SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: March 31, 1998
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d)
OF THE EXCHANGE ACT
For the transition period from __________ to __________
Commission File No. 33-32685
LEXICO ENERGY EXPLORATION, INC.
___________________________________________________________
(Exact name of small business issuer as specified in its
charter)
Delaware 84-1080261
________ ____________
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
12835 E. Arapahoe Rd, Tower 1, Ste 210
Englewood, Colorado 80112
_____________________________________________________________
(Address of principal executive offices, including zip code)
Issuer's Telephone Number: (303) 792-0416
______________________________________________________
(Former name, former address and former fiscal year,
if changed since last report)
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 X No
____ ____
As of March 31, 1998, 11,277,000 shares of common stock
were outstanding.
Transitional Small Business Disclosure Format:
Yes X No
____ ____
<PAGE>
TABLE OF CONTENTS
Form 10-QSB
2nd Quarter Ended March 31, 1998
Lexico Energy Exploration, Inc.
Page
PART I: FINANCIAL INFORMATION
Item 1.
Balance Sheets 2
Statement Of Operations 3
Statement Of Cash Flows 4
Notes To Financial Statements 5
Item 2.
Management's Discussion And
Analysis Or Plan Of Operation 6
PART II: OTHER INFORMATION 7
SIGNATURES 8
<PAGE>
PART I. FINANCIAL INFORMATION
<PAGE> 1
ITEM 1. LEXICO ENERGY EXPLORATION, INC.
(A Development Stage Company)
BALANCE SHEET
MARCH 31, 1998
(UNAUDITED)
ASSETS
Cash $ 824
_____________
Total current assets 824
Office equipment (net) 2,800
Oil and gas properties 295,000
Investment in USAPL 100,000
Option 10,000
-------------
Total Assets $ 408,624
=============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 68,031
Interest payable 39,759
Related party notes payable 180,000
____________
Total current liabilities 287,790
____________
Total Liabilities 287,790
____________
Stockholders' equity
Common stock: $.001 par
value, 50,000,000 shares
authorized, 11,277,000
shares issued
& outstanding 11,277
Preferred stock: $.01 par
value, 5,000,000 shares
authorized, 0 shares
issued & outstanding -
Additional paid in capital 494,788
Deficit accumulated during
the development stage ( 385,231)
____________
Stockholders' Equity 120,834
____________
Total Liabilities And
Stockholders' Equity $ 408,624
============
See Notes to Financial Statements
<PAGE> 2
LEXICO ENERGY EXPLORATION, INC.
(A Development Stage Company)
STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<S> <C> <C> <C>
Dec. 31, 1987
Three Months Ended Six Months Ended (inception)
March 31 March 31 to March 31,
1998 1997 1998 1997 1998
____ ____ ____ ____ _____________
Sales $ - $ - $ - $ - $ -
Operating expenses 52,389 450 92,126 650 356,459
________ ________ ________ ________ __________
Income (loss) from
operations (52,389) ( 450) (92,126) ( 650) ( 356,459)
________ ________ ________ ________ __________
Other income (expense):
Interest income - - - - 10,987
Interest expense ( 1,675) ( 1,675) ( 3,351) ( 3,351) ( 39,759)
________ ________ ________ ________ __________
Total other income ( 1,675) ( 1,675) ( 3,351) ( 3,351) ( 28,772)
________ ________ ________ ________ __________
Income (loss) before
income taxes (54,064) ( 2,125) (95,477) ( 4,001) ( 385,231)
________ ________ ________ ________ __________
Provision for income tax - - - - -
________ ________ ________ ________ __________
Net income (loss) $(54,064) $( 2,125) $(95,477) $( 4,001) $( 385,231)
======== ======== ======== ======== ==========
Net income (loss) per share $( * ) $( * ) $( * ) $( * ) $( .038 )
======== ======== ======== ======== ==========
Weighted average number of
common shares outstanding 11,277,000 11,277,000 11,277,000 11,277,000 10,088,260
========== ========== ========== ========== ==========
*Less than $.01 per share
</TABLE>
See Notes to Financial Statements
<PAGE> 3
LEXICO ENERGY EXPLORATION, INC.
(A Development Stage Company)
STATEMENT OF CASH FLOWS
(UNAUDITED)
Dec.31,1987
Six Months Ended (inception)
March 31 to March 31,
1998 1997 1998
____ ____ ___________
Cash Flows From Operating Activities:
Net income (loss) $(95,477) $( 4,001) $(385,231)
Adjustments to reconcile net
income (loss) to net cash
provided by (used for)
operating activities:
Depreciation 200 - 200
Increase in accounts payable - 650 68,031
Increase in interest payable 3,351 3,351 39,759
-------- -------- ---------
Net cash provided
by (used for)
operating activities (91,926 - (277,241)
-------- -------- ---------
Cash Flows From Investing Activities:
(Purchase) of equipment ( 3,000) - ( 3,000)
(Capitalized) expenditures (75,000) - ( 75,000)
(Purchase) of option (10,000) - ( 10,000)
(Purchase) of oil and gas interests - - (220,000)
-------- -------- ---------
Net cash provided
by (used for)
investing activities (88,000) - (308,000)
-------- -------- ---------
Cash Flows From Financing Activities:
Sale of common stock - - 11,277
Increase in related party
notes payable 180,000 - 180,000
Increase in paid in capital 750 - 394,788
-------- -------- ---------
Net cash provided
by (used for)
financing activities 180,750 - 586,065
________ ________ _________
Net Increase (Decrease) In Cash 824 - 824
________ ________ _________
Cash At The Beginning Of The Period - - -
________ ________ _________
Cash At The End Of The Period $ 824 $ - $ 824
======== ======== =========
See Notes to Financial Statements
<PAGE> 4
LEXICO ENERGY EXPLORATION, INC.
(A Development Stage Company)
Notes to Financial Statements
(Unaudited)
Note 1. Basis of Presentation
The accompanying unaudited financial statements have been
prepared in accordance with the instructions to
Form 10-QSB and do not include all of the information and
disclosures required by generally accepted accounting
principles for complete financial statements. All
adjustments which are, in the opinion of management,
necessary for a fair presentation of the results of
operations for the interim periods have been made and are
of a recurring nature unless otherwise disclosed herein.
The results of operations for such interim periods are not
necessarily indicative of operations for a full year.
<PAGE> 5
LEXICO ENERGY EXPLORATION, INC.
ITEM 2. Managements's Discussion and Analysis or Plan of
Operation
General
Lexico Energy Exploration, Inc. was incorporated in Delaware in 1987. The
Company is now engaged principally in the business of exploration and
development of natural gas wells. To date, several properties have been
acquired and additional properties are being considered for acquisition.
Strategic Developments
New Gas Well
The Uintah Basin, a major hydrocarbon producing area in Northeast Utah,
is recognized as the second largest onshore hydrocarbon basin in the
contiguous United States and one of the world's largest non-marine
petroleum accumulations.
The Company is in the process of acquiring 75% of 211.5 BCF of proven
reserves associated with the Conoco 22-1 well from NBGC. The reserves are
valued at $0.73/mcf, and are intended to be brought forward in
April of 1998. The acquisition would include the deep rights from the top
of the Mancos formation at 9,700 feet to the Weber formation at
20,000 feet. Significant finds of gas exist in the well from 9,700 feet
to 20,000 feet according to the drill stem tests.
The 22-1 well was originally drilled by Conoco and Prudential Life in 1972
to a depth of 20,000 feet, and recompleted in 1980 by Gillman Hill. The
well was cased to a depth of 14,800 feet to the Frontier zone and completed
there. Engineering reports on the 22-1 project indicate reserves of 32 BCF
in the Frontier, Castlegate and Upper Mancos formations based on 160 acre
spacing. In addition, the well has 436,000 barrels of recoverable condensate.
The Company has received a commitment from Coastal/Engage to purchase up to
4,000 MMBtu/day from this well for a one year term at Inside FERC CIG Rocky
Mountains Index minus $0.20.
In addition, Lexico is acquiring 18 more drilling sites in the immediate
area from NBGC. The probable reserves associated with this transaction
are approximately 394 BCF.
<PAGE> 6
Completion of Current Development Inventory
The Company owns the rights to 50% of Conoco Federal 13-1 gas wells ("13-1")
which is also located in the Uintah Basin. The Company anticipates raising
capital in the third quarter of fiscal 1998 to complete the 13-1. After the
required capital is made available to the Company, it is anticipated that
the 13-1 can be completed in approximately two weeks working time, with cash
flow accruing to the Company approximately 60 days thereafter.
In order to fund completion of 13-1, it is currently anticipated that the
Company will attempt to raise between $500,000 and $1,000,000 by offering
"Units" consisting of Class "A" Preferred Stock and Common Stock. The
Preferred Stock will be 6% cumulative and will be subject to mandatory
redemption from 75% of the net revenues received by the Company from sale
of gas from 13-1. It is anticipated that the Preferred Stock will be retired
by the end of 1999. The number of additional Common Shares to be issued
under the proposed structure will range from 500,000 to 1 million. In order
to complete 13-1, the minimum $500,000 will be required. If more capital
than the minimum is raised, the funds will be used to drill additional
"horizontal legs" off of the primary well hole, which is anticipated
to increase the production of the well proportionately.
The above described contemplated funding plan for 13-1 is provided for the
information of current investors and interested parties. The Company may
choose to alter the plan prior to an actual offering or to indefinitely delay
its plans to make any offering.
Australian Subsidiary
The Company owns 50% of United Stratum AUS PTY (United) which owns drilling
prospects in the South Pacific. The Company also has options to purchase
the remaining shares of United Stratum.
Interwest Vanuatu PTY LTD holds the Petroleum Prospecting License in the
Port Sandwich Basin of the Republic of Vanuatu, S.W. Pacific. United owns
a 37 1/2% interest in the "Net Area Proceeds" of the Interwest concession.
<PAGE> 7
The concession includes almost all of Malakula Island and Espiritu Santo
Island, Republic of Vanuatu, S.W. Pacific, as well as offshore areas. The
area is approximately 3,728,000 (131 graticular blocks). The concession is
being marketed to major principals in the industry who have expressed
interest in a position to proceed with a four year program to develop this
project.
Expansion Opportunities
The Company is actively seeking additional opportunities to expand its
asset base and cash flow prospects. It is conducting an ongoing process of
evaluating exploration and development properties and associated funding
sources. Several prospects are under careful scrutiny, however, no contracts
have yet been negotiated.
Results of Operations
The Company is considered a "development stage" company, with no actual
drilling or exploration operations having been conducted until midway
through the just finished quarter. The Company had losses of $54,064 for
the quarter and $95,477 year to date, resulting primarily from general
and administrative expenses.
Liquidity and Capital Resources
Operating activities of the Company used net cash of $149,000 in the quarter
primarily due to development work on the Conoco Federal 22-1 gas well,
exploration, and administrative overhead.
The Company requires capital to continue with its acquisition and
development of oil and gas properties as well as to complete drilling on
existing properties and to earn an interest in prospects developed by
others under standard industry farmout arrangements. It is anticipated that
funding for expansion activities will be provided by an offering of the
Company's securities (as described above) and through institutional
funding via standard industry arrangements.
<PAGE> 8
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 Securities Holders - None
Item 5. Other Information - None
Item 6. Exhibits and Reports on Form 8-K - None
<PAGE> 9
SIGNATURES
In accordance with the requirements of the Exchange
Act, the Registrant has duly caused this Report to be
signed on its behalf by the undersigned, thereunto duly
authorized.
LEXICO ENERGY EXPLORATION, INC.
By: /s/Lex Dolton
Lex Dolton, President
and Director
Date: April 9, 1998
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE BALANCE SHEET AT 03/31/98 (UNAUDITED)
AND STATEMENT OF OPERATIONS FOR THE QUARTER ENDED 03/31/98
(UNAUDITED). IT IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> MAR-31-1998
<CASH> 824
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 824
<PP&E> 297800
<DEPRECIATION> 0
<TOTAL-ASSETS> 408624
<CURRENT-LIABILITIES> 287790
<BONDS> 0
0
0
<COMMON> 11277
<OTHER-SE> 109557
<TOTAL-LIABILITY-AND-EQUITY> 408624
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 92126
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3351
<INCOME-PRETAX> (95477)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (95477)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
