SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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 JUNE 30, 1998.
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[ ] Transition report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the quarterly period from _______to _______.
Commission file number 1-13162
EMPIRIC ENERGY, INC.
(Exact name of registrant as specified in its charter)
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TEXAS 75-2455467
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
12750 MERIT DRIVE, SUITE 750
DALLAS, TEXAS 75251-1609
(Address of principal executive offices) (Zip Code)
(972) 387-4100
(Registrant's telephone number, including area code)
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Check whether the issuer (1) has 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
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State the number of shares outstanding of each of the issuer's classes of common
equity, as of June 30, 1998. 6,779,386
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Transitional Small Business Disclosure Format Yes No X
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Page 1 of 9 pages contained in the sequential number system. The Exhibit Index
is on Page 8 of the sequential numbering system.
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PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
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The financial statements included herein have been prepared by the
Company, without audit, pursuant to the rules and regulations of the Securities
and Exchange Commission. The financial statements reflect all adjustments which
are, in the opinion of management, necessary to fairly present such information.
Although the Company believes that the disclosures are adequate to make the
information presented not misleading, certain information and footnote
disclosure, including significant accounting policies, normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations. It is suggested that these financial statements be read in
conjunction with the financial statements and the notes thereto included in the
Company's latest annual report on Form 10-K, dated December 31, 1997.
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CONDENSED BALANCE SHEETS
June 30, 1998 December 31,
(Unaudited) 1997
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ASSETS
CURRENT ASSETS
Cash . . . . . . . . . . . . . . . . . $ 85,354 $ 18,811
Accounts Receivable. . . . . . . . . . 106,895 63,225
Notes Receivable . . . . . . . . . . . 162,781 31,000
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TOTAL CURRENT ASSETS . . . . . . . . 355,029 113,036
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OIL AND GAS PROPERTIES
Properties being amortized . . . . . . 5,413,436 3,692,500
Accumulated depreciation and depletion (1,572,562) 1,555,250
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NET OIL AND GAS PROPERTIES . . . . . 3,840,874 2,137,250
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OTHER ASSETS
Other property and equipment,. . . . . 6,361 -
Other. . . . . . . . . . . . . . . . . 5,357 2,076
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TOTAL OTHER ASSETS . . . . . . . . . 11,718 2,076
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TOTAL ASSETS. . . . . . . . . . . . . . $4,207,622 $2,252,362
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CONDENSED BALANCE SHEETS - (CONTINUED)
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June 30, 1998 December 31,
(Unaudited) 1997
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable. . . . . . . . . . . . . . $ 126,507 $ 79,414
Due to stockholders . . . . . . . . . . . . 17,981 17,981
Short-term notes payable. . . . . . . . . . 214,574 30,000
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TOTAL CURRENT LIABILITIES . . . . . . . . 359,062 127,395
Long-Term Notes Payable . . . . . . . . . . 687,500 -
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TOTAL LIABILITIES . . . . . . . . . . . . 1,046,562 127,395
STOCKHOLDERS' EQUITY
Preferred stock, $100 par value; authorized
2,000,000 shares, 5,250 shares and none . 525,000 -
outstanding, respectively
Common Stock, $0.01 par value; authorized
20,000,000 shares; 6,779,386 shares and
5,859,776 outstanding, respectively . . . 67,794 58,598
Additional paid-in capital. . . . . . . . . 4,995,742 4,286,662
Accumulated deficit . . . . . . . . . . . . (2,427,476) (2,220,292)
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TOTAL STOCKHOLDERS' EQUITY. . . . . . . . 3,161,060 2,124,968
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TOTAL LIABILITIES & STOCKHOLDERS' EQUITY . . $ 4,207,622 $ 2,252,362
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STATEMENTS OF OPERATIONS
Six Months Ended June 30 Three Months Ended June 30
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1998 1997 1998 1997
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
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Revenues
Oil and Gas Sales. . . . . . $ 68,926 $ 64,496 $ 65,617 $ 32,611
Expenses
Production . . . . . . . . . 21,777 23,914 20,585 6,955
Depreciation, depletion,
& amortization 18,291 12,446 17,112 8,169
Interest . . . . . . . . . . . 18,290 5,479 16,840 1,683
General and administrative . . 248,457 101,649 142,917 40,443
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TOTAL EXPENSES . . . . . . . 306,815 143,488 197,454 57,250
Other Income
Dividend Income. . . . . . . . 22,500 22,500 11,250 11,250
Interest Income. . . . . . . . 2,930 - 2,930 -
Other. . . . . . . . . . . . . 5,276 - 4,157 -
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TOTAL OTHER INCOME . . . . . 30,706 22,500 18,337 11,250
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Loss before extraordinary item. $ (207,183) $ (56,492) $ (113,500) $ (13,389)
Extraordinary item:
Gain from debt restructuring. . - 70,196 - 40,432
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NET AND COMPREHENSIVE (LOSS)
PROFIT $ (207,183) $ 13,704 $ (113,500) $ 27,043
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Basic and diluted net and
comprehensive loss per share
from extraordinary items $ - $ 0.02 $ - $ 0.01
Basic and diluted net and
comprehensive loss per share
after extraordinary item $ (0.03) $ - $ (0.02) $ -
Weighted average shares 6,166,313 4,674,195 6,472,849 4,658,570
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STATEMENTS OF CASH FLOWS (UNAUDITED)
Six Months Ended June 30
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1998 1997
(Unaudited)
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Cash flows from operating activities
Net Loss . . . . . . . . . . . . . . . . . . . . . . . . . $ (207,184) $ 13,707
Depreciation and amortization. . . . . . . . . . . . . . . 18,290 16,386
(Increase) decrease in :
Accounts receivable-trade. . . . . . . . . . . . . . . . (21,170) (35,854)
Accrued Dividends. . . . . . . . . . . . . . . . . . . . (22,500) -
Accrued Income . . . . . . . . . . . . . . . . . . . . . (30,803) -
Other Assets . . . . . . . . . . . . . . . . . . . . . . (9,642) (731)
Increase (decrease) in:
Accounts payable and accrued expenses. . . . . . . . . . 47,093 35,811
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Net cash provided by operating activities. . . . . . . . (225,916) 29,319
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Cash flows from investing activities
Capital expenditures . . . . . . . . . . . . . . . . . . . (68,827) (53,009)
Notes receivable . . . . . . . . . . . . . . . . . . . . . - -
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Net cash used by investing activities. . . . . . . . . . (68,827) (53,009)
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Cash flows from financing activities
Short-term notes payable . . . . . . . . . . . . . . . . . 100,000 (139,850)
Long-term notes payable. . . . . . . . . . . . . . . . . . 184,574 -
Liquidation of long-term note. . . . . . . . . . . . . . . - -
Proceeds from issuance of common stock . . . . . . . . . . 76,712 162,840
Proceeds from issuance of preferred stock. . . . . . . . . - -
Proceeds from sale of oil and gas properties . . . . . . . - -
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Net cash provided by investing activities . . . . . . . . . 361,286 22,990
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Net increase in cash and cash equivalents . . . . . . . . . 66,543 (700)
Cash and cash equivalents, at beginning of period . . . . . 18,811 1,084
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CASH AND CASH EQUIVALENTS, AT END OF PERIOD . . . . . . . . $ 85,354 $ 384
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Interest paid during period . . . . . . . . . . . . . . . . $ 18,290 $ 5,479
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Income Taxes paid during period . . . . . . . . . . . . . . $ - $ -
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NOTES TO FINANCIAL STATEMENTS
Note 1. Acquisition of Properties
Effective April 1, 1998, the Company acquired 16 producing wells and 18,000
acres in South Texas and 300 acres in South Louisiana valued at $1,700,700.
Consideration was 992,577 shares of Common stock (Rule 144), 5,250 shares of
$100 Convertible Preferred stock, $525,000 of Convertible Senior Notes, 300,000
Class B Warrants and 200,000 Class C Warrants. The transaction was accounted
for by the Purchase Method of Accounting. Revenues and expenses of the
properties are included in the Company's Statement of Operations beginning April
1, 1998.
The following pro forma information has been prepared as if the acquisition
had been completed at the beginning of the respective periods:
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Six Months Ended June 30
1998 1997
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Revenues . . . . . . . . . $ 119,488 $240,500
Net (loss)income . . . . . $(214,359) $ 67,500
Net (loss)income per share $ (0.03) $ 0.01
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See notes to financial statements included in the Company's 1997 Annual Report
on Form 10-KSB.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
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RESULTS OF OPERATIONS
Oil and gas sales of $65,617 for the quarter ended June 30, 1998
represented an increase of $33,006 from the comparable 1997 quarter. This
increase was due to the acquisition described below. Total expenses of $197,454
for the quarter ended March 31, 1998 represented an increase of $140,203 from
the comparable 1997 quarter. The increase was due to the increase in overhead
due to the hiring of a President and Chief Operating Officer and the additional
operating expenses related to the properties acquired. Total net loss of
$113,500 represented a decrease of $140,543 from the net income for the
comparable 1997 quarter due to the factors cited above and debt restructuring in
the 1997 quarter.
Empiric announced on April 13, 1998 the acquisition from a private
independent energy company and individual investors, producing properties and
related large leasehold acreage located in South/Central Texas of approximately
18,000 acres, that will provide additional drilling locations. The original
working interest acquired was 46%.
A twenty well program was commenced with three wells completed and a fourth
well being drilled and plugged and abandoned. The remaining sixteen wells will
be drilled over the next several months.
The first three wells had a combined absolute open flow (AOF) rate in
excess of 15 MMcfpd as determined by an independent engineering firm, with the
results, filed as required with the Texas Railroad Commission. The three wells
started production the last week of April at approximately 1.5 MMcfpd.
The effective date for all production income to accrue to Empiric's account
was April 1, 1998.
The acquisition further included advanced technology survey data covering
11.9 million acres of the highly prolific Upper Wilcox Trend, covering 34,000
linear miles, and resulting in "high-grading" 298,000 acres, containing over 100
potential prospects. In addition, Empiric acquired an exploration prospect in
Louisiana. The successful completion of the prospect would have a major impact
on current and future income to Empiric and related shares outstanding.
The acquisition also included a 25% interest in a partnership to utilize
advanced technology (SRMtrn) coupled with the development of sedimentary
residual magnetics bright spots (Mbtrnss) anomaly techniques and a commitment to
participate in the exploration and development of potential drilling prospects
in South Morocco (SRM).
Empiric's objective will be to develop substantial prospects for long term
growth utilizing very successful and proven proprietary technology developed
over the past fifteen years in domestic and foreign locations. The above
project will commence and continue over the next 1 to two years.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 1998, the Company had a net worth of $3,161,060 compared to
a net worth of $2,124,9968 at December 31, 1997, a 48% increase. However, the
shares outstanding increased only 16% from 5,859,776 to 6,779,386 during the
same period. This increase is primarily due to acquisition of properties with
equity of the Company. There was working capital deficit of $4,032 at June 30,
1998 compared to a deficit of $14,358 at December 31, 1997.
During the quarter Senior Notes were sold totaling $50,000. Proceeds were
used for working capital.
STRATEGY, BUSINESS PLANS AND NEED FOR THE INFUSION OF CAPITAL
The Company acquired the above properties for Securities of the Company
disclosed in a Form 8-K dated April 9, 1998. Additional capital is needed to
complete two other acquisitions and continue the expected 1998 drilling program.
Various sources of financing, including the issuance of debt and equity
securities are being investigated.
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PART II.
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
NONE
ITEM 2. CHANGES IN SECURITIES
Issued 919,610 shares of common stock, 5,250 shares of $100 preferred stock
and 300,000 shares Class B and 200,000 shares Class C warrants.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
NONE
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
At Annual Meeting of Shareholders held May 29, 1998, Directors James J.
Ling, Clyde E. Skeen and R. Renn Rothrock, Jr. were elected. Hein + Associates
LLP were elected as auditors for 1998.
ITEM 5. OTHER INFORMATION
NONE
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Form 8-K dated March 24, 1998, acquisition of properties.
Form 8-K dated June 9, 1998, election of auditors.
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SIGNATURES
In accordance with the requirements of the Exchange Act,
the Registrant caused this Form 10-QSB Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
EMPIRIC ENERGY, INC.
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By: /s/ James J. Ling. . . . . . . . Date: August 13, 1998
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James J. Ling
Chairman and Chief Executive Officer
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Pursuant to the requirements of the Securities and Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the Company
and in the capacities and on the dates indicated.
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By: /s/ Clyde E. Skeen. . Date: August 13, 1998
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Clyde E. Skeen
Chief Financial Officer
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By: /s/ James J. Ling. . . . . . . . . Date: August 13, 1998
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James J. Ling
Chairman and Chief Executive Officer
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By: /s/ R. Renn Rothrock, Jr. . . . . ..Date: August 13, 1998
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R. Renn Rothrock, Jr.
President and Chief Operating Officer
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