SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended September 30, 2000
Commission file Number 0-10337
OKLAHOMA ENERGY CORPORATION
(Formerly Cayman Resources Corporation)
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(Exact name of registrant as specified in its charter)
Oklahoma 73-1129531
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(State or other (I.R.S. Employer
jurisdiction of Identification No.)
incorporation
or organization)
2 West Main Street, Cyril, OK 73029-0579
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(Address of principal executive offices) (Zip Code)
(580) 464-3751
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Registrant's telephone number, including area code
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [ X ] No [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes [ ] No [ ] N/A [ X ]
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date:
Common stock, par value $.05 per share
47,530,755 outstanding shares as of September 30, 2000
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OKLAHOMA ENERGY CORPORATION
(Formerly Cayman Resources Corporation)
Table of Contents
PART I - FINANCIAL INFORMATION
Page No.
Item 1. OKLAHOMA ENERGY CORPORATION 1
Balance Sheet as of September 30, 2000
Statement of Operations for the three
and nine months ended September 30, 2000 and 1999
Statement of Cash Flows for the nine months
ended September 30, 2000 and 1999
Notes to Financial Statements
Item 2. Management's Discussion and Analysis 1
PART II - OTHER INFORMATION 3
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
SIGNATURE PAGE 4
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OKLAHOMA ENERGY CORPORATION
FORM 10-Q
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The financial statements as of Septmber 30, 2000 are incorporated herein by
reference as Exhibit 2.
ITEM 2. MANANGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTSOF OPERATIONS
Liquidity and Capital Resources
Presently, the Company has no working capital. The Company lacks necessary
capital to meet its obligations. The Company has not been able to meet its
current obligations.
Results of Operations - Operating Revenues
The Company had no revenues during the three months and nine months ended
September 30, 2000.
Operating Costs and Expenses
Since the Company is not currently conducting operations, it incurred no
operating expenses related to its refinery. It has incurred various
administrative expenses relating to its continuing environmental remediation
efforts and general corporate matters.
Treasury stock
During the quarter ended June 30, 2000, the Company reacquired 2,8000,000
of its common stock shares for $150,000 note payable. Through September 30,
2000, the Company has sold 800,000 of these shares raising $194,862 of
additional capital. The gain of $141,290 from these sales are recorded as
additional paid in capital in excess of par.
Significant Events
Reactivation of Cyril Refinery
In January of 1994, the Company began its Cyril Refinery operations. The
Company shut down refinery operations in April of 1995. During the sixteen
months of operations, the Company experienced substantial mechanical problems
and was unable to meet product specifications demanded by its customers. As a
result, the Company realized significant losses from its operation of the Cyril
Refinery which caused the loss of its crude oil credit lines and the ultimate
shut down of refinery operations.
Although the Company is now pursuing financing which will enable it to
renew its financing arrangements and allow it to start up operations of the
Cyril Refinery again, there is absolutely no assurance that the Company will be
successful.
Sale of Company's Oil and Gas Assets to Satisfy Working Capital Debt
Effective January 1, 1995, the Company assigned substantially all its oil
and gas production to the Cayman Lenders Limited Liability Corporation in
exchange for a release of indebtedness and in lieu of foreclosure on the
$1,600,000 in debt loaned to it by a group of individuals known as the Capital
Investors. Such funds were borrowed by the Company in 1993 to finance the Cyril
Refinery.
Cyril Refinery Vendor Payables
The Company and its subsidiary have a substantial amount of past-due vendor
payables for which the Company is currently developing a plan to offer such
vendors a settlement plan on a case by case basis.
Oklahoma Industrial Finance Authority $750,000 Loan
On November 10, 1993, the Company secured a $750,000 loan from the Oklahoma
Industrial Finance Authority (OIFA), which funds were used to satisfy a portion
of the Company's start-up working capital needs. The OIFA loan was for one year
and is now in default with interest accruing at eight percent (8%).
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On June 30, 2000, the Company entered into an "Option Contract to Purchase
Cyril Petrochemical Corporation's Promissory Note, Mortgage and Security
Agreement, and all Additional Collateral" ("Contract") with the Oklahoma
Industrial Financial Authority ("OIFA"). The original loan was dated November
10, 1993. According to the Contract, as part of the collateral subject to the
Contract, is Share Certificate No. 25, which was pledged to OIFA and continues
to be pledged to OIFA, in the amount of 1000 shares of all outstanding common
stock of Cyril Petrochemical Corporation, owned by Cayman Resources Corporation,
presently doing business as Oklahoma Energy Corporation. Additionally, according
to the terms of the OIFA loan, OIFA holds the first mortgage and has a security
interest pursuant to a Uniform Commercial Code Financing Statement as to all of
the Company's present and future equipment, filed on November 10, 1993. As
further stated in the Contract, another lien in the original amount of $321,692,
is asserted to be held by GEO American, Inc. for labor and material supplied to
the site. The mortgage, promissory note, the pledged stock, the UCC-1 security
interest and the lien can be purchased under the Contract for the aggregate sum
of $950,000, less option payments which are to be applied to the purchase price.
Management of the Company believes it to be in the best interest of the Company
to cause the exercise of the Contract.
OIFA and Geo American may foreclose on any and all collateral at any time
by the re-activation of their legal proceedings, subject to the Company's right
under the Contract.
Environmental Considerations
In 1988, the property formerly owned by Oklahoma Refinery Corporation (ORC
site) in Cyril, Oklahoma, including that portion of the Cyril Refinery owned by
CPC was placed on the National Priority List (NPL). This action was taken by the
EPA in accordance with the Comprehensive Environmental Response Compensation
Liability Act of 1980 (CERCLA), as amended by the Superfund and Reauthorization
Act of 1986 (SARA). In 1991, the EPA concluded a Remedial
Investigation/Feasibility Study (RIFS) of the Cyril Refinery site. The RIFS
identified certain areas where contamination and hazardous chemicals exist. The
RIFS conclusion was that the contaminants found at the ORC site did not pose an
immediate hazard of significant risk to human health at off-site testing
locations used by the study. It was therefore determined that the contaminants
contained within the ORC site could be remediated over a period of time. In
1991, the EPA issued a Proposed Plan of Action (PPA), which outlined several
alternative actions which could be taken to either contain, remediate or remove
the identified contaminated material. Following public hearings, the EPA issued
its Record of Decision (ROD), which together with the PPA outlines in general
the EPA's plan to clean up the entire ORC site. In January 1999, the EPA/ODEQ
addressed environmental issues existing at the Cyril Refinery and continue to
do. The remedial actions cited involved the following items (not listed in order
of importance): Asbestos containing materials, storm water and process water
issues, hazardous waste treatment, ground water recovery and treatment, PCB oil
containing transformers, and hazardous waste storage units.
The Company has agreed to the clean-up of the site in cooperation with the
lead government agency, the Oklahoma Department of Environmental Quality
("ODEQ"), and the EPA Compliance Assurance and Enforcement Division ("RCRA").
The EPA has presented its Initial Administrative Order to Cyril Petrochemical
Corporation and to the Company. The order outlines the actions necessary to
complete the clean-up. During the clean-up, the EPA has agreed to allow the
operation of the tankfarm and refinery simultaneously with the environmental
cleanup. The Company is presently pursuing the initial stages of obtaining the
necessary permits for the tankfarm and the refinery for its operations necessary
to commence such concurrent activities.
The cost of the entire clean-up is estimated to be between $2 and $4
Million. Within that range, a lower cost is expected because the EPA appears to
be agreeable to a risk-based or "brown field" approach to the clean-up. OKOK has
reserved $2.5 Million for the clean-up.
Strategic Alliance
On July 5, 2000, the Company entered into a letter of intent with Camtraco
Enterprises, Inc. ("Camtraco") of Houston, Texas. The transaction envisioned a
long-term strategic alliance with Camtraco and OKOK in the storage and blending
of crude oil and jet fuel under a Mentor-Protege program established by the
Department of Defense, together with feedstock supply necessary to operation the
program. Based on the results of subsequent negotiations, the Company is no
longer pursuing this Camtraco relationship.
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PART II OTHER INFORMATION
ITEM 1: LEGAL PROCEEDINGS
On November 10, 1993, the Company secured a $750,000 loan from the Oklahoma
Industrial Finance Authority (OIFA), which funds were used to satisfy a portion
of the Company's start-up working capital needs. The OIFA loan was for one year
and is now in default with interest accruing at eight percent (8%).
On June 30, 2000, the Company entered into an "Option Contract to Purchase
Cyril Petrochemical Corporation's Promissory Note, Mortgage and Security
Agreement, and all Additional Collateral" ("Contract") with the Oklahoma
Industrial Financial Authority ("OIFA"). The original loan was dated November
10, 1993. According to the Contract, as part of the collateral subject to the
Contract, is Share Certificate No. 25, which was pledged to OIFA and continues
to be pledged to OIFA, in the amount of 1000 shares of all outstanding common
stock of Cyril Petrochemical Corporation, owned by Cayman Resources Corporation,
presently doing business as Oklahoma Energy Corporation. Additionally, according
to the terms of the OIFA loan, OIFA holds the first mortgage and has a security
interest pursuant to a Uniform Commercial Code Financing Statement as to all of
the Company's present and future equipment, filed on November 10, 1993. As
further stated in the Contract, another lien in the original amount of $321,692,
is asserted to be held by GEO American, Inc. for labor and material supplied to
the site. The mortgage, promissory note, the pledged stock, the UCC-1 security
interest and the lien can be purchased under the Contract for the aggregate sum
of $950,000, less option payments which are to be applied to the purchase price.
Management of the Company believes it to be in the best interest of the Company
to cause the exercise of the Contract.
OIFA and Geo American may foreclose on any and all collateral at any time
by the re-activation of their legal proceedings, subject to the Company's right
under the Contract.
During the week of July 5, 2000, the Company received a letter dated June
29, 2000 from John A. Rayll, Jr. concerning a judgment in his favor against
Cayman Resources Corporation, filed in Tulsa County, Oklahoma's District Court
on May 28, 1997. Mr. Rayll claims that he is owed the sum of $119,363 as of
September 30, 2000. Mr. Rayll further claims that he had purchased at a
sheriff's sale all of Cayman Resources Corporation's right, title and interest
in Stock Certificate No. 25 representing 1,000 common stock shares of the
Company. It has been independently confirmed that the Oklahoma Industrial
Financial Authority (OIFA) has physical possession of Certificate No. 25 as part
of its security interests under the OIFA loan, and that the Notice of Sale which
was caused to be published by John Whetsel, Sheriff of Oklahoma County by D.R.
Williams on July 15, 1997, provided in pertinent part that the 1,000 shares
represented by Share Certificate No. 25 is in the possession of OIFA and any
such sale was and is subject to the prior possessory lien of OIFA, among other
matters. Management has been and is diligently pursuing to challenge Mr. Rayll's
claim. It is Management's position that this claim will be vigorously defended
and contested on several grounds.
ITEM 2: CHANGES IN SECURITIES AND USE OF PROCEEDS
None
ITEM 3: DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5: OTHER INFORMATION
None
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
a) The following exhibits are included herein:
(1) Independent accountant's review report covering financial
statements contained in Exhibit 2 below.
(2) Financial statements at September 30, 2000.
(3) Statement re: computation of earnings per share.
b) No reports on Form 8-K have been filed by the Company during the
quarter for which this report is filed.
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SAFE HARBOR STATEMENT UNDER THE PRIVATE LITIGATION REFORM ACT OF 1995:
Statements contained in this document which are not historical fact are
forward-looking statements based upon management's current expectations that are
subject to risks and uncertainties that could cause actual results to differ
materially from those set forth in or implied by forward-looking statements.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the registrant has
duly caused this Form 10-QSB report for the quarter ended September 30, 2000 to
be signed on its behalf by the undersigned, thereunto duly authorized.
OKLAHOMA ENERGY CORPORATION
Date: November 14, 2000 By: /s/ Jan H. Schutze
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Jan H. Schutze
President and Chief Executive Officer
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