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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
For the period ended March 31, 1997
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Commission File Number: 0-18049
NEROX ENERGY CORPORATION
(Exact name of registrant as specified in its charter)
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Nevada 91-1317131
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
18400 Von Karman Avenue, Suite 600
Irvine, California 92612
(Address of principal executive offices) (Zip Code)
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Issuer's Telephone Number: (714) 955-9136
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: There were 8,421,516 shares of the
Registrants Common Stock issued and outstanding as of February 27, 1998.
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NEROX ENERGY CORPORATION AND SUBSIDIARY
INDEX
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Page
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PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Balance Sheet (unaudited) at March 31, 1997 2
Consolidated Statements of Operations (unaudited) for
the three months ended March 31, 1997 and 1996 3
Consolidated Statements of Cash Flows (unaudited) for
the three months ended March 31, 1997 and 1996 4
Notes to Consolidated Financial Statements (unaudited) 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
PART II. OTHER INFORMATION 7
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NEROX ENERGY CORPORATION AND SUBSIDIARY
Consolidated Balance Sheet
(Unaudited)
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MARCH 31, 1997
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ASSETS
PROPERTY AND EQUIPMENT, AT COST:
Alaska coal mine and related equipment 2,110,460
--------------
Proved oil and gas properties, using successfuL
efforts methods accounting
Alaska properties 4,320,298
Less accumulated depletion (130,176)
Less impairment allowance (4,190,122)
--------------
0
--------------
Louisiana properties 1,748,367
Less accumulated depletion (587,018)
Less impairment allowance (1,055,422)
--------------
105,927
--------------
$ 2,216,387
==============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable to:
Shareholders $ 784,391
Placer Dome 154,233
------------
938,624
Accounts payable 479,682
Accrued expenses 93,558
Settlement of shareholder contingency 429,610
------------
TOTAL CURRENT LIABILITIES 1,941,474
------------
COMMITMENTS AND CONTINGENCIES -
STOCKHOLDERS' EQUITY:
PREFERRED STOCK, 10% cumulative, non-voting,
convertible, no par value;
shares authorized 200,000, issued and outstanding
70,709 495,000
COMMON STOCK, par value $.004167; shares authorized
12,000,000,
issued and outstanding 4,017,760 16,742
ADDITIONAL PAID-IN CAPITAL 10,663,506
ACCUMULATED DEFICIT (10,900,335)
------------
NET STOCKHOLDERS' EQUITY 274,913
------------
$ 2,216,387
============
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See accompanying notes to the financial statements.
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NEROX ENERGY CORPORATION AND SUBSIDIARY
Consolidated Statements of Operations
(Unaudited)
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<CAPTION>
THREE MONTHS ENDED MARCH 31,
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1997 1996
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Revenues:
Oil and gas sales $ 26,278 $ 48,241
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COST AND EXPENSES:
Oil and gas costs 8,136 16,421
Coal mine costs 43,004 -
General and administrative 73,100 148,405
Interest 41,691 55,368
Depletion 15,000 25,704
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180,931 245,898
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LOSS BEFORE MINORITY INTEREST (154,653) (197,657)
MINORITY INTEREST - 24,072
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NET LOSS $ (154,653) $ (173,585)
========== ==========
NET LOSS PER COMMON SHARE $ (0.04) $ (0.13)
========== ==========
WEIGHTED AVERAGE NUMBER OF COMMON SHARES 4,017,760 1,400,000
========== ==========
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See accompanying notes to the financial statements.
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NEROX ENERGY CORPORATION AND SUBSIDIARY
Consolidated Statements of Cash Flows
(Unaudited)
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THREE MONTHS ENDED MARCH 31,
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1997 1996
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Cash flows from operating activities:
Net loss $(154,653) $(173,585)
Adjustments to reconcile net loss to net cash
used by operating activities:
Minority interest - (24,072)
Depletion 15,000 25,704
Amortization of loan discount - 34,500
Write off computer equipment 6,431 -
(Increase) decrease in assets:
Other assets - (25,989)
Increase (decrease) in liabilities:
Accounts payable (7,849) 1,963
Accrued expenses (2,628) -
---------- ---------
Net cash used by operating activities (143,699) (161,479)
---------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Coal mine renovations - (24,199)
---------- ---------
Net cash used by investing activities - (24,199)
---------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable 139,391 70,000
Payments made on notes payable (50,000) -
Sales of common stock - 146,050
Payment of dividends (10,500) -
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Net cash provided by financing activities 78,891 216,050
---------- ---------
Net increase (decrease) in cash (64,808) 30,372
CASH, BEGINNING OF PERIOD 64,808 66,488
---------- ---------
CASH, END OF PERIOD $ - $ 96,860
========== =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW ACTIVITIES:
Cash paid for interest $ 2,400 $ -
========== =========
NON-CASH INVESTING AND FINANCING TRANSACTIONS:
Dividends in arrears $ 10,787 $ 12,100
========== =========
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See accompanying notes to the financial statements.
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NEROX ENERGY CORPORATION AND SUBSIDIARY
Notes to Unaudited Consolidated Financial Statements
March 31, 1997
NOTE A - BASIS OF PRESENTATION
- ------------------------------
The accompanying unaudited consolidated financial statements of Nerox Energy
Corporation and Subsidiary (the "Company") have been prepared in accordance
with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-QSB. Accordingly, they do
not include all of the information required by generally accepted accounting
principles for complete financial statements. In the opinion of management,
all adjustments (consisting of normal recurring adjustments) considered
necessary for a fair presentation have been included. Operating results for
the three months ended March 31, 1997 are not necessarily indicative of the
results for any future period. These statements should be read in
conjunction with the consolidated financial statements and notes thereto
included in the Company's Form 10-KSB for the year ended December 31, 1996.
The unaudited consolidated financial statements include the accounts of Nerox
Energy Corporation and its wholly-owned subsidiary, Nerox Power Systems, Inc.
(NPSI). All significant intercompany balances and transactions have been
eliminated.
Certain prior year amounts have been reclassified to conform to the current
year presentation.
GOING CONCERN
-------------
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles, which contemplate continuation of
the Company as a going concern. The Company has experienced significant
losses and, as of March 31, 1997, had a working capital deficiency of
approximately $1,940,000. Additional capital infusion is necessary to begin
mining operations. As of February 27, 1998 the mine is not yet operational.
These factors raise substantial doubt about the Company's ability to continue
as a going concern.
Management is currently seeking additional financing and a joint venture
partner to develop the coal mine. The methods employed by the Company to
raise capital and begin mining operations include the following:
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Year to Date
Amount
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Loans from shareholders, net $89,391
Conversion of notes payable to common stock -
Issuance of common stock for services -
-------------
$89,391
=============
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There can be no assurance that the Company will be successful in its efforts
to obtain additional financing and begin mining operations.
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NOTE B - NOTES PAYABLE
- ----------------------
NEROX ENERGY CORPORATION AND SUBSIDIARY
Notes to Unaudited Consolidated Financial Statements
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MARCH 31,
1997
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SHAREHOLDERS:
Unsecured notes payable at 10% - 12% interest 284,391
Unsecured note payable at 24% interest 500,000
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784,391
PLACER DOME:
Unsecured note payable at 10% imputed interest 154,233
---------
$938,624
=========
All notes payable are in default.
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ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
The Company has experienced significant losses and, as of March 31, 1997,
had a working capital deficiency of approximately $1,940,000. Additional
capital infusion is necessary to begin mining operations. Management is seeking
additional financing and a joint venture partner to develop the coal mine.
Management's plan is to raise additional capital through existing shareholders
and, whenever possible, issue common stock for services and convert debt to
common stock. There can be no assurance that the Company will be successful in
its efforts to obtain additional financing and begin mining operations.
RESULTS OF OPERATIONS
Total revenues from oil and gas sales for the first quarter of 1997 were
$26,278, a decrease of 46% from $48,241 for the first quarter of 1996. The
decrease was due to fewer producing wells as several wells were shut in since
1996.
Oil and gas production costs decreased in proportion to the decrease in
revenues generated by the oil and gas wells. Mining costs of $43,004 in 1997
reflect costs to get the Jonesville coal mine ready for operation. In 1996
substantially all mining costs were capitalized. General and administrative
expenses decreased by 51% to $73,100 in 1997 from $148,405 in 1996 due to a
decrease in professional services. Of the total general and administrative
expenses $35,401 can be attributed to Nerox Power Systems, Inc. ("NPSI") for
coal mine activities, a decrease from $93,932 in 1996. Interest costs decreased
25% from $55,368 in 1996 to $41,691 in 1997 due to a debt conversion in late
1996. Depletion decreased from $25,704 in 1996 to $15,000 in 1997 due to a
decrease in equivalent barrels produced plus a decrease in the oil and gas
property cost from the write off of the Alaska wells at the end of 1996. The
minority interest in the loss of NPSI in 1996 occurred due to the sale of 19% of
NPSI to Hobbs Industries.
The Company's largest oil and gas holdings were shut in in 1996 and its
coal mine is not yet operational. The Company must raise capital to develop its
coal mine and remain viable.
PART II
OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS
The Company has certain contingent liabilities resulting from litigation
and claims incident to the ordinary course of business. Management believes
that the probable resolution of such contingencies will not materially affect
the financial position or results of operations of the Company.
ITEM 2 CHANGES IN SECURITIES
Not applicable
ITEM 3 DEFAULTS UPON SENIOR SECURITIES
Not applicable
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable
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ITEM 5 OTHER INFORMATION
Not applicable
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
Exhibit 27 -- Financial Data Schedule
On March 6, 1998 the Company filed an 8-K, approved by the Board
of Directors on March 13, 1997 and effective as of that date, noting an
amendment to the Articles of Incorporation. The amendment increased the number
of voting common stock authorized to 12,000,000 having $.004167 par value.
The information set forth herein reflects all adjustments which
are, in the opinion of management, necessary to a fair statement of the results
for the interim period.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated: March 12, 1998 NEROX ENERGY CORPORATION
By: /s/ Jack Utter
---------------------------------
Jack Utter, Chairman of the Board
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 date indicated.
Dated: March 12, 1998 By: /s/ Jack Utter
---------------------------------
Jack Utter, President and Chief
Executive Officer
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<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NEROX ENERGY
CORPORATION AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 2,216,387
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,216,387
<CURRENT-LIABILITIES> 1,941,474
<BONDS> 0
0
495,000
<COMMON> 16,742
<OTHER-SE> (236,829)
<TOTAL-LIABILITY-AND-EQUITY> 2,216,387
<SALES> 26,278
<TOTAL-REVENUES> 26,278
<CGS> 51,140
<TOTAL-COSTS> 51,140
<OTHER-EXPENSES> 88,100
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 41,691
<INCOME-PRETAX> (154,653)
<INCOME-TAX> 0
<INCOME-CONTINUING> (154,653)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (154,653)
<EPS-PRIMARY> (.04)
<EPS-DILUTED> 0
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