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 June 30, 2000.
[ ] 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
---------
POWER EXPLORATION, INC.
(Exact name of small business issuer as specified in its charter)
NEVADA 84-0811647
-------- -----------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
5416 Birchman Ave., Fort Worth, Texas 76107
-------------------------------------------
(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 June 30, 2000 was 21,095,533
<PAGE>
TABLE OF CONTENTS
PART I
ITEM 1. FINANCIAL STATEMENTS..................................................3
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS..................................4
PART II
ITEM 1. LEGAL PROCEEDINGS 5
ITEM 2. RECENT SALES OF UNREGISTERED SECURITIES................................5
ITEM 5. OTHER INFORMATION.....................................................6
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K......................................7
SIGNATURES.....................................................................8
INDEX TO EXHIBITS..............................................................9
[THIS SPACE HAS BEEN INTENTIONALLY LEFT BLANK]
2
<PAGE>
PART I- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
As used herein, the term "Company" refers to Power Exploration, Inc., a Nevada
corporation, and its subsidiaries and predecessors unless otherwise indicated.
Consolidated, unaudited, condensed interim financial statements including a
balance sheet for the Company as of the quarter ended June 30, 2000 and
statements of operations, and statements of cash flows for the interim period up
to the date of such balance sheet and the comparable period of the preceding
year are attached hereto as Pages F-1 through F-14 and are incorporated herein
by this reference.
3
<TABLE>
POWER EXPLORATION & SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<CAPTION>
June 30, 2000 Sept 30,1999
Unaudited Audited
--------------------- ----------------------
ASSETS
<S> <C> <C>
CURRENT ASSETS
Cash $ 4,155 $ 1,083
Accounts Receivable 8,586 8,563
Accounts Receivable - Related Party 10,576 84,570
Inventory 400,968 323,486
Prepaid Expenses 680 230
-------------------- -----------------
Total Current Assets 424,965 417,932
----------------- -----------------
OIL & GAS PROPERTIES, FULL COST METHOD
Properties being amortized 8,134,423 7,134,910
Properties not subject to amortization - -
----------------- -----------------
Less: Accumulated depreciation, depletion & amortization (11,328) (10,491)
------------------- -----------------
Net Oil and Gas Properties 8,123,095 7,124,419
------------------ ----------------
PROPERTY AND EQUIPMENT
Property and Equipment 229,842 370,124
Accumulated Depreciation (131,270) (139,618)
------------------ -----------------
Total Property and Equipment 98,572 230,506
------------------- -----------------
OTHER ASSETS 7,155 6,037
INVESTMENT IN LAND 300,000 -
------------------ ---------------
TOTAL ASSETS $ 8,953,787 $ 7,778,894
================ ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable-Trade $ 353,677 $ 825,466
Accounts Payable-Related Parties 66,483 389,154
Payroll and Sales Taxes Payable 24,926 -
Accrued Expenses - -
Accrued Interest 38,052 -
Accrued Wages and Payroll Taxes Payable 26,880 -
Customer Deposits 55,000 30,000
Advances Payable - 25,000
Advances Payable-Related Parties - 140,000
Notes Payable 325,000 500,000
Notes payable -- Related Parties 41,160 101,313
------------------ ----------------
Total Current Liabilities 931,178 2,010,933
----------------- ----------------
LONG TERM LIABILITIES - -
------------------ ----------------
Total Liabilities 931,178 2,010,933
----------------- ----------------
STOCKHOLDERS' EQUITY
Common Stock ($.02 par value; 50,000,000 shares
authorized, 21,095,533 shares issued & outstanding) 421,910 3,553
Additional Paid-In Capital 32,520,824 13,650,157
Accumulated Deficit (24,920,126) (7,885,749)
---------------- -----------------
Total Stockholders' Equity 8,022,608 5,767,961
----------------- ----------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 8,953,787 $ 7,778,894
=============== ===============
</TABLE>
F-1
<PAGE>
<TABLE>
POWER EXPLORATION & SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
<CAPTION>
9 Months Ending 9 Months Ending
June 30, 2000 June 30, 1999
Unaudited Unaudited
------------------- ---------------------
REVENUE
<S> <C> <C>
Oil and Gas Sales $ 112,575 $ 13,422
Rig Sales 5,041 264,797
Drilling Revenue 25,806 -
Total Revenue 143,422 278,219
---------------- -------------------
COST OF REVENUE
Lease Operating 199,008 165,182
Production Taxes 5,202 36
Depreciation, Depletion & Amortization 38,526 837
Cost of Rig Sales & Drilling Revenue (1,637) 144,014
Total Cost of Revenue 241,099 310,069
---------------- -------------------
GROSS LOSS (97,677) (31,850)
---------------- -------------------
EXPENSES
General and Administrative 13,683,644 2,609,688
Interest Expense 95,868 34,734
Asset Impairment Expense 3,168,000 -
Total Expenses 16,947,512 2,644,422
---------------- -------------------
PROFIT (LOSS) BEFORE OTHER INCOME
AND PROVISION FOR INCOME TAXES (17,045,189) (2,676,272)
RECOVERY OF BAD DEBT 177 -
OTHER INCOME/(LOSS) - (75,858)
---------------- -------------------
LOSS BEFORE PROVISION
FOR INCOME TAXES (17,045,012) (2,752,130)
PROVISION FOR INCOME TAXES - -
---------------- -------------------
NET PROFIT (LOSS) $ (17,045,012) $ (2,752,130)
================== ========================
PROFIT (LOSS) PER SHARE $ (1.84) $ (159.72)
================== ====================
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 9,256,784 172,312
================ ==================
</TABLE>
F-2
<PAGE>
<TABLE>
POWER EXPLORATION & SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
<CAPTION>
3 Months Ending 3 Months Ending
June 30, 2000 June 30, 1999
Unaudited Unaudited
----------------- -----------------------
REVENUE
<S> <C> <C>
Oil and Gas Sales $ 50,321 $ 1,785
Rig Sales - 189,398
Drilling Revenue 1,429 -
Total Revenue 51,750 191,183
----------------- ------------------
COST OF REVENUE
Lease Operating 61,835 28,055
Production Taxes 2,325 -
Depreciation, Depletion & Amortization 12,842 279
Cost of Rig Sales & Drilling Revenue - 142,080
Total Cost of Revenue 77,002 170,414
----------------- ------------------
GROSS PROFIT (25,252) 20,769
----------------- ------------------
EXPENSES
General and Administrative 4,104,165 2,018,547
Interest Expense 76,142 8,648
Total Expenses 4,180,307 2,027,195
----------------- ------------------
PROFIT (LOSS) BEFORE PROVISION
FOR INCOME TAXES (4,205,559) (2,006,426)
PROVISION FOR INCOME TAXES - -
----------------- ------------------
NET PROFIT (LOSS) $ (4,205,559) $ (2,006,426)
================ ==================
PROFIT (LOSS) PER SHARE $ (0.35) $ (166.65)
=================== ==================
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 12,150,827 120,404
================== ==================
</TABLE>
F-3
<PAGE>
<TABLE>
POWER EXPLORATION & SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
<CAPTION>
9 Months Ending 9 Months Ending
June 30, 2000 June 30, 1999
Unaudited Unaudited
<S> <C> <C>
Loss After Taxes $ (17,045,012) $ (287,800)
Depreciation and Amortization 37,689 12,842
Non-Cash Compensation 13,225,713 -
Impairment Expense 3,168,000 -
Accounts Receivable Decrease (Increase) 73,971 76,983
Inventory Decrease (Increase) (77,482) (7,566)
Other Assets Decrease (Increase) (1,118) -
Prepaid & Deferred Exp Decrease (Increase) (450) 29,377
Current Liabilities Increase (Decrease) 802,543 -
Cash Flow from Operating Activities 183,854 12,403
-------------------- -----------------
Fixed Assets Decrease (Increase) 0 -
Net Oil & Gas Prop Decrease (Increase) 0 15,796
Other Investments Decrease (Increase) 0 1,655
Cash Flow from Investing Activities 0 17,451
-------------------- -----------------
Repayments Decrease (Increase) (110,782) -
Short Term Debt Increase (Decrease) (160,000) -
Common Stock Increase (Decrease) 90,000 -
Cash Flow from Financing Activities (180,782) -
-------------------- -----------------
NET INCREASE (DECREASE) IN CASH 3,072 29,854
BEGINNING CASH 1,083 (1,411)
======================= =================
ENDING CASH 4,155 28,443
======================= =================
</TABLE>
F-4
<
POWER EXPLORATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2000
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") and its
100% owned subsidiaries, Oil Retrieval Systems, Inc. ("ORS"), and
Oil Seeps, Inc. ("OSI"). 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.
Unaudited Interim Information The accompanying unaudited
financial statements have been prepared in accordance with the
instructions to Form 10QSB and, therefore do not include all the
information necessary for a fair presentation of financial
position, results of operation and cash flows in conformity with
generally accepted accounting principles.
In the opinion of management, all adjustments (consisting of
normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the nine
months ending June 30, 2000 are not necessarily indicative of the
results that may be expected for the year ending September 30,
2000. The unaudited condensed consolidated financial statements
and footnotes should be read in conjunction with the consolidated
financial statements and footnotes included in the Company's
September 30, 1999 annual report.
NOTE 2 - INVENTORY
Inventory at 9-30-99 & 06-30-00 consists of th following:
9-30-99 06-30-00
-------- --------
Raw Materia $220,069 $ 285,946
Work in Process 103,417 115,022
----------- -----------
$ 323,486 $ 400,968
========== ==========
F-5
<PAGE>
POWER EXPLORATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2000
NOTE 3 - PROPERTY AND EQUIPMENT
Property and equipment at 9-30-99 & 06-30-00 consist of the following:
9-30-99 06-30-00
------- --------
Shop Equipment $ 30,952 49,002
Furniture and Office Equipment 24,068 24,067
Machinery 269,167 156,773
---------- ------------
324,067 229,842
Less Accumulated Depreciation (93,581) (131,270)
---------- ------------
Property and Equipment - Net $ 230,506 98,572
========== =============
Depreciation expense for the three months and nine months ending
June 30, 2000 were $12,563 and $37,689, respectively.
Depreciation expenses for the three months and nine months ending
June 30, 1999 were $13,342 and $36,150, respectively.
NOTE 4 - NOTES PAYABLE
Notes payable at June 30, 2000 consist of the following:
09-30-99 06-30-00
a) Note Payable - Trident III, LLC $ 250,000 -
b) Note Payable - BEI, Inc. 250,000 250,000
c) Note Payable - Related Party 101,313 -
d) Note Payable - Landmark Bank - 75,000
--------- ----------
$ 601,313 $ 325,000
========== ==========
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 consists of the
F-6
<PAGE>
POWER EXPLORATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2000
NOTE 4 - NOTES PAYABLE (continued)
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.
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 September 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) As of June 30, 2000, the Company was indebted t Landmark Bank
under terms of a promissory note dated October 13,1999. Terms of
the note provided for interest at a rate of 10% per annum with a
maturity date of September 15, 2000. The note was collateralized
by 100% of the assets of Oil Retrieval Systems, Inc. The funds
were used as working capital for Oil Retrieval Systems, Inc. On
July 26, 2000, this note was paid in full plus interest.
NOTE 5 - RELATED PARTY TRANSACTIONS
During the nine-months ending June 30, 2000:
a) 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.
b) The Company was indebted to officers for wages accrued in year
2000 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 90,000 shares total
(30,000 shares each to the three officers) of common stock to
extinguish debt, which would reduce the corresponding liability.
These shares were issued on February 29, 2000. On June 7, 2000,
the Company issued an additional 90,000 shares of common stock to
the officers of the Company (30,000 shares each) in lieu of
compensation owed for wages
F-7
<PAGE>
POWER EXPLORATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2000
NOTE 5 - RELATED PARTY TRANSACTIONS (continued)
accrued during the current year and resulted in a reduction to
the Accrued Wages Liability of $82,800. The Company has a
remaining liability for wages due officers of $18,864.
c) On January 23rd, 2000, the Board of Directors o the Company voted
to issue 100,000 shares of its common stock to each of the
directors as compensation for services rendered and issued every
quarter during the year. On February 9th, 2000 the Company issued
25,000 shares of its restricted common stock to the six members
of the Board of Directors. The remaining shares owed will be
issued on a pro-rata basis during the remainder of the year. This
issuance resulted in a G&A charge to the Company in the amount of
$867,000 for the three month period ending March 31, 2000. On
June 1st, 2000, the Company issued 25,000 shares of its
restricted common stock to the six members of the Board of
Directors. This issuance resulted in a G&A charge to the Company
in the amount of $528,876 for the three month period ending June
30, 2000.
NOTE 6 - ADVISORY & CONSULTING AGREEMENTS
For the period ending 12-31-99, 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 nine months ended June 30, 2000, the Company
issued 1,500,000 shares of common stock under these advisory
agreements, to Ronald Welborn and Alan Wolfson, valued at
$6,403,100.
NOTE 7 - 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.
F-8
<PAGE>
POWER EXPLORATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2000
NOTE 7 - COMMITMENTS AND CONTINGENCIES (continued)
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 three
and nine months ending June 30, 2000, totaled $18,742 and
$59,672. Rent expense included in the financial statements for
the three and nine months ending June 30, 1999, totaled $14,674
and $51,465.
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 September 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 had been settled as previously
disclosed, however the terms of the settlement have changed
from cash payment to payment of the Company's restricted
stock. The amounts of shares issued under the terms of this
settlement are 13,660, which occurred on June 20, 2000 and
valued at $22,112. The Company had previously accrued
$20,000 for this contingent liability, therefore, an
additional $2,112 was charged against G&A for the three
months ending June 30, 2000.
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. A settlement has been
reached in this matter requiring the issuance of 125,000
shares of the Company's restricted common stock. These
shares were issued on July 26, 2000.
F-9
<PAGE>
POWER EXPLORATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2000
NOTE 8 - SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCIAL ACTIVITIES
During the nine-months ended June 30, 2000:
a) The Company issued 90,000 shares under a 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 receiv 750,000 for consultin services
provided to the Issuer. This transaction is valued at $236,250
and charged to G & A for the quarter ending 12-31-99.
b) The Company issued 9,000,000 shares to Rif 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 o $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.
d) The Company cancelled 1,000,000 shares (10,000 post-split shares)
issued to Mark S. Zouvas on October 21, 1999. These shares had
been issued to satisfy accrued salaries incurred by the Company
for his services.
e) On January 23rd, 2000, the Board of Directors o the Company voted
to issue 100,000 shares of its common stock to each of the
directors as compensation for services rendered. On February 9th,
2000, the Company issued 25,000 shares of its restricted common
stock to the six members of the Board of Directors; James
McGowan, Charles Barnhill, Reginald Davis, Richard Surber, M.O.
Rife III and Joe B. Bennett. The remaining shares owed will be
issued on a pro-rata basis during the remainder of the year. This
issuance resulted in a G&A charge to the Company in the amount of
$867,000 for the period ending March 31, 2000.
f) On January 23rd, 2000, the Board of Directors o the Company voted
to issue 600,000 shares of its common stock for the acquisition
of certain real estate from Genesis Capital Corp. On February
9th, 2000, the Company issued 600,000 shares of its restricted
common stock for said real estate and recorded the asset on its
balance sheet at the price of its common stock multiplied by the
number of shares issued. A discount of 30% was applied to the
real estate asset to reflect the restriction of the securities
issued. This resulted in an addition to Net Assets of the Company
of $3.456 million. The Company is currently negotiating a
contract for the sale of this real estate to a qualified buyer in
the amount of $300,000. In accordance with generally accepted
accounting principals, the Company has recorded an asset
impairment expense in the amount of $3.156 million for the period
ending March 31, 2000, while concurrently establishing a
contra-asset account to appropriately reflect the value of the
asset recorded.
F-10
<PAGE>
POWER EXPLORATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2000
NOTE 8 - SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCIAL ACTIVITIES (continued)
g) On January 23rd, 2000, the Board of Directors o the Company voted
to issue 20,000 shares of its common stock to Fauniel D. Rowland
and 50,000 shares of its common stock to Simon, Warner & Doby as
compensation for legal services rendered. On February 9th, 2000
the Company issued 70,000 shares of its restricted common stock
as described above. This issuance resulted in a G&A charge to the
Company in the amount of $404,600 for the period ending March 31,
2000.
h) The Company was indebted to officers for wages accrued in year
2000 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 90,000 shares total
(30,000 shares each to the three officers) of common stock to
extinguish debt, which would reduce the corresponding liability.
These share were issued on February 29, 2000. On June 7, 2000,
the Company issued an additional 90,000 shares of common stock to
the officers of the Company (30,000 shares each) in lieu of
compensation owed for wages accrued during the current year and
resulted in a reduction to the Accrued Wages Liability of
$82,800. The Company has a remaining liability for wages due
officers of $18,864.
i) 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
occurred in the 2nd quarter of this fiscal year. This settlement
was ratified at a meeting of the Company's Board of Director's on
January 23, 2000. This issuance resulted in a G&A charge to the
Company in the amount of $2,890,000 for the period ending March
31, 2000. This amount was based on seventy percent (70%) of the
value of the stock issued on that day less the amount of the
liability on the Company's books.
j) On January 23rd, 2000, the Board of Directors o the Company voted
to issue 500,000 shares of its common stock to Benchmark Equity
Group as compensation for consulting services rendered. On
February 9th, 2000 the Company issued 500,000 shares of its
restricted common stock as described above. This issuance
resulted in a G&A charge to the Company in the amount of
$2,890,000 for the period ending March 31, 2000.
k) The Company issued 420,000 shares under certain advisory
agreements. The shares of the Issuer's common stock were issued
to Allen Z. Wolfson (20,000 shares) and Ronald Welborn (400,000
shares), under agreements dated December 14, 1999 whereby the
recipients are entitled to receive 750,000 each for consulting
services provided to the
F-11
<PAGE>
POWER EXPLORATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 200O
NOTE 8 - SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCIAL ACTIVITIES (continued)
Issuer. This transaction is valued at $2.385 million and charged to G & A
for the quarter ending March 31, 2000.
l) The Company was indebted to Steve Wooten, Sr. for consulting services
rendered in the amount of $85,000. An agreement has been reached with
Mr. Wooten consisting of the Company issuing 10,000 shares of common
stock. The issuance of the Company's common stock shares occurred on
February 29,2000. This transaction is valued at $85,000 and charged to
G & A for the quarter ending March 31, 2000.
m) The Company issued 30,000 shares of common stoc shares of its common
stock to Henry Simon for legal services. The issuance of the Company's
common stock shares occurred on February 29,2000. This transaction
is valued at $172,500 and charged to G & A for the quarter
ending March 31, 2000.
n) The Company issued 100,000 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 $538,000 and charged to G & A
for the quarter ending March 31, 2000. Total shares issued to Mr.
Wolfson under this agreement, including this issuance, number 210,000
at this date.
o) The Company issued 150,000 shares under an advisory agreement on April
26, 2000. 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 $564,375 and
charged to G & A for the quarter ending June 30, 2000. Total shares
issued to Mr. Wolfson under this agreement, including this issuance,
number 360,000 at this date.
p) The Company issued 350,000 shares under an advisory agreement on April
26, 2000. The shares of the Issuer's common stock were issued to
Ronald Welborn, 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 $1,316,875 and
charged to G & A for the quarter ending June 30, 2000. Total shares
issued to Mr. Welborn under this agreement, including this issuance,
number 750,000 at this date.
q) The Company issued shares of its common stock t Richard Surber for
legal services.
An agreement has been reached with Mr. Surber to provide legal
and advisory services, which resulted in the Company issuing
30,000 shares of common stock. The issuance of the Company's
common stock shares occurred on May 2, 2000. This transaction is
valued at $150,000 and charged to G & A for the quarter ended
June 30, 2000.
F-12
<PAGE>
POWER EXPLORATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2000
NOTE 8 - SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCIAL ACTIVITIES (continued)
r) The Company entered into an agreement to acquir 100% of Pepin Oil
Company, an Oklahoma oil and gas Exploration Company in exchange for
3.358 million shares of its restricted common stock issued on May 2,
2000. Pepin has a working interest in a 500 well developmental
drilling program located in Oklahoma. This transaction has not been
consummated as of the date of this filing, and management of the
Company believes it will consummate this transaction. The shares are
currently held in an escrow account. The Company does not consider
these shares to be validly outstanding as of the date of this filing.
s) The Company entered into an agreement to arrang financing for its
operations through the sale of restricted stock. The Company agreed to
issue 5 million shares to Hardin County Investments in exchange for $4
million. The shares are in an escrow account and are being returned to
the Company to be cancelled within the next 30 days. The Company does
not consider these shares to be validly outstanding as of the date of
this filing.
t) The Company issued 150,000 shares and 240,000 shares under an advisory
agreement on May 25th and June 5th of 2000, respectively. 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. These
transactions are valued at $1,365,000 and charged to G & A for the
quarter ending June 30, 2000. Total shares issued to Mr. Wolfson under
this agreement, including this issuance, number 750,000 at this date.
u) On January 23rd, 2000, the Board of Directors o the Company voted to
issue 100,000 shares of its common stock to each of the directors as
compensation for services rendered. On June 1st, 2000 the Company
issued 25,000 shares of its restricted common stock to the six members
of the Board of Directors; James McGowan, Charles Barnhill, Reginald
Davis, Richard Surber, M.O. Rife III and Joe B. Bennett. The remaining
shares owed will be issued on a pro-rata basis during the remainder of
the year. This issuance resulted in a G&A charge to the Company in the
amount of $528,876 for the three month period ending June 30, 2000.
v) 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
had been settled as previously disclosed, however the terms of the
settlement have changed from cash payment to payment of the Company's
restricted stock. The amounts of shares issued under the terms of this
settlement are 13,660, which occurred on June 20, 2000 and valued at
$22,112. The Company had previously accrued $20,000 for this
contingent liability, therefore, an additional $2,112 was charged
against G&A for the three months ending June 30,2000.
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POWER EXPLORATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2000
NOTE 9 - SUBSEQUENT EVENTS
Subsequent to June 30, 2000, the Company
a) 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.
b) The Company entered into two advisory agreement 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 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 June 30, 2000,
the Company has issued 1,500,000 shares of its common stock under the
aforementioned agreements. On July 26, 2000, the advisory agreement
between Allen Z. Wolfson and Power Exploration, Inc. dated December 8,
1999, was amended by an addendum effective February 15, 2000,
canceling the option to purchase 750,000 shares of common stock.
NOTE 10 - GOING CONCERN
The accompanying consolidated financial statements have been prepared
assuming the Company will continue as a going concern. As of June 30,
2000, the Company has a working capital deficit of $457,425 and an
accumulated deficit of $24,871,338. Based on the Company's plan of
operation, the Company estimates that existing resources, together
with funds generated from operations will not be sufficient to fund
the Company's working capital. The Company is actively seeking
additional equity financing. There can be no assurances that
sufficient financing will be available on terms acceptable to the
Company or at all. If the Company is unable to obtain such financing,
the Company will be forced to scale back operations, which would have
an adverse effect on the Company's financial condition and results of
operations.
F-14
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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 third quarter of 2000, Power Exploration, Inc. and its subsidiaries
(hereinafter "Power" unless the context indicates otherwise) continued to pursue
capital financing alternatives and possible acquisition targets in order to
generate greater revenue and increase shareholder value.
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.
Results of Operations
Revenues
Gross revenues for the three and nine months ended June 30, 2000, were $51,750
and $143,422 compared to $191,183 and $278,219 for the same periods in 1999, a
73% and 49% decrease in revenues from the respective periods in 1999. The gross
revenues for three months ended June 30, 2000, were lower than the comparable
quarter in 1999 due to no equipment sales during this period and offset by an
increase in oil and gas sales, reflecting the higher spot commodity prices.
Costs and Expenses
Costs of revenues for the three and nine months ended June 30, 2000, were
$77,002 and $241,099 compared to $170,414 and $310,069 for the same periods in
1999. The decrease in the costs of revenues is primarily due to decreases in the
cost of rig sales.
Interest and general, and administrative and asset reduction expenses were
$4,180,307 and $16,947,512 for the three and nine months ended June 30, 2000
compared to $2,027,195, and $2,644,422 for the same period in 1999. The primary
reason for the increases was a significant increase in consulting fees paid by
the Company through the issuance of its common stock, which were valued and
recorded at prevailing market share prices.
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Gross Loss
Gross loss for the three and nine months ended June 30, 2000, was $25,252
(profit) and $97,677 compared to a gross profit of $20,769 and a gross loss of
$31,850 for the same periods in 1999. The losses were a result of the issuance
of stock for consultants that were valued at prevailing market prices
Liquidity and Capital Resources
At June 30, 2000, the Company had current assets of $424,965 and total assets of
$8,953,787 as compared to $417,932 and $7,778,894, respectively at September 30,
1999. The Company's working capital deficit of $457,425 at June 30, 2000
compared to a working capital deficit of $1,593,061 at September 30, 1999 shows
an improvement of $1,135,636 for the year to date from the figure for the year
ended September 30, 1999.
Net stockholders' equity in the Company was $8,022,608 as of June 30, 2000,
compared to $5,767,961 at year-end on September 30, 1999. This significant
increase is due to the increase in consulting fees paid by the Company through
the issuance of its common stock, which were valued and recorded at prevailing
market share prices.
Year 2000 Compliance
As of July 10, 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 third quarter ending June 30, 2000, 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. 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.
On June 1, 2000, the Company issued 25,000 shares of common stock to Joe Bill
Bennett, Reginald Davis, Charles Barnhill, Richard D. Surber, James McGowan and
M. O. Rife III at a value of $3.5258 per share for services as Officers and
Directors of the Company. All of the shares were issued for services 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. The Company made this
offering based on the following factors: (1) The issuance was an isolated
private transaction by the Company which did not involve a public offering; (2)
there were only six offerees who were issued stock for services as officers and
directors of the Company; (3) the
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offerees did not resell the stock but have continued to hold it since the date
of issue; (4) there were no subsequent or contemporaneous public offerings of
the stock; (5) the stock was not broken down into smaller denominations; and (6)
the negotiations for the sale of the stock took place directly between the
offerees and the Company.
On June 20, 2000, the Company issued 8,126 shares of its common stock to Roberta
Stacy and 5,534 shares of its common stock to Fielding, Parker, Jones & Posey,
LLP. for a full and final release of claims pursuant to a previously entered
into settlement agreement. The shares were valued at a total of $22,112. The
shares were issued in settlement of debt 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. The Company made this offering based on the
following factors: (1) The issuance was an isolated private transaction by the
Company which did not involve a public offering; (2) there were only two
offerees who were issued stock to settle debt; (3) the offerees did not resell
the stock but have continued to hold it since the date of issue; (4) there were
no subsequent or contemporaneous public offerings of the stock; (5) the stock
was not broken down into smaller denominations; and (6) the negotiations for the
sale of the stock took place directly between the offerees and the Company.
During the quarter ended June 30, 2000 the Company issued a total of 1,010,000
shares of stock to officers, employees and consultants of the Company pursuant
to the Company's 1999 Stock Benefit Plan as set out below. The shares were
issued pursuant to an S-8 Registration filed with the Securities and Exchange
Commission on December 15, 1999
Date Name Number of Shares
April 26, 2000 Allen Z. Wolfson 150,000
April 28, 2000 Ronald Welborn 350,000
May 2, 2000 Richard D. Surber 30,000
May 25, 2000 Allen Z. Wolfson 150,000
June 5, 2000 Allen Z. Wolfson 240,000
June 7, 2000 M. O. Rife III 30,000
June 7, 2000 Joe Bill Bennett 30,000
June 7, 2000 Mark S. Zouvas 30,000
ITEM 3. OTHER INFORMATION
On May 2, 2000, the Board of Directors of the Company approved the acquisition,
by the Company, of 100% of the issued and outstanding shares of Pepin Oil
Company, Inc., an Oklahoma corporation, in exchange for 2,500,000 shares of
restricted common shares of the Company. Pepin has a working interest in a 500
well developmental drilling program in Oklahoma. The transaction has not been
finalized and the shares are being held in escrow pending the closing of the
transaction. ( See note 8q to financial statements.) The Company does not
consider these shares to be outstanding.
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 9 of this Form 10-QSB, and are
incorporated herein by this reference.
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(b) Reports on Form 8-K. None.
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[THIS SPACE INTENTIONALLY LEFT BLANK]
7
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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 August 14, 2000 /s/ Joe B. Bennett
-------------------------
Joe B. Bennett, Chief Executive Officer
(Duly Authorized Officer)
8
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INDEX TO EXHIBITS
EXHIBIT PAGE
NO. NO. DESCRIPTION
2.1 *
Plan of Reorganization and Change of Situs by which Titan Energy
Corp., and Power Exploration, Inc. Changes Its Place of
Incorporation.
2.2 *
Agreement and Plan of Merger Between Power Exploration, Inc.
(Nevada) and Power Exploration, Inc. (Colorado). August 1, 1998
2.3 *
Articles of Merger Between Power Exploration, Inc. (Nevada) and
Power Exploration, Inc. (Colorado). August 1, 1998
3.1 *
Articles of Incorporation of Imperial Energy dated October 31,
1979.
3.2 *
Amendment to Articles of Incorporation dated June 26, 1984
3.3 *
Amendment to Articles of Incorporation dated September 25, 1996
3.4 *
Amendment to Articles of Incorporation dated June 15, 1997,
Changing Name to Oil Retrieval Systems, Inc.
3.5 *
By Laws of the Corporation
3.6 *
Articles of Incorporation of Power Exploration, Inc. (Nevada)
dated May 14, 1998
3.7 *
By Laws of Power Exploration, Inc. (Nevada) Dated June 1, 1998
23 Consent Letter of Auditor
27 __ Financial Data Schedule "CE"
* Previously filed and incorporated herein by reference from the Form 10-KSB
filed January 14, 2000 by the Company.
9
