-----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, WEEF2HgXCaaQo954lowC9ZweiEVnugaEjliTL8/JVja/KtvHETHr9gUyAxBN8d/n pw4rOm0l0ZCc9ey3M1p1yQ== 0001047469-97-008476.txt : 19971223 0001047469-97-008476.hdr.sgml : 19971223 ACCESSION NUMBER: 0001047469-97-008476 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19971031 FILED AS OF DATE: 19971222 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ARXA INTERNATIONAL ENERGY INC CENTRAL INDEX KEY: 0000774415 STANDARD INDUSTRIAL CLASSIFICATION: AGRICULTURE PRODUCTION - LIVESTOCK & ANIMAL SPECIALTIES [0200] IRS NUMBER: 133784149 STATE OF INCORPORATION: DE FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 002-99565-NY FILM NUMBER: 97742075 BUSINESS ADDRESS: STREET 1: 25227 GROGANS MILL ROAD STREET 2: STE 125 CITY: HOUSTON STATE: TX ZIP: 77380 BUSINESS PHONE: 7136522792 MAIL ADDRESS: STREET 1: 1331 LAMAR SUITE 1375 CITY: HOUSTON STATE: TX ZIP: 77010 FORMER COMPANY: FORMER CONFORMED NAME: MAJOR LEAGUE ENTERPRISES INC DATE OF NAME CHANGE: 19951002 10QSB 1 10QSB - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 --------------- FORM 10-QSB --------------- [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] FOR THE QUARTERLY PERIOD ENDED: OCTOBER 31,1997 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] COMMISSION FILE NUMBER: 2-99565 ARXA INTERNATIONAL ENERGY, INC. (Exact name of registrant as specified in its charter) Delaware 13-3784149 (State or other jurisdiction) (IRS Employer of incorporation or organization Identification No.) 110 Cypress Station Drive, Suite 280 Houston, Texas 77090 (Address of principal executive offices, including zip code) (281) 444-1088 (Registrant's telephone number, including area code) ------------- Securities registered under Section 12(b) of the Exchange Act: Name of Each Exchange Title of Each Class on which Registered ----------------------------------------- Common Stock, $.001 par value OTC / ELECTRONIC BULLETIN BOARD Indicate by check mark whether the registrant (I) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (ii) has been subject to such filing requirements for the past 90 days. Yes [ ] No [x ] As of October 31, 1997, there were 20,377,194 shares of Common Stock outstanding. - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- ARXA INTERNATIONAL ENERGY, INC. INDEX TO FORM 10-Q FOR THE QUARTER ENDED OCTOBER 31, 1997 PART I - FINANCIAL INFORMATION PAGE ITEM 1. FINANCIAL STATEMENTS Balance Sheets as of OCTOBER 31, 1997 (unaudited) and JANUARY 31, 1997 . . . . . . . . . . . . . . . . . . . . . . . . . 1 Statements of Operations for the Three Months Ended OCTOBER 31, 1997 and 1996 (unaudited) . . . . . . . . . . 2 Statements of Operations for the Nine Months Ended OCTOBER 31, 1997 and 1996 (unaudited) . . . . . . . . . . 3 Statement of Stockholders' Equity for the Nine months Ended OCTOBER 31, 1997 (unaudited) . . . . . . . . 4 Statements of Cash Flows for the Nine months Ended OCTOBER 31, 1997 and 1996 (unaudited). . . . . . . . 5 Notes to Unaudited Financial Statements. . . . . . . . . . . . . . . . . 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. . . . . . . . . . . . . 9 Arxa International Energy, Inc. Balance Sheets as of October 31, 1997 (Unaudited) and January 31, 1997 ASSETS October 31, 1997 January 31, 1997 ---------------- ---------------- CURRENT ASSETS: Cash And Cash Equivalents $ 147,509 $ 2,667 Accounts Receivable, Trade 206,205 14,627 Other Current Assets 12,302 22,906 ----------- ----------- Total Current Assets 366,016 40,200 PROPERTY AND EQUIPMENT: Successful Efforts Method: Unproved Oil And Gas Properties 528,843 1,144,159 Proved Oil And Gas Properties 2,585,679 471,682 Furniture And Equipment 150,125 9,609 ----------- ----------- 3,264,647 1,625,450 Less - Accumulated Depletion, Depreciation And Amortization (363,350) (9,227) ----------- ----------- Net Property And Equipment 2,901,297 1,616,223 LONG-TERM INVESTMENT: 66,040 - OTHER ASSETS: Organization Cost, Net - 663 Covenant Not To Compete, Net - 59,914 Investment in Pipeline Partnership - 20,000 Other 57,833 - ----------- ----------- Total Other Assets 57,833 80,577 ----------- ----------- $ 3,391,186 $ 1,737,000 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts Payable, Trade $ 65,104 $ 29,554 Accrued Expenses 68,750 122,750 Current Liabilities, Long Term Debt 132,055 29,265 ----------- ----------- Total Current Liabilities 265,909 181,569 LONG-TERM DEBT, Net Of Current Maturities 50,000 79,770 STOCKHOLDERS' EQUITY: Preferred Stock - 426,943 Common Stock 20,377 7,306 Additional Paid-In Capital 3,054,900 3,435,488 Accumulated Deficit - (2,394,076) ----------- ----------- Total Stockholders' Equity 3,075,277 1,475,661 $ 3,391,186 $ 1,737,000 The Accompanying Notes Are an Integral Part of These Financial Statements. -1- Arxa International Energy, Inc. Statements of Operations for the Three Months Ended October 31, 1997 and 1996 (Unaudited) Three Months Ended October 31, --------------------------- 1997 1996 Revenues, Oil And Gas $ 15,722 $ 4,866 Operating Costs and Expenses: Production Expenses 5,852 2,167 Exploration Costs - 447,210 Impairment of Oil & Gas Properties 194,712 - Depletion, Depreciation And Amortization 28,218 30,972 General And Administrative Expenses (22,448) 95,155 ----------- ---------- Total 206,334 575,504 ----------- ---------- Operating Loss (190,612) (570,638) Other Income (Expense): Interest Income 695 4,011 Interest Expense (1,609) (1,609) Loss on Sale of Pipeline (9,550) - ----------- ---------- (10,464) 2,402 Income Taxes - - ----------- ---------- Net Loss (201,076) (568,236) Net Loss Per Common Share $ (.026) $ (.08) Weighted Average Number Of Shares Outstanding 7,590,884 7,209,903 The Accompanying Notes Are an Integral Part of These Financial Statements. -2- Arxa International Energy, Inc. Statements of Operations for the Nine Months Ended October 31, 1997 and 1996 (Unaudited) Nine Months Ended October 31, ---------------------------- 1997 1996 ---- ---- Revenues, Oil And Gas $ 40,875 $ 4,866 Operating Costs and Expenses: Production Expenses 30,897 2,168 Exploration Costs - 458,660 Impairment of Oil & Gas Properties 194,712 - Depletion, Depreciation And Amortization 68,604 91,111 General And Administrative Expenses 197,232 313,490 ---------- ---------- Total 491,445 865,429 ---------- ---------- Operating Loss (450,570) (860,563) Other Income (Expense): Interest Income 1,727 11,002 Interest Expense (5,944) (8,682) Loss on Sale of Pipeline (9,550) - ---------- ---------- (13,767) 2,320 Income Taxes - - ---------- ---------- Net Loss (464,337) (858,243) Net Loss Per Common Share $ (.061) $ (.12) Weighted Average Number Of Shares Outstanding 7,590,884 7,209,903 The Accompanying Notes Are an Integral Part of These Financial Statements. -3- Arxa International Energy, Inc. Statements of Stockholders' Equity for the Nine Months Ended October 31, 1997 (Unaudited)
Shares Amount ------------------------ ------------------------- Add'l Paid-in Accumulated Common Preferred Common Preferred Capital Deficit --------- ---------- ---------- ---------- -------------- -------------- Balance, July 31, 1997 7,373,873 131,010 $ 7,374 $ 131,010 $ 3,968,667 $ (2,662,303) Conversion of Preferred to Common 131,010 (131,010) 131 (131,010) 130,879 - Prior period adjustment 16,001 - 16 - 11,984 - Issuance of Common Stock for: Consulting Services 70,000 - 70 - (70) - Net Loss for the Nine months Ended October 31, 1997 - - - - - (464,337) Reverse Acquisition of Arxa International by Phoenix Energy Group, Inc. on October 27, 1997 12,786,310 - 12,786 - (1,056,560) 3,126,640 ------------ ------------ ------------ ------------ ------------ ------------ Balance, October 31, 1997 20,377,194 - $ 20,377 $ - $ 3,054,900 $ -
The Accompanying Notes Are an Integral Part of These Financial Statements. -4- Arxa International Energy, Inc. Statements of Cash Flows for the Nine Months Ended October 31, 1997 and 1996 (Unaudited) Nine Months Ended October 31, 1997 1996 ----------- ---------- Cash Flows from Operating Activities: Net Loss $ (464,337) $ (858,243) Adjustments to Reconcile Net Loss to Net Cash Provided by Operating Activities: Loss on Disposition of Oil & Gas Properties 9,550 484,054 Depletion, Depreciation and Amortization 68,604 91,111 Impairment of Oil & Gas Properties 194,712 - Changes in Working Capital: Net of Effects of Non-Cash Transactions (204,388) (26,871) ---------- ---------- Net Cash Used in Operating Activities (395,859) (309,949) Cash Flows used in Investing Activities: Purchase of Oil & Gas Properties (1,396,812) (1,082,170) Purchase of Furniture and Equipment (117,242) - Additions to Long Term Investments (66,040) - Additions to Other Assets (57,278) - Buyback of 25,000 Common Shares per agreement (18,750) - Sale of West Sandy Creek Pipeline 10,450 - ---------- ---------- Net Cash Used in Investing Activities (1,645,672) (1,082,170) Cash Flows from (used in) Financing Activities: Sale of Common Stock, Net 350,000 1,569,900 Sale of Stock Options, Net 35,000 - Proceeds from Notes Payable 25,000 - Repayment of Notes Payable (61,980) (107,515) Payment of Syndication Costs (27,000) Payment of Dividends (11,562) Reverse Acquisition Equity Adjustment 1,838,353 - ---------- ---------- Net Cash Provided By Financing Activities 2,186,373 1,423,823 ---------- ---------- Net Increase (Decrease) in Cash 144,842 31,704 Cash at Beginning of Period 2,667 34,402 ---------- ---------- Cash at End of Period $ 147,509 $ 66,106 ----------- ---------- ---------- ---------- The Accompanying Notes Are an Integral Part of These Financial Statements -5- ARXA INTERNATIONAL ENERGY, INC. NOTES TO FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED OCTOBER 31, 1997 AND 1996 (UNAUDITED) 1. SUMMARY OF ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES ORGANIZATION AND OPERATIONS ARXA International Energy, Inc. (the Company) is engaged in crude oil and natural gas exploration, development, and production. The Company was inactive prior to August 8, 1995. CASH AND CASH EQUIVALENTS For purposes of the statement of cash flows, the Companies consider all short-term securities purchased with a maturity of three months or less to be cash equivalents. PROPERTY AND EQUIPMENT Property and equipment are stated at cost. Depreciation is computed by the straight-line methods for financial and federal income tax reporting over their useful lives, which are generally five to seven years. INCOME TAXES Deferred income taxes are provided for temporary differences between financial statement and income tax reporting, principally from the recognition of tax loss carry forwards as a deferred tax asset. Because the utilization of the net operating loss carry forward cannot be determined at this time, the Company has provided a valuation allowance for the entire deferred tax asset in accordance with the provisions of Financial Accounting Standards Board No. 109 "Accounting for Income Taxes". OIL AND GAS PROPERTIES The Company accounts for its exploration and production activities under the successful efforts method of accounting. Under this method, oil and gas lease acquisitions costs are capitalized when incurred. Unproved properties are assessed on a property-by-property basis and any impairment in value is recognized. If the unproved properties are determined to be productive, the appropriate related costs are transferred to proved oil and gas properties. Lease rentals are expensed as incurred. Oil and gas exploration costs, other than the costs of drilling exploratory wells, are charged to expense as incurred. The costs of drilling exploratory wells are capitalized pending determination of whether proved reserves are discovered. If proved reserves are not discovered, such drilling costs are expensed. The costs of all development well and related equipment used in the production of crude oil and natural gas are capitalized. The Company amortizes capitalized costs, including gas gathering systems, using a unit-of-production method based on proved oil and gas reserves as estimated by independent petroleum engineers. Depreciation of other property, plant and equipment is computed using principally the straight-line method over estimated useful lives of three to thirty years. NET LOSS PER COMMON SHARE Net loss per common share is determined by dividing the weighted average number of common shares outstanding during the period into net loss. Common share equivalents in the form of warrants are excluded from the calculation since they have a anti-dilutive effect on per share calculation. -6- ARXA INTERNATIONAL ENERGY, INC. NOTES TO FINANCIAL STATEMENTS - (CONTINUED) FOR THE NINE MONTHS ENDED OCTOBER 31, 1997 AND 1996 (UNAUDITED) 2. LONG-TERM DEBT For the nine months ended October 31, 1997, the Company borrowed short and long-term funds for the purposes of retiring common and preferred stock, release of certain liens on oil and gas properties, and investment in its oil and gas producing activities. The following summarizes long-term debt at October 31, 1997: Note payable, J. O. Schofield, dated March 12, 1997, non-interest bearing (imputed interest at eight percent), payable at seven percent of net funds received through March 12, 1999, after March 12, 1999 the note is repaid with the Company's common stock at the average market price for the five days preceding March 13, 1999 $ 77,285 Note payable, Duke Resources, dated March 12, 1997, due September 12, 1997; bears interest at eight percent and is unsecured 79,770 Note payable, individual, dated February 28, 1997, due February 28, 1998, non-interest bearing (imputed interest at eight percent), unsecured, repayable in cash or common stock at $1 per share 25,000 --------- 182,055 Current maturities of long-term debt (132,055) --------- Long Term-debt $ 50,000 --------- --------- Current maturities of long-term debt are $132,055 and $50,000 for the years ended October 31, 1998 and 1999. 3. COMMITMENTS AND CONTINGENCIES The Companies leases corporate office space under a month to month agreement. Rent expense for the nine months ended October 31, 1997 was $24,560. 4. SHAREHOLDERS' EQUITY The Company has authorized 100,000,000 shares of common stock, par value $.001. The Company has authorized 2,000,000 shares of preferred stock, $1 par value, 5% cumulative, convertible into $1 per common share; redeemable at $2 per share, plus arrears. At October 31, 1997 and January 31, 1997, the total outstanding shares of preferred stock totaled -0- and 426,944, respectively. During the period ending October 31, 1997, the Company under the terms of an agreement with a shareholder retired a portion of a covenant not to compete and retired 1,070,125 shares of common stock and 41,764 shares of preferred stock in exchange for a note payable of $110,000. During the period ending October 31, 1997 certain shareholders converted 385,180 shares of preferred stock into 385,180 shares of common stock. In mid-June 1997 an investment banking group that was granted a stock option to sell 1,000,000 shares of common stock for $700,000 sold 500,000 shares of common stock and delivered $350,000 to the Company. During the nine months ended October 31, 1997 the Company issued 470,000 shares of common in exchange for investment banking and consulting services. -7- ARXA INTERNATIONAL ENERGY, INC. NOTES TO FINANCIAL STATEMENTS - (CONTINUED) FOR THE NINE MONTHS ENDED OCTOBER 31, 1997 AND 1996 (UNAUDITED) Warrants for the purchase of common stock, $.001 par value, are summarized as follows: Exercise Price Expiration Date Number of Warrants -------------- --------------- ------------------ $2.00 August 9, 2000 2,025,000 $5.00 February 28, 1998 356,458 No warrants have been exercised during any time period. 5. INCOME TAXES At October 31, 1997 and 1996, the effective tax rate for the Company is reconcilable to statutory tax rates as follows: 1997 1996 ---- ---- U.S. federal Statutory Tax Rate 34% 34% Reconciling item (34) (34) ---- ---- Effective rate 0 0 For the nine months ended October 31, 1997 and 1996, the Company's deferred tax asset, resulting from net operating losses, totaled $686,845 and $313,812, respectively. Income tax expense for the nine months ended October 31, 1997 and 1996 was zero due to a valuation allowance which offset the deferred tax asset and tax expense at these dates. 6. SUBSEQUENT EVENTS ----- -8- ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. On October 27, 1997 the Company executed a Purchase and Sale Agreement with Phoenix Energy Group, Inc., culminating the previously announced negotiations. Under the Agreement, the Company has acquired substantially all of the assets of Phoenix Energy Group, Inc. in exchange for 12,786,310 shares of the Company's Common Stock, representing approximately 63% of the issued and outstanding shares of Common Stock following the transaction. This type of transaction is generally regarded by the financial community as a "reverse acquisition" or "reverse merger". The assets acquired consisted of leasehold rights to properties associated with the oil & gas rights acquired, ownership of oil & gas reserves, the working and net revenue mineral interests in oil & gas properties, and the proportionate interests in the plant and equipment associated with such properties. Additionally, the assets consisted of all accounts receivable, all bank accounts, credits due and debts owed, seller's corporate offices and all related fixtures, office space, furniture, automobiles, computers, and leasehold improvements. Following the transaction, changes were made in the officers and directors of the Company: William J. Bippus, formerly President and CEO, resigned those positions, and was replaced by L. Craig Ford. Gregory A. Stephens, formerly Treasurer, resigned and was replaced by L. Craig Ford. William J. Bippus and Gregory A. Stephens remained as directors Thomas A. Abate and Umberto Brovedani resigned as directors, creating two vacancies. The vacancies were filled by the election of L. Craig Ford, President of Phoenix Energy Group, Inc. and John Moran, both directors of Phoenix Energy Group, Inc. The financial statements required in connection with this asset acquisition will be filed on or before January 11, 1998. -9- ARXA INTERNATIONAL ENERGY, INC. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to signed on its behalf by the undersigned thereunto duly authorized. ARXA INTERNATIONAL ENERGY, INC. (Registrant) Date: December 20, 1997 /s/ L. CRAIG FORD ----------------------------------- President Date: December 20, 1997 /s/ DENNIS P. McGRATH ----------------------------------- Vice President and Controller EX-27 2 FDS
5 THIS FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM OCTOBER 31, 1997 FORM 10-Q FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 9-MOS JAN-31-1998 OCT-31-1997 147,509 0 206,205 0 0 366,016 3,264,647 (363,350) 3,391,186 265,909 0 0 0 20,377 3,054,900 3,391,186 40,875 40,875 0 0 491,445 0 5,944 (464,337) 0 (464,337) 0 0 0 (464,337) (0.061) (0.061)
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