Item 3. Legal Proceedings.
Torch/Nuevo/Panda Litigation. In connection with the Company's sale of its ---------------------------- subsidiaries Panda Resources, Inc. and Richfield Natural Gas, Inc. in 1993, the Company became a party to three different lawsuits.
On October 10, 1994, Nuevo Liquids, Inc. ("Nuevo") filed a lawsuit against the Company and its wholly-owned subsidiary, LaTex Petroleum Corporation ("LaTex Petroleum") styled Nuevo Liquids, Inc. v. LaTex Resources, Inc. and LaTex ------------------------------------------------------ Petroleum Corp., Case No. 94-049944, District Court of Harris County, Texas, - --------------- 234th Judicial District. Nuevo alleged that the Company and LaTex Petroleum had refused to arbitrate certain disputes arising under the Stock Purchase Agreement dated July 15, 1993 between Nuevo and Panda Resources, Inc. ("Panda"), pursuant to which Panda sold to Nuevo its former wholly-owned subsidiary, Richfield Natural Gas, Inc. ("Richfield"). Under the terms of the Stock Purchase Agreement, the Company was the guarantor of Panda's obligations to Nuevo. The disputed issues between Nuevo and the Company related to a post-closing final accounting and settlement statement by which the final purchase price under the Stock Purchase Agreement was to be adjusted to reflect certain post-closing costs and events.
On October 12, 1994, Torch Energy Marketing, Inc. ("Torch") filed a lawsuit against the Company and its wholly-owned subsidiary, LaTex Petroleum styled Torch Energy Marketing, Inc. v. LaTex Resources, Inc. and LaTex Petroleum Corp., - ------------------------------------------------------------------------------- Case No. 94-050945, District Court of Harris County, Texas, 270th Judicial District. Torch alleged that the Company and LaTex Petroleum had refused to arbitrate certain disputes arising under the Stock Purchase Agreement dated July 26, 1993, between Torch and LaTex Petroleum, pursuant to which the Company sold to Torch its former wholly-owned subsidiary, Panda. The disputed issues between Torch and the Company related to a post-closing final accounting and settlement by which the final purchase price under the Stock Purchase Agreement was to be adjusted to reflect certain post-closing costs and events. On January 6, 1995, the Company removed both the Nuevo and Torch lawsuits to the United States District Court for the Southern District of Texas, Houston Division, Case No. H-95-0029.
On March 21, 1995, the Company filed a lawsuit against its former wholly- owned subsidiary, Panda, styled LaTex Petroleum Corporation v. Panda Resources, ----------------------------------------------- Inc., Case No. CJ-95-01302, in the District Court of Tulsa County, Oklahoma. - ---- The Company sought recovery of $163,191.16 plus interest and attorneys' fees, for the sale of natural gas to Panda for the period from June 1993, through March 1994.
On December 7, 1995, the company entered into a Settlement Agreement (the "Settlement") with Torch, Nuevo, Panda, Steve Wilson and Wilson, Tucker & Associates to settle each of the referenced lawsuits. Pursuant to the Settlement, the company agreed (a) to pay Nuevo $20,000 on December 7, 1995, and an additional $30,000 over the course of 90 days following execution of the Settlement, and (b) to pay Torch $50,000 within one year of the Settlement, an additional $50,000 within two years of the Settlement, and an additional $150,000 within three years of the Settlement, together with interest in the amount of $36,000. To secure its obligation under the Settlement, the Company stipulated to an agreed judgment in the amount of $1,000,000 (less any amounts paid pursuant to the Settlement) upon the Company's
default of its obligations under the Settlement. Torch, Nuevo and Panda agreed to dismiss their respective claims against the Company arising from the referenced litigation. In addition, the Company agreed to assume and indemnify Panda and Torch against all obligations and amounts owed under a May 2, 1989, agreement (the "Dewey County Contract") between Panda and Northern Natural Gas Company relating to the transportation of natural gas through a facility located in Dewey County, Oklahoma. The Company has subsequently been asked to indemnify Torch with respect to claims brought against it by Northern in a lawsuit filed March 7, 1996, as more fully discussed below.
Northern Natural Gas Company v. LaTex Resources, Inc., Case No. 94-049766, ----------------------------------------------------- 152nd District Court of Harris County, Texas. On October 7, 1994, Northern Natural Gas Company ("Northern") filed a lawsuit against the Company alleging that the Company had breached two Firm Transportation Service Agreements dated December 1, 1990, between Northern and Panda, a former wholly-owned subsidiary of the Company. Northern claimed damages, including damages for anticipatory breach, in the amount of $1,600,000, plus other actual damages and interest. On June 6, 1996, Northern and the Company entered into a Settlement Agreement pursuant to which (a) the Company issued to Northern 50,000 shares of the Company's Series B Senior Convertible Preferred Stock which are convertible (subject to adjustment) into 333,333 shares of the Company's common stock, and (b) the Company agreed to pay Northern $465,000 in installments of $50,000 by June 21, 1996, $150,000 by May 1, 1997, $125,000 by May 1, 1998, and $140,000 by May 1, 1999. An agreed judgment was entered in the case, but Northern has agreed not to seek to enforce the judgment unless the Company defaults in its payment obligations. Once the required payments have been made, Northern has agreed to execute a release of the judgment.
Associated Storage Corp., formerly known as Centennial Storage Corp., a ----------------------------------------------------------------------- subsidiary of Associated Natural Gas, Inc., a Colorado corporation v. LaTex - --------------------------------------------------------------------------- Resources, Inc., Case No. CJ-94-04711, District Court for Tulsa County, - --------------- Oklahoma. On November 17, 1994, Associated Storage Corporation ("Associated") filed a lawsuit against the Company alleging that the Company had breached a July 21, 1993 agreement between Associated and the Company pursuant to which the Company allegedly agreed to pay Associated $150,000 in connection with the sale of the Company's former wholly-owned subsidiary, Panda Resources, Inc., and Panda's wholly-owned subsidiary, Richfield Natural Gas, Inc. Associated seeks actual damages in the amount of $150,000, prejudgment interest, court costs and attorneys' fees.
Jones, et al. v. Hughes Eastern, et al., Case No. CV-95-133, Circuit Court --------------------------------------- for Lamar County, Alabama; Hubbert, et al. v. Hughes Eastern, et al., Case No. ----------------------------------------- CV-95-134, Circuit Court for Lamar County, Alabama; Perkins, et al. v. Hughes ------------------------- Eastern, et al., Case No. CV-95-137, Circuit Court for Lamar County, Alabama. - --------------- Each of these cases is a wrongful death or personal injury action arising out of an accident which occurred at a heater-treatment unit on the Blowhorn Creek Millerella Oil Unit lease in Lamar County, Alabama. Germany Oil Company, a wholly-owned subsidiary of the Company, is a working interest owner in the oil and gas lease relevant to the case and, together with all other working interest owners, is a named defendant. Each plaintiff seeks damages in the amount of $25 million. All three cases have been referred to Germany Oil Company's insurance carrier for defense. Each case is in the initial stages of discovery.
Northern Natural Gas Company v. Torch Energy Advisors, Inc., Case No. ----------------------------------------------------------- 96-12462, 269th Judicial District Court of Harris County, Texas. On March 7, 1996, Northern Natural Gas Company ("Northern") filed this lawsuit against Torch Energy Advisors, Inc. ("Torch" for alleged breach of a May 2, 1989, agreement (the "Dewey County Contract") between Torch, Panda Resources, Inc. ("Panda"), and Northern relating to the transportation of natural gas through a facility located in Dewey County, Oklahoma. The Company has assumed the defense of this matter pursuant to the indemnification agreement entered into as part of the December 7, 1995, settlement among Torch, Panda and the Company discussed above.
In addition to the foregoing litigation, the Company is a named defendant in lawsuits, is a party in governmental proceedings and is subject to claims of third parties from time to time arising in the ordinary course of business. While the outcome of lawsuits or other proceedings and claims against the Company cannot be predicted with certainty, management does not expect these additional matters to have a material adverse effect on the financial position of the Company.
Item 4.

Item 4. Submission of Matters to a Vote of Security Holders.
On May 16, 1996 the Company held its 1995 annual meeting of shareholders to (i) elect six directors, and (ii) ratify the selection of Briscoe Robinson Co., (now known as Briscoe & Burke) as the Company's independent auditors for 1996. At the meeting the following individuals were elected directors of the Company. Each individual elected was a director of the Company prior to the meeting.
- -------------------- (1) Mr. Wade resigned as a Director of the Company on October 8, 1996.
(2) Mr. Strauch resigned as a Director of the Company on June 24, 1996.
The selection of Briscoe & Burke was ratified by shareholders by a vote of 14,464,929 shares for and 115,303 against with 71,815 shares abstaining.
PART II
Item 5.

Item 5. Market for Registrant's Common Equity and Related Shareholder Matters.
Market Information and Dividends
The common stock of the Company (i) is traded over-the-counter and quoted on NASDAQ under the symbol "LATX" and (ii) until September 4, 1996, was listed on the Pacific Stock Exchange under the symbol "LAT". Effective September 4, 1996, the Company's common stock was delisted by the Pacific Stock Exchange as a result of the failure of the minimum bid price for the common stock to meet the Exchange's listing maintenance requirements.
The following table sets forth, for the periods indicated, (i) the high and low closing bid prices per share of common stock as quoted by NASDAQ, and (ii) the high and low closing bid prices per share of common stock as reported on the Pacific Stock Exchange. Bid quotations represent quotations between dealers without adjustment for retail mark-ups, mark-downs or commissions and may not necessarily represent actual transactions.
(1) Effective September 4, 1996, the Company's common stock was delisted by the Pacific Stock Exchange as a result of the failure of the minimum bid price for the common stock to meet the Exchange's listing maintenance requirements.
(2) There was no trading activity in the Company's common stock on Pacific Stock Exchange during the fourth quarter of fiscal 1996 and, therefore, no price information for this period is available.
No cash dividends have been declared by the Company's Board of Directors during the Company's two most recent fiscal years. The Company does not presently intend to declare or pay dividends on the common stock. The terms of the Company's existing bank credit facility do not permit the Company to pay dividends on the common stock. Payment of dividends in the future, if any, will depend on applicable legal and contractual restrictions, as well as the financial condition and requirements of the Company and general business conditions. The Company presently intends to use its available cash flow for expansion of the Company's business, including acquisition, development and enhancement of oil and gas properties.
Recent Sales of Unregistered Securities
During the year ended July 31, 1996, the Company issued (i) effective March 12, 1996, 58,800 shares of its common stock to Princeton Otolaryngology Retirement Trust, an entity controlled by Dr. Howard S. Farmer, in payment of indebtedness of Wexford Technology, Incorporated in the amount of $23,520, and (ii) effective June 27, 1996, 85,000 shares of its common stock to Thomas J. Patrick in payment of indebtedness of Wexford Technology, Incorporated in the amount of $37,000. Following the year ended July 31, 1996 the Company issued a total of 1,690,000 shares of its common stock to various officers and employees as described in more detail at "Item 11. Executive Compensation -- Restricted Stock Grants". In each of the referenced transactions, an exemption from registration was claimed under Section 4(2) of the Securities Act of 1933, as amended, and regulations promulgated thereunder because no public offering was involved and the securities were issued for investment and not with a view to the distribution thereof. No underwriter was involved in any of the referenced transactions nor were any underwriting discounts or commissions paid. Each certificate representing shares issued in the referenced transactions bears a restrictive legend and stop transfer instructions were entered on the Company's stock transfer records with respect thereto.
Item 6.

Item 6. Selected Financial Data.
The selected historical financial information presented in the table below for and at the end of each of the years ended July 31, 1992, 1993, 1994, 1995 and 1996 is derived from the audited consolidated financial statements of the Company, of which the consolidated balance sheets as of July 31, 1995 (restated) and 1996, and the consolidated statements of income, shareholders' equity and cash flows for the years ended July 31, 1994, 1995 (restated) and 1996 are included under "Item 8. Financial Statements and Supplementary Data."
The selected financial information presented below should be read in conjunction with the Company's audited consolidated financial statements and the notes thereto included under Item 8 and Management's Discussion and Analysis of Financial Condition and Results of Operations at Item 7.

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.
FASB Accounting Standards
The Financial Accounting Standards Board ("FASB") has issued Statements of Financial Accounting Standards No. 114 ("SFAS 114"), Accounting by Creditors for Impairment of a Loan and No. 118 ("SFAS 118"), Accounting by Creditors for Impairment of a Loan - Income Recognition and Disclosures. In general, these statements require that impaired loans be measured by creditors at the present value of expected future cash flows discounted at the loan's effective interest rate or at the loan's observable market price or the fair value of the collateral if the loan is collateral dependent. The Company has adopted SFAS 114 and 118 for the fiscal year ended July 31, 1996.
FASB has issued Statement of Financial Accounting Standard No. 119 ("SFAS 119"), Disclosure about Derivative Financial Instruments and Fair Value of Financial Instruments. This statement generally requires disclosures about amounts, nature and terms of derivative financial instruments. The Company has adopted SFAS 119 for the fiscal year ended July 31, 1996.
FASB has issued Statement of Financial Accounting Standard No. 121 ("SFAS 121"), Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of. This statement requires that long-lived assets and certain identifiable intangibles to be held and used by an entity be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If the sum of the undiscounted future cash flows is less than the carrying amount of the asset, an impairment loss is recognized. This statement is effective for financial statements for fiscal years beginning after December 15, 1995. The Company intends to adopt SFAS 121 for the fiscal year ending July 31, 1997. The Company expects the adoption of SFAS 121 will not have a material effect on its financial statements.
FASB has issued Statement of Financial Accounting Standard No. 123 ("SFAS 123"), Accounting for Stock-Based Compensation. This statement establishes financial accounting and reporting standards for stock-based employee compensation plans. This statement defines a fair value based method of accounting for an employee stock option or similar equity instrument plan. Under the fair value based method, compensation cost is measured at the grant date based on the value of the award and is recognized over the service period, which is usually the vesting period. This statement is effective for transactions entered into in fiscal years that begin after December 15, 1995. The Company intends to adopt the disclosure requirements of SFAS 123 for the fiscal year ending July 31, 1997.
Results of Operations
The Company follows the "successful efforts" method of accounting for its oil and gas properties whereby costs of productive wells and productive leases are capitalized and depleted on a unit-of-production basis over the life of the remaining proved reserves. Depletion of capitalized costs is provided on a prospect-by-prospect basis. Exploratory expenses, including geological and geophysical expenses and annual delay rentals, are charged to expense as incurred. Exploratory drilling costs, including the cost of stratigraphic test wells, are initially capitalized, but charged to expense if and when the well is determined to be unsuccessful.
The factors which most significantly affect the Company's results of operations are (i) the sale prices of crude oil and natural gas, (ii) the level of oil and gas sales, (iii) the level of lease operating expenses, (iv) the level of exploratory activities, and (v) the level of and interest rates on borrowings. Total sales volumes and the level of borrowings are significantly impacted by the degree of success the Company experiences in its efforts to acquire oil and gas properties and its ability to maintain or increase production from existing oil and gas properties through its development and production enhancement activities. The following table reflects certain historical operating data for the periods presented.
(1) The Company's price hedging arrangements did not have a material effect on average prices for the year ending July 31, 1995.
(2) After giving effect to the impact of the Company's price hedging arrangements with the Company's principal bank. Without such hedging arrangements, the average sales prices for the year ended July 31, 1996 would have been $15.73 for oil and $2.03 for gas.
Relatively modest changes in either oil or gas prices significantly impact the Company's results of operations and cash flow and could significantly impact the Company's borrowing capacity. Prices received by the Company for sales of oil and natural gas have fluctuated significantly from period to period. The Company's ability to maintain current borrowing capacity and to obtain additional capital on attractive terms is substantially dependent on oil and gas prices. Domestic spot oil prices have ranged from a low of approximately $11 per barrel in July 1986 to a high of approximately $40 per barrel in October 1991, with a current price of approximately $24 per barrel. The fluctuations in oil prices during these periods reflect market uncertainty regarding OPEC's ability to control the production of its member countries, as well as concerns related to the global supply and demand for crude oil. Since the end of the Gulf War in early 1991, crude oil prices have experienced continued weakness, primarily as a result of OPEC's inability to maintain disciplined production quotas by member countries and the uncertainty associated with Iraq's return to the crude oil export market. These factors continue to overhang the market and will create significant price volatility for the foreseeable future.
Natural gas prices received by the Company fluctuate generally with changes in the spot market price for gas. Spot market gas prices have generally declined in recent years because of lower worldwide energy prices as well as excess deliverability of natural gas in the United States. However, natural gas prices have rebounded recently and appear to be poised for further strengthening. Domestic spot natural gas prices have ranged from a low of approximately $0.90 per Mcf in January 1992 to a high of approximately $2.70 per Mcf in April 1996, with a current price of approximately $2.10 per Mcf. Environmental concerns coupled with recent increases in the use of natural gas to produce electricity have combined to improve prices. Under FERC Order 636, U.S. pipelines have been made more accessible to both buyers and sellers of natural gas and, as a result, natural gas will be able to more effectively compete for market share with other end-use energy forms. All of this suggests a continued improvement in the demand for natural gas over the long term.
Within the oil and gas business, it appears that the substantial restructuring of the major and large independent companies is slowing. The merger activity of the 1980's has waned, and despite the continued exodus by U.S. companies to international ventures, it appears that the mid-1990's will be a "settling in" time for most companies. Nevertheless, there remains a large inventory of properties available for acquisition within the United States. However, it is anticipated that as crude oil and natural gas prices stabilize and strengthen, fewer companies will be inclined to sell their properties in the future.
The Company's principal source of cash flow is the production and sale of its crude oil and natural gas reserves, which are depleting assets. Cash flow from oil and gas sales depends upon the quantity of production and the price obtained for such production. Except as affected by the Company's current commodity hedging arrangement, an increase in prices permits the Company to finance its operations to a greater extent with internally generated funds. A decline in oil and gas prices reduces the cash flow generated by the Company's operations, which in turn reduces the funds available for servicing debt, acquiring additional oil and gas properties and exploring for an developing new oil and gas reserves.
In addition to the foregoing, the results of the Company's operations vary due to seasonal fluctuations in the sales prices and volumes of natural gas. In recent years, natural gas prices have been generally higher in the fall and winter. Due to these seasonal fluctuations, results of operations for individual quarterly periods may not be indicative of results which may be realized on an annual basis.
The following events have directly affected the comparability of the results of operations and financial position of the Company during the periods presented:
. During the period between July 31, 1992 and July 31, 1996, the Company completed 12 oil and gas property acquisitions that added substantial amounts of proved oil and gas reserves for a total expenditure of approximately $30.8 million. As a result of these transactions, the Company's equivalent proved reserves increased approximately 560% in fiscal 1992, 125% in fiscal 1993, 58% in fiscal 1994, 3.5% in fiscal 1995 and 68% in fiscal 1996, and the Company's oil and gas production, revenues, lease operating expenses, interest expense and net income have increased significantly.
. The Company acquired Panda Resources in February 1993 and subsequently sold Panda's gas marketing and storage operations in July 1993.
. In April 1995 the Company completed the acquisition of Germany Oil Company which approximately doubled the Company's oil and gas properties and added significantly to the Company's liabilities. The acquisition was accounted for using the purchase method of accounting. In connection with this acquisition, the Company refinanced its senior debt, issued preferred stock and entered into hedging arrangements with respect to sales prices for its oil and gas production.
. In December 1995 the Company completed the sale of certain oil and gas properties it had acquired from Phillips Petroleum and Sackett Oil Company for approximately $2,857,275 net cash to the Company.
. In March 1995 the Company acquired Germany Oil Company in a purchase transaction. The assets of Germany Oil consisted primarily of oil and gas properties. In recording the transaction, the Company failed to allocate the purchase price to all assets acquired as required by generally accepted accounting principles. During fiscal 1996 the Company, based on the reports of independent petroleum engineers, reallocated the adjusted purchase price as of the date of acquisition. Accordingly, the Company's consolidated financial statements for the year ended July 31, 1995 have been restated.
Year ended July 31, 1996 Compared to year ended July 31, 1995. Total ------------------------------------------------------------- revenues from the Company's operations for the year ended July 31, 1996 were $15,006,816 before reduction by $1,475,653 as a result of losses incurred from the Company's oil and gas price hedging arrangements. This compares to total revenues of $10,442,679 for the year ended July 31, 1995, which includes hedging gains of $157,301. The increase is attributable to a 15% increase in oil and gas prices and the inclusion of the oil and gas operations of the Company's wholly-owned subsidiary, Germany Oil Company, for the full year ended July 31, 1996. The increased revenues were partially offset by lower revenues from the Company's crude oil marketing activities.
Total operating expenses for the year ended July 31, 1996 were $17,926,639 compared to $11,559,488 for the same period a year earlier. Lease operating expense increased 20% to $6,608,089
compared to the prior year primarily as a result of including the full year of operations of Germany Oil, while expenses associated with the Company's marketing operations decreased $610,155 due to reduced oil and gas marketing activity.
Depreciation, depletion and amortization expense increased from $2,710,574 in fiscal 1995 to $4,705,912 in fiscal 1996 primarily as a result of the acquisition of Germany Oil.
General and administrative expenses for the year ended July 31, 1996 were $2,893,146 compared to $2,736,261 for the prior year due to routine increases in the Company's administrative expenses.
The Company incurred dry hole costs of $2,630,541 during the year ended July 31, 1996 which was principally due to the write-off of the Company's investment in the Tunisian Prospect. The Company also wrote off its investment in the Kazakhstan Prospect in the amount of $955,496. See "Item 1. Business and Item 2. Properties -- Exploration and Development".
The Company's equity in the net losses of its unconsolidated affiliates, Wexford Technology, Incorporated and Imperial Petroleum, Inc. was $298,839 during the fiscal year July 31, 1995. The current year equity in the losses or earnings from these unconsolidated affiliates was not subject to determination by the Company and, therefore, is included in the write off of the investment in and advances to these affiliates in the total amount of $4,184,881 for the fiscal year ended July 31, 1996. See "Item 1. Business and Item 2. Properties - - - Other Business".
The Company recognized gains on the sale of assets of $2,365,807 from the disposition of non-strategic oil and gas properties during the fiscal year ended July 31, 1996, an increase of $2,237,881 from the preceding year.
The Company had a net loss from continuing operations for the year ended July 31, 1996 of $8,420,401 ($0.50 per common share), compared to a net loss from continuing operations of $2,491,342 ($0.15 per common share) for the year ended July 31, 1995. The increase in the net loss from continuing operations is primarily a result of the write off of the cost of the Company's activities in Tunisia and Kazakhstan (reflected as dry hole cost and abandonments), hedging contract losses, and equity in losses and write-offs of investments in affiliates. These increases were partially offset by a gain on the sale of assets.
The Company also incurred additional losses of $1,810,382 from discontinued operations in connection with litigation arising out of the sale of its Panda subsidiary in July 1993. As a result, the Company incurred a net loss of $10,801,404 ($0.60 per common share) for the year ended July 31, 1996 compared to a net loss of $2,624,142 ($0.15 per common share) for the prior year.
Year ended July 31, 1995 compared to year ended July 31, 1994. Total ------------------------------------------------------------- revenues from the Company's operations for the year ended July 31, 1995 were $10,442,679 compared to $12,085,364 for the year ended July 31, 1994. The decrease is primarily attributable to a 13% decrease in oil and gas prices which also resulted in lower revenues from the Company's crude oil marketing activities. The reduced revenues were partially offset by an increase in oil and gas sales volume as a result of the acquisition of Germany Oil Company effective in April 1995. However, oil and gas sales revenues for the fourth quarter of fiscal 1995 increased 46% compared to revenues in the fourth quarter of fiscal 1994 as a result of the acquisition of Germany Oil. The Company anticipates that oil and gas sales revenues will further increase in subsequent quarters due to this acquisition.
Total operating expenses for the year ended July 31, 1995 were $11,559,488 compared to $11,880,094 for the same period a year earlier. Lease operating expense increased nine percent to $5,264,858 compared to the prior year primarily as a result of the acquisition of Germany Oil, while expenses associated with marketing operations decreased $1,472,684 due to lower product prices.
Depreciation, depletion and amortization expense increased from $2,213,823 during fiscal 1994 to $2,710,574 during fiscal 1995 as a result of the acquisition of Germany Oil and due to an increase in depletion rates as a result of the year-end price impact on the Company's base of oil and gas reserves.
General and administrative expenses for the year ended July 31, 1995 were $2,736,267 compared to $2,496,567 for the prior period. The increase was due to increases in the Company's legal and accounting fees associated with the closing of the acquisition of Germany Oil in April 1995.
The Company incurred losses from unconsolidated affiliates of $298,839 during the current fiscal year, with $216,998 of the losses attributable to Wexford Technology Incorporated, a development stage company engaged in the crude oil tank bottoms business. See "Item 1. Business and Item 2. Properties - Other Business."
The Company recognized gains on the sale of assets of $127,926 from the disposition of non-strategic oil and gas properties during the fiscal year ended July 31, 1995, a reduction from gains of $265,281 in the previous year.
The Company had an after-tax net loss from continuing operations for the year ended July 31, 1995 of $2,491,342 ($0.15 per common share) compared to a net loss of $423,341 ($0.02 per common share) for the year. The increase in the net loss is a result of lower oil and gas prices and increased operating, financing, professional, and amortization costs associated with the purchase of Germany Oil.
Year ended July 31, 1994 compared to year ended July 31, 1993. Total ------------------------------------------------------------- revenues from the Company's operations for the year ended July 31, 1994 were $12,085,366 as compared to $11,477,045 for the year ended July 31, 1993. The increase in revenues is primarily due to the Swift Energy acquisition and increased marketing margins from the sale of the Company's production in the South Carlton field in Alabama which were offset partially by a reduction in crude oil prices from $17.88 per barrel to $14.56 per barrel.
Total operating expenses for the year ended July 31, 1994 were $11,880,094 compared to $11,934,000 for the same period a year earlier. Lease operating expense increased two percent to $4,840,000 compared to the prior year primarily as a result of the acquisition of oil and gas properties from Swift Energy, while expenses from marketing operations were up $476,410 due to increased marketing efforts on the South Carlton field.
Depreciation, depletion and amortization expense in fiscal 1994 decreased to $2,213,823 from $2,899,459 for the comparable period a year ago due to significant downward revisions of oil and gas reserves in July 1993 for the Wheat field in Loving County, Texas and the Flora field wells in Madison County, Mississippi. Both of these properties were sold during the fiscal year with the Company recording significant gains on sale.
General and Administrative expenses for the year ended July 31, 1994 were $2,496,567 compared to $2,560,000 for the prior period. These expenses are within 1% of the previous year's results reflecting the Company's commitment to control overhead.
The Company had an after-tax net loss from continuing operations for the year ended July 31, 1994 of $423,341 ($0.02 per common share) compared to a net loss of $190,147 ($0.01 per common share) for the same period a year ago. The Company wrote off its $222,918 investment in its Phoenix Metals, Inc. subsidiary during fiscal 1994. To date this subsidiary has been unable to obtain financing to initiate operations. The Company's equity in the net losses of its unconsolidated affiliates was $216,998 during the current fiscal year, with $174,050 of the losses attributable to Wexford Technology, Incorporated, a start-up company engaged in the crude oil tank bottoms business. See "Item 1. Business and Item 2. Properties -- Other Business."
The Company recognized gains on the sale of assets of $392,592, primarily from the sale of non-strategic oil and gas assets during the fiscal year ended July 31, 1994, a reduction of $470,888 from the previous fiscal year which included the settlement of a natural gas contract in that period.
The net loss of the Company for the year ended July 31, 1994 was $423,341 ($0.02 per common share) compared to net income of $906,839 ($0.06 per common share) for the previous year. The decrease in net income is a result of a $1,882,685 net gain (after income taxes) resulting primarily from the sale of a gas purchasing contract in the prior period in addition to the write off of Phoenix Metals and the
Company's share of the losses of the unconsolidated affiliates.
Capital Resources and Liquidity
The Company's capital requirements relate primarily to the acquisition of developed oil and gas properties and undeveloped leasehold acreage and exploration and development activities. In general, because the Company's oil and gas reserves are depleted by production, the success of its business strategy is dependent upon a continuous acquisition and exploration and development program.
Historically, the Company's operating needs and capital expenditures have been funded by borrowings under its bank credit facilities and cash flow from operations. As a result of significant capital expenditures since 1991, the Company has experienced a decrease in its short-term liquidity and a decline in its working capital. In connection with the Company's acquisition of Germany Oil in April 1995, the Company's new credit facility provided a source of long- term financing. As a result of the Germany Oil acquisition, the Company assumed approximately $4.3 million in liabilities and accounts payable which created a significant working capital deficit. The Company immediately began a program designed to reduce these liabilities through negotiated reductions in amounts owed and term payments out of the Company's cash flow. At July 31, 1996, the Company had current assets of $4.2 million and current liabilities of $32.6 million which resulted in negative working capital of $28.4 million. This compares to the Company's current assets of $4.2 million and current liabilities of $11.3 million, which resulted in negative working capital of $7.1 million, at July 31, 1995. The increase in the Company's working capital deficit during fiscal 1996 is primarily due to the current liability classification at July 31, 1996 of all indebtedness of the Company to its principal bank (see "Financing Arrangements"), additional litigation costs principally resulting from discontinued operations of $1.8 million, and increases in royalty and vendor payables in the amount of $1.8 million resulting from the Company's inability to fund its current obligations due primarily to product hedging losses of $1.5 million. These amounts were partially offset by an increase in oil and gas receivables resulting from higher product prices of approximately $500,000. The long-term portion of the Company's debt to its principal bank was $20.6 million at July 31, 1995. At July 31, 1994, the long-term portion of the Company's debt to its principal bank was $4.5 million and negative working capital was $1.11 million. The decline in the Company's working capital during the last two years is primarily the result of the Company's assumption of approximately $4.3 million of indebtedness associated with the acquisition of Germany Oil and the continued funding of its international operations and two unconsolidated affiliates. Subject to the availability of capital, the Company intends to continue to pursue its program to achieve an orderly liquidation of the Germany Oil indebtedness. There can be no assurance that, without an infusion of additional debt or equity capital, the Company will be able to timely liquidate these liabilities. As part of the Company's effort to reduce its working capital shortage, the Company has entered into the proposed merger transaction with Alliance Resources Plc. See "Item 1. Business and Item 2. Properties - Proposed Merger with Alliance Resources Plc."
For the year ended July 31, 1996, the Company's operating activities resulted in positive cash flow of $3,359,885 compared to a positive cash flow of $1,742,623 for the year ended July 31, 1995. The improvement in cash flow is due to additional cash provided by operating activities through increased accounts payable and additional depreciation depletion and amortization. For the year ended July 31, 1994, the Company's operating activities resulted in a positive cash flow of $951,001 compared to providing deficit cash flow of $2,596,354 for the year ended July 31, 1993.
Investing activities of the Company used $206,426 in net cash flow for the year ended July 31, 1996 to fund the Company's oil and gas activities. Investing activities of the Company used $16,750,182 in net cash flow for the year ended July 31, 1995 compared to using $3,551,072 in net cash flow for the year ended July 31, 1994. The increase in investing activities in fiscal 1995 was primarily due to the drilling of the first exploration well on the Company's Tunisian prospect. Investing activities of the Company used $3,588,429 in net cash flow for the year ended July 31, 1993. The decrease in cash flow used in investing activities during fiscal 1994 compared to fiscal 1993 was a result of a reduced number of oil and gas property acquisitions by the Company.
Financing activities used $3,448,351 in net cash flow for the year ended July 31, 1996 compared to $15,113,389 provided in net cash flow for the year ended July 31, 1995 and $1,665,499 provided for the year ended July 31, 1994. The increase during fiscal 1996 was a result of the monthly amortization of the
Company's indebtedness to its principal bank and additional debt reduction upon the sale of oil and gas properties. The increase in fiscal 1995 compared to fiscal 1994 was a result of the Company's new credit facility with Bank of America associated with the Company's acquisition of Germany Oil Company in April 1995. As a result of the Company's default under certain provisions of its credit facility with Bank of America, the Company does not currently anticipate being able to increase its level of borrowing under such credit facility.
The domestic spot price for crude oil has ranged from $11.00 to $40.00 per barrel over the past ten years. To the extent that crude oil prices continue fluctuating in this manner, the Company expects material fluctuations in revenues from quarter to quarter which, in turn, could adversely affect the Company's ability to timely service its debt to its principal bank and fund its ongoing operations and could, under certain circumstances, require a write-down of the book value of the Company's oil and gas reserves.
Since the Company is engaged in the business of acquiring producing oil and gas properties, from time to time it acquires certain non-strategic and marginal properties in some of its purchases. A portion of the Company's on-going profitability is related to the disposition of these non-strategic properties on a regular basis. The Company expects to continue to pursue sales of these types of properties in the future. In most cases the revenue from these properties is insignificant and in many cases does not exceed the lease operating expense. As a result, a portion of the Company's capital resources are generated by the sale of assets from continuing operations. Sales of non- strategic and minor interests oil and gas properties accounted for $2,365,807 in gains during fiscal 1996, $127,248 in gains during fiscal 1995, and $565,932 in gains during fiscal 1994. The Company expects to pursue a more aggressive policy of disposition of oil and gas properties in fiscal 1997. Additionally, the Company incurred a loss in fiscal 1994 of $173,340 on the disposition of the 40,000 shares of Electric & Gas Technology, Inc. common stock acquired in 1991.
Capital Expenditures. The timing of most of the Company's capital -------------------- expenditures is discretionary. Currently there are no material long-term commitments associated with the Company's capital expenditure plans. Consequently, the Company has a significant degree of flexibility to adjust the level of such expenditures as circumstances warrant. The Company primarily uses internally generated cash flow and proceeds from the sale of oil and gas properties to fund capital expenditures, other than significant acquisitions, and to fund its working capital deficit. If the Company's internally generated cash flows should be insufficient to meet its debt service or other obligations, the Company may reduce the level of discretionary capital expenditures or increase the sale of non-strategic oil and gas properties in order to meet such obligations. The level of the Company's capital expenditures will vary in future periods depending on energy market conditions and other related economic factors. The Company anticipates that its cash flow will not be sufficient to fund its domestic operations and debt service at their current levels for the next year. As a result, the Company anticipates that it will be necessary to increase the level of sales of the Company's oil and gas properties or seek additional equity capital, of which there can be no assurance. The Company's proposed merger with Alliance Resources Plc, if completed, would be a source of such equity capital. See "Item 1. Business and Item 2. Properties - Proposed Merger with Alliance Resources Plc."
Substantially all of the Company's capital expenditures over its recent history have been made to acquire oil and gas properties. During fiscal 1993, 1994, 1995 and 1996, the Company made a number of significant acquisitions of oil and gas properties. During the year ended July 31, 1993, the Company completed two acquisitions of oil and gas properties for a cost of approximately $3,013,000. During the year ended July 31, 1994, the Company completed one acquisition of oil and gas properties for a cost of approximately $1,740,000. During the year ended July 31, 1995 the Company completed the acquisition of Germany Oil for a cost of approximately $18.1 million. Subsequent to July 31, 1995, the Company participated with Oakland Petroleum Operating Company in the acquisition of producing oil and gas properties from Sackett Oil Company and The Prudential Insurance Company of America for a total purchase price of $5,850,000, less adjustments. The properties are located in Texas, Louisiana and California. Of the total purchase price, the Company paid $2,885,320 for the properties located in Texas and Louisiana. The Company provided Oakland a loan in the principal amount of $2,300,000 to finance Oakland's purchase of the properties. This acquisition was funded through additional borrowings under the Company's principal credit facility. The Company's strategy is to continue to expand its reserve base
principally through acquisitions of producing oil and gas properties. As a result, it is likely that capital expenditures will exceed cash provided by operating activities in years where significant growth occurs in the Company's oil and gas reserve base. In such cases, additional external financing is likely to be required.
The Company intends to continue its practice of reserve replacement and growth through the acquisition of producing oil and gas properties, although at this time it is unable to predict the number and size of such acquisitions, if any, which will be completed. The Company's ability to finance its oil and gas acquisitions is determined by its cash flow from operations and available sources of debt and equity financing. Exclusive of potential acquisitions and subject to the availability of capital, the Company presently anticipates capital expenditures in fiscal 1997 of approximately $800,000 for oil and gas property enhancement activities.
Financing Arrangements. Since July 31, 1991, the Company has made 12 ---------------------- acquisitions of oil and gas properties. These acquisitions have been financed primarily through borrowings under the Company's bank credit facilities and through internal cash flow. The Company's acquisition of Germany Oil Company, including the cash portion of the purchase price paid by the Company for the volumetric production payments and overriding interests acquired from ENPRO Reserve Acquisition Corp. and the cash portion of the consideration paid by the Company pursuant to the exchange offer, were financed through borrowings by the Company under a credit facility pursuant to a Credit Agreement dated as of March 31, 1995 (the "Credit Agreement") between Bank of America, NT and SA ("Bank") and the Company's wholly-owned subsidiaries, LaTex Petroleum, Germany Oil and LaTex/GOC Acquisition ("Borrowers"). In addition, under the credit facility the Company and the Borrowers refinanced the Company's then existing indebtedness to the Company's former principal lender. The Company and its wholly-owned subsidiary, ENPRO, have guaranteed the obligations of the Borrowers under the Credit Agreement.
Under the Credit Agreement, the Bank agreed to make loans to the Borrowers (i) in the amount of $23,000,000 (the "Acquisition Loan") for the purposes of refinancing the Borrower's then existing indebtedness, partially funding the acquisition of Germany Oil Company and for working capital, and (ii) in the amount of $2,000,000 (the "Development Loan") for additional approved development drilling, workover or recompletion work on oil and gas properties mortgaged by the Borrowers to the Bank as security for the loans under the Credit Agreement. On July 31, 1996, the outstanding balance of the loans was $22,206,707.
Advances under the Credit Agreement maintained from time to time as a "Base Rate Loan" bear interest, payable monthly, at a fluctuating rate equal to the higher of (i) the rate of interest announced from time to time by the Bank as its "reference rate", plus 1%, or (ii) the "Federal Funds Rate" (as defined in the Credit Agreement) plus 1 1/2%. Advances under the Credit Agreement maintained from time to time as a "LIBO Rate Loan" bear interest, payable on the last day of each applicable interest period (as defined in the Credit Agreement), at a fluctuating rate equal to the LIBO Rate (Reserve Adjusted) (as defined in the Credit Agreement) plus 2%. As of July 31, 1996, all advances to the Company under the Credit Agreement are maintained as LIBO Rate Loans which currently bear interest at the annual rate of 7.5%.
Principal on any loans under the Credit Agreement is currently repayable in monthly installments of $322,500 (net of Oakland Petroleum's monthly principal payment of $42,500) plus an additional payment equal to the positive difference, if any, between the net proceeds from Borrower's oil and gas production (as defined in the Credit Agreement) times a variable dedicated percentage (as defined in the Credit Agreement) and the minimum monthly payment. All unpaid principal and accrued interest under the Credit Agreement is due March 31, 2000.
The Company's indebtedness to the Bank under the Credit Agreement is secured by mortgages on all of the Company's producing oil and gas properties and pledges of the stock of the Company's subsidiaries, LaTex Petroleum, Germany Oil Company, LaTex/GOC Acquisition and ENPRO. On a semi-annual basis, the value of the oil and gas properties securing loans under the Credit Agreement is redetermined by the Bank based upon its review of the Company's oil and gas reserves. To the extent that the aggregate principal amount of all loans under the Credit Agreement exceeds the collateral value
as determined by the Bank, the Company must either pay the Bank an amount sufficient to eliminate such excess, or provide additional oil and gas properties as security for the loans having a value satisfactory to the Bank.
Under the Credit Agreement, the Company has also granted an affiliate of the Bank an overriding royalty interest in all of the Company's existing producing oil and gas properties, other than those situated in the State of Oklahoma (the "Bank ORRI"). The Bank ORRI is 6.3% of Company's net revenue interest in each property. The Bank is not entitled to the Bank ORRI on any property acquired after closing of the financing. On the later to occur of (i) March 31, 1998 or (ii) at such time as the Bank has received a 15% internal rate of return on the $25,000,000 commitment amount under the Credit Agreement, the Bank ORRI will be adjusted downward to 2.1%.
As a condition to the Bank making the loans under the Credit Agreement, the Company's subsidiary, LaTex Petroleum, has entered into hedging agreements designed to enable the Company to obtain agreed upon net realized prices for the Company's oil and gas production and designed to protect the Company against fluctuations in interest rates with respect to the principal amounts of all loans under the Credit Agreement. Under the current hedging arrangements with the Bank, the Company pre-sold certain volumes of its gas production for a three year period beginning April 1, 1995 at a fixed price of $1.806 per MMBTU. The dedicated annual volumes for gas average 2,605,384 MMcf in fiscal 1996, 1,948,592 MMcf in fiscal 1997 and 1,115,296 MMcf in fiscal 1998. In addition, the Company placed a price "collar" on certain volumes of its oil production between $16.50 per barrel and $19.82 per barrel. The dedicated annual volumes for oil average 324,288 Bbls in fiscal 1996, 279,828 Bbls in fiscal 1997 and 170,344 Bbls in fiscal 1998. Interest rate protection was provided based on an interest rate swap at 7.47%. The effect of these hedging arrangements has been to reduce the Company's working capital in fiscal 1996 by $1,979,956 as a result of additional payments to the Bank above scheduled principal and interest payments. At July 31, 1996, the future impact of the hedging agreements are anticipated to result in additional losses of $3,649,287 based upon the prevailing commodity prices and interest rate at that time. See "Inflation and Pricing" and Note 15 to the Company's consolidated financial statements at Item 8.

Item 8.
The Credit Agreement contains affirmative and negative covenants which impose certain restrictions and requirements on the Company, including: limitations on the amount of additional indebtedness the Company may incur; prohibition against payment by the Company of cash dividends; requirements that the Company maintains a current ratio (current assets to current liabilities) of at least 1.0 to 1.0, tangible net worth of at least $5.0 million, no less than $500,000 in cash equivalent investments on hand at any given time, and no less than $500,000 in working capital; limitations on the ability of the Company to sell assets or to merge or consolidate with or into any other person; and requirements that the Company maintain a consolidated current ratio of at least 1.0 to 1.0 and consolidated tangible net worth of at least $10 million.
During the year ended July 31, 1996, the Company was in violation of various provisions of the Credit Agreement. The Company has acknowledged to the Bank these events of default and, pursuant to a Forbearance Agreement between the Company and the Bank dated July 23, 1996, as amended, the Bank agreed to delay enforcement of its rights under the Credit Agreement and related loan documents as a result of these events of default until the earlier of November 29, 1996, the occurrence of any default by the Company under the terms of Forbearance Agreement, the occurrence of any additional default by the Company under the Credit Agreement, or the Company's cure of the defaults. The Bank has indicated its willingness to further amend the Forbearance Agreement to extend its agreement to forbear any action on the Company's default through February 28, 1997. Under the terms of the Forbearance Agreement, the Company agreed to (a) obtain promissory notes from Imperial Petroleum, Inc. ("Imperial"), Wexford Technology, Inc. ("Wexford"), and LaTex Resources International evidencing their indebtedness to the Company at August 16, 1996 in the amounts of $677,705, $1,372,799 and $3,363,000, respectively, (b) obtain from Imperial a lien on and security interest in certain of Imperial's assets (subject to existing perfected liens and security interests) to secure Imperial's indebtedness to the Company, and (c) pay all unpaid overriding royalties due LaSalle Street National Resources Corporation in three monthly installments, beginning August 1, 1996, with interest at the Bank's prime rate plus two percent.
In addition, in accordance with the requirements of the Forbearance Agreement, the Company and Bank entered into Amendment No. 2 to Amended and Restated Credit Agreement dated as of August 16,
1996 ("Amendment No. 2") pursuant to which each of the Borrowers and Guarantors under the Credit Agreement granted Bank a security interest in substantially all of their assets which had not otherwise been previously pledged to the Bank under the Credit Agreement. In addition, the Company granted to the Bank a security interest in the indebtedness owed to the Company by Imperial, Wexford and LaTex, together with a security interest in the collateral pledged to the Company by Imperial to secure Imperial's indebtedness to the Company, which consists primarily of unpatented mining claims in the states of Arizona and Montana. In addition, the Company granted the Bank a security interest in the shares of common stock Wexford and Imperial owned by the Company.
The Company has dedicated a significant portion of its available revenues and cash flows to remaining current in its payment obligations to the Bank. In addition, proceeds from sales of oil and gas properties by the Company have been used to further reduce the Company's indebtedness to the Bank, with only limited amounts of such proceeds being made available to fund the Company's working capital needs. As a result, the Company continues to fall further behind in making required payments to royalty owners and vendors. The effect of the continuation of this policy, over the long term, will be to increase the Company's accounts payable while reducing its debt to the Bank. Because the level of required payments to the Bank remains constant over the term of the Credit Agreement, the rate at which the Company's accounts payable deficit increases will become greater with time and, ultimately may jeopardize certain of the Company's oil and gas leases.
The Company believes that its cash flow from operations will be insufficient to meet its anticipated capital requirements for the foreseeable future. As a result, the Company will be required to increase the level of sales of its oil and gas properties, seek additional equity capital, or restructure its existing Credit Agreement with the Bank, none of which can be assured. However, because future cash flows and the availability of debt or equity financing are subject to a number of variables, such as the level of production and the prices of oil and gas, there can be no assurance that the Company's capital resources will be sufficient to maintain current operations or planned levels of capital expenditures.
Proposed Merger With Alliance Resources Plc
As a result of the demands placed upon the Company by the Bank, the Company's continuing working capital deficit, its deteriorating financial condition and inability of the Company to raise additional debt or equity capital, management of the Company, in the fourth quarter of fiscal 1996, determined to seek an equity infusion through a strategic merger with a suitable merger candidate. Management's primary objective in seeking a merger partner was to solve the working capital deficit of the Company through an equity infusion while minimizing dilution to the shareholders. Although the Company considered several potential transactions, Alliance Resources Plc ("Alliance") emerged as the candidate most likely to meet the objectives of the Company. Subsequent to year end the Company agreed, subject to shareholder approval and satisfaction of certain other conditions, to enter into an agreement pursuant to which the Company will merge with Alliance. It is anticipated that the merger will provide the Company with sufficient capital resources to eliminate its existing working capital deficit, refinance the Company's senior debt and eliminate the hedging agreements, and provide development capital for exploration of the Company's oil and gas properties. In addition, the Company believes that the combination of the two companies provides strategic benefits to the Company important to its long term growth and the enhancement of shareholder value. Although Alliance's domestic oil and gas operations are significantly smaller than the Company's, the Company believes that the merger will enhance the overall financial strength of the Company and provide a stable platform from which future growth can be achieved. The strategic objectives of the combined Company will be to continue a policy of structured and stable growth in the domestic U.S. oil and gas sector while implementing projects in Western Europe, the Middle East and the former Soviet Union.
As a result of the refocus of the Company on its core oil and gas operations and under the terms of the merger agreement with Alliance, the Company has agreed to dispose of its interests in Wexford Technology, Inc., Imperial Petroleum, Inc., LaTex Resources International, Inc. and Phoenix Metals, Inc. Despite attempts by management to locate potential purchasers for these business interests, the financial condition of these entities and additional capital requirements to achieve stable operations and cash flow have been significant impediments to their sale. As a result, Imperial Petroleum, Inc., an affiliate of the Company, has agreed to acquire the Company's interest in these companies for 100,000 shares of the
Company's common stock. Imperial is controlled by the Company's President and largest stockholder, Jeffrey T. Wilson. Mr. Wilson will contribute to Imperial the 100,000 shares of the Company's common stock to be used by Imperial in acquiring the Company's interest in these companies. Prior to the completion of the sale, the Company will obtain an opinion from an independent investment banking firm as to the fairness of the transaction to its stockholders. See "Item 1. Business and Item 2. Properties --Proposed Merger with Alliance Resources Plc."
Seasonality
The results of operations of the Company are somewhat seasonal due to seasonal fluctuations in the price for crude oil and natural gas. Recently, crude oil prices have been generally higher in the third calendar quarter and natural gas prices have been generally higher in the first calendar quarter. Due to these seasonal fluctuations, results of operations for individual quarterly periods may not be indicative of results which may be realized on an annual basis.
Inflation and Prices
In recent years, inflation has not had a significant impact on the Company's operations or financial condition. The generally downward pressure on oil and gas prices during most of such periods has been accompanied by a corresponding downward pressure on costs incurred to acquire, develop and operate oil and gas properties as well as the costs of drilling and completing wells on properties.
In connection with the execution of the Credit Agreement with the Bank, the company has entered into a crude oil and natural gas hedging arrangement designed to enable the Company to receive a net realized price of not less than $1.81 per MMBtu of natural gas and $16.50 per barrel of crude oil on sale of the volumes of crude oil and natural gas set forth in the Credit Agreement.
Prices obtained for oil and gas production depend upon numerous factors that are beyond the control of the Company, including the extent of domestic and foreign production, imports of foreign oil, market demand, domestic and world- wide economic and political conditions, and government regulations and tax laws. Prices for both oil and gas have fluctuated significantly in 1996 and 1995. The following table sets forth the average price received by the Company for each of the last two years and the effects of the hedging arrangement described below.
The Company has entered into a master agreement to hedge the price of its oil and natural gas. The purpose of the hedging arrangement is to provide protection against price drops and to produce a measure of stability in the volatile environment of oil and natural gas spot pricing. With respect to the losses incurred by the Company as a result of this hedging arrangement, see "Capital Resources and Liquidity -- Financing Arrangements". The following table provides a summary of the Company's financial contracts.
In addition, the Company has entered into interest rate hedging agreements designed to protect the Company against fluctuations in interest rates with respect to its indebtedness to the Bank under the Credit Agreement.
Item 8. Financial Statements and Supplementary Data.
Audited Financial Statements of LaTex Resources, Inc.
INDEPENDENT AUDITORS' REPORT ----------------------------
Board of Directors LaTex Resources, Inc. Tulsa, Oklahoma
We have audited the accompanying consolidated balance sheets of LaTex Resources, Inc. and subsidiaries (the "Company") as of July 31, 1996 and 1995 and the related consolidated statements of operations, stockholders' equity, and cash flows for the years ended July 31, 1996, 1995, and 1994. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. 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 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 financial position of the Company at July 31, 1996 and 1995 and the results of the Company's operations and its cash flows for the years ended July 31, 1996, 1995, and 1994, in conformity with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has incurred a significant net loss for the year ended July 31, 1996 and has working capital deficiencies and consolidated tangible net worth deficiencies. As discussed in Notes 1 and 5 to the consolidated financial statements, the Company was not in compliance with certain financial covenants of its credit agreement with its primary lender at July 31, 1996. These factors raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty and do not include any adjustments to the classification of assets and liabilities that might result should the Company be unable to continue as a going concern.
As discussed in Note 16, the consolidated financial statements as of and for the year ended July 31, 1995 have been restated to correct the accounting for the acquisition of Germany Oil Company.
/s/ Briscoe & Burke BRISCOE & BURKE Certified Public Accountants
November 6, 1996 except as to information presented in Notes 1 and 5, for which the date is November 30, 1996 Tulsa, Oklahoma
LaTex RESOURCES, INC.
Consolidated Balance Sheets
July 31, 1996 and 1995
The accompanying notes are an integral part of these consolidated financial statements.
LaTex RESOURCES, INC.
Consolidated Statements of Operations
Years Ended July 31, 1996, 1995, and 1994
The accompanying notes are an integral part of these consolidated financial statements.
LaTex RESOURCES, INC.
Consolidated Statements of Stockholders' Equity
Years Ended July 31, 1996, 1995, and 1994
The accompanying notes are an integral part of these consolidated financial statements.
LaTex RESOURCES, INC.
Consolidated Statements of Cash Flows
Years Ended July 31, 1996, 1995, and 1994
The accompanying notes are an integral part of these consolidated financial statements.
LaTex RESOURCES, INC.
Consolidated Statements of Cash Flows
Years Ended July 31, 1996, 1995, and 1994
The accompanying notes are an integral part of these consolidated financial statements.
Notes to Consolidated Financial Statements
July 31, 1996, 1995, and 1994
1. ORGANIZATION, FINANCIAL CONDITION AND BUSINESS COMBINATIONS
Organization - LaTex Resources, Inc. (the Company) is an oil and gas ------------ company engaged in the acquisition of and enhancements to producing oil and gas properties. The Company's principal oil and gas production operations are conducted in Oklahoma, Texas, Louisiana, Mississippi and Alabama. The Company, until the fourth quarter of fiscal 1996, was also involved in the exploration and development of oil and gas prospects located in Tunisia and Kazakhstan, C. I. S.
Financial Condition - The Company's aggressive policy of oil and gas ------------------- property acquisitions, unsuccessful foreign oil and gas exploration and unsuccessful investments in their unconsolidated affiliates, along with substantial operating losses for the current and preceding two years, has resulted in a working capital deficit and non-compliance with certain loan covenants at July 31, 1996. (See Note 5)
The items of non-compliance have not been waived by the lender for the year ended July 31, 1996 and the Company was operating under a "forbearance" agreement. The "forbearance period" was from July 26, 1996 to November 29, 1996. The Company is currently seeking an extension of the forbearance agreement until such time as the proposed Alliance Resources Plc merger (See Note 17) can be consummated.
The Company's financial statements for the year ended July 31, 1996 have been prepared on a going concern basis which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. The Company incurred a net loss of $10,230,783 for the year ended July 31, 1996 and as of July 31, 1996 has an accumulated deficit of $11,747,860 and a deficit working capital of $10,564,424.
The Company expects to incur substantial expenditures to develop its undeveloped reserves and acquire additional producing oil and gas properties, however, without raising additional capital the Company will be unable to achieve its business objective or reduce its working capital deficit. Management plans for raising additional capital include consideration of alliances or other partnership arrangements or potential merger opportunities.
The Company has retained investment banking counsel to advise it on the possible sale of equity securities as well as to introduce and assist in the evaluation of potential merger and partnering opportunities. Management expects that these efforts will result in the introduction of other parties with interests and resources which may be compatible with that of the Company. See Note 17 regarding proposed transaction with Alliance Resources Plc. No assurances can be given that the Company will be successful in raising additional capital or consummating a business alliance. Further, there can be no assurance assuming the Company successfully raises additional funds or enters into a business alliance, that the Company will achieve profitability or positive cash flow.
LaTex RESOURCES, INC.
Notes to Consolidated Financial Statements
July 31, 1996, 1995, and 1994
1. ORGANIZATION, FINANCIAL CONDITION AND BUSINESS COMBINATIONS (continued)
Disposition of Panda Resources, Inc. and Its Wholly Owned Subsidiary -------------------------------------------------------------------- Richfield Natural Gas, Inc., July 1993 --------------------------------------
In July 1993 the Company sold its wholly owned subsidiary, Panda Resources, Inc., and Panda's wholly owned subsidiary, Richfield Natural Gas, Inc. Final post closing adjustments were in dispute until December 1995 when a settlement agreement by the various parties resulted in a judgment against LaTex Resources, Inc. in the amount of $1,810,382. This amount is reflected in the 1996 consolidated financial statement as a loss on disposal of discontinued subsidiaries.
Proceeds from Private Placement -------------------------------
On January 26, 1994, pursuant to a private placement, the Company issued 2,000,000 newly issued shares of common stock.
Proceeds from this offering were as follows:
Acquisition of Germany Oil Company ----------------------------------
Effective March 31, 1995 through a series of transactions, the Company acquired all of the issued and outstanding stock of Germany Oil Company ("Germany") in exchange for 250,000 and 11,800 of the Company's common and Series A Convertible Preferred Stock, respectively. The ratio of the number of shares received by the stockholders of Germany was determined through arms length negotiations between the Chairman of the Board and President of the Company and the President of Germany. The Company also issued 370,000 shares of the Series B Convertible Preferred Stock and $8,900,000 in cash to retire a volumetric production payment and acquire all of the related contract rights mortgages, vendor liens and security interests. In addition, the Company paid $1,742,294 in cash, issued 482,201 shares of its Series A Convertible Preferred Stock and $87,998 in notes payable to acquire and retire certain indebtedness of Germany. The transaction was accounted for as a purchase. The fair value of assets and liabilities of Germany at date of acquisition follows:
LaTex RESOURCES, INC.
Notes to Consolidated Financial Statements
July 31, 1996, 1995, and 1994
2. SUMMARY OF ACCOUNTING POLICIES
A summary of the significant accounting policies consistently applied in the preparation of the accompanying consolidated financial statements is as follows.
Principles of Consolidation ---------------------------
The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany accounts have been eliminated in consolidation.
Inventories -----------
Included in inventories at July 31, 1996 and 1995 are crude oil inventories at market value of $175,493 and $90,976, respectively.
Accounting Estimates --------------------
The presentation 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.
Financial Instruments ---------------------
The fair value of current assets and current liabilities are assumed to be equal to their reported carrying amounts due to the short maturities of these financial instruments. Due to the Company's financial position, it is not practicable to estimate the fair value of the Company's long-term debt; additional information pertinent to its value is provided in Note 5 to the consolidated financial statements.
The Company is required, by agreement with its primary lender (Bank of America), to participate in various hedging programs, executed by Bank of America, to protect against fluctuations in oil gas prices and interest rates. See Note 15 for discussion of the fair market value of these contracts.
The carrying value of all other financial instruments approximates fair value.
LaTex RESOURCES, INC.
Notes to Consolidated Financial Statements
July 31, 1996, 1995, and 1994
2. SUMMARY OF ACCOUNTING POLICIES (continued)
Concentrations of Credit Risk -----------------------------
Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash investments and accounts receivable. The Company places its cash investments with high quality financial institutions and limits the amount of exposure to any one institution. In the case of default of any one financial institution, no cash investments exist that are not covered by the FDIC. The Company's revenues are derived principally from uncollateralized sales to customers in the oil and gas industry. The concentration of credit risk in a single industry affects the Company's overall exposure to credit risk because customers may be similarly affected by changes in economic and other conditions. The Company has not experienced significant credit losses on such receivables. The Company performs periodic evaluations of its customers' financial condition and generally does not require collateral.
Revenue Recognition -------------------
The Company recognizes oil and gas production and gas marketing revenue in the month of sale. Uncollected revenue is accrued based on known facts and trends of the relevant oil and gas properties on a monthly basis.
Property, Equipment, Depreciation and Depletion -----------------------------------------------
The Company uses the successful efforts method to account for costs in the acquisition and exploration of oil and natural gas reserves. Costs to acquire mineral interests in proved reserves, and to drill and equip development wells are capitalized. Geological and geophysical costs and costs to drill exploratory wells which do not find proved reserves are expensed. Undeveloped oil and gas properties which are individually significant are periodically assessed for impairment of value and a loss is recognized at the time of impairment by providing an impairment allowance. The remaining unproved oil and gas properties are aggregated and an overall impairment allowance is provided based on Company experience. Depletion and depreciation are calculated on the units of production method based upon current estimates of oil and gas reserves provided by management.
Non oil and gas property and equipment are stated at cost. Depreciation is computed by the straight-line method over the estimated useful lives of non oil and gas assets. Expenditures which significantly increase values or extend useful lives are capitalized. Expenditures for maintenance and repairs are charged to expenses as incurred. Upon sale or retirement of property and equipment, the cost and related accumulated depreciation and depletion are eliminated from the respective accounts and the resulting gain or loss is included in current earnings.
Intangible Assets -----------------
Intangible assets consist primarily of debt issuance costs. Debt issuance costs are amortized over the term of the related debt.
LaTex RESOURCES, INC.
Notes to Consolidated Financial Statements
July 31, 1996, 1995, and 1994
2. SUMMARY OF ACCOUNTING POLICIES (continued)
Income Taxes ------------
Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
Gas Balancing -------------
The Company follows the sales method of accounting for gas imbalances. A liability is recorded only if the Company's excess takes of natural gas volumes exceed its estimated remaining recoverable reserves. No receivables are recorded for those wells when the Company has taken less than its ownership share of gas production.
Earnings Per Common Share -------------------------
Earnings per common share is computed based upon the weighted average common shares outstanding. Outstanding stock options and warrants of LaTex Resources are excluded from the weighted average shares outstanding since their effect on the earnings per share calculation is immaterial or antidilutive.
FASB Accounting Standards -------------------------
The Financial Accounting Standards Board has issued Statement of Financial Accounting Standards No. 119 (SFAS 119), Disclosure about Derivative Financial Instruments and Fair Value of Financial Instruments. This Statement generally requires disclosures about amounts, nature, and terms of derivative financial instruments. The Company has adopted SFAS 119 for the fiscal year ended July 31, 1996.
The Financial Accounting Standards Board has issued Statement of Financial Accounting Standards No. 121 (SFAS 121), Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of. This Statement requires that long-lived assets and certain identifiable intangibles to be held and used by an entity be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If the sum of the undiscounted future cash flows is less than the carrying amount of the asset, an impairment loss is recognized. This Statement is effective for financial statements for fiscal years beginning after December 15, 1995. The Company intends to adopt SFAS 121 for the fiscal year ending July 31, 1997. The Company expects the adoption of SFAS 121 will not have a material effect on its financial statements.
LaTex RESOURCES, INC.
Notes to Consolidated Financial Statements
July 31, 1996, 1995, and 1994
2. SUMMARY OF ACCOUNTING POLICIES (continued)
The Financial Accounting Standards Board has issued Statement of Financial Accounting Standards No. 123 (SFAS 123), Accounting for Stock-Based Compensation. This Statement establishes financial accounting and reporting standards for stock-based employee compensation plans. This Statement defines a fair value based method of accounting for an employee stock option or similar equity instrument plan. Under the fair value based method, compensation cost is measured at the grant date based on the value of the award and is recognized over the service period, which is usually the vesting period. This Statement is effective for transactions entered into in fiscal years that begin after December 15, 1995. The Company intends to adopt the disclosure requirements of SFAS 123 for the fiscal year ending July 31, 1997.
Reclassification ----------------
Certain amounts in the 1995 and 1994 consolidated financial statements have been reclassified to conform with the 1996 presentation.
3. ACCOUNTS AND NOTES RECEIVABLE AND INVESTMENTS IN AND ADVANCES TO AFFILIATES
LaTex RESOURCES, INC.
Notes to Consolidated Financial Statements
July 31, 1996, 1995, and 1994
3. ACCOUNTS AND NOTES RECEIVABLE AND INVESTMENTS IN AND ADVANCES TO AFFILIATES
The non-interest bearing note receivable from Oakland Petroleum Operating, Inc. (Oakland) represents the balance due to the Company for a loan entered into with the Company's primary lender for a joint purchase of property. The original amount was approximately $2,300,000 of which $1,267,500 was still outstanding at July 31, 1996. The note receivable is offset by a comparable amount included in the Company's long-term debt. Oakland pays all principal and interest payments directly to the Company's primary lender.
Investments in and Advances to Affiliates -----------------------------------------
Investments in and advances to affiliates includes the following:
See Note 6 - WRITE OFFS.
4. INCOME TAXES
The provisions for income taxes are as follows:
LATEX RESOURCES, INC.
Notes to Consolidated Financial Statements
July 31, 1996, 1995, and 1994
4. INCOME TAXES (continued)
Income taxes differed from the amounts computed by applying the U.S. federal tax rate of 34% as a result of the following:
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities are presented below:
LaTex RESOURCES, INC.
Notes to Consolidated Financial Statements
July 31, 1996, 1995, and 1994
4. INCOME TAXES (continued)
A valuation allowance is required when it is more likely than not that all or a portion of the deferred tax assets will not be realized. The ultimate realization of the deferred tax assets is dependent upon future profitability. Accordingly, a valuation allowance has been established to reduce the deferred tax assets to a level which, more likely than not, will be realized.
The Company has net operating loss (NOL) carryforward to offset its earnings of approximately $11,390,000. Additionally, approximately $10,490,000 of NOL carryforwards are available to offset the future separate company earnings of Germany. If not previously utilized, the net operating losses will expire in varying amounts from 2006 to 2011.
5. NOTES PAYABLE
(A) Note payable dated April 18, 1995, for $23,000,000 with option of an additional $2,000,000 for six months for approved workovers, recompletions and development drilling of specified reserves. Principal due monthly of $365,000 including Oakland Petroleum Co. payment of $42,500 monthly. Interest due monthly at the higher of a Base Rate (the higher of the Bank of America Reference Rate and the Federal Fund Rate plus .5% per annum) plus 1% per annum and the London Interbank Offered Rate plus 2%. The current rate at July 31, 1996 was 7.469%. Matures March 30, 2000. Amounts outstanding are secured by mortgages which cover certain of the Company's oil and gas properties.
The Company's existing debt agreements contain certain covenants, including maintaining a positive current ratio of 1.0, excluding current portion of long-term debt, maintaining a minimum tangible net worth of $10,000,000, maintaining a minimum cash or cash equivalents balance of $500,000, maintaining working capital of at least $500,000, the negative covenant related to permitted investments, and the covenant relating to default on other indebtedness in excess of $50,000.
Notes to Consolidated Financial Statements
July 31, 1996, 1995, and 1994
5. NOTES PAYABLE (continued)
The Company was not in compliance with the current ratio, cash equivalent, minimum tangible net worth, and working capital covenants at July 31, 1995. The items of non-compliance were subsequently waived by the lender for the year ended July 31, 1995 and through January 31, 1996. The Company was not in compliance with the above noted covenants at July 31, 1996 and was operating under a "forbearance" agreement discussed in Note 1 to the financial statements. The "forbearance" agreement expired on November 29, 1996 and the bank has not extended the agreement. The debt agreement contains various acceleration provisions of the due date in the event of non-compliance. Accordingly, the entire unpaid balance has been classified as a current liability at July 31, 1996.
6. WRITE OFFS
Investments -----------
During the fourth quarter of fiscal 1996, the Company wrote off its investments in Wexford Technology, Incorporated (Wexford) and Imperial Petroleum, Inc. (Imperial). The Company has not been able to obtain reliable current financial information, accordingly, summarized financial information is not presented.
The Company acquired 32.3% of Wexford through a series of transactions culminating in May 1994. During the fourth quarter fiscal 1996, the Company recorded a charge to earnings of $2,372,752 to write off its investment. Wexford is presently in default on its bridge debt and has received numerous written demands for payment and correspondence threatening litigation. Included in the write off was $1,462,765 in notes receivable.
The Company owns 12% of the common stock of Imperial and certain officers, directors and employees of the Company own 28.8%. During the fourth quarter of fiscal 1996, the Company recorded a charge to earnings of $1,797,378 to write off this investment. Imperial is currently in default on its bank debt. Included in the write off of the Company's investment was $722,603 in notes receivable.
Wexford and Imperial are both development stage enterprises that are seeking capital infusion to complete their facilities and achieve commercial operations. Neither Wexford nor Imperial have been able to raise additional debt or equity capital. Further, there can be no assurance, assuming Wexford and Imperial successfully raise additional funds or enter into a business alliance, that they will achieve commercial operations or positive cash flow.
Exploration Prospects ---------------------
During the fourth quarter of fiscal year 1996, the Company recorded a charge to earnings of $955,496 to write off costs incurred in connection with a venture in Kazakhstan C.I.S. Subsequent to July 31, 1996, the Company received written notice that the Company may be in breach of its agreements related to the venture. The Company believes it is in substantial compliance with the operating agreement governing the project. In addition, the Company has been notified that Uzenmunaigaz, the regional production association for the Middle Caspian Basin, may seek to further alter the terms of a contract in a manner which the Company believes would be detrimental to the project's viability.
Notes to Consolidated Financial Statements
July 31, 1996, 1995, and 1994
6. WRITE OFFS (continued)
During fiscal 1993 the Company, through a subsidiary, acquired an interest in a permit granted by the Republic of Tunisia for the exploration and production of oil and gas from a 4,936 square kilometer (1,220,000 acres) area located in north-central Tunisia. Initial seismic acquisition activities began in 1994. The first exploratory well was spudded in fiscal 1995. This well was drilled and temporarily abandoned prior to reaching the objective depth.
In fiscal 1996, the operator of the project, in response to a request from the Tunisian government, permanently plugged the well and restored the well site. The Company has insufficient capital to continue the project and, due to the limited time remaining on the exploration permit, decided to abandon the project and write off its investment.
7. SAVINGS AND PROFIT SHARING PLAN
The Company maintains an employee savings and profit sharing plan (the Plan) which covers substantially all of its employees. The Plan is comprised of a 401(k) savings portion and a noncontributory defined contribution portion. Employees are qualified to participate after approximately one year of service. Participation in the 401(k) plan is voluntary, and the Company matches contributions up to four percent of the employees' salary at a rate of 33 1/3 percent of the employee's contribution. Employees are allowed to contribute the maximum amount allowed by the Internal Revenue Code each year, subject to nondiscrimination rules.
The noncontributory defined contribution portion of the Plan allows the Company to share annual profits with employees. Annual payments to the Plan are elective. Management elected to make no contributions to the Plan for 1996, 1995, or 1994. The Company is under no obligation to make contributions to the Plan in the future.
8. STOCK OPTIONS
Stock Option Plan -----------------
The 1993 Incentive Stock Plan (the "Plan") was effective December 8, 1993.
The Plan is administered by a Compensation Committee consisting of not less than three members of the Board of Directors and a special committee appointed by the Board of Directors, as necessary.
The aggregate number of shares of the Company's Common Stock issuable under the Plan is 2,000,000. Such stock will be made available from the Company's authorized but unissued Common Stock or from Stock held as Treasury Stock.
Notes to Consolidated Financial Statements
July 31, 1996, 1995, and 1994
8. STOCK OPTIONS (continued)
Options and Appreciation Rights -------------------------------
This Plan authorizes the Committee to grant to key employees options to purchase the Company's Common Stock which may be in the form of incentive stock options ("ISO's"), or in the form of non-statutory options ("Non- Statutory Options"). The term of each option shall be for such period as the Committee determines but no longer than ten years from the date of grant or five years to an individual who is a 10% stockholder of the Company.
The aggregate fair market value exercisable by an individual optionee during any calendar year under all stock option plans of the Company may not exceed $100,000. The exercise price per share for the Common Stock covered by any Options shall be determined by the Committee and, provided that in the case of an ISO and the per share exercise price shall be not less than the fair market value (or in the case of an ISO granted to an individual who at the time is a 10% Stockholder, 110% of the fair market value) of one share of Common Stock. Options to purchase 1,690,000 shares of common stock were granted under the Plan. (See Note 17)
Restricted Stock Awards -----------------------
The Plan authorizes the Committee to grant restricted Common Stock ("Restricted Stock") to key employees. The Committee may designate a restriction period with respect to such shares of not less than one year but not more than five years (the "Restriction Period") during which an employee will not be permitted to sell, transfer, pledge or assign shares of Restricted Stock awarded to him, provided that within such limitations, the Committee may provide for the lapse of such restrictions installments where deemed appropriate. Upon termination of employment during the Restriction Period for any reason, all shares of Restricted Stock with respect to which restrictions have not yet expired will be forfeited by the employee and returned to the Company.
The Plan also authorizes the Committee to award tax gross-up rights which entitle the grantee to cash payments from the Company at such time as income and/or excise tax liabilities arise with respect to grants under the Plan. Tax gross-up rights may be granted coincident with or after the date of grant of the related Option or Restricted Stock awards. No restricted shares have been issued at July 31, 1996. (See Note 17)
9. WARRANTS
As of July 31, 1996, the Company, in connection with the sale of previously unissued common stock, has 2,700,000 Warrants outstanding. The sale included 2,587,500 of the Warrants which were detachable from the Stock/Warrant Units upon issuance and trade separately from the Units and Common Stock. Unless exercised, the 2,587,500 Warrants automatically expire on November 19, 1997. Pursuant to the terms of the Warrants, the Board of Directors of the Company may reduce the exercise price, $4.25, of the Warrants and may also extend the period during which the Warrants may be exercised. The Warrants may be redeemed by the Company at a price of $0.01 per Warrant with 30 days prior written notice by the Company.
Notes to Consolidated Financial Statements
July 31, 1996, 1995, and 1994
9. WARRANTS (continued)
In addition, the Company issued Warrants to the underwriter of the offering for $.01 per Warrant (underwriter Warrants) to purchase up to 112,500 units for $4.44 per unit. These Warrants are exercisable, in part or whole, until November 16, 1997. The Company also has agreed to register, at its sole cost and expense, all or a portion of the underwriter Warrants and/or the shares issuable, upon the exercise of the Warrants during the period November 10, 1993 to November 16, 1997.
The Company has also issued 1,516,000 private Warrants, exercisable at a price ranging from $.75 to $3.25 at a ratio of 1 to 1. These Warrants expire at various dates from January 26, 1997 to October 31, 2001.
10. PREFERRED STOCK
The Board of Directors has the authority to issue 5,000,000 shares of Preferred Stock, in one or more series, and to fix the rights, preferences, qualifications, privileges, limitations or restrictions of each such series without any further vote or action by the shareholders, including the dividend rights, dividend rate, conversion rights, voting rights, terms of redemption (including sinking fund provisions), redemption price or prices, liquidation preferences and the number of shares constituting any series or the designations of such series.
The Company's Series A Convertible Preferred Stock (i) pays annual dividends at the rate of $0.20 per share payable quarterly in cash (or, if payment of cash dividends is prohibited by the Company's senior lender, payable in additional shares of Series A Convertible Preferred Stock), (ii) has no voting rights except as otherwise required under Delaware law, (iii) has a liquidation preference over shares of the Company's common stock of $10.00 per share plus accrued and unpaid dividends, (iv) is redeemable at the option of the Company at a redemption price of $10.00 per share plus accrued and unpaid dividends, (v) is convertible by the holder into shares of the Company's common stock at a conversion price of $3.33 per share, and (vi) has piggyback registration rights in the event the Company seeks to make a registered public offering of its common stock. There are 451,097 and 442,281 shares of Series A Convertible Preferred Stock outstanding at July 31, 1996 and 1995, respectively.
The Series B Convertible Preferred Stock (i) pays annual dividends at the rate of $1.20 per share payable quarterly in cash (or, if payment of cash dividends is prohibited by the Company's senior lender, payable in additional shares of Series B Convertible Preferred Stock), (ii) has no voting rights except as otherwise required under Delaware law, (iii) has a liquidation preference over shares of the Company's Series A Convertible Preferred Stock and the Company's common stock of $10.00 per share plus accrued and unpaid dividends, (iv) is redeemable at the option of the Company at a redemption price of $10.00 per share plus accrued and unpaid dividends, and (v) is convertible by the holder into shares of the Company's common stock at an initial conversion price of $1.50 per share, subject to adjustment from time to time to prevent dilution. By separate agreement, the Company has granted certain demand registration rights and piggyback registration rights in the event the Company seeks to make a registered public offering of its common stock. There are 479,345 and 381,100 shares of Series B Convertible Preferred Stock outstanding at July 31, 1996 and 1995, respectively.
Notes to Consolidated Financial Statements
July 31, 1996, 1995, and 1994
11. LITIGATION, COMMITMENTS AND CONTINGENCIES
Litigation - In connection with the Company's sale of its subsidiaries, ---------- Panda Resources, Inc. and Richfield Natural Gas, Inc. in 1993, the Company became a party in three different lawsuits.
On December 7, 1995, the Company entered into a Settlement Agreement (the "Settlement") to settle all matters related to the sale and the related litigation. Pursuant to the Settlement, the Company agreed to pay to the plaintiffs (a) $20,000 on December 7, 1995, and an additional $30,000 over the course of 90 days following execution of the Settlement, and (b) to pay $50,000 within one year of the Settlement, an additional $50,000 within two years of the Settlement, and an additional $150,000 within three years of the Settlement, together with interest in the amount of $36,000. To secure its obligation under the Settlement, the Company stipulated in an agreed judgment that it would be liable in the amount of $1,000,000 (less any amounts paid pursuant to the Settlement) upon the Company's default of its obligations under the Settlement. In addition, the Company agreed to assume and indemnify the plaintiffs against all obligations and amounts owed under a May 2, 1989 agreement between Panda and Northern Natural Gas Company relating to the transportation of natural gas through a facility located in Dewey County, Oklahoma. Pursuant to this indemnification, the Company has been asked to indemnify one of the plaintiffs with respect to claims brought against it by Northern in a lawsuit filed March 7, 1996, as more fully discussed below.
March 7, 1996, Northern Natural Gas Company ("Northern") filed a lawsuit against Torch Energy Advisors, Inc. ("Torch") for alleged breach of a May 2, 1989 agreement (the "Dewey County Contract") between Torch, Panda Resources, Inc. ("Panda"), and Northern relating to the transportation of natural gas through a facility located in Dewey County, Oklahoma. The Company has assumed the defense of this matter pursuant to the indemnification agreement entered into as part of the December 7, 1995, settlement among Torch, Panda and the Company discussed above. Northern contends that Panda failed to transport the required volumes and that the deficiency resulted in a requirement that Panda pay a total of $973,000, representing the percentage of the costs of constructing the facilities calculated under the contract formula. Northern sued Torch under a written guaranty agreement and has claimed, in addition, that Torch denuded the assets of Panda and is therefore liable for the debts of Panda. The Company maintains that, if litigation is unsuccessful to the Company, Northern would only be entitled to the amount of the contractually required volumes.
On November 17, 1994, Associated Storage Corporation ("Associated") filed a lawsuit against the Company alleging that the Company had breached a July 21, 1993 agreement between Associated and the Company, pursuant to which Panda Resources, Inc., and Panda's wholly-owned subsidiary, Richfield Natural Gas, Inc. Associated seeks actual damages in the amount of $150,000, prejudgment interest, court costs, and attorneys' fees. Associated has filed a motion for summary adjuration which was denied by the court. The Company has asked Associated to submit to mediation.
Notes to Consolidated Financial Statements
July 31, 1996, 1995, and 1994
11. LITIGATION, COMMITMENTS AND CONTINGENCIES (continued)
On October 7, 1994, Northern Natural Gas Company ("Northern") filed a lawsuit against the Company alleging that the Company had breached two Firm Transportation Service Agreements dated December 1, 1990, between Northern and Panda, a former wholly-owned subsidiary of the Company. On June 6, 1996, Northern and the Company entered into a Settlement Agreement pursuant to which (a) the Company issued to Northern 50,000 shares of the Company's Series B Senior Convertible Preferred Stock which are convertible (subject to adjustment) into 333,333 shares of the Company's common stock, and (b) the Company agreed to pay Northern $465,000 in installments of $50,000 by June 21, 1996, $150,000 by May 1, 1997, $125,000 by May 1, 1998, and $140,000 by May 1, 1999. An agreed judgment was entered in the case, but Northern has agreed not to seek to enforce the judgment unless the Company defaults in its payment obligations. Once the required payments have been made, Northern has agreed to execute a release of the judgment. These amounts have been reflected in the Company's consolidated financial statements at July 31, 1996.
Germany Oil Company is a named defendant in three wrongful death actions involving an accident which occurred at a heater-treatment unit on the Blowhorn Creek Millerella Oil Unit lease in Lamar County, Alabama. Each plaintiff seeks damages in the amount of $25 million. The three matters are in the initial stages of discovery and have been referred to Germany Oil Company's insurance carrier. Germany has an approximate 10% ownership interest of the property. Management believes that liability insurance coverage is adequate to cover any potential loss.
Contingencies - In addition to the foregoing litigation, the Company is a ------------- named defendant in lawsuits, is a party in governmental proceedings, and is subject to claims of third parties from time to time arising in the ordinary course of business. While the outcome of lawsuits or other proceedings and claims against the Company cannot be predicted with certainty, management does not expect these additional matters to have a material adverse effect on the financial position of the Company.
Commitments -----------
The Company leases office space and certain property and equipment under various lease agreements. As of July 31, 1996, future lease commitments were approximately as follows:
Year Ending July 31, -----------
1997 $ 168,000 1998 142,000 ------------
Total minimum payments $ 310,000 ============
Notes to Consolidated Financial Statements
July 31, 1996, 1995, and 1994
12. RELATED PARTY TRANSACTIONS
In regard to the modification and cancellation of the non-compete agreements with the two previous majority shareholders of Panda, Mr. Jeffrey T. Wilson assumed the notes receivable due the Company by the two former shareholders in the amount of $339,650 plus accrued interest. The Board has voted to forgive $380,624, representing the total notes and accrued interest, due from Mr. Wilson.
The Company from time to time, has made loans to certain officers, directors and stockholders. The loans are evidenced by demand notes payable due on or before December 31, 1996, bearing interest of various rates.
13. BUSINESS SEGMENTS
The Company's operations involve oil and gas exploration, production and lease operations. Additionally, crude oil and crude oil by-products are marketed through a wholly owned subsidiary. Intersegment sales are made at prices prevailing in the industry at the time of sale. The following table sets forth information with respect to the industry segments of the Company.
The Company sold 16% of its consolidated oil and gas revenue to Enron Reserve Acquisition Corporation for the year ended July 31, 1996. The Company had no other purchasers in excess of 10% of consolidated oil and gas revenue.
Notes to Consolidated Financial Statements
July 31, 1996, 1995, and 1994
13. BUSINESS SEGMENTS (continued)
14. SUPPLEMENTARY FINANCIAL INFORMATION FOR OIL AND GAS PRODUCING ACTIVITIES
Results of Operations from Oil and Gas Producing Activities -----------------------------------------------------------
The following sets forth certain information with respect to the Company's results of operations from oil and gas producing activities for the years ended July 31, 1996, 1995 and 1994. All of the Company's oil and gas producing activities are located within the United States. The dry hole costs include $2,491,299 related to the Tunisia project.
Notes to Consolidated Financial Statements
July 31, 1996, 1995, and 1994
14. SUPPLEMENTARY FINANCIAL INFORMATION FOR OIL AND GAS PRODUCING ACTIVITIES (continued)
LaTex RESOURCES, INC.
Notes to Consolidated Financial Statements
July 31, 1996, 1995, and 1994
14. SUPPLEMENTARY FINANCIAL INFORMATION FOR OIL AND GAS PRODUCING ACTIVITIES (continued)
Estimated Quantities of Proved Oil and Gas Reserves (Unaudited) ---------------------------------------------------------------
The estimates of proved oil and gas reserves utilized in the preparation of the consolidated financial statements were prepared by independent petroleum engineers at July 31, 1996. Such estimates are in accordance with guidelines established by the Securities and Exchange Commission and the Financial Accounting Standards Board, which require that reserve reports be prepared under existing economic and operating conditions with no provision for price and cost escalations except by contractual arrangements. The Company's reserves are located onshore in the United States.
The Company emphasizes that reserve estimates are inherently imprecise. Accordingly, the estimates are expected to change as more current information becomes available. In addition, a portion of the Company's proved reserves are undeveloped, which increases the imprecision inherent in estimating reserves which may ultimately be produced.
Proved reserves are estimated quantities of crude oil, natural gas, and natural gas liquids which geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions. Proved developed reserves are those which are expected to be recovered through existing wells with existing equipment and operating methods. The following is an analysis of the Company's proved oil and gas reserves.
Notes to Consolidated Financial Statements
July 31, 1996, 1995, and 1994
14. SUPPLEMENTARY FINANCIAL INFORMATION FOR OIL AND GAS PRODUCING ACTIVITIES (continued)
Subsequent to year end, the Company has entered into letters of intent with two parties to sell oil and gas properties for approximately $1,500,000. The Company chose not to include those properties in its reserve appraisal at July 31, 1996.
Standardized Measure of Discounted Future Net Cash Flows Relating to Proved --------------------------------------------------------------------------- Oil and Gas Reserves (Unaudited) --------------------------------
The "Standardized Measure of Discounted Future Net Cash Flows Relating to Proved Oil and Gas Reserves" (Standardized Measure) is a disclosure requirement under SFAS No. 69. The Standardized Measure does not purport to present the fair market value of proved oil and gas reserves. This would require consideration of expected future economic and operating conditions, which are not taken into account in calculating the Standardized Measure.
Under the Standardized Measure, future cash inflows were estimated by applying year-end prices, adjusted for fixed and determinable escalations, to the estimated future production of year-end proved reserves. Future cash inflows were reduced by the estimated future production and development costs based on year-end costs to determine pre-tax cash inflows. Future income taxes were computed by applying the statutory tax rate to the excess of pre-tax cash inflows over the Company's tax basis in the associated proved oil and gas properties. Tax credits and permanent differences were also considered in the future income tax calculation. Future net cash inflows after income taxes were discounted using a 10% annual discount rate to arrive at the Standardized Measure.
LaTex RESOURCES, INC.
Notes to Consolidated Financial Statements
July 31, 1996, 1995, and 1994
14. SUPPLEMENTARY FINANCIAL INFORMATION FOR OIL AND GAS PRODUCING ACTIVITIES (continued)
Changes in Standardized Measure of Discounted Future Net Cash Flows ------------------------------------------------------------------- Relating to Proved Oil and Gas Reserves (Unaudited) ---------------------------------------------------
The following is an analysis of the changes in the Standardized Measure during the periods presented:
Note to Consolidated Financial Statements
July 31, 1996, 1995, and 1994
15. HEDGING
Oil and Gas - The Company is required, by agreement with its primary lender ----------- (Bank of America), to participate in a price protection program, executed by Bank of America, for a majority of its gas sales for a 36 month period until March 31, 1998. Oil is hedged at a floor of $16.50/Bbl and a ceiling of $19.82/Bbl based on projected monthly production. Gas is hedged at $1.806/MMBtu based on projected monthly production. The production rates were calculated by Bank of America from reserve report data and are fixed by Bank of America. The monthly hedge amount is calculated by Bank of America from published market rates. The current hedging agreement does not allow for full benefit from prices above the ceiling amount.
The hedging gains or losses for the years ended July 31, 1996 and 1995 are as follows:
The hedging gains and losses are included in oil and gas revenue for the years indicated.
Interest - The Company is required, by agreement with its primary lender -------- (Bank of America), to participate in an interest rate protection program, executed by Bank of America, until February 29, 2000, for its debt to its primary lender. Interest is hedged to achieve a fixed rate of 7.49% based on a fixed amortization schedule determined at loan origination. The hedging losses for the year ended July 31, 1996 and 1995 are $504,303 and $80,151, respectively, and are included in interest expense for the years indicated.
The off-balance sheet liability for all future hedging commitments based on current year end prices and rates are as follows:
Notes to Consolidated Financial Statements
July 31, 1996, 1995, and 1994
16. RESTATEMENT OF PRIOR YEAR
Effective March 31, 1995 the Company acquired Germany Oil Company ("Germany") in a purchase transaction. The net assets acquired consisted primarily of oil and gas properties. In connection with the transaction the Company failed to allocate the purchase price to all assets acquired as required by generally accepted accounting principles. During fiscal 1996 the Company, based on the reports of independent petroleum engineers, reallocated the adjusted purchase price as of the date of acquisition. Accordingly, the previously reported 1995 amounts have been restated as follows:
17. SUBSEQUENT EVENTS
Proposed Merger With Alliance Resources Plc - As a result of the demands ------------------------------------------- placed upon the Company by its primary lender, the Company's continuing working capital deficit, its deteriorating financial condition and the inability of the Company to raise additional debt or equity capital, management of the Company, in the forth quarter of fiscal 1996, determined to seek an equity infusion through a strategic merger with a suitable merger candidate. Management's primary objective in seeking a merger partner was to solve the working capital deficit of the Company through an equity infusion while minimizing dilution to the shareholders. Although the Company considered several potential transactions. Alliance Resources Plc ("Alliance") emerged as the candidate most likely to meet the objectives of the Company. The Company has entered into an Agreement and Plan of Merger ("Alliance Merger Agreement") dated August 12, 1996 with Alliance Resources Plc, a company organized under the laws of the United Kingdom ("Alliance"), Pursuant to which the Company will merge ("Alliance Merger") with a wholly- owned U.S. subsidiary of Alliance.
Notes to Consolidated Financial Statements
July 31, 1996, 1995, and 1994
17. SUBSEQUENT EVENTS (continued)
Under the terms of the Alliance Merger Agreement and after giving effect to a 1 for 40 reverse stock split to be completed by Alliance, the holders of the Company's common stock will receive 0.8806 ordinary shares of Alliance for each share of such common stock, the holders of the Company's Series A Convertible Preferred Stock will receive 2.6445 ordinary shares of Alliance for each share of such Series A Convertible Preferred Stock, and the holders of the Company's Series B Senior Convertible Preferred Stock will receive 5.8709 ordinary shares of Alliance for each share of such Series B Senior Convertible Preferred Stock. Following the Alliance Merger, the holders of the Company's common and preferred stock will own, as a group, approximately 72% of the issued and outstanding ordinary shares of Alliance and the Company will become a wholly-owned subsidiary of Alliance. Holders of outstanding warrants to purchase shares of the Company's common stock will receive from Alliance replacement warrants to purchase shares of Alliance ordinary shares on substantially the same terms.
It is anticipated that the merger will provide the Company with sufficient capital resources to eliminate its existing working capital deficit, refinance the Company's senior debt and eliminate the hedging agreements, and provide development capital for exploration of the Company's oil and gas properties. In addition, the Company believes that the combination of the two companies provides strategic benefits to the Company important to its long-term growth and the enhancement of shareholder value. Although Alliance's domestic oil and gas operations are significantly smaller than the Company's, the Company believes that the merger will enhance the overall financial strength of the Company and provide a stable platform from which future growth can be achieved. The strategic objectives of the combined Company will be to continue a policy of structured and stable growth in the domestic U.S. oil and gas sector while implementing projects in Western Europe, the Middle East and the former Soviet Union.
Under the terms of the Alliance Merger Agreement, the Company is required to dispose of its interests in its unconsolidated affiliates, Wexford Technology, Inc. ("Wexford") and Imperial Petroleum, Inc. ("Imperial"), and its interests in its wholly-owned subsidiaries LaTex Resources International, Inc. ("LaTex Resources International") and Phoenix Metals, Inc. ("Phoenix Metals"). Effective July 31, 1996, the Company has written off its $1,811,694 investment in Wexford, its $2,372,452 investment in Imperial, and its $955,496 Investment in LaTex Resources International. The Company has entered into a Purchase Agreement with Imperial pursuant to which the Company will sell its interests in Wexford, Imperial, LaTex Resources International and Phoenix Metals to Imperial for 100,000 shares of the Company's common stock. Imperial is controlled by the Company's President and largest stockholder, Jeffrey T. Wilson. Prior to the completion of the sale, the Company intends to obtain an opinion from an independent investment banking firm as to the fairness of the transaction to the Company's stockholders.
Notes to Consolidated Financial Statements
July 31, 1996, 1995, and 1994
17. SUBSEQUENT EVENTS(continued)
Effective October 21, 1996, each holder of options granted under the Company's 1993 Incentive Stock Plan agreed to terminate all options held and receive grants of restricted common stock of the Company. 1,690,000 options were canceled and 1,690,000 shares of restricted common stock were granted. The terms of the Restricted Shares provide that a holder may not sell, transfer, or otherwise dispose of any Restricted Shares as long as the Company has the right to a forfeiture of the Shares. The terms of the Restricted Stock provide that in the event that a holder's employment with the Company shall terminate for any reason other than death or total disability prior to the earlier of (a) February 1, 1997, or (b) a change in control occurs with respect to the Company, the holder shall immediately forfeit any right to the shares of Restricted Stock for which the restrictions have not otherwise lapsed.
Disposition of Oil and Gas Properties - Subsequent to year end, the ------------------------------------- Company has entered into letters of intent with two parties to sell oil and gas properties for approximately $1,500,000. The Company chose not to include those properties in its reserve appraisal at July 31, 1996.
PART III
Item 10.

Item 10. Directors and Executive Officers of the Registrant.
Directors and Executive Officers
The following table sets forth certain information regarding the directors, executive officers and key employees of the Company.
Name Age Position ---- --- --------
Jeffrey T. Wilson 43 Director, Chairman of the Board, President, and Chief Executive Officer
John L. Cox 46 Director, Vice President and Chief Financial Officer
Malcolm W. Henley 45 Director and Vice President of Marketing
John R. Martinson 61 Director
Robert L. Hull 44 Vice President of Operations
John W. Heinsius 46 Vice President of Exploration
Stacey D. Smethers 28 Secretary
Jeffrey T. Wilson has been a Director, Chairman of the Board and Chief ----------------- Executive Officer of the Company since December 1991. Mr. Wilson was a Director and Executive Vice President of Vintage Petroleum, Inc. ("Vintage") from May 1990 to July 1991. He was Vice President--Production of Vintage from January 1984 to May 1990 and Manager--Acquisitions of Vintage from May 1983 to January 1984. From August 1980 to May 1983, Mr. Wilson was an engineer with Netherland, Sewell & Associates, Inc, a petroleum engineering consulting firm, where his assignments included annual reserve appraisals, reserve acquisition appraisals and field studies. From May 1975 to August 1980, he gained experience in the oil and gas industry with Exxon Company U.S.A. in various engineering and supervisory capacities in the Louisiana and South Texas areas. Mr. Wilson holds a Bachelor of Science Degree in Mechanical Engineering from the Rose-Hulman Institute of Technology.
John L. Cox has served as a Director of the Company since November 1995. ----------- Mr. Cox became Vice President of Finance and Chief Financial Officer of the Company in January 1996. From February 1992 to December 1995, Mr. Cox held the position of Controller for the Company. Mr. Cox held the positions of Controller of Panada Exploration and Assistant Controller of Panda Resources from November 1990 to January 1993. Prior to that time, he held various managerial positions with Reading & Bates Petroleum Corporation. Mr. Cox holds a Bachelor of Science Degree in Accounting from Oklahoma City University.
Malcolm W. Henley has been Vice President of Marketing of the Company since ----------------- June 1992. Mr. Henley was elected to the Company's Board of Directors in September 1993. Mr. Henley has been Chairman of the Board, President, Chief Executive and Chief Operating officer of the Company's wholly-owned subsidiary ENPRO, Inc. since August, 1984. From 1981 to 1984, Mr. Henley served as Manager of Operations for a natural gas pipeline company subsidiary of Champlin Petroleum (now Union Pacific Resources). From 1976 to 1979 he served as Vice President and General Manager of Utilities Pipeline Company and between 1975 and 1976 held various positions with Continental Oil Company. Mr. Henley
has a Bachelor of Arts Degree in Business Administration from Oklahoma State University and an Associates Degree in Petroleum Land Technology from Tulsa Junior College.
John R. Martinson has been a Director of the Company since May 4, 1995. ----------------- Mr. Martinson has served as a consultant to the Company since August 1994. Since January 1995, Mr. Martinson has been a principal in the merchant banking firm Martinson, O'Dell & Ogden, L.L.C., specializing in corporate and project finance. Mr. Martinson is also managing director of Wood Roberts, Inc. where he has engaged in financial consulting since January 1989. Mr. Martinson earned his Bachelor of Science Degree in Engineering at Princeton University and holds a Masters in Business Administration Degree from Northwestern University.
Robert L. Hull has been Vice President of Operations of the Company since -------------- January 1992. Prior to joining the Company, Mr. Hull had been employed for seven years with Vintage Petroleum, Inc. in the position of Senior Operations Engineer. Prior to that time, Mr. Hull had been employed by other oil related companies, including Dowell-Schlumberger, Equitable Gas Co., Ladd Petroleum, Unit Corp. and Mapco. Mr. Hull holds a Bachelor of Science Degree in Geology from the University of Pittsburgh.
John W. Heinsius has been Vice President of Exploration since February ---------------- 1993. From October 1989 to February 1993, Mr. Heinsius held the positions of Vice President of Exploration and Manager of Gas supply for Panda Resources, Inc. Mr. Heinsius held the positions of Director of Exploration and Manager of Gas Marketing for Transok, Inc. from 1985 to October 1989. Prior to this time, he held the titles of Exploration Manager and Vice President of Exploration for Buttonwood Petroleum, Chief Geologist for Indian Wells Oil Co., Staff Geologist for Ladd Petroleum Corp. and Exploration Geologist for Texaco, Inc. Mr. Heinsius holds a Bachelor of Arts Degree in Geology from Hope College and a Master of Science Degree in Geology from Western Michigan University.
Stacey D. Smethers has been Secretary of the Company since November 15, ------------------ 1995. Ms. Smethers has been Executive Assistant to the President of ENPRO, Inc. and Marketing Representative for the Company from August 1992 to present. Ms. Smethers has more than seven years of varied experience in the oil and gas industry. Her areas of concentration include marketing, administration, and petroleum land management. Her prior titles include Executive Assistant, Operations Analyst, Credit Analyst, and Secretary.
Each director is elected for a period of one year at the Company's annual meeting of shareholders and serves until his successor is duly elected by the shareholders. Directors who are not officers of the Company receive no cash compensation for their services. Officers are elected by and serve at the will of the Board of Directors. There are no family relationships between any director, officer or person nominated or chosen to become a director or officer and any other such person.
The Board of Directors has established a Compensation Committee whose current members are Jeffrey T. Wilson and John R. Martinson. The Compensation Committee reviews the Company's executive compensation policies and practices and administers the Company's 1993 Incentive Stock Plan. See "Compensation Committee Interlocks and Insider Participation." The Board of Directors of the Company has not established an audit or any other committee. Directors of the Company do not receive fees for their services as directors.
Section 16(a) Reporting Deficiencies
Section 16(a) of the Securities Exchange Act of 1934 ("Exchange Act") requires the Company's directors and officers, and persons who own more than 10% of a registered class of the Company's equity securities, to file initial reports of ownership on Form 3 and reports of changes in ownership on Forms 4 and 5 with the Securities and Exchange Commission (the "SEC") and the National Association of Securities Dealers ("NASD"). Such persons are required by SEC regulation to furnish the Company with copies of all Section 16(a) forms they file.
Based upon a review of Form 3, 4 and 5 filings made by the Company's officers and directors during the fiscal year ended July 31, 1996 under Section 16(a) of the Exchange Act, the Company believes that: (i) Jeffrey T. Wilson, Chief Executive Officer, Chairman of the Board, President, and a Director of the
Company, failed to timely file one statement of change in beneficial ownership on Form 4, respecting one transaction involving his acquisition of options to purchase common stock; (ii) John L. Cox, Chief Financial Officer, Vice President, and a Director of the Company, failed to timely file one statement of change in beneficial ownership on Form 4, respecting one transaction involving his acquisition of options to purchase common stock; (iii) Malcolm W. Henley, Vice President of Marketing, and a Director of the Company, failed to timely file one statement of change in beneficial ownership on Form 4, respecting one transaction involving his acquisition of options to purchase common stock; (iv) Philip J. Wade, a Director of the Company until his resignation on October 8, 1996, failed to timely file two statements of change in beneficial ownership on Form 4, respecting 12 transactions involving the disposition of common stock of the Company; (v) Robert L. Hull, Vice President of Operations, failed to timely file one statement of change in beneficial ownership on Form 4, respecting one transaction involving his acquisition of options to purchase common stock; (vi) John W. Heinsius, Vice President of Exploration, failed to timely file one statement of change in beneficial ownership on Form 4, respecting one transaction involving his acquisition of options to purchase common stock; (vii) John R. Martinson, a Director of the Company, failed to timely file one statement of change in beneficial ownership on Form 4, respecting one transaction involving his acquisition of warrants to purchase common stock; (viii) Stacey D. Smethers, Secretary of the Company, failed to timely file one statement of change in beneficial ownership on Form 4, respecting one transaction involving her acquisition of options to purchase common stock. All of the referenced delinquent filings have now been made. Except as set forth above, the Company believes that its current officers and directors have made all requisite filings under Section 16(a) of the '34 Act on a timely basis.
Item 11.

Item 11. Executive Compensation.
The table below sets forth, in summary form, (1) the compensation paid, for the years shown, to Jeffrey T. Wilson, the Company's Chairman of the Board, President and Chief Executive Officer, and the four other highest-paid executive officers of the Company serving as executive officers on July 31, 1996 (the "Named Officers"); (2) the stock options and stock appreciation rights granted to the Named Officers for the years shown; and (3) long-term payouts and other compensation to the Named Officers for the years shown.
Summary Compensation Table
- ------------------------------ (1) None of the executive officers listed received perquisites or other personal benefits that exceeded the lesser of $50,000 or 10 percent of the salary and bonus for such officers.
(2) Reflects options issued pursuant to the Company's 1993 Incentive Stock Plan exercisable at any time until December 5, 2000, at an exercise price of $0.4375 per share, the fair market value of the Company's common stock at the time of grant. By agreement between the holder of the referenced options and the Company, effective October 21, 1996, the referenced options were terminated. See "Restricted Stock Grants".
(3) Reflects options issued pursuant to the Company's 1993 Incentive Stock Plan exercisable at any time until August 1, 2000 at an exercise price of $0.47 per share, the fair market value of the Company's common stock on the date of grant. By agreement between the holder of the referenced options and the Company, effective October 21, 1996, the referenced options were terminated. See "Restricted Stock Grants".
(4) Reflects options issued pursuant to the Company's 1993 Incentive Stock Plan exercisable at any time until May 25, 1999 at an exercise price of $0.875 per share, the fair market value of the Company's common stock on the date of grant. By agreement between the holder of the referenced options and the Company, effective October 21, 1996, the referenced options were terminated. See "Restricted Stock Grants".
(5) Reflects (a) options issued pursuant to the Company's 1993 Incentive Stock Plan to purchase 50,000 shares of common stock exercisable at any time until May 25, 1999 at an exercise price of $0.875 per share, the fair market value of the Company's common stock on the date of grant, and (b) options issued pursuant to the Company's 1993 Incentive Stock Plan to purchase 50,000 shares of common stock, issued in replacement of 50,000 non-qualified options issued to Mr. Henley in 1992, exercisable at any time until May 25, 1999 at an exercise price of $0.875 per share, the fair
market value of the Company's common stock on the date of grant. By agreement between Mr. Henley and the Company, effective October 21, 1996, the referenced options were terminated. See "Restricted Stock Grants".
(6) Reflects (a) options issued pursuant to the Company's 1993 Incentive Stock Plan to purchase 50,000 shares of common stock exercisable at any time until May 25, 1999 at an exercise price of $0.875 per share, the fair market value of the Company's common stock on the date of grant, and (b) options issued pursuant to the Company's 1993 Incentive Stock Plan to purchase 75,000 shares of common stock, issued in replacement of 75,000 non-qualified options issued to Mr. Hull in 1992, exercisable at any time until May 25, 1999 at an exercise price of $0.875 per share, the fair market value of the Company's common stock on the date of grant. By agreement between Mr. Hull and the Company, effective October 21, 1996, the referenced options were terminated. See "Restricted Stock Grants".
(7) Mr. Shreve resigned his positions as Executive Vice President and a Director of the Company on January 31, 1996, and his options lapsed at that time.
(8) Reflects (a) options issued pursuant to the Company's 1993 Incentive Stock Plan to purchase 50,000 shares of common stock exercisable at any time until May 25, 1999 at an exercise price of $0.875 per share, the fair market value of the Company's common stock on the date of grant, and (b) options issued pursuant to the Company's 1993 Incentive Stock Plan to purchase 50,000 shares of common stock, issued in replacement of 50,000 non-qualified options issued to Mr. Shreve in 1992, exercisable at any time until May 25, 1999 at an exercise price of $0.875 per share, the fair market value of the Company's common stock on the date of grant.
Stock Options
The table below sets forth, in summary form, with respect to the Named Officers, (i) the name of such officer receiving grants of stock options from the Company during the fiscal year ended July 31, 1996; (ii) the number of securities underlying the options; (iii) the percent such grant represents of the total options granted to employees during the fiscal year ended July 31, 1996; (iv) the per-share exercise price of the options granted; (v) the expiration date of the options; and(vi) the potential realizable value at assumed annual rates of stock price appreciation.
Option Grants in Fiscal Year Ended July 31, 1996(1)
(1) By agreement between each of the individuals, other than Dewitt C. Shreve, set forth in the table and the Company, effective October 21, 1996 the referenced options were terminated. See
"Restricted Stock Grants."
(2) Mr. Shreve resigned his positions as Executive Vice President and Director of the Company on January 31, 1996 and his options lapsed at that time.
During the year ended July 31, 1996 (i) no restricted stock awards were granted, (ii) other than as set forth above, no stock options or stock appreciation rights were granted, (iii) no options or stock appreciation rights were exercised, and (iv) no awards under any long-term incentive plan were made to any of the Named Officers.
The following table sets forth information relating to the exercises of stock options by each of the Company's Named Officers during the year ended July 31, 1996 and the value of unexercised stock options as of July 31, 1996.
Aggregated Option Exercises in the Fiscal Year Ended July 31, 1996 and July 31, 1996 Option Values(1)
(1) By agreement between each of the individuals, other than Dewitt C. Shreve, set forth in the table and the Company, effective October 21, 1996 the referenced options were terminated. See "Restricted Stock Grants."
(2) Mr. Shreve resigned his positions as Executive Vice President and Director of the Company on January 31, 1996 and his options to purchase 150,000 shares lapsed at that time.
The following table sets forth information relating to the repricing of stock options held by any executive officer.
Option Repricing Table
(1) Reflects options issued pursuant to the Company's 1993 Incentive Stock Plan to purchase 50,000 shares of common stock, issued in replacement of 50,000 non-qualified options issued to Mr. Henley in 1992, exercisable at any time until May 25, 1999 at an exercise price of $0.875 per share, the fair market value of the Company's common stock on the date of grant. By agreement between Mr. Henley and the Company, effective October 21, 1996 the referenced options were terminated. See "Restated Stock Grants".
(2) Reflects options issued pursuant to the Company's 1993 Incentive Stock Plan to purchase 75,000 shares of common stock, issued in replacement of 75,000 non-qualified options issued to Mr. Hull in 1992, exercisable at any time until May 25, 1999 at an exercise price of $0.875 per share, the fair market value of the Company's common stock on the date of grant. By agreement between the Mr. Hull and the Company, effective October 21, 1996 the referenced options were terminated. See "Restated Stock Grants".
(3) Reflects options issued pursuant to the Company's 1993 Incentive Stock Plan to purchase 50,000 shares of common stock, issued in replacement of 50,000 non-qualified options issued to Mr. Shreve in 1992, exercisable at any time until May 25, 1999 at an exercise price of $0.875 per share, the fair market value of the Company's common stock on the date of grant. Mr. Shreve resigned his positions as Executive Vice President and Director of the Company on January 31, 1996 and his options lapsed at that time.
Incentive Stock Plan
The Board of Directors adopted the LaTex Resources, Inc. 1993 Incentive Stock Plan (the "Plan") effective December 8, 1993 and the Shareholders approved the Plan at the Company's Annual Meeting on June 2, 1994. The Plan is administered by a Compensation Committee consisting of not less than three members of the Board of Directors and a special committee appointed by the Board of Directors, as necessary, consisting of not less than three members of the Board, who are a "disinterested persons" within the meaning of Securities and Exchange Commission ("SEC") Rule 16b-3, as in effect prior to August 1996, to address decisions regarding participation by directors and executive officers.
The aggregate number of shares of the Company's common stock issuable under the Plan is 2,000,000. The Plan authorizes the Committee to grant to key employees options ("Options") to purchase the Company's common stock which may be in the form of incentive stock options ("ISOs"), or in the form of non- statutory options ("Non-Statutory Options"). Additionally, the Committee may grant stock
appreciation rights ("SARs") in connection with such Options. The term of each Option shall be for such period as the Committee shall determine but no longer than ten years from the date of grant or five years to an individual who is a 10% shareholder of the Company. The aggregate fair market value exercisable by an individual optionee during any calendar year under all stock option plans of the Company may not exceed $100,000. The exercise price per share for the common stock covered by any Options shall be determined by the Committee, provided that in the case of an ISO, the per share exercise price shall be not less than the fair market value (or in the case of an ISO granted to an individual who at the time is a 10% shareholder, 110% of the fair market value) of one share of common stock.
The Plan additionally authorizes the Committee to grant restricted common stock ("Restricted Stock") to key employees. The Committee may designate a restriction period with respect to such shares of not less than one year but not more than five years during which an employee will not be permitted to sell, transfer, pledge or assign shares of Restricted Stock awarded to him provided, that within such limitations, the Committee may provide for the lapse of such restrictions where deemed appropriate.
Through July 31, 1996, the Company has granted ISOs under the Plan to Messrs. Wilson, Cox, Henley, Heinsius, and Hull as described in the Summary Compensation Table and the Option Grants Table above, for a total of 1,450,000 shares (excluding options for 150,000 shares granted to Mr. Shreve which lapsed upon his resignation as an officer and Director of the Company on January 31, 1996), as well ISOs under the Plan to non-executive officer employees for a total of 240,000 shares. By agreement between the holders of all outstanding ISOs and the Company, effective October 21, 1996 all outstanding ISOs were terminated. See "Restricted Stock Grants."
Restricted Stock Grants
Effective October 21, 1996, each holder of options granted under the Company's 1993 Incentive Stock Plan agreed to terminate all options held and received grants of restricted common stock of the Company ("Restricted Stock"). The following table sets forth options cancelled and shares of Restricted Stock issued with respect to each of the Company's Named Officers and other employees of the Company as a group.
(1) Mr. Shreve resigned his positions as Executive Vice President and Director of the Company on January 31, 1996, and his options lapsed at that time.
The terms of the Restricted Stock provide that a holder may not sell, transfer, or otherwise dispose of any shares of Restricted Stock as long as the Company has the right to a forfeiture of the Restricted Stock. In the event that a holder's employment with the Company shall terminate for any reason other than death or total disability prior to the earlier of (a) February 1, 1997, or (b) a Change in Control occurs with respect to the Company, the holder shall immediately forfeit any right to the shares of Restricted Stock for which the restrictions have not otherwise lapsed. For the purpose of the Restricted Stock, a "Change in Control" will be deemed to have occurred with respect to the Company if: (a) any person becomes the beneficial owner, directly or indirectly, of securities of the Company representing 50% or more of the combined voting power of the Company's then outstanding securities; (b) individuals who constitute the Company's Board of Directors on the date of grant of the Restricted Stock cease for any
reason to constitute at least a majority thereof; (c) there is a merger or consolidation of the Company in which the Company does not survive as an independent company; or (d) the business of the Company is disposed of by the Company pursuant to a partial or complete liquidation of the Company, a sale of assets (including stock of a subsidiary) of the Company, or otherwise.
Compensation Committee Interlocks and Insider Participation
During the fiscal year ended July 31, 1996, Jeffrey T. Wilson, John R. Martinson and Dennis G. Strauch served as members of the Compensation Committee of the Board of Directors of the Company. Mr. Strauch resigned his position as Director of the Company and member of the Compensation Committee on June 24, 1996. Mr. Wilson was, during the fiscal year, Chairman of the Board, President and Chief Executive Officer of the Company. With respect to certain relationships between the Company and Messrs. Wilson and Martinson, see "Item 13. Certain Relationships and Related Transactions."
During the last completed fiscal year, (i) no executive officer of the Company served as a member of the Compensation Committee (or other board committee performing equivalent functions or, in the absence of any such committee, the entire board of directors) of another entity, one of whose executive officers served on the Compensation Committee of the Company; (ii) no executive officer of the Company served as a director of another entity, one of who executive officers served on the Compensation Committee of the Company; and (iii) no executive officer of the Company served as a member of the compensation committee (or other board committee performing equivalent functions or, in the absence of any such committee, the entire board of directors) of another entity, one of whose executive officers served as a director of the Company.
Employment Agreements
The Company has no employment agreements with any of its officers or employees. All officers of the Company devote substantially all their entire business time and energies to the Company.
Item 12.

Item 12. Security Ownership of Certain Beneficial Owners and Management.
As of October 25, 1996, the Company had 19,805,495 issued and outstanding shares of common stock. The following table sets forth, as of October 25, 1996, the number and percentage of shares of common stock of the Company owned beneficially by (i) each director of the Company, (ii) each Named Officer of the Company named in the Summary Compensation Table in Item 11 above, (iii) all directors and executive officers of the Company as a group, and (iv) each person known to the Company to own of record or beneficially more than 5% of the Company's common stock. Except as otherwise indicated, the persons named in the table have sole voting and investment power with respect to the shares indicated. As of October 25, 1996, the Company had 502 holders of common stock of record.
- ------------------------------
* less than one percent.
(1) Based upon 19,805,495 issued and outstanding shares of common stock at October 25, 1996. Shares of common stock which an individual has the right to acquire within 60 days pursuant to the exercise of options, warrants, or other convertible securities are deemed to be outstanding for the purpose of computing the percentage ownership of such individual, but are not deemed to be outstanding for the purpose of computing the percentage ownership of any other person or group shown in the table.
(2) The mailing address of Messrs. Wilson, Henley, Heinsius, Hull and Cox is 4200 East Skelly Drive, Suite 1000, Tulsa, Oklahoma 74135.
(3) Includes 300,000 shares of Restricted Stock (See "Item 11. Executive Compensation -- Restricted Stock Grants".) and excludes 300,000 shares held by the Old National Bank in Evansville, Indiana, Trustee of the Jeffrey T. and Annalee Wilson Irrevocable Family Trust for the benefit of the Wilson children.
(4) The mailing address of Mr. Shreve is 2909 Cole Avenue, Suite 100, Dallas, Texas 75204. Mr. Shreve resigned his positions as Executive Vice President and a Director of the Company on January 31, 1996.
(5) Includes: (a) with respect to Mr. Henley, 300,000 shares of Restricted Stock; (b) with respect to Mr. Heinsius, 250,000 shares of Restricted Stock; (c) with respect to Mr. Hull, 325,000 shares of Restricted Stock; and (d) with respect to Mr. Cox 225,000 shares of Restricted Stock. See "Item 11. Executive Compensation -- Restricted Stock Grants".
(6) Includes presently exercisable warrants to purchase 436,000 shares held by Wood Roberts, Inc., a corporation under the control of Mr. Martinson. The mailing address of Mr. Martinson is Suite 210, 952 Echo Lane, Houston, Texas, 77024.
(7) Excludes shares owned by Dewitt C. Shreve who resigned his positions as an officer and Director of the Company on January 31, 1996.
With respect to the change in control of the Company which would result upon completion of the proposed merger of the Company with Alliance Resources Plc, see "Item 1. Business and Item 2. Properties -- Proposed Merger with Alliance Resources Plc."
Item 13.

Item 13. Certain Relationships and Related Transactions.
In connection with the sale by the Company of Panda Resources, Inc. in July 1993, the Company entered into separate agreements dated September 22, 1993 with Philip J. Wade and Dean Fuller pursuant to which the Company and Messrs. Wade and Fuller agreed to terminate their Non-Competition Agreements in exchange for payment by the Company, on or before November 21, 1993, of $25,000 each to Messrs. Wade and Fuller. In connection with the termination of the Non- Competition Agreements, Jeffrey T. Wilson, Chairman, President and Chief Executive Officer of the Company, assumed the indebtedness of Messrs. Wade and Fuller to the Company in the principal amounts of $162,788 and $176,863, respectively. At July 31, 1995, Mr. Wilson owed the Company a total of $339,651 pursuant to his assumption of this indebtedness. The Company has forgiven this and additional indebtedness of Mr. Wilson to the Company as discussed below.
As of July 31, 1996 and subsequent to July 31, 1996, the Company agreed to forgive the indebtedness of various officers, directors and employees to the Company at July 31, 1996 as follows:
A portion of the Company's oil and gas production is sold to its wholly- owned subsidiary, ENPRO, under short-term contracts. The Company believes that the terms of such contracts are fair and reasonable. The Company receives no less from the sale of production to ENPRO than it would receive from sales to unrelated third parties.
Since January 1993 the Company has leased a condominium located in Tulsa, Oklahoma owned by Jeffrey T. Wilson, Chairman and Chief Executive Officer of the Company. Under the terms of the oral lease arrangement, the Company pays Mr. Wilson approximately $1,100 per month. The condominium is used by the Company to house its out of town employees and guests. At July 31, 1996, the Company owed Mr. Wilson approximately $8,000 for unpaid rent.
With respect to transactions between the Company and its affiliates, Wexford Technology, Inc., and Imperial Petroleum, Inc., see "Item 1. Business and Item 2. Properties - Other Business."
In connection with the proposed merger of the Company and Alliance Resources Plc, the Company has entered into a Purchase Agreement with Imperial Petroleum, Inc. ("Imperial") dated September 30, 1996 pursuant to which the Company has agreed to sell to Imperial its interests in Imperial, Wexford Technology, Inc., LaTex Resources International, Inc. and Phoenix Metals, Inc. for 100,000 shares of the Company's common stock. Effective July 31, 1996 the Company has written off its investments in Imperial, Wexford and LaTex Resources International in the total amount of $5,139,642. Effective July 31, 1994 the Company wrote off its investment in Phoenix Metals in the total amount of $222,918. Imperial is controlled by Jeffrey T. Wilson, Chairman, President and Chief Executive Officer of the Company. Mr. Wilson will contribute to Imperial the 100,000 shares of the Company's common stock to be used by
Imperial in acquiring the Company's interest in these companies. See "Item 1. Business and Item 2. Properties - Exploration and Development" and "Other Business" and "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations -- Proposed Merger with Alliance Resources."
The Company was previously a party to an agreement with Wood Roberts, Inc. ("WRI"), a company controlled by John R. Martinson, a Director of the Company, pursuant to which WRI acted as a financial advisor to the Company. Under the agreement, the Company paid WRI a monthly fee of $4,000 and agreed to pay WRI a success fee in connection with any merger or acquisition involving a party introduced to the Company by WRI, and any financing facility arranged by WRI. WRI assisted the Company in obtaining its credit facility with Bank of America. Through July 31, 1996, the Company paid WRI cash retainer and success fees of $55,000. In addition, the Company has issued to WRI six year common stock purchase warrants to purchase 536,000 shares at $0.75 per share, of which WRI has exercised and purchased 100,000 shares. As of March 4, 1996, the financial advisor agreement between the Company and WRI was terminated by agreement of the parties. By separate agreement the Company agreed to pay Wood Roberts a fee of $240,000 upon completion of the proposed merger with Alliance Resources Plc and a fee equal to 0.5% of the amount of any credit facility obtained by the Company from a bank or other financial institution introduced to the Company by Wood Roberts in order to refinance its indebtedness to Bank of America.
PART IV
Item 14.

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(a) Financial Statements (included at Item 8. Financial Statements and Supplemental Data):
Audited Financial Statements of LaTex Resources, Inc.
Independent Auditor's Report; Consolidated Balance Sheets as of July 31, 1996 and 1995; Consolidated Statements of Operations for the years ended July 31, 1996, 1995, and 1994; Consolidated Statements of Stockholders' Equity for the years ended July 31, 1996, 1995 and 1994; Consolidated Statements of Cash Flows for the years ended July 31, 1996, 1995 and 1994; and Notes to Consolidated Financial Statements.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed by the Company with the Securities and Exchange Commission during the fourth quarter of the Company's fiscal year ended July 31, 1996.
(c) Exhibits.
Exhibit Number Description Page - ------- ----------- ---- 2.1 Agreement and Plan of Merger dated February 10, 1993, among Panda Resources, Inc., LRI Acquisition Corp., and the Registrant. (10)
2.2 Agreement and Plan of Merger dated March 31, 1995, among Germany Oil Company, LRI Acquisition, Inc., and the Registrant. (16)
2.3 Purchase and Sale Agreement dated March 30, 1995, between ENRON Reserve Acquisition Corp., ENRON Capital & Trade Resources Corp., LaTex/GOC Acquisition, Inc., and the Registrant. (17)
Exhibit Number Description Page - ------ ----------- ----
3.1 Certificate of Incorporation of the Registrant. (1)
3.2 Bylaws of the Registrant. (2)
4.1 Form of common stock certificate of the Registrant (filed as Exhibit 4.1 to the Registrant's Registration Statement on Form S-1, Registration No. 33-49452 (the "Registration Statement")).
4.2 Form of common stock Purchase Warren of the Registrant (filed as Exhibit 4.2 to the Registration Statement").
4.3 Form of Warrant Agreement (filed as Exhibit 4.3 to the Registration Statement).
4.4 Form of Underwriters' Warrant (filed as Exhibit 4.4 to the Registration Statement).
4.5 Certificate of Designation, Voting Powers and Rights of Series A Convertible Preferred Stock of the Registrant. (18)
4.6 Certificate of Designation, Voting Powers and Rights of Series B Senior Convertible Preferred Stock of the Registrant. (9)
9. Voting Trust Agreement. Not applicable.
10.1 Limited Partnership Agreement by and between LaTex Petroleum Corporation, Mid-Continent Energy, Inc., and Panada Exploration, Inc., dated October 26, 1990 (filed as Exhibit 10.1 to the Registration Statement).
10.2 Letter Agreement by and between Elite Enterprises, Inc., Mid-Continent Energy, Inc., and Panada Exploration dated December 12, 1990 (filed as Exhibit 10.2 to the Registration Statement).
10.3 Loan Agreement for the principal amount of $100,000 by and between LaTex Petroleum Corporation and First Texas Bank dated January 23, 1991 (filed as Exhibit 10.3 to the Registration Statement).
10.4 Lease Agreement by and between Sable Investment Corporation and 2800 East Skelly Drive, an Oklahoma partnership, dated March 20, 1991 (filed as Exhibit 10.4 to the Registration Statement).
10.5 Lease Agreement by and between Elite Enterprises, Inc. and 2800 East Skelly Drive, an Oklahoma partnership, dated March 20, 1991 (filed as Exhibit 10.5 to the Registration Statement).
10.6 Asset Sale Agreement for sale of oil and gas properties by and between Latex Petroleum Corporation, Vintage Petroleum, Inc. and American Exploration Company dated March 11, 1991 (filed as Exhibit 10.6 to the Registration Statement).
10.7 General Partnership Agreement by and between Elite Enterprises, Inc. and Panada Exploration, Inc., dated June 7, 1991 (filed as Exhibit 10.7 to the Registration Statement).
10.8 Purchase Agreement for sale of oil and gas properties by and between Latex Petroleum Corporation and Presidio Exploration, Inc., dated September 25, 1991 (filed as Exhibit 10.8 to the Registration Statement).
10.9 Promissory Note in the principal sum of $50,150 by and between ENPRO, Inc., and Elite Enterprises, Inc., dated September 27, 1991 (filed as Exhibit 10.9 to the Registration Statement).
Exhibit Number Description Page - ------ ----------- ----
10.10 Lease Agreement by and between LBR Associates, an Indiana limited partnership, and LaTex Petroleum Corporation dated October 3, 1991 (filed as Exhibit 10.10 to the Registration Statement).
10.11 Purchase Agreement for sale of oil and gas properties by and between Latex Petroleum Corporation and Chevron U.S.A., Inc., dated October 23, 1991 (filed as Exhibit 10.11 to the Registration Statement).
10.12 Assignment and Substitution Agreement by and between LaTex Petroleum Corporation, Chevron U.S.A. and Fig Equity Exchange, Inc., dated November 13, 1991 (exhibits omitted) (filed as Exhibit 10.12 to the Registration Statement).
10.13 Participation Agreement by and between Geodyne Tunisia, Ltd., Panada Exploration, Inc., Latex Petroleum Corporation and Concord International, Corp. dated November 21, 1991 (filed as Exhibit 10.13 to the Registration Statement).
10.14 Purchase and Sale Agreement for sale of oil and gas properties by and between Latex Petroleum Corporation and Sun Operating Limited Partnership dated November 25, 1991 (filed as Exhibit 10.14 to the Registration Statement).
10.15 Purchase Agreement for sale of oil and gas properties by and between Latex Petroleum Corporation and Presidio Exploration, Inc., dated November 27, 1991. (3)
10.16 Letter Agreement for the sale of oil and gas properties by and between Latex Petroleum Corporation and Sands Reserve Company dated December 1, 1991 (filed as Exhibit 10.16 to the Registration Statement).
10.17 Letter Agreement for the sale of oil and gas properties by and between Latex Petroleum Corporation and Sands Reserve Company dated December 1, 1991 (filed as Exhibit 10.17 to the Registration Statement).
10.18 Letter Agreement by and between Latex Petroleum Corporation and Sands Reserve Company dated December 2, 1991 (filed as Exhibit 10.18 to the Registration Statement).
10.19 Amendment to General Partnership Agreement by and between Elite Enterprises Limited Partnership and Panada Exploration, Inc., dated December 16, 1991 (filed as Exhibit 10.19 to the Registration Statement).
10.20 Agreement and Plan of Merger by and between Latex Petroleum Corporation, Sable Investment Corporation and Elite Enterprises, Inc., dated December 16, 1991. (4)
10.21 Agreement to Exchange Stock and Plan of Reorganization by and between Video Science Technology, Inc., Jeffrey T. Wilson, James G. Borem and Dee C. Shreve dated December 18, 1991. (5)
10.22 Letter Agreement by and between Trans-Exchange Corporation and Jeffrey T. Wilson dated January 22, 1992 (filed as Exhibit 10.22 to the Registration Statement).
10.23 Second Amended and Restated Credit Agreement by and between Latex Petroleum Corporation and Bank of Oklahoma, National Association, effective January 31, 1992 (filed as Exhibit 10.23 to the Registration Statement).
Exhibit Number Description Page - ------ ----------- ----
10.24 Stock Option Agreement by and between the Registrant and Cynthia A. Helms dated January 31, 1992 (filed as Exhibit 10.24 to the Registration Statement).
10.25 Stock Option Agreement by and between the Registrant and Robert Hull dated January 31, 1992 (filed as Exhibit 10.25 to the Registration Statement).
10.26 Letter from Director General of Energy, Republic of Tunisia dated February 11, 1992 (filed as Exhibit 10.26 to the Registration Statement).
10.27 Agreement to Terminate the General Partnership Agreement of Elite/Panada General Partnership by and between Latex Petroleum Corporation, successor by merger to Elite Enterprises, Inc., and Panada Exploration, Inc., dated February 13, 1992 (filed as Exhibit 10.27 to the Registration Statement).
10.28 Purchase Agreement for sale of oil and gas properties by and between the Registrant and Amax Exploration, Inc., dated February 14, 1992. (6)
10.29 Agreement by and between Latex Petroleum Corporation and Virgle Land-roth and Eclipse Petroleum Corporation dated as of February 17, 1992 (filed as Exhibit 10.29 to the Registration Statement).
10.30 Promissory Note in the principal sum of $50,200 by and between ENPRO, Inc., and LaTex Petroleum Corporation dated February 28, 1992 (filed as Exhibit 10.30 to the Registration Statement).
10.31 Promissory Note in the principal sum of $600,000 by and between Latex Petroleum Corporation and Bank of Oklahoma, National Association, dated February 28, 1992 (filed as Exhibit 10.31 to the Registration Statement).
10.32 Promissory Note in the principal sum of $3,280,000 by and between Latex Petroleum Corporation and Bank of Oklahoma, National Association, dated February 28, 1992 (filed as Exhibit 10.32 to the Registration Statement).
10.33 Restated Guaranty Agreement by and between Jeffrey T. Wilson and Annalee C. Wilson and Bank of Oklahoma, National Association, dated February 28, 1992 (filed as Exhibit 10.33 to the Registration Statement).
10.34 Guaranty Agreement by and between Latex Petroleum Corporation and David L. Wright dated March 4, 1992 (filed as Exhibit 10.34 to the Registration Statement).
10.35 Guaranty Agreement by and between Latex Petroleum Corporation and Ed J. Wright dated March 4, 1992 (filed as Exhibit 10.35 to the Registration Statement).
10.36 Amendment to Second Amended and Restated Credit Agreement by and between Latex Petroleum Corporation and Bank of Oklahoma, National Association, dated March 19, 1992, effective as of February 28, 1992 (exhibits omitted). (Filed as Exhibit 10.36 to the Registration Statement).
10.37 Purchase and Sale Agreement for sale of oil and gas properties by and between Latex Petroleum Corporation and American Exploration Company dated March 20, 1992 (filed as Exhibit 10.37 to the Registration Statement).
10.38 Security Agreement by and between Latex Petroleum Corporation and Phoenix Metals, Inc., dated March 27, 1992 (filed as Exhibit 10.38 to the Registration Statement).
Exhibit Number Description Page - ------ ----------- ----
10.39 Promissory Note in the principal sum of $10,000 by and between LaTex Petroleum Corporation and Phoenix Metals, Inc., dated March 27, 1992 (filed as Exhibit 10.39 to the Registration Statement).
10.40 Security Agreement by and between the Registrant and Bank of Oklahoma, National Association, dated March 30, 1992 (filed as Exhibit 10.40 to the Registration Statement).
10.41 Letter of Intent to License Certain Equipment and Proprietary Processes by and between the Registrant, Carlton B. Foster, and Waste Conversion Corporation dated March 31, 1992 (filed as Exhibit 10.41 to the Registration Statement).
10.42 Agreement and Plan of Merger by and between the Registrant and Video Science Technology, Inc., dated April 16, 1992. (7)
10.43 Letter from LaTex Petroleum Corporation dated April 20, 1992, to Brumbaugh & Fulton amending lease agreement (filed as Exhibit 10.43 to the Registration Statement).
10.44 Agreement to Exchange Stock by and between the Registrant and ENPRO, Inc., dated April 21, 1992 (filed as Exhibit 10.44 to the Registration Statement).
10.45 Purchase and Sale Agreement for sale of oil and gas properties by and between LaTex Petroleum Corporation and TOTAL Minatome Corporation dated April 27, 1992 (filed as Exhibit 10.45 to the Registration Statement).
10.46 Letter Agreement for sale of stock by and between the Registrant and Agri-Quest Mining, Inc., dated May 28, 1992 (filed as Exhibit 10.46 to the Registration Statement).
10.47 Letter Agreement by and between Latex Petroleum Corporation and TOTAL Minatome Corporation dated June 1, 1992 (filed as Exhibit 10.47 to the Registration Statement).
10.48 Loan Agreement in the principal sum of $200,000 by and between LaTex Petroleum Corporation and First Texas Bank dated June 1, 1992 (filed as Exhibit 10.48 to the Registration Statement).
10.49 Guaranty by and between S. Mort Zimmerman and First Texas Bank dated June 1, 1992 (filed as Exhibit 10.49 to the Registration Statement).
10.50 Security Agreement by and between Trans-Exchange Corporation and First Texas Bank dated June 1, 1992 (filed as Exhibit 10.50 to the Registration Statement).
10.51 Owner's Consent to pledge by S. Mort Zimmerman for Trans-Exchange Corporation dated June 1, 1992 (filed as Exhibit 10.51 to the Registration Statement).
10.52 Security Agreement by and between Gary S. Williky and First Texas Bank dated June 1, 1992 (filed as Exhibit 10.52 to the Registration Statement).
10.53 Owner's Consent to pledge by Gary S. Williky dated June 1, 1992 (filed as Exhibit 10.53 to the Registration Statement).
10.54 Promissory Note in the principal sum of $85,145.55 by and between LaTex Petroleum Corporation and ENPRO, Inc., dated June 1, 1992 (filed as Exhibit 10.54 to the Registration Statement).
Exhibit Number Description Page - ------ ----------- ----
10.55 Employment Contract by and between ENPRO, Inc., and Malcolm W. Henley dated June 1, 1992 (filed as Exhibit 10.55 to the Registration Statement).
10.56 Letter from LaTex Petroleum Corporation dated June 2, 1992, to Brumbaugh & Fulton amending lease agreements (filed as Exhibit 10.56 to the Registration Statement).
10.57 Letter Agreement by and between the LaTex Petroleum Corporation and Ed Wright dated July 6, 1992 (filed as Exhibit 10.57 to the Registration Statement).
10.58 Loan Agreement in the principal sum of $200,000 by and between LaTex Petroleum Corporation and First Texas Bank dated August 28, 1992 (filed as Exhibit 10.58 to the Registration Statement).
10.59 Promissory Note in the principal sum of $249,351 from I.B. Energy, Inc., to LaTex Petroleum Corporation dated June 1, 1992 (filed as Exhibit 10.59 to the Registration Statement).
10.60 Letter Agreement between LaTex Petroleum Corporation and I.B. Energy, Inc., dated September 30, 1992 (filed as Exhibit 10.60 to the Registration Statement).
10.61 Form of Share Escrow Agreement between Jeffrey T. Wilson, James G. Borem, the Registrant, and Bank of Oklahoma, National Association (filed as Exhibit 10.61 to the Registration Statement).
10.62 Agreement to Exchange Stock by and between the Registrant, Wright & Wright, Inc., Ed J. Wright, David L. Wright, and Phoenix Metals, Inc., dated September 24, 1992 (filed as Exhibit 10.62 to the Registrant's Annual Report on Form 10-K for the fiscal year ended July 31, 1993 (the "1993 Form 10-K")).
10.63 Stock Purchase Agreement by and between the Herokas Foundation, James C. Hadsell and Zaskia Siefert-Hadsell, Howard Finley and the Registrant dated January 29, 1993 (filed as Exhibit 10.63 to the 1993 Form 10-K).
10.64 Stock Subscription Agreement by and between J.R. Bothe & Associates, Inc., and the Registrant dated January 29, 1993 (filed as Exhibit 10.64 to the 1993 Form 10-K).
10.65 Non-Competition Agreement dated February 10, 1993, between the Registrant and Philip J. Wade. (11)
10.66 Non-Competition Agreement dated February 10, 1993, between the Registrant and A. Dean Fuller. (12)
10.67 Registration Rights Agreement by and among the Registrant, Philip J. Wade, A. Dean Fuller, Robert R. Firth, Mark E. Repasky, Charles M. Kelley, Donald B. Pettine, and Steven L. Wilson dated February 10, 1993 (filed as Exhibit 10.67 to the 1993 Form 10-K).
10.68 Stock Subscription Agreement by and between Joseph Shoaf, an individual, and the Registrant dated March 25, 1993 (filed as Exhibit 10.68 to the 1993 Form 10-K).
10.69 Purchase and Sale Agreement between Mobil Exploration & Producing U.S., Inc., and Panada Exploration, Inc., dated as of January 15, 1993 (filed as Exhibit 10.69 to the 1993 Form 10-K).
Exhibit Number Description Page - ------ ----------- ----
10.70 Purchase and Sale Agreement by and between AMAX Oil & Gas, Inc., and LaTex Petroleum Corporation dated March 16, 1993 (filed as Exhibit 10.70 to the 1993 Form 10-K).
10.71 Loan Agreement among LaTex Petroleum Corporation, Panada Exploration, Inc., Panda Resources, Inc., and First Interstate Bank of Texas, N.A., dated April 15, 1993, together with exhibits (filed as Exhibit 10.71 to the 1993 Form 10-K).
10.72 Stock Subscription Agreement by and between the Registrant and Howard Finley dated May 10, 1993 (filed as Exhibit 10.72 to the 1993 Form 10-K).
10.73 Letter Agreement by and between Geodyne Resources, Inc., and the Registrant dated November 27, 1992 (filed as Exhibit 10.73 to the 1993 Form 10-K).
10.74 Letter Agreement by and between ARCO Tunisia, Inc., and Geodyne Tunisia Ltd. dated April 2, 1993 (filed as Exhibit 10.74 to the 1993 Form 10-K).
10.75 Agreement by and between Geodyne Tunisia Ltd. and Warren American Oil Company dated May 4, 1993 (filed as Exhibit 10.75 to the 1993 Form 10-K).
10.76 Operating Agreement among ARCO Tunisia, Inc., PICT Petroleum (Tunisia) Limited, and Geodyne Tunisia Ltd. dated July 9, 1993, but effective June 30, 1993 (filed as Exhibit 10.76 to the 1993 Form 10-K).
10.77 Letter Agreement by and between AMAX Oil and Gas, Inc., and LaTex Petroleum Corporation dated May 6, 1993 (filed as Exhibit 10.77 to the 1993 Form 10-K).
10.78 Promissory Note in the principal sum of $254,288.35 by and between LaTex Petroleum Corporation and AMAX Oil and Gas, Inc., dated May 6, 1993 (filed as Exhibit 10.78 to the 1993 Form 10-K).
10.79 Stock Purchase Agreement by and between Panda Resources, Inc., and Nuevo Liquids, Inc., dated as of July 16, 1993. (13)
10.80 Stock Purchase Agreement by and between the Registrant and Torch Energy Marketing, Inc., dated July 26, 1993. (14)
10.81 Letter Agreement between the Registrant and Waste Conversion Corporation dated August 3, 1993, as agreed to August 11, 1993 (filed as Exhibit 10.81 to the 1993 Form 10-K).
10.82 Agreement by and between the Registrant and Philip J. Wade dated September 22, 1993 (filed as Exhibit 10.82 to the 1993 Form 10-K).
10.83 Agreement by and between the Registrant and A. Dean Fuller dated September 22, 1993 (filed as Exhibit 10.83 to the 1993 Form 10-K).
10.84 Letter of LaTex Petroleum Corporation requesting consent of First Interstate Bank of Texas, N.A., dated September 23, 1993, together with consent of First Interstate Bank and exhibits (filed as Exhibit 10.84 to the 1993 Form 10-K).
10.85 Stock Subscription Agreement by and between the Registrant and Salaheddine Caid Essebsi dated October 8, 1993 (filed as Exhibit 10.85 to the 1993 Form 10-K).
10.86 Promissory Note in the principal sum of $25,000 by and between Malcolm W. Henley and LaTex Petroleum Corporation dated December 28, 1992 (filed as Exhibit 10.86 to the 1993 Form 10-K).
Exhibit Number Description Page - ------ ----------- ----
10.87 Promissory Note in the principal sum of $25,000 by and between Dewitt C. Shreve and LaTex Petroleum Corporation dated March 15, 1993 (filed as Exhibit 10.87 to the 1993 Form 10-K).
10.88 Promissory Note in the principal sum of $29,089 by and between Malcolm W. Henley and ENPRO, Inc., dated July 30, 1993, marked "Paid" (filed as Exhibit 10.88 to the 1993 Form 10-K).
10.89 Promissory Note in the principal sum of $5,000 by and between Malcolm W. Henley and ENPRO, Inc., dated September 28, 1993 (filed as Exhibit 10.89 to the 1993 Form 10-K).
10.90 Promissory Note in the principal sum of $250,000 by and between LaTex Resources International, Inc., and James G. Borem dated October 5, 1993 (filed as Exhibit 10.90 to the 1993 Form 10-K).
10.91 Promissory Note in the principal sum of $130,000 by and between LaTex Resources International, Inc., and Dewitt C. Shreve dated October 5, 1993 (filed as Exhibit 10.91 to the 1993 Form 10-K).
10.92 Promissory Note in the principal sum of $100,000 by and between the Registrant and James G. Borem dated October 21, 1993 (filed as Exhibit 10.92 to the 1993 Form 10-K).
10.93 Promissory Note in the principal sum of $30,000 by and between LaTex Resources International, Inc., and Dewitt C. Shreve dated February 2, 1994 (filed as Exhibit 10.73 to the Registrant's Annual Report on Form 10-K for the fiscal year ended July 31, 1994 (the "1994 Form 10-K")).
10.94 Promissory Note in the principal sum of $50,000 by and between LaTex Resources International, Inc., and James G. Borem dated February 2, 1994 (filed as Exhibit 10.94 to the 1994 Form 10-K).
10.95 Promissory Note in the principal sum of $50,000 by and between the Registrant and James G. Borem dated February 15, 1994 (filed as Exhibit 10.95 to the 1994 Form 10-K).
10.96 Letter Agreement by and between LaTex Petroleum Corporation and Petroleum Discovery Systems, Inc., dated December 2, 1992, as agreed to December 3, 1992 (filed as Exhibit 10.96 to the 1994 Form 10-K).
10.97 Letter Agreement by and between the Registrant and J.R. Bothe & Associates, Inc., dated December 23, 1992 (filed as Exhibit 10. 97 to the 1994 Form 10-K).
10.98 Letter Agreement by and between LaTex Petroleum Corporation and Gulf Russia Ltd. dated December 27, 1992 (filed as Exhibit 10.98 to the 1994 Form 10-K).
10.99 Letter Agreement by and between the Registrant and Premier Capital Ltd. dated January 19, 1993, as agreed to January 29, 1993 (filed as Exhibit 10.99 to the 1994 Form 10-K).
10.100 Agreement and Plan of Merger by and among the Registrant, MOE Acquisition, Inc., Waste Conversion Corp., and Joseph W. Conerly dated November 17, 1993 (filed as Exhibit 10.100 to the 1994 Form 10-K). 10.101 1993 Incentive Stock Plan, effective December 8, 1993 (filed as Exhibit 10.101 to the 1994 Form 10-K).
Exhibit Number Description Page - ------ ----------- ----
10.102 First Amendment to Loan Agreement among LaTex Petroleum Corporation, Panada Exploration, Inc., and First Interstate Bank of Texas, N.A., dated October 1, 1993 (exhibits omitted) (filed as Exhibit 10.102 to the 1994 Form 10-K).
10.103 Second Amendment to Loan Agreement by and between LaTex Petroleum Corporation and First Interstate Bank of Texas, N.A., dated January 18, 1994 (exhibits omitted) (filed as Exhibit 10.103 to the 1994 Form 10-K).
10.104 Third Amendment to Loan Agreement by and between LaTex Petroleum Corporation and First Interstate Bank of Texas, N.A., dated July 26, 1994, (filed without exhibits) (filed as Exhibit 10.104 to the 1994 Form 10-K).
10.105 Purchase and Sale Agreement by and among LaTex Petroleum Corporation, LoIn Energy, Inc., and Swift Energy Company dated as of January 14, 1994. (15)
10.106 Offshore Securities Subscription Agreement by and between the Registrant and Brentwood Financial Ltd. dated January 28, 1994 (filed as Exhibit 10.106 to the 1994 Form 10-K).
10.107 Offshore Securities Subscription Agreement by and between the Registrant and Investment Development Corporation dated January 28, 1994 (filed as Exhibit 10.107 to the 1994 Form 10-K).
10.108 Offshore Securities Subscription Agreement by and between the Registrant and Gilford Manor Ltd. dated January 28, 1994 (filed as Exhibit 10.108 to the 1994 Form 10-K).
10.109 Offshore Securities Subscription Agreement by and between the Registrant and Tesoma Overseas, Inc., dated January 28, 1994 (filed as Exhibit 10.109 to the 1994 Form 10-K).
10.110 Warrant Certificate for purchase of the Registrant's common stock issued to Baytree Associates, Inc., dated January 26, 1994 (filed as Exhibit 10.110 to the 1994 Form 10-K).
10.111 Purchase and Sale Agreement by and between LaTex Petroleum Corporation and Confed Oil Incorporated dated August 10, 1994 (filed as Exhibit 10.111 to the 1994 Form 10-K).
10.112 Credit Agreement dated as of March 31, 1995, among Bank of America National Trust and Savings Association, LaTex Petroleum Corporation, LaTex/GOC Acquisition, Inc., and LRI Acquisition, Inc. (20)
10.113 Amended and Restated Credit Agreement dated as of October 20, 1995, among Bank of America National Trust and Savings Association, LaTex Petroleum Corporation, LaTex/GOC Acquisition, Inc., and Germany Oil Company (formerly known as LRI Acquisition, Inc.) (filed as Exhibit 10.113 to the Registrant's Annual Report on Form 10-K for the fiscal year ended July 31, 1995 (the "1995 Form 10-K")).
*10.114 Amendment No. 1 to Amended and Restated Credit Agreement dated December 29, 1995, among Bank of America National Trust and Savings Association, LaTex Petroleum Corporation, LaTex/GOC Acquisition, Inc., and Germany Oil Company (formerly known as LRI Acquisition, Inc.).
Exhibit Number Description Page - ------ ----------- ----
*10.115 Amendment No. 2 to Amended and Restated Credit Agreement dated August 16, 1996, among Bank of America National Trust and Savings Association, LaTex Petroleum Corporation, LaTex/GOC Acquisition, Inc., and Germany Oil Company (formerly known as LRI Acquisition, Inc.).
*10.116 Forbearance Agreement dated July 25, 1996, among Bank of America National Trust and Savings Association, LaTex Petroleum Corporation, LaTex/GOC Acquisition, Inc., Germany Oil Company (formerly known as LRI Acquisition, Inc.), Enpro, Inc., and the Registrant.
*10.117 Agreement and Plan of Merger dated August 12, 1996, among Alliance Resources Plc, Alliance Resources (Delaware), Inc., and the Registrant.
*10.118 Purchase Agreement dated September 30, 1996, between the Registrant and Imperial Petroleum, Inc.
*10.119 Letter Agreement dated November 27, 1995, among Rauscher Pierce & Clark, Inc., Rauscher Pierce & Clark Limited, and the Registrant.
*10.120 Letter Agreement dated April 23, 1996, between Wood Roberts, LLC, and the Registrant.
*10.121 Letter Agreement dated July 22, 1996, between Wood Roberts, LLC, and the Registrant.
*10.122 Letter Agreement dated July 22, 1996, between Wood Roberts, LLC, and the Registrant.
*10.123 Settlement Agreement dated as of December 7, 1995, among Torch Energy Marketing, Inc., Nuevo Liquids, Inc., Panda Resources, Inc., Wilson Tucker & Associates, Steve Wilson, an individual, and the Registrant.
*10.124 Settlement Agreement dated as of June 6, 1996, between Northern Natural Gas Company and the Registrant.
*10.125 Letter Agreement dated November 8, 1996 between Rauscher, Pierce & Clark and the Registrant.
*10.126 First Amendment to Forbearance Agreement dated October 15, 1996 among Bank of America National Trust and Savings Association, LaTex Petroleum Corporation, LaTex/GOC Acquisition, Inc., Germany Oil Company (formerly known as LRI Acquisition, Inc.), ENPRO, Inc. and the Registrant.
11 Statement re: computation of per share earnings. Not applicable.
12 Statement re: computation of ratios. Not applicable.
13 Annual Report to security holders, Form 10-Q, or quarterly report to security holders. Not applicable.
16.1 Letter of Registrant dated November 1, 1991 informing Lane, Gorman, Trubitt and Company of change in certifying accountants to Jackson, Brophy and Company. (8)
16.2 Letter of Registrant's counsel dated April 10, 1992 informing Jackson, Brophy and Company of change in certifying accountants to Briscoe and Robinson Co. (9)
18 Letter re: change in accounting principles. Not applicable.
Exhibit Number Description Page - ------ ----------- ----
21 Subsidiaries of the Registrant (filed as Exhibit 21 to the 1995 Form 10-K).
22 Published report regarding matters submitted to vote of security holders. Not applicable.
*23.1 Consent of Briscoe & Burke
*23.2 Consent of Lee Keeling and Associates, Inc.
24 Power of Attorney. Not applicable.
27 Financial Data Schedule. Not applicable.
28 Information from reports furnished to state insurance authorities. Not applicable.
99.1 Estimates of Reserves by Netherland, Sewell & Associates, Inc., dated January 1, 1991, regarding oil and gas reserves of the Registrant (filed as Exhibit 28.1 to the Registration Statement).
99.2 Estimates of Reserves by Netherland, Sewell & Associates, Inc., dated July 31, 1991, regarding oil and gas reserves of the Registrant (filed as Exhibit 28.2 to the Registration Statement).
99.3 Estimates of Reserves by Netherland, Sewell & Associates, Inc., dated January 1, 1992, regarding oil and gas reserves of the Registrant (filed as Exhibit 28.3 to the Registration Statement).
99.4 Estimates of Reserves by Netherland, Sewell & Associates, Inc., dated July 31, 1992, regarding oil and gas reserves of the Registrant (filed as Exhibit 28.4 to the Registration Statement).
99.5 Estimates of Reserves by Netherland, Sewell & Associates, Inc., dated September 7, 1993; regarding oil and gas reserves of the Registrant (filed as Exhibit 99.5 to the 1993 Form 10-K).
99.6 Estimates of Reserves by Netherland, Sewell & Associates, Inc., dated October 21, 1994, regarding oil and gas reserves of the Registrant (filed as Exhibit 99.6 to the 1994 Form 10-K).
99.7 Estimates of Reserves by Netherland, Sewell & Associates, Inc., dated November 3, 1995, regarding oil and gas reserves of the Registrant as of July 31, 1995 (filed as Exhibit 99.7 to the 1995 Form 10-K).
*99.8 Estimates of reserves by Lee Keeling and Associates, Inc. dated October 30, 1996 regarding oil and gas reserves of the Registrant as of July 31, 1996.
- ------------------------------ * Filed herewith
(1) Incorporated herein by reference to Exhibit 4.1 to the Registrant's Current Report on Form 8-K filed with the Securities and Exchange Commission on June 16, 1992.
(2) Incorporated herein by reference to Exhibit 4.2 to the Registrant's Current Report on Form 8-K filed with the Securities and Exchange Commission on June 16, 1992.
(3) Incorporated herein by reference to Exhibit 2.1 to the Registrant's Current Report on Form 8-K filed with the Securities and Exchange Commission on February 18, 1992.
(4) Incorporated herein by reference to Exhibit 2.2 to the Registrant's Current Report on Form 8-K filed with the Securities and Exchange Commission on January 10, 1992.
(5) Incorporated herein by reference to Exhibit 2.1 to the Registrant's Current Report on Form 8-K filed with the Securities and Exchange Commission on January 10, 1992.
(6) Incorporated herein by reference to Exhibit 2.1 to the Registrant's Current Report on Form 8-K filed with the Securities and Exchange Commission on May 1, 1992.
(7) Incorporated herein by reference to Exhibit 2.1 to the Registrant's Current Report on Form 8-K filed with the Securities and Exchange Commission on June 16, 1992.
(8) Incorporated herein by reference to Exhibit 16.1 to the Registrant's Current Report on Form 8-K filed with the Securities and Exchange Commission on December 11, 1991, and subsequently amended under cover of Form 8 Amendment No. 2 filed with the Commission on May 1, 1992, and Form 8 Amendment No. 3 filed with the Commission on May 26, 1992.
(9) Incorporated herein by reference to Exhibit 16.1 to the Registrant's Current Report on Form 8-K filed with the Securities and Exchange Commission on April 23, 1992, and subsequently amended under cover of Form 8 filed with the Commission on May 26, 1992.
(10) Incorporated herein by reference to Exhibit 2.1 to the Registrant's Current Report on Form 8-K filed with the Securities and Exchange Commission on February 24, 1993, and subsequently amended under cover of Form 8 Amendment No. 1 filed with the Commission on April 26, 1993, and Form 8 Amendment No. 2 filed with the Commission on May 20, 1993.
(11) Incorporated herein by reference to Exhibit 28.1 to the Registrant's Current Report on Form 8-K filed with the Securities and Exchange Commission on February 24, 1993, and subsequently amended under cover of Form 8 Amendment No. 1 filed with the Commission on April 26, 1993, and Form 8 Amendment No. 2 filed with the Commission on May 20, 1993.
(12) Incorporated herein by reference to Exhibit 28.2 to the Registrant's Current Report on Form 8-K filed with the Securities and Exchange Commission on February 24, 1993, and subsequently amended under cover of Form 8 Amendment No. 1 filed with the Commission on April 26, 1993, and Form 8 Amendment No. 2 filed with the Commission on May 20, 1993.
(13) Incorporated herein by reference to Exhibit 2.1 to the Registrant's Current Report on Form 8-K filed with the Securities and Exchange Commission on August 9, 1993, and subsequently amended under cover of Form 8 Amendment No. 1 filed with the Commission on October 12, 1993.
(14) Incorporated herein by reference to Exhibit 2.2 to the Registrant's Current Report on Form 8-K filed with the Securities and Exchange Commission on August 9, 1993, and subsequently amended under cover of Form 8 Amendment No. 1 filed with the Commission on October 12, 1993.
(15) Incorporated herein by reference to Exhibit 2.1 to the Registrant's Current Report on Form 8-K filed with the Securities and Exchange Commission on February 10, 1994.
(16) Incorporated herein by reference to Exhibit 2.1 of the Registrant's Current Report on Form 8-K filed with the Securities and Exchange Commission on April 12, 1995.
(17) Incorporated herein by reference to Exhibit 2.2 of the Registrant's Current Report on Form 8-K filed with the Securities and Exchange Commission on April 12, 1995.
(18) Incorporated herein by reference to Exhibit 4.1 of the Registrant's Current Report on Form 8-K filed with the Securities and Exchange Commission on April 12, 1995.
(19) Incorporated herein by reference to Exhibit 4.2 of the Registrant's Current Report on Form 8-K filed with the Securities and Exchange Commission on April 12, 1995.
(20) Incorporated herein by reference to Exhibit 28.1 of the Registrant's Current Report on Form 8-K filed with the Securities and Exchange Commission on April 12, 1995.
SIGNATURES
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.
LaTex Resources, Inc.
Date: November 29, 1996 /s/ Jeffrey T. Wilson ----------------------------------------- Jeffrey T. Wilson, President and Chief Executive Officer
Pursuant to the requirements of the Securities 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 dates indicated:
Signature Title Date - --------- ----- ----
/s/ Jeffrey T. Wilson Director, Chairman of the November 29, 1996 - ------------------------ Board, President and Chief Jeffrey T. Wilson Executive Officer (Principal Executive Officer)
/s/ John L. Cox Director, Vice President and November 29, 1996 - ------------------------ Chief Financial Officer John L. Cox
/s/ Malcolm W. Henley Director and Vice November 29, 1996 - ------------------------ President of Marketing Malcolm W. Henley
- -------------------- Director November ___, 1996 John R. Martinson