1
UNITED STATES
SECURITIES EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[x] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDING MAY 31, 2001.
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from to .
------------ -----------------
Commission File Number 0-30746
------------------------
TBX RESOURCES, INC.
(Exact name of small business issuer as specified in its charter)
Texas 75-2592165
- - -------------------------------------------------------------- ------------------------------------
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
12300 Ford Road
Suite 194
Dallas, TX 75234
(Address of principal executive offices)
Issuer's telephone number (972) 243-2610
----------------
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 17,090,875 .
------------------------------------
Transitional Small Business Disclosure Format (check one) Yes [ ] No [x]
2
TBX RESOURCES, INC.
BALANCE SHEETS
(Unaudited)
May 31, November 30,
2001 2000
------------ ------------
ASSETS
CURRENT ASSETS
Cash $ 137,107 $ 324,916
Accounts receivable
Trade 19,731 12,489
Affiliates -- 70,531
Other 69,994 25,744
Other current assets -- 33,744
------------ ------------
Total current assets 226,832 467,424
------------ ------------
EQUIPMENT AND PROPERTY
Office furniture, fixtures and equipment 72,086 72,086
Oil and gas properties, using successful efforts accounting
Proved properties and related equipment 2,977,445 2,907,134
------------ ------------
3,049,531 2,979,220
Less accumulated depreciation, depletion and amortization 138,998 125,220
------------ ------------
Total equipment and property 2,910,533 2,854,000
------------ ------------
INVESTMENT IN SOUTHERN OIL & GAS COMPANY, INC. 200,000 200,000
------------ ------------
OTHER ASSETS 37,755 12,685
------------ ------------
TOTAL ASSETS $ 3,375,120 $ 3,534,109
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Trade accounts payable $ 74,639 $ 73,410
Taxes payable 49,451 46,288
Accrued payroll and other 82,322 91,952
------------ ------------
Total current liabilities 206,412 211,650
------------ ------------
COMMITMENTS AND CONTINGENCIES -- --
STOCKHOLDERS' EQUITY
Common stock- $.01 par value; authorized 100,000,000 shares;
17,090,875 shares outstanding at May 31, 2001 and 16,478,350
shares outstanding at November 30, 2000 170,909 164,783
Additional paid-in capital 6,634,376 6,390,082
Accumulated deficit (3,636,577) (3,232,406)
------------ ------------
Total stockholders' equity 3,168,708 3,322,459
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 3,375,120 $ 3,534,109
============ ============
The accompanying notes are an integral part of these financial statements.
1
3
TBX RESOURCES, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
For The Three Months Ended For The Six Months Ended
------------------------------ ------------------------------
May 31, 2001 May 31, 2000 May 31, 2001 May 31, 2000
------------ ------------ ------------ ------------
REVENUES:
Oil and gas sales $ 80,122 $ 10,638 $ 94,431 $ 20,815
Joint venture income -- 30,648 -- 129,641
Other 6,055 6,584 8,572 7,718
------------ ------------ ------------ ------------
Total revenues 86,177 47,870 103,003 158,174
------------ ------------ ------------ ------------
EXPENSES:
Lease operating and taxes 61,093 34,352 120,021 57,643
Joint venture costs and expenses -- 30,648 -- 129,641
Selling, general and administrative 177,546 453,831 371,605 760,924
Geological and engineering -- 101,857 -- 101,857
Loss on option to purchase shares of Southern Oil & Gas -- -- -- 100,000
Depreciation, depletion and amortization 9,735 15,000 15,548 25,000
------------ ------------ ------------ ------------
Total expenses 248,374 635,688 507,174 1,175,065
------------ ------------ ------------ ------------
NET LOSS BEFORE PROVISION FOR
INCOME TAXES (162,197) (587,818) (404,171) (1,016,891)
Provision for income taxes -- (235,742) -- (235,742)
------------ ------------ ------------ ------------
NET LOSS $ (162,197) $ (823,560) $ (404,171) $ (1,252,633)
============ ============ ============ ============
NET LOSS PER COMMON SHARE, BASIC AND DILUTED $ (0.01) $ (0.05) $ (0.03) $ (0.08)
============ ============ ============ ============
Weighted average common shares used in calculations:
Basic and diluted 16,617,737 15,041,395 16,617,737 15,041,395
============ ============ ============ ============
The accompanying notes are an integral part of these financial statements.
2
4
TBX RESOURCES, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
For The Six Months Ended
------------------------------
May 31, 2001 May 31, 2000
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (404,171) $ (1,252,633)
Adjustments to reconcile net loss to net cash
flow from operating activities:
Depreciation, depletion and amortization 15,548 25,000
Loss on lapse of stock option agreement with Southern Oil & Gas -- 100,000
Common stock options issued for consulting services 108,328 150,000
Common stock issued to employees -- 10,500
Reversal of long-term deferred tax benefit -- 179,073
Changes in operating assets and liabilities:
Decrease (increase) in:
Trade receivables (7,242) (1,583)
Affiliate receivables 70,531 54,862
Other receivables (44,250) 89,645
Other current assets 33,744 (100,000)
Deferred income tax benefit -- 56,669
Increase (decrease) in:
Accounts payable 1,229 (32,092)
Taxes payable 3,163 (6,039)
Accrued payroll and other (9,630) 44,858
Prepaid drilling expenses -- 50,831
============ ============
Net cash provided by (used) for operating activities (232,750) (630,909)
============ ============
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash used in the development of oil and gas properties (82,081) --
Cash provided by the sale of oil and gas properties 10,000 --
Cash used in the acquisition of office equipment -- (11,623)
------------ ------------
(72,081) (11,623)
============ ============
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash provided (used) by change in other assets (25,070) 33,027
Cash provided by the issuance of common stock 142,092 1,481,149
------------ ------------
117,022 1,514,176
============ ============
Net Increase (Decrease) In Cash (187,809) 871,644
Cash at beginning of period 324,916 3,174
============ ============
Cash at end of period $ 137,107 $ 874,818
------------ ------------
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING
AND FINANCING ACTIVITIES
Fair value of oil and gas working and partnership interests acquired $ -- $ (291,961)
Issuance of common stock for assets -- 291,961
------------ ------------
$ -- $ --
============ ============
The accompanying notes are an integral part of these financial statements.
3
5
TBX RESOURCES, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(Unaudited)
COMMON STOCK ADDITIONAL ACCUM- TOTAL
----------------------------- PAID-IN ULATED STOCKHOLDERS'
SHARES PAR VALUE CAPITAL DEFICIT EQUITY
------------ ------------ ------------ ------------ -------------
BALANCE NOVEMBER 30, 2000 16,478,350 $ 164,783 $ 6,390,082 $ (3,232,406) $ 3,322,459
Issuance of common stock for cash 439,775 4,698 137,394 -- 142,092
Issuance of common stock for services 172,750 1,428 106,900 -- 108,328
Net loss for period -- -- -- (404,171) (404,171)
------------ ------------ ------------ ------------ ------------
BALANCE MAY 31, 2001 17,090,875 $ 170,909 $ 6,634,376 $ (3,636,577) $ 3,168,708
============ ============ ============ ============ ============
The accompanying notes are an integral part of these financial statements.
4
6
TBX RESOURCES, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
MAY 31, 2001
1. BUSINESS ACTIVITIES:
TBX Resources, Inc., a Texas Corporation, was organized on March 24, 1995. The
Company's principal business activity is acquiring and developing oil and gas
properties. The Company owns 54 wells and operates another 7 wells located in
East Texas and has an interest in 7 wells in Oklahoma. Of the 54 wells located
in East Texas, 8 wells have been designated as injection wells and 3 wells have
been designated as water supply wells. In addition, 6 wells are currently
producing oil. The remaining 37 wells are either currently shut-in, scheduled to
be brought back into production or are designated as injection wells. The
Company also has an interest in 7 producing wells in Oklahoma. The Company's
philosophy is to acquire properties with the purpose of reworking existing wells
and/or drilling development wells to make a profit. The Company also sponsors
joint venture development partnerships for the purpose of developing oil and gas
properties for profit.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
BASIS OF PRESENTATION - The accompanying unaudited financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with instructions to Form 10-QSB of Regulation
S-B. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of Management, these financial statements contain all
adjustments, consisting of normal recurring accruals, necessary to present
fairly the financial position, results of operations and cash flows for the
period indicated. The preparation of financial statements in accordance with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results may differ from these estimates. The
Company's quarterly financial data should be read in conjunction with the
financial statements of the Company for the year ended November 30, 2000
(including the notes thereto) set forth in Form 10-KSB.
NET LOSS PER COMMON SHARE- Stock options are excluded from the calculation of
net loss per common share because they are antidilutive.
3. SIGNIFICANT TRANSACTIONS:
a. On January 6, 1999 the Company entered into an option agreement, as amended,
to purchase all of Southern Oil & Gas Company's (Southern) stock for $1,000,000.
Southern is an oil and gas company that owns interests in approximately 435
wells, primarily in north east Louisiana, which wells produce on average
approximately 3,500 barrels of oil each month. Under the terms of the agreement,
TBX paid $100,000 for the option to purchase the shares that ran up to and
including March 31, 2000. When the Company originally entered into this
agreement with Southern, it also entered into an operations and management
contract (the "Operations Contract") providing that TBX was to be paid the
profits of Southern that exceeded $40,000 each month. Because the amounts TBX
was paid under the Operations Contract was not at the levels anticipated, TBX
decided not to increase its ownership interest in Southern and wrote-off the
option amount in February 2000. The Company currently holds a 20% interest in
Southern.
5
7
TBX RESOURCES, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
MAY 31, 2001
3. SIGNIFICANT TRANSACTIONS (CONTINUED):
b. The Company has placed restrictions on stockholders wishing to sell their
common stock as follows:
(i) To hold or to sell up 20% of the shares owned during the third quarter
of year 2001 and,
(ii) To continue to hold or to sell up to additional 20% of the original
amount of shares owned during the forth quarter of the year 2001.
This agreement expires on January 31, 2002 at which time the balance of
shares held convert to free trading shares.
c. The Company executed an Employment Agreement effective December 1, 1999 with
Mr. Tim Burroughs, President, for three years. Under the terms of the employment
agreement, Mr. Burroughs received stock options good for five years from the
date of issuance to purchase up to 500,000 shares of the Company's common stock
a year for five years at a price which shall not be greater than 50% of the
average bid price for the shares during the previous year. The options are
cumulative that allow Mr. Burroughs to exercise his options through November 30,
2004 for a total of 2,500,000 shares. The fair market value of the options will
be recorded as compensation expense when a reasonable estimate of such costs are
available or the amount Mr. Burroughs has to pay is known. No exercise price or
exercise date has been determined at this time. Based on the formula for
calculating the purchase price, material charges to compensation expense may be
recorded in future years.
d. During the six months ended May 31, 2001, the Company used the services of
consultants who received 172,750 share of common stock. The Company recorded the
transactions as a $108,328 charge to expense with an offsetting credit to
capital.
e. On February 6, 2001 the Company entered into a Regulation S Stock Purchase
agreement with Citizen Asia Pacific Limited (CAPL), a Hong Kong company. The
shares are being offered and sold on reliance of an exemption from registration
requirements of the United States federal and state securities laws under
Regulation S promulgated under the Securities Act. The agreement stipulates that
CAPL will use its best efforts to purchase from the Company up to 800,000
restricted shares of common stock at a per share price which shall be 30% of the
moving ten day average closing prices of the Company's shares of common stock as
quoted on the OTC Bulletin Board or other public trading market. The Company has
the right to accept or reject subscriptions for the shares, in whole or in part.
The agreement runs from February 7, 2001 to September 30, 2001.
6
8
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
DESCRIPTION OF PROPERTIES
Our properties generally, include leasehold rights in six oil and gas
fields located in Gregg, Hopkins, Franklin, Panola and Wood Counties, Texas,
which are located in East Texas. These six fields are referred to as the East
Texas, Mitchell, Talco, Manziel, Quitman and Bethany Fields. As of May, 2001, we
owned or operated an interest in 69 wells, 6 of which were producing, 52 of
which were shut-in, 8 of which were designated as injection wells and 3 were
designated as water supply wells. We also have recently acquired an interest in
properties in Oklahoma, the development of which is in a very early stage.
RESULTS OF OPERATIONS AS OF MAY 31, 2001 VS. MAY 31, 2000.
REVENUE - During the six months ended May 31, 2001, the Company
generated approximately $94,431 in revenue from oil and gas sales as compared to
$20,815 for the six months ended May 31, 2000. The $73,616 increase was
primarily due to gas sales on the Oklahoma properties that were developed over
the past six months. During the past six months, oil sales on the Texas
properties were $23,952 as compared to $20,815 for the same period last fiscal
year. The majority of the wells remain shut-in awaiting re-work or the
designation as injection wells.
Joint venture income for the six months ended May 31, 2000 was $129,641
as compared to $0 for this year. The Company did not sponsor a joint venture
partnership during the six months ended May 31, 2001. The Company's current
focus is on developing its Oklahoma gas properties and consequently, has no
plans to sponsor additional joint venture limited partnerships.
Other income for the six months ended May 31, 2001 was $8,572 as
compared to $7,718 for the same period last year. The $854 increase in other
income is for the $5,888 profit on the sale of a partial working interest offset
by a decrease in interest income due to lower money market cash balances.
As a result of the foregoing, total revenue decreased $55,171 from
$158,174 for the six months ended May 31, 2000 to $103,003 for the six months
ended May 31, 2001.
EXPENSES - Lease operating and taxes increased $62,378 from $57,643 for
the six months ended May 31, 2000 to $120,021 for the six months ended May 31,
2001. The increase is primarily the result of increased expenses associated with
several of the Company's Texas wells and to a lesser extent the new gas wells in
Oklahoma.
Joint venture costs and expenses were approximately $129,641 for the
six months ended May 31, 2000 as compared to $0 for the same period this year.
The Company was not a sponsor of a joint venture partnership during the six
month period ended May 31, 2001.
Selling, general and administrative expenses decreased approximately
$389,319 from $760,924 for the six months ended May 31, 2000 to $371,605 for the
six months ended May 31, 2001. The decrease is primarily due to lower
compensation and employee related costs, and consulting fees offset by somewhat
higher general expenses.
7
9
Geological and engineering fees of $101,857 for the six months ended
May 31, 2000 related to reserve studies for a proposed acquisition were
incurred. The acquisition was not consummated and the fees were charged to
operations. These same fees were not incurred during the six month period ending
May 31, 2001.
For the six months ended May 31, 2000, the Company recorded a loss of
$100,000 on the lapse of its option to purchase additional shares of Southern
Oil & Gas Company, Inc. The Company has no plans to acquire additional shares of
Southern. No such expenses were incurred during the period ending May 31, 2001.
Depreciation, depletion and amortization decreased $9,452 from $25,000
for the six months ended May 31, 2000 to $15,548 for the six months ended May
31, 2001. The decrease is due to a change in estimate.
As a result of the foregoing, total expenses decreased $667,891 from
$1,175,065 for the six months ended May 31, 2000 to $507,174 for the six months
ended May 31, 2001.
PROVISION FOR INCOME TAXES - During the six months ended May 31, 2000,
the Company reversed tax benefits totaling $235,742 that corresponded to losses
sustained in prior years. There are no recorded tax benefits for the six months
ended May 31, 2001.
NET LOSS - The Company's net loss decreased approximately $848,462 from
$1,252,633 for the six months ended May 31, 2000 to $404,171 for the same period
this year. The decrease in the loss is primarily attributable to reduced
compensation costs, consulting fees and, geological and engineering fees. Also,
there was no further write-down of the Company's investment in Southern Oil &
Gas from last fiscal year. Finally, the Company has no tax benefits to write-off
in the current fiscal year.
LIQUIDITY AND CAPITAL RESOURCES - As of May 31, 2001, the Company had
total assets of approximately $3.4 million of which net oil and gas properties
amount to approximately $2.8 million or 82.4% of our total assets. The
cumulative losses through May 31, 2001, total approximately $3.6 million. The
ratio of current assets to current liabilities is 1.1:1; the Company has no
long-term debt. As of May 31, 2001, the Company's shareholders equity is
positive by approximately $3.2 million.
At May 31, 2001, the Company showed approximately $137,107 in cash and
money market accounts and $131,042 in working capital. At November 30, 2000,
cash and working capital were approximately $324,916 and $255,774, respectively.
The Company has funded its operations through cash generated from the
sale of its common stock. The Company's cash used for operating activities
totaled $232,750 and $630,909 for the six months ended May 31 2001 and May 31,
2000, respectively. The Company's capital investments totaled $82,081 and $0 for
the six months ended May 31 2001 and May 31, 2000, respectively. Cash provided
by the sale of common stock totaled $142,092 during the six months ended May 31,
2001 as compared to approximately $1.5 million for the six months ended May 31,
2000.
8
10
The Company expects that the principal source of funds in the near
future will be from the sale of its common stock. On February 6, 2001 the
Company entered into a Regulation S Stock Purchase agreement with Citizen Asia
Pacific Limited (CAPL), a Hong Kong company. The shares are being offered and
sold on reliance of an exemption from registration requirements of the United
States federal and state securities laws under Regulation S promulgated under
the Securities Act. The agreement stipulates that CAPL will use its best efforts
to purchase from the Company up to 800,000 restricted shares of common stock at
a per share price which shall be 30% of the moving ten day average closing
prices of the Company's shares of common stock as quoted on the OTC Bulletin
Board or other public trading market. The Company has the right to accept or
reject subscriptions for the shares, in whole or in part. The agreement runs
from February 7, 2001 to September 30, 2001.The Company expects that the
principal use of funds in the foreseeable future will be for developing existing
oil and gas properties and/or the acquisition of new properties.
PLAN OF OPERATION FOR THE FUTURE. We currently expect to generate
sufficient revenues from the sale of our production to pay all costs associated
with our company for at least the following twelve months. We think that this
sufficient revenue will come from two sources: increased prices for oil
production and increased number of wells brought on-line. Specifically, over the
past twelve months, the price paid for oil production in the area in which our
wells are located has more than doubled. This increase in oil price has made it
to where more of our wells are capable of commercial production such that those
wells that have been shut in may be reopened and production commenced therefrom,
thus additionally increasing our revenues. However, our existing plan is subject
to alterations based on opportunities that may present themselves. These plans
may involve selling additional shares of our common stock.
We may purchase new oil and gas properties or additional equipment to
operate same. Any such additional purchases will be done on an "as needed" basis
and will only be done in those instances in which we believe such additional
expenditures will increase our profitability. Our ability to acquire additional
properties or equipment is strictly contingent upon our ability to locate
adequate financing to pay for these additional properties or equipment. There
can be no assurance that we will be able to obtain the opportunity to buy
properties or equipment that are suitable for our investment or that we may be
able to obtain financing to pay for the costs of these additional properties or
equipment at terms that are acceptable to us. Additionally, if economic
conditions justify the same, we may hire additional employees although we do not
currently have any definite plans to make additional hires.
The oil and gas industry is subject to various trends. In particular,
at times crude oil prices increase in the summer, during the heavy travel
months, and are relatively less expensive in the winter. Of course, the prices
obtained for crude oil are dependent upon numerous other factors, including the
availability of other sources of crude oil, interest rates, and the overall
health of the economy. We are not aware of any specific trends that are unusual
to our company, as compared to the rest of the oil and gas industry.
We do not currently have any material commitments for capital
expenditures of which we are aware. However, if we decide to purchase additional
oil and gas properties, the funds we would need to acquire such properties could
be material. However, we will not acquire properties without obtaining, in
advance, suitable financing to fund the purchase of such properties. In general,
although conditions have improved over the past six months, many financial
institutions are reluctant to loan amounts to oil and gas companies, primarily
based upon the significant downturn
9
11
with the past twenty four months of the price of oil. As a general rule, as the
price of oil increases, the ability to obtain financing for projects in the oil
and gas industry increases. However, because of the cycles experienced in the
oil and gas industry, there can be no assurance that we will be able to obtain
financing for projects it wishes to pursue, regardless of the economic viability
we envision for the project, if institutional funds are not available. We
currently do not have any firm commitments by anyone to loan or otherwise make
available to us funds necessary to conduct our operations.
PART II. OTHER INFORMATION
LEGAL PROCEEDINGS None.
CHANGES IN SECURITIES
As discussed previously, on February 6, 2001 we entered into a Stock
Purchase agreement whereby shares will be sold and issued by us. The shares to
be issued under this agreement are being offered and sold in reliance on an
exemption from the registration requirements of the United States federal
securities laws under Regulation S promulgated under the Securities Act and
related exemptions from state securities laws. During the period from February
28, 2001, to May 31, 2001, we sold the following shares at the dates and prices
indicated.
DATE OF SALE NUMBER OF SHARES SOLD AVERAGE PRICE PER SHARE
- - ------------ --------------------- -----------------------
March 1, 2001 42,668 $ 0.76
March 20, 2001 6,576 $ 0.76
April 16,2001 8,271 $ 0.76
April 19, 2001 9,636 $ 0.74
May 23, 2001 18,623 $ 0.70
TOTAL 85,774
DEFAULTS UPON SENIOR SECURITIES None.
SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS None.
OTHER INFORMATION None.
EXHIBITS AND REPORTS ON FORM 8-K No reports on Form 8-K were filed during the
period covered by this Form 10-QSB.
10
12
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed by the undersigned, hereunto duly authorized.
TBX RESOURCES, INC.
DATE: July 16, 2001
-------------------------
SIGNATURE: /s/ Tim Burroughs
--------------------------------------------
TIM BURROUGHS, PRESIDENT
CHIEF FINANCIAL OFFICER
11