U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-KSB
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED March 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (the "Act")
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 Act: None
Securities registered pursuant to Section 12(g) of the 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 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 .
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of Issuer's knowledge, in definitive proxy or
information statement incorporated by reference in Part III of this Form
10-KSB, or any amendment to this Form 10-KSB .
The Issuer's revenue for the fiscal year ended March 31, 2000 was $30,110.
As of June 27, 2000, 105,261,974 shares of the Issuer's common stock were
issued and outstanding of which 45,563,757 shares were held by
non-affiliates. As of June 27, 2000, the aggregate market value of shares
held by non-affiliates, based upon the closing price reported by the
Bulletin Board market reporting system, operated by Nasdaq of $0.20 bid,
was approximately $9,112,751.
ITEM 1. DESCRIPTION OF BUSINESS
General
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 Bureau of Land Management's ("BLM") leasing
program. The Company also obtains leases through purchases in competitive
bidding programs offered by various state agencies, principally the States
of Utah and Wyoming (the "Leasing Programs").
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 domestic 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.
Oil and Gas Leases
The Company had limited participation in the Leasing Programs from
1986 through the year ended March 31, 2000, 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 Leasing Programs. The Company believes that the deposit feature of the
Leasing Programs have made the Company's participation in such Leasing
Programs very difficult as the deposit feature penalizes many of the less
capitalized participants 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, 2000 were approximately as follows:
Location Gross Acres Net Acres
Utah 7,234 7,234
Wyoming 6,738 4,799
Montana 4,442 2,961
Total 18,414 14,994
A gross acre consists of 100% of the working interest. A net acre is
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 was approximately 40,000 gross acres at fiscal year
ended March 31, 2000. Also during the fiscal period, the Company's ability
to acquire additional leaseholds was adversely affected. 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.
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 its leases.
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, 2000 and 1999, revenues from the sale of oil and gas
lease royalties during such period were approximately $25,000 and $11,000
respectively, reflecting the upturn in the domestic oil industry. (See
"Consolidated Financial Statements")
The Company's oil and gas leasehold inventory remained at
approximately 58,000 gross acres and approximately 35,000 net acres at the
year ended March 31, 2000, including leaseholds acquired under 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,
due to the increase in price of domestic oil and gas during the past year.
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's BLM.
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 Leasing Programs, 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 leasing program are leased by the BLM 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.
The majority of the Company's BLM leasehold inventory at March 31,
2000 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, 2000 and 1999
for all oil and gas properties leased by it were approximately $2,000 and
$9,000, 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.
Leasing Programs
The federal government's Leasing Program is administered by the BLM
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 Leasing
Program. In the Leasing 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 Leasing
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 2000, 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 Leasing
Program drawing period. However, there can be no assurance as to how long
the BLM will take to refund such deposits in the future.
The BLM has on several previous occasions, since the Mineral Leasing
Act of 1920, suspended and/or modified the BLM Leasing Program. No
assurance can be given that current Leasing Programs will not be
subsequently eliminated, modified or suspended, or that the Company will be
able to actively participate in or derive profits from the Leasing
Programs.
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 evaluates leases
offered in the Leasing Programs. Such information includes comprehensive
geologic data, recommendations and reports with respect to leaseholds
offered in the Leasing Programs, 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 landsmen.
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, 2000 and 1999,
revenues contributed to the Company's consolidated revenues by PIC were
approximately $5,000 and $6,000, respectively. The decrease in revenue
contributed by PIC for such fiscal periods, as compared to prior fiscal
years, reflects the depth of the downturn in the domestic oil and gas
industry. Low oil prices since the 1986 collapse of worldwide oil prices
caused PIC to terminate the services of several employees, including its
geologists. Should higher oil prices hold for several years it is possible
that PIC could again produce higher revenues for the consolidated business
of the Company. (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 Leasing Programs, 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 Leasing
Programs 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.
Research and Development - Biofuels Technology
The Company continues to research and develop its latest technologies
for the recycle of municipal solid waste ("City Garbage") into the
following valuable recycled products: (1) inorganic materials consisting of
clean aluminum, copper, steel, iron, glass, plastics, sand, gravel, dirt,
etc. ("Salvage"); (2) organic cellulosic materials consisting of clean
paper, paper products, yard and wood wastes, etc. ("Celmat") which is
approximately 60% of the total volume of City Garbage; (3) the conversion
of Celmat into ethanol fuel; and (4) the recovery of Celmat "Lignin" for
boiler fuel. (collectively the "Biofuels Technology").
The Salvage material harvested from City Garbage at the recycle plant
will be sold into the commercial salvage market of each local area where a
City Garbage recycle plant is located, while the Celmat harvested during
the same operation, will be baled and railed, or conveyed, to a Celmat
processing center where the low-cost Celmat will be manufactured into
ethanol fuel and Lignin. Lignin is the polymeric substance and the
cementing material that forms the woody cell walls of all plant life grown
on earth. It is a brown-flour looking coal-like substance believed to be a
usable as a boiler fuel. Celmat is the inverted sugar portion inside the
woody cell walls of all plant life. The inverted sugars are converted to
fermentable sugars, principally, glucose using the Biofuels Technology.
The Lignin and plastics recovered in the Biofuels Technology process,
together with natural gas as the burner tip control boiler fuel, will
produce enough steam to power a 35 megawatt power plant for all the
electrical needs of a "Trashfuel Plant Project". Lignin may also be useable
as a specialty chemical to produce a plastics resin replacement in the
petro-chemical industry.
The above efforts by the Company have led management to believe that
the Company has developed what appears to be a commercial application of
the Biofuels Technology for all future Trashfuel Plant Projects, based upon
the technical engineering designs and experience of the Company and its
engineering and management contractor, W.J. Scales & Company, who is the
managing partner of a joint venture between W.J. Scales & Co., and design
engineers Saulsbury Engineering Company, and the Limbach Company
construction unit of Enron Corporation (the "Scales Group") in the
development of large new commercial projects.
In 1993, the Company initiated a search for a way to commercially
exploit the Biofuels Technology. Idled plants, or plants operating
uneconomically, were initially considered the most appropriate and viable
alternative, resulting in the development of the South Bend Project, which
was based upon converting current City Garbage incineration plants and
current 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 incineration and ethanol
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 garbage. These discussion 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
construction of a state-of-the-art grassroots City Garbage fed recycle
plant, Celmat fed ethanol plant, and lignin/natural gas fired power plant,
operating as the Mayfair Energy Corporation ("Mayfair"), currently a
wholly-owned subsidiary of the Company, could more readily result in an
operating facility using City Garbage from other municipalities as
feedstock (the "Mayfair Project") to be located on approximately 160 acres
of land in the Blue Mountain area of North Central Pennsylvania
approximately 10 miles west of Pottsville, Pennsylvania. (the "Breaker
Property").
The Company has completed the negotiation of a 25-year commercial
lease agreement with the owner of the Breaker Property conditioned upon
obtaining a change of use permit for the Breaker Property from coal mining
to ethanol production using City Garbage as the feedstock material.
The Company is required to obtain a change of use permit from the
Schuylkill County, Pennsylvania zoning commission prior to entry upon the
Breaker Property. The Company has prepared a change of use plan from coal
mining to ethanol production using City Garbage as feedstock material to
produce ethanol fuel (the "Marketing Plan"). The Company expects to submit
the Marketing Plan to several other Schuylkill County agencies for
operating permit approvals.
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 approximately 500 new employees, plus the
creation of approximately 200 construction jobs during the approximate
30-month construction period. Upon receiving a favorable letter from
Schuylkill County officials on the land use change contemplated in the
Marketing Plan, a closing date can be established to complete the
transaction between Mayfair and Dekko (the "Closing") and, provided it is
successful in receiving the Loan, for which there is no assurance. Actual
approval from the zoning commission is not required under the Loan
Agreement to close the initial Phase 1 portion of the Loan at Closing.
On December 7, 1999, the Company executed an underwriting agreement on
behalf of Mayfair and Triad Associates, Inc. ("Triad"), a New Jersey based
private placement organization, to assist the Company in obtaining a
$275,000,000 loan for Mayfair on the Mayfair Project (the "Loan"). On May
4, 2000, Mayfair executed the 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 June 27,
2000, the Company paid Dekko affiliates an initial underwriting fee of
$140,000 in exchange for the execution 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 to be 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 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 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 pending the Loan payout period. 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-KSB.
Upon Closing, for which there is no assurance, and upon receipt of the
$75,000,000 Phase 1 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
Closing, after which the Company expects to be in full compliance with all
the terms of the Loan Agreement and the 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 Closing as Phase I
financing for the Mayfair Project. Simultaneously, the 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 City Garbage at the Breaker Property site. The City Garbage as
feedstock for the Mayfair Project will be supplied by present private
haulers of City Garbage 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 1 portion of the Loan at Closing.
Once the 2-Mod Plant is producing ethanol in commercial quantities
another 10-modules will be constructed to complete the full 12-module plant
Mayfair Project 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. 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.
The Company, provided it is successful in receiving the Loan, for
which there is no assurance, anticipates constructing the Mayfair Project
plant facilities to process and recycle approximately 2,000,000 tons of
City Garbage per year through a
12-Module design. Initial construction would consist of 2-Modules which
would process approximately 500 tons per day of City Garbage each. Once the
2-Module design is operational, and proof of concept achieved, the plant
would be expanded to the full
12-Module design capable of processing approximately 6,000 tons per day of
City Garbage.
The Company, provided it is successful in receiving the Loan, would
construct the Mayfair Project plant facilities to operate utilizing City
Garbage as feedstock for the production of ethanol fuel. The design
capacity of the 12-Module design would produce approximately 77,000,000
gallons of ethanol per year from 1,200,000 tons of Celmat per year,
expandable to 200,000,000 gallons per year from approximately 3,000,000
tons of Celmat per year, all derived from approximately 5,000,000 tons of
City Garbage per year.
Upon receipt of the $75,000,000 Phase 1 Loan draw amount, the Company
anticipates applying to the Pennsylvania Department of Environmental
Protection (DEP) to operate the Mayfair Project plant facilities to process
and recycle approximately 2,000,000 tons of City Garbage per year at the
Breaker Property in Schuylkill County in accordance with the Marketing
Plan. The DEP permit is required before the Company can process City
Garbage through its newly proposed Mayfair Project Plant, which processing
approvals may take as long as one year to receive.
At June 27, 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 City Garbage. 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 June
27, 2000.
Government Regulations
The Company's business is subject to extensive federal, state and
local regulation. Management believes that the Company operations are in
material compliance with applicable laws, but is unable to predict what
additional government regulations, if any, affecting the Company's
business, may be enacted in the future; how existing or future laws and
regulations might be interpreted; or whether the Company will be able to
comply with such laws and regulations either in the markets in which it
presently conducts business or wishes to commence business.
There can be no assurance that either the states or the federal
government will not impose additional regulations upon the Company's
activities which might adversely affect the Company's business.
Insurance
The Company does not currently have in force general liability
insurance coverage but does have renters liability coverage on its
headquarters office space. There can be no assurance the coverage limits of
the Company's policy will be adequate, or that the Company can obtain
liability insurance in the future on acceptable terms, or at all.
Environmental Matters
The Company is not aware of any pending or threatened claim,
investigation, or enforcement action regarding environmental issues which
if determined adversely to the Company, would have an adverse effect upon
the capital expenditures, earnings, or competitive position of the Company.
Employees
As of June 27, 1999, the Company had three employees, including two
executive officers and one part time employee.In addition, the Company's
practice in connection with the Leasing Programs is to contract with
geologists and landsmen to assist the Company in the preparation of
geologic information reports, etc. 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.
Item 2. PROPERTIES
Headquarters
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 $35,000 per year, on a three (3) year renewable
lease. Such space is shared with Trachyte Oil Company ("Trachyte"), an
affiliate of the Company, who pays the Company approximately $11,000 per
year for such shared space. 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.
Oil and Gas Leaseholds
The location and gross and net acreage of the Company's inventory of
oil and gas leaseholds at March 31, 2000 was approximately as follows:
Location Gross Acres Net Acres
Utah 7,234 7,234
Wyoming 6,738 4,799
Montana 4,442 2,961
Total 18,414 14,994
A gross acre consists of 100% of the working interest. A net acre is
calculated by gross acres multiplied by the percentage of working interest
owned.
Item 3. LEGAL PROCEEDINGS
None.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to the Company's shareholders for a vote
during the fiscal year ended March 31, 2000.
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 over the
counter Bulletin Board ("OTCBB") electronic quotation service, operated by
The Bulletin Board, Inc., an affiliate of The Nasdaq Stock Market, Inc. The
following table sets forth the high and low bid quotations of the Company's
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.
Bid Price
High Low
Fiscal Year 1999
First Quarter .......... $ 0.19 $ 0.10
Second Quarter .......... 0.30 0.08
Third Quarter .......... 0.22 0.10
Fourth Quarter .......... 0.19 0.14
Fiscal Year 2000
First Quarter .......... $ 0.32 $ 0.11
Second Quarter .......... 0.20 0.12
Third Quarter .......... 0.20 0.09
Fourth Quarter .......... 0.21 0.12
Fiscal Year 2001
First Quarter .......... $ 0.31 $ 0.15
(through June 27, 2000)
Approximate Number of Equity Security Holders:
Title of Class holders as of June 27, 2000
Common Stock, par value $0.01 per share: 1,800
Preferred Stock, par value $0.01 per share: None Issued
As of June 27, 2000, there were 105,261,974 shares of common stock
outstanding and approximately 1,800 stockholders of record. The number of
stockholders of record does not include an indeterminate number of
stockholders whose shares are held by brokers and fiduciary depositories in
"street name". Management believes there are in excess of 3,000 beneficial
stockholders of the Company's common stock, including fiduciary depository
firms.
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. It is the present intention of management
to utilize all available funds for the development of the Company's
business.
Item 6. 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 increased during the fiscal year ended March 31, 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 research and
development efforts to commercialize its technologies for the recycle of
City Garbage into saleable products and the recovery of Celmat, convertible
into fuel-grade ethanol and lignin. As a result of these efforts,
management believes that the Company has developed what appears to be a
commercial application of the Biofuels Technology for its future Mayfair
Project. The Mayfair Project details are described in the Mayfair Project
Business Plan prepared by the Company and the Scales Group and further
described above under the heading "Research and Development". There can be
no assurance that the required capital 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 the Mayfair Project. Expenses
incurred for the Mayfair Project are currently being accounted for under
line item "Research and Development Costs".
Results of Operations
The Company realized revenues of approximately $30,000 for the fiscal
period ended March 31, 2000, compared with approximately $17,000 for the
corresponding 1999 fiscal period. Cash requirements during the fiscal 2000
period were obtained from a combination of internally generated cash flow
from operations, asset sales, and the sale of the Company's common stock to
private individuals to be held for investment only.
The Company realized revenues from its oil and gas lease royalty sales
of approximately $25,000 for the fiscal period ended March 31, 2000,
compared with approximately $11,000 for the corresponding 1999 fiscal
period. Oil production revenues continue to increase reflecting current
high world crude oil prices which should also create higher oil and gas
leasehold sales in future years. Revenues from the sale of the Company's
geologic information services were approximately $5,000 for fiscal period
ended March 31, 2000, compared with approximately $6,000 for the
corresponding 1999 fiscal period.
The Company incurred expenses related to the Company's oil and gas
lease royalty sales of approximately $2,000 for the fiscal period ended
March 31, 2000, compared to approximately $9,000 for the comparable fiscal
1999 period. Expenses associated with the Company's geologic information
services were approximately $5,000 for the fiscal period ended March 31,
2000, compared to approximately $12,000 for the comparable fiscal 1999
period. General and administrative expense for the fiscal period ended
March 31, 2000, were approximately $112,000, compared to approximately
$111,000 for the comparable 1999 fiscal period.
During the previous three year period all of the Company's research
and development costs were expensed under line item general and
administrative expense. During the 2000 fiscal period, the Company created
a line item for Research and development costs to better distinguish
expenses between general and administrative expense and the expenses
related to its various Trashfuel Projects. Research and development costs
were approximately $243,000 for the fiscal period ended March 31, 2000,
compared to none in fiscal 1999 due to this change on the financial
statements. (See "Consolidated Financial Statements")
The Company's net loss for the fiscal period ended March 31, 2000 was
approximately $308,000, compared to approximately $107,000 for comparable
1999 fiscal period. The Company anticipates that it will continue to
operate at a loss for the 2000 fiscal year, ended March 31, 2000, due to
continued research and development costs and costs related to its oil and
gas business. Research and development costs are currently accounted for
under line item "Research and Development Costs".
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 the remainder of fiscal 2000,
nor does it expect significant leasehold sales in the foreseeable future,
unless the domestic oil and gas industry improves with higher oil and gas
prices for a sustained period, more than only the past two years,
stabilizes from low worldwide crude oil prices over the past 15-years. The
domestic oil and gas industry may continue to decline due to negative U.S.
Government environmental policies toward oil and gas exploration and
production in the U.S.
The Company has available at March 31, 2000, unused tax operating loss
carry forward of approximately $4,900,000 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 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. (See "Consolidated Financial Statements")
Financial Condition
Management is aggressively exploring additional financing 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 price 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 research and
development 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 March 31, 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
$4,900,000 tax loss carry forward, and (5) 5,252,556 shares of Biomass.
Effective March, 17, 2000, Biomass changed its name to Austin Farms, Inc.
("Austin Farms") to pursue the pig farming business and exit the biomass
material research and development 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 June
27, 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.
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 oil and gas lease acquisition with third
party investors.
2. Aggressively pursue financing for the Mayfair Project with the
Scales Group and other current financial contacts.
3. Continue research and development, testing City Garbage
processing equipment and testing existing and new cellulose enzymes.
4. Continue design and development of the Mayfair Project.
5. Engage an investor relations person 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 and Trachyte Oil Company ("Trachyte"), and Dean W.
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 June 27, 2000, Mr. Rowell beneficially owned approximately
54% 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.
Item 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this Item is submitted as a separate
section at the rear of this Form 10-KSB report.
Item 8. CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
PART III
Item 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
A. Identification of Directors and Executive Officers. The current
directors and executive officers of the Company, who will serve until the
next annual meeting of shareholders or until their successors are elected
or appointed and qualified, are set forth below:
Name Age Position
Dean W. Rowell 62 CEO/President/Chairman
Pamela K. Nelson 42 Vice President/Secretary
Michael M. Cannon 52 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 a director and President of
the Company's wholly-owned subsidiaries, PIC, EnviroSystems, Biofuels,
Trashfuel, Inc., and Mayfair Energy Corporation.
Mr. Rowell devotes approximately 80% of his time to the Company.
Pamela K. Nelson was last elected in 1996 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 25
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
EnviroSystems, Biofuels, Trashfuel, Inc., and Mayfair Energy Corporation,
all wholly-owned subsidiaries of the Company. She devotes all of her paid
time to the Company.
Michael M. Cannon, a cum laude graduate of the University of Utah,
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. 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 15-years, and is a director
of the Company's wholly-owned subsidiaries, PIC, and EnviroSystems.
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.
B. Significant Employees. None.
C. Family Relationships. There are no family relationships among the
Company's officers and directors.
D. Other Involvement in Certain Legal Proceedings. There have been no
events under the bankruptcy act, no criminal proceedings and no judgements
or injunctions material to the evaluation of the ability and integrity of
any executive officer of the Company in last five years.
E. Compliance With Section 16(a). Section 16 of the Securities Act of
1934 requires the filing of reports for sales of the Company's common stock
made by officers, directors and 10% or greater shareholders. A Form 3 and
Form 4 must be filed within ten days after the end of the calendar month in
which a sale or purchase occurred. In the alternate, a Form 5 may be filed
within 45 days after the end of the Company's fiscal year. Based upon the
review of Form 4, Form 3, and/or Form 5 filed with the Company, the Company
is not aware of any delinquent filings of such forms by any reporting
person.
Item 10. EXECUTIVE COMPENSATION
The following table sets forth the aggregate compensation paid by the
Company for services rendered during the last three years to the Company's
Chief Executive Officer and to the Company's most highly compensated
executive officers other than the CEO, whose annual salary and bonus
exceeded $100,000:
SUMMARY COMPENSATION TABLE
Annual Compensation
Other Annual Restrict
Name and Principal Commissions Compensation Stock Options
Position Year Salary And Bonuses (Auto) Awards SAR's
Dean W.Rowell 2000 $ -0- -0- $4,000 -0- -0-
President/CEO 1999 $ -0- -0- $4,000 -0- -0-
1998 $ -0- -0- $4,000 -0- -0-
None of the Company's executive officers received aggregate
cash and cash equivalent compensation exceeding $100,000 in any
of the last three fiscal years. No options to purchase any of the
Company's securities were granted to any reporting person during
the fiscal year ended March 31, 2000. During the same period, Mr.
Rowell elected to sell stock in the Company due to limited
corporate cash flow to partially compensate Mr. Rowell in absence
of a salary.
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 without a salary or
employment agreement. On April 1, 1997, the Company discontinued
the practice of providing Mr. Rowell a credit card but continues
to provide Mr. Rowell with an automobile at a cost of
approximately $4,000 per year.
The Company has no other "plans" (as such term is used in
Item 402 of Regulation S-K) with respect to further executive
compensation.
Other Compensation
Not applicable.
Compensation of Directors
Directors of the Company receive no compensation for
services as such.
Termination of Employment and Change of Control Arrangements
Not applicable.
Item 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth the number of shares
beneficially owned, as of June 27, 2000, 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 56,617,117 54.0%
Pamela K. Nelson 3,081,100 3.0%
Michael M. Cannon 13,000 .0%
All Officers and Directors
as a group 59,711,217 57.0%
Item 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Transactions with Management and Others
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 Leasing Programs.
During the nine 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. During such periods, the
several transactions with Trachyte have provided the financial
means for the Company to pursue commercialization of the Mayfair
Project, otherwise the Company would have been unable to pursue
this goal. Final plans and final financial arrangements had not
been completed for the Mayfair Project as of June 27, 2000.
During the fiscal period ended March 31, 2000, the Company
continued to experience severe cash flow difficulties which have
continued into the 2000 fiscal period. Since the Company has been
unable to repay any of the loans from Trachyte during the past
two fiscal periods, Trachyte has received a demand note from the
Company in the amount of $50,000 plus interest at 12% per annum.
At June 27, 2000 the Company owed Trachyte approximately
$161,000. Neither Mr. Rowell nor Trachyte received any common
stock in exchange for debt forgiveness during the fiscal period
ended March 31, 2000.
On July 15, 1996, the Company formed Biofuels, Inc.
("Biofuels"), a wholly-owned subsidiary, for the purpose of
investing in and developing the Biofuels Technology for the
Mayfair Project. This effort was centered on management's belief
that a Celmat to ethanol technology could be commercialized,
based on the Company's extensive experience at its former
research center from 1982 through 1992, and its experience in
developing the Mayfair Project with the Scales Group through June
27, 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-KSB
report.
Indebtedness of Management
Reference is made to Section above entitled "Transactions
with Management and Others".
Parents of Company
The only parents of the Company, as defined in 12b-2 of the
Exchange Act, are the officers and directors of the Company. For
information regarding the share holdings of the Company's
officers and directors, see Item 11.
PART IV
Item 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
A. The Exhibits which are filed with this Report or which
are incorporated by reference are set forth in the Exhibits Index
below.
B. The Company filed no Form 8-K during the fiscal year
ended March 31, 2000. The financial statement information
required by this portion of Item 13 is submitted as a separate
section at the rear of this Report.
Exhibits to Form 10-KSB
There is only one exhibit to this Form 10-KSB filing:
Exhibit 10-1: entitled "Consent of Independent Auditors".
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 27, 2000
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 27, 2000
Dean W. Rowell (Principal Executive,
Financial and Accounting
Officer)
/s/ Pamela K. Nelson Vice President June 27, 2000
Pamela K. Nelson Corporate Secretary,
Treasurer and Director
/s/ Michael M. Cannon Director June 27, 2000
Michael M. Cannon
EXHIBIT 10-1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference of the
consolidated financial statements of Standard Energy Corporation
included in the Annual Report (Form 10-KSB) for the year ended
March 31, 2000.
HJ & ASSOCIATES, LLC
/s/ HJ & ASSOCIATES, LLC
Salt Lake City, Utah
June 27, 2000
STANDARD ENERGY CORPORATION
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2000
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......................8
Notes to the Consolidated Financial Statements.............9
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, 2000 and the related
statements of operations, stockholders' equity and cash flows for the years
ended March 31, 2000 and 1999. 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,
2000 and the consolidated results of their operations and their cash flows
for the years ended March 31, 2000 and 1999, 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 8 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 8.
The financial statements do not include any adjustments that might result
from the outcome of these uncertainties.
HJ& Associates
Salt Lake City, Utah
June 5, 2000
STANDARD ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
March 31,
2000
ASSETS
CURRENT ASSETS
Cash $ 3,861
Total Current Assets 3,861
PROPERTY AND EQUIPMENT, net (Note 2) 14,500
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) 71,653
Pledged drilling bonds (Note 3) 25,000
Total Other Assets 96,653
TOTAL ASSETS $ 115,014
The accompanying notes are an integral part of these consolidated financial
statements
STANDARD ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31,
2000
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 36,043
Revolving line of credit 94,242
Note payable - related party (Note 5) 161,000
Note payable (Note 7) 30,000
Total Current Liabilities 321,285
STOCKHOLDERS' EQUITY
Preferred stock, par value $0.01 per share
authorized 10,000,000 shares, no shares
issued and outstanding -
Common Stock; par value $.01 per share;
200,000,000 shares authorized; 105,261,974
shares issued and outstanding 1,052,619
Additional paid-in capital 7,412,973
Treasury stock (83,253)
Accumulated deficit (8,588,610)
Total Stockholders' Equity (206,271)
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 115,014
The accompanying notes are an integral part of these consolidated
financial statements
STANDARD ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ended
March 31
2000 1999
REVENUES
Oil and gas information services $ 5,160 $ 6,185
Oil production 24,950 11,240
Total Revenues 30,110 17,425
EXPENSES
Oil and gas information services 5,042 11,646
Oil and gas leasehold interests 1,914 9,472
Depreciation, depletion and amortization 4,000 4,000
Research and development costs (Note 6) 242,672 -
General and administrative 112,489 110,530
Total Expenses 366,117 135,648
OPERATING LOSS $ (336,007) $ (118,223)
Interest income and other 1,315 15,469
Interest expense (18,049) (4,964)
Total Other Income (Expense) (16,734) 10,505
LOSS BEFORE EXTRAORDINARY GAIN (352,741) (107,718)
EXTRAORDINARY GAIN
Gain on forgiveness of debt (Note 11) 44,882
Total Extraordinary Gain 44,882
INCOME TAX EXPENSE - -
NET LOSS $ (307,859) $(107,718)
NET LOSS PER SHARE $ (.00) $ (.00)
FULLY DILUTED LOSS PER SHARE $ (.00) $ (.00)
The accompanying notes are an integral part of these consolidated
financial statements
STANDARD ENERGY CORPORATION AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
For the Years Ended March 31, 2000 and 1999
Additional
Common Stock Paid-in Accumulated
Shares Amount Capital
Deficit
Balance, March 31, 1997 - - 104,082,974
1,040,829 $ 7,161,253 $(8,075,144)
Net loss for the year
ended March 31, 1998 - - - -
- - (97,889)
Balance of March 31, 1998 - - 104,082,974
1,040,829 7,161,253 (8,173,033)
Common stock issued for
cash $0.10 per share - - 325,000
3,250 28,250 -
Acquisition of treasury stock 1,037,420 (83,253) -
- -
Contribution of capital by
shareholder - - -
- 150,000 -
Net loss for the year ended
March 31, 1999 - - -
- - (107,718)
Balance, March 31, 1999 1,037,420 (83,253) 104,407,079
$1,044,079) $ 7,339,503 $(8,280,751)
Common stock issued for cash
at approximately $0.10
per share - - 854,000
8,540 73,470 -
Net loss for the year ended
March 31, 2000 - - -
- - (307,859)
Balance, March 31, 2000 1,037,420 (83,253) 105,261,974
$1,052,619 $ 7,412,973 $(8,588,610)
The accompanying notes are an integral part of these consolidated
financial statements
STANDARD ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended
March 31
2000 1999
CASH FLOWS FROM OPERATING ACTIVITES
Net income (loss) $ (307,859) $ (107,718)
Adjustments to reconcile net loss to
net cash used bt operating activities:
Depreciation, depletion and amortization 4,000 4,000
Gain on forgiveness of debt (44,882) -
Changes in assets and liabilities
(Increase) decrease accounts receivable
and other assets 10,000 6,645
Increase (decrease) accounts payable and
accrued expenses 30,284 22,729
Net Cash Provided (Used) by
Operating Activities (308,457) (74,344)
CASH FLOWS FROM INVESTING ACTIVITIES - -
CASH FLOWS FROM FINANCING ACTIVITIES
Contribution of cash by shareholder - 37,500
Payments on notes payable to related
parties 128,273 11,974
Proceeds from notes payable 92,431 -
Proceeds from issurance of common stock 82,010 31,500
Net Cash Provided (Used) by
Financing Acitivites 302,714 80,974
NET INCREASE (DECREASE) IN CASH (5,743) 6,630
CASH AT BEGINNING OF YEAR 9,604 2,974
CASH AT END OF YEAR $ 3,861 $ 9,604
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION
CASH PAID FOR:
Interest $ 3,425 $ -
Income taxes $ - $ -
SCHEDULE OF NON-CASH FINANCING ACTIVITIES
Contribution of capital by shareholder $ - $ 112,500
The accompanying notes are an integral part of these consolidated
financial statements
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, Standard
EnviroSystems, Inc., Petroleum Investment Company, Petroleum Map Service
Company and Mayfair Energy Corporation (formerly known as Mayfair
Trashfuel Corporation) (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 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, 2000, the Company had net operating loss carryforwards of
approximately $4,900,000 that may be offset 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 carryforwards will expire unused. Accordingly, the potential tax
benefits of the loss carryforwards are offset by a valuation account of
the same amount.
STANDARD ENERGY CORPORATION AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
Basis Loss Per Share
The computation of basic loss per share of common stock is based on the
weighted average number of shares of common stock outstanding during the
periods presented. Common stock equivalents have not been included because
they are antidilutive in nature.
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Basic Loss Per Share (Continued)
For Year Ended
March 31, 2000
Loss Shares Per Share
(Numerator) (Denominator) Amount
Net loss $ (307,859) 104,689,415 $ (.00)
For Year Ended
March 31, 1999
Loss Shares Per Share
(Numerator) (Denominator) Amount
Net loss $ (107,718) 103,984,042 $ (.00)
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.
STANDARD ENERGY CORPORATION AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
NOTE 2 - PROPERTY AND EQUIPMENT
The following is a summary of property and equipment - at cost, less
accumulated depreciation as of March 31, 2000:
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 (385,252)
Total $ 14,500
Depreciation expense for the years ended March 31, 2000 and 1999 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, 2000 the Company was
holding approximately $95,000 of oil and gas leases for resale. In 1998,
an allowance of $23,811 was set up for possible unsaleable leases in the
Grand Staircase Escalante National Park.
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.
In connection with its lease brokerage activities, the Company has
included in other assets pledged certificates of deposit in the amount
of $25,000 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 - COMMITMENTS AND CONTINGENCIES
Office Lease
The Company leases its office space on a month-to-month basis.
STANDARD ENERGY CORPORATION AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
NOTE 5 - RELATED PARTY TRANSACTIONS
The Company signed a $50,000 note payable to Trachyte Oil Company on March
31,1998. The note bears interest at 12.00% and is due upon demand. The
note is unsecured and has increased as funds have been advanced. The
balance due at March 31, 2000 was $161,000.
NOTE 6 - PROJECT COSTS
During the year ended March 31, 2000, the Company spect $242,672 on
project costs associates with the Mayfair Trashfuel Project (the Project)
near Pottsville, Pennsylvania. The Company entered into a loan agreement
oon May 4, 2000, whereby the COmpany will borrow $75,000,000 for Phase I
of the Project. Upon completion of Phase I, the lender will provide
$100,000,000 of financing for Phase II, and upon completion of Phase II,
they will provide $100,000,000 of financing for Pahse III. The lender
requires a 45% equity position in the ownership of the Project.
The terms of the note include monthly interest only payments calculated
using the six month Libor rate plus 3%, with a minimum to be not less than
9%, the rate being fixed for the term of loan at settlement. The term of
the loan is a five year balloon with two (2) one year extensions. One
hundred percent (100%) of net profits is to be applied to proncipal prior
to any dividened payments to shareholders. The loan is to be secured by
any and all property, incluidng the equipment, furniture, and fixtures of
the Project.
NOTE 7 - NOTE PAYABLE
The Company borrowed $30,000 for underwriting fees associates with a fuel
project in Pennsylvania. The money was borrowed interest free and was
subsequently paid pff by issuing 300,000 sahres of common stock (Note 12).
NOTE 8 - GOING CONCERN
These financial statements have been prepared assuming that the Company
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 and
to seek 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.
STANDARD ENERGY CORPORATION AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
NOTE 9 - 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, 2000.
NOTE 10 - INDUSTRY SEGMENTS
The Company operates in three principal industries: oil and gas informa-
tion 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:
2000 1999
Revenues
Oil and gas information services $ 5,160 $ 6,185
Exploration and production 24,950 11,240
Corporation and investment 1,315 15,469
$ 31,425 $ 32,894
Operating Profit (Loss) Before
Extraordinary Items
Oil and gas information services $ (5,042) $ (5,461)
Brokerage of leasehold interests (1,914) (9,472)
Exploration and production 24,950 11,240
Corporation and investment (359,161) (114,530)
$(341,167) $ (118,223)
Identifiable Assets
Oil and gas information services $ 11,000 $ 15,000
Brokerage of leasehold interests 71,653 71,653
Exploration and production 25,000 35,000
Corporation and investment 13,104 13,104
$120,757 $ 134,757
Depreciation, Depletion and
Amortization
Oil and gas information services $ 4,000 $ 4,000
STANDARD ENERGY CORPORATION AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
NOTE 10 - INDUSTRY SEGMENTS (Continued)
The Company has no intersegment sales or sales to affiliated customers.
Operating loss consists of total revenues less total expenses, except for
interest expense which has not been allocated to any segment. Identifi-able
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 1999 and 1998 were insignificant. The Company's
oil and gas exploration and production operations are presently
insignificant and no reserve information is available.
NOTE 11 - GAIN ON RELEASE OF DEBT
The Company recognized a gain on release of debt of $44,882 which related
to potential payroll texaes recorded in 1992, 1993 and 1994. The Company
obtained a legal opinion that the statute of limiatations had expired.
NOTE 12 - SUBSEQUENT EVENT
The Company issued 300,000 shares of common stock for $30,000 of debt
related to services during April of 2000.
