U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-KSB
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED March 31, 2004
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (the "Act")
Commission file number: 0-9336
STANDARD ENERGY CORPORATION
(Name of Small Business Issuer as specified in its charter)
Utah 87-0338149
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
447 Bearcat Drive
Salt Lake City, Utah 84115-2517
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (801) 364-9000
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: $.01
Par Value Common Stock
Check whether the Issuer (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Act 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 .
Check if there is no disclosure of delinquent filers in response
to Item 405 of Regulation S-B contained in this form, and no
disclosure will be contained, to the best of Issuer's knowledge,
in definitive proxy or information statement incorporated by
reference in Part III of this Form 10-KSB, or any amendment to
this Form 10-KSB .
The Issuer's revenue for the fiscal year ended March 31, 2004 was
approximately $102,400.
As of June 28, 2004, 120,836,974 shares of the Issuer's common
stock were issued and outstanding of which 52,648,761 shares were
held by non-affiliates. As of June 28, 2004, the aggregate market
value of shares held by non-affiliates, based upon the closing
price reported by the Bulletin Board market reporting system,
operated by Nasdaq of $0.01 bid, was approximately $5,264,877.
TABLE OF CONTENTS
Page
PART I.................................................. 4
Item 1. DESCRIPTION OF BUSINESS......................... 4
General............................................... 4
Oil and Gas Leases.................................... 4
Leasing Programs...................................... 7
Geologic Information Services......................... 7
Oil and Gas Exploration and Production................ 8
Competition........................................... 8
Research and Development of the Biofuels Technology... 9
Government Regulations................................ 10
Insurance............................................. 11
Environmental Matters................................. 11
Employees............................................. 11
Item 2. PROPERTIES...................................... 11
Headquarters.......................................... 11
Oil and Gas Leaseholds................................ 12
Item 3. LEGAL PROCEEDINGS............................... 12
Item 4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS................................ 12
PART II................................................. 13
Item 5. MARKET FOR THE REGISTRANT'S COMMON STOCK
AND RELATED SECURITY HOLDER MATTERS............. 13
Price Range of Common Stock........................... 13
Approximate Number of Equity Security Holders......... 13
Dividends............................................. 14
Shares Issued in Unregistered Transactions............ 14
Item 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION.............. 14
General............................................... 14
Results of Operations................................. 15
Financial Condition................................... 17
Plan of Operation..................................... 19
Inflation............................................. 20
Recent Accounting Pronouncements...................... 20
Off-Balance Sheet Arrangements........................ 20
Management's Conflicts of Interest.................... 20
Item 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA..... 20
Item 8. CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE............. 21
Table of Contents Continued
PART III................................................ 21
Item 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND
CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a)
OF THE EXCHANGE ACT............................. 21
Identification of Directors and Executive Officers.... 21
Significant Employees................................. 22
Family Relationships.................................. 23
Other Involvement in Certain Legal Proceedings........ 23
Administration Actions................................ 23
Compliance with Section 16(a)......................... 23
Code of Ethics........................................ 23
Audit Committee Financial Reports..................... 23
Item 10. EXECUTIVE COMPENSATION......................... 23
Summary Annual Compensation Table..................... 24
Compensation Pursuant to Plans........................ 24
Other Compensation.................................... 24
Compensation of Directors............................. 24
Termination of Employment and Change of Control
Arrangements........................................ 24
Item 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT.......................... 25
Item 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. 25
Transactions with Management and Others............... 25
Forward Looking Statements............................ 26
Indebtedness of Management............................ 27
Parents of Company.................................... 27
PART IV................................................. 27
Item 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8-K............................ 27
Exhibits to Form 10-KSB.............................. 27
Item 14. PRINCIPAL ACCOUNTING FEES AND SERVICES......... 27
SIGNATURE PAGE.......................................... 29
Exhibit 31
Exhibit 32 Chief Executive Officer Certification
Reports on Form 8-K................................. 30
PART I
ITEM 1. DESCRIPTION OF BUSINESS
General
Standard Energy Corporation's ("the Company") principal
business is, and historically has been, the acquisition of
unproven oil and gas leaseholds, primarily with the intent of
reselling such leaseholds to third-parties. Historically, the
Company has acquired primarily federal oil and gas leaseholds
through the Bureau of Land Management's ("BLM") leasing program.
The Company also obtains leases through purchases in competitive
bidding programs offered by various state agencies, principally
the States of Utah and Wyoming (the "Leasing Programs").
The Company evaluates the geologic potential of the leases,
which it proposes to acquire, based primarily upon geologic
information available through the Company's wholly-owned
subsidiary, Petroleum Investment Company ("PIC"). The Company's
President, Dean W. Rowell ("Rowell"), is materially involved in
such evaluations which are based, among other factors, upon the
results of prior exploratory and developmental activities on
adjacent and contiguous properties, current lease sale trends and
Rowell's 40-year experience in the domestic oil and gas business.
The Company, which is known within the industry as a buyer
and seller of leases, typically is approached by a potential
buyer for one or more of its leasehold interests. Negotiations
generally ensue and a dollar price and retained royalty interest
is agreed upon and a sale concludes.
Oil and Gas Leases
The Company had limited participation in the Leasing
Programs from 1986 through the year ended March 31, 2004, except
through its participation agreements with certain unrelated third
parties on a limited basis. The Company presently has limited
funds available to participate in the Leasing Programs. The
Company believes that the deposit feature of the Leasing Programs
have made the Company's participation in such Leasing Programs
very difficult as the deposit feature penalizes many of the less
capitalized participants and provides a substantial advantage to
Leasing Program participants which have greater financial
resources than the Company. (See "Management's Discussion and
Analysis of Financial Condition and Results of Operations")
The location and gross and net acreage of the Company's
inventory of oil and gas leaseholds at March 31, 2004 were
approximately as follows:
Location Gross Acres Net Acres
Utah 3,465 2,207
Wyoming 1,243 1,243
Total 4,708 3,450
A gross acre consists of 100% of the working interest. A net
acre is calculated by gross acres multiplied by the percentage of
working interest owned.
The above chart does not include the Company's interest in
unrelated third-party leasehold acquisitions and leasehold sales.
Third-party leasehold inventory was approximately 10,000 gross
acres at fiscal year ended March 31, 2004. Also during the fiscal
period, the Company's ability to acquire additional leaseholds
was adversely affected. Because the Company has no financial
basis in such leaseholds, the Company's financial statements and
the foregoing acreage charts do not reflect the acquisition of
such newly acquired leaseholds. As third-party leasehold sales
take place, revenue is recorded under line item "Sales of oil and
gas leasehold interest.
Management has adopted a policy of periodically evaluating
each of the leaseholds held by the Company to determine whether
the current market value of a leasehold justifies making
additional rental payments with respect thereto. Based upon such
evaluation, the Company abandons (writes off) those leaseholds
for which it does not wish to continue making rental payments.
The amount of acreage abandoned and sold by the Company in each
of the last two fiscal years has caused the Company's balance of
inventory to decline over the course of such period, primarily
due to past downturns in the domestic oil industry. No
independent appraisals are obtained by the Company on leases
purchased, nor is there an independent committee of the Board of
Directors which evaluates any of its leases.
The Company's policy is to acquire and hold leaseholds in
inventory for a period generally not longer than five years in
order to maximize the gain to the Company on such leasehold
costs. The Company does not advertise for the sale of leases
owned by it, but rather believes that most of its leasehold
purchasers become aware of the Company's leaseholds through an
examination of BLM records or other means. During the Company's
two fiscal years ended March 31, 2004 and 2003, revenues from oil
and gas lease royalties during such period were approximately
$97,000 and $27,000 respectively, reflecting the upturn in the
domestic oil industry. (See "Consolidated Financial Statements")
The Company's oil and gas leasehold inventory remains at
approximately 13,000 net acres at the year ended March 31, 2004,
including leaseholds acquired under third-party agreements.
Although its leasing activity was reduced substantially due to
the sharp decline in exploration activities during the last five
fiscal years, the Company believes it can continue its present
lines of business, including the purchase and sale of newly
acquired oil and gas leaseholds, due to the increase in price of
domestic oil and gas during the past two years.
The Company retains a royalty interest, ranging from 1% to
6%, in substantially all of the leaseholds which it has resold.
Since 1981, the Company has not received any substantial earnings
from retained royalty interests in resold leaseholds. The
majority of the leases acquired by the Company are leaseholds
granted by the BLM subject to a 12-1/2% gross royalty interest in
favor of the federal government's BLM.
The majority of the Company's inventory of undeveloped
leases are subject to the jurisdiction of the BLM, with the
balance being leased from agencies of various Rocky Mountain
states. As a result of the advance lease deposits required under
the Leasing Programs, and the Company's current working capital
difficulties, it may be expected that the percentage of leases
acquired in the future from such states may increase. BLM
leaseholds granted under the Leasing Program are leased by the
BLM at an annual rental of $1.50 per acre, and $2.00 per acre for
leases acquired and held for more than five years.
The majority of the Company's BLM leasehold inventory at
March 31, 2004 consists of BLM leaseholds granted after January
1, 1994, and generally have an initial term of ten years, which
may be extended for an additional two years if during the initial
term such leasehold is "improved" by the commencement of drilling
activities thereupon. Aggregate rentals paid by the Company
during the years ended March 31, 2004 and 2003 for all oil and
gas properties leased by it were approximately zero and zero,
respectively. The Company retains the right to reacquire the
lease if the purchaser fails to make rental payments due to the
BLM on leases sold to unrelated third-parties by the Company.
Leasing Programs
The federal government's Leasing Program is administered by
the BLM pursuant to the Minerals Leasing Act of 1920, as amended.
Under such Act, properties are made available to the public by
means of a competitive bidding system. Properties receiving no
bid are assigned to the Leasing Program. In the Leasing Program,
applicants filing for a given leasehold by a set date are deemed
to have filed simultaneously with other applicants and thus are
eligible to participate in the drawing. Under the Leasing
Program, applicants are required to deposit the first year rental
payments for each property applied for at the time of filing an
application. Funds advanced to the BLM as deposits do not bear
interest.
During fiscal 2004, the BLM took approximately 50 days, from
the date funds were required to be deposited, to process refunds
of deposits with respect to unawarded leases, which permitted
participants to "rollover" their refunds into payments of advance
deposits in the subsequent Leasing Program drawing period.
However, there can be no assurance as to how long the BLM will
take to refund such deposits in the future.
The BLM has on several previous occasions, since the Mineral
Leasing Act of 1920, suspended and/or modified the BLM Leasing
Program. No assurance can be given that current Leasing Programs
will not be subsequently eliminated, modified or suspended, or
that the Company will be able to actively participate in or
derive profits from the Leasing Programs.
Geological Information Services
The Company, through its wholly-owned subsidiary, PIC,
provides a variety of geologic lease evaluation services. PIC
makes available to subscribers monthly reports containing
information which evaluates leases offered in the Leasing
Programs. Such information includes comprehensive geologic data,
recommendations and reports with respect to leaseholds offered in
the Leasing Programs, including PIC's evaluation of the
production prospects of such leaseholds and, frequently, an
estimated resale value for such leaseholds, the names of selected
participants, results of auction sales and drawings, and other
information. In addition to such monthly reports, PIC also sells
information with respect to individual oil and gas properties
throughout the Rocky Mountain area.
The geologic and other information which PIC makes available
through its reporting services is obtained from different
sources, including PIC's internal files which contain well and
land oil and gas exploration data on a historical basis in the
nine-state area comprising the Rocky Mountain region. Such data
is interpreted and summarized by PIC's part-time in-house
geologists and landmen.
PIC, through a wholly-owned subsidiary, also provides oil
and gas mapping services with respect to properties located
throughout the Rocky Mountain region. PIC prepares base survey
and geologic maps on various scales, reflecting significant oil
and gas well drilling activity in a particular area.
During the Company's two fiscal years ended March 31, 2004
and 2003, revenues contributed to the Company's consolidated
revenues by PIC were approximately $5,400 and $6,500,
respectively. The decrease in revenue contributed by PIC for such
fiscal periods, as compared to prior fiscal years, reflects the
depth of the downturn in the domestic oil and gas industry. Low
oil prices since the initial 1986 collapse of worldwide oil
prices caused PIC to terminate the services of several employees,
including its geologists. Should higher oil prices hold for
several years it is possible that PIC could again produce higher
revenues for the consolidated business of the Company. (See
"Management's Discussion and Analysis of Financial Condition and
Results of Operations")
Oil and Gas Exploration and Production
The Company's oil and gas exploration and production
operations are presently insignificant and no reserve information
is available.
Competition
The Company experiences substantial competition in its
business of buying and selling oil and gas leaseholds. The
Company's competitors include oil companies, as well as numerous
independent operators, many of whom have substantially greater
resources than the Company and its affiliates. The Leasing
Programs, and in particular, the feature which requires advance
deposit of annual lease rentals at the time of applying for such
leases, has the effect of favoring companies with financial
resources greater than the Company's and its affiliates'.
With respect to its geologic information services, the
Company experiences competition from individual operators who
advise as to the geologic potential of properties listed for
lease under the Leasing Programs and other oil and gas
properties, as well as from publishers of newsletters providing
certain information similar to that which the Company makes
available to its subscribers. The Company believes itself to be a
factor in the geologic information services industry in the Rocky
Mountain States, premised upon the quality and volume of its land
records, the number of subscribers to its publications and the
extremely limited number of competitors, comprised mostly of
individuals, offering similar, but what management believes to be
less complete services to the general public.
The Company's competitors in oil and gas exploration,
development and production include major oil companies, numerous
independent oil and gas companies, individual proprietors and
drilling programs. Many of such competitors possess greater
financial resources than those available to the Company.
Research and Development of the Biofuels Technology
Essentially, the Company has two principal businesses. They
are its traditional oil and gas exploration and production
business that has, during the past 20-years, provided in excess
of $13,000,000 to conduct the R&D effort to commercialize its
second business, the commercial development of its Biofuels
Technology, designed to economically solve the critical problem
of disposing of Municipal Waste through the 100% recycle of
Municipal Waste into useful products saleable at a profit.
Management of the Company believes its R&D efforts have
produced trade secret and know-how protection which, in the
future, should produce valuable patent protection to the
Company's technologies from the Company's long experience and
work conducted at its former "Research Center" in Utah.
Based on its R&D efforts, the Company believes the Mayfair
Project would be the first business to economically produce
ethanol transportation fuel from low-cost organic cellulosic
materials ("Celmat") consisting of mostly paper products easily
harvested from Municipal Waste through new generation enviro-
friendly manufacturing plants fed by Municipal Waste, which
plants would combine recycling, electric power and ethanol fuel
production at several regional biofuels plant sites.
The Company further believes that its innovative Biofuels
Technology would create a profit generating solution for three
major contemporary domestic issues. First, it would provide an
opportunity to significantly reduce the volume of Municipal Waste
that currently must be landfilled or incinerated. Second, it
offers a low-cost method of producing ethanol fuel, the only
known commercially viable and publicly accepted renewable low-
polluting transportation fuel that the Company believes someday
will compete in price at the pump with gasoline. Third, it offers
a low-cost method of producing electric power from clean burning
lignin fuel. The reason for such optimism is the high Tip Fee
currently paid by municipalities to landfills and incinerators
for the dispose of Municipal Waste.
The Company's former Research Center provided the Company
with sufficient data to design and construct the 12-Module design
Mayfair Project for the 100% recycle solution to the disposal of
Municipal Waste. The 12-Module proprietary design package data is
available to entities expressing a written desire to invest funds
in the Mayfair Project. Written materials include flow sheets,
mass and energy balance, vendor equipment suppliers, construction
design, operating plans, insurance guarantees and qualification
of the selected construction contractors.
The Mayfair Project, fundamentally, is only an engineering
concept where the Company is contemplating the construction
retrofit of an existing industrial Municipal Waste plant complex
utilizing the Company's Biofuels Technology to manufacture
electricity, ethanol transportation fuel and other saleable
products derived and harvested from the contents of Municipal
Waste.
The Company is pursuing financing ideas through two wholly-
owned subsidiaries, Mayfair Energy Corporation, a Pennsylvania
corporation, and Biofuels, Inc., a Utah corporation. Final
engineering plans and final financial arrangements with unrelated
third-parties for financing and engineering contracts on the
Mayfair Project were not finalized or completed as of June 27,
2004.
Government Regulations
The Company's business is subject to extensive federal,
state and local regulation. Management believes that the Company
operations are in material compliance with applicable laws, but
is unable to predict what additional government regulations, if
any, affecting the Company's business, may be enacted in the
future; how existing or future laws and regulations might be
interpreted; or whether the Company will be able to comply with
such laws and regulations either in the markets in which it
presently conducts business or wishes to commence business.
There can be no assurance that either the states or the
federal government would not impose additional regulations upon
the Company's activities which might adversely affect the
Company's business.
Insurance
The Company does not currently have in force general
liability insurance coverage but does have renters liability
coverage on its headquarters office space. There can be no
assurance the coverage limits of the Company's policy would be
adequate, or that the Company can obtain liability insurance in
the future on acceptable terms, or at all.
Environmental Matters
The Company is not aware of any pending or threatened claim,
investigation, or enforcement action regarding environmental
issues which if determined adversely to the Company, would have
an adverse effect upon the capital expenditures, earnings, or
competitive position of the Company.
Employees
As of June 28, 2004, the Company had three employees,
including two executive officers and one part time employee. In
addition, the Company's practice in connection with the Leasing
Programs is to contract with geologists and landmen to assist the
Company in the preparation of geologic information reports, etc.
as needed. None of the Company's employees are represented by a
union or subject to a collective bargaining agreement and the
Company has never experienced a work stoppage. The Company
believes its employee relations to be good.
Item 2. PROPERTIES
Headquarters
The Company's executive offices are located in a 2,500
square foot building. The premises are leased from a
non-affiliated party, at an annual rental of approximately
$18,000 per year. Management is of the opinion that such cost is
comparable to or below normal rates in the area and believes that
such facilities are adequate for the Company needs in the
proximate future.
Oil and Gas Leaseholds
The location and gross and net acreage of the Company's
inventory of oil and gas leaseholds at March 31, 2004 was
approximately as follows:
Location Gross Acres Net Acres
Utah 3,465 2,207
Wyoming 1,243 1,243
Total 4,708 3,450
A gross acre consists of 100% of the working interest. A net
acre is calculated by gross acres multiplied by the percentage of
working interest owned.
Item 3. LEGAL PROCEEDINGS
On February 4, 2002 a Complaint in Civil Action was filed in
the Court of Common Pleas, Philadelphia, Pennsylvania, against
the Company and Mayfair Energy Corporation, a wholly-owned
subsidiary of the Company, in which the compliant alleged that
the Company and its subsidiary were in default of an amount due
to Klehr, Harrison, Harvey, Branzburg & Eller, LLP, attorney's at
law in the amount of $48,275.98. The Company's Philadelphia
counsel, Schafkopf & Burgess, LLC, filed answers to the
complaint, whereby the Company and Mayfair demand judgement in
their favor and have asked for all counts to be dismissed.
On April 23, 2003 the Company settled the Complaint with the cash
payment of $10,000 and eight payments payments of $1,000 each for
eight months for a total of $18,000.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to the Company's shareholders for
a vote during the fiscal year ended March 31, 2004.
PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
SECURITY HOLDER MATTERS
Price Range of Common Stock
The Company's shares of Common Stock are traded on the over
the counter Bulletin Board ("OTCBB") electronic quotation
service, operated by The Bulletin Board, Inc., an affiliate of
The Nasdaq Stock Market, Inc. The following table sets forth the
high and low bid quotations of the Company's common stock for the
periods indicated, as reported by the OTCBB. The quotations set
forth below represent prices between dealers and do not include
retail markups, markdowns or commissions and may not represent
actual transactions.
Bid Price
High Low
Fiscal Year 2003
First Quarter .......... $ 0.06 $ 0.03
Second Quarter .......... 0.06 0.03
Third Quarter .......... 0.05 0.03
Fourth Quarter .......... 0.03 0.02
Fiscal Year 2004
First Quarter .......... $ 0.02 $ 0.01
Second Quarter .......... 0.11 0.02
Third Quarter .......... 0.05 0.01
Fourth Quarter .......... 0.04 0.02
Fiscal Year 2005
First Quarter .......... $ 0.03 $ 0.02
(through June 28, 2004)
Approximate Number of Equity Security Holders:
Title of Class holders as of June 28, 2004
Common Stock, par value $0.01 per share: 2,200
Preferred Stock, par value $0.01 per share: None Issued
As of June 28, 2004, there were 120,836,974 shares of common
stock outstanding and approximately 2,200 stockholders of record.
The number of stockholders of record does not include an
indeterminate number of stockholders whose shares are held by
brokers and fiduciary depositories in "street name". Management
believes there are in excess of 3,000 beneficial stockholders of
the Company's common stock, including fiduciary depository firms.
Dividends
The Company has neither declared nor paid any dividends on
its Common Stock since the inception of the Company, and the
Board of Directors does not contemplate the payment of dividends
in the foreseeable future. Any decision as to the future payment
of dividends will depend on the earnings and financial position
of the Company and such other factors as the Board of Directors
may deem relevant. It is the present intention of management to
utilize all available funds for the development of the Company's
business.
Shares Issued in Unregistered Transactions
We issued shares of our common stock in unregistered
transactions from 2002 through 2004. All of the following shares
of common stock issued were issued in non registered transactions
in reliance on Section 4(2)of the Securities Act of 1933, as
amended (the "Securities Act"). The shares issued in 2003 were
issued pursuant to Rule 504 of Regulation D promulgated under the
Securities Act of 1933, as amended. The shares of common sock
issued were as follows:
2002
There were no common shares issued in 2002.
2003
On July 31, 2002, Trachyte agreed to accept 15,000,000 newly
issued shares of the Company's common stock in exchange for
$300,000 of partial debt settlement of cash paid to the Company
through July 31, 2002 and to accept a replacement note for the
balance owed to Trachyte in the amount of $311,395 with interest
at 12% per annum dated August 1, 2002. The shares were issued at
$0.03 per share, which was the closing market bid price on July
31, 2002. An additional expense of $150,000 was recorded to value
the shares at their market value. The shares are required to be
held at least two years for investment purposes.
2004
There were no common shares issued in 2004.
Item 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
General
The Company's primary oil and gas business, the brokerage of
leasehold interests, has not materially changed during the period
ended March 31, 2004 due to the lack of capital to pursue the
purchase of new leases. In light of this lack of capital the
Company has been exploring other ways of generating revenues.
During the 2004 fiscal period, the Company continues to
research and develop ("R&D") its biofuels technologies (the
"Biofuels Technology") for the recycle of ordinary municipal
solid waste, garbage, trash, paper and plastic material streams
("Municipal Waste") into recycled saleable products and the
recovery of cellulosic materials ("Celmat") believed by the
Company to be convertible into electric power and ethanol
transportation fuel. (See "Research and Development of the
Biofuels Technology")
As a result of its R&D efforts, and after working with
engineering and management contractor, W.J. Scales & Company of
Boerne, Texas (the "Scales Group"), management believes that the
Company has developed what appears to be a commercial application
of the Biofuels Technology for the future recovery of inorganic
materials and Celmat from the recycle of Municipal Waste (the
"Mayfair Project"). The Mayfair Project would be located in the
Northeast U.S. where Municipal Waste landfills and transfer
stations charge the highest dump rates ("Tip Fee") in the U.S.
for the disposal of Municipal Waste.
If operations commence, it is anticipated that the Mayfair
Project would utilize the Biofuels Technology in a facility that
combines a Municipal Waste recycle plant, an ethanol fuel
production plant and an electrical power plant. The facility
would separate Municipal Waste into separate inorganic and
organic recovery streams. The inorganic stream products would be
sold into the existing commercial salvage ("Salvage") market and
the organic stream products would be converted into specialty
products such as electricity and ethanol transportation fuels.
There can be no assurance that the required capital will be
available to construct the Mayfair Project and there can be no
assurance that the Biofuels Technology will perform on a
commercial basis. The Company's future operating results will
depend on its ability to obtain adequate financing to construct
the Mayfair Project. Expenses incurred for the Mayfair Project
are currently being accounted for under line item "Research and
Development Costs".
Results of Operations
The Company realized revenues of approximately $102,400 for
the fiscal year ended March 31, 2004, compared with approximately
$44,000 for the corresponding period ended March 31, 2003. Cash
requirements during the period were obtained from a combination
of internally generated cash flow from operations, loans, asset
sales, and the sale of Rule 144 investment stock to private
individuals.
There were no oil and gas leasehold sales for the fiscal
period ended March 31, 2004, and there were approximately $9,500
fpr the corresponding period ended March 31, 2003. Revenues from
the sale of the Company's geologic information services were
approximately $5,400 for the fiscal period ended March 31, 2004,
compared with approximately $6,500 for the corresponding period
ended March 31, 2003. Revenues from the Company's geologic
information services have declined steadily from the collapse of
world crude oil prices in 1986. Recent world crude oil and
natural gas price increases may stimulate domestic drilling
activity which would, once again, create a need for the Company's
geologic information services. Revenue from oil production was
approximately $97,000 for the fiscal period ended March 31, 2004,
compared to approximately $27,500 for the corresponding period
ended March 31, 2003. Oil production revenues are down as a
result of world crude oil and natural gas price fluctuations.
The Company incurred expenses related to its oil and gas
leasehold sales of zero for the fiscal period ended March 31,
2004, compared to zero for the comparable period ended March 31,
2003. Expenses associated with the Company's geologic information
services were approximately $3,000 for the fiscal period ended
March 31, 2004, compared to approximately $3,000 for the
comparable period ended March 31, 2003. Expenses associated with
the Company's oil production and exploration activities were zero
for the fiscal month period ended March 31, 2004, due to the
abandonment in fiscal 1998 of the Company's last operated well.
There were no costs for the comparable period ended March 31,
2002, due to the Company's exploration inactivity. General and
administrative expense for the fiscal month period ended March
31, 2004 were approximately $104,000, compared to approximately
$242,800 for the comparable period ended March 31, 2003. These
low figures reflect the Company's basic inactivity in its oil and
gas sector.
During the previous three year period all of the Company's
R&D costs were expensed under line item General and
Administrative expense. During the 2004 fiscal period, the
Company created a line item for R&D costs to better distinguish
expenses between general and administrative expenses and the
expenses related to its various biofuels plant projects. These
costs are being accounted for under line item "Project Costs" and
were approximately zero for the fiscal period ended March 31,
2004, compared to approximately $30,000 for the comparable period
ended March 31, 2003.
The Company's net loss for the 2004 fiscal period ended
March 31, 2004 was approximately $1,700, compared to
approximately $191,000 for comparable 2003 fiscal period and it
expects to operate at a loss for the 2004 fiscal period, due to
continued R&D costs incurred for the Mayfair Project, and costs
related to its oil and gas business. Mayfair Project costs are
accounted for under line item "Research and Development Costs".
(See "Consolidated Financial Statements")
The Company does not expect to realize significant cash
flows from the sale of leasehold interests, geologic information
services, or oil production and exploration activities during
fiscal 2004, nor does it expect significant leasehold sales in
the foreseeable future, as the domestic oil industry activity
continues unchanged due to uncertain world crude oil and natural
gas prices.
The Company has available at March 31, 2004, unused tax
operating loss carry forward of approximately $2,058,000 that may
be applied against future taxable income through 2020. No tax
benefit has been reported in the financial statements, because
the Company believes there is a 50% or greater chance the carry
forwards will expire unused. Accordingly, the potential tax
benefits of the loss carry forwards are offset by a valuation
account of the same amount.
Financial Condition
Management continues to explore additional financing
alternatives for ongoing and future operations of the Company and
has entered into an agreement with the Scales Group for the
engineering, management, and construction of the Mayfair Project.
There is no assurance that the efforts of management or the
Scales Group to locate and secure additional financing will be
successful, and the failure to secure the Mayfair Project
financing would substantially alter management's assumptions as
herein presented. (See "Consolidated Financial Statements").
Revenue reduction in the Company's overall oil and gas
business is related to effects of the original worldwide collapse
of crude oil prices in 1986 and the corresponding reduced oil and
gas brokerage activity of the Company. Because of the reduced
activity in its oil and gas business and a 1992 loss of
approximately $4,100,000 in Biomass International, Inc.
("Biomass"), a former partially owned biomass material R&D
subsidiary, the Company is currently experiencing cash flow
difficulties.
The Company's most significant assets are (1) its oil and
gas production income, (2) its oil and gas leaseholds held for
resale, approximating 13,000 net acres at June 27, 2004,
including leaseholds acquired under its unrelated third-party
agreements, and (3) its plan for the full development of the
Mayfair Project. Other assets are; (4) the approximate $2.1
million tax loss carry forward, and (5) 5,252,556 shares of
Biomass. In 1994, Biomass ceased to exist as an R&D organization
and in March 2000, Biomass was sold as a shell company to an
unrelated third-party under a reorganization plan, ending a 12
year R&D effort.
Due to the proposed issuance of additional shares of Biomass
to the unrelated third-party purchaser, the Company does not
expect to hold in excess of 5% of the common stock of Biomass
upon completion of the transaction and expects to recover little,
if any, of its approximate $4,100,000 investment in Biomass
represented by 5,252,556 shares of Biomass common stock. At June
27, 2004, the Biomass shares had no quoted bid price on the
electronic OTC Pink Sheet market system. With no bid, or volume
on a daily basis, sales of the Biomass shares appear impractical
in the foreseeable future.
In order to continue in existence the Company is in need of
additional financing from outside sources or from internal
operations. These conditions raise substantial doubt about the
Company's ability to continue as a going concern. Management can
give no assurances that it will be successful in its endeavors to
resolve its cash flow difficulties or that it will be able to
retain and ultimately recover its costs in oil and gas leaseholds
held for resale. The financial statements do not include any
adjustments relating to the amounts and classification of assets,
liabilities, income or expenses that might be necessary should
the Company be unable to successfully resolve these uncertainties
and continue in existence.
The Company foresees a need for additional equity financing
in order to continue in existence, and may, in the future, seek
to raise additional funds through asset sales, bank and/or other
loans, debt, or equity offerings. Any such equity offerings,
asset sales, or other financing may either be private or public
and may result in substantial dilution to the then existing
shareholders of the Company. Because of uncertainties existing in
the domestic oil and gas industry and the Mayfair Project, the
Company is not in a position to forecast future earnings or cash
flow. The Company's future is very fluid and largely dependent on
factors outside of its management's control.
For the fiscal period ended March 31, 2004, Dean W. Rowell,
the President of the Company, continues to secure and guarantee
loans for the Company: (1) He has guaranteed two credit cards up
to approximately $110,000 with an outstanding balance of
approximately $82,815 at the end of the period, and (2) he
continues to loan the Company funds through his 100% owned
privately-held Utah corporation, Trachyte Oil Company
("Trachyte") with an outstanding loan balance of approximately
$220,095, plus interest of $51,897 for a total of $271,992 at the
period ended March 31, 2004. Expenses incurred under the use of
the credit cards are being accounted for under line item
"Revolving Line of Credit" and expenses incurred under the loan
agreement are being accounted for under line item "Notes payable
to related parties".
Since fiscal 1991, Trachyte has materially supported the
Company financially largely due to Mr. Rowell's efforts to secure
loans from Trachyte for the Company and contribute the value of
an assumed salary of $50,000 per year to additional paid in
capital. The several transactions with Trachyte have provided the
financial means for the Company to pursue its R&D of the Biofuels
Technology and the commercialization of the Mayfair Project.
Without such additional contributions by Mr. Rowell the Company
would have been unable to pursue these goals. Final plans and
final financial arrangements had not been completed for the
Mayfair Project at June 28, 2004.
Plan of Operation
There have been no significant changes in capitalization or
financial status during the past two years that are not reflected
in the financial statements. The Company's plan of operation
during the next twelve (12) months includes the following:
1. Pursue financing for the Mayfair Project.
2. Continue R&D, testing Municipal Waste processing
equipment and testing existing and newly developed
cellulose enzymes.
3. Continue the design and development of the Mayfair
Project into three businesses -- Municipal Waste
recycle, ethanol fuel production and electric power
generation.
4. Pursue oil and gas lease acquisition with
third party investors and investigate the possibility
of entering into the wholesale electric power
generation business.
Inflation
Inflation continues to apply moderate upward pressure on the
cost of goods and services including those purchased by the
Company. Management believes the net effect of inflation on
operations has been minimal during the past two years.
Recent Accounting Pronouncements
There are no recent accounting pronouncements that will have
a material impact on the Company's financial statements.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have
or are reasonably likely to have a current or future effect on
our financial condition, changes in financial condition, revenues
or expenses, results of operations, liquidity, capital
expenditures or capital resources that is material to investors.
Management's Conflicts of Interest
Material conflicts of interest exist and will continue to
exist between the Company, Trachyte, and Mr. Rowell, who is also
the President of Trachyte, a privately-held Utah corporation,
whose current major activities are the exploration and production
of oil and gas resources. The Company's policy is to offer any
new oil and gas property purchase first to the Company and then
to Trachyte if the Company is unable to accept the financial
obligation of any transaction. At June 28, 2004, Mr. Rowell
beneficially owned approximately 54% of the common stock of the
Company and 100% of the common stock of Trachyte.
Mr. Rowell owes a duty of due care and fair dealing to both
the Company and Trachyte and the resolution of duties and
conflicts in favor of one company over the other may impair his
duties to each company. It is likely that any conflict of
interest between the Company and Trachyte requiring a
determination may have to be settled in favor of the Company to
the detriment of Trachyte, as well as to the detriment of the
current and future shareholders of Trachyte.
Item 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this Item is submitted as a
separate section at the rear of this Form 10-KSB report.
Item 8. CONTROL AND PROCEDURES
(a) Evaluation of Disclosure Controls and Procedures
Based on an evaluation under the supervision and with the
participation of Management, as of a date within 90 days of the
filing date of this Annual Report on Form 10-KSB, our principal
executive officer and principal financial officer have concluded
that our disclosures controls and procedures (as defined in Rule
13a-14(c) and 25d-14(c) and 15d-14(c) under the Securities Act of
1934, are effective to ensure the information required to be
disclosed in reports that we file or submit under the Exchange
Act is recorded, processed, summarized and reported within the
time specified in SEC rules and forms.
(b) Changes in Internal Controls
There were no significant changes in our internal controls
or in other factors that could significantly affect these
controls subsequent to the date of their evaluation. There were
no significant deficiencies or material weaknesses, and therefore
there were no corrective actions taken. However, the design of
any system of controls is based on part upon certain assumptions
about the likelihood of future events and there is no certainty
that any design will succeed in achieving its stated goal under
all potential future considerations, regardless of how remote.
PART III
Item 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE
ACT
Identification of Directors and Executive Officers
The current directors and executive officers of the Company,
who will serve until the next annual meeting of shareholders or
until their successors are elected or appointed and qualified,
are set forth below:
Name Age Position
Dean W. Rowell 66 CEO/President/Chairman
Pamela K. Nelson 46 Vice President/Secretary
Michael M. Cannon 56 Director
Dean W. Rowell has been Chairman of the Board, President and
Chief Executive Officer and Chief Financial Officer of the
Company since its inception in April 1978 and was last elected by
shareholders in 1996. Mr. Rowell has been involved in the oil and
gas exploration and production industries for over 40 years.
Prior to serving in his present capacities with the Company, he
served as the president of a number of privately-held energy
related companies. Mr. Rowell is also a director and President of
the Company's wholly-owned subsidiaries, PIC, EnviroSystems,
Biofuels, and Mayfair Energy Corporation. Mr. Rowell devotes
approximately 80% of his time to the Company.
Pamela K. Nelson was last elected in 1996 and has been a
Director of the Company since September 1978 and became a Vice
President of the Company in 1979 and Corporate Secretary in 1983.
Ms. Nelson has been involved in landwork and leasing services to
the oil and gas industry for the last 28 years. Ms. Nelson is
also a director, Vice President, Corporate Secretary and Manager
of land and lease operations for the Company's wholly-owned
subsidiary, PIC. She is a director, Vice President, Corporate
Secretary of EnviroSystems, Biofuels, and Mayfair Energy
Corporation, all wholly-owned subsidiaries of the Company. She
devotes all of her paid time to the Company.
Michael M. Cannon, a cum laude graduate of the University of
Utah, joined the Company in March 1982 and in September 1982
became a Vice President and Director, with responsibility for
marketing and corporate communications. From January 1979 to
March 1982, Mr. Cannon was President of an advertising and public
relations agency, Cannon Communications, a substantial number of
whose clients were members of the United States House of
Representatives and the Senate. From November 1976 to January
1979, Mr. Cannon served as the press secretary for Gunn McKay, a
United States Representative from the State of Utah. In 1985 Mr.
Cannon served as a state director of the Independent Petroleum
Association of Mountain States and was. Mr. Cannon is presently
self-employed as a consultant in the Communications industry.
Mr. Cannon resigned as an Officer of the Company, effective July
1, 1985, but remains as an outside Director being last elected in
1996, Mr. Cannon has been associated with the Company for over
15-years, and is a director of the Company's wholly-owned
subsidiaries, PIC, and EnviroSystems.
Each Director shall hold office until the next annual
meeting of shareholders or until his successor shall have been
duly elected and qualified. Officers are elected annually by, and
serve at the pleasure of, the Board of Directors.
Significant Employees
None
Family Relationships
There are no family relationships among the Company's
officers and directors.
Other Involvement in Certain Legal Proceedings
There have been no events under the bankruptcy act, no
criminal proceedings and no judgements or injunctions material to
the evaluation of the ability and integrity of any executive
officer of the Company in last five years.
Administration Action
None
Compliance With Section 16(a)
Section 16 of the Securities Act of 1934 requires the filing
of reports for sales of the Company's common stock made by
officers, directors and 10% or greater shareholders. A Form 3,
and Form 4 must be filed within two days after the sale or
purchase transaction. Based upon the review of Form 4, Form 3,
and/or Form 5 filed with the Company, the Company is not aware of
any delinquent filings of such forms by any reporting person.
Code of Ethics
We have not adopted a formal ethics policy for our chief
executive officer or senior financial officers, due to our status
as a Bulletin Board company with few management personnel. We
believe that our Board can successfully oversee and manage our
existing officers and employees. However, we believe that an
ethics policy is important and intend to consider adopting such a
policy in the future.
Audit Committee Financial Expert
The Board of Directors have determined that the company does not
have an audit committee financial expert serving on an audit
committee, due to our status as a Bulletin Board company with few
management personnel.
Item 10. EXECUTIVE COMPENSATION
The following table sets forth the aggregate compensation
paid by the Company for services rendered during the last three
years to the Company's Chief Executive Officer and to the
Company's most highly compensated executive officers other than
the CEO, whose annual salary and bonus exceeded $100,000:
Summary of Annual Compensation Table
Other Annual
Compensation Restricted
Name of Principal Commissions Awards Stock Option
Position Year Salary & Bonuses (Auto) Awards Awards
Dean W. Rowell 2004 $50,000(1) -0- $4,000 -0- -0-
President/CEO 2003 $44,000(1) -0- $4,000 -0- -0-
2002 $44,000(1) -0- $4,000 -0- -0-
__________
(1) Represents the value of Mr. Rowell's contributed services.
None of the Company's executive officers received aggregate
cash and cash equivalent compensation exceeding $100,000 in any
of the last three fiscal years. No options to purchase any of the
Company's securities were granted to any reporting person during
the fiscal year ended March 31, 2004. During the same period,
Rowell elected to sell stock in the Company due to limited
corporate cash flow to partially compensate Rowell in absence of
a salary.
Compensation Pursuant to Plans
None of the executive officers of the Company are parties to
an employment agreement with the Company. Dean W. Rowell, the
Company's Chairman of the Board, President, Chief Executive and
Chief Financial Officer will continue to serve the Company as
determined by the Board of Directors without a salary or
employment agreement. On April 1, 1997, the Company discontinued
the practice of providing Rowell a credit card but continues to
provide Rowell with an automobile at a cost of approximately
$4,000 per year.
The Company has no other "plans" (as such term is used in
Item 402 of Regulation S-K) with respect to further executive
compensation.
Other Compensation
Not applicable.
Compensation of Directors
Directors of the Company receive no compensation for
services as such.
Termination of Employment and Change of Control Arrangements
Not applicable.
Item 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth the number of shares
beneficially owned, as of June 28, 2004, by each Director of the
Company, by all officers and Directors as a group and by all
persons known to the Company as owning or possessing voting
control over five (5%) percent or more of the Company's
outstanding shares of Common Stock:
Number Percentage
of Shares of Shares
Name and Address Owned Outstanding
Dean W. Rowell (1) 65,467,113 54.2%
Pamela K. Nelson 2,708,100 2.2%
Michael M. Cannon 13,000 .0%
All Officers and Directors
as a group 68,188,213 56.4%
___________
(1) This figure includes all of the shares owned by Trachyte.
Item 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Transactions with Management and Others
Geologic and other information which PIC has or develops is
available to Rowell as an officer of the Company, and he may use
such information for the benefit of the Company in determining
which leases to buy or sell. Such information is also available
to Rowell, without cost, in connection with Rowell's
participation in the Leasing Programs.
During the twelve year period since fiscal 1991, Trachyte
has helped financially support the Company largely due to
Rowell's efforts to secure loans from Trachyte for the Company
during periodic cash flow difficulties. During such periods, the
several transactions with Trachyte have provided the financial
means for the Company to pursue commercialization of the Mayfair
Project, otherwise the Company would have been unable to pursue
this goal. Final plans and final financial arrangements had not
been completed for the Mayfair Project as of June 28, 2004.
During the fiscal period ended March 31, 2004, the Company
continued to experience severe cash flow difficulties which have
continued into the 2005 fiscal period. Since the Company has been
unable to repay any of the loans from Trachyte during the past
two fiscal periods, Trachyte has received a demand note from the
Company, including interest at 12% per annum, with a principal
and interest balance at March 31, 2004 of approximately $271,991.
On July 31, 2002, Trachyte agreed to accept 15,000,000 newly
issued shares of the Company's common stock in exchange for
$300,000 of partial debt settlement of cash paid to the Company
through July 31, 2002 and to accept a replacement note for the
balance owed to Trachyte in the amount of $311,395 with interest
at 12% per annum dated August 1, 2002. The shares were issued at
$0.03 per share, which was the closing market bid price on July
31, 2002. An additional expense of $150,000 was recorded to value
the shares at their market value. The shares are required to be
held at least two years for investment purposes.
On July 15, 1996, the Company formed Biofuels, Inc.
("Biofuels"), a wholly-owned subsidiary, for the purpose of
investing in and developing the Biofuels Technology for the
Mayfair Project. This effort was centered on management's belief
that a Celmat to ethanol technology could be commercialized,
based on the Company's extensive experience at its former
research center from 1982 through 1992, and its experience in
developing the Mayfair Project with the Scales Group through June
28, 2004.
Forward Looking Statements
The forgoing discussion in "Management's Discussion and
Analysis of Financial Condition and Results of Operation" contain
forward-looking statements, within the meaning of Section 27A of
the Securities Act of 1933, as amended (the "Act") and Section
21E of the Act, which reflect Managements current views with
respect to the future events and financial performance. The
Company cautions that words used in this document such as
"experts", "anticipates", "believes" and "may" as well as similar
words and expressions identify and refer to statements describing
events that may or may not occur in the future, including among
other things, statements relating to anticipated growth and
increased profitability, as well as to statements relating to the
Company's strategic plan, including plans to develop the Mayfair
Project and to selectively acquire other companies. These
forward-looking statements and the matters to which they refer to
are subject to considerable risks and uncertainties that may
cause actual results to be materially different from those
described in this document, including, but not limited to future
financial performance and future events, competitive pricing for
services, costs of obtaining capital as well as national,
regional and local economic conditions. Actual results
could differ materially from those addressed in the forward-
looking statements. Due to such uncertainties and risks, readers
are cautioned not to place undue reliance on such forward-looking
statements, which speak only as of the date of this Form 10-KSB
report.
Indebtedness of Management
Reference is made to Section above entitled "Transactions
with Management and Others".
Parents of Company
The only parents of the Company, as defined in 12b-2 of the
Exchange Act, are the officers and directors of the Company. For
information regarding the share holdings of the Company's
officers and directors, see Item 11.
PART IV
Item 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
Exhibits to Form 10-KSB
Exhibits filed with this Report are incorporated by
reference and set forth below:
Exhibit 31: Entitled "Certificate of Chief Executive Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002".
Exhibit 32: Entitled "Certification Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002".
The financial statement information required by this portion
of Item 13 is submitted as a separate section at the rear of this
Report entitled "Independent Auditors' Report".
Reports on Form 8-K
There were no Form 8-K's filed by the Company during the
fiscal year ended March 31, 2004.
Item 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Audit Fees - The aggregate fees billed by HJ & Associates
for professional services rendered for the audit of our annual
financial statements included in our Annual Report on Form 10-KSB
for the fiscal years ended March 31, 2004 and March 31, 2003 and
for the quarterly financial statements on Form 10-QSB were $5,950
and $5,750, respectively. There were no other fees charged to
the Company by HJ & Associates.
CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
Exhibit "31"
Item 7. CERTIFICATE OF CHIEF EXECUTIVE AND CHIEF EXECUTIVE
OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Dean W. Rowell, certify that:
1. I have reviewed this annual report on Form 10KSB of Standard
Energy Corporation;
2. Based on my knowledge, this annual report does not contain
any untrue statement of a material fact or omit a material fact
necessary to make the statements made, in light of the
circumstances under which such statements were made, not
misleading with respect to the period covered by this annual
report;
3. Based on my knowledge, the financial statements, and other
financial information included in this annual report, fairly
present in all material respects the financial condition results
of operations and cash flows of the registrant as of, and for,
the periods presented in this Annual report;
4. The registrant's other certifying officers and I are
responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-14 and 15d-
14) for the registrant and we have;
(a) designed such disclosure controls and procedures to
ensure hat material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in
which this annual report is being prepared;
(b) evaluated the effectiveness of the registrant's
disclosure controls and procedures as of a date within 90 days of
this annual report) the "Evaluation Date"); and
(c) presented in this annual report our conclusions
about the effectiveness of the disclosure controls and procedures
based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have
disclosed, based on our most recent evaluation, to the
registrant's auditors and the audit committee of registrant's
board of directors (or persons performing the equivalent
function);
(a) all significant deficiencies in the design or
operation of internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's auditors
any material weaknesses in internal controls; and
(b) any fraud, whether or not material, that involved
management or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officers and I have
indicated in this annual report whether or not there were
significant changes in internal controls or in other factors that
could significantly affect internal controls subsequent to the
date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material
weaknesses.
SIGNA TURE
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this Report to be signed on its behalf by the undersigned,
thereunto duly authorized.
STANDARD ENERGY CORPORATION
By: /s/ Dean W. Rowell
Dean W. Rowell
President
June 28, 2004
Salt Lake City, Utah
EXHIBIT "32"
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Standard Energy (the
"Company") on Form 10-KSB for the period ending March 31, 2004,
as filed with the Securities and Exchange Commission on the date
hereof (the "Report"), I, Dean W. Rowell, Chief Executive Officer
(Chief Financial Officer) of the Company, certify, pursuant to 18
U.S.C. subsection 1350, as adopted pursuant to subsection 906 of
the Sarbanes-Oxley Act of 2002, that to the best of my knowledge
and belief:
(1) The Report fully complies with the requirements of
section 13(a) or 15(d) of the Securities Exchange Act
of 1934; and
(2) The information contained in the Report fairly
presents, in all material respects, the financial
condition and result of operations of the Company.
/s/Dean W. Rowell
Dean W. Rowell
Chief Executive Officer (Chief Financial Officer)
Date: June 28, 2004
SIGNATURE PAGE
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this Report to be signed on its behalf by the undersigned,
thereunto duly authorized.
STANDARD ENERGY CORPORATION
By: /s/ Dean W. Rowell
Dean W. Rowell
President
June 28, 2004
Salt Lake City, Utah
Pursuant to the requirements of the Securities Exchange Act
of 1934, this Report has been signed below by the following
persons on behalf of the Registrant and in the capacities and on
the date indicated:
Signature Capacity Date
/s/ Dean W. Rowell President and Director June 28, 2004
Dean W. Rowell (Principal Executive,
Financial and Accounting
Officer)
/s/ Pamela K. Nelson Vice President June 28, 2004
Pamela K. Nelson Corporate Secretary,
Treasurer and Director
/s/ Michael M. Cannon Director June 28, 2004
Michael M. Cannon
STANDARD ENERGY CORP ORATION
AND SUBSIDIARIES
CONSOLIDATED FINANCI AL STATEMENTS
March 31, 2004
C O N T E N T S
Independent Auditors Report................................ 3
Consolidated Balance Sheet................................. 4
Consolidated Statements of Operations...................... 6
Consolidated Statements of Stockholders Equity (Deficit)... 7
Consolidated Statements of Cash Flows...................... 8
Notes to the Consolidated Financial Statements............. 9
INDEPENDENT AUDITORS ' REPORT
The Board of Directors
Standard Energy Corporation and Subsidiaries
Salt Lake City, Utah
We have audited the accompanying balance sheet of Standard Energy
Corporation and Subsidiaries as of March 31, 2004, and the related
consolidated statements of operations, stockholders' equity
(deficit) and cash flows for the years ended March 31, 2004 and
2003. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is
to express an opinion on these consolidated financial statements
based on our audits.
We conducted our audits in accordance with accounting standards
generally accepted in the United States of America. Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
consolidated financial statements. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the consolidated
financial position of Standard Energy Corporation and Subsidiaries
as of March 31, 2004, and the results of their operations and their
cash flows for the years ended March 31, 2004 and 2003, in
conformity with accounting principles generally accepted in the
United States of America.
The accompanying consolidated financial statements have been
prepared assuming that the Company will continue as a going
concern. As discussed in Note 7 to the consolidated financial
statements, the Company has had no significant operating results to
date and has a working capital deficit of $459,000, which together
raises substantial doubt about its ability to continue as a going
concern. Management s plans with regard to these matters are also
described in Note 7. The consolidated financial statements do not
include any adjustments that might result from the outcome of this
uncertainty.
HJ & Associates, LLC
Salt Lake City, Utah
June 15, 2004
STANDARD ENERGY CORP ORATION AND SUBSIDIARIES
Consolidated Balance Sheet (Continued)
ASSETS
March 31,
CURRENT ASSETS 2004
Cash $ 917
Total Current Assets 917
PROPERTY AND EQUIPMENT, net (Note 2) 12,232
OTHER ASSETS
Cash surrender value life insurance 808
Oil and gas leases held for resale (Note 3) 42,043
Pledged drilling bonds (Note 3) 25,000
Total Other Assets 67,851
TOTAL ASSETS $ 81,000
LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 33,945
Revolving line of credit (Note11) 82,815
Note payable (Note 10) 3,712
Note payable - related party (Note 5) 271,992
Total Current Liabilities 392,464
LONG TERM DEBT
Note payable (Note 10) 8,658
Total Long Term Debt 8,658
Total Liabilities 401,122
STANDARD ENERGY CORP ORATION AND SUBSIDIARIES
Consolidated Balance Sheet (Continued)
COMMITMENTS AND CONTINGENCIES (Note 4)
STOCKHOLDERS EQUITY (DEFICIT)
Preferred stock, par value $0.01 per share:
10,000,000 shares authorized, no shares issued
and outstanding -
Common stock, par value $0.01 per share:
200,000,000 shares authorized, 120,836,974 shares
issued and outstanding 1,208,369
Additional paid-in capital 7,961,073
Treasury stock (83,253)
Accumulated deficit (9,406,311)
Total Stockholders Equity (Deficit) (320,122)
TOTAL LIABILITIES AND STOCKHOLDERS
EQUITY (DEFICIT) $ 81,000
The accompanying notes are an integral part of these consolidated
financial statements
STANDARD ENERGY CORP ORATION AND SUBSIDIARIES
Consolidated Stateme nt of Operations
For the Years Ended
March 31,
2004 2003
REVENUES
Oil and gas information services $ 5,400 $ 6,450
Oil and gas leasehold interests - 9,447
Oil and gas lease royalties 97,030 27,763
Total Revenues 102,430 43,660
EXPENSES
Oil and gas information services 3,271 3,271
Depreciation, depletion/amortization 5,664 5,664
General and administrative 103,676 242,880
Total Expenses 103,676 251,735
OPERATING LOSS (1,246) (208,075)
OTHER INCOME (EXPENSE)
Gain on Leasehold held for resale - 70,390
Interest and other income 31,136 2,302
Interest expense (31,624) (55,740)
Total Other Income (Expense) (488) 16,952
NET LOSS $ (1,734) $ (191,123)
BASIC LOSS PER SHARE $ (0.00) $ (0.00)
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 120,836,974 114,800,855
The accompanying notes are an integral part of these consolidated
financial statements
STANDARD ENERGY CORP ORATION AND SUBSIDIARIES
Consolidated Statement of Stockholders' Equity (Deficit)
For the Years Ended March 31, 2004 and 2003
Additional
Treasury Stock Common
Stock Paid-In Accumulated
Shares Amount Shares
Amount Capital Deficit
Balance, March 31, 2001
1,037,420 $ (83,253) 105,851,974 $
1,058,519 $ 7,523,073 $ (8,984,919)
Common stock cancelled 0 0 (15,000)
(150) 0 0
Common stock issued for
payment on note payable
and accrued interest
related party at $0.02
per share 0 0 15,000,000
150,000 300,000 0
Contributed capital for
services rendered by an
officer 0 0 0
0 44,000 0
Net loss for the year
ended March 31, 2003
0 0 0
0 0 (191,123)
Balance, March 31, 2003
1,037,420 (83,253) 120,836,369
1,208,369 7,911,073 (9,404,577)
Contributed capital for
services rendered by an
officer 0 0 0
0 50,000 0
Net loss for the year
ended March 31, 2004 0 0 0
0 0 (1,734)
Balance, March 31, 2004 1,037,420 $ (83,253) 120,836,974
$ 1,208,369 $ 7,961,073 $ (9,406,311)
The accompanying notes are an integral part of these consolidated
financial statements
STANDARD ENERGY CORP ORATION AND SUBSIDIARIES
Consolidated Stateme nt of Cash Flows
For the Years Ended
March 31,
2004 2003
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (1,734) $ (191,123)
Adjustments to reconcile net loss to
net cash used by operating activities:
Depreciation, depletion and
amortization 3,660 5,664
Gain on Leasehold held for resale - (70,390)
Common stock cancelled - (150)
Common stock issued for services
-related party - 150,000
Contributed capital for services
rendered by an officer 50,000 44,000
Changes in assets and liabilities:
Increase in accounts payable and
accrued expenses (21,276) 42,752
Increase in deferred lease income (942) (4,266)
Net Cash Used by Operating Activities 29,708 (23,513)
CASH FLOWS FROM INVESTING ACTIVITIES
Gain on Leasehold held for resale - 100,000
Cash value life insurance 4,893 (4,028)
Net Cash Provided (Used) by Investing
Activities 4,893 95,972
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on notes payable
- related parties (42,400) (132,000)
Proceeds from notes payable
- related parties 23,500 53,500
Net change to line of credit (15,657) 4,936
Net Cash Provided (Used) by Financing
Activities (34,557) (73,564)
NET DECREASE IN CASH 44 (1,105)
CASH AT BEGINNING OF YEAR 873 1,978
CASH AT END OF YEAR $ 917 $ 873
The accompanying notes are an integral part of these consolidated
financial statements
STANDARD ENERGY CORP ORATION AND SUBSIDIARIES
Consolidated Stateme nt of Cash Flows (Continued)
For the Years Ended
March 31,
2004 2003
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION
CASH PAID FOR:
Interest $ - $ 12,249
Income taxes $ - $ -
NON-CASH INVESTING AND FINANCING ACTIVITIES
Vehicle acquired through note payable $ - $ 18,556
Common stock issued for payment on note
payable and accrued interest
related party $ - $ 450,000
Contributed capital for services
rendered by an officer $ 50,000 $ 44,000
Common stock issued for services
related party $ - $ 150,000
The accompanying notes are an integral part of these consolidated
financial statements
STANDARD ENERGY CORP ORATION AND SUBSIDIARIES
Notes to the Consoli dated Financial Statements
March 31, 2004 and 2 003
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
The Company was organized under the laws of the State of Utah on
April 3, 1978. The Company's principal business activity is the
acquisition and resale of unproven oil and gas leaseholds. The
Company also provides a variety of geologic lease evaluation
services and information. Further, the Company receives royalty
income from leasehold interests held by the Company.
Principles of Consolidation
The consolidated financial statements include the accounts of
Standard Energy Corporation and its wholly-owned subsidiaries,
Standard EnviroSystems, Inc., Petroleum Investment Company,
Petroleum Map Service Company and Mayfair Energy Corporation
(formerly known as Mayfair Trashfuel Corporation) (collectively
the Company) . Significant intercompany accounts and transactions
have been eliminated in consolidation.
Oil and Gas Leasehold Interests Held for Resale
The Company's inventory of oil and gas leasehold interests held
primarily for resale to other parties is valued at the lower of the
costs to acquire the interests or market. Cost of sales is based
on the cost of the specific leasehold interest sold.
Oil and Gas Activities
The Company follows the successful efforts method of accounting for
its oil and gas exploration and production activities as prescribed
by Statement No. 19 of the Financial Accounting Standards Board.
Property and Equipment
Property and equipment are valued at cost and, are depreciated or
amortized principally by the straight-line method over their
estimated useful lives. The useful lives of property and equipment
for purposes of financial reporting range from five to seven years.
STANDARD ENERGY CORP ORATION AND SUBSIDIARIES
Notes to the Consoli dated Financial Statements
March 31, 2004 and 2 003
NOTE 1 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Provision for Taxes
Deferred taxes are provided on a liability method whereby deferred
tax assets are recognized for deductible temporary differences and
operating loss and tax credit carryforwards and deferred tax
liabilities are recognized for taxable temporary differences.
Temporary differences are the differences between the reported
amounts of assets and liabilities and their tax bases. Deferred
tax assets are reduced by a valuation allowance when, in the
opinion of management, it is more likely that not that some portion
or all of the deferred tax assets will not be realized. Deferred
tax assets and liabilities are adjusted for the effects of changes
in tax laws and rates on the date of enactment.
Net deferred tax assets consist of the following components as of
March 31, 2004 and 2003:
2004 2003
Deferred tax assets
NOL Carryover $ (771,750) $ (802,870)
Contribution Carryover (4,311) (4,311)
Total Deferred Tax Asset - -
Deferred tax liabilities: - -
Valuation allowance 776,061 807,181
Net deferred tax asset $ - $ -
The income tax provision differs from the amount of income tax
determined by applying the U.S. federal income tax rate of 39% to
pretax income from continuing operations for the years ended March
31, 2004 and 2003 due to the following:
2004 2003
Book income $ (675) $ (16,040)
Services 19,500 17,160
Contribution carryover - (1,065)
Other 12,293 (55)
NOL Utilization (31,118) -
Valuation allowance - -
$ - $ -
At March 31, 2004, the Company had net operating loss carryforwards
of approximately $2,058,000 that may be offset against future
taxable income from the year 2004 through 2023. No tax benefit has
been reported in the March 31, 2004 consolidated financial
statements since the potential tax benefit is offset by a valuation
allowance of the same amount.
STANDARD ENERGY CORPORATION AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
March 31, 2004 and 2003
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Provision for Taxes (Continued)
Due to the change in ownership provisions of the Tax Reform Act of
1986, net operating loss carryforwards for Federal income tax
reporting purposes are subject to annual limitations. Should a
change in ownership occur, net operating loss carryforwards may be
limited as to use in the future.
Basic Loss Per Share
The computation of basic loss per share of common stock is based on
the weighted average number of shares of common stock outstanding
during the periods presented. Common stock equivalents have not
been included because they are antidilutive in nature.
For the Year Ended
March 31, 2004
Loss Shares Per Share
(Numerator) (Denominator) Amount
$ (1,734) 120,836,974 $ (0.00)
For the Year Ended
March 31, 2003
Loss Shares Per Share
(Numerator) (Denominator) Amount
$ (191,123) 114,800,855 $ (0.00)
Cash Flows Statement
For purposes of statements of cash flows, the Company considers all
highly liquid debt investments purchased with a maturity of three
months or less to be cash equivalents.
Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
STANDARD ENERGY CORPORATION AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
March 31, 2004 and 2003
NOTE 2 - PROPERTY AND EQUIPMENT
The following is a summary of property and equipment - at cost,
less accumulated depreciation as of March 31, 2004:
Vehicle $ 18,556
Computers 7,711
Furniture and fixtures 51,393
Printing systems 35,648
Well and land files and maps 305,000
Total 418,308
Less: accumulated depreciation (406,076)
Total $ 12,232
Depreciation expense for the years ended March 31, 2004 and 2003
was $3,660 and $5,664, respectively.
NOTE 3 - OIL AND GAS PROPERTIES
The Company's primary oil and gas businesses, brokerage of
leasehold interests and sales related to its information services,
have decreased significantly over the past few years. At March 31,
2004, the Company was holding of oil and gas leases for resale with
a cost basis of $42,043.
During the year ended March 31, 2003, the Company sold its interest
in a lease located in Montana for $100,000. The Company's basis was
$29,610 which resulted in a gain on sale of $70,390.
The Company has negotiated agreements with certain non affiliates
to provide capital to jointly participate in a leasing program for
oil and gas leases. Under these agreements, the Company provides
raw data and services to identify potential leases. The Company
earns approximately 40% gross interest in each leasehold obtained.
Because the Company has no cost in the leases, its share of the net
proceeds is recognized as revenue when the leases are sold and are
recorded as sales of oil and gas leasehold interests.
In connection with its lease brokerage activities, the Company has
included in other assets pledged certificates of deposit in the
amount of $25,000 which are to secure a statewide oil and gas lease
bond in the State of Utah and an individual lease bond in the State
of Wyoming.
STANDARD ENERGY CORPORATION AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
March 31, 2004 and 2003
NOTE 4 - COMMITMENTS AND CONTINGENCIES
Office Lease
The Company entered into a lease extension agreement for office
space which commenced December 15, 2002 for a term of one year with
monthly lease payments of $1,500 per month.
NOTE 5 - RELATED PARTY TRANSACTIONS
The Company signed a $50,000 note payable to Trachyte on March 31,
1998 related to funds advanced to the Company. The note bears
interest at 12.00% and is due upon demand. The note is unsecured
and has increased as additional funds have been advanced. On July
31, 2002, the Company issued 15,000,000 shares of its common stock
for payment on this note payable and accrued interest totaling
$300,000. The shares were issued at a discount of $0.01 to market
value. Accordingly, compensation expense in the amount of $150,000
(15,000,000 x $0.01) was recognized upon issuance of the shares.
On August 1, 2002, the Company cancelled the original note payable
and issued a new note payable for remaining balance of $311,395.
The new note also bears interest at 12%, is due on demand and is
unsecured. The principal balance due at March 31, 2004 was
$220,095 plus accrued interest of $51,901.
During the years ended March 31, 2004 and 2003, an officer of the
Company contributed services valued at $50,000 and $44,000,
respectively, which is recorded as an increase in additional paid-
in capital.
NOTE 6 - GOING CONCERN
These financial statements have been prepared assuming that the
Company will continue as a going concern. The Company has incurred
significant losses in the past which have resulted in working
capital and accumulated deficits. These deficits have been caused
primarily from the Company's investment in Biomass International,
Inc. (a development stage company) and significantly reduced
revenues from sales of its oil and gas leasehold interests and
information services. Because of the currently depressed
conditions in the oil and gas industry, coupled with the Company's
cash flow difficulties, the Company's ability to retain and
ultimately recover its investments in oil and gas leaseholds held
for resale and other assets of the Company, is uncertain at this
time. These conditions raise substantial doubt about the Company's
ability to continue as a going concern. Management's plans in this
regard are to seek additional financing through loans or through
the issuance of equity securities and to seek increased sales
STANDARD ENERGY CORPORATION AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
March 31, 2004 and 2003
related to its oil and gas businesses. However, management can
STANDARD ENERGY CORPORATION AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
March 31, 2004 and 2003 give no assurance that it will be
successful in its endeavor to resolve its cash flow difficulties
or that it will be able to retain and ultimately recover its cost
in oil and gas leaseholds held for resale and the other assets of
the Company. The financial statements do not include any
adjustments relating to the recoverability and classification of
liabilities, income or expenses that might be necessary should
the Company be unable to continue as a going concern.
NOTE 7 - CAPITAL STOCK
Preferred Stock
The Company has authorized 10,000,000 shares of preferred stock,
$0.01 par value with such rights, preferences and designations
and to be issued in such series as determined by the Board of
Directors. No shares are issued and outstanding at March 31,
2004.
NOTE 8 - INDUSTRY SEGMENTS
The Company operates in three principal industries: oil and gas
information services, brokerage of oil and gas leasehold interests
and oil and gas exploration and production. Information as to the
Company's segments is summarized below as of March 31 for the years
then ended:
2004 2003
Revenues
Oil and gas information services $ 5,400 $ 6,450
Oil and gas leasehold interests - 9,447
Oil and gas leases royalties 97,030 27,763
$ 102,430 $ 43,660
Operating Loss
Oil and gas information services $ 2,014 $ 3,179
Oil and gas leasehold interests - -
Oil and gas royalties 97,030 27,763
Corporation and investment (100,290) (239,017)
$ (1,246) $(208,075)
Identifiable Assets
Oil and gas leases held for resale $ 42,043 $ 42,043
Pledged drilling bonds 25,000 25,000
Corporation and investment 13,957 22,466
$ 81,000 $ 89,509
Depreciation, Depletion and Amortization
Corporation and investment $ 3,660 $ 5,664
STANDARD ENERGY CORPORATION AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
March 31, 2004 and 2003
The Company has no intersegment sales or sales to affiliated
customers. Operating loss consists of total revenues less total
expenses, except for interest expense which has not been
allocated to any segment. Identifiable assets by segment
represent those assets that are used in the Company's operations
in each industry. Corporate assets which are not allocated to
any segment are principally cash, short-term investments,
marketable securities and a portion of property and equipment.
Capital expenditures in fiscal 2004 and 2003 were insignificant.
The Company's oil and gas exploration and production operations
are presently insignificant and no reserve information is
available.
NOTE 9 - NEWLY ISSUED ACCOUNTING PRONOUNCEMENTS
During the year ended March 31, 2004, the Company adopted the
following accounting pronouncements which had no impact on the
financial statement or results of operations:
- SFAS No. 143, Accounting for Asset Retirement Obligations;
- SFAS No. 145, Recision of FASB Statements 4, 44, and 64,
amendment of Statement 13, and Technical Corrections;
- SFAS No. 146, Accounting for Exit or Disposal Activities;
- SFAS No. 147, Acqusitions of certain Financial
Institutions;and
- SFAS No. 148, Accounting for Stock Based Compensation.
- SFAS No. 149, Amendment of Statement 133 on Derivative
Instruments and Hedging Activities;
- SFAS No. 150, Accounting for Certain Financial Instruments
with Characteristics of both Liabilities and Equity
In addition, during the year ended March 31, 2004, FASB
Interpretations No. 45 and No. 46, along with various Emerging
Issues Task Force Consensuses (EITF) were issued and adopted by the
Company and has no impact on its financial statements.
NOTE 10 - NOTE PAYABLE
Note payable to vehicle financing agency,
bearing no interest, monthly payments of
$309, secured by vehicle $ 12,370
Less current portion (3,712)
Long Term portion $ 8,648
STANDARD ENERGY CORPORATION AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
March 31, 2004 and 2003
Future maturities of long term debt are as follows:
For the year ended
March 31,
2005 $ 3,712
2006 3,712
2007 3,712
2008 1,234
Total $ 12,370
NOTE 11 - REVOLVING LINES OF CREDIT
Line of credit due to Wells Fargo
Business currently in default,
bearing interest at 8.0%, unsecured. $ 67,825
Line of credit due to American Express,
Bearing interest at 9.49%, variable
monthly payments, unsecured 14,990
y$ 82,815