<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
OR
[_] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
EXCHANGE ACT
For the transition period from ______ to _______
Commission File No. 0-9378
ENEX RESOURCES CORPORATION
(Exact name of small business issuer as specified in its charter)
Delaware 93-0747806
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
777 Walker Street
Two Shell Plaza, Suite 2400
Houston, TX 77002
(Address of principal executive offices)
(713) 821-7100
(Issuer's telephone number)
N/A
(Former Name, Former Address and Former Fiscal Year,
If Changed Since Last Report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of Exchange 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 [_]
Number of shares outstanding of each of the Registrant's classes of common
stock, as of the latest practicable date:
Common stock, $.05 par value
1,342,672 shares as of June 30, 2000
Transitional Small Business Disclosure Format (check one)
Yes [_] No [X]
<PAGE>
ENEX RESOURCES CORPORATION
INDEX
<TABLE>
<CAPTION>
Page
No.
----
<S> <C>
Part I. Consolidated Financial Information
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets-
June 30, 2000 (Unaudited) and December 31, 1999 ............ 1
Consolidated Statements of Operations (Unaudited)-
Three and six months ended June 30, 2000 and 1999 .......... 3
Consolidated Statements of Cash Flows (Unaudited)-
Six months ended June 30, 2000 and 1999 .................... 4
Notes to Consolidated Financial Statements (Unaudited) ........ 5
Item 2. Management's Discussion and Analysis
Of Financial Condition and Results of Operations ..... 7
Part II. Other Information
Item 6. Exhibits and reports on Form 8-K ...................... 9
</TABLE>
<PAGE>
ENEX RESOURCES CORPORATION AND SUBSIDIARY
-----------------------------------------
CONSOLIDATED BALANCE SHEETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
June 30,
2000 December 31,
ASSETS (Unaudited) 1999
------ ------------ ------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 63,770 $ -
Accounts receivable:
Oil and gas sales 451,383 208,956
Joint owners 14,879 6,443
------------ ------------
Total current assets 530,032 215,399
------------ ------------
PROPERTY:
Oil and gas properties (successful efforts method): 3,363,179 3,363,151
Furniture, fixtures and other (at cost) 345,919 345,919
------------ ------------
3,709,098 3,709,070
Less accumulated depreciation,
depletion and amortization 2,964,854 2,918,652
------------ ------------
Net property 744,244 790,418
------------ ------------
OTHER ASSETS:
Preferred Stock-3TEC 6,467,610 6,467,610
Note receivable-3TEC 6,778,661 6,310,942
------------ ------------
Total other assets 13,246,271 12,778,552
TOTAL ASSETS $ 14,520,547 $ 13,784,369
============ ============
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
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1
<PAGE>
ENEX RESOURCES CORPORATION AND SUBSIDIARY
-----------------------------------------
CONSOLIDATED BALANCE SHEETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
June 30,
2000 December 31,
LIABILITIES AND STOCKHOLDERS' EQUITY (Unaudited) 1999
------------------------------------ ------------- -------------
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 149,886 $ 249,092
------------ -------------
Total current liabilities 149,886 249,092
------------ -------------
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value;
5,000,000 shares authorized;
none issued
- -
Common stock, $.05 par value;
10,000,000 shares authorized;
1,804,912 shares issued and outstanding at
June 30, 2000 and December 31,1999 90,246 90,246
Additional paid-in capital 10,807,472 10,807,472
Retained earnings 6,717,890 5,882,506
Less Cost of treasury stock:
462,240 shares at June 30, 2000 and December 31, 1999 (3,244,947) (3,244,947)
------------ -------------
Total stockholders' equity 14,370,661 13,535,277
------------ -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 14,520,547 $ 13,784,369
============ =============
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
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2
<PAGE>
ENEX RESOURCES CORPORATION AND SUBSIDIARY
-----------------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2000 AND 1999
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
June 30 June 30
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
REVENUES:
Oil and gas sales $ 405,248 $ 288,434 $ 719,176 $ 478,129
Gain on sale of assets 36,226 1,170 36,226 1,170
Preferred stock dividends 161,690 161,690 323,380 323,380
Interest income 108,535 94,223 220,290 189,898
Other income 8,940 (16,131) 28,814 10,616
----------- ----------- ----------- -----------
Total revenues 720,639 529,386 1,327,886 1,003,193
----------- ----------- ----------- -----------
COSTS AND EXPENSES:
General and administrative 100,811 117,227 141,610 313,341
Lease operating and other 108,806 242,017 258,085 393,539
Production taxes 26,968 16,268 46,013 28,444
Depreciation, depletion and amortization 22,183 42,557 46,202 70,582
Interest expense - 314 - 1,386
Other expense 179 - 592 -
----------- ----------- ----------- -----------
Total costs and expenses 258,947 418,383 492,502 807,292
----------- ----------- ----------- -----------
INCOME BEFORE INCOME TAXES 461,692 111,003 835,384 195,901
INCOME TAX EXPENSE - 69,966 - 66,606
----------- ----------- ----------- -----------
NET INCOME $ 461,692 $ 41,037 $ 835,384 $ 129,295
=========== =========== =========== ===========
NET INCOME PER SHARE
Basic $ 0.34 $ 0.03 $ 0.62 $ 0.10
=========== =========== =========== ===========
Diluted $ 0.34 $ 0.03 $ 0.62 $ 0.10
=========== =========== =========== ===========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic 1,342,672 1,342,672 1,342,672 1,342,637
=========== =========== =========== ===========
Diluted 1,342,672 1,342,672 1,342,672 1,342,637
=========== =========== =========== ===========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
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3
<PAGE>
ENEX RESOURCES CORPORATION AND SUBSIDIARY
-----------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999
-------------------------------------------------------------
<TABLE>
<CAPTION>
2000 1999
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 835,384 $ 129,295
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation, depletion and amortization 46,202 70,582
Deferred income tax expense - 66,606
Gain on sale of properties (36,226) (1,170)
Changes in operating assets and liabilities:
(Increase) Decrease in accounts receivable (250,863) 65,537
(Decrease) Increase in accounts payable (99,206) 29,516
------------- -------------
Net cash provided by operating activities 495,291 360,366
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in note receivable - 3TEC (467,719) (390,554)
Proceeds from sale of properties 36,226 1,170
Property additions (28) (4,631)
------------- -------------
Net cash used by investing activities (431,521) (394,015)
------------- -------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 63,770 (33,649)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD - 33,649
------------- -------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 63,770 $ -
============= =============
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
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4
<PAGE>
ENEX RESOURCES CORPORATION
Notes to Consolidated Financial Statements
June 30, 2000
(Unaudited)
(1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
------------
Enex Resources Corporation (the "Company") was incorporated under the
laws of the state of Colorado on August 17, 1979. On June 30, 1992, the Company
reincorporated in Delaware. 3TEC Energy Corporation ("3TEC") owns 80% of the
common stock of the Company. The Company is engaged in the development and
production of oil and natural gas in the contiguous United States. The Company
considers its business to be a single operating segment.
Basis of Presentation
---------------------
In management's opinion, the accompanying consolidated financial
statements contain all adjustments (consisting solely of normal recurring
adjustments) necessary to present fairly the consolidated financial position of
the Company as of June 30, 2000 and December 31, 1999 and the consolidated
results of operations and consolidated cash flows for the periods ended June 30,
2000 and 1999.
The consolidated financial statements were prepared pursuant to the
rules and regulations of the Securities and Exchange Commission. An independent
accountant has not audited the accompanying consolidated financial statements.
Certain information and disclosures normally included in annual audited
financial statements prepared in accordance with generally accepted accounting
principles have been omitted, although the Company believes that the disclosures
made are adequate to make the information presented not misleading. These
consolidated financial statements should be read in conjunction with the
Company's financial statements and notes thereto included in the Company's
Annual Report on Form 10-KSB for the year ended December 31, 1999.
Earnings Per Share
------------------
Basic earnings per share is based on the weighted average shares
outstanding without any dilutive effects considered. Diluted earnings per share
reflects dilution from all potential common shares, including options, warrants
and convertible preferred stock.
5
<PAGE>
ENEX RESOURCES CORPORATION
Notes to Consolidated Financial Statements
June 30, 2000
(Unaudited)
(2) RELATED PARTY TRANSACTIONS
The Company has a note receivable from 3TEC, an owner of 80% of the
outstanding common stock of the Company, as of June 30, 2000 of $6,778,661. The
principal balance of the note accrues interest at the prime rate and is due on
demand. The note consists of advances to 3TEC for general corporate purposes and
is unsecured. Interest of $844,979 was accrued on the note as of June 30, 2000.
The Company owns 1,293,522 shares of 3TEC Series C Preferred Stock ("Series
C"). As a holder of Series C, the Company is entitled to receive cumulative cash
dividends at an annual rate of $0.50 per share, payable March 31 and September
30 of each year. The Series C has a liquidation preference of $5.00 per share
plus an amount equal to all accumulated, accrued and unpaid dividends. Each
share of Series C is convertible into 1/3 share of 3TEC common stock. 3TEC has
the right to redeem all or a portion of the Series C at its option (upon 30 days
written notice), at a purchase price of $5.00 per share plus all accumulated,
accrued and unpaid dividends.
The Company is a party to the credit agreement between the Company, 3TEC
and certain banks. If certain properties are sold by the Company an amount
determined by the banks would have to be paid on the outstanding principal
balance of the debt. The debt payment could be made by 3TEC or the Company.
Amounts paid to the banks by the Company would reduce the amount of sales
proceeds the Company would retain. Amounts paid to the banks by 3TEC would
reduce the amount of cash available to be paid to the Company. The principal
balance of bank debt outstanding on 3TEC's financial statements at June 30, 2000
was approximately $71 million.
All but one of the officers and directors of the Company also serve as the
officers and directors of 3TEC.
(3) COMMITMENTS AND CONTINGENCIES
The Company is a defendant in various legal proceedings which are
considered routine litigation incidental to the Company's business, the
disposition of which management believes will not have a material effect on the
financial position or results of operations of the Company.
(4) ACCOUNTING PRONOUNCEMENTS
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 standardizes the accounting
for and disclosures of derivative instruments, including certain derivative
instruments embedded in other contracts. SFAS No. 137, "Accounting for
Derivative Instruments and Hedging Activities - Deferral of the Effective Date
of FASB Statement No. 133, an Amendment of FASB Statement No. 133," issued in
June, 1999, defers the effective date for implementation of SFAS No. 133 for one
year making it effective for all fiscal quarters of all fiscal years beginning
after June 15, 2000. We have not yet determined the impact of the statement on
our financial condition or results of operations.
6
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Liquidity and Capital Resources
-------------------------------
The principal source of the Company's cash flow will be sales of oil and
natural gas and income from the Company's investment in 3TEC preferred stock and
the note receivable from 3TEC.
The Company does not anticipate any capital expenditures for acquisition or
exploration of oil and natural gas reserves in the future. The Company expects
to make expenditures to develop its proved undeveloped reserves, to maintain its
proved developed reserves and to plug and abandon certain wells in Florida. The
Company expects to incur a minimum of $50,000 in capital expenditures over the
next twelve months. The Company expects that cash flows from operations,
proceeds from sales of certain oil and gas properties and advances from 3TEC
will be sufficient to fund the planned capital expenditures for the next twelve
months.
Because future cash flows from the Company's oil and gas properties are
subject to a number of variables, such as, the level of production and prices
received for oil and gas and the prices received on property sales, there can be
no assurance that the Company's capital resources will be sufficient to maintain
planned levels of capital expenditures and accordingly, oil and gas revenues and
operating results may be adversely affected.
The continued accrual of income from the Company's investment in 3TEC
preferred stock and the note receivable from 3TEC depends solely upon the
creditworthiness of the Company's 80% owner, 3TEC. Should 3TEC experience
problems that adversely affect its financial condition, the financial condition
and results of operations of the Company will be adversely affected.
Results of Operations
---------------------
Three months ended June 30, 2000 and 1999
-----------------------------------------
The Company's total revenues increased 36% to $720,639 caused primarily by
a 40% increase in oil and gas revenues to $405,248. Increases in oil and gas
prices caused the oil and gas revenue increase. During the current period, the
Company sold 3,200 barrels of oil at an average price of $26.24 per barrel and
94,970 Mcf of gas at an average price of $3.39 per Mcf. In the comparable
period, the Company sold 6,600 barrels of oil at an average price of $11.77 per
barrel and 101,000 Mcf of gas at an average price of $2.09 per Mcf.
7
<PAGE>
Total costs and expenses decreased 38% to $258,947 caused primarily by a
decline in lease operating expenses. Lease operating expenses decreased because
of operational improvements on the Segundo field, as well as the sale of
properties late in 1999.
The amount of current income tax expense calculated based on pre-tax income
for the three months ended June 30, 2000 was offset by a reduction in the
valuation allowance placed on the Company's deferred tax asset. Management of
the Company believes that sufficient evidence to date does not support a full
reversal of the valuation allowance placed on the Company's deferred tax asset.
The Company reported net income of $461,692 for the current period versus a
net income of $41,037 for the comparable period. The primary reason for the
increase was higher oil and gas revenues and lower lease operating expenses.
Six months ended June 30, 2000 and 1999
---------------------------------------
The Company's total revenues increased 32% to $1,327,886 caused primarily
by a 50% increase in oil and gas revenues to $719,176. Increases in oil and gas
prices caused the oil and gas revenue increase. During the current period, the
Company sold 6,700 barrels of oil at an average price of $25.32 per barrel and
185,000 Mcf of gas at an average price of $2.97 per Mcf. In the comparable
period, the Company sold 10,900 barrels of oil at an average price of $11.51 per
barrel and 186,000 Mcf of gas at an average price of $1.90 per Mcf.
Total costs and expenses decreased 39% to $492,502 caused primarily by a
decline in general and administrative lease operating expenses. General and
administrative expenses decreased because of the consolidation of the Company's
general and administrative functions which are now performed by 3TEC employees.
Lease operating expenses decreased because of operational improvements on the
Segundo field, as well as the sale of properties late in 1999.
The amount of current income tax expense calculated based on year-to-date
pre-tax income was offset by a reduction in the valuation allowance placed on
the Company's deferred tax asset. Management of the Company believes that
sufficient evidence to date does not support a full reversal of the valuation
allowance placed on the Company's deferred tax asset.
The Company reported net income of $835,384 for the current period versus a
net income of $129,295 for the comparable period. The primary reason for the
increase was higher oil and gas revenues and lower lease operating expenses.
8
<PAGE>
PART II. OTHER INFORMATION
---------------------------
(a) Exhibits
3.1 Certificate of Incorporation of the Company as currently
in effect/(1)/
3.2 Bylaws of the Company as currently in effect/(1)/
4.1 Form of Rights Agreement dated as of September 4, 1990
between the Company's predecessor-in-interest, Enex
Resources Corporation, a Colorado corporation (the
"Predecessor"), and American Securities Transfer,
Incorporated, as Rights Agent, which includes as
exhibits thereto the Form of Rights Certificate and the
Summary of Rights to Purchase Common Stock/(2)/
10.1 Enex Employees Stock Purchase Program/(3)/
10.2 1991 Non-Qualified Stock Option Award Program/(3)/
10.3 1990 Non-Qualified Stock Option Plan/(3)/
10.4 1984 Incentive Stock Option Plan and 1979 Employees Non-
Qualified Stock Option Plan/(4)/
10.5 Credit Agreement between the Company and Middle Bay Oil
Company, Inc., as borrower, and Compass Bank, as agent
and lender, Bank of Oklahoma, N.A., as a lender, and the
other lenders signatory thereto dated March 27,
1998/(5)/
16.1 from Deloitte & Touche, LLP regarding change in
certifying public accountants dated October 26,
1998/(6)/
21.1 Subsidiaries of the Company/(7)/
27.1 Financial Data Schedule (Filed herewith)
9
<PAGE>
1. Incorporated by reference to Exhibits to Form 8-K dated June 30, 1992
2. Incorporated by reference to Exhibits to Form 8-K dated September 4, 1990
3. Incorporated by reference to Exhibits to Registration Statement on Form S-8
filed with the Securities and Exchange Commission on March 22, 1993
4. Incorporated by reference to Exhibits to Registration Statement on Form S-8
filed with the Securities and Exchange Commission on July 1, 1992
5. Incorporated by reference to Exhibits to Amendment No. 3 and Final
Amendment to Schedule 14D-1 filed by Middle Bay Oil Company, Inc. (MBOC) on
April 13, 1998
6. Incorporated by reference to Exhibits to Form 8-K filed October 29, 1998
7. Incorporated by reference to Exhibits to Annual Report on Form 10-K dated
March 16, 1992
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 by
the undersigned, thereunto duly authorized, as of August 18, 2000.
ENEX RESOURCES CORPORATION
(Registrant)
/s/ FLOYD C. WILSON
By: _______________________________________
Floyd C. Wilson
Chief Executive Officer and Chairman
/s/ R.A. WALKER
By: _______________________________________
R.A. Walker
President and
Chief Financial Officer
/s/ STEPHEN W. HEROD
By: _______________________________________
Stephen W. Herod
Executive Vice President
Corporate Development
/s/ SHANE M. BAYLESS
By: _______________________________________
Shane M. Bayless
Vice President - Controller
10
