UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ x ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: March 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to ________
Commission File Number: 0-9204
EXCO RESOURCES, INC.
(formerly MINERAL DEVELOPMENT, INC.)
(Exact name of registrant as specified in its charter)
Texas 74-1492779
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
9400 N. Central Expressway,
Suite 1209, L.B. 196
Dallas, Texas 75231
(Address of principal executive offices) (Zip Code)
(214) 368-2084
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO
----- -----
Indicate the number of shares outstanding of each of
the issuer's classes of common stock as of April 30, 1997.
Class: Common stock, par value $0.01 per share
Outstanding at April 30, 1997: 805,300 shares
<PAGE>
EXCO RESOURCES, INC.
(formerly MINERAL DEVELOPMENT, INC.
INDEX
Page
Number
------
Part I. Financial Information:
- ------- ---------------------
Item 1. Financial Statements 2
Condensed Balance Sheets - March 31, 1997
and December 31, 1996 (Unaudited) 2
Condensed Statements of Operations
Three Months Ended March 31, 1997 and 1996
(Unaudited) 3
Condensed Statements of Cash Flows - Three
Months Ended March 31, 1997 and 1996 (Unaudited) 4
Notes to Financial Statements 5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
Part II. Other Information:
- -------- -----------------
Item 6. Exhibits and Reports on Form 8-K 10
Signatures 10
-1-
<PAGE>
Part I. Financial Information
Item 1. Financial Statements
EXCO RESOURCES, INC.
(formerly MINERAL DEVELOPMENT, INC.)
CONDENSED BALANCE SHEETS (UNAUDITED)
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
------------ ------------
ASSETS
------
<S> <C> <C>
CURRENT ASSETS:
Cash $ 99,000 $ 46,000
Accounts receivable 328,000 326,000
Other 0 1,000
------------ ------------
TOTAL CURRENT ASSETS 427,000 373,000
PROPERTY AND EQUIPMENT, AT COST:
Undeveloped oil and gas properties 55,000 55,000
Proved developed oil and gas properties, based on
successful efforts method 5,182,000 5,243,000
Office and field equipment 375,000 375,000
------------ ------------
5,612,000 5,673,000
Allowance for depreciation, depletion and amortization (4,802,000) (4,803,000)
------------ ------------
810,000 870,000
------------ ------------
$ 1,237,000 $ 1,243,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 390,000 $ 352,000
Joint interest prepayments 20,000 31,000
Revenues and royalties payable 121,000 95,000
Current portion of long-term debt 31,000 30,000
Note payable 125,000 150,000
------------ ------------
TOTAL CURRENT LIABILITIES 687,000 658,000
LONG TERM DEBT, LESS CURRENT PORTION 27,000 36,000
STOCKHOLDERS' EQUITY:
Common stock, $0.01 par value; 25,000,000 shares
authorized, 805,300 shares issued and
outstanding (Note 3) 8,000 8,000
Capital in excess of par value 9,118,000 9,118,000
Deficit (8,603,000) (8,577,000)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 523,000 549,000
------------ ------------
$ 1,237,000 $ 1,243,000
============ ============
See accompanying notes to financial statements.
</TABLE>
-2-
<PAGE>
EXCO RESOURCES, INC.
(formerly MINERAL DEVELOPMENT, INC.)
CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------
1997 1996
--------- ---------
<S> <C> <C>
REVENUES:
Oil and gas $ 219,000 $ 220,000
Management fees and other 50,000 53,000
--------- ---------
269,000 273,000
COSTS AND EXPENSES
Oil and gas production costs 99,000 108,000
Depreciation, depletion and amortization 28,000 29,000
General and administrative 145,000 100,000
Interest 5,000 6,000
Loss on disposition of properties 18,000 0
--------- ---------
295,000 243,000
--------- ---------
NET INCOME (LOSS) $ (26,000) $ 30,000
========= =========
INCOME (LOSS) PER COMMON SHARE $ (.03) $ .04
========= =========
Weighted average shares outstanding (Note 2) 805,300 675,000
See accompanying notes to financial statements.
</TABLE>
-3-
<PAGE>
EXCO RESOURCES, INC.
(formerly MINERAL DEVELOPMENT, INC.)
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------------
1997 1996
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (26,000) $ 30,000
Adjustments to reconcile net income (loss) to net cash provided
(used) by operating activities:
Depreciation, depletion and amortization 28,000 29,000
Loss on disposition of property and equipment 18,000 0
Net (increase) decrease in:
Accounts receivable 2,000 (8,000)
Other current assets 1,000 (8,000)
Net increase (decrease) in accounts payable and other
current liabilities 53,000 (248,000)
----------- -----------
Net cash provided (used) by operating activities 76,000 (205,000)
Cash flows from investing activities:
Additions to property and equipment (25,000) (8,000)
Proceeds from disposition of property and equipment 35,000 0
----------- -----------
Net cash provided (used) by investing activities 10,000 (8,000)
Cash flows from financing activities:
Payments on long-term debt (8,000) (7,000)
Payments on note payable (25,000) 0
Proceeds from issuance of common stock 0 225,000
----------- -----------
Net cash provided (used) by financing activities (33,000) 218,000
----------- -----------
Net increase in cash 53,000 5,000
Cash at beginning of year 46,000 221,000
----------- -----------
Cash at end of period $ 99,000 $ 226,000
=========== ===========
Supplemental information:
Interest paid $ 5,000 $ 6,000
=========== ===========
Federal income tax paid $ 0 $ 0
=========== ===========
See accompanying notes to financial statements.
-4-
<PAGE>
EXCO RESOURCES, INC.
(formerly MINERAL DEVELOPMENT, INC.)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1997
1 - Statement by Management Concerning Interim Financial
Information
- ---------------------------------------------------------
The financial information included herein is unaudited and
does not include all information and footnotes required by
generally accepted accounting principles for complete financial
statements; however, such information reflects all adjustments
(consisting solely of normal recurring adjustments), which are,
in the opinion of management, necessary for a fair presentation
of the results of operation for the interim period. It is
recommended that these interim financial statements be read in
conjunction with the financial statements and the notes thereto
included in the Company's Annual Report on Form 10-K for the year
ended December 31, 1996.
2 - Income Per Common Share
- ---------------------------
The Income per common share was computed by dividing the net
income for each period by the weighted average number of common
shares outstanding during the quarter. Common stock options are
not considered to be common stock equivalents as their effect
would be anti-dilutive. The weighted average number of common
shares outstanding during the period were retroactively restated
to give effect to the one-for-five reverse stock split effective
July 19, 1996.
3 - Changes in Stockholders' Equity
- -----------------------------------
On July 11, 1996, the Company's shareholders approved a one-
for-five reverse stock split of the Company's common stock. The
reverse stock split was effective July 19, 1996. The par value
of common stock and the number of authorized shares of common
stock remained unchanged. All references in the financial
statements to number of shares, per share amounts and market
prices of the Company's common stock have been retroactively
restated to reflect the decreased number of shares outstanding.
4 - Employment Agreement
- ------------------------
In April 1996, the Company entered into an employment
agreement with an individual to serve as President and Chief
Executive Officer of the Company. The agreement provides for a
three-year term, subject to extension upon mutual agreement of
the parties; provided, however, the employment agreement
originally provided that it would not become effective until the
Company was successful in raising at least $9,000,000 of capital
in a registered public offering (the "Funding Condition"). During
the employment term, the Company is required to cause such
individual to be nominated for election as a director at each
annual or applicable special meeting
-5-
<PAGE>
of shareholders of the Company, and the Company is required to
use its best efforts, consistent with its fiduciary
responsibilities to the shareholders, to cause the election of
such individual as a director. The employment agreement has been
amended to provide that it is effective, but that the Board may
terminate it at any time if the Company has not satisfied the
Funding Condition. The employment agreement is subject to early
termination as provided therein, including termination by the
Company for "cause" (as defined in the employment agreement) or
termination by such individual for "good reason upon change of
control" (as defined in the employment agreement). The employment
agreement provides for an annual base salary of $140,000 and such
bonuses or other discretionary compensation as the Board may
determine. In addition, the employment agreement provides, among
other things, for expense reimbursement and, as amended, the
grant of stock options to purchase up to 100,000 shares of Common
Stock for an exercise price of $2.75 per share. This stock option
has a ten year term, but will only vest upon the satisfaction of
the Funding Condition or upon the sale of the Company.
5 - Note Payable
- ----------------
In August 1996, the Company obtained a $200,000 short-term
credit facility with a bank to finance costs related to the
Company's finance and acquisition activities. The outstanding
principal amount of the loan is due June 2, 1997, or sooner if
demanded, and bears interest at the prime rate plus 2%, and
interest is payable monthly. The loan is secured by the pledge
of certain of the Company's oil and natural gas properties. The
loan restricts the Company's ability to borrow additional funds
or guarantee other indebtedness and requires the maintenance of a
positive working capital, excluding the loan amount. Currently,
as a result of expenses incurred in connection with the Company's
finance and acquisition activities, the Company does not meet the
loan requirement of maintaining a positive working capital, as
defined. At March 31, 1997, the amount of this deficiency was
$135,000. The Company, as a part of its overall refocus, intends
to divest certain nonstrategic assets to bring the Company in
compliance with this requirement of the credit facility. At
March 31, 1997, the Company owed $125,000 on this credit
facility.
6 - Recent Accounting Pronouncements
- ------------------------------------
In June 1996, the Financial Accounting Standards Board (the
"FASB") issued Statements of Financial Accounting Standards No.
125 "Accounting for Transfers and Servicing of Financial Assets
and Extinguishments of Liabilities" ("FAS 125"). FAS 125
provides accounting and reporting standards for, among other
things, the transfer and servicing of financial assets, such as
factoring receivables with recourse. FAS 125 is effective for
transfers and servicing of financial assets occurring after
December 31, 1996, and is to be applied prospectively. Earlier
or retroactive application is not permitted. In December 1996,
the FASB issued Statement of Financial Accounting Standards No.
127, "Deferral of the Effective Date of Certain Provisions of FAS
125" ("FAS 127"). FAS 127 amends the effective date for certain
provisions of FAS 125 to December 31, 1997. Management of the
Company does not anticipate the adoption of FAS 125 will have a
material impact on the Company's financial position or results of
operations.
In March 1997, the FASB issued Statement of Financial
Accounting Standards No. 128, "Earnings Per Share" ("FAS 128"),
which establishes standards for computing and presenting
-6-
<PAGE>
earnings per share for entities with publicly held common stock
or potential common stock. FAS 128 simplifies the standards for
computing earnings per share previously found in Accounting
Principles Board Opinion No. 15, "Earnings per Share," and makes
them comparable to international earnings per share standards.
It replaces the presentation of primary earnings per share with a
presentation of basic earnings per share, which excludes
dilution. It also requires dual presentation of basic and
diluted earnings per share on the face of the income statement
for all entities with complex capital structures. FAS 128 is
effective for fiscal years ending after December 15, 1997, and
early adoption is not permitted. Management of the Company does
not anticipate the adoption of FAS 128 will have a material
impact on the Company's financial position or results of
operations.
In February 1997, the FASB issued Statement of Financial
Accounting Standards No. 129, "Disclosure of Information about
Capital Structure" ("FAS 129"), which establishes standards for
disclosing information about an entity's capital structure. FAS
129 continues the existing requirements to disclose the pertinent
rights and privileges of all securities other than ordinary
common stock, but expands the number of companies subject to
portions of its requirements. FAS 129 is effective for fiscal
years ending after December 15, 1997. Management of the Company
does not anticipate the adoption of FAS 129 will have a material
impact on the Company's financial statements or results of
operations.
-7-
<PAGE>
Item 2.
EXCO RESOURCES, INC.
(formerly MINERAL DEVELOPMENT, INC.)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
THIS QUARTERLY REPORT ON FORM 10-Q OF EXCO RESOURCES, INC.
(THE "COMPANY") CONTAINS "FORWARDING-LOOKING STATEMENTS" WITHIN
THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND SECTION 21E OF THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED (THE "EXCHANGE ACT").
SPECIFICALLY, ALL STATEMENTS OTHER THAN STATEMENTS OF HISTORICAL
FACTS INCLUDED IN THIS REPORT REGARDING THE COMPANY'S FINANCIAL
POSITION, BUSINESS STRATEGY AND PLANS AND OBJECTIVES OF
MANAGEMENT OF THE COMPANY FOR FUTURE OPERATIONS ARE FORWARD-
LOOKING STATEMENTS. THESE FORWARD-LOOKING STATEMENTS ARE BASED
ON THE BELIEFS OF THE COMPANY'S MANAGEMENT AS WELL AS ASSUMPTIONS
MADE BY AND INFORMATION CURRENTLY AVAILABLE TO THE COMPANY'S
MANAGEMENT. WHEN USED IN THIS REPORT, THE WORDS "ANTICIPATE,"
"BELIEVE," "ESTIMATE," "EXPECT" AND "INTEND" AND WORDS OR PHRASES
OF SIMILAR IMPORT, AS THEY RELATE TO THE COMPANY OR COMPANY
MANAGEMENT, ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS.
SUCH STATEMENTS REFLECT THE CURRENT VIEW OF THE COMPANY WITH
RESPECT TO FUTURE EVENTS AND ARE SUBJECT TO CERTAIN RISKS,
UNCERTAINTIES AND ASSUMPTIONS RELATED TO CERTAIN FACTORS
INCLUDING, WITHOUT LIMITATION, PRICE LEVELS FOR OIL AND NATURAL
GAS, CONCENTRATION OF OIL AND NATURAL GAS RESERVES AND
PRODUCTION, DRILLING RISKS, UNCERTAINTY OF OIL AND GAS RESERVES,
RISKS ASSOCIATED WITH THE DEVELOPMENT OF ADDITIONAL REVENUES AND
WITH THE ACQUISITION OF OIL AND GAS PROPERTIES AND OTHER ENERGY
ASSETS, OPERATING HAZARDS AND UNINSURED RISKS, GENERAL ECONOMIC
CONDITIONS, GOVERNMENTAL REGULATION, CHANGES IN INDUSTRY
PRACTICES, MARKETING RISKS, ONE TIME EVENTS AND OTHER FACTORS
DESCRIBED HEREIN ("CAUTIONARY STATEMENTS"). ALTHOUGH THE COMPANY
BELIEVES THAT THE EXPECTATIONS REFLECTED IN SUCH FORWARD-LOOKING
STATEMENTS ARE REASONABLE, IT CAN GIVE NO ASSURANCE THAT SUCH
EXPECTATIONS WILL PROVE TO HAVE BEEN CORRECT. BASED UPON
CHANGING CONDITIONS, SHOULD ANY ONE OR MORE OF THESE RISKS OR
UNCERTAINTIES MATERIALIZE, OR SHOULD ANY UNDERLYING ASSUMPTIONS
PROVE INCORRECT, ACTUAL RESULTS MAY VARY MATERIALLY FROM THOSE
DESCRIBED HEREIN AS ANTICIPATED, BELIEVED, ESTIMATED, EXPECTED OR
INTENDED. THE COMPANY DOES NOT INTEND TO UPDATE THESE FORWARD-
LOOKING STATEMENTS. ALL SUBSEQUENT WRITTEN AND ORAL FORWARD-
LOOKING STATEMENTS ATTRIBUTABLE TO THE COMPANY OR PERSONS ACTING
ON ITS BEHALF ARE EXPRESSLY QUALIFIED IN THEIR ENTIRETY BY THE
APPLICABLE CAUTIONARY STATEMENTS. REFERENCE IS MADE TO
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - FORWARD-LOOKING INFORMATION - CAUTIONARY
STATEMENTS" INCLUDED IN THE COMPANY'S ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 1996, WHICH IS INCORPORATED
HEREIN BY REFERENCE.
Results of Operations - Comparison of Three Month Periods Ended
March 31, 1997 and 1996
- ---------------------------------------------------------------
REVENUES. Revenues for the three month period ended
March 31, 1997 were $269,000 compared with $273,000 for the
corresponding period in 1996, a 1% increase. Higher oil and gas
prices for the current quarter effectively offset the normal
production declines.
COSTS AND EXPENSES. Costs and expenses for the three month
period ended March 31, 1997 increased $52,000, or 21%, to
$295,000 versus $243,000 for the corresponding period of 1996.
-8-
<PAGE>
This increase was due primarily to a $45,000 increase in general
and administrative costs resulting from the addition of a new
President and Chief Executive Officer in June 1996 (See Note 4).
Also contributing to the increase was a $18,000 loss on the
disposition of properties during the current quarter.
NET INCOME (LOSS). Net income for the quarter ended
March 31, 1997 was a loss of $26,000 compared to an income of
$30,000 for the corresponding quarter of 1996, representing
$(.03) and $.04 per share, respectively. All earnings per share
figures are based on restated weighted average shares outstanding
after the retroactive effect of the one-for-five reserve stock
split approved at the Company's shareholders meeting held
July 11, 1996.
Liquidity and Capital Resources
- -------------------------------
The Company's working capital at March 31, 1997 was a
negative $260,000 compared to a negative $285,000 at December 31,
1996. At March 31, 1997, $125,000 was owed on a short-term
credit facility with a bank and is payable June 2, 1997, or
sooner if demanded. The outstanding principal amount of the loan
bears interest at the prime rate plus 2%, and interest is payable
monthly. The loan is secured by the pledge of certain of the
Company's oil and gas properties. The loan restricts the
Company's ability to borrow additional funds or guarantee other
indebtedness and requires the maintenance of a positive working
capital, excluding the loan amount Currently, the Company does
not meet the loan requirement of maintaining a positive working
capital, as defined. At March 31, 1997, the amount of this
deficiency was $135,000. The Company, as part of its overall
consolidation and refocus, intends to divest certain nonstrategic
assets to bring the Company in compliance with this requirement
of the credit facility.
Also impacting the Company's working capital was positive
earnings before interest, taxes, depreciation, depletion and
amortization ("EBITDA"). EBITDA for the three-month period ended
March 31, 1997 was $7,000 or $.01 per share. Management is of
the opinion that the Company's cash flow, available borrowing
capacity and ability to raise additional capital will be adequate
to meet its current obligations as well as fund currently
anticipated property acquisitions, new projects, and generation
and/or participation in new drilling and recompletion work.
However, any significant acquisitions, projects or drilling
and/or recompletion work will require additional debt and/or
equity financing. There is no assurance that the Company will be
able to obtain additional debt and/or equity financing for any
significant activities.
-9-
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
(a) Exhibits
27.1 Financial Data Schedule
(b) Reports on Form 8-K - The Company filed one Report on
Form 8-K during the three months ended March 31, 1997.
On January 16, 1997, the Company filed a Report on Form
8-K reporting the termination of its letter of intent
to acquire Taurus Energy Corp.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed in
its behalf by the undersigned thereunto duly authorized.
EXCO RESOURCES, INC.
formerly MINERAL DEVELOPMENT, INC.
(Registrant)
Date: May 15, 1997 /s/ Glenn L. Seitz
-----------------------------------
Glenn L. Seitz, Treasurer
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL DATA INFORMATION EXTRACTED FROM THE
UNAUDITED FINANCIAL STATEMENTS FOR EXCO RESOURCES, INC. FOR THE THREE MONTHS
ENDED MARCH 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 99,000
<SECURITIES> 0
<RECEIVABLES> 328,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 427,000
<PP&E> 5,612,000
<DEPRECIATION> 4,802,000
<TOTAL-ASSETS> 1,237,000
<CURRENT-LIABILITIES> 687,000
<BONDS> 27,000
0
0
<COMMON> 8,000
<OTHER-SE> 515,000
<TOTAL-LIABILITY-AND-EQUITY> 1,237,000
<SALES> 0
<TOTAL-REVENUES> 269,000
<CGS> 0
<TOTAL-COSTS> 295,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,000
<INCOME-PRETAX> (26,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (26,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (26,000)
<EPS-PRIMARY> (.03)
<EPS-DILUTED> (.03)
</TABLE>
