10KSB 1 file.txt U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-KSB [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED March 31, 2002 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (the "Act") Commission file number: 0-9336 STANDARD ENERGY CORPORATION (Name of Small Business Issuer as specified in its charter) Utah 87-0338149 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 363 Bearcat Drive Salt Lake City, Utah 84115-2517 (Address of principal executive offices) (Zip Code) Issuer's telephone number, including area code: (801) 364-9000 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: $.01 Par Value Common Stock Check whether the Issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Act during the preceding 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 . Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B contained in this form, and no disclosure will be contained, to the best of Issuer's knowledge, in definitive proxy or information statement incorporated by reference in Part III of this Form 10-KSB, or any amendment to this Form 10-KSB . The Issuer's revenue for the fiscal year ended March 31, 2002 was approximately $38,000. As of June 27, 2002, 105,851,974 shares of the Issuer's common stock were issued and outstanding of which 52,486,927 shares were held by non-affiliates. As of June 27, 2002, the aggregate market value of shares held by non-affiliates, based upon the closing price reported by the Bulletin Board market reporting system, operated by Nasdaq of $0.03 bid, was approximately $1,574,608. ITEM 1. DESCRIPTION OF BUSINESS General Standard Energy Corporation's ("the Company") principal business is, and historically has been, the acquisition of unproven oil and gas leaseholds, primarily with the intent of reselling such leaseholds to third-parties. Historically, the Company has acquired primarily federal oil and gas leaseholds through the Bureau of Land Management's ("BLM") leasing program. The Company also obtains leases through purchases in competitive bidding programs offered by various state agencies, principally the States of Utah and Wyoming (the "Leasing Programs"). The Company evaluates the geologic potential of the leases, which it proposes to acquire, based primarily upon geologic information available through the Company's wholly-owned subsidiary, Petroleum Investment Company ("PIC"). The Company's President, Dean W. Rowell, is materially involved in such evalu- ations which are based, among other factors, upon the results of prior exploratory and developmental activities on adjacent and contiguous properties, current lease sale trends and Mr. Rowell's 40-year experience in the domestic oil and gas business. The Company, which is known within the industry as a buyer and seller of leases, typically is approached by a potential buyer for one or more of its leasehold interests. Negotiations generally ensue and a dollar price and retained royalty interest is agreed upon and a sale concludes. Oil and Gas Leases The Company had limited participation in the Leasing Programs from 1986 through the year ended March 31, 2002, except through its participation agreements with certain unrelated third parties on a limited basis. The Company presently has limited funds available to participate in the Leasing Programs. The Company believes that the deposit feature of the Leasing Programs have made the Company's participation in such Leasing Programs very difficult as the deposit feature penalizes many of the less capitalized participants and provides a substantial advantage to Leasing Program participants which have greater financial resources than the Company. (See "Management's Discussion and Analysis of Financial Condition and Results of Operations") The location and gross and net acreage of the Company's inventory of oil and gas leaseholds at March 31, 2002 were approximately as follows: Location Gross Acres Net Acres Utah 3,465 2,207 Wyoming 1,243 1,243 Montana 4,442 2,961 Total 9,150 6,411 A gross acre consists of 100% of the working interest. A net acre is calculated by gross acres multiplied by the percentage of working interest owned. The above chart does not include the Company's interest in unrelated third-party leasehold acquisitions and leasehold sales. Third-party leasehold inventory was approximately 9,000 gross acres and 4,500 net acres at fiscal year ended March 31, 2002. Also during the fiscal period, the Company's ability to acquire additional leaseholds was adversely affected. Because the Company has no financial basis in such leaseholds, the Company's financial statements and the foregoing acreage charts do not reflect the acquisition of such newly acquired leaseholds. As third-party leasehold sales take place, revenue is recorded under line item "Sales of oil and gas leasehold interest. Management has adopted a policy of periodically evaluating each of the leaseholds held by the Company to determine whether the current market value of a leasehold justifies making additional rental payments with respect thereto. Based upon such evaluation, the Company abandons (writes off) those leaseholds for which it does not wish to continue making rental payments. The amount of acreage abandoned and sold by the Company in each of the last two fiscal years has caused the Company's balance of inventory to decline over the course of such period, primarily due to past downturns in the domestic oil industry. No independent appraisals are obtained by the Company on leases purchased, nor is there an independent committee of the Board of Directors which evaluates any of its leases. The Company's policy is to acquire and hold leaseholds in inventory for a period generally not longer than five years in order to maximize the gain to the Company on such leasehold costs. The Company does not advertise for the sale of leases owned by it, but rather believes that most of its leasehold purchasers become aware of the Company's leaseholds through an examination of BLM records or other means. During the Company's two fiscal years ended March 31, 2002 and 2001, revenues from oil and gas lease royalties during such period were approximately $31,000 and $42,000 respectively, reflecting little change in the domestic oil industry during the previous year. (See "Consolidated Financial Statements") The Company's oil and gas leasehold inventory is approximately 11,000 net acres at the year ended March 31, 2002, including leaseholds acquired under third-party agreements. Although its leasing activity was reduced substantially due to the sharp decline in exploration activities during the last five fiscal years, the Company believes it can continue its present lines of business, including the purchase and sale of newly acquired oil and gas leaseholds, due to the increase in the price of domestic oil and gas during the past two years. The Company retains a royalty interest, ranging from 1% to 6%, in substantially all of the leaseholds which it has resold. Since 1981, the Company has not received any substantial earnings from retained royalty interests in resold leaseholds. The majority of the leases acquired by the Company are leaseholds granted by the BLM subject to a 12-1/2% gross royalty interest in favor of the federal government's BLM. The majority of the Company's inventory of undeveloped leases are subject to the jurisdiction of the BLM, with the balance being leased from agencies of various Rocky Mountain states. As a result of the advance lease deposits required under the Leasing Programs, and the Company's current working capital difficulties, it may be expected that the percentage of leases acquired in the future from such states may increase. BLM leaseholds granted under the Leasing Program are leased by the BLM at an annual rental of $1.50 per acre, and $2.00 per acre for leases acquired and held for more than five years. The majority of the Company's BLM leasehold inventory at March 31, 2002 consists of BLM leaseholds granted after January 1, 1994, and generally have an initial term of ten years, which may be extended for an additional two years if during the initial term such leasehold is "improved" by the commencement of drilling activities thereon. Aggregate rentals paid by the Company for all oil and gas properties leased by it were zero during the period ended March 31, 2002 and approximately $800 for the comparable 2001 period. The Company retains the right to reacquire the lease if the purchaser fails to make rental payments due to the BLM on leases sold to such unrelated third-parties by the Company. Leasing Programs The federal government's Leasing Program is administered by the BLM pursuant to the Minerals Leasing Act of 1920, as amended. Under such Act, properties are made available to the public by means of a competitive bidding system. Properties receiving no bid are assigned to the Leasing Program. In the Leasing Program, applicants filing for a given leasehold by a set date are deemed to have filed simultaneously with other applicants and thus are eligible to participate in the drawing. Under the Leasing Program, applicants are required to deposit the first year rental payments for each property applied for at the time of filing an application. Funds advanced to the BLM as deposits do not bear interest. During fiscal 2002, the BLM took approximately 50 days, from the date funds were required to be deposited, to process refunds of deposits with respect to unawarded leases, which permitted participants to "rollover" their refunds into payments of advance deposits in the subsequent Leasing Program drawing period. However, there can be no assurance as to how long the BLM will take to refund such deposits in the future. The BLM has on several previous occasions, since the Mineral Leasing Act of 1920, suspended and/or modified the BLM Leasing Program. No assurance can be given that current Leasing Programs will not be subsequently eliminated, modified or suspended, or that the Company will be able to actively participate in or derive profits from the Leasing Programs. Geological Information Services The Company, through its wholly-owned subsidiary, PIC, provides a variety of geologic lease evaluation services. PIC makes available to subscribers monthly reports containing information which evaluates leases offered in the Leasing Programs. Such information includes comprehensive geologic data, recommendations and reports with respect to leaseholds offered in the Leasing Programs, including PIC's evaluation of the production prospects of such leaseholds and, frequently, an estimated resale value for such leaseholds, the names of selected participants, results of auction sales and drawings, and other information. In addition to such monthly reports, PIC also sells information with respect to individual oil and gas properties throughout the Rocky Mountain area. The geologic and other information which PIC makes available through its reporting services is obtained from different sources, including PIC's internal files which contain well and land oil and gas exploration data on a historical basis in the nine-state area comprising the Rocky Mountain region. Such data is interpreted and summarized by PIC's part-time in-house geologists and landmen. PIC, through a wholly-owned subsidiary, also provides oil and gas mapping services with respect to properties located throughout the Rocky Mountain region. PIC prepares base survey and geologic maps on various scales, reflecting significant oil and gas well drilling activity in a particular area. During the Company's two fiscal years ended March 31, 2002 and 2001, revenues contributed to the Company's consolidated revenues by PIC were approximately $7,000 and $6,000, respectively. The decrease in revenue contributed by PIC for such fiscal periods, as compared to prior fiscal years, reflects little change in the domestic oil and gas industry during the previous year. Low oil prices since the initial 1986 collapse of worldwide oil prices caused PIC to terminate the services of several employees, including its geologists. Should higher oil prices hold for several years it is possible that PIC could again produce higher revenues for the consolidated business of the Company. (See "Management's Discussion and Analysis of Financial Condition and Results of Operations") Oil and Gas Exploration and Production The Company's oil and gas exploration and production operations are presently insignificant and no reserve information is available. Competition The Company experiences substantial competition in its business of buying and selling oil and gas leaseholds. The Company's competitors include oil companies, as well as numerous independent operators, many of whom have substantially greater resources than the Company and its affiliates. The Leasing Programs, and in particular, the feature which requires advance deposit of annual lease rentals at the time of applying for such leases, has the effect of favoring companies with financial resources greater than the Company's and its affiliates'. With respect to its geologic information services, the Company experiences competition from individual operators who advise as to the geologic potential of properties listed for lease under the Leasing Programs and other oil and gas properties, as well as from publishers of newsletters providing certain information similar to that which the Company makes available to its subscribers. The Company believes itself to be a factor in the geologic information services industry in the Rocky Mountain States, premised upon the quality and volume of its land records, the number of subscribers to its publications and the extremely limited number of competitors, comprised mostly of individuals, offering similar, but what management believes to be less complete services to the general public. The Company's competitors in oil and gas exploration, development and production include major oil companies, numerous independent oil and gas companies, individual proprietors and drilling programs. Many of such competitors possess greater financial resources than those available to the Company. Research and Development of the Biofuels Technologies Essentially, the Company has two principal businesses. They are its traditional oil and gas exploration and production business that has, during the past 20-years, provided in excess of $13,000,000 to conduct the research and development ("R&D") effort to commercialize its second business, the commercial development of its "Biofuels Technologies", designed to economically solve the critical problem of disposing of municipal solid waste ("MSW") through the 100% recycle of MSW into useful products saleable at a profit. Management of the Company believes its R&D efforts have produced trade secret and know-how protection which, in the future, should produce valuable patent protection to the Company's Biofuels Technologies from the Company's long experience and work conducted at its former "Research Center". Based on its R&D efforts, the Company believes its biofuels plant project near Philadelphia (the "Mayfair Project") would be the first business to economically produce ethanol transportation fuel from low-cost organic cellulosic materials ("Celmat") consisting of mostly paper products easily harvested from MSW through new generation enviro-friendly manufacturing plants fed by MSW, which plants would combine recycling, electric power and ethanol fuel production at several regional biofuels plant sites. The Company further believes that its innovative Biofuels Technologies would create a profit generating solution for three major contemporary domestic issues. First, it would provide an opportunity to significantly reduce the volume of MSW that currently must be landfilled or incinerated. Second, it offers a low-cost method of producing ethanol fuel, the only known commercially viable and publicly accepted renewable low-polluting transportation fuel that the Company believes someday will compete in price at the pump with gasoline. Third, it offers a low-cost method of producing electric power from clean burning lignin fuel. The reason for such optimism is the high dump rates ("Tip Fee") currently paid by municipalities to landfills and incinerators for the dispose of MSW. The Company's Biofuels Technologies is comprised of five basic elements: Recycling MSW: Receiving and separating inorganic "Salvage" products including aluminum, copper, steel, iron, glass, plastics, sand, gravel, dirt, etc. from the organic products in MSW and selling those inorganic items into local and world Salvage markets. New separating techniques are introduced, otherwise, the recycle processes are the same process used in many present-day commercial MSW recycle operations. The inorganic portion is approximately 40% of the total volume of MSW. Harvesting Celmat: Harvesting the organic Celmat products, consisting of paper products, yard and wood wastes, etc. from the total MSW stream. The organic Celmat is approximately 60% of the total volume of the MSW stream. Reducing Celmat into inverted sugars and "Lignin": Lignin is the polymeric substance and cementing material that forms the woody cell walls of all plant life. Inverted sugars are inside the woody cell walls. Using the Biofuels Technologies the inverted sugars are converted into base sugars. These rich carbohydrates are mostly glucose and xylose fermentable into 200 proof alcohol. Producing ethanol fuel: Ethanol fuel has an octane rating of 112, much higher than any gasoline. It is produced by blending 5% gasoline with 100% anhydrous alcohol (200 proof/113 octane). Anhydrous alcohol is a natural alcohol usually made from corn. Manufacturing alcohol from Celmat has never been economically successful due to the high cost to extract the fermentable sugars. The Biofuels Technologies uses several unique processes to separate the Lignin from the fermentable sugars that reduce the manufacturing costs dramatically and, based upon current studies and information, make possible the manufacture of ethanol fuel for approximately $0.30 per gallon. Generating Electric Power: The recovered Salvage plastics and Lignin would provide about 50% of the boiler fuel mix. Together with the addition of 50% natural gas for burner tip control efficiency, enough steam would be produced to power an entire Mayfair Project with total electrical self-sufficiency, plus a substantial amount of excess electric power for sale to the local or regional power grid systems. The sales value of the excess electric power has not been included in the Business Plan financial proforma. Ethanol fuel is currently used primarily as an additive to boost the octane rating of premium grade gasolines. Lignin would be used as a boiler fuel to produce plant electric power. After further research, Lignin may have a higher value as a specialty chemical in the petro-chemical industry to produce a non-toxic replacement base plastics resin usable to produce such things as vehicle side panels and bumpers. The Biofuels Technologies would recycle 100% of MSW delivered to the Mayfair Project plant site by independent private carter/haulers into a stream of inorganic Salvage and organic Celmat. The Salvage would be harvested and sold into local and world salvage markets while the Celmat would be harvested as feedstock for the ethanol fuel production plant for processing into enviro-friendly renewable ethanol fuel at a total net cost of approximately $0.30 per gallon compared to the corn- based method net cost of approximately $1.25 per gallon. The renewable Lignin cost recovery is included in the cost to produce ethanol fuel. Based upon current studies and information, the full 12-Module design Mayfair Project would consist of a MSW fed recycle plant (the "Recycle Plant"), a Celmat fed ethanol fuel production plant (the "Ethanol Plant") and a Salvage plastic/ Lignin/natural gas fired power plant (the "Power Plant"). The design capacity of the Recycle Plant would process approximately 2,000,000 tons per year of MSW (6,000 tons per day) within a 12-Module design, converting the 2,000,000 tons per year of MSW into approximately 1,200,000 tons per year of Celmat (3,700 tons per day) which, in turn, would produce approximately 80,000,000 gallons per year of ethanol fuel (240,000 gallons per day). Operations would ramp-up in 4-Module sequences until the 12-Module design becomes fully operational. The Company's former Research Center provided the Company with sufficient data to design and construct the 12-Module design Mayfair Project for the 100% recycle solution to the disposal of MSW. The 12-Module proprietary design package data is available to entities expressing a written desire to invest funds in the Mayfair Project. Written materials include flow sheets, mass and energy balance, vendor equipment suppliers, construction design, operating plans, insurance guarantees and qualification of the selected construction contractors. The Mayfair Project, fundamentally, is only an engineering concept where the Company is contemplating the construction retrofit of an existing industrial MSW plant complex utilizing the Company's Biofuels Technologies to manufacture electric power, ethanol transportation fuel and other saleable products derived and harvested from the contents of MSW. The Company is pursuing a $100,000,000 third-party loan (the "Loan") and other financing ideas through two wholly-owned subsidiaries, Mayfair Energy Corporation, a Pennsylvania corporation ("Mayfair"), and Biofuels, Inc., a Utah corporation to construct an initial 4-Module design biofuels plant. Final engineering plans and final financial arrangements with unrelated third-parties for the Loan and engineering contracts on the Mayfair Project were not finalized or completed as of June 27, 2002. Government Regulations The Company's business is subject to extensive federal, state and local regulation. Management believes that the Company operations are in material compliance with applicable laws, but is unable to predict what additional government regulations, if any, affecting the Company's business, may be enacted in the future; how existing or future laws and regulations might be interpreted; or whether the Company will be able to comply with such laws and regulations either in the markets in which it presently conducts business or wishes to commence and conduct business in the future. There can be no assurance that either the states or the federal government would not impose additional regulations upon the Company's activities which might adversely affect the Company's business. Insurance The Company does not currently have in force general liability insurance coverage but does have renters liability coverage on its headquarters office space. There can be no assurance the coverage limits of the Company's policy would be adequate, or that the Company can obtain liability insurance in the future on acceptable terms, or at all. Environmental Matters The Company is not aware of any pending or threatened claim, investigation, or enforcement action regarding environmental issues which if determined adversely to the Company, would have an adverse effect upon the capital expenditures, earnings, or competitive position of the Company. Employees As of June 27, 2002, the Company had three employees, including two executive officers and one part time employee. In addition, the Company's practice in connection with the Leasing Programs is to contract with geologists and landmen to assist the Company in the preparation of geologic information reports, etc. as needed. None of the Company's employees are represented by a union or subject to a collective bargaining agreement and the Company has never experienced a work stoppage. The Company believes its employee relations to be good. Item 2. PROPERTIES Headquarters The Company's executive offices are located in a 4,000 square foot building. The premises are leased from a non-affiliated party, at an annual rental of approximately $35,000 per year. Such space is shared with Trachyte Oil Company ("Trachyte"), an affiliate of the Company, who pays the Company approximately $11,000 per year for such shared space. Management is of the opinion that such cost is comparable to or below normal rates in the area and believes that such facilities are adequate for the Company needs in the proximate future. Oil and Gas Leaseholds The location and gross and net acreage of the Company's inventory of oil and gas leaseholds at March 31, 2002 was approximately as follows: Location Gross Acres Net Acres Utah 3,465 2,207 Wyoming 1,243 1,243 Montana 4,442 2,961 Total 9,150 6,411 A gross acre consists of 100% of the working interest. A net acre is calculated by gross acres multiplied by the percentage of working interest owned. Item 3. LEGAL PROCEEDINGS On February 4, 2002 a Civil Action Complaint was filed in the Court of Common Pleas, Philadelphia, Pennsylvania, against the Company and Mayfair Energy Corporation, a wholly-owned subsidiary of the Company, in which the compliant alleges that the Company and its subsidiary are in default, among other things, of an amount due to Klehr, Harrison, Harvey, Branzburg & Eller, LLP, attorney's at law in the amount of $48,275.98. The Company's Philadelphia counsel, Schafkopf & Burgess, LLC, filed answers to the complaint, where the Company and Mayfair demand judgement in their favor, asking for dismissal of all counts. At June 27, 2002 this action is still pending. Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to the Company's shareholders for a vote during the fiscal year ended March 31, 2002. PART II Item 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER MATTERS Price Range of Common Stock The Company's shares of Common Stock are traded on the over the counter Bulletin Board ("OTCBB") electronic quotation service, operated by The Bulletin Board, Inc., an affiliate of The Nasdaq Stock Market, Inc. The following table sets forth the high and low bid quotations of the Company's common stock for the periods indicated, as reported by the OTCBB. The quotations set forth below represent prices between dealers and do not include retail markups, markdowns or commissions and may not represent actual transactions. Bid Price High Low Fiscal Year 2001 First Quarter .......... $ 0.24 $ 0.12 Second Quarter .......... 0.36 0.17 Third Quarter .......... 0.30 0.11 Fourth Quarter .......... 0.19 0.11 Fiscal Year 2002 First Quarter .......... $ 0.25 $ 0.12 Second Quarter .......... 0.19 0.08 Third Quarter .......... 0.10 0.06 Fourth Quarter .......... 0.09 0.03 Fiscal Year 2003 First Quarter .......... $ 0.06 $ 0.03 (through June 27, 2002) Approximate Number of Equity Security Holders: Title of Class holders as of June 27, 2002 Common Stock, par value $0.01 per share: 1,800 Preferred Stock, par value $0.01 per share: None Issued As of June 27, 2002, there were 105,851,974 shares of common stock outstanding and approximately 1,800 stockholders of record. The number of stockholders of record does not include an indeterminate number of stockholders whose shares are held by brokers and fiduciary depositories in "street name". Management believes there are in excess of 3,000 beneficial stockholders of the Company's common stock, including fiduciary depository firms. Dividends The Company has neither declared nor paid any dividends on its Common Stock since the inception of the Company, and the Board of Directors does not contemplate the payment of dividends in the foreseeable future. Any decision as to the future payment of dividends will depend on the earnings and financial position of the Company and such other factors as the Board of Directors may deem relevant. It is the present intention of management to utilize all available funds for the development of the Company's business. Item 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS General The Company's primary oil and gas business, the brokerage of leasehold interests, has not materially changed during the period ended March 31, 2002 due to the lack of capital to pursue the purchase of new leases. In light of this lack of capital the Company has been exploring other ways of generating revenues. During the 2003 fiscal period, the Company continues R&D efforts of its Biofuels Technologies for the recycle of ordinary MSW into recycled saleable products and the recovery of Celmat believed by the Company to be convertible into electric power and ethanol transportation fuel. As a result of its R&D efforts, and after working with its engineering and management contractor, W.J. Scales & Company of Boerne, Texas (the "Scales Group"), management believes that the Company has developed what appears to be a commercial application of the Biofuels Technologies for the future recovery of inorganic materials and Celmat from the recycle of MSW at its Mayfair Project. The Mayfair Project would be located in the Northeast U.S., probably near Philadelphia, where MSW landfills and transfer stations charge the highest Tip Fee in the U.S. for the disposal of MSW. If operations commence, it is anticipated that the Mayfair Project would utilize the Biofuels Technologies in a facility that combines a MSW Recycle Plant, Ethanol Plant and an electric Power Plant. The facility would separate MSW into separate inorganic and organic recovery streams. The inorganic stream products would be sold into the existing commercial Salvage markets and the organic stream products would be converted into specialty products such as electric power and ethanol transportation fuels. There can be no assurance that the required capital will be available to construct the Mayfair Project and there can be no assurance that the Biofuels Technologies will perform on a commercial basis. The Company's future operating results will depend on its ability to obtain adequate financing to construct the Mayfair Project. Expenses incurred for the Mayfair Project are currently being accounted for under line item "Research and Development Costs". Results of Operations The Company realized revenues of approximately $38,000 for the fiscal year ended March 31, 2002, compared with approximately $54,000 for the corresponding period ended March 31, 2001. Cash requirements during the period were obtained from a combination of internally generated cash flow from operations, loans, asset sales, and the sale of Rule 144 investment stock to private individuals. There were no revenues from oil and gas leasehold sales for the fiscal period ended March 31, 2002, and approximately $6,000 for the corresponding period ended March 31, 2001. Leasehold sales were zero, due to the Company's exploration inactivity. Revenues from the sale of the Company's geologic information services were approximately $7,000 for the fiscal period ended March 31, 2002, compared with approximately $6,000 for the corresponding period ended March 31, 2001. Revenues from the Company's geologic information services have declined steadily from the original collapse of world crude oil prices in 1986. Recent world crude oil and natural gas price increases may stimulate domestic drilling activity which would, once again, create a need for the Company's geologic information services. Revenue from oil production was approximately $31,000 for the fiscal period ended March 31, 2002, compared to approximately $42,000 for the corresponding period ended March 31, 2001. Oil production revenues are steady as a result of increased world crude oil and natural gas prices. The Company incurred expenses related to its oil and gas leasehold sales of zero for the fiscal period ended March 31, 2002, compared to approximately $800 for the comparable period ended March 31, 2001. Expenses associated with the Company's geologic information services were approximately $6,000 for the fiscal month period ended March 31, 2002, compared to approximately $5,000 for the comparable period ended March 31, 2001. Expenses associated with the Company's oil production and exploration activities were zero for the fiscal month period ended March 31, 2002, due to the abandonment in fiscal 1998 of the Company's last operated well. There were no costs for the comparable period ended March 31, 2001, due to the Company's exploration inactivity. General and administrative expense for the fiscal month period ended March 31, 2002 were approximately $118,000, compared to approximately $108,000 for the comparable period ended March 31, 2002. These low figures reflect the Company's basic inactivity in its oil and gas sector. During the previous three year period all of the Company's R&D costs were expensed under line item General and Administrative expense. During the 2002 fiscal period, the Company created a line item for R&D costs to better distinguish expenses between general and administrative expenses and the expenses related to its various biofuels plant projects. These costs were approximately $30,000 for the fiscal period ended March 31, 2002, compared to approximately $246,000 for the comparable period ended March 31, 2001. The Company's net loss for the 2002 fiscal period ended March 31, 2002 was approximately $184,000, compared to approximately $352,000 for comparable 2001 fiscal period and it expects to operate at a loss for the 2003 fiscal period, due to continued R&D costs incurred for the Mayfair Project, and costs related to its oil and gas business. Mayfair Project costs are accounted for under line item "Research and Development Costs". (See "Consolidated Financial Statements") The Company does not expect to realize significant cash flows from the sale of leasehold interests, geologic information services, or oil production and exploration activities during fiscal 2003, nor does it expect significant leasehold sales in the foreseeable future, as the domestic oil industry activity continues unchanged due to uncertain world crude oil and natural gas prices. The Company has available at March 31, 2002, unused tax operating loss carry forward of approximately $3,467,672 that may be applied against future taxable income through 2020. No tax benefit has been reported in the financial statements, because the Company believes there is a 50% or greater chance the carry forwards will expire unused. Accordingly, the potential tax benefits of the loss carry forwards are offset by a valuation account of the same amount. Financial Condition Management continues to explore additional financing alternatives for ongoing and future operations of the Company and has entered into an agreement with the Scales Group for the engineering, management, and construction of the Mayfair Project. There is no assurance that the efforts of management or the Scales Group to locate and secure additional financing will be successful, and the failure to secure the Mayfair Project financing would substantially alter management's assumptions as herein presented. Revenue reduction in the Company's overall oil and gas business is related to effects of the original worldwide collapse of crude oil prices in 1986 and the corresponding reduced oil and gas brokerage activity of the Company. Because of the reduced activity in its oil and gas business and a 1992 loss of approximately $4,100,000 in Biomass International, Inc. ("Biomass"), a former partially owned R&D subsidiary, the Company is currently experiencing cash flow difficulties. The Company's most significant assets are (1) its oil and gas production income, (2) its oil and gas leaseholds held for resale, approximating 11,000 net acres at June 27, 2002, including leaseholds acquired under its unrelated third-party agreements, and (3) its plan for the full development of the Mayfair Project. Other assets are; (4) the $3,467,672 tax loss carry forward, and (5) 5,252,556 shares of Biomass. In 1994, Biomass ceased to exist as an R&D organization and in March 2000, Biomass was sold as a shell company to an unrelated third-party under a reorganization plan, ending a 12 year R&D effort. Due to the proposed issuance of additional shares of Biomass to the unrelated third-party purchaser, the Company does not expect to hold in excess of 5% of the common stock of Biomass upon completion of a transaction and expects to recover little, if any, of its approximate $4,100,000 investment in Biomass represented by 5,252,556 shares of Biomass common stock. At June 27, 2002, the Biomass shares had little value at a bid price of $0.00 and asked $0.005 on the electronic OTC Pink Sheet market system. With little or no volume on a daily basis, sales of the Biomass shares appear impractical in the foreseeable future. In order to continue in existence the Company is in need of additional financing from outside sources or from internal operations. These conditions raise substantial doubt about the Company's ability to continue as a going concern. Management can give no assurances that it will be successful in its endeavors to resolve its cash flow difficulties or that it will be able to retain and ultimately recover its costs in oil and gas leaseholds held for resale. The financial statements do not include any adjustments relating to the amounts and classification of assets, liabilities, income or expenses that might be necessary should the Company be unable to successfully resolve these uncertainties and continue in existence. The Company foresees a need for additional equity financing in order to continue in existence, and may, in the future, seek to raise additional funds through asset sales, bank and/or other loans, debt, or equity offerings. Any such equity offerings, asset sales, or other financing may either be private or public and may result in substantial dilution to the then existing shareholders of the Company. Because of uncertainties existing in the domestic oil and gas industry and the Mayfair Project, the Company is not in a position to forecast future earnings or cash flow. The Company's future is very fluid and largely dependent on factors outside of its management control. For the fiscal period ended March 31, 2002, Dean W. Rowell, the President of the Company, continues to secure and guarantee loans for the Company: (1) He has guaranteed two credit cards up to $110,000 with an outstanding balance of approximately $87,000 at the end of the period, and (2) he continues to loan the Company funds through Trachyte, his 100% owned privately-held Utah corporation, with an outstanding loan balance of $489,350, plus accrued interest of $107,957 for a total amount of $597,307 owed to Trachyte at the period ended March 31, 2002. Expenses incurred under the use of the credit cards are being accounted for under line item "Revolving Line of Credit" and expenses incurred under the loan agreement are being accounted for under line item "Notes payable to related parties". (See "Consolidated Financial Statements" above). Since fiscal 1991, Trachyte has materially supported the Company financially largely due to Mr. Rowell's efforts to secure loans from Trachyte for the Company. The several transactions with Trachyte have provided the financial means for the Company to pursue its R&D of the Biofuels Technologies and the commercialization of the Mayfair Project, otherwise the Company would have been unable to pursue these goals. Final plans and final financial arrangements had not been completed for the Mayfair Project at June 27, 2002. Plan of Operation There have been no significant changes in capitalization or financial status during the past two years that are not reflected in the financial statements. The Company's plan of operation during the next twelve (12) months includes the following: 1. Pursue financing for the Mayfair Project. 2. Continue R&D, testing MSW processing equipment and testing existing and newly developed cellulose enzymes. 3. Continue the design and development of the Mayfair Project into three businesses -- MSW recycle, ethanol fuel production and electric power generation. 4. Pursue oil and gas lease acquisition with third party investors and investigate the possibility of entering into the wholesale electric power generation business. Inflation Inflation continues to apply moderate upward pressure on the cost of goods and services including those purchased by the Company. Management believes the net effect of inflation on operations has been minimal during the past two years. Recent Accounting Pronouncements There are no recent accounting pronouncements that will have a material impact on the Company's financial statements. Management's Conflicts of Interest Material conflicts of interest exist and will continue to exist between the Company, Trachyte, and Mr. Rowell, who is also the President of Trachyte, a privately-held Utah corporation, whose current major activities are the exploration and production of oil and gas resources. The Company's policy is to offer any new oil and gas property purchase first to the Company and then to Trachyte if the Company is unable to accept the financial obligation of any transaction. At June 27, 2002, Mr. Rowell beneficially owned approximately 48% of the common stock of the Company and 100% of the common stock of Trachyte. Mr. Rowell owes a duty of due care and fair dealing to both the Company and Trachyte and the resolution of duties and conflicts in favor of one company over the other may impair his duties to each company. It is likely that any conflict of interest between the Company and Trachyte requiring a determination may have to be settled in favor of the Company to the detriment of Trachyte, as well as to the detriment of the current and future shareholders of Trachyte. Item 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The information required by this Item is submitted as a separate section at the rear of this Form 10-KSB report. Item 8. CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III Item 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT A. Identification of Directors and Executive Officers. The current directors and executive officers of the Company, who will serve until the next annual meeting of shareholders or until their successors are elected or appointed and qualified, are set forth below: Name Age Position Dean W. Rowell 64 CEO/President/Chairman Pamela K. Nelson 44 Vice President/Secretary Michael M. Cannon 54 Director Dean W. Rowell has been Chairman of the Board, President and Chief Executive Officer and Chief Financial Officer of the Company since its inception in April 1978 and was last elected by shareholders in 1996. Mr. Rowell has been involved in the oil and gas exploration and production industries for over 40 years. Prior to serving in his present capacities with the Company, he served as the president of a number of privately-held energy related companies. Mr. Rowell is also a director and President of the Company's wholly-owned subsidiaries, PIC, EnviroSystems, Biofuels, Inc., and Mayfair Energy Corporation. Mr. Rowell devotes approximately 80% of his time to the Company. Pamela K. Nelson was last elected in 1996 and has been a Director of the Company since September 1978 and became a Vice President of the Company in 1979 and Corporate Secretary in 1983. Ms. Nelson has been involved in landwork and leasing services to the oil and gas industry for the last 26 years. Ms. Nelson is also a director, Vice President, Corporate Secretary and Manager of land and lease operations for the Company's wholly-owned subsidiary, PIC. She is a director, Vice President, Corporate Secretary of EnviroSystems, Biofuels, Inc., and Mayfair Energy Corporation, all wholly-owned subsidiaries of the Company. She devotes all of her paid time to the Company. Michael M. Cannon, a cum laude graduate of the University of Utah, joined the Company in March 1982 and in September 1982 became a Vice President and Director, with responsibility for marketing and corporate communications. From January 1979 to March 1982, Mr. Cannon was President of an advertising and public relations agency, Cannon Communications, a substantial number of whose clients were members of the United States House of Representatives and the Senate. From November 1976 to January 1979, Mr. Cannon served as the press secretary for Gunn McKay, a United States Representative from the State of Utah. In 1985 Mr. Cannon served as a state director of the Independent Petroleum Association of Mountain States and was. Mr. Cannon is presently self-employed as a consultant in the Communications industry. Mr. Cannon resigned as an Officer of the Company, effective July 1, 1985, but remains as an outside Director being last elected in 1996, Mr. Cannon has been associated with the Company for over 15-years. Each Director shall hold office until the next annual meeting of shareholders or until his successor shall have been duly elected and qualified. Officers are elected annually by, and serve at the pleasure of, the Board of Directors. B. Significant Employees. None. C. Family Relationships. There are no family relationships among the Company's officers and directors. D. Other Involvement in Certain Legal Proceedings. There have been no events under the bankruptcy act, no criminal proceedings and no judgements or injunctions material to the evaluation of the ability and integrity of any executive officer of the Company in last five years. E. Administration Action. None F. Compliance With Section 16(a). Section 16 of the Securities Act of 1934 requires the filing of reports for sales of the Company's common stock made by officers, directors and 10% or greater shareholders. A Form 3 and Form 4 must be filed within ten days after the end of the calendar month in which a sale or purchase occurred. Based upon the review of Form 4, Form 3, and/or Form 5 filed with the Company, the Company is not aware of any delinquent filings of such forms by any reporting person. Item 10. EXECUTIVE COMPENSATION The following table sets forth the aggregate compensation paid by the Company for services rendered during the last three years to the Company's Chief Executive Officer and to the Company's most highly compensated executive officers: SUMMARY COMPENSATION TABLE Annual Compensation Other Annual Restrict Name and Principal Commissions Compensation Stock Options Position Year Salary And Bonuses (Auto) Awards SAR's Dean W. Rowell 2002 $ -0- -0- $4,000 -0- -0- President/CEO 2001 $ -0- -0- $4,000 -0- -0- 2000 $ -0- -0- $4,000 -0- -0- None of the Company's executive officers received aggregate cash and cash equivalent compensation exceeding $100,000 in any of the last three fiscal years. No options to purchase any of the Company's securities were granted to any reporting person during the fiscal year ended March 31, 2002. During the same period, Mr. Rowell elected to sell stock in the Company due to limited corporate cash flow to partially compensate Mr. Rowell in absence of a salary. Compensation Pursuant to Plans None of the executive officers of the Company are parties to an employment agreement with the Company. Mr. Rowell who is the Company's Chairman of the Board, President, Chief Executive and Chief Financial Officer will continue to serve the Company as determined by the Board of Directors without a salary or employment agreement. On April 1, 1997, the Company discontinued the practice of providing Mr. Rowell a credit card but continues to provide Mr. Rowell with an automobile at a cost of approximately $4,000 per year. The Company has no other "plans" (as such term is used in Item 402 of Regulation S-K) with respect to further executive compensation. Other Compensation Not applicable. Compensation of Directors Directors of the Company receive no compensation for services as such. Termination of Employment and Change of Control Arrangements Not applicable. Item 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth the number of shares beneficially owned, as of June 27, 2002, by each Director of the Company, by all officers and Directors as a group and by all persons known to the Company as owning or possessing voting control over five (5%) percent or more of the Company's outstanding shares of Common Stock: Number Percentage of Shares of Shares Name and Address Owned Outstanding Dean W. Rowell (1) 50,643,947 47.8% Pamela K. Nelson 2,708,100 2.6% Michael M. Cannon 13,000 .0% All Officers and Directors as a group 53,365,047 50.4% ___________ (1) This figure includes all of the shares owned by Trachyte. Item 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Transactions with Management and Others Geologic and other information which PIC has or develops is available to Mr. Rowell as an officer of the Company, and he may use such information for the benefit of the Company in determining which leases to buy or sell. Such information is also available to Mr. Rowell, without cost, in connection with Mr. Rowell's participation in the Leasing Programs. During the eleven year period since fiscal 1991, Trachyte has helped financially support the Company largely due to Mr. Rowell's efforts to secure loans from Trachyte for the Company during periodic cash flow difficulties. During such periods, the several transactions with Trachyte have provided the financial means for the Company to pursue commercialization of the Mayfair Project, otherwise the Company would have been unable to pursue this goal. Final plans and final financial arrangements had not been completed for the Mayfair Project as of June 27, 2002. During the fiscal period ended March 31, 2002, the Company continued to experience severe cash flow difficulties which have continued into the 2003 fiscal period. Since the Company has been unable to repay any of the loans from Trachyte during the past two fiscal periods, Trachyte has received a demand note from the Company, including interest at 12% per annum, with a principal and interest balance at March 31, 2002 of approximately $597,307. Neither Mr. Rowell nor Trachyte received any common stock in exchange for debt forgiveness during the period ended March 31, 2002. On July 15, 1996, the Company formed Biofuels, Inc., a wholly- owned subsidiary, for the purpose of investing in and developing the Biofuels Technologies for the Mayfair Project. This effort was centered on management's belief that a Celmat to ethanol technologies could be commercialized, based on the Company's extensive experience at its former Research Center from 1982 through 1992, and its experience in developing the Mayfair Project with the Scales Group through June 27, 2002. Forward Looking Statements The forgoing discussion in "Management's Discussion and Analysis of Financial Condition and Results of Operation" contain forward-looking statements, within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Act") and Section 21E of the Act, which reflect Managements current views with respect to the future events and financial performance. The Company cautions that words used in this document such as "experts", "anticipates", "believes" and "may" as well as similar words and expressions identify and refer to statements describing events that may or may not occur in the future, including among other things, statements relating to anticipated growth and increased profitability, as well as to statements relating to the Company's strategic plan, including plans to develop the Mayfair Project and to selectively acquire other companies. These forward-looking statements and the matters to which they refer to are subject to considerable risks and uncertainties that may cause actual results to be materially different from those described in this document, including, but not limited to future financial performance and future events, competitive pricing for services, costs of obtaining capital as well as national, regional and local economic conditions. Actual results could differ materially from those addressed in the forward- looking statements. Due to such uncertainties and risks, readers are cautioned not to place undue reliance on such forward-looking statements, which speak only as of the date of this Form 10-KSB report. Indebtedness of Management Reference is made to Section above entitled "Transactions with Management and Others". Parents of Company The only parents of the Company, as defined in 12b-2 of the Exchange Act, are the officers and directors of the Company. For information regarding the share holdings of the Company's officers and directors, see Item 11. PART IV Item 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K A. The Exhibits which are filed with this Report or which are incorporated by reference are set forth in the Exhibits Index below. B. The Company filed no Form 8-K during the fiscal year ended March 31, 2002. The financial statement information required by this portion of Item 13 is submitted as a separate section at the rear of this Report. Exhibits to Form 10-KSB There is only one exhibit to this Form 10-KSB filing: "Consent of Independent Auditors". SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized. STANDARD ENERGY CORPORATION By: /s/ Dean W. Rowell Dean W. Rowell President June 27, 2002 Salt Lake City, Utah Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the date indicated: Signature Capacity Date /s/ Dean W. Rowell President and Director June 27, 2002 Dean W. Rowell (Principal Executive, Financial and Accounting Officer) /s/ Pamela K. Nelson Vice President June 27, 2002 Pamela K. Nelson Corporate Secretary, Treasurer and Director /s/ Michael M. Cannon Director June 27, 2002 Michael M. Cannon STANDARD ENERGY CORPORATION AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS March 31, 2002 C O N T E N T S Independent Auditors' Report...............................3 Consolidated Balance Sheet.................................4 Consolidated Statements of Operations......................6 Consolidated Statements of Stockholders' Equity (Deficit)..7 Consolidated Statements of Cash Flows......................8 Notes to the Consolidated Financial Statements.............9 INDEPENDENT AUDITORS' REPORT The Board of Directors Standard Energy Corporation Salt Lake City, Utah We have audited the accompanying consolidated balance sheet of Standard Energy Corporation and Subsidiaries as of March 31, 2002, and the related consolidated statements of operations, stockholders' equity (deficit) and cash flows for the years ended March 31, 2002 and 2001. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion of these consolidated financial statements based on our audits. We conducted our audits in accordance with accounting standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Standard Energy Corporation and Subsidiaries as of March 31, 2002, and the results of their operations and their cash flows for the years ended March 31, 2002 and 2001, in conformity with accounting principles generally accepted in the United States of America. The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 7 to the consolidated financial statements, the Company has had no significant operating results to date and has a working capital deficit of $772,441, which together raises substantial doubt about its ability to continue as a going concern. Management's plans with regard to these matters are also described in Note 7. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. HJ& Associates Salt Lake City, Utah May 21, 2002 STANDARD ENERGY CORPORATION AND SUBSIDIARIES Consolidated Balance Sheet ASSETS March 31, 2002 CURRENT ASSETS Cash $ 1,978 Total Current Assets 1,978 PROPERTY AND EQUIPMENT, net(Note 2) 3,000 INVESTMENT IN OIL AND GAS PRODUCING PROPERTIES, net of depletion of $92,970 (Note 3) - OTHER ASSETS Cash surrender - life insurance 1,673 Oil abd gas leases held for resale (Note 3) 71,653 Pledged drilling bonds (Note 3) 25,000 Total Other Assets 98,326 TOTAL ASSET $ 103,304 The accompanying notes are an integral part of these consolidated financial statements STANDARD ENERGY CORPORATION AND SUBSIDIARIES Consolidated Balance Sheet (Continued) LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT) March 31, 2002 CURRENT LIABILITIES Accounts payable and accrued expenses $ 192,511 Deferred lease income 5,208 Revolving line of credit 87,350 Note payable - related party (Note 5) 489,350 Total Current Liabilities 774,419 COMMITMENTS AND CONTINGENCIES (Note 4) STOCKHOLDERS' EQUITY (DEFICIT) Preferred stock, par value $0.01 per share authorized 10,000,000 shares, no shares issued and outstanding - Common Stock; par value $.01 per share; 200,000,000 shares authorized; 105,851,974 shares issued and outstanding 1,058,519 Additional paid-in capital 7,479,073 Treasury stock (83,253) Accumulated deficit (9,125,454) Total Stockholders' Equity (Deficit) (671,115) TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) $ 103,304 The accompanying notes are an integral part of these consolidated financial statements STANDARD ENERGY CORPORATION AND SUBSIDIARIES Consolidated Statements of Operations For the Years Ended March 31 2002 2001 REVENUES Oil and gas information services $ 6,936 $ 6,000 Oil and gas leasehold interests - 5,888 Oil and gas lease royalties 31,334 41,735 Total Revenues 38,270 53,623 EXPENSES Oil and gas information services 6,187 5,343 Oil and gas leasehold interests - 837 Depreciation, depletion and amortization 7,500 4,000 Project Costs (Note 6) 29,997 246,315 General and administrative 118,137 107,758 Total Expenses 161,821 364,253 OPERATING LOSS $ (123,551) $ (310,630) Interest and other income 4,582 14,343 Interest expense (65,566) (56,022) Total Other Income (Expense) (60,984) (41,679) NET LOSS $ (184,535) $ (352,309) BASIC LOSS PER SHARE $ (.00) $ (.00) WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 105,851,974 104,738,582 The accompanying notes are an integral part of these consolidated financial statements STANDARD ENERGY CORPORATION AND SUBSIDIARIES Consolidated Statements of Stockholders' Equity (Deficit) For the Years Ended March 31, 2002 and 2001 Additional Common Stock Paid-in Accumulated Shares Amount Capital Deficit Balance, March 31, 2000 1,037,420 (83,253) 105,261,974 $1,052,619 $ 7,412,973 $(8,588,610) Common stock issued for cash at $0.10 to $0.15 per share - - 590,000 5,900 66,100 - Net loss for the year ended March 31, 2001 - - - - - (352,309) Balance, March 31, 2001 1,037,420 (83,253) 105,851,974 $1,058,519 $ 7,479,073 $(8,940,919) Net loss for the year ended March 31, 2002 - - - - - (184,535) Balance, March 31, 2002 1,037,420 (83,253) 105,851,974 $1,058,519 $ 7,479,073 $(9,125,454) The accompanying notes are an integral part of these consolidated financial statements STANDARD ENERGY CORPORATION AND SUBSIDIARIES Consolidated Statements of Cash Flows For the Years Ended March 31 2002 2001 CASH FLOWS FROM OPERATING ACTIVITIES Net loss $ (184,535) $(352,309) Adjustments to reconcile net loss to net cash used by operating activities: Depreciation, depletion and amortization 7,500 4,000 Changes in assets and liabilities: Increase in accounts payable and accrued expenses 96,394 60,074 Increase in deferred rental income 5,208 - Net Cash Used by Operating Activities (75,433) (288,235) CASH FLOWS FROM INVESTING ACTIVITIES Cash value - life insurance (806) (867) Net Cash Used by Investing Activities (806) (867) CASH FLOWS FROM FINANCING ACTIVITIES Payments on notes payable-related parties - (45,650) Proceeds from notes payable-related parties 88,500 285,500 Proceeds from notes payable - - Net change to line of credit (20,389) 13,497 Proceeds from issuance of common stock - 42,000 Net Cash Provided by Financing Activities 68,111 295,347 NET INCREASE (DECREASE) IN CASH (8,128) 6,245 CASH AT BEGINNING OF YEAR 10,106 3,861 CASH AT END OF YEAR $ 1,978 $ 10,106 SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION CASH PAID FOR: Interest $ 12,037 $ 2,647 Income taxes $ - $ - NON-CASH FINANCING ACTIVITIES Common stock issued for debt $ - $ 30,000 The accompanying notes are an integral part of these consolidated financial statements STANDARD ENERGY CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements March 31, 2002 and 2001 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization The Company was organized under the laws of the State of Utah on April 3, 1978. The Company's principal business activity is the acquisition and resale of unproven oil and gas leaseholds. The Company also provides a variety of geologic lease evaluation services and information. Further, the Company receives royalty income from leasehold interests held by the Company. Principles of Consolidation The consolidated financial statements include the accounts of Standard Energy Corporation and its wholly owned subsidiaries, Standard EnviroSystems, Inc., Petroleum Investment Company, Petroleum Map Service Company and Mayfair Energy Corporation (formerly known as Mayfair Trashfuel Corporation) (the Company). Significant intercompany accounts and transactions have been eliminated in consolidation. Oil and Gas Leasehold Interest Held for Resale The Company's inventory of oil and gas leasehold interests held primarily for resale to other parties is valued at the lower of the costs to acquire the interests or market. Cost of sales is based on the cost of the specific leasehold interest sold. Oil and Gas Activities The Company follows the successful efforts method of accounting for its oil and gas exploration and production activities as prescribed by Statement No. 19 of the Financial Accounting Standards Board. Property and Equipment Property and equipment are valued at cost and, except for oil and gas properties, are depreciated or amortized principally by the straight-line method over their estimated useful lives. The useful lives of property and equipment for purposes of financial reporting range from five to seven years. STANDARD ENERGY CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements March 31, 2002 and 2001 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICES (Continued) Provision for Taxes At March 31, 2002, the Company had net operating loss carryforwards of $5,436,844 that may be offset against future taxable income through 2020. No tax benefit has been reported in the financial statements, because the Company believes there is a 50% or greater chance the carryforwards will expire unused. Accordingly, the potential tax benefits of the loss carryforwards are offset by a valuation account of the same amount. The income tax benefit differs from the amount computed at federal statutory rates of approximately 38% as follows: For the Years Ended March 31 2002 2001 Income tax benefit at statutory rate $ (70,123) $ (133,877) Change in valuation allowance 70,123 133,877 $ - $ - Deferred tax assets (liabilities are comprised of the following: or the Years Ended March 31 2002 2001 Income tax benefit at statutory rate $(3,467,672) $(3,397,549) Change in valuation allowance 3,467,672 3,397,549 $ - $ - Due to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carryforwards for Federal income tax reporting purposes are subject to annual limitations. Should a change in ownership occur, net operating loss carryforwards may be limited as to use in future years. STANDARD ENERGY CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements March 31, 2002 and 2001 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Basic Loss Per Share The computation of basic loss per share of common stock is based on the weighted average number of shares of common stock outstanding during the periods presented. Common stock equivalents have not been included because they are antidilutive in nature. For Year Ended March 31, 2002 Loss Shares Per Share (Numerator) (Denominator) Amount $ (184,535) 105,851,974 $ ( .00) For Year Ended March 31, 2001 Loss Shares Per Share (Numerator) (Denominator) Amount $ (352,309) 104,738,582 $ (.00) Cash Flows Statement For purposes of statements of cash flows, the Company considers all highly liquid debt investments purchased with a maturity of three months or less to be cash equivalents. Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. STANDARD ENERGY CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements March 31, 2002 and 2001 NOTE 2 - PROPERTY AND EQUIPMENT The following is a summary of property and equipment - at cost, less accumulated depreciation as of March 31, 2002: Computers $ 7,711 Furniture and fixtures 51,393 Printing systems 35,648 Well and land files and maps 305,000 Total 399,752 Less: accumulated depreciation (396,752) Total $ 3,000 Depreciation expense for the years ended March 31, 2002 and 2001 was $7,500 and $4,000, respectively. NOTE 3 - OIL AND GAS PROPERTIES The Company's primary oil and gas businesses, brokerage of leasehold interests and sales related to its information services, have decreased significantly over the past few years. At March 31, 2002 the Company was holding of oil and gas leases for resale with a cost basis of $71,189. The Company has negotiated agreements with certain non affiliates to provide capital to jointly participate in a leasing program for oil and gas leases. Under these agreements, the Company provides raw data and services to identify potential leases. The Company earns approximately 40% gross interest in each leasehold obtained. Because the Company has no cost in the leases, its share of the net proceeds is recognized as revenue when the leases are sold and are recorded as sales of oil and gas leasehold interests. In connection with its lease brokerage activities, the Company has included in other assets pledged certificates of deposit in the amount of $25,000 which are to secure a statewide oil and gas lease bond in the State of Utah and an individual lease bond in the State of Wyoming. NOTE 4 - COMMITMENTS AND CONTINGENCIES Office Lease The Company leases its office space on a month-to-month basis. STANDARD ENERGY CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements March 31, 2002 and 2001 NOTE 5 - RELATED PARTY TRANSACTIONS The Company signed a $50,000 note payable to Trachyte Oil Company on March 31,1998. The note bears interest at 12.00% and is due upon demand. The note is unsecured and has increased as funds have been advanced. The balance due at March 31, 2002 was $489,350 plus accrued interest is $107,957. NOTE 6 - PROJECT COSTS During the year ended March 31, 2002 and 2001, the Company spent $246,315 and $29,997 on Project costs associated with the Mayfair Energy Project (the Project) near Bridgewater township Somerset County, New Jersey. The Company had entered into a long term agreement. The agreement is now null and void. NOTE 7 - GOING CONCERN These financial statements have been prepared assuming that the Company will continue as a going concern. The Company has incurred significant losses in the past which have resulted in working capital and accumulated deficits. These deficits have been caused primarily from the Company's investment in Biomass International, Inc. (a development stage company) and significantly reduced revenues from sales of its oil and gas leasehold interests and information services. Because of the currently depressed conditions in the oil and gas industry, coupled with the Company's cash flow difficulties, the Company's ability to retain and ultimately recover its investments in oil and gas leaseholds held for resale and other assets of the Company, is uncertain at this time. These conditions raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in this regard are to seek additional financing through loans or through the issuance of equity securities and to seek increased sales related to its oil and gas businesses. However, management can give no assurance that it will be successful in its endeavor to resolve its cash flow difficulties or that it will be able to retain and ultimately recover its cost in oil and gas leaseholds held for resale and the other assets of the Company. The financial statements do not include any adjustments relating to the recoverability and classification of liabilities, income or expenses that might be necessary should the Company be unable to continue as a going concern. STANDARD ENERGY CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements March 31, 2002 and 2001 NOTE 8 - CAPITAL STOCK Preferred Stock The Company has authorized 10,000,000 shares of preferred stock, $0.01 par value with such rights, preferences and designations and to be issued in such series as determined by the Board of Directors. No shares are issued and outstanding at March 31, 2002. NOTE 9 - INDUSTRY SEGMENTS The Company operates in three principal industries: oil and gas information services, brokerage of oil and gas leasehold interests and oil and gas exploration and production. Information as to the Company's segments is summarized below as of March 31 for the years then ended: 2002 2001 Revenues Oil and gas information services $ 6,396 $ 6,000 Oil and gas leasehold interests - 5,888 Oil and gas leases royalties 31,334 41,735 $ 38,270 $ 53,623 Operating Profit (Loss) Oil and gas information services $ 749 $ 657 Oil and gas lease interest - 5,051 Oil and gas royalties 31,334 41,735 Corporation and investment (155,634) (358,073) $(123,551) $(310,630) Identifiable Assets Oil and gas leases held for resale $ 71,653 $ 71,653 Pledged drilling bonds 25,000 25,000 Corporation and investment 6,651 13,063 $ 103,304 $ 118,126 Depreciation, Depletion and Amortization $ 7,500 $ 4,000 STANDARD ENERGY CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements March 31, 2002 and 2001 NOTE 9 - INDUSTRY SEGMENTS (Continued) The Company has no intersegment sales or sales to affiliated customers. Operating loss consists of total revenues less total expenses, except for interest expense which has not been allocated to any segment. Identifi-able assets by segment represent those assets that are used in the Company's operations in each industry. Corporate assets which are not allocated to any segment are principally cash, short-term investments, marketable securities and a portion of property and equipment. Capital expenditures in fiscal 2002 and 2001 were insignificant. The Company's oil and gas exploration and production operations are presently insignificant and no reserve information is available. NOTE 10 - NEWLY ISSUED ACCOUNTING PRONOUNCEMENTS During the years ended December 31, 2001, and 2000, the Company adopted the provisions of FASB Statement No. 140 "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities (a replacement of FASB Statement No. 142, "Goodwill and Other intangible Assets," FASB Statement No. 143, "Accounting for Asset Retirement Obligations," FASB Statement No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," and FIN 44 "Accounting for Certain Transactions Involving Stock Compensation (an interpretation of APB Opinion No. 25)." The effect of these adopted provisions on the Company's financial statement was not significant.