<PAGE>
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MAY 31, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to ________
COMMISSION FILE NO. 0-9092
CHENIERE ENERGY, INC.
(Exact name as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
95-4352386
(I. R. S. Identification No.)
1200 SMITH STREET, SUITE 1710
HOUSTON, TEXAS
(Address or principal place of business)
77002-4312
(Zip Code)
(713) 659-1361
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] NO [ ].
As of July 15, 1997, there were 13,510,866 shares of Cheniere Energy, Inc.
Common Stock, $.003 par value, issued and outstanding.
================================================================================
<PAGE>
CHENIERE ENERGY, INC.
INDEX TO FORM 10-Q
<TABLE>
<CAPTION>
Page
----
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements................................ 3
Consolidated Balance Sheet (Unaudited)......................... 3
Consolidated Statement of Operations (Unaudited)............... 4
Consolidated Statement of Stockholders' Equity (Unaudited)..... 5
Consolidated Statement of Cash Flows (Unaudited)............... 6
Notes to Consolidated Financial Statements....................... 7
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.......................................... 13
PART II. OTHER INFORMATION
Item 2. Changes in Securities............................................ 16
Item 5. Other Information................................................ 16
Item 6. Exhibits and Reports on Form 8-K................................. 16
SIGNATURES.................................................................... 18
</TABLE>
2
<PAGE>
CHENIERE ENERGY, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEET (UNAUDITED)
<TABLE>
<CAPTION>
May 31, August 31,
ASSETS 1997 1996
----------- ----------
<S> <C> <C>
CURRENT ASSETS
Cash $ 2,255,281 $1,093,180
Prepaid Expenses and Other Assets 79,700 4,800
----------- ----------
TOTAL CURRENT ASSETS 2,334,981 1,097,980
----------- ----------
PROPERTY AND EQUIPMENT, NET 51,265 46,830
----------- ----------
OTHER ASSETS
Investment in 3-D Exploration Program 10,000,000 4,000,000
Security Deposit 500 500
----------- ----------
TOTAL OTHER ASSETS 10,000,500 4,000,500
----------- ----------
TOTAL ASSETS $12,386,746 $5,145,310
=========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable and Accrued Expenses $ 436,821 $ 292,894
Loans Payable - 425,000
Advance from Officers - 961
Advance for Issuance of Common Stock - -
----------- ----------
TOTAL LIABILITIES 436,821 718,855
----------- ----------
STOCKHOLDERS' EQUITY
Common Stock- $.003 Par Value
Authorized 20,000,000 shares;
13,477,533 and 9,931,767 Issued and
Outstanding at May 31, 1997 and
August 31, 1996, respectively 40,433 29,795
Preferred Stock- Authorized
1,000,000 Shares; None Issued
and Outstanding
Additional Paid-in-Capital 12,834,239 4,518,507
Deficit Accumulated During the Development Stage (924,747) (121,847)
----------- ----------
TOTAL STOCKHOLDERS' EQUITY 11,949,925 4,426,455
----------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $12,386,746 $5,145,310
=========== ==========
</TABLE>
See Accompanying Notes to Financial Statements.
3
<PAGE>
CHENIERE ENERGY, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended Cumulative
May 31, May 31, from the Date
1997 1997 of Inception
--------------------- --------------------- -------------------
<S> <C> <C> <C>
Revenue $ - $ - $ -
------------ ------------ ------------
General and Administrative Expenses 364,696 676,389 780,203
Professional Fees in Connection with
Poseidon Agreement 164,812 164,812 164,812
Interest Expense - 15,002 34,835
----------- ----------- -----------
529,508 856,203 979,850
----------- ----------- -----------
Loss from Operations Before Other Income (529,508) (856,203) (979,850)
Interest Income 31,307 53,303 55,103
----------- ----------- -----------
Loss From Operations Before Income Taxes (498,201) (802,900) (924,747)
Provision for Income Taxes - - -
----------- ----------- -----------
Net Loss $ (498,201) $ (802,900) $ (924,747)
=========== =========== ===========
Loss Per Share $(.039) $(.069) $(.088)
=========== =========== ===========
Weighted Average Number of Shares Outstanding 12,727,022 11,608,843 10,451,418
=========== =========== ===========
</TABLE>
See Accompanying Notes to Financial Statements
4
<PAGE>
CHENIERE ENERGY, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (UNAUDITED)
<TABLE>
<CAPTION>
Common Stock Additional Total
-------------------------- Paid-In Retained Stockholders'
Per Share Shares Amount Capital Deficit Equity
----------- ---------- --------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Sale of Founders Shares on
April 9, 1996 $ 0.012 6,242,422 $ 18,727 $ 56,276 $ - $ 75,003
Sale of Shares on May 5, 1996 1.50 2,000,000 6,000 2,994,000 - 3,000,000
Issuance of Shares to an Employee
on July 1, 1996 1.00 30,000 90 29,910 - 30,000
Issuance of Shares in
Reorganization to Former
Bexy Shareholders - 600,945 1,803 (1,803) - -
Sale of Shares on July 30, 1996 2.00 50,000 150 99,850 - 100,000
Sale of Shares on August 1, 1996 2.00 508,400 1,525 1,015,275 - 1,016,800
Sale of Shares on August 30, 1996 2.00 500,000 1,500 998,500 - 1,000,000
Expenses Related to Offering - - - (686,251) - (686,251)
Issuance of Warrants - - - 12,750 - 12,750
Net Loss - - - - (121,847) (121,847
---------- -------- ----------- ---------- -----------
Balance - August 31, 1996 9,931,767 29,795 4,518,507 (121,847) 4,426,455
Sale of Shares on September 12, 1996 2.00 50,000 150 99,850 - 100,000
Sale of Shares on September 16, 1996 2.00 80,250 241 160,259 - 160,500
Conversion of Debt 2.00 105,000 315 209,685 - 210,000
Sale of Shares on October 30, 1996 2.25 457,777 1,373 1,028,627 - 1,030,000
Issuance of Warrants - - - 6,450 - 6,450
Sale of Shares on December 6, 1996 2.25 475,499 1,426 1,068,448 - 1,069,874
Sale of Shares on December 9, 1996 2.50 400,000 1,200 998,800 - 1,000,000
Sale of Shares on December 11, 1996 2.25 22,222 67 49,933 - 50,000
Sale of Shares on December 19, 1996 2.50 200,000 600 499,400 - 500,000
Sale of Shares on December 20, 1996 2.50 220,000 660 549,340 - 550,000
Sale of Shares on February 28, 1997 4.25* 352,947 1,059 1,498,967 - 1,500,026
Sale of Shares on March 4, 1997 4.25* 352,947 1,059 1,498,966 1,500,025
Sale of Shares on May 22, 1997 3.00 535,000 1,605 1,603,395 1,605,000
Issuance of Shares to Adjust
Prices of Shares Sold on February 28
and March 4 -* 294,124 883 (883) -
Expenses Related to Offering - - - (955,505) - (955,505)
Net Loss - - - - (802,900) (802,900)
---------- -------- ----------- ---------- -----------
Balance - May 31, 1997 13,477,533 $ 40,433 $12,834,239 $ (924,747) $11,949,925
========== ======== =========== ========== ===========
</TABLE>
All of the sales of shares indicated above were made pursuant to private
placement transactions.
* Additional shares were issued to the purchasers of the shares sold on
February 28, 1997 and March 4, 1997 pursuant to the terms of those sales - see
Note 6(4).
See Accompanying Notes to Financial Statements.
5
<PAGE>
CHENIERE ENERGY, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
For the Nine Cumulative
Months Ended from Date
May 31, 1997 of Inception
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss $ (802,900) $ (924,747)
Adjustments to Reconcile Net Loss to
Net Cash Used by Operating Activities:
Depreciation 6,065 9,668
Compensation Paid in Common Stock - 30,000
(Increase) in Prepaid Expenses and Other Current Assets (74,900) (79,700)
Increase in Security Deposit - (500)
(Decrease) Increase in Accounts Payable and
Accrued Expenses 143,927 436,831
(Decrease) in Advance from Officers (961) -
------------ ------------
NET CASH USED BY OPERATING ACTIVITIES (728,769) (528,448)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of Furniture, Fixtures and Equipment (10,500) (60,943)
Investment in 3-D Exploration Program (6,000,000) (10,000,000)
------------ ------------
NET CASH USED BY INVESTING ACTIVITIES (6,010,500) (10,060,943)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds of Loan - 425,000
Repayment of Loan (215,000) (215,000)
Sale of Common Stock 9,065,425 14,257,228
Issuance of Warrants 6,450 19,200
Offering Costs (955,505) (1,641,756)
------------ ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 7,901,370 12,844,672
------------ ------------
NET INCREASE IN CASH 1,162,101 2,255,281
CASH-BEGINNING OF YEAR 1,093,180 -
------------ ------------
CASH-MAY 31, 1997 $ 2,255,281 $ 2,255,281
============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash Paid for Interest $ 15,635 $ 15,635
============ ============
Cash Paid for Income Taxes $ - $ -
============ ============
</TABLE>
SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCIAL ACTIVITIES:
Common Stock totaling 105,000 shares was issued upon the conversion of $210,000
of debt.
See Accompanying Notes to Financial Statements.
6
<PAGE>
CHENIERE ENERGY, INC. AND SUBSIDIARIES
( A DEVELOPMENT STAGE COMPANY )
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 1997
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
1) Basis of Presentation
The accompanying financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q. Accordingly, they
do not include all of the information and footnotes required by
generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting
only of normal recurring adjustments) considered necessary for a fair
presentation have been included. Certain reclassifications have been
made to the prior period to conform to the current periods'
presentation.
For further information refer to the financial statements and
footnotes included in the Registrant's Annual Report on Form 10-K, as
amended, for the period ending August 31, 1996.
The results of operations for any interim period are not necessarily
indicative of the results to be expected for the full fiscal year
ended August 31, 1997.
The accompanying consolidated financial statements include the
accounts of Cheniere Inc. (the "Company" or "Cheniere") and its 100%
owned subsidiaries, Cheniere Energy Operating Co., Inc. ("Cheniere
Operating") and Cheniere Energy California, Inc. ("Cheniere
California"). Accordingly, all references herein to Cheniere or the
Company include the consolidated results of its subsidiaries. All
significant intercompany accounts and transactions have been
eliminated in consolidation.
On July 3, 1996, Cheniere, formerly Bexy Communications, Inc. ("Bexy")
acquired all of the outstanding capital stock of Cheniere Operating.
For accounting purposes, this acquisition has been treated as a
recapitalization of Cheniere Operating.
The financial statements presented include only the accounts of
Cheniere and its subsidiaries since Cheniere Operating's inception
(February 21, 1996). While Cheniere Operating did obtain a presence in
the public market through the recapitalization, it did not succeed to
the business or assets of Bexy. For this reason, the value of the
shares issued to the former Bexy shareholders has been deemed to be de
minimus and, accordingly, no value has been assigned to those shares.
The Company is currently a development stage enterprise under the
provisions of SFAS No. 7. The Company's future business will be in
the field of oil and gas exploration and exploitation.
7
<PAGE>
CHENIERE ENERGY, INC. AND SUBSIDIARIES
( A DEVELOPMENT STAGE COMPANY )
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 1997
2) Loss Per Share
Loss per share is based on the weighted average number of shares of
common stock outstanding during the period.
3) Offering Costs
Offering costs consist primarily of placement fees, professional fees
and printing costs. These costs are charged against the proceeds of
the sale of common stock in the periods in which they occur.
NOTE 2 INCORPORATION OF SUBSIDIARY
On December 19, 1996, Cheniere California was incorporated. Cheniere
California is a 100% owned subsidiary of the Company.
NOTE 3 WARRANTS
The Company has issued and outstanding certain warrants described
herein.
The Company has issued and outstanding 141,666 and 2/3 warrants
(collectively, the "June Warrants"), each of which entitles the
registered holder thereof to purchase one share of Common Stock. The
June Warrants are exercisable at any time on or before June 14, 1999,
at an exercise price of $3.00 per share (subject to customary anti-
dilution adjustments). The exercise price was determined at a 100%
premium to the sale price of Cheniere Operating Stock by private
placement during May, 1996. The June Warrants were originally issued
by Cheniere Operating and were converted to warrants of Cheniere
following the Reorganization. The June Warrants were issued to a group
of 11 investors in connection with a private placement of unsecured
promissory notes. Pursuant to APB 14, the warrants issued have been
valued at the differential rate between the initial interest rate (8%)
and the estimated market rate (20%), applied to the principal balance.
This value, $12,750, has been credited to additional paid-in capital.
Effective September 14, 1996, the Company had not paid all amounts
due and payable under certain promissory notes by the Maturity Date
thereof. Certain of the noteholders converted their notes into
105,000 shares of Common Stock. An individual noteholder purchased
the promissory notes of the remaining noteholders. As per the terms
of the notes, the holder was entitled to receive up to an aggregate of
21,500 additional warrants for each month, or partial month, any
amounts that remained due and payable after September 14, 1996, up to
a maximum aggregate number of 86,000 such additional warrants. These
notes were repaid on December 14, 1996
8
<PAGE>
CHENIERE ENERGY, INC. AND SUBSIDIARIES
( A DEVELOPMENT STAGE COMPANY )
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 1997
and, upon repayment, the Company issued 64,500 warrants in accordance
with the relevant loan agreement. The terms of the warrants were
similar to the June Warrants. Pursuant to APB 14, these additional
warrants will be valued at the differential rate between the interest
rate charged (13%) and the then estimated market rate (25%), applied
to the principal balance for each month outstanding after September
14, 1996. This value, $6,450, has been credited to additional paid-in
capital.
In consideration of certain investment advisory and other services to
the Company, pursuant to warrant agreements each dated as of August
21, 1996, the Company issued warrants to purchase 13,600 and 54,400
shares of Common Stock, (collectively the "Adviser Warrants"). The
Adviser Warrants are exercisable at any time on or before May 15, 1999
at an exercise price of $3.00 per share (subject to customary anti-
dilution adjustments). The exercise price represents the approximate
market price of the underlying Common Stock at the time of the
transaction.
In connection with the July and August 1996 placement of 508,400
shares of Common Stock, the Company issued warrants to purchase 12,500
shares of Common Stock to one of two distributors who placed the
shares. Such warrants are exercisable on or before the second
anniversary of the sale of the shares of Common Stock at an exercise
price of $3.125 per share (subject to customary anti-dilution
adjustments). The exercise price represents the approximate market
price of the underlying Common Stock at the time of the transaction.
In late August 1996, the Company sold 100,000 units, each such unit
consisting of five shares of Common Stock and a warrant to purchase
one share of Common Stock. Each such warrant is exercisable on or
before September 1, 1999 at an exercise price of $3.125 per share
(subject to customary anti-dilution adjustments). The exercise price
represents the approximate market price of the underlying Common Stock
at the time of the transaction.
The Warrants do not confer upon the holders thereof any voting or
other rights
NOTE 4 STOCK OPTIONS
The Company has granted certain options to purchase shares of Common
Stock to two executives. Such options are exercisable for an
aggregate of 300,000 shares at an exercise price of $3.00 per share.
The options vest and are exercisable as follows:
9
<PAGE>
CHENIERE ENERGY, INC. AND SUBSIDIARIES
( A DEVELOPMENT STAGE COMPANY )
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 1997
1) 75,000 qualified options vest and become exercisable on June 1, 1997
and expire June 1, 2001.
2) 75,000 qualified options vest and become exercisable on June 1, 1998
and expire June 1, 2001.
3) 150,000 qualified options vest and become exercisable in equal annual
installments of 25% each on the first through fourth anniversary of
July 16, 1996 and expire July 16, 2001.
In addition, the Company has granted qualified options to the former
President of the Company. The holder has the option to acquire 19,444
and 2/3 shares of Common Stock at an exercise price of $1.80 per
share. The options expire November 11, 2003.
Also, the Company had granted qualified options to an employee at an
exercise price of $3.00 per share. These options were to vest and
become exercisable in equal installments of 25% each on the first
through fourth anniversary of January 23, 1997 and expire January 23,
2002. This employee left the company in May 1997 and these options
have been canceled.
The disclosure provisions of SFAS No. 123 do not have a material
effect on the financial statements.
NOTE 5 COMMON STOCK RESERVED
The Company has reserved 386,666 and 2/3 share of Common Stock for
issuance upon the exercise of outstanding warrants.
The Company has reserved 319,444 and 2/3 shares of Common Shares for
issuance upon the exercise of outstanding options.
NOTE 6 COMMITMENTS AND CONTINGENCIES
1) The Company subleases its Houston, Texas headquarters under a
month-to-month sublease.
2) On December 20, 1996, Cheniere California signed a Purchase and Sale
Agreement with Poseidon Petroleum, LLC ("Poseidon") to acquire
Poseidon's 60% working interest in six undeveloped leases in the
Bonito Unit of the Pacific Outer Continental Shelf (OCS) off Santa
Barbara County, California.
10
<PAGE>
CHENIERE ENERGY, INC. AND SUBSIDIARIES
( A DEVELOPMENT STAGE COMPANY )
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 1997
During May, 1997 Cheniere California and Poseidon mutually agreed to
terminate the Purchase and Sale Agreement pursuant to the terms
thereof and that, upon termination, neither party thereto shall have
any liability thereunder. The Company has expensed $164,812 in
professional fees relating to this agreement.
3) As of May 31, 1997, the Company has an investment of $10,000,000 in a
joint exploration program. Under the terms of the joint exploration
program, the Company is required to make additional monthly payments
aggregating, at least, approximately $3.5 million, which is due in two
payments: $2 million on May 22, 1997 and $1.5 million on June 21,
1997. A thirty day grace period applies to each payment. The
Company's potential participation in the joint exploration program
could be significantly reduced in the event of a failure by the
Company to make such required monthly payments when due. The May 22
payment has not been made as of May 31, 1997 (but as indicated in Note
7 - Subsequent Events, the $2 million payment was subsequently made on
June 2, 1997).
4) On March 4, 1997 the Company issued 352,947 shares of Common Stock to
offshore investors pursuant to Regulation S ("Regulation S")
promulgated under the Securities Act of 1933, as amended (the
"Securities Act"), at a price of $4.25 per share, for net proceeds of
$1,353,800. With respect to these shares of Common Stock, as well as
352,947 shares of Common Stock issued to offshore investors pursuant
to Regulation S on February 28, 1997 at a price of $4.25 per share,
the Company agreed that if, during the 270 day period following the
dates of purchase of these shares, the Company offers and sells any
shares of Common Stock for a per share gross sales price lower than
the per share price paid for these shares, the Company would issue
additional shares of Common Stock to investors that bought shares to
reflect the lowest per share gross sales price at which shares were
offered and sold during the period.
On May 22, 1997, the Company issued 535,000 shares of Common Stock, at
a sale price of $3.00 per share to "accredited investors" (as defined
in Rule 501(a) promulgated under the Securities Act) pursuant to Rule
506 of Regulation D ("Regulation D") promulgated under the Securities
Act, and received net proceeds of $1,485,000 from such sale. As a
consequence of the private placement of Common Stock at a price of
$3.00 per share, the Company has issued an aggregate of 294,124
additional shares of Common Stock to investors that bought shares on
February 28, 1997 and March 4, 1997 pursuant to Regulation S,
consistent with the terms of these sales as outlined above.
11
<PAGE>
CHENIERE ENERGY, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 1997
NOTE 7 SUBSEQUENT EVENTS
1) Subsequent to the balance sheet date, the Company made the required
May 22 installment to the Joint Exploration Program. This amount, $2
million, was paid on June 2, 1997.
2) During June 1997, the Company issued 33,333 shares of Common Stock to
an accredited investor pursuant to Regulation D, at a sale price of
$3.00 per share, and received net proceeds of $100,000 from such sale.
12
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The Company is currently a development stage company under the
provisions of SFAS No. 7. As such, the Company's accompanying financial
statements and notes thereto relate to the three and nine month periods ended
May 31, 1997 and the period from inception (February 21, 1996) to May 31, 1997.
These statements and notes thereto and the consolidated financial statements
included in the Company's Annual Report on Form 10-K, as amended, for the period
ended August 31, 1996 contain detailed information that should be referred to in
conjunction with the following discussion.
GENERAL. On July 3, 1996, the Company changed its name to Cheniere
Energy, Inc. and its principal business became oil and gas exploration.
3-D SEISMIC EXPLORATION PROGRAM. The Company made two payments
totaling $2.9 million during the quarter, and a third payment of $2.0 million on
June 2, 1997 to Zydeco Exploration, Inc. to raise its investment in the two
companies' 3-D seismic exploration program in southern Louisiana (the "3-D
Exploration Program") to $12.0 million. Cheniere has a remaining commitment of
at least $1.5 million, which was due on June 21, 1997. That payment, which has a
thirty-day grace period, has not yet been paid.
Subsequent to May 31, 1997, the Company announced that it had
completed the data acquisition phase of its 3-D Exploration Program and had
retained INEXS (Interactive Exploration Solutions, Inc.) as a seismic
interpretation consultant, to complement Zydeco's interpretation effort relating
to the seismic data.
PRIVATE PLACEMENT OF COMMON SHARES. On March 4, the Company issued
352,947 shares of Common Stock to offshore investors pursuant to Regulation S at
a price of $4.25 per share, for net proceeds of $1,353,800. With respect to
these shares of Common Stock, as well as 352,947 shares of Common Stock issued
to offshore investors pursuant to Regulation S on February 28, 1997 at a price
of $4.25 per share, the Company agreed that if, during the 270 day period
following the dates of purchase of these shares, the Company offers and sells
any shares of Common Stock for a per share gross sales price lower than the per
share price paid for these shares, the Company would issue additional shares of
Common Stock to investors that bought shares to reflect the lowest per share
gross sales price at which shares were offered and sold during the period.
On May 22, 1997, the Company issued 535,000 shares of Common Stock, at
a sale price of $3.00 per share to accredited investors pursuant to Regulation
D, and received net proceeds of $1,485,000 from such sale. As a consequence of
the private placement of Common Stock at a price of $3.00 per share, the Company
has issued an aggregate of 294,124 additional shares of Common Stock to
investors that bought shares on February 28, 1997 and March 4, 1997, pursuant to
Regulation S, consistent with the terms of these sales.
During June 1997, the Company issued 33,333 shares of Common Stock to
an accredited investor pursuant to Regulation D, at a sale price of $3.00 per
share, and received net proceeds of $100,000 from such sale.
The proceeds of the sales of Common Stock will be used to fund
payments to the 3-D Exploration Program and for general corporate purposes.
13
<PAGE>
CHENIERE ENERGY CALIFORNIA, INC.; TERMINATION OF PURCHASE AND SALE
AGREEMENT. On December 20, 1996, Cheniere Energy California, Inc. ("Cheniere
California"), a wholly-owned direct subsidiary of the Company, signed a Purchase
and Sale Agreement with Poseidon Petroleum, LLC ("Poseidon") to acquire
Poseidon's 60% working interest in six undeveloped leases in the Bonito Unit of
the Pacific Outer Continental Shelf (OCF) off Santa Barbara County, California.
During May 1997, Cheniere California and Poseidon mutually agreed to
terminate the Purchase and Sale Agreement pursuant to the terms thereof and
that, upon termination, neither party shall have any liability thereunder. The
Company has expensed $164,812 in professional fees relating to this agreement.
RESULTS OF OPERATIONS; THREE MONTHS ENDED MARCH 31, 1997. The Company's
operating results for the three months ended May 31, 1997 reflect a loss of
$498,201, or $0.039 per share, as there were no operating revenues. General and
administrative expenses of $364,696 included an unusually high amount of legal
expense, related in part to the process of becoming listed on the Nasdaq
SmallCap Market, in addition to the usual expenses of salary, occupancy, office
expense and insurance. In connection with the termination of a Purchase and
Sale Agreement by Cheniere Energy California, Inc. during May 1997, the Company
expensed $164,812 of professional expenses relating to that agreement. Expenses
were partially offset by interest income of $31,307, which was generated on the
Company's cash balances.
RESULTS OF OPERATIONS; NINE MONTHS ENDED MAY 31, 1997. The Company's
operating results for the nine months ended May 31, 1997 reflect a loss of
$802,900, or $0.069 per share, as there were no operating revenues. General and
administrative expenses of $676,389 included an unusually high amount of legal
expense during the most recent three months, related in part to the process of
becoming listed on the Nasdaq SmallCap Market. In connection with the
termination of a Purchase and Sale Agreement by Cheniere Energy California,
Inc., the Company expensed $164,812 of professional expenses relating to that
agreement. Interest expense of $15,002 was incurred with respect to a short
term promissory note that was repaid on December 14, 1996 and to the issuance of
certain warrants during the period. Expenses were partially offset by interest
income of $53,303 which was generated on the Company's cash balances.
RESULTS OF OPERATIONS; PERIOD FROM INCEPTION (FEBRUARY 21, 1996) TO MAY 31,
1997. The Company's operating results for the period from inception (February
21, 1996) to May 31, 1997 reflect a loss of $924,747, or $0.088 per share, as
there were no operating revenues. General and administrative expenses of
$780,203 included an unusually high amount of legal expense during the most
recent three months, related in part to the process of becoming listed on the
Nasdaq SmallCap Market. In connection with the termination of a Purchase and
Sale Agreement by Cheniere Energy California, Inc., the Company expensed
$164,812 of professional expenses relating to that agreement. Interest expense
of $34,835 was incurred with respect to a short term promissory note that was
repaid on December 14, 1996 and to the issuance of certain warrants during the
period. Expenses were partially offset by interest income of $55,103 which was
generated on the Company's cash balances.
14
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES. At May 31, 1997, total assets were
$12,386,746 compared to $5,145,310 at August 31, 1996. The increase is due
primarily to an increase to additional paid-in capital of $8,315,732 from the
sale of Common Stock. Current assets increased to $2,234,981 from $1,097,980
during the same period. Current liabilities decreased to $436,821 from $718,855.
The Company has no long term liabilities. Other assets reflect an increase in
investment to $10.0 million from $4.0 million in the 3-D Exploration Program.
This increase was funded primarily from equity proceeds and cash balances.
On June 2, 1997, the Company funded an additional $2,000,000 investment in
the 3-D Exploration Program, bringing its total investment to $12,000,000.
OTHER. This document includes "forward looking" statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Act of 1934, as amended. Although the Company believes
that the expectations reflected in such forward looking statements are based
upon reasonable assumptions, it can give no assurance that its expectations will
be achieved. Certain risks and uncertainties inherent in the Company's business
are set forth in the filings of the Company with the Securities and Exchange
Commission.
15
<PAGE>
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES
PRIVATE PLACEMENT OF COMMON SHARES. On March 4, 1997 the Company issued
352,947 shares of Common Stock, to offshore investors pursuant to Regulation S
at a price of $4.25 per share, for net proceeds of $1,353,800. With respect to
these shares of Common Stock, as well as 352,947 shares of Common Stock issued
to offshore investors pursuant to Regulation S on February 28, 1997 at a price
of $4.25 per share, the Company agreed that if, during the 270 day period
following the dates of purchase of these shares, the Company offers and sells
any shares of Common Stock for a per share gross sales price lower than the per
share price paid for these shares, the Company would issue additional shares of
Common Stock to investors that bought shares to reflect the lowest per share
gross sales price at which shares were offered and sold during the period.
On May 22, 1997, the Company issued 535,000 shares of Common Stock, at
a sale price of $3.00 per share and received net proceeds of $1,485,000 from
such sale. As a consequence of the private placement of Common Stock at a price
of $3.00 per share to accredited investors pursuant to Regulation D, the Company
has issued an aggregate of 294,124 additional shares of Common Stock to
investors that bought shares on February 28, 1997 and March 4, 1997 pursuant to
Regulation S, consistent with the terms of these sales as outlined above.
During June 1997, the Company issued 33,333 shares of Common Stock, to
an accredited investor pursuant to Regulation D, at a sale price of $3.00 per
share, and received net proceeds of $100,000 from such sale.
ITEM 5. OTHER INFORMATION
FILING OF AMENDED REPORT ON FORM 10-K AND REPORTS ON FORM 10-Q.
Subsequent to the period ended May 31, 1997, the Company filed a Report on Form
10-K/A for the period ended August 31, 1996, and Reports on Form 10-Q/A for the
periods ended November 30, 1996 and February 28, 1997.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Each of the following exhibits is filed herewith:
27.1 --Financial Data Schedule
(b) A report on Form 8-K was filed on May 23, 1997 relating to the termination
of a Purchase and Sale Agreement to acquire an interest in the Bonito Unit
of the Pacific Outer Continental Shelf offshore Santa Barbara County,
California.
16
<PAGE>
A report on Form 8-K/A was filed on June 23, 1997 relating to amended
Financial Statements for the period ended December 31, 1996.
A report on Form 8-K was filed on June 9, 1997 relating to a change in the
Registrant's Certifying Accountant.
17
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereto duly authorized.
CHENIERE ENERGY, INC.
/s/ KEITH F. CARNEY
------------------------------
Keith F. Carney
Chief Financial Officer and
Authorized Signatory
Date: July 15, 1997
18
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM 10-Q FOR
PERIOD ENDED MAY 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 9-MOS 3-MOS
<FISCAL-YEAR-END> AUG-31-1997 AUG-31-1997
<PERIOD-START> SEP-01-1996 MAR-01-1997
<PERIOD-END> MAY-31-1997 MAY-31-1997
<CASH> 2,255,281 2,255,281
<SECURITIES> 0 0
<RECEIVABLES> 0 0
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 2,334,981 2,334,981
<PP&E> 60,943 60,943
<DEPRECIATION> 6,065 2,022
<TOTAL-ASSETS> 12,386,746 12,386,746
<CURRENT-LIABILITIES> 436,821 436,821
<BONDS> 0 0
0 0
0 0
<COMMON> 40,433 40,433
<OTHER-SE> 11,949,925 11,949,925
<TOTAL-LIABILITY-AND-EQUITY> 12,386,746 12,386,746
<SALES> 0 0
<TOTAL-REVENUES> 0 0
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 15,002 0
<INCOME-PRETAX> (802,900) (498,201)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (802,900) (498,201)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (802,900) (498,201)
<EPS-PRIMARY> (0.069) (0.039)
<EPS-DILUTED> (0.069) (0.039)
</TABLE>
