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 MARCH 31, 1998
[ ] 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)
TEXAS 75-2455467
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
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)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities and Exchange Act during the past 12 months (or for
such shorter period that the registrant was to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes __X__ No _____
-
State the number of shares outstanding of each of the issuer's classes of common
equity, as of March 26, 1998.
5,955,276
Transitional Small Business Disclosure Format Yes __X__
-
No _____
Page 1 of 9 pages contained in the sequential number system. The Exhibit Index
is on Page 8 of the sequential numbering system.
<PAGE>
PART I
Item 1. Financial Statements
- - -------- ---------------------
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-KSB, dated December 31, 1997.
<TABLE>
<CAPTION>
CONDENSED BALANCE SHEETS
------------------------
March 31, 1997
ASSETS (Unaudited) December 31, 1997
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<S> <C> <C>
Cash $ 24,112
Current Assets 77,035
31,000 $ 18,811
----------------
Accounts Receivable 132,147 63,225
----------------
Note Receivable-Texoil 31,000
-------------------
Total Current Assets 3,725,871 113,036
---------------- -------------------
Oil and Gas Properties, using full cost accounting
Properties being amortized (1,555,954) 3,692,500
---------------- -------------------
Less accumulated depreciation, depletion, amortization 2,169,917
----------------
and impairment (1,555,250)
-------------------
Net Oil and Gas Properties 2,137,250
-------------------
Other Assets 3,962
Other property and equipment, at cost, less 5,357
----------------
accumulated depreciation 9,319 -
----------------
Other 2,076
-------------------
Total Other Assets $ 2,311,383 2,076
---------------- -------------------
TOTAL ASSETS $ 2,252,362
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</TABLE>
<PAGE>
<TABLE>
<CAPTION>
March 31, 1997
LIABILITIES AND STOCKHOLDERS= EQUITY (Unaudited) December 31, 1997
- - ------------------------------------------------------------- ---------------- -------------------
<S> <C> <C>
Current Liabilities $ 98,899 $ 79,414
Accounts Payable 17,981 17,981
Due to stockholders 30,000 30,000
---------------- -------------------
Short-term notes payable 146,880 127,395
---------------- -------------------
Total Current Liabilities
Long-Term Notes Payable 112,500 -
---------------- -------------------
TOTAL LIABILITIES 259,380 127,395
Stockholders= Equity
Preferred stock, $100 par value; authorized 2,000,000
shares; none outstanding at 3/31/98 and
at 12/31/97 - -
Common Stock, $0.01 par value; authorized 20,000,000
shares; issued 5,955,276 shares and 5,859,776, respectively 59,008 58,598
Additional paid-in capital 4,306,971 4,286,662
Retained deficits (2,313,976) (2,220,292)
---------------- -------------------
Total Stockholders= Equity 2,052,003 2,124,968
---------------- -------------------
TOTAL LIABILITIES AND STOCKHOLDERS= EQUITY $ 2,311,383 $ 2,252,362
- - ------------------------------------------------------------- ---------------- -------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONDEDSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
- - -----------------------------------------------------------------
Three Months Ended
----------------------------------
March 31, 1998 March 31, 1997
(Unaudited) (Unaudited)
---------------- ----------------
<S> <C> <C>
Revenues
Oil and Gas Sales $ 3,308 $ 31,885
Expenses
Production 1,192 16,958
Depreciation, depletion, and amortization 1,179 4,277
Interest 1,450 3,976
General and administrative 105,539 61,026
---------------- ----------------
TOTAL EXPENSES 109,360 86,237
---------------- ----------------
Other Income
Dividend Income 11,250 11,250
Interest Income 1,118 -
---------------- ----------------
TOTAL OTHER INCOME 12,368 11,250
---------------- ----------------
Loss before provision for income taxes and
extraordinary item (93,684) (43,103)
Provision for income taxes - -
---------------- ----------------
Loss before extraordinary item (93,684) (43,103)
Extraordinary item:
Gain from debt restructuring - 29,764
---------------- ----------------
NET AND COMPREHENSIVE LOSS $ (93,684) $ (13,339)
================ ================
Basic and diluted net and comprehensive loss per share
before extraordinary items $ (0.016) $ (0.009)
================ ================
Basic and diluted net and comprehensive loss per share
after extraordinary items $ (0.016) $ (0.003)
- - ------------------------------------------------------ ================ ================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONDENSED STATEMENTS OF CASH FLOWS
----------------------------------
Three Months Ended
----------------------------------
March 31, 1998 March 31, 1997
(Unaudited) (Unaudited)
---------------- ----------------
<S> <C> <C>
Cash flows from operating activities
Net Loss $ (93,684) $ (13,339)
Adjustments to reconcile net loss to net cash provided
by operating activities
Depreciation, depletion and amortization 1,179 4,277
Other - 1,729
(Increase) decrease in :
Accounts receivable (13,810) (16,890)
Other Assets (3,281) (730)
Increase (decrease) in:
Accounts payable and accrued expenses 19,485 (9,781)
---------------- ----------------
NET CASH PROVIDED BY OPERATING
ACTIVITIES (90,111) (34,734)
---------------- ----------------
Cash flows from investing activities
Purchases of oil and gas properties (33,371) (26,945)
Purchases of other property and equipment (4,437) -
---------------- ----------------
NET CASH USED BY INVESTING ACTIVITIES (37,808) (26,945)
---------------- ----------------
Cash flows from financing activities
Short-term notes payable - (90,061)
Long-term debt retired 112,500 -
Proceeds from issuance of common and
preferred stock 20,720 150,840
---------------- ----------------
NET CASH PROVIDED BY INVESTING
ACTIVITIES 133,220 60,779
---------------- ----------------
NET INCREASE IN CASH AND CASH
EQUIVALENTS 5,301 (900)
Cash and cash equivalents, at beginning of period 18,811 1,084
---------------- ----------------
CASH AND CASH EQUIVALENTS, END OF
PERIOD $ 24,112 $ 184
- - ------------------------------------------------------ ================ ================
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
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.
RESULTS OF OPERATIONS
Oil and gas sales of $3,308 for the quarter end March 31, 1998 represented
a decrease of $28,577 from the comparable 1997 quarter. This decrease was due to
the Texas Panhandle producing properties of the Company being sold during the
third quarter 1997, leaving only the Pennsylvania properties producing during
the first quarter 1998. Total expenses of $109,360 for the quarter ended March
31, 1998 represented a increase of $23,123 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 at the end of 1997. Total net loss of $93,684
represented an increase of $80,345 over the net loss for the comparable 1997
quarter due to the factors cited above and the extraordinary gain recognized in
the quarter ended March 31, 1997
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 1998, the Company had a net worth of $2,052,003 compared to
a net worth of $2,124,968 at December 31, 1997. This decrease is primarily due
to the net loss in the quarter ended March 31, 1998. There was a working
capital deficit of $14,733 at March 31, 1998 compared to $14,358 at December 31,
1997.
During the quarter, Senior Secured Notes were sold totaling $112,500
secured by repayment from an option agreement to purchase acreage owned in the
Texas Panhandle. Proceeds from the notes was used for working capital.
SUBSEQUENT EVENTS
Empiric announced on April 13, 1998 the acquisition from a private
independent energy company (SEI) 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%, has since been increased to 75%
in the drilling program.
A twenty well program was commenced with three wells completed and a fourth well
being drilled and awaiting completion. The remaining sixteen wells will be
drilled over the next several months. The fourth well has been logged and has
four potentially productive zones with more than 70 feet of net pay.
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.
<PAGE>
The acquisition further included the advance technology survey data
covering 11.9 million acres of the highly prolific Upper Wilcox Trend, covering
34,000 linear miles, and resulting in Ahigh-grading@ 298,000 acres, containing
over 100 potential prospects. In addition, Empiric may participate in two
semi-exploration prospects in Alabama and Louisiana, with drilling to commence
in the next sixty days. The successful completion of either or both prospects
would have a major impact on current and future income to Empiric and related
shares outstanding.
In the next several weeks Empiric will take over and commence operations of
the Texas producing properties and future wells developed therefrom.
The acquisition further included a 25% interest in a partnership with SEI
to utilize SEI=s advanced technology (SRM(tm)) coupled with the development of
sedimentary residual magnetics brights spots (Mb(tnss)) anomaly techniques and a
commitment to participate in the exploration and development of potential
drilling prospects in the following areas:
West Texas - Permian Basin (SRM)
South Argentina (SRM)
South Morocco (SRM)
SEI and Empiric=s objective will be to develop substantial prospects for
long term growth utilizing its very successful and proven proprietary technology
developed over the past fifteen years in domestic and foreign locations. The
above projects will commence immediately and continue over the next 11 / 2 to
two years.
STRATEGY, BUSINESS PLANS AND NEED FOR THE INFUSION OF CAPITAL
Subsequent to March 31, 1998, the Company acquired the above properties for
Securities of the Company disclosed in an 8-K dated April 9, 1998 drilling
program. Various sources of financing, including the issuance of dept and equity
securities are being investigated.
The recently acquired properties' cash flow will begin to contribute to
earnings of the Company during the second quarter.
<PAGE>
PART II.
OTHER INFORMATION
Item 1. Legal Proceedings
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NONE
Item 2. Changes in Securities
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NONE
Item 3. Defaults Upon Senior Securities
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NONE
Item 4. Submission of Matters to a Vote of Securities Holders
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NONE
Item 5. Other Information
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NONE
Item 6. Exhibits and Reports on Form 8-K
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<PAGE>
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.
EMPIRIC ENERGY, INC
By: /s/ James J. Ling Date: May 13, 1998
--------------------
Chairman and Chief Executive Officer
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
By: /s/ Clyde E. Skein Date: May 13, 1998
Clyde E. Skein
Chief Financial Officer
By: /s/ James J. Ling Date: May 13, 1998
James J. Ling
Chairman and Chief Executive
By: /s/ R. Reno Rothrock, Jr. Date: May 13, 1998
R. Renn Rothrock, Jr.
President and Chief Operating
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 24112
<SECURITIES> 0
<RECEIVABLES> 148058
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 132147
<PP&E> 3725871
<DEPRECIATION> 1555954
<TOTAL-ASSETS> 2311383
<CURRENT-LIABILITIES> 146880
<BONDS> 0
<COMMON> 59008
0
0
<OTHER-SE> 1992995
<TOTAL-LIABILITY-AND-EQUITY> 2311383
<SALES> 3308
<TOTAL-REVENUES> 26926
<CGS> 109360
<TOTAL-COSTS> 109360
<OTHER-EXPENSES> 0
<LOSS-PROVISION> (93684)
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (93684)
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<INCOME-CONTINUING> (93684)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (93684)
<EPS-PRIMARY> (.02)
<EPS-DILUTED> (.02)
</TABLE>
