UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
- --------------------------------------------------------------------------------
(Mark one)
XX QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
- ---------- EXCHANGE ACT OF 1934
For the quarterly period ended April 30, 1999
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE
ACT OF 1934
For the transition period from _________ to _________
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Commission File Number: 000-19708
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PHOENIX RESOURCES TECHNOLOGIES, INC.
(Exact name of small business issuer as specified in its charter)
Nevada 84-1034982
------------------------ ------------------------
(State of incorporation) (IRS Employer ID Number)
5565 Shady Lane Circle, Brainard MN 56401
-----------------------------------------
(Address of principal executive offices)
(218) 828-0415
--------------
(Issuer's telephone number)
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Check whether the issuer (1) 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 NO X
--- ---
State the number of shares outstanding of each of the issuer's classes of common
equity as of the latest practicable date: June 30, 1999: 27,000,000
Transitional Small Business Disclosure Format (check one): YES NO X
--- ---
<PAGE>
PHOENIX RESOURCES TECHNOLOGIES, INC.
Form 10-QSB for the Quarter ended April 30, 1999
Table of Contents
Page
----
Part I - Financial Information
Item 1 Financial Statements 3
Item 2 Management's Discussion and Analysis or Plan of Operation 11
Part II - Other Information
Item 1 Legal Proceedings 12
Item 2 Changes in Securities 12
Item 3 Defaults Upon Senior Securities 12
Item 4 Submission of Matters to a Vote of Security Holders 12
Item 5 Other Information 12
Item 6 Exhibits and Reports on Form 8-K 12
Signatures 12
2
<PAGE>
<TABLE>
<CAPTION>
Part 1 - Item 1 - Financial Statements
PHOENIX RESOURCES TECHNOLOGIES, INC.
BALANCE SHEETS
April 30, 1999 and 1998
(Unaudited)
-----------
1999 1998
------------ ------------
ASSETS
------
<S> <C> <C>
Current Assets
Cash on hand and in bank $ -- $ --
------------ ------------
Total Assets $ -- $ --
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current Liabilities
Judgment payable $ 306,621 $ 280,001
------------ ------------
Total current liabilities 306,621 280,001
------------ ------------
Commitments and Contingencies
Shareholders' Equity Preferred Stock - $0.001 par value
Series A 200 200
Common stock - $0.001 par value 27,000 27 000
Additional paid-in capital 13,312,212 13,313,212
Accumulated deficit (12,672,633) (12,646,013)
------------ ------------
666,779 693,399
Stock subscription receivable (240,000) (240,000)
Treasury stock - at cost (560,000 shares) (733,400) (733,400)
------------ ------------
Total shareholders' equity (306,621) (280,001)
------------ ------------
Total Liabilities and Shareholders' Equity $ -- $ --
============ ============
</TABLE>
The financial information presented herein has been prepared by management
without audit by independent certified public accountants.
3
<PAGE>
<TABLE>
<CAPTION>
PHOENIX RESOURCES TECHNOLOGIES, INC.
STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
Six and Three months ended April 30, 1999 and 1998
(Unaudited)
-----------
Six months Six months Three months Three months
ended ended ended ended
April 30, April 30, April 30, April 30,
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues $ -- $ -- $ -- $ --
------------ ------------ ------------ ------------
Expenses
General and administrative -- -- -- --
------------ ------------ ------------ ------------
Total expenses -- -- -- --
------------ ------------ ------------ ------------
Loss from continuing operations
before income taxes and other
income (expenses) -- -- -- --
Other income (expenses)
Interest on judgment payable (13,310) (13,310) (6,655) (6,555)
------------ ------------ ------------ ------------
Loss before income taxes (13,310) (13,310) (6,655) (6,655)
Income tax expense -- -- -- --
------------ ------------ ------------ ------------
Net Loss (13,310) (13,310) (6,655) (6,655)
Other comprehensive income -- -- -- --
------------ ------------ ------------ ------------
Comprehensive Loss $ (13,310) $ (13,310) $ (6,655) $ (6,555)
============ ============ ============ ============
Loss per share of common stock
outstanding, computed on net loss
- basic and fully diluted nil nil nil nil
============ ============ ============ ============
Weighted-average number of
shares outstanding 27,000,000 27,000,000 27,000,000 27,000,000
============ ============ ============ ============
</TABLE>
The financial information presented herein has been prepared by management
without audit by independent certified public accountants.
4
<PAGE>
<TABLE>
<CAPTION>
PHOENIX RESOURCES TECHNOLOGIES, INC.
STATEMENTS OF CASH FLOWS
Six months ended April 30, 1999 and 1998
(Unaudited)
-----------
1999 1998
------------ ------------
<S> <C> <C>
Cash Flows from Operating Activities
Net loss $ (13,310) $(13,310)
Adjustments to reconcile net income to net cash
provided by operating activities
Increase (decrease) in
Judgment payable 13,310 13,310
------------ ------------
Net cash provided by operating activities -- --
------------ ------------
Cash Flows from Investing Activities -- --
------------ ------------
Cash Flows from Financing Activities -- --
------------ ------------
Increase in Cash and Cash Equivalents -- --
Cash and cash equivalents at beginning of period -- --
------------ ------------
Cash and cash equivalents at end of period $ -- $ --
============ ============
Supplemental Disclosures of Interest and Income Taxes Paid
Interest paid during the period $ -- $ --
============ ============
Income taxes paid (refunded) $ -- $ --
============ ============
</TABLE>
The financial information presented herein has been prepared by management
without audit by independent certified public accountants.
5
<PAGE>
PHOENIX RESOURCES TECHNOLOGIES, INC.
Notes to Financial Statements
Note 1 - Basis of Presentation
Phoenix Resources Technologies, Inc. (Company) was originally incorporated in
1986 as Firma, Inc. under the laws of the State of Colorado as a corporation
organized to take advantage of unspecified business opportunities. In 1991, in
accordance with a reorganization agreement, the Company acquired 100% of the
issued and outstanding stock of Hughes Wood Products, Inc., a privately-owned
Texas corporation, and changed its corporate name to Hughes Resources, Inc.
Hughes Wood Products, Inc. became a wholly-owned subsidiary of the Company.
Pursuant to a plan of merger and reorganization, the Company, as a Colorado
corporation, merged into Hughes Resources, Inc., a Nevada corporation, on June
27, 1995. The purpose of this merger was to redomicile the Company from Colorado
to Nevada. The Nevada corporation had been formed solely for this reorganization
purpose and had no assets, liabilities or operations prior to the merger. The
Articles of Incorporation of the surviving Nevada corporation were amended to
increase the authorized number of common shares to 100,000,000 with a par value
of $0.001 each and to increase the authorized number of preferred shares to
50,000,000 with a par value of $0.001 per share.
In May 1995, the Company acquired oil & gas wells located in the State of
Louisiana from an entity domiciled in the British Virgin Islands for
approximately 825,100 shares of the Company's common stock issued pursuant to
Regulation S of the US Securities and Exchange Commission and approximately
200,000 shares of Series A Preferred Stock. These assets were disposed of by the
Company in a block asset transfer during the year ended October 31, 1997.
In July 1995, the Company acquired approximately 330 oil & gas producing
properties located in the State of West Virginia and related equipment and real
estate for the issuance of approximately 1,000,000 shares of Series C Preferred
Stock and 1,000,000 shares of Series D Preferred Stock. In August 1996, the
original seller, and member of the Company's Board of Directors, made an offer
to repurchase these properties at terms identical to the initial sale. This
offer was accepted by the Company and the issued and outstanding shares of
Series C and Series D Preferred Stock were returned to the Company and canceled.
In January 1996, the Company entered into a transaction to acquire 56 producing
oil & gas wells from the former sole shareholder of Hughes Wood Products, Inc.
and former officer of the Company in a transaction to sell a Pole Mill located
in DeQuincy, Louisiana back to the former officer. As a part of this
transaction, the former officer was to assume certain liabilities of the Company
and return approximately 400,000 shares of common stock to the Company. This
transaction was not completed and the Company filed a lawsuit against the former
officer and the former officer's certified public accounting firm seeking
damages and alleging acts that would allow the assessment of treble damages
against the defendants. This litigation was settled in May 1996 with the
agreement that the Company would retain the 56 producing oil & gas wells,
receive a $1,000,000 promissory note from the former officer and would sell the
entire wood products division (Hughes Wood Products, Inc.) to the former
officer. Additionally, the former officer would assume all debt and other
liabilities attributable to this division and indemnified the Company against
all debts arising from the sale of these assets to the former officer.
In January 1996, the Company acquired three pipeline systems in West Virginia
from an unrelated Canadian corporation for the issuance of 2,250,000 shares of
the Company's common stock issued pursuant to Regulation S of the US Securities
and Exchange Commission and the assumption of a related $100,000 debt associated
with the pipeline properties. These properties were disposed of by the Company
in a block asset transfer during the year ended October 31, 1997.
6
<PAGE>
PHOENIX RESOURCES TECHNOLOGIES, INC.
Notes to Financial Statements - Continued
Note 1 - Basis of Presentation - continued
In January 1997, the Company exchanged 6,000,000 shares of Class "B" Preferred
Stock for 6,000,000 shares of common stock of Rocky Mountain Crystal Water, Inc.
Rocky Mountain Crystal Water, Inc. owned the rights to produce water from the
aquifer located in Ten Sleep, Wyoming. Various disputes arose between the
selling parties and the Company and this transaction was rescinded in September
1997. Due to the nature and timing of the disputes, the Company experienced no
financial impact from this transaction between January and September 1997.
In March 1997, the Company exchanged all of its assets and liabilities with MVP
Holdings, Inc., an unrelated entity, for approximately 4,000,000 shares of MVP
Holdings, Inc. common stock with a street value of approximately $3.50 per share
or $14,000,000 in total. The Company valued this transaction at the historical
values of the assets given and liabilities assumed by MVP Holdings, Inc. and no
gain or loss was recognized in this transaction.
In October 1997, the Company distributed 100.0% of its holdings in MVP Holdings,
Inc. to its shareholders as a property distribution. Concurrent with this
action, the Company ceased to have any assets, liabilities or operations and
became totally dependent upon management and/or significant shareholders to
provide sufficient working capital to preserve the integrity of the corporate
entity at this time. It is the intent of management and significant shareholders
to provide sufficient working capital necessary to support and preserve the
integrity of the corporate entity.
During interim periods, the Company follows the accounting policies set forth in
its Annual Report Pursuant to Section 13 or 15(d) of The Securities Exchange Act
of 1934 on Form 10-KSB filed with the U. S. Securities and Exchange Commission.
The information presented herein does not include all disclosures required by
generally accepted accounting principles and the users of financial information
provided for interim periods should refer to the annual financial information
and footnotes contained in its Annual Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934 on Form 10-KSB when reviewing the interim
financial results presented herein.
In the opinion of management, the accompanying interim financial statements,
prepared in accordance with the instructions for Form 10-QSB, are unaudited and
contain all material adjustments, consisting only of normal recurring
adjustments necessary to present fairly the financial condition, results of
operations and cash flows of the Company for the respective interim periods
presented. The current period results of operations are not necessarily
indicative of results which ultimately will be reported for the full fiscal year
ending October 31, 1999.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
7
<PAGE>
PHOENIX RESOURCES TECHNOLOGIES, INC.
Notes to Financial Statements - Continued
Note 2 - Summary of Significant Accounting Policies
1. Cash and cash equivalents
-------------------------
The Company considers all cash on hand and in banks, including accounts in
book overdraft positions, certificates of deposit and other highly-liquid
investments with maturities of three months or less, when purchased, to be
cash and cash equivalents.
Cash overdraft positions may occur from time to time due to the timing of
making bank deposits and releasing checks, in accordance with the
Company's cash management policies.
2. Income taxes
------------
The Company utilizes the asset and liability method of accounting for
income taxes. At April 30, 1999 and 1998, the deferred tax asset and
deferred tax liability accounts, as recorded when material, are entirely
the result of temporary differences. Temporary differences represent
differences in the recognition of assets and liabilities for tax and
financial reporting purposes, primarily the allowance for doubtful
accounts, accumulated depreciation and certain liability items. A 100%
valuation allowance was provided against deferred tax assets, where
applicable.
Due to the liquidation and/or disposition of all of the Company's assets,
liabilities and operations as of January 31, 1997, the Company will have
no available net operating loss carryforwards available for use in future
years.
3. Earnings (loss) per share
-------------------------
Earnings (loss) per share are computed by dividing net income (loss) by
the weighted-average number of shares issued and outstanding during the
reporting period. As of April 30, 1999 and 1998, the Company had no
warrants, options or other equity issues which might be considered
dilutive in nature to the weighted-average number of shares outstanding
calculation.
Note C - Common Stock Transactions
During Fiscal 1997, the Company issued an aggregate 950,112 shares of common
stock registered pursuant to a prior year filing on Form S-8. These transactions
were valued at $0.10 per share, or an aggregate $95,011, which approximates the
fair value of the stock issued and the fair value of the services provided for
legal and financial consulting services.
8
<PAGE>
PHOENIX RESOURCES TECHNOLOGIES, INC.
Notes to Financial Statements - Continued
Note C - Common Stock Transactions - Continued
In September 1997, the Company, in an effort to seek and obtain a suitable
merger or acquisition agreement with an on-going privately owned business,
issued 15,000,000 shares of unregistered, restricted common stock into the
escrow account of the Company's corporate attorney under a subscription
agreement. The attorney is responsible for securing the Company's books and
records, validating the Company's corporate status, procuring the services of a
qualified independent certified accounting firm to audit the Company's financial
statements, facilitate the filing of all delinquent reports with the US
Securities and Exchange Commission and evaluate potential private companies for
either merger or acquisition. The Company's common stock had an estimated market
trading price of approximately $0.04 per share on the date of the issuance of
these shares. Due to the restricted nature of the shares issued into escrow, the
Stock Subscription Agreement was valued at approximately $0.016 per share, or
approximately $240,000 in total, as the "fair value" of this transaction. The
Stock Subscription Agreement will be settled upon the successful merger with or
acquisition of a suitable private company.
Note D - Distributions
In March 1997, effective January 31, 1997, the Company exchanged all of its
assets to an unrelated entity in exchange for 4,000,000 shares of the acquiring
company's common stock and the assumption of all known and unknown liabilities.
The street value of the stock issued to the Company was approximately $3.50 per
share at closing. This transaction was valued by the Company at approximately
$10,300,000, which approximates the net book value of the assets transferred
less the value of the liabilities assumed. In October 1997, the Company
distributed 100.0% of its holdings in MVP Holdings, Inc. to its shareholders as
a property distribution.
Note E - Litigation
The Company was a co-maker on a loan payable to Agriculture Production Credit
Association (AG-PCA) along with its former subsidiary, Hughes Wood Products,
Inc. and Houston Woodtech, Inc. On March 17, 1997, AG-PCA foreclosed on the
underlying assets collateralizing the loan and was subsequently granted an
approximate $3,236,048 judgment collectively against the Company, Hughes Wood
Products, Inc. and Houston Woodtech, Inc.
On August 21, 1998, AG-PCA filed litigation titled "Petition to Enforce Final
Judgment" for collection of an unsatisfied balance of approximately $1,092,100,
as of May 6, 1998, in Texas District Court against 17 named co-defendants,
including the Company and its former officers. The litigation alleges various
actions on behalf of the Company, its former officers, including Racketeering,
Influence and Corrupt Organization (RICO) statute violations. The Company
continues to vigorously rely upon the indemnification discussed in the following
paragraph.
In the March 1997 sale of the Company's assets to and assumption of liabilities
by MVP Holdings, Inc., the Company was specifically indemnified in the sale
document as follows: "The Purchaser [MVP] will guarantee seller [Company] that
all debts of any kind including but not limited to amounts owed to the United
States Treasury Department, the State of Texas, Agricultural Production Credit
Association and or Community Bank, N. A., incurred or owed by the Phoenix
Resources Technologies, Inc. as of the closing date except the specific debts to
be retained by Seller under this agreement will be paid on a timely basis."
Accordingly, the Company is vigorously pursuing all avenues available to it in
order to cancel this judgment and related litigation and anticipates no material
financial impact as a result of this action.
9
<PAGE>
PHOENIX RESOURCES TECHNOLOGIES, INC.
Notes to Financial Statements - Continued
Note F - Litigation - continued
On March 20, 1997, the Company was named as the Garnishee in the settlement of a
judgment rendered against Mr. James R. Ray, the Company's former president and
chief executive officer. The garnishment placed against the Company by the
Superior Court of the State of Arizona, Maricopa County, was in the amount of
$266,205.91, plus interest at 10.0% per annum until paid in full. The Company
has accrued this garnishment as a current liability and has accrued the
requisite interest on the unpaid balance through April 30, 1999 in the
accompanying financial statements, as appropriate.
(Remainder of this page left blank intentionally)
10
<PAGE>
Part I - Item 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(1) Caution Regarding Forward-Looking Information
This quarterly report contains certain forward-looking statements and
information relating to the Company that are based on the beliefs of the Company
or management as well as assumptions made by and information currently available
to the Company or management. When used in this document, the words
"anticipate," "believe," "estimate," "expect" and "intend" and similar
expressions, as they relate to the Company or its management, are intended to
identify forward-looking statements. Such statements reflect the current view of
the Company regarding future events and are subject to certain risks,
uncertainties and assumptions, including the risks and uncertainties noted.
Should one or more of these risks or uncertainties materialize, or should
underlying assumptions prove incorrect, actual results may vary materially from
those described herein as anticipated, believed, estimated, expected or
intended. In each instance, forward-looking information should be considered in
light of the accompanying meaningful cautionary statements herein.
(2) Results of Operations, Liquidity and Capital Resources
As of the date of this filing, the Company has no operations, assets or
liabilities. Accordingly, the Company is dependent upon management and/or
significant shareholders to provide sufficient working capital to preserve the
integrity of the corporate entity at this time. It is the intent of management
and significant shareholders to provide sufficient working capital necessary to
support and preserve the integrity of the corporate entity.
The Company is currently seeking a suitable merger or acquisition candidate.
(3) Year 2000 Considerations
The Year 2000 (Y2K) date change is believed to affect virtually all computers
and organizations. The Company has undertaken a comprehensive review of its
information systems, including personal computers, software and peripheral
devices, and its general communications systems. The Company has no direct
electronic links with any customer or supplier. In addition, the Company has
held discussions with certain of its software suppliers with respect to the Y2K
date change. The Company has completed its detailed review, as a preliminary
assessment and the Company believes, as of the date of this filing, that it will
not be required to modify or replace significant portions of its computer
hardware or software and any such modifications or replacements are, or will be,
readily available. The Company has no known direct Y2K exposures and anticipates
that any costs associated with the Y2K date change compliance to have a material
effect on its financial position or its results of operations. There can be no
assurance until January 1, 2000, however, that all of the Company's systems, and
the systems of its suppliers, shippers, customers or other external business
partners will function adequately.
(Remainder of this page left blank intentionally)
11
<PAGE>
Part II - Other Information
Item 1 - Legal Proceedings
None
Item 2 - Changes in Securities
None
Item 3 - Defaults on Senior Securities
None
Item 4 - Submission of Matters to a Vote of Security Holders
The Company has held no regularly scheduled, called or special meetings
of shareholders during the reporting period.
Item 5 - Other Information
None
Item 6 - Exhibits and Reports on Form 8-K
None
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
PHOENIX RESOURCES TECHNOLOGIES, INC.
June 30 , 1999 /s/ William C. Nichols
-------- ------------------------------------
William C. Nichols
President and Director
12
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<ARTICLE> 5
<LEGEND>
</LEGEND>
<CIK> 0000808575
<NAME> Phoenix Resources Technologies, Inc.
<MULTIPLIER> 1
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<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1999
<PERIOD-START> NOV-01-1998
<PERIOD-END> APR-30-1999
<EXCHANGE-RATE> 1
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0
200
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