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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 Septrmber 30, 2000
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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)
Texas 75-2455467
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
14677 Midway Rd, Suite 207
Addison, Texas 75001
(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 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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As of November 15, 2000 the aggregate market value of voting stock held by
non-affiliates, computed by reference to the closing price on the OTC Bulletin
Board was $9,821,446.
As of November 15, 2000 the number of shares outstanding of the Registrant's
common stock was 11,976,757.
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 2 of the sequential
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EMPIRIC ENERGY, INC.
INDEX TO FORM 10-QSB
PAGE
PART I
Item 1. Financial Statements........................................... 3
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 7
PART II
Item 1. Legal Proceedings.............................................. 9
Item 2. Changes in Securities.......................................... 9
Item 3. Defaults Upon Senior Securities................................ 9
Item 4. Submission of Matters to a Vote of Securities Holders.......... 9
Item 5. Other Information.............................................. 9
Item 6. Exhibits and Reports on Form 8-K............................... 9
SIGNATURE PAGE................................................................ 9
Page 2
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<TABLE>
<CAPTION>
PART I
ITEM 1. FINANCIAL INFORMATION
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, 1999.
EMPIRIC ENERGY, INC.
BALANCE SHEET
September 30, December 31,
ASSETS 2000 1999
------ ------------- -------------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash $ 185,285 $ 62,575
Oil and gas sales receivable, net of allowance of doubtful
accounts of $24,244 and $24,244 respectively 19,603 45,047
------------- -------------
Total current assets 204,888 107,622
PROPERTY AND EQUIPMENT:
Oil and gas properties (full cost method):
Unproved leasehold costs 234,089 179,609
Proved leasehold costs and well equipment 4,912,453 4,658,398
Less accumulated depletion, depreciation and impairment (2,664,919) (2,603,395)
------------- -------------
Net property and equipment 2,481,623 2,234,612
OTHER FURNITURE AND EQUIPMENT, net of accumulated
depreciation of $30,230 and $26,861 respectively 4,280 7,649
DEPOSITS 5,023 3,281
------------- -------------
Total assets $ 2,695,814 $ 2,353,164
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</TABLE>
Page 3
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<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDER'S EQUITY September 30, December 31,
------------------------------------ 2000 1999
----------- -----------
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES
Current portion of long-term debt, including related parties $ 55,000 $ 371,602
Accounts payable and accrued expenses 188,667 298,250
Accrued interest payable, including related parties 2,074 29,486
Oil and Gas revenues payable 34,970 11,962
Due to related parties 97,769 114,540
----------- -----------
Total current liabilities 378,480 825,840
LONG- TERM DEBT, net of current portion, including related parties -- 223,849
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Series A Convertible preferred stock, no par value, $575,000
liquidation preference 43,168 43,168
Series B Convertible Preferred stock, $.05 par value, $50,000
liquidation preference 313 --
Series C Convertible Preferred stock, $.05 par value, $350,000
Liquidation preference 2,800 --
Common stock, $.01 par value, 20,000,000 shares authorized;
11,180,163 and 9,046,027 issued and
outstanding, respectively 111,802 90,461
Common stock subscribed, 472,500 shares and 56,475 shares,
respectively 4,725
469
Additional paid-in capital 7,461,033 5,882,146
Receivables (74,061) (99,061)
Obligation to repurchase treasury stock -- (11,875)
Accumulated deficit (5,232,446) (4,601,833)
----------- -----------
Total stockholders' equity 2,317,334 1,303,475
----------- -----------
Total liabilities and stockholders' equity $ 2,695,814 $ 2,353,164
=========== ===========
</TABLE>
Page 4
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<TABLE>
<CAPTION>
EMPIRIC ENERGY, INC.
CONDENSED STATEMENTS OF OPERATIONS
Nine Months Ended Three Months Ended
September September September September
30, 2000 30, 1999 30, 2000 30, 1999
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
REVENUE:
Oil and gas sales $ 91,658 $ 139,592 $ 8,150 $ 51,343
COSTS AND EXPENSES:
Production Expense 96,723 83,527 28,253 51,156
Depletion and Depreciation 64,893 134,553 1,123 44,885
General and Administrative 574,744 419,960 194,269 188,929
------------ ------------ ------------ ------------
Total Costs and Expenses 736,360 638,040 223,645 284,970
OTHER INCOME (EXPENSE):
Consulting Income 354 945 -- --
Other Income 47,295 62,649 47,295 37,500
Interest Expense (33,560) (54,253) (1,738) (14,630)
------------ ------------ ------------ ------------
Total other income (expense) 14,089 9,341 45,557 22,870
NET LOSS $ (630,613) $ (489,107) $ (169,938) $ (210,757)
============ ============ ============ ============
BASIC AND DILUTED $ (.07) $ (.06) $ (.02) $ (0.02)
NET LOSS PER SHARE
============ ============ ============ ============
WEIGHTED AVERAGE 9,418,644 8,148,844 10,670,374 8,445,980
SHARES OUTSTANDING
============ ============ ============ ============
</TABLE>
Page 5
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<TABLE>
<CAPTION>
EMPIRIC ENERGY, INC.
STATEMENT OF CASH FLOWS
Nine Months Ended
September 30, September 30,
2000 1999
(Unaudited) (Unaudited)
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(630,613) $(489,107)
Adjustments to reconcile net loss to net cash from operating activities:
Depletion, depreciation and impairment 64,893 134,553
Amortization of debt discount 11,782 --
Common stock, warrants and options issued for services 176,227 99,335
Changes in assets and liabilities:
Accounts receivable 25,453 (33,247)
Accounts payable and accrued expenses 21,551 172,270
Oil and gas revenues payable 23,008 (1,004)
Due to related parties 102,532 (3,750)
Other 70,114 (3,693)
--------- ---------
Net cash used by operating activities (135,053) (124,643)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of oil and gas properties (107,775) (343,363)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt -- 342,784
Repayments of long-term debt (1,012) (85,437)
Proceeds from sales of common and preferred stock 366,550 400,405
--------- ---------
Net cash provided by financing activities 365,538 657,752
--------- ---------
NET INCREASE (DECREASE) IN CASH 122,710 189,746
CASH, beginning of the period 62,575 721
--------- ---------
CASH, end of the period 185,285 $ 190,467
========= =========
SUPPLEMENTAL INFORMATION
Cash paid during period for interest $ 1,634 $ 53,252
========= =========
Conversion of liabilities to common and preferred stock $ 801,658 $ --
========= =========
Issuance of stock to acquire oil and gas properties $ 200,760 $ --
========= =========
Stock Dividends $ 43,750 $ --
========= =========
</TABLE>
NOTES TO FINANCIAL STATEMENTS
See notes to financial statements included in the Company's 1999 Annual
Report on Form 10-KSB.
Page 6
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
COMPARISON OF SEPTEMBER 30, 2000 QUARTER TO SEPTEMBER 30, 1999 QUARTER
Revenues of $8,150 were $68,074 or 88% lower than 1999. The decrease was
due to our South Texas properties being shut in from July 1 to September 29, due
to the gas transportation pipeline being shut in. Gas production resumed
September 29.
Production expense of $28,253 was $22,903 or 45% lower than 1999. The
production expense was lower due to the properties being shut in as described
above.
Depletion and depreciation expenses of $1,123 were $43,762 or 97% lower
than 1999. The reduction was due to the properties being shut in and an increase
in management's estimate of reserves.
General and Administrative expense of $194,269 was $5,340 or 3% higher
than 1999.
Interest expense of $1,738 was $12,892 or 88% lower than 1999. The
difference was due to a lower level of debt in the 2000 quarter.
COMPARISON OF NINE MONTHS ENDED SEPTEMBER 30, 2000 TO SEPTEMBER 30, 1999
Revenues of $91,658 were $47,934 or 34% lower than 1999. The decrease was
due to production from the South Texas properties being shut in for the quarter.
Production expense of $96,723 was $13,196 or 16% higher than 1999. The
production expense was higher due to work being done on wells in South Texas
that was expensed.
Depletion and depreciation expenses of $64,893 were $69,660 or 52% lower
than 1999. The reduction was due to lower production from the South Texas
properties and an increase in management's estimates of reserves.
General and Administrative expense of $574,744 was $154,784 or 37% higher
than 1999. The expenses were higher due to issuing stock and warrants for
financial services and a reduction in revenue accruals. Actual cash expenses for
the quarters were similar.
Interest expense of $33,560 was $20,693 or 38% lower than 1999. The
difference was due to a lower level of debt in 2000.
As noted in the annual financial statements, the Company has suffered
recurring losses from operations. Future positive results are a function of the
Company's ability to raise capital or utilize securities to acquire producing
properties or drill developmental wells in order to generate profits. In the
event the Company is not able to raise capital or acquire properties, there is
doubt about the Company's ability to continue as a going concern.
LIQUIDITY
Cash flows provided an increase of $122,710 leaving a cash balance of
$185,285 at September 30, 2000. Net cash used by operating activities was
$135,053 due primarily to the net loss of $630,613, offset by non cash expenses
and the increases in the accruals of current liabilities. Net cash used by
investing activities was $107,775 which was primarily for the purpose of
purchasing oil and gas properties. Financing activities provided $365,538 which
was primarily from sale of securities.
During the nine months ended September 30, 2000, the Company exchanged
debt, accounts payable and accrued interest totalling approximately $801,000 for
common and preferred stock.
Page 7
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At September 30, 2000, the Company had a working capital deficit of
$173,592 and a debt to equity ratio of approximately .16 to 1. The Company needs
and is seeking the infusion of working capital for expanded drilling and
developmental programs, for further debt reduction and for acquisition of
production properties to obtain improved cash flow.
SUBSEQUENT EVENTS
The Company has continued its program of exchanging securities for debt and
payables.
During September, 2000 the Company acquired a 13% working interest in 1,086
acres of oil and gas leases in the South Thornwell Field in South Louisiana with
a combination of cash and stock. The leases have four non-producing wells on the
property, all of which have produced in the past. There are also a minimum of
three drilling locations, which would probably be classified as development
wells. The company plans to re-enter the four wells to re-complete them in zones
varying from 12,450 ft to 15,200 ft. The first re-entry is currently being
completed at 12,450 ft after evaluation logs were run to 13,800 ft. The logs
indicated two potential producing zones at 12,450 ft and 13,800 ft. Plans are to
move to a second well on the lease immediately after re-completing the first
well and re-complete in the 13,800 ft zone. In early November, the Company
acquired an additional 5% working interest in the project with common stock.
Similar wells in the South Thornwell Field have produced at rates varying
from 5 million cubic feet and 200 barrels per day to as high as 15 million cubic
feet and 500 barrels per day. There can be no assurance that the wells to be re-
completed will achieve the same or similar rates.
In early October, 2000, one of the founding members of the Board of
Directors, Clyde E. Skeen, died. He had served faithfully from inception of the
Company until the day of his death. In addition, he served as Chief Financial
Officer and Secretary of the Company during the entire period. His duties as an
officer will be shared by the remaining executive officers, James J. Ling and
Renn Rothrock, Jr. until a replacement can be found.
STRATEGY, BUSINESS PLANS AND NEED FOR THE INFUSION OF CAPITAL
All of the Company's plans to strengthen its financial capability for
development and growth involve the need for the infusion of capital funds.
Sources of financing, involving the issuance of debt and equity securities as
well as acquisitions and business combinations with companies in the related
energy business, are being investigated. The Company has drafted for
consideration before formal release a Private Placement Offering Memorandum
involving the issuance of up to $1,500,000 in equity securities consisting of
Convertible Preferred Stock, convertible into restricted common stock. No
minimums will be included if this financing plan is activated. Seven units
totalling $350,000 of these securities have been issued through the date of the
filing of this Form 10-QSB for either cash or exchange of debt..
Page 8
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PART II.
ITEM 1. LEGAL PROCEEDINGS
The Company is involved in litigation in the ordinary course of its
business and operations. The Company does not expect the outcome of any current
litigation to have a material impact on its financial position or results of
operations.
ITEM 2. CHANGES IN SECURITIES
During the Quarter ended September 30, 2000, the Company issued 1,049,600
shares of common stock, $.01 par value and 56,000 shares of Series C preferred
stock, $.05 par value. None of the securities were registered.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
The Company was in default on $15,000 principal value of notes payable as
of September 30, 2000.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Annual Meeting of Shareholders, held July 27, 2000 at the offices of
the Company, there were two matters submitted to a vote of security holders.
James J. Ling, Renn Rothrock, Jr. and Clyde E. Skeen were re-elected as
Directors of the Company to serve until the next annual meeting and Hein +
Associates, LLP was confirmed as Independent Auditors of the Company for the
year 2000.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
There were no reports filed on Forms 8-K.
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.
Date: November 17, 2000
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EMPIRIC ENERGY, INC.
By: /s/ James J. Ling
-------------------------------------
James J. Ling
Chairman and Chief Executive Officer
By: /s/ R. Renn Rothrock, Jr.
-------------------------------------
R. Renn Rothrock, Jr.
President and Chief Operating Officer
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