U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 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 June 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER: 0-9336
STANDARD ENERGY CORPORATION
(Name of Small Business Issuer as specified in its charter)
Utah 87-0338149
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
363 Bearcat Drive
Salt Lake City, Utah 84115-2517
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (801) 364-9000
Securities registered pursuant to Section 12(b) of the Exchange Act:
None
Securities registered pursuant to Section 12(g) of the Exchange Act:
$.01 Par Value Common Stock
Check whether the Issuer (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1933, as
amended (the "Act") 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 .
Common Stock outstanding at August 10, 2000: 105,561,974 shares
of $0.01 par value Common Stock.
DOCUMENTS INCORPORATION BY REFERENCE: NONE
FORM 10-QSB
Financial Statements and Schedules
STANDARD ENERGY CORPORATION
For three months Ended June 30, 2000
The following table of contents of financial statements and other
information of the registrant and its consolidated subsidiaries are
submitted herewith:
PART I - FINANCIAL INFORMATION
Item Page
Item 1. Consolidated Balance Sheets -
June 30, 2000 and March 31, 2000................... 3
Consolidated Statements of Operations -
For the three months
ended June 30, 2000................................ 5
Consolidated Statements of Cash Flows -
For the three months ended
ended June 30, 2000................................ 6
Notes to consolidated financial statements............ 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations - General...... 8
Results of Operations................................. 9
Financial Condition................................... 10
Plan of Operation..................................... 12
Inflation............................................. 13
Recent Accounting Pronouncements...................... 13
Management's Conflicts of Interest.................... 13
Research and Development of the Biofuels Technology... 13
Mayfair Project....................................... 13
Forward Looking Statements............................ 17
PART II - OTHER INFORMATION
Item
Item 1. Legal Proceedings..................................... 17
Item 2. Changes in Securities................................. 17
Item 3. Defaults upon Senior Securities....................... 17
Item 4. Submission of Matters to a Vote of Security Holders... 17
Item 5. Other Information..................................... 17
Item 6. Exhibits.............................................. 17
Signature Page........................................ 18
INDEPENDENT ACCOUNTANTS REVIEW REPORT
Board of Directors
Standard Energy Corporation and Subsidiaries
Salt Lake City, Utah
We have reviewed the accompanying consolidated balance sheet
of Standard Energy Corporation and Subsidiaries as of June 30,
2000 and the related consolidated statements of operations,
stockholders equity and cash flows for the three months ended
June 30, 2000. These consolidated financial statements are the
responsibility of the Company s management.
We conducted our review in accordance with standards established
by the American Institute of Certified Public Accountants. A
review of interim financial information consists principally of
applying analytical procedures to financial data, and making
inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing
standards, which will be performed for the full year with the
objective of expressing an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such
an opinion.
Based on our review, we are not aware of any material
modifications that should be made to the accompanying financial
statements referred to above for them to be in conformity with
accounting principles generally accepted in the United States.
We have previously audited, in accordance with auditing standards
generally accepted in the United States, the consolidated balance
sheet of Standard Energy Corporation and Subsidiaries as of March
31, 2000, and the related consolidated statements of operations,
stockholders equity, and cash flows for the year then ended (not
presented herein) and in our report dated June 5, 2000, we
expressed an unqualified opinion on those consolidated financial
statements.
HJ & Associates, LLC
Salt Lake City, Utah
August 10, 2000
PART I - ITEM 1
STANDARD ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30 March 31
2000 2000
(Unaudited) (Audited)
ASSETS
CURRENT ASSETS
Cash $ 56,761 $ 3,861
TOTAL CURRENT ASSETS 56,761 3,861
INVESTMENT IN OIL AND GAS PRODUCING
PROPERTIES, net of depletion of $92,970
PROPERTY AND EQUIPMENT, net 13,500 14,500
OIL AND GAS LEASEHOLD INTERESTS HELD
OTHER ASSETS
Oil and gas leases held for resale 71,653 71,653
Pledged drilling bonds 25,000 25,000
TOTAL OTHER ASSETS 96,653 96,653
TOTAL ASSETS $ 166,914 $ 115,014
See notes to consolidated financial statements
STANDARD ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30 March 31
2000 2000
(Unaudited) (Audited)
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Revolving Line of Credit $ 92,406 $ 94,242
Notes payable 50,000 30,000
Notes payable to related parties 318,000 161,000
Accounts payable and accrued expenses 36,276 36,043
TOTAL CURRENT LIABILITIES 496,682 321,285
STOCKHOLDERS' EQUITY
Common Stock, par value $.01 per share:
Authorized 200,000,000 shares; issued
and outstanding 105,561,974 shares at
June 30, 2000 1,055,619 1,052,619
Preferred Stock, par value $.01 per share;
Authorized 10,000,000 shares 0 0
Additional paid-in capital 7,439,973 7,412,973
Retained earnings (deficit) (8,742,107) (8,588,610)
Treasury stock, at cost (83,253) (83,253)
TOTAL STOCKHOLDERS EQUITY (329,768) (206,271)
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 166,914 $ 115,014
See notes to consolidated financial statements
STANDARD ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three months Ended June 30
2000 1999
REVENUES
Oil and gas information services $ 1,350 $ 1,350
Sales of oil and gas leasehold interests 0 0
Oil production 5,632 7,250
Other income 343 356
7,325 8,956
COSTS AND EXPENSES
Oil and gas information services 2,707 2,070
Oil and gas leasehold interests (5,647) (5,648)
Oil production 0 0
Depreciation, depletion and amortization 1,000 1,000
Interest 3,514 1,757
Project Cost 139,001 39,400
General and administrative 20,247 30,388
TOTAL COSTS AND EXPENSES 160,822 68,967
NET INCOME (LOSS) $ (153,497) $ (60,011)
NET INCOME (LOSS) $ (.00) $ .00
See notes to consolidated financial statements
STANDARD ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three months Ended June 30
2000 1999
Cash Flows From Operating Activities
Net income (loss) $ (153,497) $ (60,011)
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and depletion 1,000 1,000
Changes in:
Accounts receivable 0 0
Accounts payable 233 (4,977)
Net cash provided by (used in)
operating activities (152,264) (63,988)
Cash Flow From Industry Activities
(Increase) decrease to long-term investments $ 0 $ 0
(Increase) decrease oil & gas leasehold
interests 0 0
Net cash provided by (used in)
investing activities $ 0 $ 0
Cash Flows From Financing Activities
Increase (decrease) in notes payable $ 175,164 $ 57,782
Proceeds from sale of common stock 30,000 0
Net cash provided by (used in)
Financing activities $ 205,164 $ 57,782
Net Increase (Decrease) in Cash $ 52,900 $ (6,206)
Cash at Beginning of Period 3,861 9,604
Cash at End of Period $ 56,761 $ 3,398
See notes to consolidated financial statements.
STANDARD ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2000
(Unaudited)
NOTE A - Basis of Presentation
The accompanying unaudited consolidated financial statements have
been reviewed in accordance with generally accepted accounting
principles for interim financial information and with the
instructions to Form 10-QSB and Item 310(b) of Regulation S-B.
Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles
for complete financial statements.
In the opinion of management, all adjustments (consisting of
normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the three
month period ended June 30, 2000 are not necessarily indicative
of the results that may be expected for the entire fiscal year
ending March 31, 2001. For further information, refer to the
consolidated financial statements and footnotes thereto included
in the Company's Annual Report on Form 10-KSB for the year ended
March 31, 2000.
PART I - ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
The Company's primary oil and gas business, the brokerage of
leasehold interests, has not materially increased during the period
ended June 30, 2000, due to decreased activity in the domestic oil and
gas exploration industry. In light of this decreased activity, and the
Company's lack of capital, it has been exploring other ways of
generating revenues.
During the current fiscal period, the Company continues to
research and develop ("R&D") its technologies for the recycle of
municipal solid waste ("Municipal Waste") into recycled products and
feedstock for the production of ethanol fuel. The Company's "Biofuels
Technology" is comprised of four elements:
1. Receiving and separating inorganic products including
aluminum, copper, steel, iron, glass, plastics, sand, gravel, dirt,
etc. ("Salvage") from Municipal Waste and selling them into the
existing commercial Salvage market.
2. Harvesting organic cellulosic materials ("Celmat")
consisting of paper products, yard and wood wastes, etc. which is
about 60% of the total volume of Municipal Waste.
3. Reducing Celmat into inverted sugars and lignin. The
inverted sugars from inside the woody cell walls of all plant life are
converted into fermentable sugars for use as feedstock for ethanol
production. Lignin is the polymeric substance and cementing material
that forms the woody cell walls of all plant life.
4. Generating a clean burning boiler fuel from lignin and
Salvage plastics by adding natural gas to the fuel mixture for burner
tip control efficiency will supply all the electrical needs of a
Municipal Waste recycle plant and ethanol production facility. Lignin
may also have a higher value as a specialty chemical in the petro-
chemical industry to produce a non-toxic plastics resin replacement.
Working with its engineering and management contractor, W.J.
Scales & Company of Boerne, Texas, the Company believes it has
developed a commercial application for the Biofuels Technology in
Pennsylvania at a site approximately 10 miles west of Pottsville (the
"Mayfair Project"). W.J. Scales & Company is the managing partner of a
joint venture between itself and Richmond, Virginia, based Limbach
Company, a construction unit of Enron Corporation that develops large
new commercial projects; and Saulsbury Engineering Company of Odessa,
Texas, which will complete the detailed design of the Mayfair Project
(collectively the "Scales Group").
If operations commence, it is anticipated that the Mayfair
Project will utilize the Biofuels Technology in a facility that
combines a Municipal Waste recycle plant, an ethanol production plant
and a power plant. It will separate Municipal Waste into separate
inorganic and organic recovery streams. The inorganic stream products
will be sold into the existing commercial Salvage market and the
organic stream products will be converted into specialty products such
as ethanol fuel and electricity. (See "Research and Development of
the Biofuels Technology" below)
There can be no assurance that the required capital will be
available to develop the Mayfair Project, and even if adequate capital
is available, there can be no assurance that the Biofuels Technology
will perform on a commercial basis. The Company's future operating
results will depend on its ability to obtain adequate financing to
actually construct the Mayfair Project. Expenses incurred for the
Mayfair Project are being accounted for under line item Project Cost.
Results of Operations
The Company realized revenues of approximately $7,000 for the
three-month period ended June 30, 2000, compared with approximately
$9,000 for the corresponding period ended June 30, 1999. Cash
requirements during the period were obtained from a combination of
internally generated cash flow from operations, loans, asset sales,
and the sale of Rule 144 investment stock to private individuals.
There were no revenues from oil and gas leasehold sales for the
three-month period ended June 30, 2000, and none for the corresponding
period ended June 30, 1999. Leasehold sales were zero, due to the
Company's exploration inactivity. Revenues from the sale of the
Company's geologic information services were approximately $1,300 for
the three-month period ended June 30, 2000, compared with
approximately $1,300 for the corresponding period ended June 30, 1999.
Revenues from the Company's geologic information services have
declined steadily from the 1986, 1993 and 1998 collapse of world crude
oil prices. Recent world crude oil and natural gas price increases may
stimulate domestic drilling activity which would, once again, create a
need for the Company's geologic information services. Revenue from oil
production was approximately $6,000 for the three-month period ended
June 30, 2000, compared to approximately $6,000 for the corresponding
period ended June 30, 1999. Oil production revenues are up as a result
of increased world crude oil and natural gas prices.
The Company incurred expenses related to its oil and gas
leasehold sales of approximately $(5,000) for the three-month period
ended June 30, 2000, compared to approximately $(5,000) for the
comparable period ended June 30, 1999. Expenses associated with the
Company's geologic information services were approximately $3,000 for
the three-month period ended June 30, 2000, compared to approximately
$2,000 for the comparable period ended June 30, 1999. Expenses
associated with the Company's oil production and exploration
activities were zero for the three-month period ended June 30, 2000,
due to the abandonment in fiscal 1998 of the Company's last operated
well. There were no costs for the comparable period ended June 30,
1999, due to the Company's exploration inactivity. General and
administrative expense for the three-month period ended June 30, 2000
were approximately $20,000, compared to approximately $30,000 for the
comparable period ended June 30, 1999. This decline reflects the
Company's basic inactivity in its oil and gas sector.
During the previous three year period all of the Company's R&D
costs were expensed under line item General and Administrative
expense. During the 2000 fiscal period, the Company created a line
item for R&D costs to better distinguish expenses between general and
administrative expense and the expenses related to its various
trashfuel projects. These costs are being accounted for under line
item Project Cost and were approximately $139,000 for the three-month
period ended June 30, 2000, compared to approximately $40,000 for the
comparable period ended June 30, 1999.
The Company's net loss for the three-month period ended June 30,
2000 was approximately $153,000, compared to approximately $60,000 for
comparable 1999 fiscal period and it expects to operate at a loss for
the remainder of the 2001 fiscal period, due to continued R&D costs
incurred for its Mayfair Project, and costs related to its oil and gas
business. These costs are accounted for under line item Project Cost.
(See "Consolidated Financial Statements")
The Company does not expect to realize significant cash flows
from the sale of leasehold interests, geologic information services,
or oil production and exploration activities during fiscal 2001, nor
does it expect significant leasehold sales in the foreseeable future,
as the domestic oil industry continues to shrink despite current high
world crude oil and natural gas prices.
The Company has available at March 31, 2000, unused tax
operating loss carry forward of approximately $4,240,000 that may be
applied against future taxable income through 2020. No tax benefit
has been reported in the financial statements, because the Company
believes there is a 50% or greater chance the carry forwards will
expire unused. Accordingly, the potential tax benefits of the loss
carry forwards are offset by a valuation account of the same amount.
Financial Condition
Management continues to explore additional financing
alternatives for ongoing and future operations of the Company and
has entered into an agreement with the Scales Group for the
engineering, management, and construction of the Mayfair Project.
There is no assurance that the efforts of management or the Scales
Group to locate and secure additional financing will be successful,
and the failure to secure the Mayfair Project financing would
substantially alter management's assumptions as herein presented.
Revenue reduction in the Company's overall oil and gas business
is related to effects of the 1986, 1993 and 1998 worldwide collapse
of crude oil prices and the corresponding reduced oil and gas
brokerage activity of the Company. Because of the reduced activity in
its oil and gas business and a 1992 loss of approximately $4,100,000
in Biomass International, Inc. ("Biomass"), a former partially owned
biomass material R&D subsidiary, the Company is currently experiencing
cash flow difficulties.
The Company's most significant assets are (1) its oil and gas
production income, (2) its oil and gas leaseholds held for resale,
approximating 35,000 net acres at June 30, 2000, including leaseholds
acquired under its unrelated third-party agreements, and (3) its plan
for the full development of the Mayfair Project. Other assets are; (4)
the $4,240,000 tax loss carry forward, and (5) 5,252,556 shares of
Biomass. Effective March 29, 2000, Biomass changed its name to Austin
Farms, Inc. ("Austin Farms") to pursue the pig farming business and
exit the biomass material R&D business.
Due to the proposed issuance of additional shares of Biomass to
Austin Farm shareholders, the Company does not expect to hold in
excess of 5% of the common stock of Austin Farms upon completion of
the transaction and expects to recover little, if any, of its
approximate $4,100,000 investment in Biomass represented by 5,252,556
shares of Biomass common stock. At August 10, 2000, the Biomass shares
had little value at a bid price of $0.01 and asked $0.05 on the
electronic OTC Pink Sheet market system. With little or no volume on a
daily basis, sales of the Biomass shares appear impractical in the
foreseeable future.
In order to continue in existence the Company is in need of
additional financing from outside sources or from internal operations.
These conditions raise substantial doubt about the Company's ability
to continue as a going concern. 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. 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.
The Company foresees a need for additional equity financing in
order to continue in existence, and may, in the future, seek to raise
additional funds through asset sales, bank and/or other loans, debt,
or equity offerings. Any such equity offerings, asset sales, or other
financing 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 the Mayfair Project, 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 of its management's control.
For the period ended June 30, 2000, Dean W. Rowell, the President
of the Company, continues to secure and guarantee loans for the
Company: (1) He has guaranteed two credit cards up to $100,000 with an
outstanding balance of approximately $92,000 at the end of the period,
and (2) he continues to loan the Company funds through his 100% owned
privately-held Utah corporation, Trachyte Oil Company ("Trachyte")
with an outstanding loan balance of approximately $318,000 at the end
of the period. Expenses incurred under the use of the credit cards are
being accounted for under line item "Revolving Line of Credit" and
expenses incurred under the loan agreement are being accounted for
under line item "Notes payable to related parties". These amounts
largely offset the Company's cash flow difficulties and its quarterly
operating deficit of approximately $153,000. (See "Consolidated
Financial Statements" above).
Since fiscal 1991, Trachyte has materially supported the Company
financially largely due to Mr. Rowell's efforts to secure loans from
Trachyte for the Company. The several transactions with Trachyte have
provided the financial means for the Company to pursue its R&D of the
Biofuels Technology and the commercialization of the Mayfair Project,
otherwise the Company would have been unable to pursue these goals.
Final plans and final financial arrangements had not been completed
for the Mayfair Project at August 10, 2000.
On May 19, 2000, due to the Company's continued cash flow
difficulties, the Company issued 300,000 newly issued shares of the
Company's common stock investment shares at $0.10 per share to one
unrelated third party in exchange for $30,000 in cash.
Plan of Operation
There have been no significant changes in capitalization or
financial status during the past two years that are not reflected in
the financial statements. The Company's plan of operation during the
next twelve (12) months includes the following:
1. Aggressively pursue financing for the Mayfair Project
with Dekko and other current financial contacts.
2. Continue R&D, testing Municipal Waste processing equipment
and testing existing and newly developed cellulose enzymes.
3. Continue design and development of the Mayfair Project.
4. Aggressively pursue oil and gas lease acquisition with
third party investors.
5. Engage an investor relations representative to disseminate
information about the Company, its technologies, and the
Mayfair Project.
Inflation
Inflation continues to apply moderate upward pressure on the
cost of goods and services including those purchased by the Company.
Management believes the net effect of inflation on operations has
been minimal during the past two years.
Recent Accounting Pronouncements
There are no recent accounting pronouncements that will have a
material impact on the Company's financial statements.
Management's Conflicts of Interest
Material conflicts of interest exist and will continue to exist
between the Company, Trachyte, and Mr. Rowell, who 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. At August 10, 2000, Mr. Rowell beneficially owned
approximately 53% of the common stock of the Company and 100% of the
common stock of Trachyte.
Mr. Rowell owes a duty of due care and fair dealing to both the
Company and Trachyte 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 and Trachyte requiring a determination may have to be settled
in favor of the Company to the detriment of Trachyte, as well as to
the detriment of the current and future shareholders of Trachyte.
Research and Development of the Biofuels Technology
Mayfair Project
The Company continues its Biofuels Technology R&D efforts for the
recycle of Municipal Waste into clean recycled products and feedstock
for the production of ethanol fuel at its proposed Mayfair Project
plant site near Pottsville, Pennsylvania, for the conversion of Celmat
sugars into ethanol fuel and the recovery of Celmat lignin for use as
a boiler fuel to produce electricity. The inverted sugars which are
inside the woody cell walls of all plant life are converted to
fermentable sugars, principally, glucose using the Biofuels
Technology. Lignin is the polymeric substance and the cementing
material that forms the woody cell walls of all plant life. Lignin and
Salvage plastics recovered, together with the addition of natural gas
for burner tip control efficiency, will produce enough steam to power
a 35 megawatt power plant for all the electrical needs of the Mayfair
Project buildings and equipment.
In 1993, the Company initiated a search for a way to commercially
exploit the Biofuels Technology. Idled plants and plants operating
uneconomically, were initially considered the most appropriate and
viable alternative, resulting in the development of the South Bend
Project, which is based upon converting Municipal Waste incineration
plants and operating ethanol plants into trashfuel plant projects
utilizing the Company's Biofuels Technology. The Company is still
considering this approach with owners of currently operating ethanol
plants and Municipal Waste incineration plants.
In October 1999, the Company announced that it was conducting
on-going discussions with the City of Philadelphia regarding the
possibility of locating a Company owned trashfuel plant project in the
City to process all of the City's Municipal Waste. These discussions
continue with City officials but currently appear to be a possibility
only in future years.
Meanwhile, working with its advisors, the Company has determined
that optimum results would be achieved from the Biofuels Technology by
constructing a state-of-the-art grassroots Municipal Waste fed recycle
plant, Celmat fed ethanol plant, and lignin/natural gas fired power
plant operating as the Mayfair Project. Currently a wholly-owned
Pennsylvania subsidiary of the Company, Mayfair Energy Corporation
("Mayfair") would utilize Municipal Waste from municipalities,
serviced by private haulers located throughout the Eastern U.S., as
feedstock for the production of ethanol fuel.
The Company and Mayfair have identified, and completed the
negotiation of a 25-year commercial lease agreement with the owner of
approximately 150 acres of land in the Blue Mountain area of North
Central Pennsylvania approximately 10 miles west of Pottsville,
Pennsylvania. (the "Breaker Property"). Closing on the lease agreement
is conditioned upon obtaining a change of land use permit.
The Company has prepared a plan for change of land use from coal
mining to ethanol production using Municipal Waste as feedstock (the
"Marketing Plan") for the Breaker Property. Prior to entry upon the
property the Company must obtain a change of use approval from the
Schuylkill County, Pennsylvania zoning commission. The Company also
expects to submit the Marketing Plan to several other Schuylkill
County agencies for operating permit approvals.
On December 7, 1999, Mayfair, a wholly-owned subsidiary of the
Company, executed an underwriting agreement with Triad Associates,
Inc. ("Triad"), a New Jersey based private placement organization, to
obtain a $275,000,000 loan for the Mayfair Project (the "Loan"). On
May 4, 2000, Mayfair executed a Loan commitment agreement with Dekko
Management International Ltd. ("Dekko") with headquarters also located
in New Jersey at the offices of Triad (the "Loan Agreement"). As of
August 10, 2000, the Company had paid Dekko affiliates an initial
underwriting fee of $140,000.
The Company reports initial reaction from Schuylkill County
officials to be very favorable as the Marketing Plan estimates the
Mayfair Project will provide full-time jobs for about 500 new
employees as well as some 200 construction jobs during the approximate
30-month construction period. Upon receipt of a letter from Schuylkill
County officials endorsing the change of land use requested in the
Marketing Plan, a Loan closing date can be established to complete the
transaction between Mayfair and Dekko. Provided Mayfair is successful
in receiving the Loan, for which there is no assurance, a closing on
the property lease would occur. Actual approval from the zoning
commission is not required to close the initial Phase I portion of the
Loan Agreement.
The terms of the Loan include monthly interest only payments
calculated using the six month Libor rate plus 3% with a minimum of
not less than 9%, the rate being fixed for the term of the Loan. The
term of the Loan is a five year balloon with an option of two (2) one
year extensions. One hundred percent (100%) of the net profit is to be
applied to the principal prior to any dividend payments to Mayfair
shareholders. The Loan is to be secured by any and all property,
including the equipment, furniture, and fixtures of the Mayfair
Project. All shares of Mayfair shall be held in escrow for seven (7)
years or until full Loan repayment. Due to the pending nature of both
the Breaker Lease Property Agreement and the Dekko Loan Agreement,
they have not been submitted as exhibits to this Form 10-QSB.
Upon Loan closing, for which there is no assurance, and upon
receipt of the $75,000,000 Phase I Loan draw amount from Dekko,
Mayfair will be owned 55% by the Company and 45% by Dekko until payout
of the Loan and all accrued interest, at which time the Company will
have the option to purchase Dekko's 45% interest in Mayfair at the
then MIA appraised value of Mayfair. Under the Loan Agreement the
Company is required to advance another $200,000 underwriting fee to
Dekko and its affiliates on or before the Loan closing, after which
the Company expects to be in full compliance with all the terms of the
Loan Agreement. The Loan closing is expected to take place at the
offices of the Company's attorneys in Doylestown, Pennsylvania.
Under the Loan Agreement the Company is required to provide all
the Loan documents for execution between Mayfair and Dekko, including
the delivery of a 25-year base lease for the Breaker Property. Dekko
is expected to disburse $75,000,000 to Mayfair at the Loan closing as
Phase I financing for the Mayfair Project. Simultaneously, the Loan
closing agent is expected to disburse approximately $22,000,000 in
underwriting and other costs leaving Mayfair a balance of
approximately $53,000,000 to construct an initial 2-module commercial
plant ("2-Mod Plant") to process 1,000 tons per day of Municipal Waste
at the Breaker Property site. Once the Phase I, 2-Mod Plant is
operational and proof of concept is achieved, build-out of the plant
will proceed.
The Municipal Waste feedstock for the Mayfair Project will be
supplied by present private haulers of Municipal Waste located
throughout the Eastern U.S. delivered to the Breaker Property gate.
Actual delivery contracts are not required under the Loan Agreement to
close the Phase I portion of the Loan at the Loan closing.
The Company, provided it is successful in receiving the Loan, for
which there is no assurance, anticipates constructing the Mayfair
Project plant facilities in three phases to process and recycle a
total of 2,000,000 tons of Municipal Waste per year through a
12-Module design. Between Month 13 and 16, Dekko will release
$100,000,000 of Phase II financing to construct modules 3 through 6.
Then, between Month 17 and 22, Dekko will release the final
$100,000,000 of Phase III financing to construct modules 7 through 12.
The design capacity of the 12-Module plant is approximately 78,000,000
gallons of ethanol per year from approximately 1,200,000 tons of
Celmat per year, derived from approximately 2,000,000 tons of
Municipal Waste per year. There can be no assurance that the required
Loan will be available and there can be no assurance that the Biofuels
Technology will perform on a commercial basis. The Company's future
operating results will depend on its ability to obtain adequate
financing to construct any of its trashfuel plant projects.
Upon receipt of the $75,000,000 Phase I Loan draw amount, the
Company anticipates applying to the Pennsylvania Department of
Environmental Protection (DEP) for an operating permit for the Mayfair
Project in accordance with the Marketing Plan. The DEP permit is
required before the Company can process Municipal Waste at the Breaker
Property, and may take up to a year to receive.
At August 10, 2000, the Mayfair Project, fundamentally, is only
an engineering concept where the Company is contemplating the
construction of a grassroots industrial plant complex utilizing the
Company's Biofuels Technology to manufacture ethanol and other
saleable products derived and harvested from the contents of Municipal
Waste. The Company is pursuing the Loan and other financing ideas
through two wholly-owned subsidiaries, Mayfair Energy Corporation, a
Pennsylvania corporation, and Biofuels, Inc., a Utah corporation.
Final engineering plans and final financial arrangements with
unrelated third-parties for the Loan and engineering contracts on the
Mayfair Project were not finalized or completed as of August 10, 2000.
Forward Looking Statements
The forgoing discussion in "Management's Discussion and Analysis
of Financial Condition and Results of Operation" contain forward-
looking statements, within the meaning of Section 27A of the
Securities Act of 1933, as amended (the "Act") and Section 21E of the
Act, which reflect Managements current views with respect to the
future events and financial performance. The Company cautions that
words used in this document such as "experts", "anticipates",
"believes" and "may" as well as similar words and expressions
identify and refer to statements describing events that may or may
not occur in the future, including among other things, statements
relating to anticipated growth and increased profitability, as well
as to statements relating to the Company's strategic plan, including
plans to develop the Mayfair Project and to selectively acquire other
companies. These forward-looking statements and the matters to which
they refer to are subject to considerable risks and uncertainties that
may cause actual results to be materially different from those
described in this document, including, but not limited to future
financial performance and future events, competitive pricing for
services, costs of obtaining capital as well as national, regional and
local economic conditions. Actual results could differ materially from
those addressed in the forward-looking statements. Due to such
uncertainties and risks, readers are cautioned not to place undue
reliance on such forward-looking statements, which speak only as of
the date of this Form 10-QSB report.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings. None
Item 2. Changes in Securities. None.
Item 3. Defaults On Senior Securities. None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information. None.
Item 6. Exhibits and Reports on Form 8-K, filed during the
quarter ended June 30, 2000. None.
SIGNATURE
Pursuant to the requirements 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
(Registrant)
By: /s/Dean W. Rowell
Dean W. Rowell, President and
Chief Financial Officer
Date: August 10, 2000
