-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BQve5KzF7TbClFNeBN8hDwKiLz4vv4cnC1bcPX8fwXYq5mb3uQG3xGLBN4+AEwKH Vy4lM+VvOGTSPIBIUyEoZA== 0000899243-01-501665.txt : 20020410 0000899243-01-501665.hdr.sgml : 20020410 ACCESSION NUMBER: 0000899243-01-501665 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010930 FILED AS OF DATE: 20011108 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ENEX RESOURCES CORP CENTRAL INDEX KEY: 0000314864 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 930747806 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-09378 FILM NUMBER: 1777661 BUSINESS ADDRESS: STREET 1: 700 MILAM STREET, SUITE 1100 CITY: HOUSTON STATE: TX ZIP: 77002-28 BUSINESS PHONE: 7138217100 MAIL ADDRESS: STREET 1: 700 MILAM STREET, SUITE 1100 CITY: HOUSTON STATE: TX ZIP: 77002 10QSB 1 d10qsb.txt FORM 10QSB FOR PERIOD ENDING 9/30/2001 U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 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 September 30, 2001 OR [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT For the transition period from ______ to _______ Commission File No. 0-9378 ENEX RESOURCES CORPORATION (Exact name of small business issuer as specified in its charter) DELAWARE 93-0747806 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) 700 Milam, Suite 1100 Houston, TX 77002 (Address of principal executive offices) (713) 821-7100 (Issuer's telephone number) N/A (Former Name, Former Address and Former Fiscal Year, If Changed Since Last Report) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of Exchange 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 [ ] Number of shares outstanding of each of the Registrant's classes of common stock, as of the latest practicable date: Common stock, $.05 par value 1,342,672 shares as of September 30, 2001 Transitional Small Business Disclosure Format (check one) Yes [ ] No [X] ENEX RESOURCES CORPORATION INDEX
PAGE NO. ---- PART I. FINANCIAL INFORMATION Item 1. Financial Statements Balance Sheets- September 30, 2001 (Unaudited) and December 31, 2000 (Audited).................................. 1 Statements of Operations (Unaudited)- Three and nine months ended September 30, 2001 and 2000......................................... 2 Statements of Cash Flows (Unaudited)- Nine months ended September 30, 2001 and 2000................................................... 3 Notes to Financial Statements (Unaudited)......................................................... 4 Item 2. Management's Discussion and Analysis Of Financial Condition and Results of Operations...... 5 PART II. OTHER INFORMATION Item 6. Exhibits and reports on Form 8-K........................................................... 7
PART I. FINANCIAL INFORMATION ITEM I. FINANCIAL STATEMENTS ENEX RESOURCES CORPORATION BALANCE SHEETS
SEPTEMBER 30, DECEMBER 31, 2001 2000 ----------- ----------- ASSETS (UNAUDITED) (AUDITED) CURRENT ASSETS Cash and cash equivalents..................................................... $ 730 $ - Accounts receivable........................................................... 490,109 310,345 Note Receivable-3TEC.......................................................... 13,475,829 14,264,018 ----------- ----------- Total current assets...................................................... 13,966,668 14,574,363 PROPERTY (AT COST) Oil and gas-successful efforts method......................................... 6,692,038 3,923,053 Other......................................................................... 345,919 345,919 ----------- ----------- 7,037,957 4,268,972 Less accumulated depreciation, depletion and amortization....................... (2,874,735) (2,980,890) ----------- ----------- Net Properties and Equipment.................................................... 4,163,222 1,288,082 ----------- ----------- OTHER ASSETS.................................................................... 1,538,371 2,323,350 ----------- ----------- TOTAL ASSETS.................................................................... $19,668,261 $18,185,795 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable.............................................................. $ 190,483 $ 164,738 ----------- ----------- Total current liabilities................................................. $ 190,483 $ 164,738 ----------- ----------- STOCKHOLDERS' EQUITY Preferred stock, $0.01 par, 5,000,000 shares authorized; none issued............ - - Common stock, $.05 par value, 10,000,000 shares authorized, 1,804,912 shares issued and outstanding at September 30, 2001 and December 31, 2000, respectively................................................................ 90,246 90,246 Additional paid-in capital.................................................... 10,807,472 10,807,472 Retained earnings............................................................. 11,825,007 10,368,286 Treasury stock; 462,240 shares at September 30, 2001 and December 31, 2000, respectively................................................................ (3,244,947) (3,244,947) ----------- ----------- TOTAL STOCKHOLDERS' EQUITY...................................................... 19,477,778 18,021,057 ----------- ----------- COMMITMENTS AND CONTINGENCIES................................................... - - ----------- ----------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY...................................... $19,668,261 $18,185,795 =========== ===========
SEE ACCOMPANYING NOTES TO UNAUDITED FINANCIAL STATEMENTS 1 ENEX RESOURCES CORPORATION STATEMENTS OF OPERATIONS
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30 SEPTEMBER 30 ------------------------- ------------------------- (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) 2001 2000 2001 2000 ---------- ---------- ---------- ---------- REVENUES Oil, natural gas and plant income............ $ 923,025 $ 537,547 $2,436,536 $1,256,724 Gain on sale of properties................... 44,560 - 44,560 36,226 Preferred stock dividends.................... - 161,690 - 485,070 Interest income.............................. 216,592 102,866 786,344 320,766 Other........................................ - 136 - 2,574 ---------- ---------- ---------- ---------- TOTAL REVENUES................................. 1,184,177 802,239 3,267,440 2,101,360 ---------- ---------- ---------- ---------- EXPENSES Production Lease Operations........................... 177,911 89,446 419,822 346,104 Production, severance and ad valorem tax... 72,809 25,485 168,276 72,926 General and administrative................... 99,826 71,110 293,088 183,955 Interest..................................... - - 218 592 Depreciation, depletion and amortization..... 94,005 23,834 143,238 70,033 ---------- ---------- ---------- ---------- TOTAL EXPENSES................................. 444,551 209,875 1,024,642 673,610 ---------- ---------- ---------- ---------- INCOME BEFORE INCOME TAXES..................... 739,626 $ 592,364 2,242,798 $1,427,750 INCOME TAX EXPENSE............................. 259,968 - 786,078 - ---------- ---------- ---------- ---------- NET INCOME..................................... 479,658 $ 592,364 1,456,720 $1,427,750 ---------- ---------- ---------- ---------- NET INCOME PER COMMON SHARE BASIC........................................ $ 0.36 $ 0.44 $ 1.08 $ 1.06 ========== ========== ========== ========== DILUTED...................................... $ 0.36 $ 0.44 $ 1.08 $ 1.06 ========== ========== ========== ========== WEIGHTED AVERAGE COMMON SHARES BASIC........................................ 1,342,672 1,342,672 1,342,672 1,342,672 ========== ========== ========== ========== DILUTED...................................... 1,342,672 1,342,672 1,342,672 1,342,672 ========== ========== ========== ==========
SEE ACCOMPANYING NOTES TO UNAUDITED FINANCIAL STATEMENTS 2 ENEX RESOURCES CORPORATION STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30 -------------------------- (UNAUDITED) (UNAUDITED) 2001 2000 ----------- ----------- OPERATING ACTIVITIES Net income.......................................................................... $ 1,456,720 $1,427,750 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, depletion and amortization.......................................... 143,238 70,033 Deferred income taxes............................................................. 784,979 - Gain on sale of properties........................................................ (44,560) (36,226) Changes in operating assets and liabilities: Increase in accounts receivable................................................... (179,764) (525,942) (Decrease) Increase in accounts payable........................................... 25,745 (62,983) ----------- ---------- NET CASH PROVIDED BY OPERATING ACTIVITIES........................................... 2,186,358 872,632 ----------- ---------- CASH FLOW FROM INVESTING ACTIVITIES Decrease (Increase) in note receivable - 3TEC..................................... 788,189 (908,745) Proceeds from sale of properties.................................................. 45,982 36,226 Property additions................................................................ (3,019,799) (113) ----------- ---------- NET CASH USED IN INVESTING ACTIVITIES............................................... (2,185,628) (872,632) ----------- ---------- NET INCREASE IN CASH AND CASH EQUIVALENTS........................................... 730 - CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD.................................... - - ----------- ---------- CASH AND CASH EQUIVALENTS AT ENDING OF PERIOD....................................... $ 730 $ - =========== ==========
SEE ACCOMPANYING NOTES TO UNAUDITED FINANCIAL STATEMENTS 3 ENEX RESOURCES CORPORATION NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES In management's opinion, the accompanying financial statements contain all adjustments (consisting solely of normal recurring adjustments) necessary to present fairly the financial position of the Company as of September 30, 2001 and the results of operations and cash flows for the periods ended September 30, 2001 and 2000. The financial statements were prepared pursuant to the rules and regulations of the Securities and Exchange Commission. An independent accountant has not audited the accompanying financial statements. Certain information and disclosures normally included in annual audited financial statements prepared in accordance with generally accepted accounting principles have been omitted, although the Company believes that the disclosures made are adequate to make the information presented not misleading. These financial statements should be read in conjunction with the Company's financial statements and notes thereto included in the Company's Annual Report on Form 10-KSB for the year ended December 31, 2000. (2) EARNINGS PER SHARE Basic earnings per share is based on the weighted average shares outstanding without any dilutive effects considered. Diluted earnings per share reflects dilution from all potential common shares, including options, warrants and convertible preferred stock. The Company currently has no transactions with a dilutive effect on diluted shares outstanding. (3) RELATED PARTY TRANSACTIONS The Company has a note receivable from 3TEC, an owner of 80% of the outstanding common stock of the Company, as of September 30, 2001 of $13,475,829. The principal balance of the note accrues interest at the prime rate and is due on demand. Interest of approximately $2.0 million was accrued on the note as of September 30, 2001 and is included in the note receivable balance. The Company is a party to the credit agreement between the Company, 3TEC and certain banks. If certain properties are sold by the Company an amount determined by the banks would have to be paid on the outstanding principal balance of the debt. The debt payment could be made by 3TEC or the Company. Amounts paid to the banks by the Company would reduce the amount of sales proceeds the Company would retain. Amounts paid to the banks by 3TEC would reduce the amount of cash available to be paid to the Company. The principal balance of bank debt outstanding on 3TEC's financial statements at September 30, 2001 was approximately $95 million. All but one of the officers and directors of the Company also serve as the officers and directors of 3TEC. (4) COMMITMENTS AND CONTINGENCIES The Company is a defendant in various legal proceedings which are considered routine litigation incidental to the Company's business, the disposition of which management believes will not have a material effect on the financial position or results of operations of the Company. (5) ACCOUNTING PRONOUNCEMENTS On October 3, 2001, the Financial Accounting Standards Board issued FASB Statement No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, which addresses financial accounting and reporting for the impairment or disposal of long-lived assets. While Statement No. 144 supersedes FASB Statement No. 121, Accounting for the Impairment of Long-Lived Assets and for Long Lived Assets to Be Disposed Of, it retains many of the fundamental provisions of that Statement. Statement No. 144 also supersedes the accounting and reporting provisions of APB Opinion No. 30, Reporting the Results of Operations - Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions, for the disposal of a segment of business. However, it retains the requirement in Opinion 30 to report separately discontinued operations and extends that reporting to a component of an entity that either has been disposed of (by sale, abandonment, or in a distribution to owners) or is classified as held for sale. By broadening the presentation of discontinued operations to include more disposal transactions, the FASB has enhanced managements ability to provide information that helps financial statement users to assess the effects of a disposal transaction on the ongoing operations of an entity. 4 Statement No. 144 is effective for fiscal years beginning after December 15, 2001 and interim periods within those fiscal years. The Company does not anticipate the adoption of SFAS 144 to have a material adverse impact on its financial position or results of operations. In August, 2001, the Financial Accounting Standards Board (FASB) issued SFAS No. 143, "Accounting for Asset Retirement Obligations". SFAS No. 143 addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. The standard applies to legal obligations associated with the retirement of long-lived assets that result from the acquisition, construction, development and (or) normal use of the asset. SFAS 143 requires that the fair value of a liability for an asset retirement obligation be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. The fair value of the liability is added to the carrying amount of the associated asset and this additional carrying amount is depreciated over the life of the asset. The liability is accreted at the end of each period through charges to operating expense. If the obligation is settled for other than the carrying amount of the liability, the Company will recognize a gain or loss on settlement. Implementation of SFAS 143 is required for fiscal year 2003. To accomplish this, the Company must identify all legal obligations for asset retirement obligations, if any, and determine the fair value of these obligations on the date of adoption. The determination of fair value is complex and will require the Company to gather market information and develop cash flow models. Additionally, the Company will be required to develop processes to track and monitor these obligations. Due to the effort necessary to comply with the adoption of SFAS 143, it is not practicable for management to estimate the impact of adopting SFAS 143 at the date of this report. In July 2001, the Financial Accounting Standards Board (FASB) issued SFAS No. 141, "Business Combinations" and SFAS No. 142, "Goodwill and Other Intangible Assets". SFAS No. 141 requires that all business combinations be accounted for under the purchase method and that certain intangible assets in a business combination be recognized as assets apart from good will. The company is required to implement SFAS No. 141 for all business combinations for which the date of acquisition is July 1, 2001 or later. SFAS No 142 requires that ratable amortization of goodwill be replaced with periodic tests of the impairment of goodwill and that intangible assets other than goodwill should be amortized over their useful lives. Implementation of SFAS No 142 is required for fiscal year 2002. The Company does not anticipate the adoption of SFAS 142 to have a material adverse impact on its financial position or results of operations. (6) SUBSEQUENT EVENT During October, 2001, the Company announced it had entered into a definitive merger agreement with 3TEC, that if approved, would result in each share of the Company's common stock (other than shares owned by 3TEC) being converted into the right to receive $14.00 per share in cash. Closing of the transaction is subject to the approval of the Company's stockholders and other customary closing conditions. A special meeting of the Company's stockholders is expected to be held in December, 2001. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This quarterly report on Form 10-QSB contains forward - looking statements within the meaning of Section 27A of the Securities Act of 1993 and Section 21E of the Securities Exchange Act of 1934. Such forward - looking statements involve risks and uncertainties and other factors beyond the control of the Company. Readers are cautioned that any such forward - looking statements are not guarantees of future performance and that actual results or developments may differ materially from those projected in the forward - looking statements. LIQUIDITY AND CAPITAL RESOURCES The principal source of the Company's cash flow will be sales of oil and natural gas and income from the Company's note receivable from 3TEC. The Company does not anticipate any significant capital expenditures for acquisition or exploration of oil and natural gas reserves in the future. The Company expects to make expenditures to develop its proved undeveloped reserves and to maintain its proved developed reserves. The Company also expects that cash flows from operations, proceeds from sales of certain oil and gas properties and advances from 3TEC will be sufficient to fund the planned capital expenditures for the next twelve months. Because future cash flows from the Company's oil and gas properties are subject to a number of variables, such as, the level of production and prices received for oil and gas and the prices received on property sales, there can be no assurance that the Company's capital resources will be sufficient to maintain planned levels of capital expenditures and accordingly, oil and gas revenues and operating results may be adversely affected. 5 The continued accrual of income from the Company's note receivable from 3TEC depends solely upon the creditworthiness of the Company's 80% owner, 3TEC. Should 3TEC experience problems that adversely affect its financial condition, the financial condition and results of operations of the Company will be adversely affected. RESULTS OF OPERATIONS THREE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000 The Company's total revenues increased 48% to $1,184,177 caused primarily by a 72% increase in oil and gas revenues to $923,025. Increases in production, offset by lower oil and gas prices caused the oil and gas revenue increase. During the current period, the Company sold 3,446 barrels of oil at an average price of $22.22 per barrel and 243,984 Mcf of gas at an average price of $3.47 per Mcf. In the comparable period, the Company sold 4,287 barrels of oil at an average price of $29.79 per barrel and 97,999 Mcf of gas at an average price of $4.26 per Mcf. Total costs and expenses increased 112% to $444,551. Lease operations expense increased by 99% to $177,911 as a result of the additional wells drilled and placed on production during the current period. Production, severance and ad valorem expense increased 186% to $72,809 due primarily to the increase in gas volumes discussed above. Income tax expense of $259,968 was recorded for the three months ended September 30, 2001 compared to no expense during the same period 2000. The provision recorded in 2001 represents the Company's net income for the three month end at its expected tax rate for 2001 of 35%. The Company reported net income of $479,658 for the current period versus a net income of $592,364 for the comparable period. The primary reason for the decrease was higher oil and gas revenues at lower average prices offset by higher lease operating and production, severance and ad valorem taxes. NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000 The Company's total revenues increased 55% to $3,267,440 caused primarily by a 94% increase in oil and gas revenues to $2,436,536. Increases in gas prices coupled with higher production volumes caused the oil and gas revenue increase. During the current period, the Company sold 12,944 barrels of oil at an average price of $25.20 per barrel and 453,721 Mcf of gas at an average price of $4.65 per Mcf. In the comparable period, the Company sold 10,973 barrels of oil at an average price of $26.67 per barrel and 283,450 Mcf of gas at an average price of $3.40 per Mcf. Total costs and expenses increased 52% to $1,024,642. Lease operations expense increased 21% as a result of additional wells drilled and placed on production during the current period. Production, severance and ad valorem expense increased 131% to $168,276 due to the increase in commodity prices realized by the company during 2001 compared to 2000 and the increase in gas volumes discussed above. Income tax expense of $786,078 was recorded for the nine months ended September 30, 2001 compared to no expense during the same period 2000. The provision recorded in 2001 represents the Company's net income for the nine month end at its expected tax rate for 2001 of 35%. The Company reported net income of $1,456,720 for the current period versus a net income of $1,427,750 for the comparable period. The primary reason for the increase was higher oil and gas revenues offset by increased lease operating and production, severance, ad valorem taxes and income taxes. 6 PART II. OTHER INFORMATION (a) Exhibits 3.1 Certificate of Incorporation of the Company as currently in effect/(1)/ 3.2 Bylaws of the Company as currently in effect/(1)/ 4.1 Form of Rights Agreement dated as of September 4, 1990 between the Company's predecessor-in-interest, Enex Resources Corporation, a Colorado corporation (the "Predecessor"), and American Securities Transfer, Incorporated, as Rights Agent, which includes as exhibits thereto the Form of Rights Certificate and the Summary of Rights to Purchase Common Stock/(2)/ 10.1 Enex Employees Stock Purchase Program/(3)/ 10.2 1991 Non-Qualified Stock Option Award Program/(3)/ 10.3 1990 Non-Qualified Stock Option Plan/(3)/ 10.4 1984 Incentive Stock Option Plan and 1979 Employees Non- Qualified Stock Option Plan/(4)/ 10.5 Credit Agreement between the Company and Middle Bay Oil Company, Inc., as borrower, and Compass Bank, as agent and lender, Bank of Oklahoma, N.A., as a lender, and the other lenders signatory thereto dated March 27, 1998/(5)/ 16.1 from Deloitte & Touche, LLP regarding change in certifying public accountants dated October 26, 1998/(6)/ 21.1 Subsidiaries of the Company/(7)/ 1. Incorporated by reference to Exhibits to Form 8-K dated September 30, 1992 2. Incorporated by reference to Exhibits to Form 8-K dated September 4, 1990 3. Incorporated by reference to Exhibits to Registration Statement on Form S-8 filed with the Securities and Exchange Commission on March 22, 1993 4. Incorporated by reference to Exhibits to Registration Statement on Form S-8 filed with the Securities and Exchange Commission on July 1, 1992 5. Incorporated by reference to Exhibits to Amendment No. 3 and Final Amendment to Schedule 14D-1 filed by Middle Bay Oil Company, Inc. (MBOC) on April 13, 1998 6. Incorporated by reference to Exhibits to Form 8-K filed October 29, 1998 7. Incorporated by reference to Exhibits to Annual Report on Form 10-K dated March 16, 1992 7 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 by the undersigned, thereunto duly authorized, as of November 8, 2001. ENEX RESOURCES CORPORATION (Registrant) By: /s/ FLOYD C. WILSON ------------------------------ Floyd C. Wilson Chief Executive Officer and Chairman By: /s/ R.A. WALKER ------------------------------ R.A. Walker President and Chief Financial Officer By: /s/ SHANE M. BAYLESS ------------------------------ Shane M. Bayless Vice President - Controller 8 -----END PRIVACY-ENHANCED MESSAGE-----