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:
September 30, 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 12,962,062 shares of common stock $.001 par value outstanding as of
Oct. 31, 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
September 30,
2000
(Unaudited)
ASSETS
Cash $ 47,368
Account receivable - trade, no allowance deemed necessary 39,500
Inventory 179,158
-----------
Total Current Assets 266,026
-----------
Oil and gas properties, using full cost accounting:
Properties being amortized 334,953
Less accumulated depreciation, depletion,
amortization and impairment (334,953)
-----------
Furniture and Equipment, net of accumulated
depreciation of $8,777 65,443
Other Assets:
Marketable securities 59,291
Notes receivable from related companies 109,594
-----------
168,885
Total Assets $ 500,354
===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Liabilities:
Accounts payable and accrued liabilities $ 884
Subordinated debentures 20,000
Notes payable to related companies 22,500
-----------
Total Current Liabilities 43,384
-----------
Stockholders' Equity
Common stock, authorized 50,000,000
shares of $.001 par value, issued
and outstanding 13,712,062 13,712
Additional paid in capital 3,912,065
Common stock held in treasury, 750,000 shares (412,500)
Comprehensive income, marketable securities (21,906)
Previous accumulated deficit (1,867,999)
Accumulated deficit during
development stage (1,166,402)
-----------
Total Stockholders' Equity 456,970
-----------
Total Liabilities and Stockholders' Equity $ 500,354
===========
The accompanying notes are an integral part of these financial statements.
<PAGE>
EMPIRE ENERGY CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS (Unaudited)
--------------------------------------------------------------------------------
For The Three Month periods Ended September 30, 2000 and 1999
--------------------------------------------------------------------------------
September 30,
2000 1999
------------ -----------
Oil and gas sales $ 190,376 $ --
Interest Income 2,847 --
------------ -----------
Total Revenue 193,223 --
Expenses:
Lease operating 1,942 --
Depreciation, depletion, amortization and
impairment 116,860 --
Impairment on notes receivable -- --
Interest 4,200 9,968
General and administrative 160,106 156,887
------------ ------------
Loss before discontinued interests (89,885) (166,855)
Loss on discontinued operations (121,748) --
Loss on sale of subsidiary (70,310) --
------------ ------------
Loss before taxes and extraordinary item (281,943) (166,855)
Provision for income taxes -- --
------------ ------------
Net Loss $ (281,943) $ (166,855)
============ ============
Basic loss per common share: $ (.02) $ (.01)
============ ============
Weighted average shares outstanding 13,697,839 11,491,597
============ ============
<PAGE>
<TABLE>
<CAPTION>
EMPIRE ENERGY CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS (Unaudited)
-----------------------------------------------------------------------------------------------
For The Nine Month periods Ended September 30, 2000 and 1999 and the Period from
March 21, 1995 (inception) to September 30, 2000
-----------------------------------------------------------------------------------------------
September 30, Cumulative
2000 1999 Since Inception
------------ ------------ ---------------
<S> <C> <C> <C>
Oil and gas sales $ 414,826 $ -- $ 484,226
Interest Income 10,273 -- 10,273
------------ ------------ ------------
Total Revenue 425,099 -- 494,499
Expenses:
Lease operating 8,401 -- 9,501
Depreciation, depletion, amortization and
impairment 262,993 -- 334,953
Impairment on notes receivable -- -- 147,500
Interest 18,684 14,711 47,822
General and administrative 493,923 367,444 1,169,444
------------ ------------ ------------
Loss before partial interests (358,902) (382,155) (1,214,721)
Unconsolidated equity interest (4,375) -- (4,375)
Loss on discontinued operations (132,224) -- (132,224)
Loss on sale of subsidiary (70,310) -- (70,310)
------------ ------------ ------------
Loss before taxes and extraordinary item (565,811) (382,155) (1,421,630)
Provision for income taxes -- -- (300)
------------ ------------ ------------
Loss before extraordinary item (565,811) (382,155) (1,421,930)
Extraordinary item - gain on restructuring of
debt, net of taxes -- -- 255,528
------------ ------------ ------------
Net Loss $ (565,811) $ (382,155) $ (1,166,402)
============ ============ ============
Basic loss per common share:
Loss before extraordinary item $ (.04) $ (.03)
Extraordinary item -- --
------------ ------------
Net loss per share (.04) (.03)
============ ============
Weighted average shares outstanding 12,698,347 11,491,597
============ ============
---------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EMPIRE ENERGY CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS (Unaudited)
---------------------------------------------------------------------------------------------------------------------------------
For The Nine month periods Ended September 30, 2000 and 1999 And The Period From March 21, 1995 (Inception) to September 30, 2000
---------------------------------------------------------------------------------------------------------------------------------
September 30,
-------------------------- Cumulative
2000 1999 Since Inception
----------- ---------- ---------------
Cash Flows From Operating:
<S> <C> <C> <C>
Net loss $ (565,811) $ (382,155) $(1,166,402)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Common stock issued for expenses 38,030 -- 87,099
Stock based compensation for non-employee
stock options granted -- -- 128,701
Depreciation, depletion, amortization and
impairment 271,055 192 343,730
Impairment of notes receivable -- -- 147,500
Loss on sale of subsidiary 202,534 -- 202,534
Minority and unconsolidated interests 4,375 -- 4,375
Changes in Assets and Liabilities:
Increase in accounts receivable (10,200) -- (39,500)
Increase in prepaid expenses -- -- --
Increase in accounts payable (4,766) 13,734 (252,083)
----------- ----------- -----------
Net Cash Used by Operating Activities (64,783) (368,229) (544,046)
----------- ----------- -----------
Cash Flows From Investing Activities:
Purchase of oil and gas properties (162,994) (77,697) (306,913)
Purchase of furniture and equipment (2,137) (5,544) (11,813)
Advances on notes receivable -- (135,000) (147,500)
Loans to related companies (109,594) -- (109,594)
Purchase of minority interests (4,375) -- (4,375)
----------- ----------- -----------
Net Cash Used in Investing Activities (279,100) (218,241) (580,195)
----------- ----------- -----------
Cash Flows From Financing Activities:
Proceeds from note payable -- -- 101,500
Payment of note payable (61,816) -- (163,316)
Proceeds from notes payable - related parties 22,500 59,500 50,000
Proceeds from convertible debt 20,000 500,000 520,000
Proceeds from issuance of common stock 386,400 241,000 689,900
Repurchase of common stock (26,475) -- (26,475)
----------- ----------- -----------
Net Cash Provided by Financing Activities 340,609 800,500 1,171,609
----------- ----------- -----------
Net Increase in Cash (3,274) 214,030 47,368
Cash, beginning 50,642 5,585 --
----------- ----------- -----------
Cash, end $ 47,368 $ 219,615 $ 47,368
=========== =========== ===========
Supplemental Disclosure of Cash Flow Information
Income taxes paid $ -- $ 100 $ 300
Interest paid 16,068 -- 20,956
Supplemental Disclosure Of Non-Cash Investing
And Financing Activities
Conversion of convertible debt to common stock $ 342,500 -- $ 500,000
including accrued interest of 24,591 -- 24,591
---------------------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
EMPIRE ENERGY CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENT
SEPTEMBER 30, 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 and nine
month periods ended September 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 at September 30, 2000 consist of a demand loan owed to a major
shareholder with a current balance of $22,500 accruing interest at ten percent
per annum. A limited number of Convertible subordinated debentures, totaling
$20,000, were issued in conjunction with a proposed transaction that was not
completed. The debentures accrue interest at a rate of twelve percent per annum,
mature on August 31, 2001 and can be converted to common stock on the basis of
$2.00 per share.
3. ACQUISITIONS
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. Omega is focused on business opportunities in Africa, primarily the
purchase and resale of minerals in Ghana. 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.
On April 12, 2000 the Company acquired substantially all the assets of Talisman
marketing, Inc., a marketing company, for 562,150 shares of the Company's common
stock. These financial statements consolidate the financial position and results
of operations of both corporations, since the date of acquisition. All
intercompany items have been eliminated.
On June 20, 2000 the Company acquired a majority ownership interest in One E
Group, Inc. in exchange for a total of 846,667 shares of the Company's common
stock. In August 2000, One E Group, Inc. lost the services of critical personnel
and key proposed contracts. As a result, the Company discontinued operations and
liquidated equipment and assets in settlement of corporate liabilities.
Subsequently, the Company sold its investment in One E Group and any claims the
Company may have against the sellers of that investment to a major Empire
shareholder and received 750,000 shares of Empire common stock in payment. The
reacquired Empire stock is reflected as treasury stock on the balance sheet and
the net loss from the discontinued operations of the subsidiary and the loss
from the purchase and sale of the stock in the subsidiary are stated separately
from operating results in the statement of income.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
General
The Company began to actively explore investment opportunities in March
1999. Plans for the future 12 months are to continue to explore opportunities in
the energy market, 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 recent months the Company has identified opportunities and made
progress toward their exploitation. A subsidiary of the Company has become
legally qualified to do business with the government of Nicaragua and is
positioned to bid or negotiate to acquire development rights to explore for oil
and gas in that country.
The Company continues to search for production or exploration companies
with existing reserves and production to which the Company can add value through
investment, combination or joint venture. The Company presently has an agreement
in principle to combine with Commonwealth Energy Corp. and a contract is under
negotiation.
The Company continues oil and gas development and production in Overton
County, Tennessee. Since the Company began participation in this development,
eleven wells have been drilled. Four wells did not find commercial quantities of
oil or gas. Four wells located commercial quantities of gas that will be
produced when an adequate transportation facility is constructed. Three wells
have been completed and have produced commercial quantities of oil. The Company
and its co-participant in the exploration and development program continue to
evaluate and refine the exploration technology process for hydrocarbon location
and various well completion techniques. During the next year, as appropriate
sites are identified, based on studies of seismic and geological information,
the Company anticipates drilling additional wells on the currently leased
properties.
During the next 12 months, the Company's cash requirements will be for
these drilling and production activities and for expenses associated with
searching for, investigating and pursuing other potential oil and gas
opportunities. Necessary funding may be provided by operating revenue, sales of
equity or a combination thereof. Because the Company has not identified all
opportunities that may arise or the timing of those opportunities, it cannot
predict the total amount of such cash needs. As of the date of this report, the
Company has no specific capital commitments.
Results of Operations
During the nine months ended September 30, 2000, the Company generated
$414,826 in revenue from the sale of oil from its producing oil wells in
Tennessee and incurred $8,401 in lease operating expense related to these wells.
The Company generated an operating loss of $358,902 from exploration and
production activities, including $262,993 in depletion and impairment expense
from wells drilled and $493,923 in Company operating expenses and expenses of
pursuing proposed projects. The Company had no revenue and generated a net loss
of $382,155 during the nine months ended September 30, 1999 after beginning
operations in March 1999.
During the quarter ended September 30, 2000, the Company generated $190,376
in revenue from the sale of oil from its producing oil wells in Tennessee and
incurred $1,942 in lease operating expense related to these wells. The Company
generated a net loss of $89,885 from exploration and production activities,
including $116,860 in depletion and impairment expense from wells drilled and
$160,106 in Company operating expenses and expenses of pursuing proposed
projects. During the quarter ended September 30, 1999, the Company had no
revenue and generated a net loss of $166,855.
The Company has primarily financed activities to date with a total of
$1,189,900 raised from the private placement sales of common stock and from the
private placement sales of convertible subordinated debentures which have since
been converted to common stock.
<PAGE>
Liquidity and Capital Resources
On September 30, 2000, the Company had $86,868 in cash and accounts
receivable and a total of $43,384 in current liabilities, primarily to related
parties. Net cash used in operating activities for the nine months ended
September 30, 2000 was $64,783 compared to $368,229 for the nine months ended
September 30, 1999. Net cash used in investing activities rose to $279,100 for
the nine months ended September 30, 2000 from $218,241 for the nine months ended
September 30, 1999. Net cash provided by financing activities was $340,609 for
the nine months ended September 30, 2000 compared to $800,500 for the nine
months ended September 30, 1999.
The Company invested $191,034 in oil and gas properties during the nine
months ended September 30, 2000 in addition to $143,919 invested in oil and gas
wells in 1999. Due to the fractured nature of the reservoirs and limited
production history, capacity of the reservoirs and thus the present value of
reserves cannot be reliably estimated. Therefore, $271,055 of depletion and
impairment expense has been recorded to reduce the balance sheet carrying value
of these completed properties to known reserve value. In addition, the Company
loaned $100,000 to an entity in which it has a 39% ownership interest. This
entity is involved in real estate development without requiring additional
investment commitment from the Company.
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: 11/1/00 Reporting possible acquisition
<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
