10QSB 1 a2035467z10qsb.txt FORM 10-QSB U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended November 30, 2000 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to --------------- --------------- Commission File No. 0-20879 PYR ENERGY CORPORATION (Exact name of small business issuer as specified in its charter) Delaware 95-4580642 ------------------------------ ------------------- (State or jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1675 Broadway, Suite 1150, Denver, CO 80202 ---------------------------------------- ---------- (Address of principal executive offices) (Zip Code) Issuer's telephone number, including area code (303) 825-3748 Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 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 / / (APPLICABLE ONLY TO CORPORATE REGISTRANTS) The number of shares outstanding of each of the issuer's classes of common equity as of January 16, 2001 is as follows: $.001 Par Value Common Stock 22,091,857 ---------- PYR ENERGY CORPORATION FORM 10-QSB INDEX PART I. FINANCIAL INFORMATION Item 1. Financial Statements............................................. 3 Balance Sheet - August 31, 2000 and November 30, 2000............ 3 Statement of Operations - Three Months Ended November 30, 1999 and November 30, 2000 and Inception Through November 30, 2000.............................. 4 Statement of Cash Flows - Three Months Ended November 30, 1999 and November 30, 2000 and Cumulative Amounts From Inception Through November 30, 2000........................................ 5 Notes to Financial Statements.................................... 6 Summary of Significant Accounting Policies....................... 6 Item 2. Management's Discussion and Analysis or Plan of Operation........ 7 PART II. OTHER INFORMATION Item 1. Legal Proceedings................................................ 10 Item 2. Changes in Securities; Recent Sales of Unregistered Securities... 10 Item 3. Defaults Upon Senior Securities.................................. 10 Item 4. Submission of Matters to a Vote of Security Holders.............. 10 Item 5. Other Information................................................ 10 Item 6. Exhibits and Reports on Form 8-K................................. 11 Signatures................................................................ 11
2 PART I ITEM 1. FINANCIAL STATEMENTS PYR ENERGY CORPORATION (A DEVELOPMENT STAGE COMPANY) BALANCE SHEETS
ASSETS 08/31/00 11/30/00 (UNAUDITED) CURRENT ASSETS Cash $ 8,598,016 $ 4,618,899 Other Receivables -- 40,562 Prepaid Expenses 20,835 38,806 ------------ ------------ Total Current Assets 8,618,851 4,698,267 ------------ ------------ PROPERTY AND EQUIPMENT, at cost Furniture and equipment, net 29,650 24,572 Undeveloped oil and gas prospects 11,293,589 15,640,362 ------------ ------------ 11,323,239 15,664,934 ------------ ------------ $ 19,942,090 $ 20,363,201 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable and accrued liabilities $ 165,289 $ 65,747 Current portion of capital lease obligation 920 -- ------------ ------------ Total Current Liabilities 166,209 65,747 ------------ ------------ Total Liabilities 166,209 65,747 ------------ ------------ COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY Preferred Stock, $.001 par value; Authorized 1,000,000 shares Series A - Issued and outstanding - 14,263 shares at 8/31/00-$100 face value, 10% coupon 14 -- Common stock, $.001 par value Authorized 50,000,000 shares Issued and outstanding - 19,069,019 shares at 8/31/00 and 21,689,053 shares at 11/30/00 19,069 21,689 Capital in excess of par value 22,048,384 22,714,569 Deficit accumulated during development stage (2,291,586) (2,438,804) ------------ ------------ 19,775,881 20,297,454 ------------ ------------ $ 19,942,090 $ 20,363,201 ============ ============
3 PYR ENERGY CORPORATION (A DEVELOPMENT STAGE COMPANY) STATEMENTS OF OPERATIONS (UNAUDITED)
Three Three Months Months Inception Ended Ended Through 11/30/99 11/30/00 11/30/00 REVENUES Consulting fees $ -- $ -- $ 127,528 Interest 56,842 111,128 434,993 ------------ ------------ ------------ 56,842 111,128 562,521 ------------ ------------ ------------ OPERATING EXPENSES General and administrative 217,845 254,248 2,745,708 Dry hole, impairment and abandonments -- -- 521,369 Interest 66 -- 184,306 Depreciation and amortization 4,558 4,098 70,271 ------------ ------------ ------------ 222,469 258,346 3,521,654 ------------ ------------ ------------ OTHER INCOME Gain on sale of oil and gas prospects -- -- 556,197 ------------ ------------ ------------ (165,627) (147,218) (2,402,936) INCOME APPLICABLE TO PREDECESSOR LLC (NOTE 1) -- -- (35,868) ------------ ------------ ------------ NET (LOSS) (165,627) (147,218) (2,438,804) Less dividends on preferred stock -- -- (229,531) ------------ ------------ ------------ NET (LOSS)COMMON STOCKHOLDERS $ (165,627) $ (147,218) $ (2,668,335) ============ ============ ============ NET (LOSS) PER COMMON SHARE - BASIC AND DILUTED $ (.011) $ (.007) $ (.237) ============ ============ ============ WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 14,536,370 19,532,027 10,302,421 ============ ============ ============
4 PYR ENERGY CORPORATION (A DEVELOPMENT STAGE COMPANY) STATEMENTS OF CASH FLOWS (UNAUDITED)
Cumulative Amounts from Three Months Ended Inception 11/30/99 11/30/00 Through 11/30/00 CASH FLOWS FROM OPERATING ACTIVITIES Net (loss) $ (165,627) $ (147,218) $ (2,402,936) Adjustments to reconcile net (loss) to net cash provided by operating activities Depreciation and amortization 4,558 4,098 70,272 Contributed services -- -- 36,000 Gain on sale of oil and gas prospects -- -- (556,197) Dry hole, impairment and abandonments -- -- 521,369 Common stock issued for interest on debt -- -- 116,822 Common stock issued for consulting fees 20,000 -- 20,000 Amortization of financing costs -- -- 26,939 Amortization of marketable securities -- -- (20,263) Changes in assets and liabilities Decrease (increase) in accounts and other receivables (55,196) (39,996) (40,562) (Increase) in prepaids (14,100) (18,537) (43,923) (Decrease) increase in accounts payable (122,211) (99,542) (39,939) Other -- 980 7,229 ------------ ------------ ------------ Net cash (used) by operating activities (332,576) (300,215) (2,305,189) ------------ ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES Cash paid for furniture and equipment -- -- (90,155) Cash paid for undeveloped oil and gas properties (1,557,898) (4,346,773) (15,503,800) Proceeds from sale of oil and gas properties -- -- 1,050,078 Cash paid for marketable securities -- -- (5,090,799) Proceeds received from marketable securities 1,916,552 -- 5,111,062 Cash paid for reimbursable property costs (20,500) -- (410,000) ------------ ------------ ------------ Net cash (used) in investing activities 338,154 (4,346,773) (14,933,614) ------------ ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES Members capital contributions -- -- 28,000 Distributions to members -- -- (66,000) Cash from short-term borrowings -- -- 285,000 Repayment of short-term borrowings -- -- (285,000) Proceeds from sale of common stock -- -- 19,188,750 Proceeds from sale of convertible debt -- -- 2,500,001 Proceeds from exercise of warrants -- 666,385 1,120,292 Proceeds from exercise of options -- 2,406 18,406 Cash paid for offering costs -- -- (875,978) Cash received upon recapitalization and merger -- -- 336 Payments on capital lease (385) (920) (5,195) Preferred dividends paid -- -- (50,910) ------------ ------------ ------------ Net cash (used) provided by financing activities (385) 667,871 21,857,702 ------------ ------------ ------------ NET (DECREASE) INCREASE IN CASH 5,193 (3,979,117) 4,618,899 CASH, BEGINNING OF PERIODS 117,905 8,598,016 -- ------------ ------------ ------------ CASH, END OF PERIODS $ 123,098 $ 4,618,899 $ 4,618,899 ============ ============ ============
5 PYR ENERGY CORPORATION (A DEVELOPMENT STAGE COMPANY) NOTES TO FINANCIAL STATEMENTS NOVEMBER 30, 2000 The accompanying interim financial statements of PYR Energy Corporation are unaudited. In the opinion of management, the interim data includes all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the results for the interim period. We have prepared the financial statements included herein pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosure normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. We believe the disclosures made are adequate to make the information not misleading and recommend that these condensed financial statements be read in conjunction with the financial statements and notes included in our Form 10-KSB for the year ended August 31, 2000. PYR Energy Corporation (formerly known as Mar Ventures Inc. ("Mar")) was incorporated under the laws of the State of Delaware on March 27, 1996. Mar had been a public company which had no significant operations as of July 31, 1997. On August 6, 1997, Mar acquired all the interests in PYR Energy LLC ("PYR LLC") (a Colorado limited liability company organized on May 31, 1996), a development stage company as defined by Statement of Financial Accounting Standards (SFAS) No. 7. PYR LLC, an independent oil and gas exploration company, had been engaged in the acquisition of undeveloped oil and gas interests for exploration and exploitation in the Rocky Mountain region and California. As of August 6, 1997, PYR LLC had acquired only non-producing leases and acreage and no exploration had been commenced on the properties. Upon completion of the acquisition of PYR LLC by Mar, PYR LLC ceased to exist as a separate entity. Mar remained as the surviving legal entity and, effective November 12, 1997, Mar changed its name to PYR Energy Corporation. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES USE OF ESTIMATES - The preparation of financial statements in conformity with generally accepted accounting principles requires us 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 reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. CASH EQUIVALENTS - For purposes of reporting cash flows, we consider as cash equivalents all highly liquid investments with a maturity of three months or less at the time of purchase. At November 30, 2000, there were no cash equivalents. MARKETABLE SECURITIES - At August 31, 1999, we held investments in marketable securities which were classified as held-to-maturity. Securities classified as held-to-maturity consisted of securities with a maturity date within one year, and are classified as Marketable Securities as a part of Current Assets. These securities, which consisted of U.S. Government backed discount notes, are stated at amortized cost. At November 30, 2000, all marketable securities previously held by the Company had matured. PROPERTY AND EQUIPMENT - Furniture and equipment is recorded at cost. Depreciation is provided by use of the straight-line method over the estimated useful lives of the related assets of three to five years. Expenditures for replacements, renewals, and betterments are capitalized. Maintenance and 6 repairs are charged to operations as incurred. OIL AND GAS PROPERTIES - We follow the full cost method to account for our oil and gas exploration and development activities. Under the full cost method, all costs incurred which are directly related to oil and gas exploration and development are capitalized and subjected to depreciation and depletion. Depletable costs also include estimates of future development costs of proved reserves. Costs related to undeveloped oil and gas properties may be excluded from depletable costs until such properties are evaluated as either proved or unproved. The net capitalized costs are subject to a ceiling limitation. Gains or losses upon disposition of oil and gas properties are treated as adjustments to capitalized costs, unless the disposition represents a significant portion of the Company's proved reserves. Undeveloped oil and gas properties consists of ongoing exploratory drilling costs for which no results have been obtained and leases and acreage we acquire for our exploration and development activities. The cost of these non-producing leases is recorded at the lower of cost or fair market value. We have adopted SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed of", which requires that long-lived assets to be held and used be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. During the fiscal year ended August 31, 2000, we recorded an impairment loss of approximately $200,000. No impairment losses have been recorded during the three months ended November 30, 2000. INCOME TAXES - We have adopted the provisions of SFAS No. 109, "Accounting for Income Taxes". SFAS 109 requires recognition of deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax liabilities and assets are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION We are an independent oil and gas exploration company with a strategic focus on exploring for and developing significant oil and gas reserves in deep, structurally complex formations. To date, the primary focus of our activity has been in the San Joaquin Basin of California. We are involved in a number of high potential exploration projects in this area, the most notable being our East Lost Hills project. We initiated this project in 1997 and brought in industry partners in 1998. We also are active in the Rocky Mountain region, where we continue to acquire acreage positions in exploration areas we have identified as having significant oil and gas production and reserve potential. Our activities have been focused on prospect generation, the acquisition of acreage, geological and geophysical work, securing partners and drilling exploration wells. To date, we have not had oil and gas production or operating revenues. In February 2001, we anticipate the start of production from our first well at East Lost Hills. Our future financial results continue to depend primarily on (1) our ability to discover commercial quantities of oil and gas; (2) the market price for oil and gas; (3) our ability to continue to generate potential projects; and (4) our ability to fully implement our exploration and development program. There can be no assurance that we will be successful in any of these respects or that the prices of oil and gas prevailing at the time of production will be at a level allowing for profitable production. 7 During the three months ended November 30, 2000, we paid approximately $4,346,000 for the cost of acquiring an additional 1.5443% working interest at East Lost Hills, drilling and completion costs, transportation pipeline costs, production facilities costs, delay rentals, and other related direct costs with respect to our exploration and development projects. During the three months ended November 30, 1999, we paid approximately $1,558,000 for drilling costs, delay rentals, acquisition of acreage, direct geological and geophysical costs, and other related direct costs with respect to our identified exploration and exploitation projects. We have not recorded any revenues from oil and gas production. We currently anticipate that we will participate in the drilling of up to six exploration/development wells during the next 12 months, although the number of wells may increase as additional projects are added to our portfolio. However, there can be no assurance that any such wells will be drilled and if drilled that any of these wells will be successful. It is anticipated that the future development of our business will require additional, and possibly substantial, capital expenditures. Depending upon the extent of success of our ability to sell additional prospects for cash, the level of industry participation in our exploration projects, the continuing results at East Lost Hills and the deep Temblor exploration program, we anticipate spending from approximately $8 million up to approximately $24 million for capital expenditures relating to exploration and development of our projects during calendar 2001. To limit capital expenditures, we intend to form industry alliances and exchange an appropriate portion of our interest for cash and/or a carried interest in our exploration projects. We may need to raise additional funds to cover capital expenditures. These funds may come from cash flow, equity or debt financing, or from sales of interests in our properties although there is no assurance additional funding will be available. At November 30, 2000, we had a working capital amount of approximately $4,633,000. We had no outstanding long-term debt at November 30, 2000 and had not entered into any commodity swap arrangements or hedging transactions. Although we have no current plans to do so, we may enter into commodity swap and/or hedging transactions in the future in conjunction with oil and gas production. Nevertheless, there can be no assurance that we will ever have oil and gas production. The following provides a summary update at our East Lost Hills project in the San Joaquin Basin of California. On August 26, 1999, we and other working interest owners began drilling the Berkley ELH #1 well, approximately two miles northwest of the #1-17R well. On April 12, 2000, this well had drilled to a total depth of 19,724 feet. Production testing began on May 28, 2000, and on July 6, 2000, based on the results of the production testing and other analysis, we announced a natural gas discovery at the East Lost Hills field. Currently, construction of production facilities and a connection pipeline are in the final stages of completion. We believe that commercial production of natural gas and liquid hydrocarbons from this well will begin in February 2001. On July 11, 2000, the participants commenced drilling the Berkley ELH #2 well. This well is located approximately 1.5 miles northwest of the Berkley ELH #1 and has been drilled and cased to a measured depth of 18,011 feet. We currently are in the process of completing the well for testing as a potential natural gas producer. 8 On June 19, 2000, the participants at East Lost Hills commenced drilling the Berkley ELH #3 well. Currently, intermediate casing is being installed at a depth of approximately 18,900 feet with the intent of drilling deeper. On November 26, 2000, the participants commenced drilling the Berkley ELH #4 well. This well is projected to drill to a total depth of 20,000 feet. We have set intermediate casing to 10,000 feet and are currently drilling below 12,400 feet. The participants may drill up to six additional wells in this prospect during calendar year 2001, although there is no assurance this will occur. RESULTS OF OPERATIONS THE QUARTER ENDED NOVEMBER 30, 2000 COMPARED WITH THE QUARTER ENDED NOVEMBER 30, 1999. Operations during the quarter ended November 30, 2000 resulted in a net loss of $147,218 compared to a net loss of $165,627 for the quarter ended November 30, 1999. OIL AND GAS REVENUES AND EXPENSES. We have not owned any producing or proved oil and gas properties. Accordingly, no oil and gas revenues or expenses have been recorded. INTEREST INCOME. We recorded $111,128 and $56,842 in interest income for the quarters ended November 30, 2000 and November 30, 1999, respectively. The increase in interest income results from an increase in cash on hand from a private placement completed in August 2000. DEPRECIATION, DEPLETION AND AMORTIZATION. We recorded no depletion expense from oil and gas properties for the quarters ended November 30, 2000 and November 30, 1999. We do not own any proved reserves and have had no oil or gas production. We recorded $4,098 and $4,558 in depreciation expense associated with capitalized office furniture and equipment during the quarters ended November 30, 2000 and November 30, 1999, respectively. GENERAL AND ADMINISTRATIVE EXPENSE. We incurred $254,248 and $217,845 in general and administrative expenses during the quarters ended November 30, 2000 and November 30, 1999, respectively. The increase results primarily from increases in investor and stockholder relations. INTEREST EXPENSE. We recorded no interest expense in the quarter ended November 30, 2000 and nominal interest expense for the quarter ended November 30, 1999. 9 PART II. OTHER INFORMATION Item 1. Legal Proceedings Not Applicable Item 2. Changes in Securities; Recent Sales Of Unregistered Securities On October 26, 2000, we met specific requirements to enable us to seek to repurchase of all of the remaining outstanding Series A Convertible Preferred Stock. Rather than allow their shares to be repurchased at $0.60 per underlying common share, the fifty-two holders of the preferred stock converted all of the remaining outstanding Series A Convertible Preferred Stock into common stock. This resulted in cashless transactions in November 2000 whereby 14,263.41 shares of Series A Preferred Stock were converted into a total of 2,377,234 shares of common stock. The conversions were made pursuant to exemptions from registration in accordance with Rules 505 and/or 506 and/or Sections 3(a)(9), 3(b), and/or 4(2) of the Securities Act. At November 30, 2000 there were no remaining outstanding shares of Series A Preferred Stock outstanding. In addition, outstanding warrants to purchase 116,667 shares of common stock were exercised at the exercise price of $.75 per share. We received $87,500 in cash as the result of these exercises. There are no additional outstanding warrants associated with this placement. During November 2000, we met certain share price requirements to enable us to repurchase all remaining outstanding warrants issued in conjunction with a private placement that was completed in May of 1999. During the quarter ended November 30, 2000, warrants held by five persons were exercised to purchase a total of 17,125 shares of our common stock at a purchase price of $2.50 per share. Total proceeds received from these warrant exercises were $42,813. Prior to the quarter ended November 30, 2000, warrants held by seven persons were exercised to purchase a total of 160,938 shares of our common stock. Total proceeds received from these warrant exercises were $402,345. During December 2000, all of the remaining outstanding warrants from the May 1999 placement held by forty-two persons have been exercised to purchase an aggregate 259,437 shares of common stock, resulting in aggregate proceeds to us of $648,593. The issuance of the shares of common stock upon the exercise of the warrants were made pursuant to exemptions from registration in accordance with Rules 505 and/or 506 and/or Sections 3(b) and/or 4(2) of the Securities Act. Also during the quarter ended November 30, 2000, warrants issued in conjunction with the August 2000 private placement had been exercised to purchase 114,286 shares of common stock at an exercise price of $4.80 per share. This resulted in proceeds to us of $548,573. The issuance of the shares of common stock upon the exercise of the warrants were made pursuant to exemptions from registration in accordance with Rules 505 and/or 506 and/or Sections 3(b) and/or 4(2) of the Securities Act. Item 3. Defaults Upon Senior Securities None Item 4. Submission of Matters to a Vote of Security Holders None Item 5. Other Information None 10 Item 6. Exhibits and Reports on Form 8-K (a) Exhibits None (b) During the Quarter ended November 30, 2000, we filed two reports on Form 8-K A Form 8-K was filed on November 28, 2000 reporting a news release dated November 28, 2000. A Form 8-K was filed on November 30, 2000 reporting a news release dated November 30, 2000. SIGNATURES In accordance with the requirements of the Exchange Act, the registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. PYR ENERGY CORPORATION Signatures Title Date ---------- ----- ---- /s/ D. Scott Singdahlsen Chief Executive Officer; January 16, 2001 ------------------------ President and Chairman D. Scott Singdahlsen Of The Board /s/ Andrew P. Calerich Chief Financial Officer, January 16, 2001 ------------------------ Vice-President and Secretary Andrew P. Calerich 11