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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 March 31,2000
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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)
12750 Merit Drive, Suite 750
Dallas, Texas 75251
(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 No X
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As of May 10, 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 $5,394,880. As of May 10, 2000 the number of shares outstanding of the
Registrant's common stock was 9,142,902.
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 numbering system.
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<CAPTION>
EMPIRIC ENERGY, INC.
INDEX TO FORM 10-QSB
PART I PAGE
<S> <C> <C>
Item 1. Financial Statements.................................................. 3
Item 2. Management's Discussion and Analysis of Financial Condition 7
and Results of Operations....................................
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
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Page 2
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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
March 31, 2000 December 31,
ASSETS (Unaudited) 1999
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<S> <C> <C>
CURRENT ASSETS:
Cash $ 162 $ 62,575
Oil and gas sales receivable, net of allowance of doubtful
accounts of $24,244 and $24,244 respectively 42,107 45,047
------------------- -------------------
Total current assets 42,269 107,622
PROPERTY AND EQUIPMENT:
Oil and gas properties (full cost method):
Unproved leasehold costs 179,609 179,609
Proved leasehold costs and well equipment 4,679,825 4,658,398
Less accumulated depletion, depreciation and impairment (2,634,157) (2,603,395)
------------------- -------------------
Net property and equipment 2,225,277 2,234,612
OTHER FURNITURE AND EQUIPMENT, net of accumulated
depreciation of $27,985 and $26,861 respectively 6,525 7,649
DEPOSITS 3,281 3,281
------------------- -------------------
Total assets $ 2,277,352 $ 2,353,164
=================== ===================
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LIABILITIES AND STOCKHOLDER'S EQUITY March 31, 2000 December 31,
------------------------------------
(Unaudited) 1999
<S> <C> <C>
CURRENT LIABILITIES
Current portion of long-term debt, including related parties $ 477,397 $ 371,602
Accounts payable and accrued expenses 310,535 298,250
Accrued interest payable, including related parties 41,303 29,486
Oil and Gas revenues payable 16,986 11,962
Due to related parties 146,113 114,540
------------------- ------------------
Total current liabilities 992,334 825,840
LONG- TERM DEBT, net of current portion, including related parties 124,219 223,849
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Series A Convertible preferred stock, no par value, $575,000
liquidation preference 43,168 43,168
Common stock, $.01 par value, 20,000,000 shares authorized;
9,102,902 and 9,046,027 issued and 91,029 90,461
outstanding, respectively
Common stock subscribed, 56,475 shares - 469
Additional paid-in capital 5,882,146 5,882,146
Receivables (99,061) (99,061)
Obligation to repurchase treasury stock (11,875) (11,875)
Accumulated deficit (4,744,608) (4,601,833)
------------------- ------------------
Total stockholders' equity 1,160,799 1,303,475
------------------- ------------------
Total liabilities and stockholders' equity $ 2,277,352 $ 2,353,164
=================== ==================
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EMPIRIC ENERGY, INC.
CONDENSED STATEMENTS OF OPERATIONS
Three Months Ended
March 31, 2000 March 31, 1999
(Unaudited) (Unaudited)
----------- -----------
<S> <C> <C>
REVENUE:
Oil and gas sales $ 31,820 $ 46,376
COSTS AND EXPENSES:
Production Expense 20,250 20,650
Depletion and Depreciation 31,885 44,783
General and Administrative 103,193 106,658
--------------------- ---------------------
Total Costs and Expenses 155,328 172,091
OTHER INCOME (EXPENSE):
Consulting Income - 945
Other Income - 25,118
Interest Expense (19,267) (22,674)
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Total other income (expense) (19,267) 3,389
NET LOSS $ (142,775) $ (122,326)
===================== =====================
BASIC AND DILUTED NET LOSS PER SHARE $ (0.02) $ (0.02)
===================== =====================
WEIGHTED AVERAGE SHARES OUTSTANDING 9,096,920 7,872,390
===================== =====================
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EMPIRIC ENERGY, INC.
STATEMENT OF CASH FLOWS
Three Months Ended
March 31, 2000 March 31, 1999
(Unaudited) (Unaudited)
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (142,775) $ (122,326)
Adjustments to reconcile net loss to net cash from operating activities:
Depletion, depreciation and impairment 31,885 44,783
Amortization of debt discount 6,539 -
Common stock, warrants and options issued for services - 6,963
Changes in assets and liabilities:
Accounts receivable 2,940 18,811
Accounts payable and accrued expenses 24,102 (20,900)
Oil and gas revenues payable 5,024 1,353
Due to related parties 31,573 (3,750)
Other 133 1,875
------------------ ----------------
Net cash used by operating activities (40,579) (73,191)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of oil and gas properties (21,427) (36,738)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt - 82,900
Repayments of long-term debt (407) (85,437)
Proceeds from sales of common stock - 143,377
------------------ ----------------
Net cash (used) provided by financing activities (407) 140,840
------------------ ----------------
NET INCREASE (DECREASE) IN CASH (62,413) 30,911
CASH, beginning of the period 62,575 721
------------------ ----------------
CASH, end of the period $ 162 $ 31,632
================== ================
SUPPLEMENTAL INFORMATION
Cash paid during period for interest $ 197 $ 22,674
================== ================
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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 MARCH 31, 2000 QUARTER TO MARCH 31, 1999 QUARTER
Revenues of $31,820 were $14,556 or 31% lower than 1999. The reduction was
due to lower production from South Texas properties even though average oil
prices were higher.
Production expense of $20,250 was $400 or 2% less than 1999. The
production expense was approximately the same for the two quarters.
Depletion and depreciation expenses of $31,885 were $12,898 or 29% lower
than 1999. The reduction was also due to lower production from the South Texas
properties.
General and Administrative expense of $103,193 was $3,465 or 3% lower
than 1999. The expenses of the quarters were similar and there were no
administrative differences between the periods.
Interest expense of $19,267 was $3,407 or 15% lower than 1999. The
difference was due to a lower level of debt in the 2000 quarter.
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 a decrease of $62,413 leaving a cash balance of $162
at March 31, 2000. Net cash used by operating activities was $40,579 due
primarily to the net loss of $142,775, offset by non cash expenses and the
increases in the accruals of current liabilities. Net cash used by investing
activities was $21,427 which was primarily for the purpose of purchasing oil and
gas properties. Financing activities used $407 which was repayment of debt.
At March 31, 2000, the Company had a working capital deficit of $950,065
and a debt to equity ratio of approximately 1 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.
YEAR 2000 COMPLIANCE
The Company has not incurred any significant expense related to Year 2000
compliance and remediation. Year 2000 compliance and remediation has not had a
material effect on the financial position, cash flows or results of operations
of the Company. There can be no assurance, however, as to the ultimate effect of
the Year 2000 issue on the Company.
SUBSEQUENT EVENTS
The Company signed an investment banking contract with M. H. Meyerson &
Co., Inc. to provide investment banking services to the Company for a five year
period. In April, 2000 the Company issued 30,000 shares of restricted common
stock to Meyerson for their services and also issued them 250,000 warrants to
purchase stock at $1 per share for a period of five years with half of the
warrants not exercisable until October, 2000.
The Company has also entered into a Security Exchange Agreement with
Daedalus Systems, Inc. that involves the exchange of $1,500,000 face value of
Empiric convertible preferred stock (convertible into 750,000 shares of Empiric
common stock) and 750,000 warrants to purchase a share of Empiric common stock
Page 7
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for $2 for a period of three years to Daedalus in exchange for 1,500,000 common
shares of Daedalus and 750,000 Daedalus warrants to purchase a share of common
stock for $2 for a period of three years. If the exchange agreement is
consummated, management of the company plans to distribute the majority of the
Daedalus common shares received to its shareholders as a dividend after a
registration statement becomes effective.
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 $3,000,000 in equity securities consisting of
Convertible Preferred Stock, convertible into restricted common stock. No
minimums will be included if this financing plan is activated. None of these
securities have been issued through the date of the filing of this Form 10-QSB.
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 March 31, 2000, the Company issued 56,475 shares
of common stock, $.01 par value that had been earlier subscribed. None of the
securities were registered.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
The Company was in default on $325,500 principal value of notes payable
and $21,000 in accrued interest on these notes payable as of March 31, 2000.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders.
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: 5/15/00
EMPIRIC ENERGY, INC.
By: /S/ Clyde E. Skeen
----------------------------------------------
Clyde E. Skeen
Chief Financial Officer
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
Page 9
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
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<CIK> 0000921182
<NAME> EMPIRIC ENERGY, INC.
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<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<EXCHANGE-RATE> 1
<CASH> 162
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<RECEIVABLES> 66,351
<ALLOWANCES> 24,244
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<CURRENT-ASSETS> 42,269
<PP&E> 4,859,434
<DEPRECIATION> 2,634,157
<TOTAL-ASSETS> 2,277,352
<CURRENT-LIABILITIES> 992,334
<BONDS> 0
0
43,168
<COMMON> 91,029
<OTHER-SE> 1,169,846
<TOTAL-LIABILITY-AND-EQUITY> 2,277,352
<SALES> 31,820
<TOTAL-REVENUES> 31,820
<CGS> 52,135
<TOTAL-COSTS> 155,328
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 19,267
<INCOME-PRETAX> (142,775)
<INCOME-TAX> 0
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