SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
For the quarterly period ended:
March 31, 2000
Commission File Number
1-10077
EMPIRE ENERGY CORPORATION
-------------------------------------------
(Name of small business issuer in its charter)
Utah 87-0401761
- ------------------------------- --------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification number)
11011 King Street, Suite 260 66210
Overland Park, KS (Zip Code)
--------------------------------------
(Address of Principal Executive offices)
Issuer's telephone number: (913) 469-5615
Securities registered under Section 12(b) of the Act: None
Securities registered under Section 12(g) of the Act: None:
Check whether the issuer (1) has 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 X No
There were 12,164,717 shares of common stock $.001 par value outstanding as of
April 30, 2000.
Documents incorporated by reference: None
Transitional Small Business Format (check one); Yes ; No X
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
The Consolidated Financial Statements of the Company required to be filed
with this 10-QSB Quarterly Report were prepared by management and commence on
the following page, together with related Notes. In the opinion of management,
the Consolidated Financial Statements fairly present the financial condition of
the Company.
<PAGE>
EMPIRE ENERGY CORPORATION
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
March 31, 2000 (Unaudited)
- --------------------------------------------------------------------------------
ASSETS
Cash $ 126,723
Account receivable - trade, no allowance deemed necessary 57,773
Prepaid expenses 18,500
------------
Total Current Assets 202,996
------------
Oil and gas properties, using full cost accounting:
Properties being amortized 170,821
Less accumulated depreciation, depletion,
amortization and impairment (170,821)
------------
--
------------
Other Assets:
Furniture and equipment, net of
accumulated depreciation of $1,213 8,462
Notes receivable from related companies 101,675
------------
110,137
------------
Total Assets $ 313,133
============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Liabilities:
Accounts payable and accrued liabilities $ 17,745
Notes payable - related parties 8,500
Convertible debentures 25,000
------------
Total Current Liabilities 51,245
------------
Stockholders' Deficit
Common stock, authorized 50,000,000
shares of $.001 par value, issued
and outstanding 12,139,717 12,140
Additional paid in capital 2,845,608
Previous accumulated deficit (1,867,999)
Accumulated deficit during
development stage (727,861)
------------
Total Stockholders' Deficit 261,888
------------
Total Liabilities and Stockholders' Deficit $ 313,133
============
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
EMPIRE ENERGY CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS (Unaudited)
- --------------------------------------------------------------------------------------------------------------------
For The Three Month periods Ended March 31, 2000 and 1999 and the Period from
March 21, 1995 (inception) to March 31, 2000
- --------------------------------------------------------------------------------------------------------------------
March 31, Cumulative
2000 1999 Since Inception
------------ ------------ ---------------
<S> <C> <C> <C>
Oil and gas sales $ 122,053 $ -- $ 191,454
Expenses:
Lease operating 2,032 -- 3,132
Depreciation, depletion, amortization and
impairment 99,359 -- 171,035
Impairment on notes receivable -- -- 147,500
Interest 6,700 -- 35,838
General and administrative 141,231 8,639 816,038
------------ ------------ ------------
Loss before taxes and extraordinary item (127,269) (8,639) (983,089)
Provision for income taxes -- -- (300)
------------ ------------ ------------
Loss before extraordinary item (127,269) (8,639) (983,389)
Extraordinary item - gain on restructuring of
debt, net of taxes -- -- 255,528
------------ ------------ ------------
Net Loss $ (127,269) $ (8,639) $ (727,861)
============ ============ ============
Basic loss per common share:
Loss before extraordinary item $ (.01) $ (.00) $ (.09)
Extraordinary item -- -- .02
------------ ------------ ------------
Net loss per share (.01) (.00) (.07)
============ ============ ============
Weighted average shares outstanding 12,102,514 7,412,062 11,321,612
============ ============ ============
- -------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
<PAGE>
EMPIRE ENERGY CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS (Unaudited)
- -----------------------------------------------------------------------------------------------------------------------------
For The Three month periods Ended March 31, 2000 and 1999 And The Period From March 21, 1995 (Inception) to March 31, 2000
- -----------------------------------------------------------------------------------------------------------------------------
March 31,
------------------------------ Cumulative
2000 1999 Since Inception
---------- ---------- ---------------
Cash Flows From Operating:
Net loss $(127,269) $ (8,639) $(727,861)
Adjustments to reconcile net loss to net cash provided by operating
activities:
Common stock issued for services -- -- 49,069
Stock based compensation for non-employee
stock options granted -- -- 128,701
Depreciation, depletion, amortization and
impairment 99,359 -- 172,034
Impairment of notes receivable -- -- 147,500
Changes in Assets and Liabilities:
Increase in accounts receivable (29,473) -- (57,773)
Increase in prepaid expenses (18,500) -- (18,500)
Increase (decrease) in accounts payable 16,116 3,817 (231,201)
--------- --------- ---------
Net Cash Used by Operating Activities (59,767) (4,822) (538,031)
--------- --------- ---------
Cash Flows From Investing Activities:
Purchase of oil and gas properties (26,902) -- (170,821)
Purchase of furniture and equipment -- -- (9,675)
Advances on notes receivable -- -- (147,500)
Loans to related companies (100,675) -- (101,675)
--------- --------- ---------
Net Cash Used in Investing Activities (127,577) -- (429,671)
--------- --------- ---------
Cash Flows From Financing Activities:
Proceeds from note payable -- -- 101,500
Payment of note payable -- (1,500) (101,500)
Proceeds from notes payable - related parties (19,000) 30,000 8,500
Proceeds from convertible debt -- -- 500,000
Proceeds from issuance of common stock 308,900 -- 612,400
Repurchase of common stock (26,475) -- (26,475)
--------- --------- ---------
Net Cash Provided by Financing Activities 263,425 28,500 1,094,425
--------- --------- ---------
Net Increase in Cash 76,081 23,678 126,723
Cash, beginning 50,642 5,585 --
--------- --------- ---------
Cash, end $ 126,723 $ 29,263 $ 126,723
========= ========= =========
Supplemental Disclosure of Cash Flow Information
Income taxes paid $ -- $ 100 $ 300
Interest paid 886 -- 5,774
Supplemental Disclosure Of Non-Cash Investing
And Financing Activities
Conversion of convertible debt to common stock $ 317,500 -- $ 475,000
including accrued interest of 22,407 -- 162,972
- --------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
EMPIRE ENERGY CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENT
MARCH 31, 2000 AND 1999
1. INTERIM REPORTING - BASIS OF PRESENTATION
Summary of issuer's significant accounting policies are incorporated by
reference to the Company's annual report on Form 10KSB at December 31, 1999.
The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles and with Form 10-QSB requirements.
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 considered necessary for a fair
presentation have been included. Operating results for the three month period
ended March 30, 2000, are not necessarily indicative of the results that may be
expected for the year ended December 31, 2000.
2. NOTES PAYABLE AND CONVERTIBLE DEBENTURES
Notes payable and convertible debentures consist of the following at March 31,
2000:
Notes payable - related parties, interest
at 10%, due on demand. The notes are
without collateral. $ 8,500
---------
Convertible debentures, interest at 10%,
due in one year from issuance. The notes are
convertible on a $1.00 for one share basis
into shares of common stock. $ 25,000
=========
Through March 31, 2000, $475,000 of the original $500,000 converted into 475,000
shares of common stock. Subsequent to March 31, 2000, the final $25,000
converted to 25,000 shares of common stock.
3. ACQUISITION
On February 8, 2000, the Company acquired all the outstanding common stock of
Omega International, Inc. ( "Omega" ) for 560,000 shares of the Company's common
stock.
The Company and Omega were related through common ownership prior to the
acquisition and therefore, the transaction was accounted for in a manner similar
to a pooling of interests and all assets and liabilities will be recorded at
cost. These financial statements consolidate the financial position and results
of operations of both corporations, including prior periods presented. All
intercompany items have been eliminated.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
General
The Company had not engaged in any material operations or had any revenues
from operations during recent years and through the first quarter of 1999. The
Company's plan of operation since March 1999 and for the next 12 months is to
continue to explore opportunities both domestically and internationally that may
benefit the Company and its stockholders. Management anticipates that to exploit
any such opportunities, the Company will issue shares of its common stock as the
primary consideration for the participation in such opportunities.
During July 1999 the Company entered into an agreement to participate in
the development of oil and gas prospects in Overton County, Tennessee. An
initial well was completed and began production October 4, 1999. Three
additional wells were drilled, of which two did not find commercial quantities
of oil or gas. The third located commercial quantities of gas, however, the gas
will not be produced until an adequate transportation facility is constructed. A
fifth well was completed and began oil production in March 2000. The Company,
along with its co-participant in the exploration and development program
continues to evaluate the exploration technology process for hydrocarbon
location as well as various well completion techniques. Once criteria are met,
and based on studies of seismic and geological information, the Company
anticipates drilling additional wells on the currently leased properties during
the next year as funding is obtained for this purpose.
During the next 12 months, the Company's cash requirements will be used in
this drilling activity and payment of expenses associated with searching for,
investigating and pursuing other potential opportunities. Such funds may be
provided by sales of equity or debt financing or a combination thereof. Because
the Company has not identified such opportunities with any specificity, it
cannot predict the total amount of such cash needs. As of the date of this
report, the Company has no capital commitments other than to complete the wells
referred to above, which commitments will not exceed $500,000.
Results of Operations
The Company had no material business operations during the previous
calendar year and through March 31, 1999. During the nine months ended December
31, 1999, the Company raised $500,000 from the private placement of convertible
subordinated debentures and has been searching for and evaluating both domestic
and international opportunities. In addition, the Company raised $308,900 from
the sale of common stock during the quarter ending March 31, 2000.
During the quarter ended March 31, 2000, the Company generated $122,053 in
revenue from the sale of oil from its producing oil wells in Tennessee and
incurred $2,032 in lease operating expense related to these wells. The Company
generated a net loss of $127,269, including $98,861 in depletion and impairment
expense from wells drilled and $148,429 in Company operating expenses and
expenses of pursuing proposed projects. These expenses were offset by $120,021
of net revenue produced by the wells. During the quarter ended March 31, 1999,
the Company had no significant business operations and generated a net loss of
$8,639.
Liquidity and Capital Resources
On March 31, 2000, the Company had $184,496 in cash and accounts receivable
and $51,245 in total liabilities. The liabilities include $25,000 in convertible
subordinated debentures that have subsequently been converted to common stock.
Net cash used in operating activities for the quarter ended March 31, 2000 was
$59,767 compared to $4,822 for the quarter ended March 31, 1999. Net cash used
in investing activities rose to $127,675 for the quarter ended March 31, 2000
from $.00 for the quarter ended March 31, 1999. Net cash provided by financing
activities was $263,425 for the quarter ended March 31, 2000 compared to $28,500
for the quarter ended March 31, 1999.
The Company invested an additional $26,902 in oil and gas properties during
the quarter ended March 31, 2000. Due to the limited number of wells drilled and
limited production history, the present value of reserves cannot be reliably
estimated. Therefore, $98,861 of impairment expense has been recorded to reduce
the carrying value of these properties to known reserve value. The Company
loaned $100,000 in March 2000 to an entity in which it acquired a 27% ownership
interest in April 2000. This investment is expected to be involved in real
estate development without requiring additional investment commitment from the
Company.
<PAGE>
Year 2000 Concerns
The Company addressed the concerns of potential year 2000 computing
problems and incurred no significant problems or costs as a result of this
issue. The Company expects no additional problems from this issue in the future.
Forward Looking Statements
Certain statements contained in this Report on Form 10-QSB, including
statements of the Company's current expectations, intentions, plans and beliefs,
and statements containing the words "believes," "anticipates," "estimates,"
"expects," or "may," are forward-looking statements, as defined in Section 21D
of the Securities Exchange Act of 1934. Such forward-looking statements involve
known and unknown risk, uncertainties and other factors which may cause the
actual results, performance, timing or achievements of the Company to be
materially different from any results, performance, timing or achievements
expressed or implied by such forward-looking statements.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
None
Item 2. Changes in Securities.
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) Exhibits. Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K:
February 9, 2000 reporting a change in certifying auditors.
February 22, 2000 reporting acquisition of Omega International,
Inc.
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Empire Energy Corporation
By: /s/ Norman L. Peterson
----------------------------------------
Norman L. Peterson
President and Principal
Executive Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheets and consolidated statements of operations found on
pages 3 and 4 of the Company's Form 10-QSB for the year to date, and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 126,723
<SECURITIES> 0
<RECEIVABLES> 57,773
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 202,996
<PP&E> 180,496
<DEPRECIATION> 172,034
<TOTAL-ASSETS> 313,133
<CURRENT-LIABILITIES> 51,245
<BONDS> 0
<COMMON> 12,140
0
0
<OTHER-SE> 249,748
<TOTAL-LIABILITY-AND-EQUITY> 313,133
<SALES> 122,053
<TOTAL-REVENUES> 122,053
<CGS> 101,391
<TOTAL-COSTS> 101,391
<OTHER-EXPENSES> 141,231
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,700
<INCOME-PRETAX> (127,269)
<INCOME-TAX> 0
<INCOME-CONTINUING> (127,269)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (127,269)
<EPS-BASIC> (0.01)
<EPS-DILUTED> (0.01)
</TABLE>
