PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PHOENIX RESOURCES TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEET
FOR THE PERIOD ENDED
(Unaudited)
1/31/96 1/31/95
Current assets:
Cash $ 20,949 $ 380
Trade receivable 1,161,412 2,856,264
Inventories 1,647,139 2,129,627
Timber deeds 661,884 754,110
Prepaid expenses 211,183 106,340
Deferred income tax
TOTAL CURRENT ASSETS $ 3,909,076 $ 6,076,471
Long-term receivables 386,651 315,294
Property and equipment 22,150,155 6,551,766
Other assets 1,431,957 282,418
----------- -----------
TOTAL ASSETS $27,877,839 $13,225,949
LIABILITIES AND STOCKHOLDERS EQUITY
Current liabilities:
Notes payable and current maturities
of long term debt $ 5,365,514 $ 2,381,196
Bank overdraft 678,054 -0-
Accounts payable 2,551,848 1,703,711
Customer deposits 76,456 73,942
Accrued expenses 315,715 187,718
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Total current liabilities $ 8,987,587 $ 4,346,567
Long term debt
(less current maturities) 888,392 3,140,187
Deferred income taxes 388,491 209,783
STOCKHOLDERS' EQUITY
Common stock $ 7,780 53,097
Preferred stock-Series A 200 -
Preferred stock-Series B 1,000 -
Preferred stock-Series C 1,000 -
Additional paid in capital 20,381,951 4,547,752
Treasury stock (733,400) (733,400)
Retained earnings
TOTAL STOCKHOLDERS' EQUITY
TOTAL LIABILITIES AND EQUITY $27,877,839 $13,225,949
PHOENIX RESOURCES TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
1996 1995
Income:
Net Sales-Woodproducts $5,032,698 $ 6,769,653
Net Sales-Oil and gas 313,837 -0-
--------- ----------
TOTAL INCOME $5,346,535 $ 6,769,653
Cost of Sales
Gross Profit 243,835 630,599
Operating expenses
Operating income (384,972) (162,163)
Other income (expense)
Other income 0 9,006
Interest expense ( )
Total other income (expense) ( 85,591) ()
Net income before income tax (470,563) (326,785)
Income tax expense -0-
-----------
Net income after income tax (470,563) $(215,679)
Earnings per share of common
stock outstanding $ (0.06) $ (0.04)
PHOENIX RESOURCES TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 Basis of Presentation
The financial information included herein is unaudited however such information
reflects all adjustments (consisting solely of normal adjustments) which are in
the opinion of management necessary for a fair statement of results for the
interim periods.
The results of operations for the three month period ended January 31, 1996 are
not necessarily indicative of the results to be expected for the full year.
The condensed consolidated financial statements include the accounts of
Phoenix Resources Technologies, Inc. and the following subsidiaries. Hughes Wood
Products, Inc. Houston Woodtech, Inc.
Note 2. Inventories
The company values its inventories generally at the lower of cost (first in
first-out) or market. lumber and wood products are valued using a full
absorption procedure using standard cost techniques. Inventoried costs include
material, direct labor and production overhead. Cost for the log inventory
generally represents average current purchase cost.
Note 3 Income taxes
The provision for income taxes has been estimated by annualizing income
based on the results of operations for the first six months of this fiscal year.
Then the annual income taxes are calculated at the statutory rate of 34%. The
quarterly estimated income tax expense is calculated at on- fourth (1/4) of the
estimated annual income tax expense. No provision for tax savings on the
quarterly loss was computed due to the continuing losses incurred by the
corporation. Under the applicable FAS tax assets are to be accrued only if a
reasonable certainity that such assets can be utilized by the corporation.
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
Information contained in the notes to the financial statements hereinabove
have been incorporated by reference into this section as well as to other
related items in Part II below.
Statement of Financial Condition
Phoenix Resources Technologies, Inc. ("Company" or "Registrant") continued
to increase its expanding Energy Division during the first quarter of fiscal
year 1996. On January 18, 1996, the Company announced the acquisition of three
pipeline systems located in Ritchie County, West Virginia. These three pipeline
systems, which in aggregate exceed sixty five miles of gas gathering lines and
equipment, were acquired from an unrelated Canadian corporation, in exchange for
2,250,000 share of the Company's common stock and the assumption of $150,000 in
debt. Through the acquisitions of the various oil and gas properties this past
fiscal year, the Company increased its total property, plant and equipment
holdings to $22,150,155 for the period ended January 31, 1996 as compared to
$6,551,766 for the same period ended a year earlier, or an increase of
$15,598,389 or by 238%. Also attributable to its expansion into the oil and gas
industry has been the increase to the Companys operating expenses during the
1995 fiscal year. Operating expenses increased to $4,955,852 for the three year
period ended October 31, 1995 as compared to $3,117,290 for s similar period
ended the year before. This increase is due to the additional operating expenses
incurred in running its new corporate headquarter in Scottsdale Arizona in
addition to payment for consulting services rendered in connection with mergers
and acquisition services, payment for services for corporate financing
transactions, investor and public relations support, legal and other services
for which the company has issued its S-8 registered stock as compensation.
Liquidity and Capital Resources
As of the end of the first quarter ended January 31, 1996, the Company
generated a total of $5,346,535 in revenue. However its operating costs continue
to exceed its revenues, due largely from costs associated with the acquisitions
of the several oil and gas properties. The AG-PCA promissory note and
obligation, (See Item 7. Management's Discussion & Analysis: Form 10-K 1995
incorporated by reference herein.) which was, as of October 31, 1995, recorded
in aggregate as a current liability rather than as long-term, continues to be an
event that, if called and accelerated, could impact the availability of the
company's ability to meet its current obligation and its overall capital
resources. However, Management intends to formally divest certain of the Wood
Products assets and is currently in negotiations to assign or refinance this The
security of the AG-PCA note was the Louisiana Property, Bon Wier Property, Comal
County Property, Houston Property, all general intangibles, contract rights,
chattel paper, farm products and instruments and fixtures of Resources (the
Company), Wood Products, and Woodtech, and the equipment and continuing
guarantee agreement of James E. Hughes, Sr.
Material Acquisitions
As previously stated, the Company acquired 3 gas pipeline systems located
in Ritchie County, West Virginia in exchange for its common stock and an
assumption of a one hundred and fifty thousand of debt.
Results of Operations
The Companys gross revenue for the quarter ended January 31, 1996 was
$5,032,698, as compared to $6,769,653 for the first quarter of fiscal year 1995,
which represents a decrease of $1,736,955, or a 25.7% decrease in total
revenues. Revenues from the oil and gas operations were only $313,837 for the
first quarter ended January 31, 1996. The revenues generated from the West
Virginia oil and gas properties continue to be reinvested into several ongoing
rework projects. Once completed, these revenues should be in excess of $30,000
per month.
ITEM 3. LEGAL PROCEEDINGS.
There were no significant or material legal proceedings that occurred
during the fourth quarter of the 1995 fiscal year. In a subsequent event, on May
1, 1996 the Company, acting through its agent Mr. James R. Ray, filed suit in
the United States District Court for the Northern District of Texas, Case No.
3-960V1000-D, against the former chairman of the Board, James E. Hughes, Sr.,
its former auditors, Langley, Williams & Company, as well as other related
individuals. The suit was dismissed by the Company in order so that all parties
could cooperate in the preparation and filing of the Companys delinquent Form
10-K annual report for fiscal year end 1995. At this time, however, there is no
clear evidence that the allegations made in the lawsuit are with our without
merit. The lawsuit has been dismissed without prejudice. The disputes alleged in
this lawsuit arise from certain obligations to perform that were alleged to have
been breached by the parties in their contract dated January 31, 1996. It is
anticipated that an acceptable divestiture of assets will be reached between the
parties within a few months, however the Company cannot give any assurances that
this lawsuit or similar suits between the parties will not be reasserted or
asserted in the future.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
By: /s/ James R. Ray
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Title: President/Director/Chairman of Registrant
Date:
By:
Title
Date:
By: /s/ George W. Smith
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Title: Secretary/Director of Registrant
Date:
