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, 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 X No
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As of August 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 $3,972,917. As of August 10, 2000 the number of shares outstanding of
the Registrant's common stock was 10,629,963.
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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EMPIRIC ENERGY, INC.
INDEX TO FORM 10-QSB
PART I PAGE
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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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
June 30, 2000 December 31,
ASSETS (Unaudited) 1999
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<S> <C> <C>
CURRENT ASSETS:
Cash $ 2,400 $ 62,575
Oil and gas sales receivable, net of allowance of doubtful
accounts of $24,244 and $24,244 respectively 41,629 45,047
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Total current assets 44,029 107,622
PROPERTY AND EQUIPMENT:
Oil and gas properties (full cost method):
Unproved leasehold costs 179,609 179,609
Proved leasehold costs and well equipment 4,687,288 4,658,398
Less accumulated depletion, depreciation and impairment (2,664,919) (2,603,395)
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Net property and equipment 2,201,978 2,234,612
OTHER FURNITURE AND EQUIPMENT, net of
accumulated depreciation of $29,107 and $26,861 respectively 5,403 7,649
DEPOSITS 3,281 3,281
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Total assets $ 2,254,691 $ 2,353,164
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LIABILITIES AND STOCKHOLDER'S EQUITY
------------------------------------ June 30, 2000 December 31,
(Unaudited) 1999
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<S> <C> <C>
CURRENT LIABILITIES
Current portion of long-term debt, including related parties $ 273,673 $ 371,602
Accounts payable and accrued expenses 317,294 298,250
Accrued interest payable, including related parties 24,906 29,486
Oil and Gas revenues payable 14,251 11,962
Due to related parties 50,988 114,540
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Total current liabilities 681,112 825,840
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 --
Common stock, $.01 par value, 20,000,000 shares authorized;
10,130,563 and 9,046,027 issued and 101,306 90,461
outstanding, respectively
Common stock subscribed, 56,475 shares -- 469
Additional paid-in capital 6,577,237 5,882,146
Receivables (74,061) (99,061)
Obligation to repurchase treasury stock (11,875) (11,875)
Accumulated deficit (5,062,509) (4,601,833)
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Total stockholders' equity 1,573,579 1,303,475
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Total liabilities and stockholders' equity $ 2,254,691 $ 2,353,164
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EMPIRIC ENERGY, INC.
CONDENSED STATEMENTS OF OPERATIONS
Six Months Ended Three Months Ended
June 30, June 30, June 30, June 30,
2000 1999 2000 1999
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
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<S> <C> <C> <C> <C>
REVENUE:
Oil and gas sales $ 83,508 $ 88,249 $ 51,688 $ 41,873
COSTS AND EXPENSES:
Production Expense 68,470 32,368 48,220 11,718
Depletion and Depreciation 63,770 89,668 31,885 44,885
General and Administrative 380,475 231,095 277,282 124,437
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Total Costs and Expenses 512,715 353,151 357,387 181,041
OTHER INCOME (EXPENSE):
Consulting Income 354 945 354 0
Other Income -- 25,148 -- 30
Interest Expense (31,822) (39,560) (12,555) (16,885)
----------- ----------- ----------- -----------
Total other income (expense) (31,468) (13,466) (12,201) (16,855)
NET LOSS $ (460,675) $ (278,349) $ (317,900) $ (156,023)
=========== =========== =========== ===========
BASIC AND DILUTED $ (0.05) $ (.03) $ (0.03) $ (0.02)
NET LOSS PER SHARE
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WEIGHTED AVERAGE 9,203,019 7,993,021 9,309,119 8,155,092
SHARES OUTSTANDING
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EMPIRIC ENERGY, INC.
STATEMENT OF CASH FLOWS
Six Months Ended
June 30, 2000 June 30, 1999
(Unaudited) (Unaudited)
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (460,675) $ (278,349)
Adjustments to reconcile net loss to net cash
from operating activities:
Depletion, depreciation and impairment 63,770 89,688
Amortization of debt discount 11,782 --
Common stock, warrants and options issued for services 134,613 11,910
Changes in assets and liabilities:
Accounts receivable 3,418 17,072
Accounts payable and accrued expenses 73,420 81,649
Oil and gas revenues payable 2,289 7,508
Due to related parties 91,210 (3,750)
Other -- (18,226)
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Net cash used by operating activities (80,173) (92,518)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of oil and gas properties (28,990) (233,599)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt -- 242,784
Repayments of long-term debt (1,012) (85,437)
Proceeds from sales of common stock -- 170,356
Proceeds from sales of preferred stock 50,000 --
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Net cash provided by financing activities 48,988 327,703
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NET INCREASE (DECREASE) IN CASH (60,175) 1,586
CASH, beginning of the period 62,575 721
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CASH, end of the period $ 2,400 $ 2,307
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SUPPLEMENTAL INFORMATION
Cash paid during period for interest $ 197 $ 38,622
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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 JUNE 30, 2000 QUARTER TO JUNE 30, 1999 QUARTER
Revenues of $51,688 were $9,815 or 23% higher than 1999. The increase was
due to higher average oil and gas prices.
Production expense of $48,220 was $36,502 or 311% 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 $31,885 were $13,000 or 29% lower
than 1999. The reduction was due to an increase in reserves resulting from
higher oil and gas prices.
General and Administrative expense of $277,282 was $152,845 or 122%
higher than 1999. The expenses were higher due to issuing stock and warrants
valued at $135,000 for financial services. Actual cash expenses for the quarters
were similar.
Interest expense of $12,555 was $4,330 or 26% lower than 1999. The
difference was due to a lower level of debt in the 2000 quarter.
COMPARISON OF SIX MONTHS ENDED JUNE 30, 2000 TO JUNE 30, 1999
Revenues of $83,508 were $4,741 or 5% lower than 1999. The decrease was
due to lower production from the South Texas properties in the first quarter
even with higher average oil and gas prices.
Production expense of $68,470 was $36,102 or 115% 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 $63,770 were $25,898 or 29% lower
than 1999. The reduction was due to lower production from the South Texas
properties and an increase in reserves resulting from average higher prices.
General and Administrative expense of $380,475 was $149,380 or 65%
higher than 1999. The expenses were higher due to issuing stock and warrants for
financial services. Actual cash expenses for the quarters were similar.
Interest expense of $31,822 was $7,738 or 20% 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 $60,175 leaving a cash balance of $2,400
at June 30, 2000. Net cash used by operating activities was $80,173 due
primarily to the net loss of $460,675, offset by non cash expenses and the
increases in the accruals of current liabilities. Net cash used by investing
activities was $28,890 which was primarily for the purpose of purchasing oil and
gas properties. Financing activities provided $48,988 which was repayment of
debt and sale of securities.
During the six months ended June 30, 2000, the Company exchanged debt,
accounts payable and accrued interest totalling approximately $510,000 for
common stock.
At June 30, 2000, the Company had a working capital deficit of $637,082
and a debt to equity ratio of approximately .43 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.
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SUBSEQUENT EVENTS
The Company has continued its program of exchanging securities for debt
and payables. Through August 14, 2000, an additional 14,375 of debt and $80,451
in payables had been exchanged for equity.
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
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 June 30, 2000, the Company issued 1,027,661
shares of common stock, $.01 par value and 6,250 shares of Series B preferred
stock, $.05 par value. None of the securities were registered.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
The Company was in default on $214,375 principal value of notes payable
and $20,451 in accrued interest on these notes payable as of June 30, 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: August 16, 2000
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EMPIRIC ENERGY, INC.
By: /s/ Clyde E. Skeen
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Clyde E. Skeen
Chief Financial Officer
By: /s/ James J. Ling
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James J. Ling
Chairman and Chief Executive Officer
By: /s/ R. Renn Rothrock, Jr.
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R. Renn Rothrock, Jr.
President and Chief Operating Officer
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