 4,442 2,961
Total 19,098 15,678
A gross acre is an acre in which the Company owns a working interest.
Net acres are calculated by gross acres multiplied by the percentage of
working interest owned.
Item 3. LEGAL PROCEEDINGS
The Company has been found liable pursuant to a motion of summary
judgement in the case of Echard vs.Standard Energy Corporation.The amount
of damages have not been determined and awaits a further hearing by the
court.Such proceedings date back to 1989 and no action to set damages or
collect the same has been taken since that date by plaintiff.In the event
damages are awarded by the court it is believed that such damage amount
would be material to the financial condition of the Company.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On January 17, 1996, the Company submitted proxy material to
security holders of the Company through the solicitation of proxies. The
Company's last shareholders meeting was held on February 5, 1996, at Little
America Hotel in Salt Lake City, Utah, re-electing the former board of
directors consisting of Dean W.Rowell, Pamela K.Nelson and Michael
M.Cannon, confirmed Peterson, Siler and Stevenson as the Company's
auditors for the 1996 fiscal year and increased the capital stock from
100,000,000 shares to 200,000,000 shares, all pursuant to proxy material
mailed to shareholders on January 17, 1996.
The Company is now authorized to issue two classes of stock divided
into 10,000,000 shares of $.01 par value preferred shares, of which none
are issued, and 200,000,000 shares of $.01 par value common shares of which
104,082,974 shares were issued as of June 26, 1997.The Company foresees a
need for additional equity financing, through either private or public
means, in order to continue in existence.
On June 5, 1996, Peterson, Siler and Stevenson was terminated as
Company auditors. The termination was due to a lower bid price for the
Company's audit business for the annual period ended March 31, 1997, and
did not involve a dispute with the Company over accounting policies or
practices. Simultaneous with the termination of Peterson, Siler and
Stevenson, the Company retained the audit services of Jones, Jensen &
Company of Salt Lake City, Utah whom have completed a certified audit of
the Company's books and records for the fiscal periods ended March 31, 1997
and 1996.
The Company intends to solicit proxies for a shareholders meeting to
be held on approximately October 22, 1997 at 9:30 a.m. at the Company's
corporate headquarters at 363 Bearcat Drive, Salt Lake City, Utah 84115.
The Company anticipates that proxy material will be available to
shareholders by September 20, 1997.
PART II
Item 5.MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY
HOLDER MATTERS
Price Range of Common Stock
The Company's shares of Common Stock are traded on the OTC Bulletin
Board ("OTCBB") electronic quotation service, operated by The Nasdaq Stock
Market, Inc. The following table sets forth the high and low bid quotations
of such Common Stock for the periods indicated, as reported by the OTCBB.
The quotations set forth below represent prices between dealers and do not
include retail markups, markdowns or commissions and may not represent
actual transactions.
COMMON STOCK
High Low
Fiscal Year 1996
First Quarter .......... $ 0.08 $ 0.06
Second Quarter .......... 0.10 0.06
Third Quarter .......... 0.10 0.06
Fourth Quarter .......... 0.43 0.12
Fiscal Year 1997
First Quarter .......... $ 0.19 $ 0.06
Second Quarter .......... 0.35 0.21
Third Quarter .......... 0.32 0.11
Fourth Quarter .......... 0.18 0.13
Fiscal Year 1998
First Quarter .......... $ 0.26 $ 0.15
(through June 26, 1997)
Approximate Number of Equity Security Holders
Approximate number of record
Title of Class holders as of June 26, 1997
Common Stock, par value $0.01 per share 1,800
Preferred Stock, par value $0.01 per share None Issued
Dividends
The Company has neither declared nor paid any dividends on its Common
Stock since the inception of the Company, and the Board of Directors does
not contemplate the payment of dividends in the foreseeable future.Any
decision as to the future payment of dividends will depend on the earnings
and financial position of the Company and such other factors as the Board
of Directors may deem relevant.
Item 6. SELECTED FINANCIAL DATA
Operating Data:
(in thousands, except per share data)
Years Ended March 31
1997 1996
Revenue $ 35 $ 36
Costs and expenses:
Oil and Gas related expenses 32 26
Securities transactions 0 0
General and administrative,
including interest 145 146
Total costs and expenses 177 172
Other income (expense) before
income taxes 1 2
Net income (loss) $ (141) $ (134)
Earnings (loss) per share:
Net income (loss) $ (.00) $ (.00)
Weighted average shares of
Common Stock outstanding 102,712 97,582
Balance Sheet Data:
(in thousands)
Years Ended March 31
1997 1996
Current assets $ 5 $ 96
Total assets $ 181 $ 276
Current liabilities 55 40
Stockholders' equity (deficiency) $ 126 $ 236
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Revenues
The Company realized revenues of approximately $36,000 during the
fiscal 1997 period, ended March 31, 1997, as compared with approximately
$37,000 for the corresponding 1996 fiscal period. Cash requirements during
the fiscal 1997 period were obtained from a combination of internally
generated cash flow from operations, asset sales, and private sales of
Common Stock.
Revenue from the sale of oil and gas leasehold interests during the
fiscal 1997 period, ended March 31, 1997, was $0.00 (zero), compared to
$0.00 (zero) for the comparative 1996 fiscal period. Traditionally the
Company's largest revenue source, oil and gas leasehold sales have
positively affected the Company's operations during the past five years.
The continued downturn in the domestic oil and gas industry since the 1993
worldwide collapse of crude oil prices is apparent from fiscal 1997
leasehold sales, and from interest in future lease offerings, the result of
which is a decrease in oil and gas exploration activities in the U.S.
Reduced exploration activities has caused the Company to write-off or
write-down most of its prior leaseholds held for resale.
The Company does not expect to realize significant cash flows from the
sale of leaseholds during fiscal 1998, as the domestic oil industry
continues to shrink from the 1993 worldwide collapse of crude oil prices in
what appears to be a domestic oil industry in full flight to foreign
exploration caused by negative U.S. Government policies toward oil and gas
exploration in the U.S.
The revised BLM leasing program requires advance deposits covering the
first year rental for leases applied for, but the Company and its
affiliates have only limited funds to participate in such revised leasing
program. In order to participate the Company has agreements with unrelated
third-parties, in which such third-parties provided capital to jointly
participate in the revised leasing program. Recent increases in frontier
area leasing and exploration has resulted in an increase in third-party
leasehold acquisitions. The Company provides the raw data and services to
identify potential leaseholds, but because the Company has no financial
basis in such leaseholds, the Company's financial statements do not reflect
the acquisition of such newly acquired leaseholds. As third-party leasehold
sales take place, revenue is recorded under line item "sales of oil and gas
leasehold interest".
New leasehold acquisitions, together with existing leaseholds have
resulted in a leveling of the Company's leasehold inventory to
approximately 80,000 net acres into fiscal 1998, including third-party
acquisitions.
Revenues from the sale of the Company's geologic information services
were approximately $14,000 for the fiscal 1997 period, ended March 31,
1997, compared with approximately $15,000 for the corresponding 1996 fiscal
period. Revenues from the Company's geologic information services have not
returned to their prior 1986 levels. Correspondingly, the number of
subscribers to the Company's geologic lease evaluation service is
approximately 10% of pre-1986 levels.
Revenues from oil exploration and production activities were
approximately $22,000 for the fiscal 1997 period, ended March 31, 1997,
compared to approximately $21,000 for the corresponding 1996 fiscal period.
Oil production revenue reflects the acquisitions of an oil and gas royalty
interest in fiscal 1992. The royalty acquisition has brought more certainty
to income projections from the Company's oil producing properties.
Expenses
Expenses related to the Company's oil and gas leasehold sales were
approximately $16,000 for the fiscal 1997 period, ended March 31, 1997,
compared to approximately 7,000 for the comparable fiscal 1996 period.
Expenses associated with the Company's geologic information services were
approximately $12,000 for the fiscal 1997 period, compared to approximately
$16,000 for the comparable fiscal 1996 period.There were no oil production
and exploration costs during the fiscal 1997 and 1996 periods.General and
administrative expenses for the fiscal 1997 period, ended March 31, 1997,
were approximately $145,000, compared to approximately $146,000 for the
comparable 1996 fiscal period.
The first crude oil price collapse in early 1986, tax law changes
effective in 1987, and the second crude oil price collapse in 1993, has
resulted in a sharp decline in domestic oil and gas exploration
activities.Although natural gas prices are still depressed, crude oil
prices are up, due to a sharp increase in domestic crude oil imports. The
Company's oil and gas leasehold inventory remained at approximately 80,000
net acres for the fiscal period, ended March 31, 1997.Although its leasing
activity was reduced substantially during the past eight years due to a
sharp decline in domestic exploration activity, the Company believes it can
continue its present lines of business, including the purchase and resale
of oil and gas leaseholds.
Net Operating Loss for Federal Income Tax Purposes
The Company adopted Statement of Financial Accounting Standards
No. 109 "Accounting for Income Taxes" [FASB 109] during the year ended
March 31, 1994. FASB 109 requires the Company to provided a net deferred
tax asset or liability equal to the expected future tax benefit or expense
of temporary reporting differences between book and tax accounting and any
available operating loss or tax credit carryforwards. At March 31, 1997 and
1995, the total of the deferred tax assets were $1,837,459 and $1,800,064
the total of all deferred tax liabilities were $0 and $(1,789). The amount
of and ultimate realization of the benefits from the deferred tax assets
for income tax purposes is dependent, in part, upon the tax laws in effect,
the Company's future earnings, and other future events, the effects of
which cannot be determined. Because of the uncertainty surrounding the
realization of the deferred tax assets, the Company has established a
valuation allowance of $1,837,459 and $1,800,064 as of March 31, 1997 and
1995, which has been offset against the deferred tax assets. The net change
in the valuation allowance during the year ended March 31, 1997 was
$37,395. The cumulative effect of the change in accounting for income taxes
for prior years was not material to the statement of income for the year
ended March 31, 1994. The financial statements for prior years have not
been restated.
The Company has available at March 31, 1997, unused tax operating loss
carryforwards of approximately $4,380,000, which may be applied against
future taxable income and expire in various years beginning in 1996 through
2009. (See Consolidated Financial Statements)
Liquidity and Capital Resources
The Company's primary oil and gas business, brokerage of leasehold
interests, has decreased during the fiscal period ended March 31, 1997 due
to decreased activity in the domestic oil and gas exploration industry.
Leasehold inventory held for resale have remained level at approximately
80,000 acres during the fiscal period ended March 31, 1997.Revenue
reduction in the Company's overall oil and gas business is related to
effects of the 1986 and 1993 worldwide collapse of crude oil price and the
corresponding reduced oil and gas brokerage activity of the Company.Due to
this reduced activity in its oil and gas business, along with the Company's
investment in the Biomass Technology, without any intervening revenues,
have resulted in the Company incurring losses in its Biomass investment
aggregating approximately $4.1 million from fiscal 1981 through March 31,
1997.Because of these circumstances the Company is currently experiencing
cash flow difficulties.In order to continue in existence the Company is in
need of additional financing from outside sources or from internal
operations. (See Consolidated Financial Statement)
Management is seeking additional financing from equity or debt
financing(s), or from sales related to its oil and gas business, or from
the sale of its holdings in Biomass common stock.However, management can
give no assurances that it will be successful in its endeavors to resolve
its cash flow difficulties or that it will be able to retain and ultimately
recover its costs in oil and gas leaseholds held for resale and from its
Biomass investment.The financial statements do not include any adjustments
relating to the amounts and classification of assets, liabilities, income
or expenses that might be necessary should the Company be unable to
successfully resolve these uncertainties and continue in existence.
In the fiscal 1997 period ending March 31, 1997, the Company had no
additional research and development expense in Biomass and Biomass'
technology for converting cellulosic waste material into base sugars, and
the Company expects to make no further investments in Biomass in the
foreseeable future.
The Company's most significant assets are (1) oil and gas leaseholds
held for resale, approximating 80,000 net acres at March 31, 1997,
including leaseholds acquired under its unrelated third-party agreements,
(2) 5,252,556 shares of Biomass common stock (carried at no value on the
financial statements), representing approximately 15% of Biomass' common
shares outstanding at March 31, 1997, which were bid $0.02 and asked $0.08
as of March 31, 1997, and (3) exclusive license rights to the Biomass
Technology in the States of Ohio, Louisiana, Pennsylvania and
Indiana.Sales of its leasehold interests, together with the private sale
of a portion of the investment in Biomass common stock, have been the
Company's primary source of cash flow over the past two years.The Biomass
shares are being held for investment purposes but can, as of March 2, 1992,
be publicly sold and redistributed, and such sales may be made periodically
by the Company to raise working capital.
The Company held its last annual shareholders meeting on February 5,
1996 at the Little America Hotel in Salt Lake City, Utah, re-electing the
present board of directors consisting of Dean W.Rowell, Pamela K.Nelson
and Michael M.Cannon, confirmed Peterson, Siler and Stevenson as the
Company's auditors for the 1995 fiscal period and Jones, Jensen & Company
for the 1996 fiscal period. The shareholders also authorized an increase in
the capital stock of the Company from 100,000,000 shares to 200,000,000
shares of common stock, all pursuant to proxy material mailed to
shareholders on January 17, 1996.The Company is now authorized to issue
two classes of stock divided into 10,000,000 shares of $.01 par value
preferred shares, of which none are issued, and 200,000,000 shares of $.01
par value common shares of which 104,082,974 shares are issued as of June
26, 1997. The Company foresees a need for additional equity financing,
through either private or public means, in order to continue in existence.
The Company in the future may seek to raise additional funds through
bank and/or other loans, debt or equity offerings. Any such equity
offerings may either be private or public and may result in substantial
dilution to the then existing shareholders of the Company. Because of
uncertainties existing in the domestic oil and gas industry, and with
Biomass, the Company is not in a position to forecast future earnings or
cash flow. The Company's future is very fluid and largely dependent on
factors outside its control. (See Certain Business Relationships)
General
As the worldwide price of crude oil is set by changing political
realities, so is the search for crude oil and natural gas in the United
States, now set by the reality of political environmentalism. In 1992, in
the name of environmental protection, the best oil prospects to drill in
the U.S., mostly in the Rocky Mountain frontier areas and the off-shore
waters of the U.S., were declared off limits to the oil industry by the
U.S. Congress. This large area set-aside was instituted despite the fact
that by the year 2010 the U.S. may be importing fully 75% of its crude oil
requirements.
Management's Conflicts of Interest
Material conflicts of interest exist and will continue to exist
between the Company, Biomass and Trachyte Oil Company ("Trachyte"). Dean W.
Rowell, the President and Chief Executive Officer and a director of the
Company. He is also the vice President and the treasurer of Biomass, a
publicly-held Utah corporation, whose current major activities are to
support the commercial development of the Biomass Technology. The Company
holds an exclusive license from Biomass in the States of Ohio, Louisiana,
Pennsylvania and Indiana to build, use, sell, sublicense or otherwise
develop for its own advantage and gain the Biomass Technology totally free
(including royalty free) from Biomass. Mr. Rowell is also the President of
Trachyte, a privately-held Utah corporation, whose current major activities
are the exploration and production of oil and gas resources. The Company's
policy is to offer any new oil and gas property purchase first to the
Company and then to Trachyte if the Company is unable to accept the
financial obligation of any transaction. In addition, Mr. Rowell owns
beneficially approximately 50% of the common stock of the Company as of
June 26, 1997.
Mr. Rowell owes a duty of due care and fair dealing to all three
companies, and the resolution of duties and conflicts in favor of one
company over the other may impair his duties to each company. It is likely
that any conflict of interest between the Company, Biomass and Trachyte
requiring a determination may have to be settled in favor of the Company to
the detriment of both Biomass and Trachyte, as well as to the detriment of
the current and future shareholders of Trachyte and Biomass.
Biomass - Liquidity and Capital Resources
Biomass, in which the Company has made a substantial investment, had
little working capital at fiscal year end. It has expended all of the funds
invested by the Company and others on research and development relating to
the Biomass Technology and in general and administrative expenses. At March
31, 1996, Biomass had approximately $2,000,000 of liabilities and a
deficiency in assets of approximately $1,900,000 and cash on hand of
approximately $500. The March 31, 1997 financial report was not available
from Biomass as of June 26, 1997.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this Item is submitted as a separate
section of this report.
Item 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
On June 5, 1996, Peterson, Siler and Stevenson was terminated as
Company auditors. The termination was due to a lower bid price for the
Company's audit business for the annual period ended March 31, 1997, and
did not involve a dispute with the Company over accounting policies or
practices. Simultaneous with the termination of Peterson, Siler and
Stevenson, the Company retained the audit services of Jones, Jensen &
Company of Salt Lake City, Utah whom have completed a certified audit of
the Company's books and records for the fiscal periods ended March 31, 1997
and 1996.
The Company intends to solicit proxies for a shareholders meeting to
be held on approximately October 22, 1997 at 9:30 a.m. at the Company's
corporate headquarters at 363 Bearcat Drive, Salt Lake City, Utah 84115.
The Company anticipates that proxy material will be available to
shareholders by September 20, 1997.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT
Directors and Executive Officers of the Company
The following table sets forth certain information regarding the
Directors and executive officers of the Company as of June 26, 1997:
Name Age Position
Dean W. Rowell 59 Chairman of the Board of Directors;
President and Chief Executive
and Chief Financial Officer
Pamela K. Nelson 39 Vice President, Corporate
Secretary, Treasurer and Director
Michael M. Cannon 49 Director
Dean W. Rowell has been Chairman of the Board, President and Chief
Executive Officer and Chief Financial Officer of the Company since its
inception in April 1978 and was last elected by shareholders in 1996.
Mr. Rowell has been involved in the oil and gas exploration and production
industries for over 35 years. Prior to serving in his present capacities
with the Company, he served as the president of a number of privately-held
energy related companies. Mr. Rowell is also vice president, chief
financial officer and a director of Biomass, a publicly-traded OTC company.
He is also a director and President of the Company's wholly-owned
subsidiaries, PIC and Standard EnviroSystems, Inc. Mr. Rowell devotes
approximately 80% of his time to the affairs of the Company.
Pamela K. Nelson was last elected in 1991 and has been a Director of
the Company since September 1978 and became a Vice President of the Company
in 1979 and Corporate Secretary in 1983. Ms. Nelson has been involved in
landwork and leasing services to the oil and gas industry for the last 21
years. Ms. Nelson is also a director, Vice President, Corporate Secretary
and Manager of land and lease operations for the Company's wholly-owned
subsidiary, PIC. She is a director, Vice President, Corporate Secretary of
Standard EnviroSystems, Inc., also a wholly-owned subsidiary of the
Company. Ms. Nelson devotes approximately 80% of her time to the affairs of
the Company.
Michael M. Cannon joined the Company in March 1982 and in September
1982 became a Vice President and Director, with responsibility for
marketing and corporate communications. From January 1979 to March 1982,
Mr. Cannon was President of an advertising and public relations agency,
Cannon Communications, a substantial number of whose clients were members
of the United States House of Representatives and the Senate. From November
1976 to January 1979, Mr. Cannon served as the press secretary for Gunn
McKay, a United States Representative from the State of Utah. In 1985 Mr.
Cannon served as a state director of the Independent Petroleum Association
of Mountain States and was a cum laude graduate of the University of Utah.
Mr. Cannon is presently self-employed as a consultant in the Communications
industry. Mr. Cannon resigned as an Officer of the Company, effective July
1, 1985, but remains as an outside Director being last elected in 1996, Mr.
Cannon has been associated with the Company for over 10-years, and is a
director of the Company's two wholly-owned subsidiaries, PIC and Standard
EnviroSystems, Inc.
Each Director shall hold office until the next annual meeting of
shareholders or until his successor shall have been duly elected and
qualified. Officers are elected annually by, and serve at the pleasure of,
the Board of Directors.
Item 11. EXECUTIVE COMPENSATION
(a) Cash Compensation
The following table sets forth the compensation paid to (1) each
of the executive officers of the Company whose aggregate cash and cash
equivalent compensation exceeded $60,000 and (2) all executive officers
as a group during the fiscal year ended March 31, 1997:
Name and Capacities Cash Non-Cash
Compensation Served Compensation Compensation Total
Dean W.Rowell Chairman of the $ -0- $ -0- $ -0-
Board of Directors,
President and
Chief Executive and
Chief Financial Officer
Pamela K.Nelson Vice President 15,600 -0- 15,600
Corporate Secretary
All executive officers as a
group (2 persons) $ 15,600 $ -0- $ 15,600
The Company's management, Dean W. Rowell and Pamela K. Nelson,
have elected from time to time to sell stock in the Company pursuant
to Rule 144 to compensate them for the lack of cash received from the
Company in lieu of cash salaries.
(b) Compensation Pursuant to Plans.
None of the executive officers of the Company are parties to an
employment agreement with the Company. Mr. Dean W. Rowell, the Company's
Chairman of the Board, President, Chief Executive and Chief Financial
Officer will continue to serve the Company as determined by the Board of
Directors. In addition, the Company will continue to provide Mr. Rowell
with a $1,000 limit credit card and an automobile. Mr. Rowell continues
to provide the Company with his services without an employment agreement.
The Company has no other "plans" (as such term is used in Item 402
of Regulation S-K) with respect to further executive compensation.
(c) Other Compensation
Inapplicable.
(d) Compensation of Directors
Directors of the Company receive no compensation for services as
such.
(e) Termination of Employment and Change of Control Arrangements.
Inapplicable.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the number of shares beneficially
owned, as of June 26, 1997, by each Director of the Company, by all
officers and Directors as a group and by all persons known to the Company
as owning or possessing voting control over five (5%) percent or more of
the Company's outstanding shares of Common Stock:
Number Percentage
of Shares of Shares
Name and Address Owned Outstanding
Dean W. Rowell(1) 57,392,912 55.0%
Kathleen Hogan(2) 9,322,500 9.0%
Pamela K. Nelson 3,161,100 3.0%
Michael M. Cannon 113,000 .0%
All Officers and Directors and 69,989,512 67.0%
controlling shareholders as a group
_____________
(1) Dean W. Rowell, the Company's President, is the beneficial owner of
all the shares held by Trachyte Oil Company.
(2) Kathleen Hogan is the former wife of Dean W. Rowell. Ms. Hogan was
granted a total of 15,000,000 shares in a Utah State Divorce Court ruling
effective May 8, 1995, and includes shares owned by Ms. Hogan prior to
the date of the divorce decree. Since then Ms. Hogan has sold 7,190,000
shares in three private placement transactions none of which required
registration under the Act.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
(a) Transactions with Management and Others.
During the fiscal period ended March 31, 1996, the Company continued
to experience severe cash flow difficulties, and on February 6, 1996, the
Board of Directors of the Company, faced with the immediate liquidation of
the Company, due principally, to a continued cash flow short-fall in the
Company's daily operations, promptly negotiated a solution to such cash
flow difficulties with Trachyte, the Company's largest shareholder,
whereupon the Company issued 2,350,000 shares of the Company's common stock
at $0.03 per share to Trachyte in exchange for $70,000 in debt settlement
of cash loaned to the Company through June 30, 1995. Also effective June
30, 1995, the Company issued 833,333 shares of the Company's common stock
at $0.03 per share to Trachyte in exchange for $25,000 in debt settlement
of cash loaned to the Company through June 30, 1995. Trachyte received the
stock based on a 50% discount from the closing market bid price on June 30,
1995 of $0.06 per share, as reported on the OTC Bulletin Board electronic
quotation service, operated by The Nasdaq Stock Market, Inc. ("OTCBB").
During fiscal 1996, ended March 31, 1996, Mr. Rowell was able to
secure sales of common stock to unrelated third parties that largely offset
the Company's cash flow difficulties, due largely to an increase in the
value of the Company's publicly traded shares. This resulted in the sale of
1,500,000 shares of the Company's common stock in exchange for $75,000 cash
to two unrelated third parties on August 18 and September 7, 1995. The
stock was sold at $0.05 per share which was the closing market bid price of
$0.05 per share on the day of each sale, as reported on the OTCBB. During
the fiscal year ended March 31, 1997, and as of June 26, 1997, Mr. Rowell
was unable to sell any of the Company's common stock in exchange for cash,
due the higher value of the Company's publicly traded shares, as reported
on the OTCBB.
On February 10, 1997, due to the Company's continued cash flow
difficulties, the Company issued 890,000 newly issued shares of the
Company's common stock investment shares at $0.02 per share to Trachyte in
exchange for $17,800 in debt settlement of cash loaned to the Company
through December 31, 1996. On March 31, 1997, due to the Company's
continued cash flow difficulties, the Company issued 700,000 newly issued
shares of the Company's common stock investment shares at $0.02 per share
to Trachyte in exchange for $14,000 in debt settlement of cash loaned to
the Company through March 31, 1997.
Trachyte received the above investment shares at $0.02 per share based
upon a price per share that was established in previous transactions
between Trachyte and the Company in exchange for debt settlement, and not
based upon the traditional 50% discount from the closing market bid price
per share on the day of the transaction. On February 10, 1997 the Company's
shares were quoted on the OTC:BB at bid $0.15 and asked $0.18 per share, a
market value not consistent with previous market values in transactions
with Trachyte. Since Trachyte is the only source of funds and other
marketable assets the Company can rely on for additional operating capital
and asset trades, Company management deemed it advisable to accept the
offered common stock exchange transactions with Trachyte. Another benefit
the Company receives from the Trachyte transactions is an exchange of debt
for equity swap, which swap dramatically improves the Company's financial
statements.
During the six year period since fiscal 1991, Trachyte has helped
financially support the Company largely due to Mr. Rowell's efforts to
secure loans from Trachyte for the Company during periodic cash flow
difficulties. Since the Company has been unable to repay most of the loans
from Trachyte during the past two fiscal periods, Trachyte has exchanged
the loans for common stock investment shares in the Company without any
intervening cash compensation to Trachyte, including interest payments on
the amounts owed.
Geologic and other information which PIC has or develops is available
to Mr. Rowell as an officer of the Company, and he may use such information
for the benefit of the Company in determining which leases to buy or sell.
Such information is also available to Mr. Rowell, without cost, in
connection with Mr. Rowell's participation in the BLM leasing program.
The several transactions with Trachyte have provided the financial
means for the Company to pursue further commercialization efforts for the
Biomass Technology in the Company's exclusive royalty free licensed
territory of the states of Indiana, Ohio, Pennsylvania and Louisiana.
Management of the Company continues to believe that a viable business
opportunity exists in the states of Indiana, Ohio, Pennsylvania and
Louisiana where the Biomass Technology could be utilized in conjunction
with existing ethanol plants to process cellulose-glucose into ethanol upon
a retrofit of such existing ethanol plants. Final plans and financial
arrangements had not been completed for such project as of June 26, 1997.
(b) Certain Business Relationships.
Relationships with Biomass and Biomass Affiliates
Since 1980, the Company has invested approximately $4.1 million in
the Biomass Technology through several reorganizations of Biomass.
Effective April 14, 1987, Biomass was reorganized as a publicly-held Utah
corporation, and simultaneously, Mr. Alan M. Neves was re-elected president
and Mr. Rowell was elected vice president and secretary-treasures, and
Biomass was reorganized into its present form. The Biomass Technology
acquired in the reorganization is considered Biomass' principal asset.
The Biomass Technology
The Biomass Technology is a proprietary chemical process which has
been designed to convert the cellulosic (plant) portion of forest,
agricultural and MSW materials, principally, into glucose and certain other
base sugars, which have a wide range of commercial applications, and
lignin, a coal-like aromatic substance which is a usable fuel. The Biomass
Technology has been designed to be a continuous, acid hydrolysis process
based on a proprietary combination of time, heat and catalytic agents.
The Biomass Technology separates the lignin and the cellulose
contained in plant material while converting the cellulose in such material
into base sugars. Such base sugars have a wide range of commercial
applications, including fermentation into ethanol, the principal commercial
product from a Biomass Plant, which is used to raise octane ratings in
unleaded gasoline, and reportedly, can lower pollutants from automobiles.
Ethanol is also widely used in the pharmaceutical and cosmetic industries.
The lignin, a coal-like substance (hydrocarbons), is the other major
product of the Biomass Technology and may be burned as boiler fuel to
generate steam and electricity sufficient to power an entire integrated
processing facility ("Biomass Refinery") utilizing ordinary grain, straw,
hulls, sawdust, or MSW, as the feedstock material. Lignin may also be
utilized commercially for the production of specialty chemicals for the
petro-chemical industry.
Biomass Trade Secret and Patents
Management of the Company is of the opinion that the ability of
Biomass to maintain the proprietary nature of the Biomass Technology is
limited due to the present adverse financial condition of Biomass. Biomass
is the assignee from Alan M. Neves ("Neves") and others of two domestic and
several corresponding foreign patent applications covering methods and
apparatus of the Biomass Technology. Biomass owns certain patents and
patent applications for its proprietary technology. However, the Company
does not believe that such patents and patent applications, even if allowed
and letters of patent are issued, will afford Biomass significant patent
protection with respect to the Biomass Technology. All Directors, officers
and employees of Biomass have entered into confidentiality agreements with
Biomass, to protect the trade secret nature of the Biomass Technology.
Historical Operations of Biomass
Neves commenced his research in 1974 following the 1973 Arab oil
embargo and the resulting increase in gasoline costs of that year. In 1979,
the Biomass Technology was demonstrated on a bench scale. In 1980,
Professor Joseph M. Glassett (deceased, 1989), an independent engineer and
associate Professor of chemical engineering at Brigham Young University at
Provo, Utah, undertook a preliminary study to determine the technical and
economic viability of the Biomass Technology. Professor Glassett
subsequently opined that the Biomass Technology held sufficient promise to
warrant the construction of a pilot scale facility to further test the
commercial viability of the Biomass Technology.
In the second quarter of 1981, Biomass commenced the construction of
a non-commercial scale pilot plant and research center ("Research Center")
in Ogden, Utah. The center operated from 1982 through October 1987 when the
center was closed. The test results received from the Research Center
during its five year research and development period led management to
believe that the Biomass technology is commercially viable, based
partially, upon Professor Glassett's second opinion, rendered in April
1984, as to the technical feasibility of the Biomass Technology, where he
concluded that Biomass' non-commercial scale pilot plant had successfully
demonstrated the technical feasibility of the Biomass Technology by
repeatedly producing high yields of base sugars from sawdust feedstock
material, recommending that a preliminary design and cost estimate for a
commercial Biomass Refinery be prepared to determine the economic viability
of the Biomass Technology.
In March 1990, based upon its research and development activities,
Biomass began constructing a 1/10th scale commercial demonstration module
("Demo Module") from the design of the full-sized 500 ton per day input
capacity of MSW material Weber County Biomass Refinery to prove the
commercial viability of the Biomass Technology. Design of the commercial
Demo Module is the accumulation of eight years of experience gained by
Biomass scientists who developed the Biomass Technology at its former
Research Center facility, and is designed to process approximately 56-tons
of "as-received" MSW during an eight hour period. The Demo Module was
constructed at the Weber County, Utah Landfill site in an existing County
owned building. On June 24, 1992, the construction of the Demo Module was
shut-down due to lack of funds to continue operations.
The Company's Biomass Technology Licenses
The Company's management continues to believe its investment in the
Biomass Technology will ultimately result in future revenues and earnings
for the Company through its common stock ownership in Biomass and its
30-year exclusive license to the Biomass Technology in the States of
Indiana, Ohio, Pennsylvania and Louisiana. The time starts to run on the
license beginning on the date Biomass receives commercial certification of
the Biomass Technology from a major international engineer/construction
firm acceptable to the Biomass Board of Directors, and provided that the
Company construct and operate Biomass Refineries with a combined annual
ethanol production of 20,000,000 gallons. The exclusive license means the
unrestricted, totally free (including royalty free) use of the Biomass
Technology within the States of Indiana, Ohio, Pennsylvania and Louisiana,
to build, use, sell, sublicense or otherwise develop for its own commercial
advantage and gain the right to distribute and/or sell the products or
by-products generated from the use of the Biomass Technology anywhere that
it may deem desirable.
The investment by the Company in Biomass to date has been
approximately $4.1 million for which the Company received 8,100,000 shares
of Biomass stock in a reorganization of Biomass on March 2, 1987. The
Company has since sold 2,847,444 shares to finance on-going operations of
the Company and presently owns 5,252,556 shares representing approximately
15% of Biomass. (See Management's Discussion and Analysis of Financial
Condition and Results of Operations)
Potential Dispute Involving Alan M. Neves
The Company is party to four Exclusive License Agreements with
Biomass, pursuant to which the Company has the right in the States of
Indiana, Ohio, Pennsylvania and Louisiana to utilize the Biomass Technology
relating to the conversion of cellulosic materials ("Celmat") into sugars
and the conversion of such sugars into ethanol and other alcohols and
products (the "Licensed Technology"). The Company intends to utilize the
Licensed Technology in connection with certain planned ethanol production
facilities (the "Midwest Plant"), and a shut-down MSW processing plant (the
"River Plant"). The Louisiana license is dated March 2, 1987, and the
Indiana, Ohio, and Pennsylvania licenses are dated December 30, 1996,
In March 1997, Neves, who is the President and largest beneficial
shareholder of Biomass, informed the board of directors of Biomass and the
Company that he has developed a new technology over the last several years,
which he claims is separate and apart from the Licensed Technology and
which he claims is necessary in order to make the Licensed Technology
commercially feasible. Neves has proposed the formation of a partnership
between Biomass and a company which he has formed for the joint marketing
of the Licensed Technology and his alleged new technology.
The assertions made by Neves could potentially affect the Company
since Neves is claiming that Biomass is not the owner of all the technology
which the Company believes to be covered by the Exclusive License
Agreements. Nevertheless, it is the position of the Company's management
that none of the alleged new technology claimed by Neves will be required
in connection with the Midwest Plant and River Plant facilities, since
those plant facilities have been designed around prior technology, which is
the property of Biomass, and other technology which is in the public domain
and/or the property of the Company (the "STDE Technology").
Moreover, it is the position of the Company's management that the new
technology which has allegedly been developed by Neves, if any, is the
property of Biomass. In any event it is management's opinion that any of
Neves claims are not material to the Company's present and future plans.
The Company's MSW/Ethanol Project
The Company is currently pursuing a project loan (the "Loan") with
unrelated parties and a lender (the "Lender") to raise up to $250,000,000
to commercialize the Biomass and STDE Technologies. This effort began when
the Company learned that at least five ethanol plant located in the midwest
U.S. had shut-down, and/or were available on good terms, due to high grain
prices and low ethanol prices. The Company is presently in contact with two
of the plant owners to negotiate a possible sale to the Company of the
Midwest Plant for approximately $80,000,000. The Company is also in
negotiations to purchase the River Plant, located at Philadelphia,
Pennsylvania, for approximately $3,000,000. The planned purchase of these
two plants have created the Company's "MSW/Ethanol Project".
The $250,000,000 Loan, if obtained, would be used to finance the
purchase, refit, and initial operations of both the Midwest Plant and River
Plant facilities as a single economic unit in two locations. It is the
Company's belief that combined, and operated as one economic unit, the two
plants have better overall economic strengths than each plant would have if
operated as separate integrated recycle/ethanol plants. The principal
reason for such conclusion is that no immediate new building erection would
be required at either plant site.
The Company, providing it is successful in receiving the $250,000,000
Loan, for which there is no assurance, anticipates refitting the River
Plant to operate only as a MSW sorting plant which could recycle
approximately 2200 tons/day of MSW into, principally, 900 tons/day of
metals, glass and other inorganic products, together with approximately
1300 tons/day of Celmat. The inorganic's would be sold, or landfilled, in
the Philadelphia/New York area. The organic Celmat would be baled and
shipped to the Midwest Plant for processing into Celmat-glucose and other
sugar products. The glucose then would be fermented into ethanol fuel. The
MSW would be supplied to the River Plant by present haulers of MSW located
in the northeast U.S.
The Company, providing it is successful in receiving the $250,000,000
Loan, would also refit the Midwest Plant to operate only as a glucose and
other sugar product extraction and ethanol production plant, that would
process the baled Celmat from the River Plant through twelve module
processing units to be installed in an existing 40,000 square foot building
located on the Midwest Plant site. The glucose recovered from the Celmat
would then be used as normal glucose feedstock material for the existing
Midwest Plant, a fuel-grade ethanol plant.
The Company is pursuing the $250,000,000 Loan and other financing
ideas through its wholly-owned subsidiary Standard EnviroSystems, Inc., a
Utah corporation. Final plans and final financial arrangements with
unrelated third-parties and the Lender on the MSW Project Loan had not been
finalized or completed as of June 26, 1997.
(c) Indebtedness of Management.
Reference is made to Section (a) of this Item, "Transactions with
Management and Others."
(d) Transactions with Promoters.
Inapplicable.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a)(1) List of Financial Statements.
The information required by this portion of Item 14 is submitted as a
separate section of this Report.
(a)(2) List of Financial Statement Schedules.
The information required by this portion of Item 14 is submitted as a
separate section of this Report.
(a)(3) List of Exhibits.
None
(a)(4) Documents filed with the Securities Exchange Commission which are
incorporated by reference.
(1) -Incorporated by reference to Registrant's Registration Statement
on Form 10 dated August 5, 1980.
(2) -Incorporated by reference to Registrant's Registration Statement
on Form S-2 (File No. 2-92734) filed August 13, 1984.
(3) -Incorporated by reference to Registrant's Annual Report on Form
10-K for the year ended March 31, 1981.
(4) -Incorporated by reference to Registrant's Annual Report on Form
10-K for the year ended March 31, 1982.
(5) -Incorporated by reference to Registrant's Annual Report on Form
10-K for the year ended March 31, 1983.
(6) -Incorporated by reference to Registrant's Annual Report on Form
10-K for the year ended March 31, 1984.
(7) -Incorporated by reference to Registrant's Annual Report on Form
10-K for the year ended March 31, 1985.
(8) -Incorporated by reference to Registrant's Annual Report on Form
10-K for the year ended March 31, 1986.
(9) -Incorporated by reference to Registrant's Annual Report on Form
10-K for the year ended March 31, 1987.
(10) -Incorporated by reference to Registrant's Annual Report on Form
10-K for the year ended March 31, 1988.
(11) -Incorporated by reference to Registrant's Annual Report on Form
10-K for the year ended March 31, 1989.
(12) -Incorporated by reference to Registrant's Annual Report on Form
10-K for the year ended March 31, 1990.
(13) -Incorporated by reference to Registrant's Annual Report on Form
10-K for the year ended March 31, 1991.
(14) -Incorporated by reference to Registrant's Annual Report on Form
10-K for the year ended March 31, 1992.
(15) -Incorporated by reference to Registrant's Annual Report on Form
10-K for the year ended March 31, 1993.
(16) -Incorporated by reference to Registrant's Annual Report on Form
10-K for the year ended March 31, 1994.
(17) -Incorporated by reference to Registrant's Annual Report on Form
10-K for the year ended March 31, 1995.
(18) -Incorporated by reference to Registrant's Annual Report on Form
10-K for the year ended March 31, 1996.
(19) -Incorporated by reference to Registrant's Annual Report on Form
10-K for the year ended March 31, 1997.
(b) Reports on Form 8-K.
The Company filed a Report on Form 8-K for an event dated June 5,
1985, which is incorporated by reference with the Company's Annual
Report filed on Form 10-K for fiscal year ended March 31, 1986.
The Company filed a Report on Form 8-K for an event dated July 31,
1986, which is incorporated by reference with the Company's Annual
Report filed on Form 10-K for fiscal year ended March 31, 1987.
The Company filed a Report on Form 8-K for an event dated December 19,
1986, which is incorporated by reference with the Company's Annual
Report filed on Form 10-K for fiscal year ended March 31, 1987.
The Company filed a Report on Form 8-K for an event dated March 2,
1987, which is incorporated by reference with the Company's Annual
Report filed on Form 10-K for fiscal year ended March 31, 1987.
The Company filed a Report on Form 8-K for an event dated April 29,
1988, which is incorporated by reference with the Company's Annual
Report filed on Form 10-K for fiscal year ended March 31, 1988.
The Company filed a Report on Form 8-K for an event dated June 13,
1988, which is incorporated by reference with the Company's Annual
Report filed on Form 10-K for fiscal year ended March 31, 1988.
The Company did not have any events requiring the filing of a Form 8-K
for the period ending March 31, 1989.
The Company did not have any events requiring the filing of a Form 8-K
for the period ending March 31, 1990.
The Company did not have any events requiring the filing of a Form 8-K
for the period ending March 31, 1991.
The Company did not have any events requiring the filing of a Form 8-K
for the period ending March 31, 1992.
The Company filed a Report on Form 8-K for an event dated November 16,
1992 for the fiscal year ended March 31, 1993.
The Company did not have any events requiring the filing for Form 8-K
for the period ending March 31, 1994.
The Company did not have any events requiring the filing for Form 8-K
for the period ending March 31, 1995.
The Company filed a Report on Form 8-K for an event dated June 19,
1996 for the fiscal year ended March 31, 1996.
The Company did not have any events requiring the filing for Form 8-K
for the period ending March 31, 1997.
(c) Exhibits.
All of the exhibits listed under Item 14 (a)(3) above have been
incorporated by reference, except where otherwise noted.
(d) Financial Statement Schedules.
The information required by this portion of Item 14 is submitted as a
separate section of this report.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be
signed on its behalf by the undersigned, thereunto duly authorized.
STANDARD ENERGY CORPORATION
By:
Dean W. Rowell
President
June 28, 1997
Salt Lake City, Utah
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated:
Signature Capacity Date
_______________________
Dean W. Rowell President and Director June 28, 1997
(Principal Executive,
Financial and Accounting
Officer)
_______________________
Pamela K. Nelson Vice President June 28, 1997
Corporate Secretary,
Treasurer and Director
_______________________
Michael M. Cannon Director June 28, 1997
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be
signed on its behalf by the undersigned, thereunto duly authorized.
STANDARD ENERGY CORPORATION
By: /s/ Dean W. Rowell
Dean W. Rowell
President
June 28, 1997
Salt Lake City, Utah
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated:
Signature Capacity Date
/s/ Dean W. Rowell President and Director June 28, 1997
Dean W. Rowell (Principal Executive,
Financial and Accounting
Officer)
/s/ Pamela K. Nelson Vice President June 28, 1997
Pamela K. Nelson Corporate Secretary,
Treasurer and Director
/s/ Michael M. Cannon Director June 28, 1997
Michael M. Cannon
STANDARD ENERGY CORPORATION
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1997 and 1996
C O N T E N T S
Independent Auditors' Report 3
Consolidated Balance Sheet 4
Consolidated Statements of Operations 6
Consolidated Statements of Stockholders' Equity 7
Consolidated Statements of Cash Flows 9
Notes to the Consolidated Financial Statements 11
INDEPENDENT AUDITORS' REPORT
Board of Directors
Standard Energy Corporation
Salt Lake City, Utah
We have audited the accompanying consolidated balance sheet of Standard
Energy Corporation and Subsidiaries at March 31, 1997 and the related
statements of operations, stockholders' equity and cash flows for the
years ended March 31, 1997 and 1996. These financial statements are
the responsibility of the Company's management. Our responsibility
is to express an opinion of these financial statements based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management,
as well as evaluating the overall consolidated financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material aspects, the consolidated financial
position of Standard Energy Corporation and Subsidiaries as of March 31,
1997 and the consolidated results of their operations and their cash flows
for the years ended March 31, 1997 and 1996, in conformity with generally
accepted accounting principles.
The accompanying financial statements have been prepared assuming the
Company will continue as a going concern. As discussed in Note 7 to the
financial statements, the Company has incurred significant losses, which
have resulted in working capital and accumulated deficits, which raises
substantial doubt about its ability to continue as a going concern.
Management's plans in regard to these matters are also described in Note 7.
The financial statements do not include any adjustments that might result
from the outcome of these uncertainties.
Jones, Jensen & Company
June 3, 1997
STANDARD ENERGY CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
ASSETS
March 31,
1997
CURRENT ASSETS
Cash $ 2,533
Accounts receivable, net of no allowance 2,296
Total Current Assets 4,829
PROPERTY AND EQUIPMENT, net (Note 2) 26,500
INVESTMENT IN OIL AND GAS PRODUCING
PROPERTIES, net of depletion of $92,970 (Note 3) -
OTHER ASSETS
Oil and gas leases held for resale (Note 3) 95,464
Pledged drilling bonds (Note 3) 35,000
Cash value of life insurance 19,650
Total Other Assets 150,114
TOTAL ASSETS $181,443
STANDARD ENERGY CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
March 31,
1997
CURRENT LIABILITIES
Accounts payable and accrued expenses $41,051
Revolving line of credit 13,454
Total Current Liabilities 54,505
STOCKHOLDERS' EQUITY
Preferred stock, par value $0.01 per share
authorized 10,000,000 shares, no shares
issued and outstanding-
Common stock; par value $0.01 per share;
200,000,000 shares authorized; 104,082,974
shares issued and outstanding 1,040,829
Additional paid-in capital 7,161,253
Accumulated deficit (8,075,144)
Total Stockholders' Equity 126,938
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $181,443
STANDARD ENERGY CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
For the Years Ended
March 31,
1997 1996
REVENUES
Oil and gas information services $13,558 $14,871
Oil production 21,862 21,377
Total Revenues 35,420 36,248
EXPENSES
Oil and gas information services 11,441 15,959
Oil and gas leasehold interests 16,358 6,465
Depreciation, depletion and amortization 4,000 4,000
General and administrative 144,708 145,870
Total Expenses 176,507 172,294
OPERATING LOSS (141,087) (136,046)
OTHER INCOME (EXPENSE)
Interest income and other 1,323 2,616
Interest expense (1,616) (846)
Total Other Income (Expense) (293) 1,770
LOSS BEFORE INCOME TAXES (141,380) (134,276)
INCOME TAX EXPENSE - -
NET LOSS $(141,380) $(134,276)
NET LOSS PER SHARE $(0.00) $(0.00)
STANDARD ENERGY CORPORATION AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
For the Years Ended March 31, 1997 and 1996
Additional
Common Stock Paid-in
Shares Amount Capital
Balance, March 31, 1995 93,512,641 $935,125 $6,924,617
Stock issued for cash at
$0.02 per share, July 1995 1,400,000 14,000 14,000
Stock issued for oil lease
purchase at $0.02 per
share, July 1995 2,277,000 22,770 22,770
Stock issued for cash
at $0.05 per share,
August 1995 1,000,000 10,000 40,000
Stock issued for cash
at $0.05 per share,
September 1995 500,000 5,000 20,000
Stock issued for cash
at $0.07 per share
January 1996 300,000 3,000 18,000
Stock issued for cash
at $0.03 per share
February 1996 2,350,000 23,500 46,500
Stock issued for cash
at $0.14 per share
February 1996 70,000 700 9,300
Stock issued for cash
at $0.22 per share
March 1996 50,000 500 10,500
Stock issued for cash
at $0.125 per share
March 1996 200,000 2,000 23,000
Stock issued for cash
at $0.03 per share,
March 1996 833,333 8,334 16,666
Net loss for the year
ended March 31, 1996 - - -
Balance, March 31, 1996 102,492,974 $1,024,929 $7,145,353
STANDARD ENERGY CORPORATION AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity (Continued)
For the Years Ended March 31, 1997 and 1996
Additional
Common Stock Paid-in
Shares Amount Capital
Balance forward 102,492,974 $1,024,929 $7,145,353
Stock issued for cash
at $0.02 per share
December 1996 890,000 8,900 8,900
Stock issued for cash
at $0.02 per share
March 1997 700,000 7,000 7,000
Net loss for the year
ended March 31, 1997 - - -
Balance, March 31, 1997 104,082,974 $1,040,829 $7,161,253
STANDARD ENERGY CORPORATION AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
For the Years Ended March 31, 1997 and 1996
Accumulated
Deficit Total
Balance, March 31, 1995 (7,799,488) $ 60,254
Stock issued for cash at
$0.02 per share, July 1995 - 28,000
Stock issued for oil lease
purchase at $0.02 per
share, July 1995 - 45,540
Stock issued for cash
at $0.05 per share,
August 1995 - 50,000
Stock issued for cash
at $0.05 per share,
September 1995 - 25,000
Stock issued for cash
at $0.07 per share
January 1996 - 21,000
Stock issued for cash
at $0.03 per share
February 1996 - 70,000
Stock issued for cash
at $0.14 per share
February 1996 - 10,000
Stock issued for cash
at $0.22 per share
March 1996 - 11,000
Stock issued for cash
at $0.125 per share
March 1996 - 25,000
Stock issued for cash
at $0.03 per share,
March 1996 - 25,000
Net loss for the year
ended March 31, 1996 (134,276) (134,276)
Balance, March 31, 1996 $(7,933,764) $ 236,518
STANDARD ENERGY CORPORATION AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity (Continued)
For the Years Ended March 31, 1997 and 1996
Accumulated
Deficit Total
Balance forward $(7,933,764) $ 236,518
Stock issued for cash
at $0.02 per share
December 1996 - 17,800
Stock issued for cash
at $0.02 per share
March 1997 - 14,000
Net loss for the year
ended March 31, 1997 (141,380) (141,380)
Balance, March 31, 1997 $(8,075,144) $ 16,938
STANDARD ENERGY CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the Years Ended
March 31,
1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $(141,380) $(134,276)
Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation, depletion and amortization 4,000 4,000
Changes in assets and liabilities:
(Increase) decrease accounts receivable
and other assets 84,596 (88,156)
Increase (decrease) accounts payable and
accrued expenses 14,413 (9,908)
Net Cash Provided (Used) by Operating
Activities (38,371) (228,340)
CASH FLOWS FROM INVESTING ACTIVITIES - -
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on notes payable to related parties - (32,000)
Proceeds from issuance of common stock 31,800 265,000
Net Cash Provided (Used) by Financing
Activities 31,800 233,000
NET INCREASE (DECREASE) IN CASH (6,571) 4,660
CASH AT BEGINNING OF YEAR 9,104 4,444
CASH AT END OF YEAR $2,533 $9,104
STANDARD ENERGY CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Continued)
For the Years Ended
March 31,
1997 1996
SUPPLEMENTAL DISCLOSURES OF CASH
FLOWS INFORMATION
CASH PAID FOR:
Interest $1,616 $875
Income taxes $ - $ -
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
For the Year Ended March 31, 1996:
The Company issued a total of 2,277,000 shares of common stock to a
related party for an oil and gas leasehold. The leasehold was valued
at $45,540.
STANDARD ENERGY CORPORATION AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
NOTE 1 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
The Company was organized under the laws of the State of Utah on
April 3, 1978. The Company's principal business activity is the
acquisition and resale of unproven oil and gas leaseholds. The
Company also provides a variety of geologic lease evaluation
services and information. Further, the Company receives royalty
income from leasehold interests held by the Company.
Principles of Consolidation
The consolidated financial statements include the accounts of
Standard Energy Corporation and its wholly owned subsidiaries
(the Company). Significant intercompany accounts and
transactions have been eliminated in consolidation.
Oil and Gas Leasehold Interest Held for Resale
The Company's inventory of oil and gas leasehold interests held
primarily for resale to other parties is valued at the lower of
the initial costs to acquire the interests or market. Cost of
sales is based on the cost of the specific leasehold interest
sold.
Oil and Gas Activities
The Company follows the successful efforts method of accounting
for its oil and gas exploration and production activities as
prescribed by Statement No. 19 of the Financial Accounting
Standards Board.
Property and Equipment
Property and equipment are valued at cost and, except for oil and
gas properties, are depreciated or amortized principally by the
straight-line method over their estimated useful lives. The
useful lives of property
and equipment for purposes of financial reporting range from five
to seven years.
Income Taxes
At March 31, 1997, the Company had net operating loss
carryforwards of approximately $4,380,000 that may be offset
against future taxable income through 2011. No tax benefit has
been reported in the financial statements, because the Company
believes there is a 50% or greater chance the carryforwards will
expire unused. Accordingly, the potential tax benefits of the
loss carryforwards are offset by a valuation account of
the same amount.
Loss Per Share
The computation of loss per share of common stock is based on the
weighted average number of shares outstanding during the periods
presented.
STANDARD ENERGY CORPORATION AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
NOTE 1 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Cash Flows Statement
For purposes of statements of cash flows, the company considers
all highly liquid debt investments purchased with a maturity of
three months or less to be cash equivalents.
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.
NOTE 2 -PROPERTY AND EQUIPMENT
The following is a summary of property and equipment - at cost,
less accumulated depreciation as of March 31, 1997:
Computers $7,711
Furniture and fixtures 51,393
Printing systems 35,648
Well and land files and maps 305,000
Total 399,752
Less: accumulated depreciation (373,252)
Total $26,500
Depreciation expense for the years ended March 31, 1997 and 1996
was $4,000 and $4,000, respectively.
NOTE 3 -OIL AND GAS PROPERTIES
The Company's primary oil and gas businesses, brokerage of
leasehold interests and sales related to its information
services, have decreased significantly over the past few years.
At March 31, 1997 the Company was holding approximately $95,000
of oil and gas leases for resale.
The Company has negotiated agreements with certain non affiliates
to provide capital to jointly participate in a leasing program
for oil and gas leases. Under these agreements, the Company
provides raw data and services to identify potential leases. The
Company earns approximately 40% gross interest in each leasehold
obtained. Because the Company has no cost in the leases, its
share of the net proceeds is recognized as revenue when the
leases are sold and are recorded as sales of oil and gas
leasehold interests.
STANDARD ENERGY CORPORATION AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
NOTE 3 -OIL AND GAS PROPERTIES (Continued)
During June, 1992, the Company issued 40,000,000 shares of common
stock to Trachyte Oil Company (Trachyte), a related party for an
overriding royalty interest in a producing oil and gas property.
The transaction was entered into to reduce the Company's cash
flow difficulties. The actual royalties received varies
according to the actual production and the current market prices
of oil. The transaction was recorded by increasing common stock
by $400,000 and reducing additional paid-in capital by the same
amount which results in no change in stockholders' equity. After
the issuance, Trachyte held approximately 65% of the Company's
common stock outstanding. Subsequently, the Company's president
entered into a personal transaction which resulted in his
acquiring 100% ownership of Trachyte. The issuance of the above
shares resulted in the substantial dilution to existing
shareholders and personal benefit to the Company's President.
In connection with its lease brokerage activities, the Company
has included in other assets pledged certificates of deposit in
the amount of $35,000 which are to secure a statewide oil and gas
lease bond in the State of Utah and an individual lease bond in
the State of Wyoming.
NOTE 4 -OPERATING LEASES
The Company leases its office space on a month-to-month basis.
NOTE 5 -RELATED PARTY TRANSACTIONS
The Company made various issuances of common stock to officers
and directors of the Company during 1995 for services rendered.
(See Note 8)
The Company made various issuances of common stock to Trachyte,
an entity related to an officer, director and shareholder of the
Company, during 1997, 1996 and 1995 for cash to provide working
capital. (See Note 8)
STANDARD ENERGY CORPORATION AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
NOTE 6 -INVESTMENT IN BIOMASS INTERNATIONAL, INC.
At March 31, 1997, the Company held 5,252,556 shares (15% equity
interest) in Biomass International, Inc. (Biomass), a development
stage company, which owns the exclusive right to market, develop
and exploit the Biomass Process. The Biomass Process consists of
the technology of producing ethanol, a motor fuel extender and
octane enhancer and other products from common cellulose
materials. Biomass has received technical certification (an
independent chemical engineer's opinion that the process has
technical feasibility) of the Biomass Process and is continuing
in its efforts to obtain commercial certification (an independent
engineer's opinion that the process has commercial feasibility)
through the proposed construction of a commercial scale plant.
The Company's contribution and investment in Biomass was
approximately $4,079,000 at March 31, 1997. Because the Biomass
Process has not yet been proven commercially feasible, all of the
Company's contributions have been considered to be research and
development costs and were accounted for as operating expenses in
prior years. Consequently, the investment in Biomass common
stock is not reflected in the Company's accompanying consolidated
balance sheets and management of Biomass can give no assurance
that Biomass' attempts to obtain commercial certification will be
successful or that Biomass can achieve profitable operations
through commercialization of the Biomass Process.
The Company has a 30 year exclusive territorial license to the
Biomass Technology in the States of Indiana, Ohio, Pennsylvania
and Louisiana. The 30 year life begins on the date Biomass
receives commercial certification, provided that the Company
construct and operate Biomass Refineries with a combined annual
ethanol production of 20,000,000 gallons. The exclusive license
means the Company has the unrestricted use of the Biomass
Technology to build, use, sell, sublicense or otherwise develop
for commercial advantage and gain. Also, the Company has the
right to distribute and/or sell the products or by-products
generated from the use of the Biomass Technology anywhere that it
may deem desirable.
STANDARD ENERGY CORPORATION AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
NOTE 7 -GOING CONCERN
These financial statements have been prepared assuming that
Standard Energy Corporation and Subsidiaries will continue as a
going concern. The Company has incurred significant losses in
the past which have resulted in working capital and accumulated
deficits. These deficits have been caused primarily from the
Company's investment in Biomass International, Inc. (a
development stage company) and significantly reduced revenues
from sales of its oil and gas leasehold interests and information
services. Because of the currently depressed conditions in the
oil and gas industry, coupled with the Company's cash flow
difficulties, the Company's ability to retain and ultimately
recover its investments in oil and gas leaseholds held for resale
and other assets of the Company, is uncertain at this time.
These conditions raise substantial doubt about the Company's
ability to continue as a going concern. Management's plans in
this regard are to seek additional financing through loans or
through the issuance of equity securities or from increased sales
related to its oil and gas businesses. However, management can
give no assurance that it will be successful in its endeavor to
resolve its cash flow difficulties or that it will be able to
retain and ultimately recover its cost in oil and gas leaseholds
held for resale and the other assets of the Company. The
financial statements do not include any adjustments relating to
the recoverability and classification of liabilities, income or
expenses that might be necessary should the Company be unable to
continue as a going concern.
NOTE 8 -CAPITAL STOCK
Preferred Stock
The Company has authorized 10,000,000 shares of preferred stock,
$0.01 par value with such rights, preferences and designations
and to be issued in such series as determined by the Board of
Directors. No shares are issued and outstanding at March 31,
1997 and 1996.
Common Stock Issuance
In December 1996 and March 31, 1997, the Company issued 890,000
and 700,000 shares of common stock to a related party for cash
valued at $0.02 per share.
From April 1, 1995 to March 31, 1996, the Company issued
6,703,333 shares of common stock at prices ranging from $0.02 to
$0.22 per share for cash.
On July 2, 1995 the Company issued 2,277,000 shares of common
stock to a related party for the purchase of an oil lease. The
transaction was valued at $0.02 per share.
STANDARD ENERGY CORPORATION AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
NOTE 9 -INDUSTRY SEGMENTS
The Company operates in three principal industries: oil and gas
information services, brokerage of oil and gas leasehold
interests and oil and gas exploration and production.
Information as to the Company's segments is summarized below as
of March 31 for the years then ended:
1997 1996
Revenues
Oil and gas information services $ 13,558 $ 14,871
Exploration and production 21,862 21,377
Corporation and investment 1,323 2,616
$36,743 $38,864
Operating Profit (Loss) Before
Extraordinary Items
Oil and gas information services $(2,117) $(1,088)
Brokerage of leasehold interests (16,358) (6,465)
Exploration and production 21,862 21,377
Corporation and investment (144,474) (149,870)
$(141,087) $(136,046)
Identifiable Assets
Oil and gas information services $23,000 $27,000
Brokerage of leasehold interests 95,464 95,464
Exploration and production 35,000 35,000
Corporation and investment 27,979 119,146
$181,443 $276,610
Depreciation, Depletion and
Amortization
Oil and gas information services $4,000 $4,000
$4,000 $4,000
The Company has no intersegment sales or sales to affiliated
customers. Operating profit (loss) consists of total revenued
less total expenses, except for general corporate expenses and
interest expense which have not been allocated to any segment.
Identifiable assets by segment represent those assets that are
used in the Company's operations in each industry. Corporate
assets which are not allocated to any segment are principally
cash, short-term investments, marketable securities and a portion
of property and equipment. Capital expenditures in fiscal 1997
and 1996 were insignificant. The Company's oil and gas
exploration and production operations are presently insignificant
and no reserve information is available.
