U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
(AMENDMENT NO. 1)
QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1999
COMMISSION FILE NO. 0-25386
FX ENERGY, INC.
----------------------------------------------------
(Exact name of registrant as specified in its charter)
NEVADA 87-0504461
------------------------------ -------------------
(State or other jurisdiction of (IRS Employer
Incorporation or organization) Identification No.)
3006 HIGHLAND DRIVE, SUITE 206
SALT LAKE CITY, UTAH 84106
--------------------------------------
(Address of principal executive offices)
(801) 486-5555
-------------------------
(Issuer's telephone number)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by section 13 of 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
The number of shares of $.001 par value common stock outstanding as of May 17,
1999 was 15,297,003.
- -------------------------------------------------------------------------------
NOTE: The only change effected by this Amendment is to correct the number of
shares in Note 4: Subsequent Events--Private Placement of Securities
to 1,792,500 shares rather than 1,917,500 shares as incorrectly
reported in the initial filing.
- -------------------------------------------------------------------------------
1
PART I.
ITEM 1. FINANCIAL STATEMENTS
FX ENERGY, INC., AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH DECEMBER
31, 1999 31, 1998
---------- ------------
(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 940,041 $ 1,811,780
Investment in marketable debt securities 2,906,829 2,929,914
Accounts receivable:
Accrued oil sales 142,527 95,064
Interest receivable 63,465 86,258
Joint interest owners and others 184,412 240,102
Inventory 66,706 68,327
Other current assets 70,267 66,053
---------- ----------
Total current assets 4,374,247 5,297,498
---------- ----------
PROPERTY AND EQUIPMENT, AT COST:
Oil and gas properties (successful
efforts method):
Proved 1,636,285 1,605,279
Unproved 1,478,485 1,178,408
Other property and equipment 2,527,391 2,494,688
---------- ----------
Gross property and equipment 5,642,161 5,278,375
Less accumulated depreciation, depletion
and amortization (2,805,871) (2,679,441)
---------- ----------
Net property and equipment 2,836,290 2,598,934
---------- ----------
OTHER ASSETS:
Certificates of deposit 356,500 356,500
Other 2,789 --
---------- ----------
Total other assets 359,289 356,500
---------- ----------
TOTAL ASSETS $ 7,569,826 $ 8,252,932
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 385,414 $ 420,906
Accrued liabilities 1,113,005 911,950
---------- ----------
Total current liabilities 1,498,419 1,332,856
---------- ----------
Total liabilities 1,498,419 1,332,856
---------- ----------
STOCKHOLDERS' EQUITY:
Common stock, $.001 par value, 30,000,000
shares authorized, 13,054,503 issued and
outstanding as of March 31, 1999 and December
31, 1998 13,055 13,055
Notes receivable from officers (1,430,677) (1,304,527)
Additional paid-in capital. 31,112,861 31,112,861
Accumulated deficit (23,623,832) (22,901,313)
---------- ----------
Total stockholders' equity 6,071,407 6,920,076
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 7,569,826 $ 8,252,932
========== ==========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS.
2
FX ENERGY, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
FOR THE THREE MONTHS ENDED
MARCH 31,
--------------------------
1999 1998
---------- -----------
REVENUES:
Oil sales $ 233,708 $ 331,828
Drilling revenue 87,543 --
Gain on sale of property
interests -- 466,891
---------- ----------
Total revenues 321,251 798,719
---------- ----------
OPERATING COSTS AND EXPENSES:
Lease operating expenses 236,069 285,462
Production taxes 14,368 20,899
Geological and geophysical 179,832 251,920
costs
Exploratory dry hole costs -- 12,324
Drilling costs 52,874 11,386
Depreciation, depletion and 126,429 178,796
amortization
General and administrative 536,389 741,669
---------- ----------
Total operating costs
and expenses 1,145,961 1,502,456
Operating loss (824,710) (703,737)
---------- ----------
Other income (expense):
Interest and other income 102,191 184,633
---------- ----------
Total other income. 102,191 184,633
---------- ----------
NET LOSS $ (722,519) $ (519,104)
========== ==========
Basic and diluted net loss per
common share $ (.06) $ (.04)
========== ==========
Basic and diluted weighted average
number of shares outstanding 13,054,503 12,822,704
========== ==========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS.
3
FX ENERGY, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
FOR THREE MONTHS ENDED
MARCH 31,
----------------------
1999 1998
-------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (722,519) $ (519,104)
Adjustments to reconcile net loss to net
cash used in
operating activities:
Depreciation, depletion and
amortization 126,429 178,796
Gain on sale of property interests -- (466,891)
Increase (decrease) from changes in:
Accounts receivable (17,640) 414,929
Inventory 1,621 2,611
Other current assets (4,214) 17,914
Accounts payable and accrued liabilities (103,484) (299,679)
---------- ----------
Net cash used in operating
activities (719,807) (671,424)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to oil and gas properties (65,036) (89,284)
Additions to other property and equipment (12,382) (123,117)
Additions to other assets (2,789) --
Proceeds from sale of property interests 3,000 500,000
Proceeds from sale of other property and
equipment -- 3,267
Purchase of marketable debt securities (1,041,915) (4,038,710)
Proceeds from maturing marketable debt
securities 1,065,000 3,785,000
---------- ----------
Net cash provided by (used in) investing
activities (54,122) 37,156
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Advances to officers (97,810) (331,275)
Proceeds from exercise of warrants and
options -- 64,900
---------- ----------
Net cash used in financing activities (97,810) (266,375)
---------- ----------
Decrease in cash and cash equivalents (871,739) (900,643)
Cash and cash equivalents at beginning of period 1,811,780 4,511,919
---------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 940,041 $ 3,611,276
========== ==========
SUPPLEMENTAL NON-CASH ACTIVITY DISCLOSURE:
Non-cash investing activities:
Additions to oil and gas properties for the three months ended March 31,
1999 included $269,047 of additions financed with accounts payable and accrued
liabilities.
Non-cash financing activities:
During the three months ended March 31, 1998, two of FX Energy's officers
exercised their options to purchase 150,000 shares each of FX Energy's common
stock at $1.50 per share. Each officer utilized a $100,000 bonus and a $125,000
note payable to FX Energy to exercise the options.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS.
4
FX ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1: BASIS OF PRESENTATION
The interim financial data are unaudited; however, in the opinion of the
management of FX Energy, Inc. and Subsidiaries ("FX Energy" or the "Company"),
the interim data includes all adjustments, consisting only of normal recurring
adjustments, necessary for a fair statement of the results for the interim
periods. The interim financial statements should be read in conjunction with FX
Energy's annual report on Form 10-K for the year ended December 31, 1998,
including the financial statements and notes thereto.
The consolidated financial statements include the accounts of FX Energy and
its wholly-owned subsidiaries and FX Energy's undivided interests in Poland.
All significant inter-company accounts and transactions have been eliminated in
consolidation. At March 31, 1999, FX Energy owned 100% of the voting stock of
all of its subsidiaries.
FX Energy follows the successful efforts method of accounting for its oil
and gas operations. Under this method of accounting, all property acquisition
costs and costs of exploratory and development wells are capitalized when
incurred, pending determination of whether an individual well has found proved
reserves. If it is determined that an exploratory well has not found proved
reserves, the costs of drilling the well are expensed. The costs of development
wells are capitalized whether productive or nonproductive.
Certain balances in the 1998 financial statements have been reclassified to
conform to the current quarter presentation. These changes had no effect on
total assets, total liabilities, stockholders' equity or net loss.
NOTE 2: INCOME TAXES
FX Energy recognized no income tax benefit from the losses generated in the
first quarter of 1999 and the first quarter of 1998.
5
NOTE 3: BUSINESS SEGMENT INFORMATION
FX Energy operates within two segments of the oil and gas industry: the
exploration and production segment and the contract drilling and well servicing
segment; and, within the exploration segment of the mining industry. Mining,
which consists of gold exploration on FX Energy's Sudety Project Area in Poland,
is immaterial to FX Energy and is not considered a reportable business segment
by FX Energy.
Reportable business segment information as of March 31, 1999 and for the
three months ended March 31, 1999 follows:
Reportable Segments
----------------------
Exploration Drilling Non- Other
and and Well Reportable Reconciling
Production Servicing Segments Items (1) Total
----------- --------- ---------- ----------- ---------
Revenues $ 233,708 $ 87,543 -- -- $321,251
Net loss (211,004) (46,266) -- (465,249) (722,519)
Identifiable net
property and
equipment (2) 1,957,953 655,963 -- 222,374 2,836,290
(1) Net loss reconciling items include $536,389 of general and
administrative expenses, $102,191 of other income and $31,051 of
corporate DD&A. Identifiable net property and equipment includes
$222,374 of corporate office equipment, hardware and software.
(2) Identifiable net property and equipment are reported by business segment
for management reporting and reportable business segment disclosure
purposes. Current assets and other assets are not allocated to business
segments for management reporting or business segment disclosure
purposes.
Reportable business segment information as of March 31, 1998 and for the
three months ended March 31, 1998 follows:
Reportable Segments
---------------------
Exploration Drilling Non- Other
and and Well Reportable Reconciling
Production Servicing Segments Items (1) Total
---------- --------- ---------- ----------- -------
Revenues 798,719 -- -- -- 798,719
Net income or 159,614 (88,827) (5,102) (584,789) (519,104)
(loss)
Identifiable net
property and
equipment (2) 7,598,984 867,315 -- 291,578 8,757,877
(1) Net loss reconciling items include $741,669 of general and
administrative expenses, $184,633 of other income and $27,753 of
corporate DD&A. Identifiable net property and equipment includes
$291,578 of corporate office equipment, hardware and software.
(2) Identifiable net property and equipment are reported by business segment
for management reporting and reportable business segment disclosure
purposes. Current assets and other assets are not allocated to business
segments for management reporting or business segment disclosure
purposes.
6
NOTE 4: SUBSEQUENT EVENTS
Advances to Officers
On April 8, 1999, FX Energy made final advances totaling $500,000 to two
officers in accordance with the April 10, 1998 agreements with such officers.
FX Energy now has no further commitment to advance additional funds to the
officers. As of March 31, 1999, notes receivable from officers was $1.4
million, including interest, which, along with the $500,000 advanced on April 8,
1999, is due on or before December 31, 1999.
Private Placement of Securities
On April 8, 1999, FX Energy initiated a private placement that resulted
in the sale during May 1999 of 1,792,500 shares of common stock resulting in
gross proceeds of $7,170,000. The proceeds from this placement are to be used
to partially fund activities on the Lachowice Farm-in and for other general
corporate purposes. No placement fees were paid by FX Energy in connection
with the sale of the aforementioned shares.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
FX ENERGY, INC.
(Registrant)
Date: May 18 1999 By /s/ Dennis L. Tatum
Vice-President, Treasurer and Chief
Accounting Officer
7