SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
[FEE REQUIRED]
For the fiscal year ended: September 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
[NO FEE REQUIRED]
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
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act: None
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 September 30, 1997, 11,277,000 shares of common stock were outstanding,
and the aggregate market value of the common stock of the Registrant held by
nonaffiliates was approximately $-0-.
Documents incorporated by reference: Exhibits (Item 13)
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [X]
State Issuer's revenues for its most recent fiscal year: $-0-
This Form 10-KSB consists of 22 pages. The Exhibit Index begins on page 7.
<PAGE>
TABLE OF CONTENTS
Form 10-KSB Annual Report - 1997
Lexico Energy Exploration, Inc.
Page
Facing Page
Index
PART I
Item 1. Business 1
Item 2. Properties 1
Item 3. Legal Proceedings 1
Item 4. Submission of Matters to a Vote of Security Holders 1
PART II
Item 5. Market For Registrant's Common Equity
And Related Shareholder Matters 2
Item 6. Management's Discussion And Analysis Or Plan Of
Operations 2
Item 7. Financial Statements 4
Item 8. Disagreements On Accounting And Financial Disclosures 4
PART III
Item 9. Directors And Executive Officers Of The Registrant 5
Item 10. Executive Compensation 6
Item 11. Security Ownership Of Certain Beneficial Owners And
Management 6
Item 12. Certain Relationships And Related Transactions 7
PART IV
Item 13. Exhibits, Financial Statement Schedules, And
Reports On Form 8-K 7
SIGNATURES 8
<PAGE>
PART I
Item 1. Business
Lexico Energy Exploration, Inc. (the "Company" or the "Registrant")
is a development stage oil and gas firm that was organized under the laws
of the state of Delaware on December 31, 1987. Since inception, the primary
activity of the Company has been directed to organizational efforts and
obtaining financing. The Company's initial public offering of its common
stock was completed on November 27, 1990. Subsequently, the Company has
conducted limited oil and gas operations, primarily buying, selling, and
trading working interests in oil and gas properties.
The Company's officers are currently seeking financing for completion of a
deep gas well called the Conoco 13-1 in Uintah County, Utah, in which the
Company has a 50% working interest. The Conoco 13-1 was drilled to over 15,000
feet and cased in the mid 1970's, and the Company feels that gas markets
in the area are now strong enough to warrant recompletion of the well.
An engineering report prepared for the Company in 1987, and updated in
January of 1997 concluded that conventional completion of the well could
result in recovery of approximately 2.3 BCF (billion cubic feet) of gas,
and that horizontal completion could result in cumulative gas recovery of
in excess of 11 BCF.
Item 2. Properties
The Company maintains its offices in Englewood, Colorado.
Item 3. Legal Proceedings
The Company was involved in no legal proceedings during the fiscal year
ended September 30, 1997.
Item 4. Submission of Matters to a Vote of Security Holders
In September 1997, Lex Dolton and Clarey Zingler were elected to the Board
of Directors.
1
<PAGE>
PART II
Item 5. Market for Registrant's Common Equity and Related Shareholder Matters
(a) Principal Market or Markets: During the fiscal year ended
September 30, 1997, no separate market developed for the Company's
common stock. The Company currently has no outstanding trading market.
High and low bids for the Company's common stock for the previous eight
quarters are shown below.
BID
Class Quarter Ended High Low
Common Dec. 31, 1995 No Bid
Common Mar. 31, 1996 No Bid
Common June 30, 1996 No Bid
Common Sept. 30, 1996 No Bid
Common Dec. 31, 1996 No Bid
Common Mar. 31, 1997 No Bid
Common June 30, 1997 No Bid
Common Sept. 30, 1997 No Bid
(b) Common Stock: On September 30, 1997 there were 11,277,000
shares of common stock issued and outstanding, which were held by 28
shareholders of record excluding individuals holding securities in street name.
The Company has never paid cash dividends on its common stock and currently
intends to continue its policy of retaining all of its earnings for use in its
business.
(c) Preferred Stock: The Company at September 30, 1997 had no preferred
shares issued or outstanding.
Item 6. Management's Discussion and Analysis or Plan of Operations
The following discussion should be read in conjunction with the Financial
Statements and notes thereto included herein.
The Company earned no revenues in 1997 and incurred minor losses from
operating expenses. Management believes that the Company
has access to sufficient funds to continue operations through the end of its
current fiscal year on September 30, 1998.
2
<PAGE>
(a) Liquidity: The Registrant's securities are currently not liquid.
The Company's efforts, however, are to bring producing properties online.
The Company is also focusing on creating a liquid market for its outstanding
common stock. The Business Plan is directed toward meeting the listing
requirements for the NASDAQ national market system; and the Company is currently
negotiating with investment bankers to provide assistance in this regard.
The Company cannot insure liquidity at any time in the future,
regardless of whether or not it conducts successful future business
operations.
(b) Capital Resources: The Company currently has few capital
resources, and is attempting to secure funding in the capital markets.
(c) Investments/Joint Ventures: The Company is negotiating the
purchase of an Australian based firm that applies for, and has, significant
interests in oil and gas concessions in Australia and the South Pacific. The
firm also markets the exploration of the concessions which it is granted. The
purchase of this firm would be accomplished through a stock acquisition and/or
financial outlay. It is anticipated that these negotiations and subsequent
agreements will be finalized before the end of the year 1997. Mr. Dolton
has been successful in the past in his application efforts for oil and gas
concessions in Australia. The acquisition of such a company would project
at least one application per year for an oil and gas concession in Australia
or the South Pacific.
Certain assets in a closely affiliated company, Natural Buttes Gas Corp.,
are being compiled with the intent of Lexico Energy Exploration, Inc.
acquiring said assets. These assets exist in the Uintah Basin in Utah where
Lexico Energy Exploration, Inc. owns working interests in reserves in the
deeper zones.
(d) Plan of Operations: The Company intends to complete and place on
line for gas sales the Conoco 13-1 Well located in the NW/4 of Section 13,
Township 10 South, Range 20 East, located in the Bitter Creek Field of
Uintah County, Utah. The Company has a 50% working interest in the well.
The area is a well developed gas producing area within the Uintah Basin,
a sedimentary basin known for the variety of petroleum resources located
within its boundaries. Potential gas reserves within the Company's area of
focus in the basin have been estimated in excess of 1 trillion cubic feet and
oil reserves have been estimated as being in excess of 500 million barrels.
Preliminary engineering reports indicate that recompletion of the Conoco 13-1
could yield substantial gas reserves of approximately 2.3 BCF
(billion cubic feet) through conventional completion, and 11 BCF through
horizontal completion methods. Successful recompletion of the well would
provide the Company a significant and immediate asset value.
Upon completion and establishment of gas sales from the wells in which the
Company has an interest either through ownership or farm-in rights, it is
the intention of the Company to undertake a drilling program to further
develop these lands.
3
<PAGE>
Item 7. Financial Statements
The Report of the Independent Certified Public Accountant appearing at
page F-1 and the Financial Statements and Notes to Financial Statements
appearing at pages F-2 through F-10 are incorporated herein by reference.
Item 8. Changes In and Disagreements With Accountants on Accounting and
Financial Disclosure
In May of 1996 the Board of Directors approved the engagement of
Ronald R. Chadwick, P.C. as its independent auditor, replacing the firm of
J.D. Kish, Certified Public Accountant, who resigned as the Company's
independent auditor effective May 20, 1991, as set forth in the Company's
8-K filed June 3, 1991. The decision by the Board of Directors to change
accountants was based solely on the decision by Mr. Kish not to stand
for re-election.
There were no adverse opinions, disclaimer of opinions, or modification of
opinions as to uncertainty, audit scopes, or accounting principles issued by
Mr. Kish during his tenure as the Company's auditor, nor were there any
disagreements with the former accountant on any matters of accounting
principles or practices, financial statement disclosure, or auditing scope and
procedures. The Company has retained no other auditors since 1991.
4
<PAGE>
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance With Section 16(a) of the Exchange Act
The Directors and Officers of the Registrant as of the date of this report are
as follows:
Served as a
Name Age Position Director Since
Lex Dolton 67 Chairman, Acting President, November, 1990
and a Director
Clarey Zingler 53 Secretary/Treasurer, Chief September, 1997
Financial Officer, and a
Director
All Directors of the Company will hold office until the next annual meeting of
the shareholders, and until successors have been elected and qualified.
Officers of the Company are elected by the Board of Directors at the first
meeting of the Company's shareholders, and hold office until their death,
resignation, or removal from office.
Lex Dolton. Chairman, Acting President, and a Director. Mr. Lex Dolton
attended Colorado Christian University from 1950 to 1954 and Colorado
University studying Geology in 1955. He conducted business from 1960
through 1973 as a commercial and residential developer. He purchased land
for development within the Denver Metropolitan area. Mr. Dolton formed
Lexicon resuorces in 1977, serving as vice president in charge of foreign
concessions and oil and gas acquisitions. Within the same field, he formed
Concord Royalty Company in 1981, and served through 1992. In 1992, Mr. Dolton
established Natural Buttes Oil and Gas (a privately held oil and gas
company) and assumed the position of Chairman of the Board. Mr. Dolton is
the President and Chairman of the Board of Lexico Energy Exploration, Inc.
Clarey Zingler. Secretary/Treasurer, Chief Financial Officer, and a Director.
Mr. Clarey Zingler has a Bachelors Degree in Economics, a Masters Degree in
Complex Organizations/Economics, and a PhD (ABD) in Complex Organizations.
He has taught MBA and DBA courses as an Associate Professor at major colleges
and universities, and he has managed the Management Practices Division of a
Big Six accounting firm. Mr. Zingler is Secretary/Treasurer of the Board of
Directors for Lexico Energy Exploration, Inc., and has overall responsibility
for project management and finance. He has extensive experience in industry
and private/public businesses as a controller, chief financial officer, and
vice president of finance.
5
<PAGE>
Item 10. Executive Compensation
Compensation paid to Officers and Directors is set forth in the Summary
Compensation Table below. The Company may reimburse its Officers and
Directors for any and all out-of-pocket expenses incurred relating to the
business of the Company.
SUMMARY COMPENSATION TABLE
Name and Fiscal Other Annual
Principal Position Year Salary Bonus Compensation
Lex Dolton, 1995 - - -
President 1996 - - -
1997 - - -
Item 11. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth, as of the date of this Report, the stock
ownership of each person known by the Registrant to be the beneficial owner
of five percent or more or the Registrant's common stock, each Officer and
Director individually and all Directors and Officers of the Registrant as a
group:
NO. OF % OF
NAME CLASS SHARES CLASS
Lex Dolton Common 10,310,000 91.42
12835 E. Arapahoe Rd
Tower 1, Ste 210
Englewood, Colorado 80112
Vanco Investment Co. Common 930,000 8.25
6160 S. Syracuse Way, Ste 350
Englewood, Colorado 80111
Directors and Common 10,310,000 91.42
Officers as a Group
6
<PAGE>
Item 12. Certain Relationships and Related Transactions
In September of 1991 the Company purchased certain oil and gas working
interests in Uintah County, Utah for $220,000 in cash from an entity
controlled by an affiliate of the Company. These interests were subsequently
traded to a corporation controlled by common ownership in 1994 for preferred
stock, then reacquired by the Company in 1997.
PART IV
Item 13. Exhibits and Reports on Form 8-K
(a) Exhibits
-- The following Exhibits were filed with the Securities and Exchange
Commission in the Exhibits to Form S-18 in November of 1990, and are
incorporated by reference herein:
3.1 Articles of Incorporation
3.2 Amendment to Articles
3.3 Correction of Amendment
3.4 Certificate of Renewal and Revival
3.5 Amendment to Articles
3.6 By Laws
10.1 Amended Stock Option Plan
(b) Reports on Form 8-K
-- There were no reports filed on form 8-K during the last quarter
covered by this report.
7
<PAGE>
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, on February 5, 1998.
LEXICO ENERGY EXPLORATION, INC.
By: /s/Lex Dolton
Lex Dolton, President
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 in
the capacities indicated, on February 5, 1998.
Principal Executive Officer, Financial Officer, Accounting Officer and Director:
/s/Lex Dolton
Lex Dolton
Directors:
/s/Lex Dolton
Lex Dolton
/s/Clarey Zingler
Clarey Zingler
8
<PAGE>
LEXICO ENERGY EXPLORATION, INC.
(A Development Stage Company)
FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
<PAGE>
LEXICO ENERGY EXPLORATION, INC.
(A Development Stage Company)
Financial Statements
TABLE OF CONTENTS
Page
INDEPENDENT AUDITOR'S REPORT ON
THE FINANCIAL STATEMENTS F-1
FINANCIAL STATEMENTS
Balance sheet F-2
Statement of operations F-3
Statement of stockholders' equity F-4
Statement of cash flows F-6
Notes to financial statements F-8
<PAGE>
RONALD R. CHADWICK, P.C.
Certified Public Accountant
3025 South Parker Road
Suite 109
Aurora, Colorado 80014
Telephone (303)306-1967
Fax (303)306-1944
INDEPENDENT AUDITOR'S REPORT
Board of Directors
Lexico Energy Exploration, Inc.
Englewood, Colorado
I have audited the accompanying balance sheet of Lexico Energy Exploration, Inc.
as of September 30, 1997 and the related statements of operations,
stockholders' equity and cash flows for the years ended September 30, 1996
and September 30, 1997. These financial statements are the responsibility of
the Company's management. My responsibility is to express an opinion on these
financial statements based on my audit.
I conducted my audit in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. I believe that my audit provides a
reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Lexico Energy
Exploration, Inc. as of September 30, 1997, and the results of its
operations and its cash flows for the years ended September 30, 1996
and September 30, 1997 in conformity with generally accepted accounting
principles.
Aurora, Colorado
January 12, 1998 RONALD R. CHADWICK, P.C.
<PAGE>
LEXICO ENERGY EXPLORATION, INC.
( A Development Stage Company)
BALANCE SHEET
September 30, 1997
ASSETS
Oil and gas properties $ 220,000
----------
Total Assets $ 220,000
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 68,031
Interest payable 36,408
----------
Total current liabilities 104,439
----------
Total Liabilities 104,439
----------
Stockholders' equity
Common stock: $.001 par value,
50,000,000 shares authorized,
11,277,000 shares issued
and outstanding 11,277
Preferred stock, $.01 par value,
5,000,000 shares authorized,
0 shares issued and outstanding -
Additional paid in capital 394,038
Deficit accumulated during the
development stage ( 289,754)
----------
Stockholders' Equity 115,561
----------
Total Liabilities And Stockholders' Equity $ 220,000
==========
The accompanying notes are an integral part of the financial statements.
F-2
<PAGE>
LEXICO ENERGY EXPLORATION, INC.
(A Development Stage Company)
STATEMENT OF OPERATIONS
Year Ended Year Ended December 31, 1987
Sept. 30, Sept. 30, (inception) to
1996 1997 Sept. 30, 1997
---------- ---------- -----------------
Sales $ - $ - $ -
Operating expenses 820 10,608 264,333
--------- --------- ----------
Income (loss) from operations ( 820) ( 10,608) ( 264,333)
--------- --------- ----------
Other income (expense):
Interest income - - 10,987
Interest expense ( 6,702) ( 6,702) ( 36,408)
--------- --------- ----------
( 6,702) ( 6,702) ( 25,421)
--------- --------- ----------
Income (loss) before provision
for income taxes and
extraordinary items ( 7,522) ( 17,310) ( 289,754)
Provision for income tax (Note 1) - - -
--------- --------- ----------
Net income (loss) $( 7,522) $( 17,310) $( 289,754)
========= ========= ==========
Net income (loss) per share $ ( * ) $ ( * ) $ ( .029)
========= ========= ==========
Weighted average number of
common shares outstanding 11,277,000 11,277,000 10,029,542
========== ========== ==========
*less than $(.01) per share
The accompanying notes are an integral part of the financial statemetns.
F-3
<PAGE>
LEXICO ENERGY EXPLORATION, INC.
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
For the period December 31, 1987 (inception)
to September 30, 1997
<TABLE>
<S> <C> <C> <C> <C>
COMMON STOCK Total
Paid in (Accumulated Stockholders'
Shares Amount Capital Deficit ) Equity
Balances at
December 31, 1987 - $ - $ - $ - $ -
Stock issued to initial stockholders for
cash, Jan.4, 1988 at $.001 per share 7,000,000 7,000 - - 7,000
Net income (loss) - - - - -
---------- -------- -------- --------- ---------
Balances at Sept. 30, 1988 7,000,000 7,000 - - 7,000
Net income (loss) - - - ( 549) ( 549)
---------- -------- -------- --------- ---------
Balances at Sept. 30, 1989 7,000,000 7,000 - ( 549) 6,451
Net income (loss) - - - ( 9,151) ( 9,151)
---------- -------- -------- --------- ---------
Balances at Sept. 30, 1990 7,000,000 7,000 - ( 9,700) ( 2,700)
Sale of stock in public offering,
Nov. 27, 1990 at $.01 per
share (net of offering costs) 4,277,000 4,277 391,240 - 395,517
Net income (loss) - - - (170,951) (170,951)
---------- -------- -------- --------- ---------
Balances at Sept. 30, 1991 11,277,000 $ 11,277 $391,240 $(180,651) $ 221,866
-Continued On Following Page-
The accompanying notes are an integral part of the financial statements.
F-4
<PAGE>
LEXICO ENERGY EXPLORATION, INC.
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
For the Period December 31, 1987 (inception)
to September 30, 1997
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
COMMON STOCK Total
Paid in (Accumulated Stockholders'
Shares Amount Capital Deficit ) Equity
Net income (loss) - - - $( 40,092) $( 40,092)
---------- -------- -------- --------- ---------
Balances at Sept. 30, 1992 11,277,000 11,277 391,240 (220,743) 181,774
Net income (loss) - - - ( 12,226) ( 12,226)
---------- -------- -------- --------- ---------
Balances at Sept. 30, 1993 11,277,000 11,277 391,240 (232,969) 169,548
Net income (loss) - - - ( 21,640) ( 21,640)
---------- -------- -------- --------- ---------
Balances at Sept. 30, 1994 11,277,000 11,277 391,240 (254,609) 147,908
Net income (loss) - - - ( 10,313) ( 10,313)
---------- -------- -------- --------- ---------
Balances at Sept. 30, 1995 11,277,000 11,277 391,240 (264,922) 137,595
Paid in capital - - 298 - 298
Net income (loss) - - - ( 7,522) ( 7,522)
---------- ------- -------- --------- ---------
Balances at Sept. 30, 1996 11,277,000 11,277 391,538 (272,444) 130,371
Paid in capital - - 2,500 - 2,500
Net income (loss) - - - ( 17,310) ( 17,310)
---------- ------- -------- --------- ---------
Balances at Sept. 30, 1997 11,277,000 $11,277 $394,038 $(289,754) $ 115,561
========== ======= ======== ========= =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-5
<PAGE>
LEXICO ENERGY EXPLORATION, INC.
(A Development Stage Company)
STATEMENT OF CASH FLOWS
Dec. 31, 1987
Year Ended Year Ended (inception) to
September 30, September 30, September 30,
1996 1997 1997
---------- ---------- ------------
Cash Flows From
Operating Activities:
Net income (loss) $( 7,522) $( 17,310) $(289,754)
Adjustments to reconcile
net income (loss) to
net cash provided by
(used for) operating
activities:
Increase in accounts payable 522 8,108 68,031
Increase in interest payable 6,702 6,702 36,408
--------- --------- ---------
Net cash provided by (used
for) operating activities ( 298) ( 2,500) (185,315)
Cash Flows From
Investing Activities:
(Purchase) of oil and gas
interests - - (220,000)
--------- --------- ---------
Net cash provided by (used
for) investing activities - - (220,000)
--------- --------- ---------
-Continued On Following Page-
The accompanying notes are an integral part of the financial statements.
F-6
<PAGE>
LEXICO ENERGY EXPLORATION, INC.
(A Development Stage Company)
STATEMENT OF CASH FLOWS
-Continued From Previous Page-
Dec. 31, 1987
Year Ended Year Ended (inception) to
September 30, September 30, September 30,
1996 1997 1997
---------- ---------- ----------
Cash Flows From
Financing Activities:
Sale of common stock $ - $ - $ 11,277
Increase in paid in capital 298 2,500 394,038
--------- --------- ---------
Net cash provided by (used
for) financing activities 298 2,500 405,315
--------- --------- ---------
Net Increase (Decrease)
In Cash - - -
Cash At The Beginning
Of The Period - - -
--------- --------- ---------
Cash At The End
Of The Period $ - $ - $ -
========= ========= =========
Schedule of Non-Cash Investing and Financing Activities:
- --------------------------------------------------------
In September of 1997 the Company reacquired oil and gas interests valued at
$220,000 from Natural Buttes Gas Corp.
Supplemental Disclosure
- -----------------------
Cash paid during the year for:
1996 1997
--------- ---------
Interest $ - $ -
Income taxes $ - $ -
The accompanying notes are an integral part of the financial statements.
F-7
<PAGE>
LEXICO ENERGY EXPLORATION, INC.
( A Development Stage Company)
Notes to Financial Statements
NOTE 1. ORGANIZATION, OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES:
Lexico Energy Exploration, Inc. ("LXC", the "Company") was incorporated in
the state of Delaware on December 31, 1987. The Company's primary business
purpose is to engage in the exploration and production of oil and gas. The
Company has commenced only limited principal operations and is a development
stage company.
Oil and gas properties
The Company follows the successful efforts method of accounting for its oil
and gas activities. Under this accounting method, costs associated with the
acquisition, drilling and equipping of successful exploratory and development
wells are capitalized. Geological and geophysical costs, delay rentals and
drilling costs of unsuccessful exploratory wells are charged to expense as
incurred. Depletion and depreciation of the capitalized costs for producing
oil and gas properties are provided by the unit-of-production method based
on proved oil and gas reserves. Undeveloped properties are periodically
assessed for possible impairment due to unrecoverability of costs invested.
Cash received for partial conveyances of property interests are treated as
a recovery of cost and no gain or loss is recognized.
Income tax
Deferred taxes are provided on a liability method whereby deferred tax
assets are recognized for deductible temporary differences and operating
loss carryforwards and deferred tax liabilities are recognized for
taxable temporary differences. Temporary differences are the differences
between the reported amounts of assets and liabilities and their tax bases.
Deferred tax assets are reduced by a valuation allowance when, in the opinion
of management, it is more likely than not that some portion or all of
the deferred tax assets will not be realized. Deferred tax assets and
liabilities are adjusted for the effects of changes in tax laws and rates
on the date of enactment.
Cash and cash equivalents
The Company considers all highly liquid investments with an original
maturity of three months or less as cash equivalents.
Accounting year
The Company employs a fiscal year which ends September 30.
F-8
<PAGE>
LEXICO ENERGY EXPLORATION, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS - Continued
NOTE 1. ORGANIZATION, OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (Continued):
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect 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.
Net income (loss) per share
The net income (loss) per share is computed by dividing the net income (loss)
by the weighted average number of shares of common outstanding. Warrants,
stock options, and common stock issuable upon the conversion of the Company's
preferred stock (if any), are not included in the computation if the effect
would be anti-dilutive and would increase the earnings or decrease loss per
share.
NOTE 2. OIL AND GAS PROPERTIES
The Company's oil and gas properties consist of working interests in
640 acres in Uintah County, Utah, which include a 50% working interest in
Conoco Well 13-1 with possible reserves. The properties are carried at their
historic cost of $220,000.
NOTE 3. RELATED PARTY TRANSACTIONS
Since the Company's inception, founders, officers, directors and others have
purchased 7,000,000 shares of the Company's common stock for $.001 per share,
while the price paid by the public for the Company's common stock at LXC's
initial public offering was $.10 per share.
In September of 1991 the Company purchased certain oil and gas working
interests in Uintah County, Utah for $220,000 in cash from an entity
controlled by an affiliate of the Company. These interests were subsequently
traded to a corporation controlled by common ownership in 1994, then
reacquired by the Company in 1997.
F-9
<PAGE>
LEXICO ENERGY EXPLORATION, INC.
( A Development Stage Company)
Notes to Financial Statements - Continued
NOTE 4. INCOME TAXES
Deferred income taxes arise from the temporary differences between financial
statement and income tax recognition of net operating losses. These loss
carryovers are limited under the Internal Revenue Code should a significant
change in ownership occur.
At September 30, 1997 the Company had approximately $290,000 of unused
federal net operating loss carryforwards, which begin to expire
in the year in 2005.
A deferred tax asset, arising from the net operating loss carryover, of
approximately $43,000 has been offset by a valuation allowance.
NOTE 5. STOCKHOLDERS' EQUITY
Common stock
The Company has 50,000,000 authorized shares of common stock, par value $.001,
with 11,277,000 shares outstanding as of September 30, 1997.
On November 8, 1989 the Company affected a 2 for 1 forward split of its
common stock. On December 4, 1989 the Company affected a 1 for 2,000 reverse
split of its common stock. On June 11, 1991 the Company forward split its
common stock 100 for 1. All common stock issuances set forth in the
Statement of Stockholders' Equity take into account the above noted stock
splits.
Preferred stock
The Company has 5,000,000 authorized shares of preferred stock, par
value $.001, issuable from time to time in different series with rights and
privileges to be determined by the Board of Directors. No specific series of
preferred stock have yet been established.
Stock option plan
The Company has adopted an incentive stock option plan (the "Plan"), to be
administered by a Compensation Committee of the Board of Directors. The Plan
provides that no option may be granted at an exercise price less than the
fair market value of the common stock of the Company on the date of grant
and that, unless otherwise specified, the options expire five years from the
date of grant and may not be exercised during the initial one year period
from the date of grant. Thereafter, options may be exercised in whole or in
part, depending on terms of the particular option. To date, no Board members
have been appointed to the Compensation Committee and no options have been
granted pursuant to the Plan.
F-10
<PAGE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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09/30/97.
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