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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q/A
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED FEBRUARY 28, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1943
For the transition period from _______ to ________
COMMISSION FILE NO. 0-9092
CHENIERE ENERGY, INC.
(Exact name as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation or organization)
95-4352386
(I. R. S. Identification No.)
1200 SMITH STREET, SUITE 1710
HOUSTON, TEXAS
(Address or principal place of business)
77002-4312
(Zip Code)
(713) 659-1361
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has 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 [ ].
As of March 14, 1997, there were 12,648,409 shares of Cheniere Energy, Inc.
Common Stock, $.003 par value, issued and outstanding.
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CHENIERE ENERGY, INC
INDEX TO FORM 10-Q
PAGE
----
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements.............................. 3
Consolidated Balance Sheet................................... 3
Consolidated Statement of Operations......................... 4
Consolidated Statement of Stockholders' Equity............... 5
Consolidated Statement of Cash Flows......................... 6
Notes to Consolidated Financial Statements........................ 7
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations........................................ 12
PART II. OTHER INFORMATION
Item 5. Other Information.............................................. 15
Item 6. Exhibits and Reports on Form 8-K............................... 15
SIGNATURES.................................................................. 16
2
CHENIERE ENERGY, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEET (UNAUDITED)
February 28, August 31,
1997 1996
------------ ----------
ASSETS
CURRENT ASSETS
Cash $ 3,843,088 $ 1,093,180
Prepaid Expenses And Other Current Assets 153,321 4,800
------------ ------------
TOTAL CURRENT ASSETS 3,996,409 1,097,980
------------ ------------
PROPERTY AND EQUIPMENT, NET 48,967 46,830
------------ ------------
OTHER ASSETS
Investment in 3-D Exploration Program 7,141,745 4,000,000
Security Deposit 500 500
------------ ------------
TOTAL OTHER ASSETS 7,142,245 4,000,500
------------ ------------
TOTAL ASSETS $ 11,187,621 $ 5,145,310
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable and Accrued Expenses $ 196,776 $ 292,894
Loans Payable - 425,000
Advance from Officers - 961
Advances for Issuance of Common Stock 1,500,025 -
------------ ------------
TOTAL LIABILITIES 1,696,801 718,855
------------ ------------
STOCKHOLDERS' EQUITY
Common Stock - $.003 Par Value
Authorized 20,000,000 shares;
12,295,462 and 9,931,767 Issued and
Outstanding at February 28, 1997 and
August 31, 1996, respectively 36,886 29,795
Preferred Stock - Authorized
1,000,000 shares; None Issued
and Outstanding
Additional Paid-in-Capital 9,880,480 4,518,507
Deficit Accumulated During the Development Stage (426,546) (121,847)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 9,490,820 4,426,455
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 11,187,621 $ 5,145,310
============ ===========
See Accompanying Notes to Financial Statements.
3
CHENIERE ENERGY, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED CUMULATIVE
FEBRUARY 28, FEBRUARY 28, FROM THE DATE
1997 1997 OF INCEPTION
------------ ----------- -------------
Revenue $ - $ - $ -
----------- ----------- ----------
General and Administrative Expenses 165,765 311,693 415,507
Interest Expense 1,313 15,002 34,835
----------- ----------- ----------
167,078 326,695 450,342
----------- ----------- ----------
Loss from Operations Before Other Income (167,078) (326,695) (450,342)
Interest Income 20,495 21,996 23,796
----------- ----------- ----------
Loss From Operations Before Income Taxes (146,583) (304,699) (426,546)
Provision for Income Taxes - - -
----------- ----------- ----------
Net Loss $ (146,583) $ (304,699) $ (426,546)
=========== =========== ==========
Loss Per Share (.012) (.028) (.043)
=========== =========== ==========
Weighted Average Number of Shares
Outstanding 11,757,696 11,036,471 9,950,972
=========== =========== ==========
See Accompanying Notes to Financial Statements.
4
CHENIERE ENERGY, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Common Stock Additional Total
---------------------- Paid-in Retained Stockholders'
Per Share Shares Amount Capital Deficit Equity
--------- ------------ -------- ------------- -------------- ------------
Sale of Founders Shares on
April 9, 1996 $ 0.012 $ 6,242,422 $ 18,727 $ 56,276 $ - $ 75,003
Sale of Shares on May 3, 1996 1.50 2,000,000 6,000 2,994,000 - 3,000,000
Issuance of Shares to an Employee
on July 1, 1996 1.00 30,000 90 29,910 - 30,000
Issuance of Shares in Re-
organization to Former
Bexy Shareholders - 600,945 1,803 (1,803) - -
Sale of Shares on July 30, 1996 2.00 50,000 150 99,850 - 100,000
Sale of Shares on August 1, 1996 2.00 508,400 1,525 1,015,275 - 1,016,800
Sale of Shares on August 30, 1996 2.00 500,000 1,500 988,500 - 1,000,000
Expenses Related to Offering - - - (686,251) - (686,251)
Issuance of Warrants - - - 12,750 - 12,750
Net Loss - - - - (121,847) (121,847)
---------- ------- ----------- ------------- ----------
Balance - August 31, 1996 9,931,767 29,795 4,518,507 (121,847) 4,426,455
Sales of Shares on September 12, 1996 2.00 50,000 150 99,850 - 100,000
Sale of Shares on September 16, 1996 2.00 80,250 241 160,259 - 160,500
Conversion of Debt 2.00 105,000 315 209,685 - 210,000
Sale of Shares on October 30, 1996 2.25 457,777 1,374 1,028,627 - 1,030,001
Issuance of Warrants - - - 6,450 - 6,450
Sale of Shares on December 6, 1996 2.25 475,499 1,426 1,068,448 - 1,069,874
Sale of Shares on December 9, 1996 2.50 400,000 1,200 998,800 - 1,000,000
Sale of Shares on December 11, 1996 2.25 22,222 67 49,933 - 50,000
Sale of Shares on December 19, 1996 2.50 200,000 600 499,400 - 500,000
Sale of Shares on December 20, 1996 2.50 220,000 660 549,340 - 550,000
Sale of Shares on February 28, 1997 4.25 352,947 1,058 1,498,967 - 1,500,025
Expenses Related to Offering - - - (807,786) - (807,786)
Net Loss - - - - (304,699) (304,699)
---------- ------- ----------- ------------- ----------
Balance - February 28, 1997 12,295,462 $36,886 $ 9,880,480 $ (426,546) $9,490,820
========== ======= =========== ============= ==========
All of the Sales of Shares indicated above were made pursuant to private
placement transactions.
The accompanying notes are an integral part of this report.
5
CHENIERE ENERGY, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
For the Six Cumulative
Months Ended from Date of
February 28, 1997 Inception
----------------- ------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss $ (304,699) $ 426,546
Adjustments to Reconcile Net Loss to
Net Cash Used by Operating Activities:
Depreciation 4,043 7,646
Compensation Paid in Common Stock - 30,000
(Increase) in Prepaid Expenses and Other Current Assets (148,521) (153,321)
Increase in Security Deposit - (500)
(Decrease) Increase in Accounts Payable and Accrued Expenses (96,118) 196,786
(Decrease) in Advance from Officers (961) -
-------------- ------------
NET CASH USED BY OPERATING ACTIVITIES (546,256) (345,935)
-------------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of Furniture, Fixtures and Equipment (6,180) (56,623)
Investment in 3-D Exploration Program (3,141,745) (7,141,745)
-------------- ------------
NET CASH USED BY INVESTING ACTIVITIES (3,147,925) (7,198,368)
-------------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds of Loan - 425,000
Repayment of Loan (215,000) (215,000)
Sale of Common Stock 5,960,400 11,152,203
Issuance of Warrants 6,450 19,200
Offering Costs (807,786) (1,494,037)
Advances for Issuance of Common Stock 1,500,025 1,500,025
-------------- ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 6,444,089 11,387,391
-------------- ------------
NET INCREASE IN CASH 2,749,908 3,843,088
CASH - BEGINNING OF YEAR 1,093,180 -
-------------- ------------
CASH - FEBRUARY 28, 1997 $ 3,843,088 $ 3,843,088
============== ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash Paid for Interest $ 15,635 $ 15,635
==============
Cash Paid for Income Taxes $ - $ -
============== ============
SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCIAL ACTIVITIES:
Common stock totaling 105,000 shares was issued upon the conversion of
$210,000 of debt.
See Accompanying Notes to Financial Statements.
6
CHENIERE ENERGY, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 28, 1997
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING
a) Basis of Presentation
The accompanying financial statements have been prepared in
accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q.
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, all
adjustments (consisting only of normal recurring adjustments)
considered necessary for a fair presentation have been included.
Certain reclassifications have been made to the prior period to
conform to the current periods' presentation.
For further information refer to the financial statements and
footnotes included in the Registrant's Annual Report on form 10-K
for the period ending August 31, 1996.
The results of operations for any interim period are not
necessarily indicative of the results to be expected for the full
fiscal year ended August 31, 1997.
The accompanying consolidated financial statements include the
accounts of Cheniere Energy, Inc. ("The Company") and its 100% owned
subsidiaries, Cheniere Energy Operating Co., Inc. ("Cheniere
Operating") and Cheniere Energy California, Inc. ("Cheniere
California"). Accordingly, all references herein to Cheniere
Energy, Inc. or the "Company" include the consolidated results of
its subsidiaries. All significant intercompany accounts and
transactions have been eliminated in consolidation.
On July 3, 1996, Cheniere Energy, Inc. ("Cheniere"), formerly Bexy
Communications, Inc., acquired all of the outstanding capital stock
of Cheniere Energy Operating Co., Inc. ("Cheniere Operating"). For
accounting purposes, this acquisition has been treated as a
recapitalization of Cheniere Operating.
The financial statements presented include only the accounts of
Cheniere and its subsidiaries since Cheniere Operating's inception
(February 21, 1996). While Cheniere Operating did obtain a presence
in the public market through the recapitalization, it did not
succeed to the business or assets of Bexy. For this reason, the
value of the shares issued to the former Bexy shareholders has been
deemed to be de minimus and, accordingly, no value has been assigned
to those shares.
The Company is currently a development stage enterprise under the
provisions of SFAS No.7. The Company's future business will be in
the field of oil and gas exploration and exploitation.
b) Loss Per Share
Loss per share is based on the weighted average number of shares
of common stock outstanding during the period.
c) Offering Costs
Offering costs consist primarily of placement fees, professional
fees and printing costs. These costs are charged against the
proceeds of the sale of common stock in the periods in which they
occur.
NOTE 2 - ACQUISITIONS
On December 19, 1996, Cheniere California was incorporated.
Cheniere California is a 100% owned subsidiary of the Company.
NOTE 3 - WARRANTS
The Company has issued and outstanding certain warrants described
herein.
The Company has issued and outstanding 141,666 and 2/3 warrants
(collectively, the "June Warrants"), each of which entitles the
registered holder thereof to purchase one share of Common Stock.
The June Warrants are exercisable at any time on or before
June 14, 1999, at an exercise price of $3.00 per share (subject to
customary anti-dilution adjustments). The exercise price was
determined at a 100% premium to the sale price of Cheniere Operating
Stock by private placement during May, 1996. The June Warrants were
originally issued by Cheniere Operating and were converted to
warrants of Cheniere following the Reorganization. The June Warrants
were issued to a
7
CHENIERE ENERGY, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 28, 1997
NOTE 3 - WARRANTS (Cont'd)
group of 11 investors in connection with a private placement of
unsecured promissory notes. Pursuant to APB 14, the warrants issued
have been valued at the differential rate between the initial
interest rate (8%) and the estimated market rate (20%), applied
to the principal balance. This value, $12,750, has been credited to
additional paid-in capital.
Effective September 14, 1996, the Company had not paid all amounts
due and payable under the Notes by the Maturity Date. Certain of
the noteholders converted their notes into 105,000 shares of Common
Stock. An individual note holder purchased the promissory notes of
the remaining note holders. As per the terms of the notes, the
holder was entitled to receive up to an aggregate of 21,500
additional warrants for each month, or partial month, any amounts
that remained due and payable after September 14, 1996, up to a
maximum aggregate number of 86,000 such additional warrants. These
notes were repaid on December 14, 1996 and, upon repayment, the
Company issued 64,500 warrants in accordance with the loan
agreement. The terms of the warrants were similar to the June
warrants. Pursuant APB 14, these additional warrants will be valued
at the differential rate between the interest rate charged (13%) and
the then estimated market rate (25%), applied to the principal
balance for each month outstanding after September 14, 1996. This
value, $6,450, has been credited to additional paid-in capital.
In consideration of certain investment advisory and other services
to the Company, pursuant to warrant agreements each dated as of
August 21, 1996, the Company issued warrants to purchase 13,600 and
54,400 shares of Common Stock, (collectively the "Adviser
Warrants"). The Adviser Warrants are exercisable at any time on or
before May 15, 1999 at an exercise price of $3.00 per share (subject
to customary anti-dilution adjustments). The exercise price
represents the approximate market price of the underlying Common
Stock at the time of the transaction.
In connection with the July and August 1996 placement of 508,400
shares of Common Stock, the Company issued warrants to purchase
12,500 shares of Common Stock to one of two distributors who placed
the shares. Such warrants are exercisable on or before the second
anniversary of the sale of the shares of Common Stock at an exercise
price of $3.125 per share (subject to customary anti-dilution
adjustments). The exercise price represents the approximate market
price of the underlying Common Stock at the time of the transaction.
In late August 1996, the Company sold 100,000 units, each such
unit consisting of 5 shares of Common Stock and a warrant to
purchase one share of Common Stock. Each such warrant is
exercisable on or before September 1, 1999 at an exercise price of
$3.125 per share (subject to customary anti-dilution adjustments).
The exercise price represents the approximate market price of the
underlying Common Stock at the time of the transaction.
The Warrants do not confer upon the holders thereof any voting or
other rights of a stockholder of the Company.
8
CHENIERE ENERGY, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 28, 1997
NOTE 4 - STOCK OPTIONS
The Company has granted certain options to purchase shares of
Common Stock to 2 executives. Such options aggregate 300,000 shares
at an exercise price of $3.00 per share. The options vest and are
exercisable as follows:
1) 75,000 qualified options vest and become exercisable on June 1,
1997 and expire June 1, 2001.
2) 75,000 qualified options vest and become exercisable on June 1,
1998 and expire June 1, 2001.
3) 150,000 qualified options vest and become exercisable in equal
annual installments of 25% each on the first through fourth
anniversary of July 16, 1996 and expire July 16, 2001.
In addition, the Company has granted qualified options to the
former President of the Company. The holder has the option to
acquire 19,444 and 2/3 shares of Common Stock at an exercise price
of $1.80 per share. The options expire November 11, 2003.
Also, the Company has granted 12,000 options to an employee at an
exercise price of $3.00 per share. These options vest and become
exercisable in equal annual installments of 25% each on the first
through fourth anniversary of January 23, 1997 and expire January
23, 2002.
The disclosure provisions of SFAS No. 123 do not have a material
effect on the financial statements.
NOTE 5 - COMMON STOCK RESERVED
The Company has reserved 386,666 and 2/3 share of Common Stock for
insurance upon the exercise of outstanding warrants.
The Company has reserved 331,444 and 2/3 shares of Common Shares
for insurance upon the exercise of outstanding options.
NOTE 6 - COMMITMENTS AND CONTINGENCIES
1) The Company subleases its Houston, Texas headquarters from Zydeco
under a month-to-month sublease.
2) On December 19, 1996, Cheniere Energy California, Inc. ("Cheniere
California") was incorporated. Cheniere California is a 100% owned
subsidiary of the Company.
9
CHENIERE ENERGY, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 28, 1997
NOTE 6 - COMMITMENTS AND CONTINGENCIES (CONT'D)
On December 20, 1996, Cheniere California signed a Purchase and Sale
Agreement with Poseidon Petroleum, LLC ("Poseidon") to acquire
Poseidon's 60% working interest in six undeveloped leases in the
Bonito Unit of the Pacific Outer Continental Shelf (OCS) off Santa
Barbara County, California. The combined working interest of the six
leases are equal to a 47% working interest in the Bonito Unit, which
includes a seventh lease that Poseidon has no interest in. Poseidon
estimates that the net proved undeveloped reserves attributable to
its interest are approximately 47 million barrels of oil equivalent.
As payment for this interest, Poseidon will receive production
payments aggregating $18,000,000 to be paid as three percent of the
production revenue from the leases being assigned. Minimum
prepayments from the annual production payment shall be made at the
rate of $540,000 per year, payable in advance. Poseidon will receive
the first minimum prepayment of $540,000 at closing. Poseidon will
have a reserve report prepared with respect to the leases which is
subject to Cheniere California's acceptance. The principal amount of
the production payment and the required minimum yearly payments are
subject to adjustment based on the results of the reserve report.
Closing of the transaction is subject to the satisfaction of certain
conditions by Poseidon and Cheniere California.
3) As of February 28, 1997, the Company has an investment of $7,141,745
in a joint exploration program. Under the terms of the joint
exploration program, the Company is required to make additional
monthly payments aggregating, at least, approximately $6.358 million
(See Note 7). The Company's potential participation in the joint
exploration program could be significantly reduced in the event of a
failure by the Company to make such required monthly payments when
due.
4) On February 28, 1997, the Company issued 352,947 shares of Common
Stock at a price of $4.25 per share. If during the 270 day period
following the date of purchase of these shares the Company offers
and sells any shares of its common stock for a gross sales
price lower than the price paid for these shares, the Company will
issue additional shares of Common Stock to reflect the lowest per
share gross sales price at which shares were offered
and sold during the period.
NOTE 7 - SUBSEQUENT EVENTS
1) As previously disclosed, Cheniere California signed a Purchase and
Sale Agreement with Poseidon Petroleum, LLC ("Poseidon") to acquire
Poseidon's 60% working interest in six undeveloped leases in the
Bonito Unit of the Pacific Outer Continental Shelf offshore Santa
Barbara County, California. Cheniere California and Poseidon have
mutually agreed to terminate the Purchase and Sale Agreement
pursuant to the terms thereof and that upon termination, neither
party thereto shall have any liability thereunder. The Company has
decided that it is in its best interests at this time to concentrate
its resources on the 3-D Exploration Program.
2) On March 4, 1997, $1,500,025 of Advances for Issuance of Common
Stock were transferred to capital, as the Company issued 352,947
shares of common stock. Proceeds received are intended to fund
future commitments to the 3-D Exploration Program. If during the 270
day period following the date of purchase of these shares the
Company offers and sells any shares of its common stock for a gross
sales price lower than the price paid for these shares, the Company
will issue additional shares to reflect the
10
CHENIERE ENERGY, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 28, 1997
NOTE 7 - SUBSEQUENT EVENTS (CONT'D)
lowest per share gross sales price at which shares were offered and
sold during the period.
On March 4, 1997, the Company funded an additional $858,255
investment in the 3-D Exploration Program, bringing its total
investment to date to $8,000,000. The Company has a remaining
commitment of at least $5.5 million, which is due in three payments:
$2 million each on April 22, 1997 and May 22, 1997 and $1.5 million
due on June 21, 1997. A thirty day grace period applies to each of
the payments.
If the two events described above had occurred as of February 28,
1997, along with applicable costs and expenses, the balance sheet as
of February 28, 1997 would reflect the following:
Cash $ 2,759,882
Prepaid Expenses and Other Current Assets 119,571
Property and Equipment, Net 48,967
Investment 8,000,000
Security Deposit 500
Total Assets $10,928,920
===========
Accounts Payable and Accrued Expenses $ 84,300
-----------
Common Stock 37,946
Additional Paid-in Capital 11,233,220
Deficit Accumulated during the
Development Stage (426,546)
-----------
10,844,620
-----------
Total Liabilities and Stockholders' Equity $10,928,920
===========
3) During May 1997, Cheniere issued 535,000 shares of Common Stock, at
a sale price of $3.00 per share and received net proceeds of
$1,605,000 from such sale. As noted above, under the terms of the
February 28, 1997 and March 4, 1997 sales of Common Stock, Cheniere
has agreed that if, during the 270 day period following the date of
purchase of these shares, Cheniere offers and sells any shares of
Common Stock for a per share gross sales price lower than the per
share price paid for these shares, Cheniere will issue additional
shares of Common Stock to reflect the lowest per share gross sales
price at which shares were offered and sold during the period. As a
consequence of the private placement of Common Stock at a price of
$3.00 per share, Cheniere is obligated to issue 294,124 additional
shares of Common Stock to those investors who purchased Common Stock
on February 28, 1997 or March 4, 1997.
11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Cheniere Energy, Inc. is currently a development stage company under
the provisions of SFAS No. 7. As such, the Company's accompanying unaudited
financial statements and notes thereto relate to the fiscal quarter ended
November 30, 1996. These statements and notes thereto together with the
consolidated financial statements included in the Company's Annual Report on
Form 10-K for the period ended August 31, 1996 contain detailed information that
should be referred to in conjunction with the following discussion.
GENERAL. On July 3, 1996, the Company changed its name to Cheniere
Energy, Inc. and its principal business became oil and gas exploration.
CHENIERE ENERGY CALIFORNIA, INC. PURCHASE AND SALE AGREEMENT On December
20, 1996, Cheniere Energy California, Inc. ("Cheniere California"), a wholly-
owned direct subsidiary of the Company, signed a Purchase and Sale Agreement
with Poseidon Petroleum, LLC ("Poseidon") to acquire Poseidon's 60% working
interest in six undeveloped leases in the Bonito Unit of the Pacific Outer
Continental Shelf (OCF) off Santa Barbara County, California. The majority
interest in the unit is owned by Nuevo Energy Company. Torch Operating Co. is
the operator of the Unit, pursuant to an agreement with Nuevo.
Poseidon estimates that the net proved undeveloped reserves attributable
to its interests are approximately 47 million barrels of oil equivalent. As
payment for this interest, Poseidon will receive production payments aggregating
$18,000,000 to be paid as three percent of the production revenue from the
leases being assigned. Minimum prepayments of the annual production payment
shall be made at the rate of $540,000 per year, payable in advance. Poseidon
will receive the first minimum prepayment of $540,000 at closing. Poseidon will
have a reserve report prepared with respect to the leases which is subject to
Cheniere California's acceptance. The principal amount of the production payment
and the required minimum yearly payments are subject to adjustment based on the
results of the revenue report. Subject to the satisfaction of certain conditions
by Poseidon and Cheniere California, it is anticipated that the closing of the
purchase will occur during the second quarter of 1997.
ZYDECO EXPLORATION, INC. 3-D SEISMIC EXPLORATION PROGRAM. Cheniere
made two payments totaling $1.14 million during the quarter, and a third payment
of $0.86 million on March 4, 1997 to Zydeco Exploration, Inc. to raise its
investment in the two companies' 3-D seismic exploration program in southern
Louisiana (the "3-D Joint Venture") to $8 million. On January 22, 1997 the
Company was given notice by Zydeco to resume the schedule of Seismic Fund
payments pursuant to the November 29, 1996 amendment to the Exploration
Agreement relating to the project, in anticipation of the resumption of seismic
acquisition activities during April. Cheniere has a remaining commitment of at
least $5.5 million, which is due in three payments; $2 million each on April 22
and May 22 of 1997, and $1.5 million on June 21, 1997. A thirty-day grace
period applies to each of the payments.
12
PRIVATE PLACEMENT OF COMMON SHARES. In December 1996, pursuant to
Regulation D promulgated under the Securities Act of 1933 ("Regulation D"), the
Company sold an aggregate of 182,166 shares for gross proceeds of $414,875. The
Common Stock was sold to six "accredited investors" pursuant to Rule 506 of
Regulation D. Net proceeds after placement fees totaled $389,638.
In December 1996 and February 1997, pursuant to Regulation S promulgated
under the Securities Act of 1933, the Company sold an aggregate of 1,448,502
shares of Common Stock to nine offshore investors for gross proceeds of
$4,225,025. Net proceeds after fees and placement commissions totaled
$3,933,284.
The proceeds of the sales of Common Stock during the quarter as set forth
above, together with cash balances, were used to fund payments to the 3-D Joint
Venture and for general corporate purposes.
RESULTS OF OPERATIONS; THREE MONTHS ENDED FEBRUARY 28, 1997 AND FEBRUARY
29, 1996 The Company's operating results for the three months ended February
28, 1997 reflect a loss of $146,583, or $0.12 per share, as there were no
operating revenues. General and administrative expenses of $165,765 and
interest expenses of $1,313 were partially offset by interest income of $20,495.
General and administrative expense consisted primarily of the costs of salary,
occupancy, office expense and insurance. Interest expense was incurred with
respect to a short term promissory note that was repaid on December 14, 1996.
Interest income was generated on the Company's cash balances.
RESULTS OF OPERATIONS - SIX MONTHS ENDED FEBRUARY 28, 1997 The
Company's operating results for the six months ended February 28, 1997 reflect a
loss of $304,699, or $0.028 per share, as there were no operating revenues.
General and administrative expenses of $311,693 and interest expenses of $15,002
were offset partially by interest income of $21,996. General and Administrative
expense consisted primarily of the costs of salary, occupancy, office expense
and insurance. Interest expense was incurred with respect to a short term
promissory note that was repaid on December 14, 1996 and to the issuance of
certain warrants during the period. Interest income was generated on the
Company's cash balances.
RESULTS OF OPERATIONS - PERIOD FROM INCEPTION (FEBRUARY 21, 1996) TO
FEBRUARY 28, 1997 The Company's operating results for the period from inception
(February 21, 1996) to February 28, 1997 reflect a loss of $426,546, or $0.043
per share, as there were no operating revenues. General and administrative
expenses of $415,507 and interest expense of $34,835 were offset partially by
interest income of $23,796. General and administrative expenses consisted
primarily of thee costs of salary and compensation, occupancy, office expense
and insurance. Interest expense was incurred with respect to a short term
promissory note that was repaid on December 14, 1996, and to the issuance of
certain warrants during the period. Interest income was generated on the
Company's cash balances.
LIQUIDITY AND CAPITAL RESOURCES At February 28, 1997, total assets were
$11,187,621 compared to $5,145,310 at August 31, 1996. The increase is primarily
an increase in additional paid-in capital of $5,361,973, from the sale of Common
Stock. Other assets reflected an increase in investment to approximately $7.1
million from $4 million in the 3-D Exploration Program. This increase was funded
primarily from cash balances and equity proceeds. On March 4, 1997, the Company
funded an additional $858,255 investment in the 3-D Exploration Program also
from equity proceeds and cash balances, and on May 2, 1997, the Company funded
an additional $2 million investment in the 3-D Exploration Program from cash
balances, bringing its total investment to date in the 3-D Exploration Program
to $10 million. General and administrative and interest expenses were funded
with equity proceeds and cash balances.
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PART II. OTHER INFORMATION
ITEM 5. OTHER INFORMATION
CHAIRMAN OF BOARD OF DIRECTORS SELECTED. On January 23, 1997 the Company's
Board of Directors elected Charif Souki as Chairman of the Board. Mr. Souki
also serves as Corporate Secretary.
PRIVATE PLACEMENT OF COMMON SHARES. On February 28, 1997, pursuant to
Regulation S under the Securities Act of 1933, the Company sold an aggregate of
352,947 shares of Common Stock for a price of $4.25 per share to two offshore
investors for gross proceeds of $1,500,025. Net proceeds after fees/commissions
totaled $1,353,800. On March 4, 1997, the Company sold an additional 352,947
shares of Common Stock Pursuant to Regulation S for a price of $4.25 per share
to two offshore investors for gross proceeds of $1,500,025. Net proceeds after
fees/commissions totaled $1,353,800 If during the 270 day period following the
date of purchase of these shares the Company offers and sells any shares of its
Common Stock for a per share gross sales price lower than the price paid for
these shares, the Company will issue additional shares of Common Stock to
reflect the lowest per share gross sales price at which shares were offered and
sold during the period.
The proceeds of the sales of Common Stock will be used to fund payments to the
3-D Joint Venture.
ITEM 6. REPORTS ON FORM 8-K
27.1 --Financial Data Schedule
(b) A report on Form 8-K was filed on December 18, 1996 relating to the private
placement of Common Stock. A report on Form 8-K was filed on January 2, 1997
relating to the signing of a Purchase and Sale Agreement to acquire an interest
in the Bonito Unit of the Pacific Outer Continental Shelf and to the private
placement of Common Stock. An additional Form 8-K was filed on January 15, 1997
in order to disclose Financial Statements for the period ended December 31,
1996.
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereto duly authorized.
CHENIERE ENERGY, INC.
/s/ WILLIAM D. FORSTER
-------------------------------------------
William D. Forster
President and Chief Executive Officer
Date: June 25, 1997
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