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:
June 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 13,443,387 shares of common stock $.001 par value outstanding as of
July 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.
2
<PAGE>
EMPIRE ENERGY CORPORATION
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
June 30, 2000 (Unaudited)
------------- -----------
ASSETS
Cash $ 117,637
Account receivable - trade, no allowance deemed necessary 51,700
Inventory 179,158
Prepaid expenses 6,175
-----------
Total Current Assets 354,670
-----------
Oil and gas properties, using full cost accounting:
Properties being amortized 258,853
Less accumulated depreciation, depletion,
amortization and impairment (218,093)
-----------
40,760
Furniture and Equipment, net of accumulated
depreciation of $24,819 245,398
Other Assets:
Deposits and prepayments 53,551
Goodwill, Net of amortization of $1,160 416,360
Marketable securities 68,780
Notes receivable from related companies 107,244
-----------
645,935
-----------
Total Assets $ 1,286,763
===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Liabilities:
Accounts payable and accrued liabilities $ 95,446
Notes payable 63,732
Customer prepayments 120,000
-----------
Total Current Liabilities 279,178
-----------
Minority Interests 90,350
Stockholders' Equity
Common stock, authorized 50,000,000
shares of $.001 par value, issued
and outstanding 13,443,387 13,443
Additional paid in capital 3,668,667
Comprehensive income, marketable securities (12,417)
Previous accumulated deficit (1,867,999)
Accumulated deficit during
development stage (884,459)
-----------
Total Stockholders' Equity 917,235
-----------
Total Liabilities and Stockholders' Equity $ 1,286,763
===========
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
EMPIRE ENERGY CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS (Unaudited)
--------------------------------------------------------------------------------
For The Three Month periods Ended June 30, 2000 and 1999
--------------------------------------------------------------------------------
June 30,
2000 1999
------------ ------------
Oil and gas sales $ 102,397 $ --
Computer service revenue 9,382 --
Interest Income 7,426 --
------------ ------------
Total Revenue 119,205 --
Expenses:
Lease operating 4,427 --
Depreciation, depletion, amortization and
impairment 46,774 --
Impairment on notes receivable -- --
Interest 6,896 4,743
General and administrative 225,039 201,917
------------ ------------
Loss before partial interests (163,931) (206,660)
Unconsolidated equity interest (4,375) --
Minority equity interests 11,707 --
------------ ------------
Loss before taxes and extraordinary item (156,599) (206,660)
Provision for income taxes -- --
------------ ------------
Net Loss $ (156,599) $ (206,660)
============ ============
Basic loss per common share: $ (.01) $ (.02)
============ ============
Weighted average shares outstanding 12,744,773 10,931,597
============ ============
4
<PAGE>
<TABLE>
<CAPTION>
EMPIRE ENERGY CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS (Unaudited)
----------------------------------------------------------------------------------------------
For The Six Month periods Ended June 30, 2000 and 1999 and the Period from March 21, 1995
(inception) to June 30, 2000
----------------------------------------------------------------------------------------------
June 30, Cumulative
2000 1999 Since Inception
------------ ------------ ---------------
<S> <C> <C> <C>
Oil and gas sales $ 224,450 $ -- $ 293,851
Computer service revenue 9,382 -- 9,382
Interest Income 7,426 -- 7,426
------------ ------------ ------------
Total Revenue 241,258 -- 310,659
Expenses:
Lease operating 6,459 -- 7,559
Depreciation, depletion, amortization and
impairment 146,133 -- 217,809
Impairment on notes receivable -- -- 147,500
Interest 13,596 4,743 42,734
General and administrative 366,270 210,556 1,042,076
------------ ------------ ------------
Loss before partial interests (291,200) (215,299) (1,147,019)
Unconsolidated equity interest (4,375) -- (4,375)
Minority equity interests 11,707 -- 11,707
------------ ------------ ------------
Loss before taxes and extraordinary item (283,868) (215,299) (1,139,687)
Provision for income taxes -- -- (300)
------------ ------------ ------------
Loss before extraordinary item (283,868) (215,299) (1,139,987)
Extraordinary item - gain on restructuring of
debt, net of taxes -- -- 255,528
------------ ------------ ------------
Net Loss $ (283,868) $ (215,299) $ (884,459)
============ ============ ============
Basic loss per common share:
Loss before extraordinary item $ (.02) $ (.02)
Extraordinary item -- --
------------ ------------
Net loss per share (.02) (.02)
============ ============
Weighted average shares outstanding 12,200,378 10,931,597
============ ============
-----------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
5
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EMPIRE ENERGY CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS (Unaudited)
-------------------------------------------------------------------------------------------------
For The Six month periods Ended June 30, 2000 and 1999 And The Period From March 21, 1995
(Inception) to June 30, 2000
-------------------------------------------------------------------------------------------------
June 30,
-------------------------- Cumulative
2000 1999 Since Inception
----------- ----------- ---------------
<S> <C> <C> <C>
Cash Flows From Operating:
Net loss $ (283,868) $ (215,299) $ (884,459)
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 152,434 -- 225,109
Impairment of notes receivable -- -- 147,500
Minority and unconsolidated interests (6,757) -- (6,757)
Changes in Assets and Liabilities:
Increase in accounts receivable (3,460) (60,000) (31,760)
Increase in prepaid expenses -- -- --
Increase (decrease) in accounts payable 16,725 3,766 (230,593)
----------- ----------- -----------
Net Cash Used by Operating Activities (124,926) (271,533) (603,190)
----------- ----------- -----------
Cash Flows From Investing Activities:
Purchase of oil and gas properties (86,894) -- (230,813)
Purchase of furniture and equipment -- (1,701) (9,675)
Advances on notes receivable -- -- (147,500)
Loans to related companies (107,094) -- (108,094)
Purchase of minority interests (4,525) -- (4,525)
----------- ----------- -----------
Net Cash Used in Investing Activities (198,513) (1,701) (500,607)
----------- ----------- -----------
Cash Flows From Financing Activities:
Proceeds from note payable -- -- 101,500
Payment of note payable -- -- (101,500)
Proceeds from notes payable - related parties (27,500) 36,500 --
Proceeds from convertible debt -- 350,000 500,000
Proceeds from issuance of common stock 444,409 241,000 747,909
Repurchase of common stock (26,475) -- (26,475)
----------- ----------- -----------
Net Cash Provided by Financing Activities 390,434 627,500 1,221,434
----------- ----------- -----------
Net Increase in Cash 66,995 354,266 117,637
Cash, beginning 50,642 5,585 --
----------- ----------- -----------
Cash, end $ 117,637 $ 359,851 $ 117,637
=========== =========== ===========
Supplemental Disclosure of Cash Flow Information
Income taxes paid $ -- $ 100 $ 300
Interest paid 1,068 -- 5,956
Supplemental Disclosure Of Non-Cash Investing
And Financing Activities
Conversion of convertible debt to common stock $ 342,500 -- $ 500,000
Conversion of accrued interest to common
stock 24,591 -- 24,591
------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
6
</TABLE>
<PAGE>
EMPIRE ENERGY CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENT
JUNE 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 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 at June 30, 2000 consist of installment loans related to the
purchase of equipment, payable in monthly installments maturing over terms
ranging from eighteen to sixty months
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.
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 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 700,000 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.
7
<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 future 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. To date seven
additional wells have been drilled, of which three did not find commercial
quantities of oil or gas. Three located commercial quantities of gas, however,
the gas will not be produced until an adequate transportation facility is
constructed. Three wells have been completed and have produced commercial
quantities of oil. 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.
During the quarter ended June 30, 2000, the company acquired the assets of a
consumer marketing company, a majority interest in a computer services company
and a minority interest in a land development company. These were acquired
substantially by issuance of common stock and serve to diversify the company's
investment opportunities.
Results of Operations
The Company had no material business operations during 1998 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 $444,409 from the
sale of common stock during the six months ending June 30, 2000.
During the six months ended June 30, 2000, the Company generated $224,450
in revenue from the sale of oil from its producing oil wells in Tennessee and
incurred $6,459 in lease operating expense related to these wells. The Company
generated an operating loss of $229,996 from natural resources activities,
including $146,132 in depletion and impairment expense from wells drilled and
$301,856 in Company operating expenses and expenses of pursuing proposed
projects. The Company had no revenue and generated a net loss of $215,299 during
the six months ended June 30, 1999 after beginning operations in March 1999.
During the quarter ended June 30, 2000, the Company generated $102,397 in
revenue from the sale of oil from its producing oil wells in Tennessee and
incurred $4,427 in lease operating expense related to these wells. The Company
generated a net loss of $88,137 from natural resources activities, including
$46,774 in depletion and impairment expense from wells drilled and $155,502 in
Company operating expenses and expenses of pursuing proposed projects. During
the quarter ended June 30, 1999, the Company had no revenue and generated a net
loss of $206,660.
The company acquired consumer marketing and computer services businesses
during the quarter ended June 30, 2000. Activity of these businesses is in
development stage and generated revenue of $9,382 and operating expenses of
$77,357, primarily in payroll, facility and equipment charges.
8
<PAGE>
Liquidity and Capital Resources
On June 30, 2000, the Company had $169,337 in cash and accounts receivable,
$95,446 in trade liabilities and a total of $63,732 in liabilities due under
monthly installments. Net cash used in operating activities for the six months
ended June 30, 2000 was $124,926 compared to $271,533 for the six months ended
June 30, 1999. Net cash used in investing activities rose to $198,513 for the
six months ended June 30, 2000 from $1701 for the six months ended June 30,
1999. Net cash provided by financing activities was $390,434 for the six months
ended June 30, 2000 compared to $627,500 for the six months ended June 30, 1999.
The Company invested an additional $114,933 in oil and gas properties
during the six months ended June 30, 2000. Due to the limited number of wells
drilled and limited production history, the present value of reserves cannot be
reliably estimated. Therefore, $146,133 of impairment expense has been recorded
to reduce the carrying value of these completed properties to known reserve
value. The Company loaned $100,000 in March 2000 to an entity in which it
acquired a 39% ownership interest in April 2000. This investment is expected to
be 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.
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: None
9
<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
10
<PAGE>
EXHIBIT INDEX
EXHIBIT METHOD OF FILING
------- -----------------------------
27. FINANCIAL DATA SCHEDULE Filed herewith electronically
