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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of
1934 for the quarterly period ended December31, 1999
[ ] Transition report under Section 13 or 15(d) of the Securities Exchange Act
of 1934 for the transition period from ----------- to --------------.
Commission file number:000-09419
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POWER EXPLORATION, INC.
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(Exact name of small business issuer as specified in its charter)
- - - - ----------------------------------------------------------- --------------------
Nevada 84-0811647
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
- - - - ----------------------------------------------------------- --------------------
5416 Birchman Avenue, Fort Worth, Texas 76107
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(Address of principal executive office) (Zip Code)
(817) 377-4464
---------------------
(Issuer's telephone number)
Check whether the issuer: (1) filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act during the past 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 XX No
The number of outstanding shares of the issuer's common stock, $0.02 par
value (the only class of voting stock), as of December 31, 1999 was 9,569,260.
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<PAGE>
INDEX
PART I. FINANCIAL INFORMATION 3
Item 1. Financial Statements 3
Consolidated Balance Sheet for the Two Most Recent Quarters 3
Consolidated Statement of Operations for the Two Most Recent Quarters 4
Consolidated Statement of Cash Flows for the First Quarter of 1999 5
Notes to Unaudited Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
General 15
Financial Results 15
Liquidity And Capital Resources 16
Year 2000 Compliance 16
PART II. OTHER INFORMATION 16
Item 1. Legal Proceedings 16
Item 2. Changes in Securities and Use of Proceeds 16
Item 3. Other Information 17
Item 4. Exhibits and Reports 18
Signature 19
EXHIBITS
- - - - --------------------------------------------------------------------------------
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
POWER EXPLORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET FOR THE TWO MOST RECENT QUARTERS
Dec. 31, 1999 Sept. 30, 1999
Unaudited Audited
ASSETS
CURRENT ASSETS
Cash $ (3,700) 1,083
Accounts Receivable 12,769 8,563
Accounts Receivable - Related Party 9,708 84,570
Inventory 378,719 323,486
Prepaid Expenses - 230
-------------- -----------------
Total Current Assets 397,496 $ 417,932
OIL & GAS PROPERTIES, FULL COST METHOD
Properties being amortized 11,134,423 7,134,910
Properties not subject to amortization - -
-------------- -----------------
Total Oil and Gas Properties 11,134,423 7,134,910
Less: Accumulated depreciation,
depletion & amortization (25,770) (10,491)
-------------- -----------------
Net Oil and Gas Properties 11,108,653 7,124,419
PROPERTY AND EQUIPMENT
Property and Equipment 222,236 370,124
Accumulated Depreciation (106,144) (139,618)
-------------- -----------------
Total Property and Equipment 116,092 230,506
OTHER ASSETS 11,028 6,037
TOTAL ASSETS $ 11,633,269 $ 7,778,894
============== =================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable Trade $ 256,978 $ 623,441
Accounts Payable - Related Parties - 389,154
Payroll and Sales Tax Payable 13,041 -
Accrued Expenses 24,000 -
Accrued Interest 62,542 -
Accrued Wages and P/roll Taxes 274,689 202,025
Customer Deposits 55,000 30,000
Advances Payable - 25,000
Advances Payable - Related Parties - 140,000
Notes Payable -- Related Parties - 101,313
-------------- -----------------
Total Current Liabilities $ 1,286,250 $ 2,010,933
LONG TERM LIABILITIES
Total Liabilities $ 1,286,250 $ 2,010,933
STOCKHOLDERS' EQUITY
Common Stock ($.02 par value;
50,000,000 shares authorized,
9,569,260 shares issued & outstanding) 191,385 3,553
Additional Paid-In Capital 18,587,731 13,650,157
Accumulated Deficit (8,432,097) (7,885,749)
Total Stockholders' Equity $ 10,347,019 $ 5,767,961
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 11,633,269 $ 7,778,894
============== ==============
See Notes to Financial Statements
3
<PAGE>
POWER EXPLORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS FOR THE TWO MOST RECENT QUARTERS
3 Months Ending 3 Months Ending
Dec. 31, 1999 Dec. 31, 1998
Unaudited Unaudited
REVENUE
Oil and Gas Sales $ 15,144 $ 2,485
Equipment Sales 5,041 7,635
Drilling Revenue 6,327 -
--------- ----------
Total Revenue 26,512 10,120
COST OF REVENUE
Lease Operating 69,011 44,878
Production Taxes 700 32
Depreciation,
Depletion & Amortization 12,842 279
Exploration - -
Cost of Equipment Sales - 1,510
--------- ----------
Total Cost of Revenue 82,553 46,699
GROSS PROFIT (56,041) (36,579)
EXPENSES
General and Administrative 480,093 404,210
Interest Expense 10,214 17,115
--------- ----------
Total Expenses 490,307 421,325
PROFIT (LOSS) BEFORE OTHER INCOME
AND PROVISION FOR INCOME TAXES (546,348) (457,904)
OTHER INCOME - -
----------- ----------
PROFIT (LOSS) BEFORE PROVISION
FOR INCOME TAXES (546,348) (457,904)
PROVISION FOR INCOME TAXES
- -
NET PROFIT (LOSS) (546,348) (457,904)
=========== ==========
PROFIT (LOSS) PER SHARE $ (0.06) $ (0.04)
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 9,569,260 12,040,382
See Notes to Financial Statements
4
<PAGE>
POWER EXPLORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE FIRST QUARTER OF 1999
3 Months Ending
Dec. 31, 1999
Unaudited
Profit (Loss) After Taxes $ (546,348)
Depreciation and Amortization 12,842
Cash Flow from Income Statement (533,506)
Accounts Receivable.................Decr (Incr) (4,206)
Inventory...........................Decr (Incr) (55,233)
Other Current Assets.................Decr (Incr) (4,991)
Prepaid & Deferred Exp..............Decr (Incr) 230
Accounts Payable.....................Incr (Decr) (516,359)
Other Current Liab.....................Incr (Decr) -
Notes Payable - Related Parties..Incr (Decr) (241,313)
Cash Flow from Operating Activities (821,872)
Fixed Assets............................Decr (Incr) 114,414
Net Oil & Gas Prop....................Decr (Incr) (3,984,234)
Other Assets............................Decr (Incr) (4,991)
Cash Flow from Investing Activities (3,874,811)
New Borrowings -
Repayments -
Short Term Debt........................Incr (Decr) 100,000
Long Term Debt.........................Incr (Decr) -
Common Stock.........................Incr (Decr) 187,832
Additional Paid In Capital............Incr (Decr) 4,937,574
Cash Flow from Financing Activities 5,225,406
Net Increase (Decrease) in Cash (4,783)
Beginning Cash 1,083
Ending Cash (3,700)
See Notes to Financial Statements
5
<PAGE>
POWER EXPLORATION, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
The Company is engaged primarily in the fields of acquisition,
development, exploration for and sale of oil and gas, and the
construction and sale of oil and gas extraction equipment.
Basis of Consolidation
The consolidated financial statements include the accounts of Power
Exploration, Inc. ("Power", formerly Titan Energy Corp., Inc.) and its
100% owned subsidiaries, Oil Retrieval Systems, Inc. ("ORS"), acquired
May 16, 1997 and Oil Seeps, Inc. ("OSI") acquired June 17, 1997.
Accordingly, all references herein to Power or the "Company" include
the consolidated results of its subsidiaries. All significant
inter-company accounts and transactions have been eliminated in
consolidation.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with the
original maturity of three months or less to be cash equivalents.
Inventory
Inventory, consisting of parts and materials used in the construction
of oil extraction equipment, are stated at the lower of cost or
market, cost being determined by the average cost method.
Oil and Gas Properties
The Company follows the full cost method of accounting for oil and gas
property acquisition, exploration, development, and production.
Capitalization Policies: All oil and gas property acquisition,
exploration, and development costs are capitalized as
incurred. There were no internal costs directly attributable
to such activities. Net capitalized costs of unproved property
and exploration well costs are reclassified as proven property
and well costs when related proven reserves are found. Costs
to operate and maintain wells and field equipment are expensed
as incurred.
Amortization Policies: Except for cost of (1) unevaluated,
unproved properties and (2) major development projects in
progress, all capitalized oil and gas property costs, net of
prior accumulated amortization, are amortized by country using
the unit-of-production method based on proved reserves. The
amortization base includes estimated future costs to develop
proved reserves and estimated future dismantlement,
reclamation, and abandonment costs, net of equipment salvage
values.
6
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POWER EXPLORATION, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Impairment Policies: Costs not being amortized are periodically
assessed for impairment. Any impairment is added to the amortization
base. Net capitalized costs of oil and gas properties, less related
deferred income taxes are limited, by country, to the sum of (1)
future net revenues (using prices and cost rates as of the balance
sheet date) from proved reserves and discounted at ten percent per
annum, plus (2) costs not being amortized, less (3) related income tax
effects. Excess costs are charged to proved property impairment
expense.
Sales and Retirements Policies: No gain or loss is recognized on the
sale of oil and gas properties unless non-recognition would
significantly alter the relationship between capitalized costs and
remaining proved reserves for the affected amortization base. When
gain or loss is not recognized, the amortization base is reduced by
the amount of sales proceeds.
Revenue Recognition
Revenues from the sale of oil and gas production are recognized when
title passes, net of royalties. Natural gas revenues are generally
recognized under the entitlement method of accounting for gas
imbalances, i.e., monthly sales quantities that do not match the
Company's entitled share of joint production. Entitled quantities in
excess of sales quantities are recorded as a receivable from joint
venture partners. The receivable is carried at the lower of current
market price or the market price at the time the imbalance occurred.
Sales quantities in excess of entitled quantities are recorded as
deferred revenue carried at the gas market price received at the time
the imbalance occurred.
Hedging
The Company may enter into derivative contracts to hedge the risk of
future oil and gas price fluctuations. Such contracts may either fix
or support oil and gas prices, limit the impact of price fluctuations
with respect to the Company's sales of oil and gas. Gains and losses
on such hedging activities are recognized in oil and gas revenues when
the hedged production is sold. Hedged oil and gas prices used in
computing the year-end standardized measure of discounted future net
cash flows relating to proved oil and gas reserves reflect the
estimated effects of hedging contracts existing at year end.
7
<PAGE>
POWER EXPLORATION, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Use of Estimates
The preparation of the financial statements is in conformity with
generally accepted accounting principles, which requires management to
make estimates and assumptions that affect the reported amount of
assets and liabilities. Disclosure of contingent assets and
liabilities, at the date of the financial statements are included
along with the reported amounts of revenues and expenses during the
reporting date. Actual results could differ from those estimates.
Depreciation and Amortization
Property and equipment are stated at cost and are depreciated using
the straight-line method over their estimated useful lives.
The costs of maintenance and repairs are charged to expense when
incurred; costs of renewals and enhancements are capitalized. Upon the
sales or retirement of property and equipment, the cost and related
accumulated depreciation are eliminated from the respective accounts
and the resulting gain or loss is included in operations.
Estimated useful lives are as follows:
Shop Equipment 5 years
Furniture and Office Equipment 5 years
Machinery 5 - 7 years
Fair Value of Financial Instruments
The Company's financial instruments consist of cash, accounts
receivable, and accounts payable and short-term debt. The carrying
amounts of cash, accounts receivable, accounts payable and short-term
debt approximate fair value due to the relatively short maturity of
these instruments.
Long-Lived Assets
Long-lived assets to be held and used are reviewed for impairment
whenever events or changes in circumstances indicate that the related
carrying amount may not be recoverable. When required, impairment
losses on assets to be held and used are recognized based on the fair
value of the assets and long-lived assets to be disposed of are
reported at the lower of carrying amount of fair value less cost to
sell.
8
<PAGE>
POWER EXPLORATION, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Income Taxes
Provisions for income taxes are based on taxes payable or
refundable for the current year and deferred taxes on
temporary differences between the amount of taxable income and
pretax financial income and between the tax bases of assets
and liabilities and their reported amounts in the financial
statements. Deferred tax assets and liabilities are included
in the financial statements at currently enacted income tax
rates applicable to the period in which the deferred tax
assets and liabilities are expected to be realized or settled
as prescribed in FASB Statement No. 109, Accounting for Income
Taxes. As changes in tax laws or rates are enacted, deferred
tax assets and liabilities are adjusted through the provision
for income taxes.
Concentration of Credit Risk
The Company places its cash in what it believes to be
credit-worthy financial institutions. However, cash balances
may exceed FDIC insured levels at various times during the
year.
Stock-Based Compensation
The Company has adopted the intrinsic value method of
accounting for stock-based compensation in accordance with
Accounting Principles Board Opinion ("APB") No. 25,
"Accounting for Stock Issued to Employees" and related
interpretations.
Comprehensive Income
In June 1997, SFAS No. 130, "Reporting Comprehensive Income",
was issued. This statement establishes standards for the
reporting and display of comprehensive income and its
components in the financial statements. As of September 30,
1999 and 1998, the Company had no items that represent other
comprehensive income and, therefore, has not included a
schedule of comprehensive income in the financial statements.
Per Share of Common Stock
Per share amounts have been computed based on the average
number of common shares outstanding during the period. In
February 1997, the Financial Accounting Standards Board issued
a new statement titled "Earnings Per Share" (SFAS No. 128).
This statement is effective for both interim and annual
periods ending after December 15, 1997 and specifies the
computation, presentation, and disclosure requirements for
earnings per share for entities with publicly held common
stock or potential common stock. All prior-period EPS data
presented has been restated to conform with the provisions for
SFAS No. 128.
Potential common stock has been excluded from the computation
of earnings per share since the inclusion of options and
warrants would be anti-dilutive.
9
<PAGE>
POWER EXPLORATION, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
All share and per share data have been adjusted to
retroactively reflect the 1 for 100 reverse stock split
effected on October 19, 1999.
Impact of Recently Issued Accounting Standards
During 1998, the FASB issued No. 131, "Disclosure About
Segments of an Enterprise and Related Information", which
changes the way public companies report information about
segments. SFAS No. 131, which is based on the selected segment
information quarterly and entity-wide disclosures about
products and services, major customers and the material
countries in which the entity holds assets and reports
revenue. This statement is effective for the Company's fiscal
year. The Company is in the process of evaluating the
disclosure requirements under this standard.
Additionally, during 1998, the America Institute of Certified
Accountants' Executive Committee issued Statement of Position
Number 98-1 (SOP 98-1), "Accounting for the Cost of Computer
Software Developed or Obtained for Internal Use". SOP 98-1 is
effective for fiscal years beginning after December 15, 1998.
Management believes that the Company is substantially in
compliance with this pronouncement and that its
complementation will not have a material effect on the
Company's financial position, results of operations or cash
flows.
NOTE 2 - INVENTORY
Inventory at 9-30-99 & 12-31-99 consist of the following:
9-30-99 12-31-99
------- --------
Raw Material $ 220,069 $ 251,861
Work in Process 103,417 126,858
----------- -----------
$ 323,486 $ 378,719
========== ==========
NOTE 3 - PROPERTY AND EQUIPMENT
Property and equipment at 9-30-99 & 12-31-99 consist of the
following:
9-30-99 12-31-99
------- --------
Shop Equipment $ 30,852 $ 30,852
Furniture and Office Equipment 24,068 22,887
Machinery 269,167 123,072
---------- ---------
324,087 176,811
Less Accumulated Depreciation 93,581 60,719
----------- -----------
Property and Equipment - Net $ 230,506 $ 116,092
========= =========
Depreciation Expense Recorded in
the Statement of Operations $ 47,544 $ 12,842
========== ==========
10
<PAGE>
POWER EXPLORATION, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
NOTE 4 - OIL AND GAS PROPERTIES NOT SUBJECT TO AMORTIZATION
The Company's oil and gas properties are located in the United
States and Australia. Amortization expense was $2.41 and $1.07
per Bbl production during the years ended September 30, 1999 and
1998, respectively.
Costs excluded from amortization are as follows at September 30:
1999 1998
--------------- --------------
Acquisition Costs $ - $ 1,200,000
Exploration Costs - 112,505
------------------ -------------
$ - $ 1,312,505
================= ==============
All excluded costs at September 30, 1998 are located in
Australia.
At September 30, 1998, a determination could not be made about the
extent of oil reserves that should be classified as proven
reserves for this prospect. Consequently, the associated
property costs and exploration costs have been excluded in
computing amortization of the full cost pool. Amortization of
these costs began during fiscal 1999.
NOTE 5 - NOTES PAYABLE
Notes payable at December 31, 1999 consists of the
following:
9-30-99 12-31-99
a) Note Payable - Trident III, LLC $ 250,000 250,000
b) Note Payable - BEI, Inc 250,000 250,000
c) Note Payable - Related Party 101,313 -
d) Note Payable - Landmark Bank - 100,000
- -------
$ 601,313 $ 600,000
========= ===========
a) The Company was indebted to Trident III, L.L.C. under terms of a
promissory note dated October 21, 1998 in the amount of $250,000. Terms of
the note provide for interest at a rate of 10% per annum, with an original
maturity date of April 20, 1999. The Company issued 1,000 shares of its
common stock to Trident III, L.L.C. in connection with this loan. The loan
has been extended at various times with a current maturity date of October
30, 1999. The Company issued a total of 2,600 shares of its common stock in
consideration of these extensions. When the note was extended to September
30, 1999, the Company agreed that if the note was not paid on or before
September 30, 1999, then it would issue 50,000 shares per day for each day
that the note is outstanding subsequent to September 30, 1999. Concurrent
with the extension to October 30, 1999 the provision was added that if
payment of outstanding principal and interest were made by that date, the
lender would not seek to receive the 50,000 shares per day due under the
previous extension. The lender has waived this provision of the contract.
A settlement has been reached with the lender that requires the
company issuing 279,861 common stock shares to Trident III,
L.L.C. in exchange for a full release from the debt and
indemnity against any and all current and future claims. The
issuance of the Company's common stock shares on February 9,
2000, eliminated the debt and satisfied the agreement in full.
11
<PAGE>
POWER EXPLORATION, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
NOTE 5 - NOTES PAYABLE (continued)
b) The Company is indebted to Business Exchange Investment, Inc. under
terms of a promissory note dated September 15, 1998. Terms of the note
provide for interest at a rate of 10% per annum with a maturity date
of June 30, 2000. The note is collateralized by 100% of the shares of
OSI. The Company hopes to satisfy this debt by issuing shares of its
common stock. No agreement has been reached at this date, however, the
Company is active in its attempt to resolve this debt.
c)The Company was indebted to the M.O. Rife III, Trust A under terms
of a promissory note date March 31, 1999 in the amount of $101,313.
This note was eliminated according to the terms of the December 7,
1999 Acquisition Agreement of certain assets of Rife Oil Properties,
Inc. and the extinguishment of this debt.
d)The Company is indebted to Landmark Bank under terms of a
promissory note dated October 13. 1999. Terms of the note provide for
interest at a rate of 10% per annum with a maturity date of February
9, 2000. The note is collateralized by 100% of the assets of Oil
Retrieval Systems, Inc. The funds were used as working capital for Oil
Retrieval Systems, Inc.
NOTE 6 - RELATED PARTY TRANSACTIONS
During the quarter ending December 31, 1999:
a) The Company issued a promissory note to M.O. Rife III Trust A
(the "Rife Trust"), who is a principal stockholder in the amount
of $101,313. The proceeds of the note were used to repay a loan
to the Company from the Bank of Commerce, which the stockholder
had guaranteed. This note was forgiven pursuant to the
acquisition dated December 7, 1999 whereby this promissory was
forgiven in exchange for the consideration enumerated in said
agreement. This consideration consisted, in part, of the issuance
of one million shares of the issuer's common stock.
b) The Company was advanced a net of $140,000 by Rife Oil
Properties, Inc., a company owned by the beneficiary to the Rife
Trust. This amount was forgiven pursuant to the acquisition dated
December 7, 1999 whereby this promissory was forgiven in exchange
for the consideration enumerated in said agreement. This
consideration consisted, in part, of the issuance of one million
shares of the issuer's common stock.
c) The Company incurred a net accounts payable to Rife Oil
Properties, Inc. of $389,154. This amount was forgiven pursuant
to the acquisition dated December 7, 1999 whereby this promissory
was forgiven in exchange for the consideration enumerated in said
agreement. This consideration consisted, in part, of the issuance
of one million shares of the issuer's common stock.
d) The Company occupies space in facilities leased by M.O. Rife III.
The Company pays rent to the stockholder in the amount of $2,000
per month. The space is rented on a monthly basis.
e) The Company is indebted to officers for wages accrued in year
1999 in the amount of $254,820, which incurred payroll tax
accrual of $19,869. A settlement has been reached with the
officers consisting of the Company issuing 100,000 shares common
stock to extinguish debt. As of the date of this filing, these
shares have not been issued.
12
<PAGE>
POWER EXPLORATION, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
NOTE 7 - ADVISORY & CONSULTING AGREEMENTS
For the period ending December 31,1999, the Company entered into
various cancelable advisory agreements with third parties.
Compensation for services provided under these agreements will
be paid in either Common Shares or Common Share Purchase options
of the Company. During the quarter ended December 31, 1999, the
Company issued 90,000 shares of common stock under these
advisory agreements, valued at $236,250.
NOTE 8 - COMMITMENTS AND CONTINGENCIES
a)The Company has entered into various non-cancelable operating lease
agreements for office and warehouse space and equipment.
1) Warehouse facilities located in Fort Worth, Texas. The lease
term expires on September 30, 2001.
2) Various office equipment leases expiring through March 2004.
Future minimum lease payments under the lease agreements for
each of the years ended September 30 are as follows:
2000 $ 109,319
2001 77,790
2002 11,639
2003 8,731
2004 2,368
-------------
Total minimum lease payments $ 209,847
==========
Rent expense included in the financial statements for the
quarter ended December 31, 1998 totaled $39,700.
b) The Company has pledged 100% of the shares of Oil Seeps, Inc., a
wholly owned subsidiary, as collateral for a $250,000 promissory
note due on June 30, 2000.
c) A former employee had filed a claim against ORS. The employee had
demanded $75,000 in exchange for a full and final release. The
claim has been settled for $20,000 through mediation in December
1998. The settlement amount has not been paid and has been
accrued in the financial statements.
d) A suit has been filed against the Company alleging breach of
contract and seeking damages of approximately $120,000. This
relates to an alleged agreement to repurchase equipment
previously sold by the Company. This amount has not been recorded
in the financial statements as of December 31, 1999.
13
<PAGE>
POWER EXPLORATION, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
NOTE 9 - SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCIAL ACTIVITIES
During the quarter ended December 31, 1999:
a) The Company issued 90,000 shares under an advisory agreement.
The shares of the Issuer's common stock were issued to Allen Z.
Wolfson, under an agreement dated December 14, 1999 whereby the
recipient is entitled to receive 750,000 for consulting services
provided to the Issuer. This transaction is valued at $236,250
and charged to G & A for the quarter ending December 31, 1999.
b) The Company issued 9,000,000 shares to Rife Oil Properties for
certain oil leases and the relinquishment of certain debt owed
by the issuer to Rife Oil Properties, Inc.
c) The Company issued 300,000 shares of its common stock in order
to secure a loan by Global Universal, Inc. in the amount of
$25,000. The loan was subsequently forgiven and the shares were
returned to the Company's treasury during the second quarter of
its fiscal year.
NOTE 10 - SUBSEQUENT EVENTS
Subsequent to December 31, 1999, the Company
a) The Company is indebted to officers for wages accrued in year
1999 in the amount of $254,820, which incurred payroll tax
accrual of $19,869. A settlement has been reached with the
officers consisting of the Company issuing 100,000 shares common
stock to extinguish debt, thereby eliminating accrued payroll
taxes. The issuance of the Company's common stock shares for
this matter will occur in the 2nd of this fiscal year.
b) A settlement has been reached with Trident III, L.L.C. that
consists of the company issuing 279,188 common stock shares to
Trident III, L.L.C. in exchange for a full release from the debt
and indemnity against any and all current and future claims. The
issuance of the Company's common stock shares for this matter
will occur in the 2nd of this fiscal year.
c) The Company is seeking to resolve debt payable burdens with the
issuance of shares in its common stock. Under this scenario, the
Company is seeking to negotiate a settlement with Business
Exchange, Inc. for its debt of $250,000. The Company is also
seeking to eliminate the claim made by a former employee of Oil
Retrieval Systems, Inc.
d) The Company entered into two advisory agreements covering
financial and investment services to be provided to the Company
on a best efforts basis. The agreements provide for the Company
to issue an aggregate of 1,500,000 shares of post reverse split
common stock plus options to purchase an aggregate of 1,500,000
shares of post reverse split common stock at an exercise price
of $0.66667 per share for a period of one year, the term of the
agreements. As of the end of the fiscal quarter ending 12-31-99,
the Company has issued 90,000 shares of its common stock under
the aforementioned agreements.
NOTE 11 - Additional footnotes included by reference
Except as indicated in Notes above, there have been no other
material changes in the information disclosed in the notes to
the financial statements included in the Company's Annual Report
on Form 10-KSB for the year ended September 30, 1999. Therefore,
those footnotes are included herein by reference.
14
<PAGE>
POWER EXPLORATION, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Forward Looking Statements
The information herein contains certain forward looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E
of the Securities Exchange Act of 1934, as amended, which are intended to be
covered by the safe harbors created thereby. Investors are cautioned that all
forward looking statements involve risks and uncertainty, including, without
limitation, the ability of Power Exploration, Inc. ("Power") to continue its
expansion strategy, changes in the real estate markets, labor and employee
benefits, as well as general market conditions, competition, and pricing.
Although Power believes that the assumptions underlying the forward looking
statements contained herein are reasonable, any of the assumptions could be
inaccurate, and therefore, there can be no assurance that the forward looking
statements included in the Form 10QSB will prove to be accurate. In view of the
significant uncertainties inherent in the forward looking statements included
herein, the inclusion of such information should not be regarded as a
representation by Power or any other person that the objectives and plans of
Power will be achieved.
General
During the first quarter of 2000,Power Exploration, Inc. and its subsidiaries
(hereinafter the "Company" unless the context indicates otherwise) continued to
improve its financial condition. Power decreased its net losses over the
comparable quarter in 1999. As a direct result of slightly increased revenues
for the three months ended December 31, 1999, Power's overall financial health
has somewhat improved.
The following discussion of the consolidated financial condition and results of
operations of Power should be read in conjunction with the consolidated
financial statements of Power and the notes thereto included in Item 1 of Part I
of this Report.
Financial Results
Revenues
Oil and gas sales increased $12,659, or 509%, to $15,144 for the three months
ended December 31, 1999 from $2,485 for the three months ended December 31,
1998. Equipment sales decreased $2,594, or 34%, to $5,041 for the three months
ended December 31, 1999 from $7,635 for the three months ended December 31,
1998. To date, Power has been putting the necessary components in place to
create ongoing income, and these efforts should begin to be realized during the
second half of the 2000 fiscal year.
Costs and Expenses
Power's general and administrative expenses increased $75,883, or 19%, to
$480,093 for the three months ended December 31, 1999 from $404,210 for the
three months ended December 31, 1998. The change in the dollar amount of general
and administrative expenses was due primarily to an increase in consulting
expenses. Other major components of general and administrative expenses included
officer's salaries at 14%, non-officer salaries at 14%, and legal fees at 4%.
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Net Loss
Net loss for the three months ended December 31, 1999 was $546,348, or $.06 per
share, compared to a loss of $457,904, or $.04 per share, for the three months
ended December 31, 1998. Net cash used in operating activities was $821,872 for
the three months ended December 31, 1999, and $384,034 for the three months
ended September 30, 1999, representing a increase of more than 100% in cash
usage. All cash activities of the business produced a $4,783 decrease in cash
for the three months ended December 31, 1999.
Liquidity and Capital Resources
Power's working capital deficit on December 31, 1999 was $888,754 compared to a
deficit of $986,680 on September 30, 1999, a ratio of 0.4 for the three months
ended December 31, 1999 as well as for the fiscal year ended September 30, 1999.
A comparison of other ratios that measure financial performance show a quick
ratio of 0.2, a change in the net worth to assets ratio of 0.9, and debt to net
worth of (8.4). This data all highlights Power's need to raise additional equity
capital.
Cash and cash equivalents totaled $18,777 at December 31, 1999, a $75,439
increase from September 30, 1999. This change represents the conversion of
related party receivables against existing debt of the same. An increase in
short-term debt funded Power's capital expenditures. Power's debt totaled
$1,286,250 at December 31, 1999, down 40% from September 30, 1999. The decrease
was due to the conversion of short-term debt to common stock.
Long Term Debt
On December 31, 1999, Power had no long-term debt. Although 89% of Power's
assets are comprised of oil and gas properties that are not a current asset, all
of Power's borrowings have been short term in nature. This has aggravated
Power's cash position and produced lower measures of financial performance than
would otherwise be possible.
Year 2000 Compliance
As of February 18, 2000, Power has experienced no significant year 2000
problems.
Power currently uses Year 2000 compliant engineering evaluation software for
acquisition analysis, as well as internal engineering applications. Power's
spreadsheet and word processing software is also Year 2000 compliant.
Power currently has limited information concerning the Year 2000 compliance
status of its clients and associates. However, even if Power's clients are not
Year 2000 complaint Power does not anticipate that such noncompliance will have
a material adverse effect on Power's business, financial condition, results of
operations or cash flows.
PART II.OTHER INFORMATION
ITEM 1. Legal Proceedings
During the first quarter ending December 31, 1999, no material developments
occurred regarding Power's legal proceedings. For more information please see
Power's Form 10KSB for the year ended September 30, 1999 which is incorporated
herein by reference.
ITEM 2. Changes in Securities and Use of Proceeds
Common Stock
On October 12, 1999, Power's board of directors agreed to effect a 1 for 100 on
October 19, 1999. Power by board resolution approved the effectuation of the
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reverse split in an effort to assist Power in raising additional capital.
Power's current financial condition and low stock price has facilitated
management's decision to effect the reverse split.
On October 25, 1999, Power adopted a Stock Benefit Plan which provides for the
issuance of up to four million (4,000,000) shares of common stock of Power
according to the terms of the plan.
Recent sales of Unregistered Securities
The following is a list of all securities sold by Power within the period
covered by this report, including, where applicable, the identity of the person
who purchased the securities, title of the securities, and the date sold.
In November, 1999, Power issued 100 shares of common stock at $68.75 per share
to Company employees, in exchange for services performed for Power. The
transaction was carried out pursuant to section 4(2) of the Securities Act of
1933 in an isolated private transaction by the Company which did not involve a
public offering.
On November 23, 1999, Power entered into an agreement to borrow $25,000 from A-Z
Professional Consultants, a Utah Corporation and Global Universal, Inc., a
Nevada Corporation. As consideration for making the loan, Power issued 150,000
post-reverse-split shares of common stock to each of the two corporations
pursuant to section 4(2) of the Securities Act of 1933 in an isolated private
transaction by the Company which did not involve a public offering.
On December 9, 1999 Power acquired approximately 32 sets of oil leases,
representing mineral rights to approximately Two Hundred Forty (240) producing
oil wells, as well as approximately 39 injection wells, in the Corsicana Shallow
Field, Navarro County, Texas. Power acquired the Oil Leases from Rife Oil
Properties, Inc., a Nevada corporation in exchange for 8,000,000 shares of
Power's common voting stock issued pursuant to section 4(2) of the Securities
Act of 1933 in an isolated private transaction by the Company which did not
involve a public offering (for more information see Form 8-K filed 12/13/99).
ITEM 3. Other Information
On October 5, 1999, Guy Pyron, Jack Gallagher, and Thom Schleim resigned as
directors of Power. Mark Zouvas was elected as a Director to serve on a three
man Board of Directors with M. O. Rife III and Joe Bill Bennett On October 27,
1999 Power entered into two advisory agreements covering financial and
investment services to be provided to Power on a best efforts basis by Allen Z.
Wolfson and Ronald Welborn. The agreements provide for Power to issue 750,000
shares of post-reverse-split common stock plus an option to purchase 750,000
shares of post-reverse-split common stock of Power at an exercise price of
$0.66667 per share for a period of one year, the term of the agreement, to Allen
Z. Wolfson, and the same number of shares and options to Ronald Welborn.
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On December 20,1999 Power entered into two settlement agreements to settle
Company debts.
1. Power agreed to issue 279,861 restricted shares of Power's common
stock to Trident III, L.L.C., a Cayman Islands, West Indies exempted Company
("Trident") in exchange for cancellation of a note in the amount of$250,000 plus
accrued interest owed to Trident by Power.
2. Power agreed to issue 500,000 restricted shares of Power's common
stock to Benchmark Equity Group, Inc., a Delaware Corporation ("Benchmark") in
exchange for cancellation of a note in the amount of $500,000 plus accrued
interest owed to Benchmark by Power and the agreement of Jeffrey W. Tomz to
cancellation of certain warrants to purchase stock of Power which were owned by
Mr. Tomz.
These two agreements have been finalized and signed by the parties
thereto. However the shares of stock have not yet been issued. The parties to
the agreements have agreed to issuance of the shares during Power's next fiscal
quarter. Power intends to issue the said shares pursuant to section 4(2) of the
Securities Act of 1933 in an isolated private transaction by the Company which
will not involve a public offering
ITEM 4. Exhibits and Reports on Form 8-K
(a) Exhibits Exhibits required to be attached by Item 601 of Regulation S-B are
listed in the Index to Exhibits on page _ of this Form 10-QSB, and are
incorporated herein by this reference.
(b) Reports on Form 8-K. Power filed a Form 8-K on December 13, 1999, which is
incorporated herein by this reference.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
POWER EXPLORATION, INC.
------------------------------
(Registrant)
Date February 19, 2000 /s/ Joe B. Bennett
------------------------- ------------------------------
Joe B. Bennett, Chief Executive Officer
(Duly Authorized Officer)
19
COMPROMISE SETTLEMENT AGREEMENT
AND MUTUAL RELEASE
1. Parties. This Compromise Settlement Agreement and Mutual Release (the
"Release) is dated this 20th day of December, 1999 (the "Effective Date") and is
by and between Power Exploration, Inc., a Nevada corporation formerly known as
Titan Energy Corp., Inc. a Colorado corporation ("Power"), Benchmark Equity
Group, Inc., a Delaware corporation ("Benchmark"), Rife Oil Properties, Inc.
("Rife") and Jeffrey W. Tomz ("Tomz") an individual and resident of Brazoria
County, Texas. Power, Benchmark, Rife and Tomz represent, covenant, agree to,
and accept the statements, terms and conditions hereof as evidenced by their
respective signatures below.
2. Recitals. The alleged facts and circumstances giving rise to this Release are
as set forth hereinbelow.
2.1. Titan Energy Corp., Inc., ("Titan") predecessor-in-interest to Power
Exploration, Inc. and Benchmark executed a document entitled Loan Agreement
("Titan Loan Agreement") dated to be effective May 7, 1998. A true and correct
copy of the Titan Loan Agreement is attached hereto marked Exhibit "A" and
incorporated herein by reference for all purposes.
2.2. In connection with the Titan Loan Agreement, Titan and Benchmark
executed a document entitled Line of Credit Note ("Titan Note") dated to be
effective May 7, 1998. A true and correct copy of the Titan Note is attached
hereto as Exhibit "B" and incorporated herein by reference for all purposes.
Pursuant to the terms of the Titan Note, Titan promised to pay to Benchmark the
principal amount of $500,000 bearing interest and payable as therein provided.
2.3. Further in connection with the Titan Loan Agreement, Titan and
Benchmark executed a document entitled Security Agreement ("Titan Security
Agreement") dated to be effective May 7, 1998. A true and correct copy of the
unexecuted Titan Security Agreement is attached hereto marked Exhibit "C" and
incorporated herein by reference for all purposes. Pursuant to the terms of the
Titan Security Agreement, Titan granted to Benchmark a security interest in
certain assets of Titan as more fully described therein.
2.4. To secure repayment of the debt evidenced by the Titan Note,
Benchmark as pledgee and Rife as Pledgor executed a document, together with
Titan, entitled Pledge Agreement ("Titan Pledge Agreement") dated to be
effective May 7, 1998 whereby Rife was required to pledge to Benchmark 200,000
shares of Titan common stock. A true and correct copy of the Titan Pledge
Agreement is attached hereto marked Exhibit "D" and incorporated herein by
reference for all purposes. In performance of the Titan Pledge Agreement, Rife
delivered to Benchmark certificate number 91005 for 2,000,000 million shares of
Titan common stock of which 200,000 shares were to be pledged and the balance
returned to Rife.
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2.5. In connection with the Titan Loan Agreement, Titan and Benchmark
executed a document entitled Common Stock Warrant Agreement ("Titan Warrant")
dated to be effective May 7, 1998. A true and correct copy of the Titan Warrant
is attached hereto marked Exhibit "E" and incorporated herein by reference for
all purposes (with the executed Titan Warrant being identical to the document
attached at Exhibit "E" but for the inclusion of the signature of Benchmark).
Pursuant to the terms of the Titan Warrant, Benchmark was granted an option to
acquire 400,000 shares of unregistered common stock of Titan at an exercise
price of $2.50 per share.
2.6. Pursuant to agreement between Titan, Benchmark and Tomz, the Titan
Warrant was not exercised and rather was retired and warrants were to be
reissued in connection with the Titan Loan Agreement. Specifically, Power and
Benchmark executed a document entitled Common Stock Warrant Agreement ("Power
Benchmark Warrant") dated to be effective October 21, 1998. A true and correct
copy of the Power Benchmark Warrant is attached hereto at Exhibit "F" and
incorporated herein by reference for all purposes (with the executed Power
Benchmark Warrant being identical to the document at Exhibit "F" but for the
inclusion of signatures). Pursuant to the terms of the Power Benchmark Warrant,
Benchmark was granted an option to acquire 375,000 shares of unregistered common
stock of Power at an exercise price of $1.00 per share. Attached hereto at
Exhibit "G" is a true and correct copy of the election by Benchmark ("Benchmark
Election") to exercise its rights to acquire the stock pursuant to the Power
Benchmark Warrant under the cashless exercise provision described therein.
Further, Power and Tomz executed a document entitled Common Stock Warrant
Agreement ("Power Tomz Warrant") dated to be effective October 21, 1998. A true
and correct copy of the Power Tomz Warrant is attached hereto at Exhibit "H" and
incorporated herein by reference for all purposes (with the executed Power
Benchmark Warrant being identical to the document at Exhibit "G" but for the
inclusion of signatures). Pursuant to the terms of the Power Tomz Warrant, Tomz
was granted an option to acquire 50,000 shares of unregistered common stock of
Power at an exercise price of $1.00 per share. Attached hereto at Exhibit "I" is
a true and correct copy of the election by Tomz ("Tomz Election") to exercise
his rights to acquire the stock pursuant to the Power Tomz Warrant under the
cashless exercise provision described therein.
2.7. In connection with the Titan Loan Agreement, the following were issued
(collectively, the "Miscellaneous Titan Warrants"):
a. Warrant Certificate dated to be effective May 15, 1998, granting Marc N.
Siegel a right to acquire 30,000 shares of common stock of Titan;
b. Warrant Certificate dated to be effective May 15, 1998, granting Alvin
Mirman a right to acquire 30,000 shares of common stock of Titan;
c. Warrant Certificate dated to be effective May 15, 1998, granting to
Grady Hatch and Company, Inc. a right to acquire 15,000 shares of common stock
of Titan; and
COMPROMISE SETTLEMENT AGREEMENT AND MUTUAL RELEASE
21
<PAGE>
d. The parties hereto hereby agree that any warrants or options issued to
either Benchmark, its affiliates, or any individuals related thereto, including,
without limitation, Tomz, are hereby extinguished.
2.8. Titan, Benchmark, Rife and Tomz wish to settle the matters pertaining
to the Titan Loan Agreement, Titan Note, Titan Security Agreement, Titan Pledge
Agreement, Titan Warrant, Power Benchmark Warrant, Benchmark Election, Power
Tomz Warrant, Tomz Election and Miscellaneous Titan Warrants (collectively, the
"Transaction Documents") and have reached an agreement to that effect as set
forth herein.
3. Consideration. Consideration for this Release is the mutual promises herein
and each act done by the parties hereto pursuant hereto, the receipt and
sufficiency of which is acknowledged by the parties hereto, and the following:
a) The issuance to Benchmark of 500,000 shares of Power common stock,
restricted under Rule 144, by certificate in the form attached hereto at Exhibit
"J" and incorporated herein by reference for all purposes ("Power Restricted
Stock"), the delivery and receipt of which is hereby acknowledged; b) The
agreement by Power to register the 500,000 shares of Power Restricted Stock,
restricted under Rule 144, at the time that Power next files a SEC Registration
Statement; and c). If any of the stock acquired hereunder is not registered, is
held by the holder for the time required under Rule 144 and the legend is then
removed, then Benchmark agrees, with regard to the stock acquired hereunder, not
to sell more than 1% of the outstanding shares of Power every 90 days.
The parties hereto acknowledge that they will not be entitled to any additional
consideration for the execution of this Release other than as expressly set
forth and provided for herein. By their signatures below, the parties hereto
acknowledge the receipt and sufficiency of the consideration evidenced by this
Release, including Benchmark's receipt of the Power Restricted Stock.
4. No Pending Claims. Benchmark and Tomz warrant and represent that there are no
claims against any party hereto or any party in any way related hereto, which is
either pending, threatened or of which Benchmark, Tomz or Power are otherwise
aware. Benchmark and Tomz acknowledge that Power is relying upon this
representation and that this representation is a material inducement to the
execution of this Release by Power.
5. Mutual Releases. In consideration of the agreements and compromises set
forth herein, Benchmark, Tomz, Rife and Power each agree, covenant and represent
as follows:
COMPROMISE SETTLEMENT AGREEMENT AND MUTUAL RELEASE
22
<PAGE>
5.1. Except for the obligations of Benchmark and Tomz as set forth
herein, Power and Rife hereby release, acquit and forever discharge Benchmark
and Tomz, and their respective current and former stockholders, successors,
assigns, agents, directors, officers, affiliates (as commonly used and as
defined in the Titan Loan Agreement), employees, representatives, attorneys,
divisions, subsidiaries, affiliates (and agents, directors, officers, employees,
representatives and attorneys of such divisions, subsidiaries and affiliates),
administrators, predecessors-in- interest and successors-in-interest, of and
from any and all claims, demands, actions and causes of action of whatever kind
or character which Power and Rife may now have, whether known or unknown,
asserted or unasserted, arising out of or connected in any way with the
relationship between Benchmark, Power, Titan, Rife and Tomz including, without
limitation, the Transaction Documents and any and all other matters from the
beginning of time until the date hereof, and excluding enforcement of this
release.
5.2. Benchmark and Tomz hereby release, acquit and forever discharge
Power, Rife and Titan and their respective current and former stockholders,
successors, assigns, agents, directors, officers, affiliates (as commonly used
and as defined in the Titan Loan Agreement), employees, representatives,
attorneys, divisions, subsidiaries (and agents, directors, officers, employees,
representatives and attorneys of such divisions, subsidiaries and affiliates),
administrators, predecessors-in-interest and successors-in-interest, of and from
any and all claims, demands, actions and causes of action of whatever kind or
character which Benchmark and Tomz may now have, whether known or unknown,
asserted or unasserted, arising out of or connected in any way with the
relationship between Benchmark, Power, Titan, Rife and Tomz including, without
limitation, the Transaction Documents and any and all other matters from the
beginning of time until the date hereof, and excluding enforcement of this
release.
6. Settlement of a Disputed Obligation. The agreements being made herein are
merely to settle disputed claims and are not to be construed as an admission of
any fault or liability of any party hereto, such being hereby specifically and
expressly denied by each party hereto.
7. Authorization. The making and performance of this Release has been duly
authorized and is approved by each party hereto. This Release constitutes the
legal, valid and binding obligation of each party hereto and is enforceable in
accordance with its terms. In addition, the undersigned are duly authorized by
the respective parties to execute this Release in their representative
capacities by all necessary proceedings.
8. Representation of Ownership and Indemnification. Each party hereto and/or
their subsidiaries represent and covenant that they are the owners of any and
all claims at issue herein or in any way relating to or involving the subject
matter set
COMPROMISE SETTLEMENT AGREEMENT AND MUTUAL RELEASE
23
<PAGE>
forth herein. Further, Benchmark and Tomz warrant and represent that there are
no warrants existing in favor of Benchmark, Tomz, or any entity or individual in
any way related thereto of which there are aware to acquire Power stock.
Benchmark agrees to indemnify and hold harmless Power for all matters in
connection with the Miscellaneous Titan Warrants. This provision shall survive
any termination of this Release.
9. Review and Understanding. Each party hereto has reviewed this Release and
they (a) understand fully the terms of this Release and its consequences and (b)
have had this Release reviewed by competent legal counsel of their choice.
10. No Other Representations. Execution of this Release is not based upon
reliance by any party hereto upon any representation, understanding or agreement
that is not expressly set forth herein, and no party hereto has made any
representations which are not expressly set forth herein; and further, but not
in limitation of the foregoing, no party hereto has made any representations
which affect the consideration or any condition for which the Release is
executed which has not been expressly embodied and fully set forth herein.
11. Binding Effect. This Release shall be binding upon and inure to the benefit
of the parties hereto and their respective successors, assigns, heirs, and legal
representatives, but shall not be binding upon any party until signed by all
parties. It is expressly understood and agreed that the terms hereof are
contractual in nature, including those set forth in the provisions designated
"Recitals," and are not mere recitals, that the agreements herein contained and
the consideration transferred hereby are to buy peace, and the consideration
transferred and conveyed hereby shall not be construed as an admission of
liability by any of the parties to this Release.
12. Modification. No modification or amendment of this Release shall be
effective unless such modification or amendment is in writing and signed by all
parties hereto.
13. Gender and Number. Throughout this Release, the singular number shall
include the plural, the plural shall include the singular, and the use of any
gender shall be applicable to all genders.
14. Governing Law. The interpretation, construction, and performance of this
Release shall be governed by the laws of the State of Texas, without giving
effect to conflict of laws principles, and this Release is performable in
Tarrant County, Texas.
15. Headings. The headings of this Release have been included only for ease of
reference for the subject covered by each provision and are not to be used in
construing this Release or in ascertaining its meaning.
COMPROMISE SETTLEMENT AGREEMENT AND MUTUAL RELEASE
24
<PAGE>
16. Severability. If any portion of this Release shall be held to be invalid or
inoperative, then, so far as is reasonable and possible, the remainder of this
Release shall be considered valid and operative, and no effect shall be given to
the intent manifested by the portion held invalid or inoperative.
17. Execution of Necessary Documents. Each party hereto further covenants and
agrees to execute any and all documents necessary to effectuate the provisions
of this Release and to cooperate fully with each other in carrying out the
provisions of this Release.
18. Survival. Each and every provision of this Release shall survive the
execution hereof.
19. Entire Agreement. This Agreement and the Purchase Agreement of even date
herewith executed between Power and Benchmark incorporated herein by reference
for all purposes constitute the entire agreement between the parties hereto and
supersedes all prior and contemporaneous agreements, understandings,
negotiations and discussions, whether oral or written. There are no warranties,
representations, or other agreements between the parties in connection with the
subject matter hereof, except as specifically set forth herein.
20. Attorneys' Fees. In the event of any litigation concerning any controversy,
claim or dispute between each party hereto arising out of or relating to this
Release or the breach hereof, or the interpretation hereof, the prevailing party
shall be entitled to recover from the losing party reasonable expenses,
attorneys' fees, and costs incurred therein or in the enforcement or collection
of any judgment or award rendered therein. The "prevailing party" means the
party determined by the court to have most nearly prevailed, even if such party
did not prevail in all matters, and is not necessarily the one in whose favor a
judgment is rendered.
21. Broadest Nature. Each party warrants that this Release is to be of the
broadest nature and is to be dispositive of all matters between the parties
hereto with respect to the Transaction Documents and all matters at issue in
each, directly and indirectly. Further, Benchmark warrants that it has not
recorded in any jurisdiction with any entity the Titan Security Agreement nor
any document in any way related thereto including, without limitation, any UCC-1
forms.
22. Joint Preparation. This Release was prepared jointly by the parties hereto
and not by any one to the exclusion of the other.
COMPROMISE SETTLEMENT AGREEMENT AND MUTUAL RELEASE
25
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Release to be duly executed and
delivered as of the Effective Date.
Power Exploration, Inc. Benchmark Equity Group, Inc.
By:/s/ Joe Bill Bennett By: /s/ Frank DeLape
---------------------------- ----------------
Printed Name: Joe Bill Bennett Printed Name: Frank Delape
Title: President Title: CEO
Rife Oil Properties, Inc.
By: /s/ M. O. Rife III /s/ Jeffrey W. Tomz
--------------------------------- --------------------
Printed Name: M. O. Rife III Jeffrey W. Tomz
Title: President
COMPROMISE SETTLEMENT AGREEMENT AND MUTUAL RELEASE
26
COMPROMISE SETTLEMENT AGREEMENT
AND MUTUAL RELEASE
1. Parties. This Compromise Settlement Agreement and Mutual Release (the
"Release) is dated this 20th day of December, 1999 (the "Effective Date") and is
by and between Power Exploration, Inc., a Nevada corporation ("Power") and
Trident III, L.L.C., a Cayman Islands, West Indies exempted company ("Trident").
Power and Trident represent, covenant, agree to, and accept the statements,
terms and conditions hereof as evidenced by their respective signatures below.
2. Recitals. The alleged facts and circumstances giving rise to this Release are
as set forth hereinbelow.
2.1. Power and Trident executed a document entitled Loan Agreement
("Power Loan Agreement") dated to be effective October 21, 1998. A true and
correct copy of the unexecuted Power Loan Agreement is attached hereto marked
Exhibit "A" and incorporated herein by reference for all purposes (with the
executed Power Loan Agreement being identical to the document attached hereto
marked Exhibit "A" but for the inclusion of signatures).
2.2. In connection with the Power Loan Agreement, Power and Trident
executed a document entitled 10% Promissory Note ("Power Note") dated to be
effective October 21, 1998. A true and correct copy of the unexecuted Power Note
is attached hereto as Exhibit "B" and incorporated herein by reference for all
purposes (with the executed Power Note being identical to the document attached
at Exhibit "B" but for the inclusion of signatures). Pursuant to the terms of
the Power Note, Power promised to pay to Trident the principal amount of
$250,000 bearing interest and payable as therein provided.
2.3. On or about March 15, 1999, Power and Trident executed a document
entitled Agreement To Extend Repayment Obligation ("Power Modification"). A true
and correct copy of the Power Modification is attached hereto marked Exhibit "C"
and incorporated herein by reference for all purposes (with the executed Power
Note being identical to the document attached at Exhibit "C" but for the
inclusion of signatures). Pursuant to the terms of the Power Modification, Power
and Trident agreed to modify the repayment terms of the Power Note.
2.4. In connection with the Power Loan Agreement, Power and Trident
executed a document entitled Security Agreement ("Power Security Agreement")
dated to be effective October 21, 1998. A true and correct copy of the
unexecuted Power Security Agreement is attached hereto marked Exhibit "D" and
incorporated herein by reference for all purposes (with the executed Power
Security Agreement being identical to the document attached at Exhibit "D" but
for the inclusion of signatures). Pursuant to the terms of the Power Security
Agreement, Power granted to Trident a security interest in certain assets as
more fully described therein.
27
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2.5. Power and Trident wish to settle the matters pertaining to the
Power Loan Agreement, Power Note, Power Modification and Power Security
Agreement and have reached an agreement to that effect as set forth herein.
3. Consideration. Consideration for this Release is the mutual promises herein
and each act done by Power and Trident pursuant hereto, the receipt and
sufficiency of which is acknowledged by Power and Trident, and the following:
a) The issuance to Trident of 279,861 shares of Power common stock,
restricted under Rule 144, by certificate in the form attached hereto
at Exhibit "E" and incorporated herein by reference for all purposes
("Power Restricted Stock"), the delivery and receipt of which is hereby
acknowledged; b) The agreement by Power to register the 279,861 shares
of Power Restricted stock, restricted under Rule 144, at the time that
Power next files a SEC Registration Statement; and c) If any of the
stock acquired hereunder is not registered, is held by the holder for
the time required under Rule 144 and the legend is then removed, then
Trident agrees, with regard to the stock acquired hereunder, not to
sell more than 1% of the outstanding shares of Power every 90 days.
Power and Trident acknowledge that they will not be entitled to any additional
consideration for the execution of this Release other than as expressly set
forth and provided for herein. By their signatures below, Power and Trident
acknowledge the receipt and sufficiency of the consideration evidenced by this
Release, including, without limitation, Trident's receipt of the Power
Restricted Stock.
4. No Pending Claims. Trident warrants and represents that there are no claims
against Trident or Power or any party in any way related thereto, which are
either pending, threatened or of which Trident or Power are otherwise aware. The
parties hereto hereby agree that any warrants or options issued to either
Trident, its affiliates, or any individuals related thereto are hereby
extinguished. Trident acknowledges that Power is relying upon these
representations and that these representations are a material inducement to the
execution of this Release by Power.
5. Mutual Releases. In consideration of the agreements and compromises set forth
herein, Power and Trident each agree, covenant and represent as follows:
28
<PAGE>
5.1. Power hereby releases, acquits and forever discharges Trident, and
its respective current and former stockholders, successors, assigns, agents,
directors, officers, employees, representatives, attorneys, divisions,
subsidiaries, affiliates (and agents, directors, officers, employees,
representatives and attorneys of such divisions, subsidiaries and affiliates),
administrators, predecessors-in- interest and successors-in-interest, of and
from any and all claims, demands, actions and causes of action of whatever kind
or character which Power may now have, whether known or unknown, asserted or
unasserted, arising out of or connected in any way with the relationship between
Power and Trident including the Power Loan Agreement, Power Note, Power
Modification and Power Security Agreement and any and all other matters, from
the beginning of time until the date hereof, excluding enforcement of this
release.
5.2. Except for the obligation of Power set forth herein at paragraph
3b, Trident hereby releases, acquits and forever discharges Power, and its
respective current and former stockholders, successors, assigns, agents,
directors, officers, employees, representatives, attorneys, divisions,
subsidiaries, affiliates (and agents, directors, officers, employees,
representatives and attorneys of such divisions, subsidiaries and affiliates),
administrators, predecessors-in-interest and successors-in-interest, of and from
any and all claims, demands, actions and causes of action of whatever kind or
character which Trident may now have, whether known or unknown, asserted or
unasserted, arising out of or connected in any way with the relationship between
Power and Trident including the Power Loan Agreement, Power Note, Power
Modification and Power Security Agreement and any and all other matters from the
beginning of time until the date hereof, and excluding enforcement of this
release.
6. Settlement of a Disputed Obligation. The agreements being made herein by
Power and Trident are merely to settle disputed claims and are not to be
construed as an admission of any fault or liability by Power or Trident, such
being hereby specifically and expressly denied by Power and Trident.
7. Authorization. The making and performance of this Release has been duly
authorized and is approved by Power and Trident. This Release constitutes the
legal, valid and binding obligation of Power and Trident and is enforceable in
accordance with its terms. In addition, the undersigned are duly authorized by
the respective parties to execute this Release in their representative
capacities by all necessary proceedings.
8. Representation of Ownership. Power and Trident and/or their subsidiaries
represent and covenant that they are the owners of any and all claims at issue
herein or in any way relating to or involving the subject matter set forth
herein.
9. Review and Understanding. Power and Trident have reviewed this Release and
they (a) understand fully the terms of this Release and its consequences and (b)
have had this Release reviewed by competent legal counsel of their choice.
COMPROMISE SETTLEMENT AGREEMENT AND MUTUAL RELEASE
29
<PAGE>
10. No Other Representations. Execution of this Release is not based upon
reliance by Power or Trident upon any representation, understanding or agreement
that is not expressly set forth herein, and neither Power nor Trident have made
any representations to each other which are not expressly set forth herein; and
further, but not in limitation of the foregoing, neither Power nor Trident have
made any representations which affect the consideration or any condition for
which the Release is executed which has not been expressly embodied and fully
set forth herein.
11. Binding Effect. This Release shall be binding upon and inure to the benefit
of the parties hereto and their respective successors, assigns, heirs, and legal
representatives, but shall not be binding upon any party until signed by all
parties. It is expressly understood and agreed that the terms hereof are
contractual in nature, including those set forth in the provisions designated
"Recitals," and are not mere recitals, that the agreements herein contained and
the consideration transferred hereby are to buy peace, and the consideration
transferred and conveyed hereby shall not be construed as an admission of
liability by any of the parties to this Release.
12. Modification. No modification or amendment of this Release shall be
effective unless such modification or amendment is in writing and signed by all
parties hereto.
13. Gender and Number. Throughout this Release, the singular number shall
include the plural, the plural shall include the singular, and the use of any
gender shall be applicable to all genders.
14. Governing Law. The interpretation, construction, and performance of this
Release shall be governed by the laws of the State of Texas, without giving
effect to conflict of laws principles, and this Release is performable in
Tarrant County, Texas.
15. Headings. The headings of this Release have been included only for ease of
reference for the subject covered by each provision and are not to be used in
construing this Release or in ascertaining its meaning.
16. Severability. If any portion of this Release shall be held to be invalid or
inoperative, then, so far as is reasonable and possible, the remainder of this
Release shall be considered valid and operative, and no effect shall be given to
the intent manifested by the portion held invalid or inoperative.
17. Execution of Necessary Documents. Power and Trident further covenant and
agree to execute any and all documents necessary to effectuate the provisions of
this Release and to cooperate fully with each other in carrying out the
provisions of this Release.
COMPROMISE SETTLEMENT AGREEMENT AND MUTUAL RELEASE
30
<PAGE>
18. Survival. Each and every provision of this Release shall survive the
execution hereof.
19. Entire Agreement. This Agreement and the Purchase Agreement executed by the
parties hereto of even date herewith and incorporated herein by reference for
all purposes constitute the entire agreement between Power and Trident and
supersede all prior and contemporaneous agreements, understandings, negotiations
and discussions, whether oral or written. There are no warranties,
representations, or other agreements between the parties hereto in connection
with the subject matter hereof, except as specifically set forth herein.
20. Attorneys' Fees. In the event of any litigation concerning any controversy,
claim or dispute between Power and Trident arising out of or relating to this
Release or the breach hereof, or the interpretation hereof, the prevailing party
shall be entitled to recover from the losing party reasonable expenses,
attorneys' fees, and costs incurred therein or in the enforcement or collection
of any judgment or award rendered therein. The "prevailing party" means the
party determined by the court to have most nearly prevailed, even if such party
did not prevail in all matters, and is not necessarily the one in whose favor a
judgment is rendered.
21. Broadest Nature. Power and Trident warrant that this Release is to be of the
broadest nature and is to be dispositive of all matters between Power and
Trident with respect to the Power Loan Agreement, Power Note, Power Modification
and Power Security Agreement and all matters at issue in each, directly and
indirectly. Further, Trident warrants that it has not recorded in any
jurisdiction with any entity the Power Security Agreement nor any document in
any way related thereto including, without limitation, any UCC-1 forms.
22. Joint Preparation. This Release was prepared jointly by the parties hereto
and not by any one to the exclusion of the other.
IN WITNESS WHEREOF, the parties have caused this Release to be duly executed and
delivered as of the Effective Date.
Power Exploration, Inc. Trident III, L.L.C.
By: /s/Joe Bill Bennett By: /s/Jeffrey W. Tomz
----------------------------------- ----------------
Printed Name:Joe Bill Bennett Printed Name: Jeffrey W. Tomz
Title: President Title: Director
COMPROMISE SETTLEMENT AGREEMENT AND MUTUAL RELEASE
31
PURCHASE AGREEMENT
This Purchase Agreement ("Agreement") is made effective this 20th day
of December, 1999 ("Effective Date") by and between Power Exploration, Inc.
("Power"), a Nevada corporation with a principal office at 5020 Collinwood,
Suite 201, Fort Worth, Texas, and Benchmark Equity Group, Inc. ("Benchmark") a
Delaware corporation with a principal office at 700 Gemini Road, Houston, Texas,
with respect to the following:
RECITALS
WHEREAS, contemporaneous with the execution of the within Agreement,
the parties hereto, together with Rife Oil Properties, Inc. ("Rife") and Jeffrey
W. Tomz ("Tomz"), have executed a Mutual Release and Compromise Settlement
Agreement ("Release") the terms of which Release are incorporated herein by
reference for all purposes;
WHEREAS, pursuant to the terms of the Release the parties hereto,
together with Rife and Tomz, are thereby compromising disputed issues arising
between Power and Benchmark; and
WHEREAS, as part of the consideration for the Release the parties
hereto are hereby entering into the within Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements contained herein, and for other good and valuable consideration, the
receipt and adequacy of which is expressly acknowledged, Power and Benchmark
agree as follows:
1. Purchase of Stock as Consideration for Release.
Upon the terms and conditions contained herein, Power agrees to sell,
and Benchmark agrees to buy, Five hundred thousand (500,000) shares of Power's
common stock ("Stock" or "Shares") restricted pursuant to Rule 144 of the
Securities Act of 1933 (the "Act"), in exchange for the mutual promises,
covenants and agreements set forth in the Release. Power common stock has traded
in over the counter trading on the electronic bulletin board at between $2.50
and $8.25 during the ninety day period ending on January 25, 2000.
2. Delivery of Stock.
Benchmark hereby acknowledges delivery and receipt of the Stock.
3. Representation and Warranties of Benchmark:
a. Benchmark is acquiring the Shares for its own account and not
with a view to any distribution within the meaning of the
Securities Act of 1933, as amended (the "Act"). Benchmark
acknowledges that it has been advised and is aware that (i)
32
<PAGE>
Power is relying upon an exemption under the Act predicated
upon Benchmark's representations and warranties contained in this
Agreement, and (ii) the Shares issued to Benchmark pursuant to
this Agreement will be "restricted stock" within the meaning of
the rules and regulations (the "Rules") promulgated by the United
States Securities and Exchange Commission ("SEC") pursuant to the
Act. Unless, and until, the Shares are registered under the Act,
they will be subject to limitations upon resale set forth in the
Rules or in other administrative interpretations by the SEC in
effect at the time of the proposed sale or other disposition.
b. Benchmark has received all of the information i considers
necessary or appropriate for determining whether to purchase the
Shares. Benchmark is familiar with the business, affairs, risks
and properties of Power. Benchmark has had an opportunity to ask
questions of and receive answers from Power, and its officers,
directors and other representatives regarding Power and the terms
and conditions of the offering of the Shares. Benchmark has had
the opportunity to obtain any additional information Power
possesses or could acquire without unreasonable effort or
expense, necessary to verify the accuracy of the information
furnished.
c. Benchmark has such knowledge and expertise in financial and
business matters that it is capable of evaluating the merits and
substantial risks of an investment in the Shares and is able to
bear the economic risks relevant to the purchase of the Shares
hereunder.
d. Benchmark is relying solely upon independent consultation with
its professional, legal, tax and accounting advisors and such
others as Benchmark deems to be appropriate in purchasing the
Shares; Benchmark has been advised to, and has consulted with,
its professional tax and legal advisors with respect to any tax
consequences of investing in Power.
e. Benchmark recognizes that an investment in the securities of
Power involves substantial risk and understands all of the risk
factors related to the purchase of the Shares.
f. Benchmark understands that there may be no market for the
Shares.
g. Benchmark's financial condition is such that Benchmark is
under no present or contemplated future need to dispose of any
portion of Shares to satisfy any existing or contemplated
undertaking, need or indebtedness.
h. Without in any way limiting the representation set forth
above, Benchmark further agrees not to make any disposition of
all or any portion of the Shares unless and until:
(1) There is then in effect a registration statement under the
Act covering such proposed disposition and such disposition
is made in accordance with such registration statement; or
COMPROMISE SETTLEMENT AGREEMENT AND MUTUAL RELEASE
33
<PAGE>
(2) Benchmark shall have notified Power of the proposed
disposition and shall have furnished Power with a detailed
statement of the circumstances surrounding the proposed
disposition, and if requested by Power, Benchmark shall have
furnished Power with an opinion of counsel, reasonably
satisfactory to Power and its counsel, that such disposition
will not require registration under the Act.
i. It is understood that the certificates evidencing the Shares
will bear substantially the following legends:
"The securities evidenced hereby have not been registered under
the Securities Act of 1933, as amended (the "Act") nor qualified
under the securities laws of any states, and have been issued in
reliance upon exemptions from such registration and qualification
for nonpublic offerings. Accordingly, the sale, transfer, pledge,
hypothecation, or other disposition of any such securities or any
interest therein may not be accomplished except pursuant to an
effective registration statement under the Act and qualification
under applicable State securities laws, or pursuant to an opinion
of counsel, satisfactory in form and substance to Power, to the
effect that such registration and qualification are not
required."
j. Benchmark confers full authority upon Power (i) to instruct
its transfer agent not to transfer any of the Shares until it has
received written approval from Power and (ii) affix the legend in
subparagraph (i) above to the face of the certificate or
certificates representing the Shares.
k. Benchmark understands that Power is relying upo Benchmark's
representations and warranties as contained in this Agreement in
consummating the sale and transfer of the Shares without
registering them under the Act or any law. Therefore, Benchmark
agrees to indemnify Power against, and hold it harmless from, all
losses, liabilities, costs, penalties and expenses (including
attorney's fees) which arise as a result of a sale, exchange or
other transfer of the Shares other than as permitted under this
Agreement. Benchmark further understands that Power will make an
appropriate notation on its transfer records of the restrictions
applicable to these Shares.
4. Representations and Warranties of Power. Power represents and warrants
that:
a Power is a corporation duly organized, validly existing under the laws
of the State of Nevada.
COMPROMISE SETTLEMENT AGREEMENT AND MUTUAL RELEASE
34
<PAGE>
b. Power has all necessary corporate power and authority under the laws
of Nevada and all other applicable provisions of law to own its
properties and other assets now owned by it, to carry on its business
as now being conducted, and to execute and deliver and carry out the
provisions of this Agreement.
c. All corporate action on the part of Power required for the lawful
execution and delivery of this Agreement and the issuance, execution
and delivery of the Shares has been duly and effectively taken. Upon
execution and delivery, this Agreement will constitute a valid and
binding obligation of Power, enforceable in accordance with its terms,
except as the enforceability may be limited by applicable bankruptcy,
insolvency or similar laws and judicial decisions affecting creditors'
rights generally.
5. Survival of Representations, Warranties and Covenants. The representations,
warranties and covenants made by Power and Benchmark in this Agreement
shall survive the purchase and sale of the Shares.
6. Transfer Agent Instructions. Power's transfer agent will be instructed to
issue one or more stock certificates representing the Stock set forth in
Section 1 above, with the restrictive legend set forth in Section 3 above,
in the name of Benchmark and will be advised that the Shares have been
issued pursuant to Rule 144 of the Securities Act of 1933. Power further
warrants that no stop transfer instructions other than instructions to
issue the Shares will be given to its transfer agent and that these Shares
shall be freely transferable on the books and records of Power, subject to
compliance with applicable securities laws and the restrictions set forth
herein.
7. Stock Delivery Instructions. Benchmark hereby acknowledges receipt of the
share certificates evidencing the Stock.
8. Governing Law. This Purchase Agreement shall be governe by and interpreted
in accordance with the laws of the State of Texas, without regard to its
law on the conflict of laws and any dispute arising hereunder shall be
brought in a court of competent jurisdiction in Tarrant County, Texas.
9. Miscellaneous.
A. Notices. Any notice under this Agreement shall be deemed to have been
sufficiently given if sent by registered or certified mail, postage
prepaid, addressed as follows:
To the attention of the President at the address first indicated above
for the respective entity, or any new address which the parties hereto
may hereafter designate by notice. All notices shall be deemed to have
been given as of the date of receipt.
COMPROMISE SETTLEMENT AGREEMENT AND MUTUAL RELEASE
35
<PAGE>
B. Entire Agreement. This instrument and the Release set forth the entire
agreement between the parties hereto and no prior or contemporaneous
written or oral statement or agreement shall be recognized or
enforced.
C. Severability. If a court of competent jurisdiction determines that any
clause or provision of this Agreement is invalid, illegal or
unenforceable, the other clauses and provisions of the Agreement shall
remain in full force and effect. The clauses and provisions which the
Court determines are void, illegal or unenforceable shall be limited
so that they remain in effect to the extent permissible by law.
D. Assignment. Neither party hereto may assign this Agreement without the
express written consent of the other party. However, if the other
party consents to the assignment such assignment will be binding and
inure to the benefit of the assignee.
E. Waiver of Jury Trial. To the extent permitted by law, the parties
hereby irrevocably waive a jury trial in the event of litigation. The
parties included this provision because of the cost and delay of a
jury trial and because the parties believe that a jury trial would not
be necessary to resolve any dispute or claim between them.
F. Attorney's Fees. If either party institutes legal action or other
proceedings (including, but not limited to, arbitration) to enforce or
to declare any right or obligation under this Agreement or as a result
of a breach, default or misrepresentation in connection with any of
the provisions of this Agreement, or otherwise because of a dispute
among the parties, the successful or prevailing party will be entitled
to recover reasonable attorney's fees. Attorney's fees shall include
fees for appeals, collections and other expenses incurred in such
action or proceeding. Legal fees shall be awarded in addition to any
other relief to which the prevailing party may be entitled.
G. No Third Party Beneficiary. Nothing in this Agreement, expressed or
implied, is intended to confer any rights or remedies upon any person
other than the parties hereto and their successors.
H. Further Assurances. At any time and from time to time, after the date
of this Agreement, each party hereto will execute such additional
instruments and take such actions as are reasonably necessary to
confirm or perfect title to the Shares or otherwise to carry out the
intent and purposes of this Agreement.
I. Amendment or Waiver. Every right and remedy provided herein shall be
cumulative with every other right or remedy at law, or in equity, and
may be enforced concurrently herewith. No waiver by any party of the
performance of any obligation by the other shall be construed as a
waiver of the same or any other default then, theretofore, or
thereafter occurring or existing. At any time, this Agreement may be
amended by a writing signed by both parties hereto. Any term or
condition of this Agreement may be waived or the time for performance
hereof may be extended by a writing signed by the party or parties for
whose benefit the provision is intended.
36
<PAGE>
J. Headings. The section and subsection headings in this Agreement are
inserted for convenience only. In the event of a conflict between a
heading and the text of this Agreement, the text shall control the
meaning and interpretation of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement.
DATED this 20th day of December, 1999.
POWER EXPLORATION, INC.
By: /s/Joe Bill Bennett
----------------------
Printed Name: Joe Bill Bennett
Title:President
BENCHMARK EQUITY GROUP, INC.
By: /s/ Frank DeLape
-------------------
Printed Name: Frank DeLape
Title: CEO
37
PURCHASE AGREEMENT
This Purchase Agreement ("Agreement") is made effective this 20th day
of December, 1999 ("Effective Date") by and between Power Exploration, Inc.
("Power"), a Nevada corporation with a principal office at 5020 Collinwood,
Suite 201, Fort Worth, Texas, and Trident III, L.L.C. ("Trident") a Cayman
Islands, West Indies exempted company with a principal office located at 802
West Bay Road, Grand Cayman BWI, with respect to the following:
RECITALS
WHEREAS, contemporaneous with the execution of the within Agreement,
the parties hereto have executed a Mutual Release and Compromise Settlement
Agreement ("Release") the terms of which Release are incorporated herein by
reference for all purposes;
WHEREAS, pursuant to the terms of the Release the parties hereto are
thereby compromising disputed issues arising between Power and Trident; and
WHEREAS, as part of the consideration for the Release the parties
hereto are hereby entering into the within Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements contained herein, and for other good and valuable consideration, the
receipt and adequacy of which is expressly acknowledged, Power and Trident agree
as follows:
1. Purchase of Stock as Consideration for Release.
Upon the terms and conditions contained herein, Power agrees to sell,
and Trident agrees to buy, Two hundred and seventy nine thousand eight hundred
and sixty one (279,861) shares of Power's common stock ("Stock" or "Shares")
restricted pursuant to Rule 144 of the Securities Act of 1933 (the "Act"), in
exchange for the mutual promises, covenants and agreements set forth in the
Release. Power common stock has traded in over the counter trading on the
electronic bulletin board at between $2.50 and $8.25 during the ninety day
period ending on January 25, 2000.
2. Delivery of Stock.
Trident hereby acknowledges delivery and receipt of the Stock.
3. Representation and Warranties of Trident:
a. Trident is acquiring the Shares for its own account and not with a
view to any distribution within the meaning of the Securities Act of
1933, as amended (the "Act"). Trident acknowledges that it has been
advised and is aware that
38
<PAGE>
(i) Power is relying upon an exemption under the Act predicated upon
Trident's representations and warranties contained in this Agreement,
and (ii) the Shares issued to Trident pursuant to this Agreement will
be "restricted stock" within the meaning of the rules and regulations
(the "Rules") promulgated by the United States Securities and Exchange
Commission ("SEC") pursuant to the Act. Unless, and until, the Shares
are registered under the Act, they will be subject to limitations upon
resale set forth in the Rules or in other administrative
interpretations by the SEC in effect at the time of the proposed sale
or other disposition.
b. Trident has received all of the information it considers necessary or
appropriate for determining whether to purchase the Shares. Trident is
familiar with the business, affairs, risks and properties of Power.
Trident has had an opportunity to ask questions of and receive answers
from Power, and its officers, directors and other representatives
regarding Power and the terms and conditions of the offering of the
Shares. Trident has had the opportunity to obtain any additional
information Power possesses or could acquire without unreasonable
effort or expense, necessary to verify the accuracy of the information
furnished.
c. Trident has such knowledge and expertise in financial and business
matters that it is capable of evaluating the merits and substantial
risks of an investment in the Shares and is able to bear the economic
risks relevant to the purchase of the Shares hereunder.
d. Trident is relying solely upon independent consultation with its
professional, legal, tax and accounting advisors and such others as
Trident deems to be appropriate in purchasing the Shares; Trident has
been advised to, and has consulted with, its professional tax and
legal advisors with respect to any tax consequences of investing in
Power.
e. Trident recognizes that an investment in the securities of Power
involves substantial risk and understands all of the risk factors
related to the purchase of the Shares.
f. Trident understands that there may be no market for the Shares.
g. Trident's financial condition is such that Trident is under no present
or contemplated future need to dispose of any portion of Shares to
satisfy any existing or contemplated undertaking, need or
indebtedness.
h. Without in any way limiting the representation set forth above,
Trident further agrees not to make any disposition of all or any
portion of the Shares unless and until:
(1) There is then in effect a registration statement under the Act
covering such proposed disposition and such disposition is made
in accordance with such registration statement; or
39
<PAGE>
(2) Trident shall have notified Power of the proposed disposition and
shall have furnished Power with a detailed statement of the
circumstances surrounding the proposed disposition, and if
requested by Power, Trident shall have furnished Power with an
opinion of counsel, reasonably satisfactory to Power and its
counsel, that such disposition will not require registration
under the Act.
i. It is understood that the certificates evidencing the Shares will bear
substantially the following legends:
"The securities evidenced hereby have not been registered under the
Securities Act of 1933, as amended (the "Act") nor qualified under the
securities laws of any states, and have been issued in reliance upon
exemptions from such registration and qualification for nonpublic
offerings. Accordingly, the sale, transfer, pledge, hypothecation, or
other disposition of any such securities or any interest therein may
not be accomplished except pursuant to an effective registration
statement under the Act and qualification under applicable State
securities laws, or pursuant to an opinion of counsel, satisfactory in
form and substance to Power, to the effect that such registration and
qualification are not required."
j. Trident confers full authority upon Power (i) t instruct its transfer
agent not to transfer any of the Shares until it has received written
approval from Power and (ii) affix the legend in subparagraph (i)
above to the face of the certificate or certificates representing the
Shares.
k. Trident understands that Power is relying upon Trident's
representations and warranties as contained in this Agreement in
consummating the sale and transfer of the Shares without registering
them under the Act or any law. Therefore, Trident agrees to indemnify
Power against, and hold it harmless from, all losses, liabilities,
costs, penalties and expenses (including attorney's fees) which arise
as a result of a sale, exchange or other transfer of the Shares other
than as permitted under this Agreement. Trident further understands
that Power will make an appropriate notation on its transfer records
of the restrictions applicable to these Shares.
4. Representations and Warranties of Power. Power represents and warrants
that:
a Power is a corporation duly organized, validly existing under the laws
of the State of Nevada.
b. Power has all necessary corporate power and authority under the laws
of Nevada and all other applicable provisions of law to own its
properties and other assets now owned by it, to carry on its business
as now being conducted, and to execute and deliver and carry out the
provisions of this Agreement.
40
<PAGE>
c. All corporate action on the part of Power required for the lawful
execution and delivery of this Agreement and the issuance, execution
and delivery of the Shares has been duly and effectively taken. Upon
execution and delivery, this Agreement will constitute a valid and
binding obligation of Power, enforceable in accordance with its terms,
except as the enforceability may be limited by applicable bankruptcy,
insolvency or similar laws and judicial decisions affecting creditors'
rights generally.
5. Survival of Representations, Warranties and Covenants. The representations,
warranties and covenants made by Power and Trident in this Agreement shall
survive the purchase and sale of the Shares.
6. Transfer Agent Instructions. Power's transfer agent will be instructed to
issue one or more stock certificates representing the Stock set forth in
Section 1 above, with the restrictive legend set forth in Section 3 above,
in the name of Trident and will be advised that the Shares have been issued
pursuant to Rule 144 of the Securities Act of 1933. Power further warrants
that no stop transfer instructions other than instructions to issue the
Shares will be given to its transfer agent and that these Shares shall be
freely transferable on the books and records of Power, subject to
compliance with applicable securities laws and the restrictions set forth
herein.
7. Stock Delivery Instructions. Trident hereby acknowledge receipt of the
share certificates evidencing the Stock.
8. Governing Law. This Purchase Agreement shall be governe by and interpreted
in accordance with the laws of the State of Texas, without regard to its
law on the conflict of laws and any dispute arising hereunder shall be
brought in a court of competent jurisdiction in Tarrant County, Texas.
9. Miscellaneous
A. Notices. Any notice under this Agreement shall be deemed to have been
sufficiently given if sent by registered or certified mail, postage
prepaid, addressed as follows:
To the attention of the President at the address first indicated above
for the respective entity, or any new address which the parties hereto
may hereafter designate by notice. All notices shall be deemed to have
been given as of the date of receipt.
B. Entire Agreement. This instrument and the Release set forth the entire
agreement between the parties hereto and no prior or contemporaneous
written or oral statement or agreement shall be recognized or
enforced.
41
<PAGE>
C. Severability. If a court of competent jurisdiction determines that any
clause or provision of this Agreement is invalid, illegal or
unenforceable, the other clauses and provisions of the Agreement shall
remain in full force and effect. The clauses and provisions which the
Court determines are void, illegal or unenforceable shall be limited
so that they remain in effect to the extent permissible by law.
D. Assignment. Neither party hereto may assign this Agreement without the
express written consent of the other party. However, if the other
party consents to the assignment such assignment will be binding and
inure to the benefit of the assignee.
E. Waiver of Jury Trial. To the extent permitted by law, the parties
hereby irrevocably waive a jury trial in the event of litigation. The
parties included this provision because of the cost and delay of a
jury trial and because the parties believe that a jury trial would not
be necessary to resolve any dispute or claim between them.
F. Attorney's Fees. If either party institutes legal action or other
proceedings (including, but not limited to, arbitration) to enforce or
to declare any right or obligation under this Agreement or as a result
of a breach, default or misrepresentation in connection with any of
the provisions of this Agreement, or otherwise because of a dispute
among the parties, the successful or prevailing party will be entitled
to recover reasonable attorney's fees. Attorney's fees shall include
fees for appeals, collections and other expenses incurred in such
action or proceeding. Legal fees shall be awarded in addition to any
other relief to which the prevailing party may be entitled.
G. No Third Party Beneficiary. Nothing in this Agreement, expressed or
implied, is intended to confer any rights or remedies upon any
person other than the parties hereto and their successors.
H. Further Assurances. At any time and from time to time, after the date
of this Agreement, each party hereto will execute such additional
instruments and take such actions as are reasonably necessary to
confirm or perfect title to the Shares or otherwise to carry out the
intent and purposes of this Agreement.
I. Amendment or Waiver. Every right and remedy provided herein shall be
cumulative with every other right or remedy at law, or in equity, and
may be enforced concurrently herewith. No waiver by any party of the
performance of any obligation by the other shall be construed as a
waiver of the same or any other default then, theretofore, or
thereafter occurring or existing. At any time, this Agreement may be
amended by a writing signed by both parties hereto. Any term or
condition of this Agreement may be waived or the time for performance
hereof may be extended by a writing signed by the party or parties for
whose benefit the provision is intended.
42
<PAGE>
J. Headings. The section and subsection headings in this Agreement are
inserted for convenience only. In the event of a conflict between a
heading and the text of this Agreement, the text shall control the
meaning and interpretation of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement.
DATED this 20th day of December, 1999.
POWER EXPLORATION, INC.
By:/s/Joe Bill Bennett
---------------------
Printed Name: Joe Bill Bennett
Title: President
TRIDENT III, L.L.C.
By:/s/Jeffrey W. Tomz
---------------------
Printed Name: Jeffrey W. Tomz
Title: Director
43
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED FINANCIAL STATEMENTS FOR THE PERIOD ENDED NOVEMBER 30, 1999 THAT
WERE FILED WITH THE COMPANY'S REPORT ON FORM 10-QSB AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000316621
<NAME> Power Exploration, Inc.
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-2000
<PERIOD-START> OCT-1-1999
<PERIOD-END> DEC-31-1999
<EXCHANGE-RATE> 1
<CASH> (3,700)
<SECURITIES> 0
<RECEIVABLES> 22,477
<ALLOWANCES> 0
<INVENTORY> 378,719
<CURRENT-ASSETS> 397,496
<PP&E> 11,330,899
<DEPRECIATION> (106,144)
<TOTAL-ASSETS> 11,330,899
<CURRENT-LIABILITIES> 1,286,250
<BONDS> 0
0
0
<COMMON> 191,385
<OTHER-SE> 10,155,634
<TOTAL-LIABILITY-AND-EQUITY> 11,330,899
<SALES> 26,512
<TOTAL-REVENUES> 26,512
<CGS> 82,553
<TOTAL-COSTS> 562,646
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,214
<INCOME-PRETAX> (546,438)
<INCOME-TAX> 0
<INCOME-CONTINUING> (546,438)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (546,438)
<EPS-BASIC> (.06)
<EPS-DILUTED> (.06)
</TABLE>
