x | Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the quarterly period ended | |
o | Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the transition period from ______________to ______________. | |
Nevada | 20-8428738 | |||
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |||
Large accelerated filer o | Accelerated filer o | |||
Non-accelerated filer o (Do not check if a smaller reporting company) | Smaller reporting company x |
Class | Outstanding at |
Common Stock, par value $0.001 per share | 80,181,310 |
Page |
September 30, 2008 (unaudited) | March 31, 2008 | December 31, 2008 (unaudited) | March 31, 2008 | |||||||||
ASSETS | ||||||||||||
Current Assets: | ||||||||||||
Cash | $ | 284,932 | $ | 592,665 | $ | 155,279 | $ | 592,665 | ||||
Accounts Receivable: | ||||||||||||
Oil & Gas - Related Party | 1,212,377 | 868,406 | 574,629 | 868,406 | ||||||||
Other - Related Party | 1,149,370 | - | 740,484 | - | ||||||||
Inventory | 8,731 | 4,748 | 15,814 | 4,748 | ||||||||
Hedging Account | 6,316 | 13,062 | 6,316 | 13,062 | ||||||||
Total Current Assets | 2,661,726 | 1,478,881 | 1,492,522 | 1,478,881 | ||||||||
Note Receivable | 1,348,617 | 1,355,228 | 553,537 | 1,355,228 | ||||||||
Oil and Gas Properties - successful efforts method | 22,713,212 | 17,832,931 | 24,805,078 | 17,832,931 | ||||||||
Less Accumulated Depletion and Depreciation | (4,827,430 | ) | (4,139,337 | ) | (4,355,967 | ) | (4,139,337 | ) | ||||
Oil & Gas Properties (net) | 17,885,782 | 13,693,594 | 20,449,111 | 13,693,594 | ||||||||
Other Depreciable Assets: | 2,007,742 | 1,641,806 | 2,603,714 | 1,641,806 | ||||||||
Less Accumulated Depreciation | (215,656 | ) | (121,113 | ) | (300,945 | ) | (121,113 | ) | ||||
Other Depreciable Assets (net) | 1,792,086 | 1,520,693 | 2,302,769 | 1,520,693 | ||||||||
Other Related Party Receivable | 80,395 | 80,395 | 81,771 | 80,395 | ||||||||
Leasehold Held for Sale | 1,680,813 | 1,680,813 | 1,680,813 | 1,680,813 | ||||||||
Investment in Equity Method Investment | - | 142,395 | - | 142,395 | ||||||||
Total Assets | $ | 25,449,419 | $ | 19,951,999 | $ | 26,560,523 | $ | 19,951,999 | ||||
LIABILITIES | ||||||||||||
Current Liabilities: | ||||||||||||
Accounts Payable | $ | 312,464 | $ | 103,479 | $ | 44,946 | $ | 103,479 | ||||
Notes Payable to Related Party | 500,000 | 324,330 | - | 324,330 | ||||||||
Payable to Related Parties | 3,717,266 | 1,547,136 | - | 1,547,136 | ||||||||
Royalties Payable | 86,947 | 57,485 | 65,587 | 57,485 | ||||||||
Accrued Expenses | 1,250,333 | 857,887 | 609,691 | 857,887 | ||||||||
Accrued Expenses - Related Party | 168,762 | 171,788 | 141,473 | 171,788 | ||||||||
Short Term Notes Payable | 525,000 | - | - | - | ||||||||
Current Portion of Long-Term Debt | 16,320 | 14,960 | - | 14,960 | ||||||||
Total Current Liabilities | 6,577,092 | 3,077,065 | 861,697 | 3,077,065 | ||||||||
Notes Payable | 1,521,940 | 1,647,769 | 9,213,000 | 1,647,769 | ||||||||
Notes Payable - Related Parties | 3,769,674 | 3,194,594 | 3,518,924 | 3,194,594 | ||||||||
Other Related Party Payables | 240,090 | 490,840 | 240,090 | 490,840 | ||||||||
Less Current Portion of Notes Payable | (16,320 | ) | (14,960 | ) | - | (14,960 | ) | |||||
Total Long-Term Debt | 5,515,384 | 5,318,243 | 12,972,014 | 5,318,243 | ||||||||
Deferred Tax Liability | 2,796,083 | 2,163,183 | 2,575,793 | 2,163,183 | ||||||||
Total Liabilities | 14,888,559 | 10,558,491 | 16,409,504 | 10,558,491 | ||||||||
Commitments & Contingencies: | ||||||||||||
Contingent Stock Based Compensation | 268,856 | 214,976 | 268,856 | 214,976 | ||||||||
Stockholders' Equity | ||||||||||||
Common Stock, $.001 par,200,000,000 shares authorized and 80,181,310 shares outstanding on September 30, 2008 and March 31, 2008 | 80,181 | 80,181 | ||||||||||
Common Stock, $.001 par,200,000,000 shares authorized and 80,181,310 shares outstanding on December 31, 2008 and March 31, 2008 | 80,181 | 80,181 | ||||||||||
Additional Paid-In-Capital | 9,590,313 | 9,553,346 | 9,590,313 | 9,553,346 | ||||||||
Retained Deficit | 621,510 | (454,995 | ) | |||||||||
Retained Earnings (Deficit) | 211,669 | (454,995 | ) | |||||||||
Total Stockholders' Equity | 10,292,004 | 9,178,532 | 9,882,163 | 9,178,532 | ||||||||
Total Liabilities & Stockholders' Equity | $ | 25,449,419 | $ | 19,951,999 | $ | 26,560,523 | $ | 19,951,999 | ||||
Three Months Ended | Six Months Ended | Three Months Ended | Nine Months Ended | |||||||||||||||||||||||
September 30, 2008 (unaudited) | September 30, 2007 (unaudited) | September 30, 2008 (unaudited) | September 30, 2007 (unaudited) | December 31, 2008 (unaudited) | December 31, 2007 (unaudited) | December 31, 2008 (unaudited) | December 31, 2007 (unaudited) | |||||||||||||||||||
Revenues | ||||||||||||||||||||||||||
Oil & Gas Sales | $ | 2,282,048 | $ | 1,019,222 | $ | 5,034,795 | $ | 1,833,146 | $ | 904,494 | $ | 1,597,018 | $ | 5,939,289 | $ | 3,430,164 | ||||||||||
Sale of Leases | 18,005 | 307,028 | 18,005 | 307,028 | - | - | 18,005 | 307,028 | ||||||||||||||||||
Other Income | 109,568 | 79,367 | 208,983 | 79,432 | 124,194 | 80,989 | 333,178 | 160,421 | ||||||||||||||||||
2,409,621 | 1,405,617 | 5,261,783 | 2,219,606 | 1,028,688 | 1,678,007 | 6,290,472 | 3,897,613 | |||||||||||||||||||
Costs and Expenses | ||||||||||||||||||||||||||
Oil & Gas Lease Operating Expenses | 789,234 | 491,703 | 1,385,267 | 825,224 | 709,047 | 667,420 | 2,094,314 | 1,470,053 | ||||||||||||||||||
Workover Expenses | 87,982 | - | 160,407 | - | 35,862 | 16,402 | 196,269 | 38,993 | ||||||||||||||||||
Severance & Ad Valorem Taxes | 132,125 | 59,947 | 286,237 | 108,883 | 103,617 | 93,378 | 389,854 | 202,261 | ||||||||||||||||||
Geological & Geophysical | - | 8,993 | - | 8,993 | ||||||||||||||||||||||
Delay Rentals | - | 8,571 | - | 52,186 | - | - | - | 52,186 | ||||||||||||||||||
Dry Holes & Abandonments | 9,925 | - | 9,925 | - | ||||||||||||||||||||||
Depletion & Depreciation | 381,660 | 332,245 | 782,636 | 618,376 | 453,736 | 254,721 | 1,236,372 | 873,097 | ||||||||||||||||||
General & Administrative: | ||||||||||||||||||||||||||
Salaries & Benefits | 135,068 | 249,533 | 321,613 | 483,012 | 133,284 | 300,393 | 454,744 | 796,733 | ||||||||||||||||||
Legal & Professional | 193,129 | 121,953 | 313,639 | 279,802 | 44,481 | 210,451 | 358,272 | 490,253 | ||||||||||||||||||
Other General & Administrative | 40,295 | 101,751 | 211,784 | 161,166 | 173,336 | 90,999 | 384,738 | 238,837 | ||||||||||||||||||
Interest, net of capitalized interest of $151,343 and $126,676 for the three months ended 9/30/08 and 9/30/07, respectively and $312,919 and $267,688 for the six months ended 9/30/08 and 9/30/07, respectively | 2,900 | - | 2,900 | - | ||||||||||||||||||||||
Interest, net of capitalized interest of $170,196 and $100,403 for the three months ended 12/31/08 and 12/31/07, respectively and $482,494 and $368,091 for the nine months ended 12/31/08 and 12/31/07, respectively | 880 | - | 3,780 | - | ||||||||||||||||||||||
1,762,393 | 1,365,703 | 3,464,483 | 2,528,649 | 1,664,168 | 1,642,757 | 5,128,268 | 4,171,406 | |||||||||||||||||||
Interest Income | 40 | 70,930 | 61,246 | 94,262 | 4,966 | 61,717 | 66,211 | 155,979 | ||||||||||||||||||
Loss on Equity Method Investments | (142,395 | ) | - | (142,395 | ) | - | - | - | (142,395 | ) | - | |||||||||||||||
Hedging Loss | (93 | ) | - | (6,746 | ) | - | - | - | (6,746 | ) | - | |||||||||||||||
Income (Loss) from continuing operations before income taxes and discontinued operations | 504,780 | 110,844 | 1,709,405 | (214,781 | ) | (630,514 | ) | 96,967 | 1,079,274 | (117,814 | ) | |||||||||||||||
Income Tax Provision | (211,323 | ) | (38,796 | ) | (632,941 | ) | 75,173 | 220,290 | (33,938 | ) | (412,651 | ) | 41,235 | |||||||||||||
Income from discontinued operations, net of income taxes: | Income from discontinued operations, net of income taxes: | |||||||||||||||||||||||||
Pipeline Income | - | - | - | 22,930 | - | - | - | 22,930 | ||||||||||||||||||
Gain on Sale of Pipeline | - | (5,169 | ) | - | 1,453,658 | - | (2,854 | ) | - | 1,450,804 | ||||||||||||||||
Income from discontinued operations | - | (5,169 | ) | - | 1,476,588 | - | (2,854 | ) | - | 1,473,734 | ||||||||||||||||
Net Income (Loss) | $ | 293,457 | $ | 66,879 | $ | 1,076,464 | $ | 1,336,980 | $ | (410,224 | ) | $ | 60,175 | $ | 666,623 | $ | 1,397,155 | |||||||||
Basic & Diluted Loss per Common Share | $ | 0.00 | $ | 0.00 | $ | $0.01 | $ | 0.02 | $ | (0.01 | ) | $ | 0.00 | $ | 0.01 | $ | 0.02 | |||||||||
Weighted Average Common Shares Outstanding | 80,181,310 | 79,711,310 | 80,181,310 | 77,907,148 | 80,181,310 | 79,711,310 | 80,181,310 | 78,484,396 | ||||||||||||||||||
Six Months Ended | Nine Months Ended | |||||||||||
September 30, 2008 (unaudited) | September 30, 2007 (unaudited) | December 31, 2008 (unaudited) | December 31, 2007 (unaudited) | |||||||||
Operating Activities: | ||||||||||||
Net Income | $ | 1,076,464 | $ | 1,336,980 | $ | 666,623 | $ | 1,397,155 | ||||
Adjustments to reconcile net income to cash from operating activities: | ||||||||||||
Income Tax Expense | 632,941 | 719,913 | ||||||||||
Deferred Income Tax Expense | 412,651 | 752,316 | ||||||||||
Depletion, Depreciation, & Amortization | 782,636 | 618,376 | 1,236,372 | 873,097 | ||||||||
�� Loss on Equity Method Investment | 142,395 | - | ||||||||||
Loss on Equity Method Investment | 142,395 | - | ||||||||||
Stock based compensation | 53,880 | 309,451 | 53,880 | 464,986 | ||||||||
Joint Venture Partner Expense | - | 3,080,400 | - | 3,084,789 | ||||||||
Gain on Sale of Pipeline | - | (5,272,701 | ) | - | (5,272,701 | ) | ||||||
Salvage in Excess of Plugging Costs | (50,290 | ) | - | |||||||||
Changes in Operating Assets and Liabilities | ||||||||||||
Changes in Accrued Liabilities | 86,086 | 124,366 | (278,511 | ) | (390,144 | ) | ||||||
Change in Inventory | (3,983 | ) | - | (11,066 | ) | - | ||||||
Change in Related Party Receivables/Payables | (1,149,370 | ) | (392,168 | ) | (741,859 | ) | (328,894 | ) | ||||
Changes in Other Receivables | - | (674,524 | ) | - | 63,389 | |||||||
Changes in Hedging Account | 6,746 | - | 6,746 | (23,109 | ) | |||||||
Changes in Royalties Payable | 29,462 | 13,834 | 8,102 | 48,345 | ||||||||
Change in Revenue Receivables | (343,971 | ) | (142,099 | ) | 293,777 | (518,929 | ) | |||||
Changes in Accounts Payable | 208,985 | 67,875 | (58,533 | ) | (412,307 | ) | ||||||
Net Cash provided (used) from operating activities | 1,522,271 | (210,297 | ) | 1,680,287 | (262,007 | ) | ||||||
Net Cash provided (used) from discontinued operations | - | 6,802,113 | - | 6,202,067 | ||||||||
Net Cash provided (used) by operating activities and discontinued operations | 1,522,271 | 6,591,816 | 1,680,287 | 5,940,060 | ||||||||
Investing Activities: | ||||||||||||
Oil & Gas Drilling, Completing and Leasehold Acquisition Costs | (4,843,315 | ) | (2,813,409 | ) | (7,724,800 | ) | (4,944,410 | ) | ||||
Change in Capitalized Note Accretion | - | 70,000 | - | 105,000 | ||||||||
Change in Related Party Payable related to drilling | 2,170,131 | (4,120,568 | ) | (1,547,136 | ) | (4,120,568 | ) | |||||
Investment in Other Depreciable Assets | (365,936 | ) | (1,372,717 | ) | (458,569 | ) | (1,475,435 | ) | ||||
Investment in Equity Method Investment | - | (175,000 | ) | |||||||||
Note Receivable Collections (Advances) | 6,611 | 148,794 | 801,691 | 208,905 | ||||||||
Net Cash used in investing activities | (3,032,509 | ) | (8,087,900 | ) | (8,928,814 | ) | (10,401,508 | ) | ||||
Financing Activities | ||||||||||||
Notes Payable (Payments) Advances | 702,505 | (2,029,603 | ) | 7,565,231 | (2,105,078 | ) | ||||||
Related Party Note Advances | 500,000 | - | ||||||||||
Loan Costs | (503,340 | ) | - | |||||||||
Related Party Note (Payments) Advances | (250,750 | ) | (100,000 | ) | ||||||||
Net cash received from common stock subscriptions | - | 6,885,353 | - | 6,885,353 | ||||||||
Net Cash provided (used) from financing activities. | 1,202,505 | 4,855,750 | 6,811,141 | 4,680,275 | ||||||||
Net Increase (Decrease) in cash | (307,733 | ) | 3,359,666 | (437,386 | ) | 218,827 | ||||||
Cash - Beginning of the period | 592,665 | 212,254 | 592,665 | 212,254 | ||||||||
Cash - End of the period | $ | 284,932 | $ | 3,571,920 | $ | 155,279 | $ | 431,081 | ||||
Six Months Ended | Nine Months Ended | |||||||||||
September 30, 2008 (unaudited) | September 30, 2007 (unaudited) | December 31, 2008 (unaudited) | December 31, 2007 (unaudited) | |||||||||
Supplemental Disclosure of Cash Flow Information | ||||||||||||
Cash paid during period for: | ||||||||||||
Interest | $ | 195,386 | $ | 64,330 | $ | 290,898 | $ | 127,111 | ||||
Income Taxes | $ | - | $ | - | $ | - | $ | - | ||||
Non Cash Investing and Financing Activities | ||||||||||||
Warrants Issued | $ | 36,967 | $ | - | $ | 36,967 | $ | - | ||||
Stock Based Property Acquisition | $ | - | 298,800.00 | $ | - | $ | 298,800 | |||||
Year Ending March 31, | |||||||||
2009 | 2010 | 2011 | |||||||
Restricted Stock Compensation | $ | 48,564 | $ | - | $ | - | |||
Stock Option Compensation | 5,316 | 186,719 | 82,423 | ||||||
$ | 53,880 | $ | 186,719 | $ | 82,423 |
Fiscal Years Ending March 31, | |||||||||||||||||
2009 | 2010 | 2011 | 2012 | Thereafter | Total | ||||||||||||
Office Lease Payments | $ | 37,500 | $ | 160,000 | $ | - | $ | - | $ | - | $ | 197,500 | |||||
Notes Payable - Related Parties | - | - | - | - | 3,518,924 | 3,518,924 | |||||||||||
Senior Secured Note Payable | - | - | 8,000,000 | - | - | 8,000,000 | |||||||||||
Lease Notes Payable | - | - | - | - | 1,213,000 | 1,213,000 | |||||||||||
$ | 37,500 | $ | 160,000 | $ | 8,000,000 | $ | - | $ | 4,731,924 | $ | 12,929,424 | ||||||
Fiscal Years Ending March 31, | |||||||||||||||||
2009 | 2010 | 2011 | 2012 | Thereafter | Total | ||||||||||||
Office Lease Payments | $ | 75,000 | $ | 160,000 | $ | - | $ | - | $ | - | $ | 235,000 | |||||
Construction Loan ** | 8,160 | 16,320 | 16,320 | 16,320 | 179,720 | 236,840 | |||||||||||
Notes Payable - Related Parties * | - | 3,518,924 | - | 250,750 | - | 3,769,674 | |||||||||||
Short Term Note Payable - Related Party ** | - | 500,000 | - | - | - | 500,000 | |||||||||||
Line of Credit ** | 525,000 | - | - | - | - | 525,000 | |||||||||||
Lease Notes Payable | - | - | - | - | 1,285,100 | 1,285,100 | |||||||||||
$ | 608,160 | $ | 4,195,244 | $ | 16,320 | $ | 267,070 | $ | 1,464,820 | $ | 6,551,614 |
EXHIBIT NUMBER | DESCRIPTION | |
10.1 | Credit Agreement, dated October 30, 2008, among ReoStar Energy Corporation, certain lenders party thereto from time to time, and Union Bank of California, N.A. as administrative agent and issuing lender. (Incorporated by reference from the registrant's current report on Form 8-K filed on November 4, 2008.) | |
10.2 | Security Agreement, dated October 30, 2008, among ReoStar Energy Corporation, ReoStar Gathering, Inc., ReoStar Leasing, Inc., ReoStar Operating Incorporated, and Union Bank of California, N.A. as administrative agent. (Incorporated by reference from the registrant's current report on Form 8-K filed on November 4, 2008.) | |
10.3 | Pledge Agreement, dated October 30, 2008, among ReoStar Energy Corporation and Union Bank of California, N.A. as administrative agent. (Incorporated by reference from the registrant's current report on Form 8-K filed on November 4, 2008.) | |
31.1 | CEO Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
31.2 | CFO Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
32.1 | CEO Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
32.2 | CFO Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
REOSTAR ENERGY CORPORATION | |
By /s/ Scott D. Allen | |
Scott D. Allen, Chief Financial Officer (Principal Financial Officer and duly authorized signatory) | |
EXHIBIT NUMBER | DESCRIPTION | |
10.1 | Credit Agreement, dated October 30, 2008, among ReoStar Energy Corporation, certain lenders party thereto from time to time, and Union Bank of California, N.A. as administrative agent and issuing lender. (Incorporated by reference from the registrant's current report on Form 8-K filed on November 4, 2008.) | |
10.2 | Security Agreement, dated October 30, 2008, among ReoStar Energy Corporation, ReoStar Gathering, Inc., ReoStar Leasing, Inc., ReoStar Operating Incorporated, and Union Bank of California, N.A. as administrative agent. (Incorporated by reference from the registrant's current report on Form 8-K filed on November 4, 2008.) | |
10.3 | Pledge Agreement, dated October 30, 2008, among ReoStar Energy Corporation and Union Bank of California, N.A. as administrative agent. (Incorporated by reference from the registrant's current report on Form 8-K filed on November 4, 2008.) | |
31.1 | CEO Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
31.2 | CFO Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
32.1 | CEO Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
32.2 | CFO Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |