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 | 81,643,912 |
Page |
September 30, 2009 (unaudited) | March 31, 2009 | December 31, 2009 (unaudited) | March 31, 2009 | |||||||||
ASSETS | ||||||||||||
Current Assets: | ||||||||||||
Cash | $ | 105,457 | $ | 426,430 | $ | 619,986 | $ | 426,430 | ||||
Accounts Receivable: | ||||||||||||
Oil & Gas - Related Party | 382,987 | 337,879 | 672,660 | 337,879 | ||||||||
Related Party | 773,219 | 1,107,854 | 285,397 | 1,107,854 | ||||||||
Other | 41,554 | 15,760 | 6,407 | 15,760 | ||||||||
Inventory | 2,445 | 7,514 | 3,397 | 7,514 | ||||||||
Hedging Account | 6,317 | 6,317 | 6,317 | 6,317 | ||||||||
Total Current Assets | 1,311,979 | 1,901,754 | 1,594,164 | 1,901,754 | ||||||||
Note Receivable | 553,536 | 553,536 | 112,991 | 553,536 | ||||||||
Oil and Gas Properties - successful efforts method | 26,316,823 | 25,254,777 | 26,696,331 | 25,254,777 | ||||||||
Less Accumulated Depletion and Depreciation | (7,328,208 | ) | (6,206,558 | ) | (7,864,825 | ) | (6,206,558 | ) | ||||
Oil & Gas Properties (net) | 18,988,615 | 19,048,219 | 18,831,506 | 19,048,219 | ||||||||
Other Depreciable Assets: | 2,322,167 | 2,171,654 | 2,352,855 | 2,171,654 | ||||||||
Less Accumulated Depreciation | (425,303 | ) | (315,093 | ) | (483,579 | ) | (315,093 | ) | ||||
Other Depreciable Assets (net) | 1,896,864 | 1,856,561 | 1,869,276 | 1,856,561 | ||||||||
Leasehold Held for Sale | 150,000 | 150,000 | - | 150,000 | ||||||||
Total Assets | $ | 22,900,994 | $ | 23,510,070 | $ | 22,407,937 | $ | 23,510,070 | ||||
LIABILITIES | ||||||||||||
Current Liabilities: | ||||||||||||
Accounts Payable | $ | 59,466 | $ | 22,033 | $ | 132,317 | $ | 22,033 | ||||
Payable to Related Parties | 29,812 | 148,550 | 61,451 | 148,550 | ||||||||
Accrued Expenses | 132,902 | 106,141 | 114,236 | 106,141 | ||||||||
Accrued Expenses - Related Party | 109,664 | 130,870 | 99,061 | 130,870 | ||||||||
Hedging Liabilities - Current | 120,869 | - | 130,958 | - | ||||||||
Current Portion of Long Term Debt | 3,200,000 | - | ||||||||||
Total Current Liabilities | 452,713 | 407,594 | 3,738,023 | 407,594 | ||||||||
Notes Payable | 10,119,270 | 8,955,202 | 10,201,305 | 8,955,202 | ||||||||
Notes Payable - Related Parties | 3,518,924 | 3,518,924 | 3,518,924 | 3,518,924 | ||||||||
Less Current Portion of Notes Payable | (3,200,000 | ) | - | |||||||||
Total Long-Term Debt | 13,638,194 | 12,474,126 | 10,520,229 | 12,474,126 | ||||||||
Asset Retirement Obligation | 387,353 | 344,079 | 368,810 | 344,079 | ||||||||
Hedging Liability - Noncurrent | 25,056 | - | - | - | ||||||||
Deferred Tax Liability | 1,010,794 | 1,702,782 | 703,470 | 1,702,782 | ||||||||
Total Liabilities | 15,514,110 | 14,928,581 | 15,330,532 | 14,928,581 | ||||||||
Commitments & Contingencies: | - | - | - | - | ||||||||
Stockholders' Equity | ||||||||||||
Common Stock, $.001 par,200,000,000 shares authorized and 81,643,912 shares outstanding on September 30, 2009 and 80,353,912 shares outstanding on March 31, 2009 | 81,643 | 80,353 | ||||||||||
Common Stock, $.001 par,200,000,000 shares authorized and 81,643,912 shares outstanding on December 31, 2009 and 80,353,912 shares outstanding on March 31, 2009 | 81,643 | 80,353 | ||||||||||
Additional Paid-In-Capital | 11,685,345 | 10,959,965 | 11,812,650 | 10,959,965 | ||||||||
Retained Deficit | (4,380,104 | ) | (2,458,829 | ) | (4,816,888 | ) | (2,458,829 | ) | ||||
Total Stockholders' Equity | 7,386,884 | 8,581,489 | 7,077,405 | 8,581,489 | ||||||||
Total Liabilities & Stockholders' Equity | $ | 22,900,994 | $ | 23,510,070 | $ | 22,407,937 | $ | 23,510,070 | ||||
Three Months Ended | Six Months Ended | Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||||
September 30, 2009 (unaudited) | September 30, 2008 (unaudited) | September 30, 2009 (unaudited) | September 30, 2008 (unaudited) | December 31, 2009 (unaudited) | December 31, 2008 (unaudited) | December 31, 2009 (unaudited) | December 31, 2008 (unaudited) | |||||||||||||||||||||||
Revenues | ||||||||||||||||||||||||||||||
Oil & Gas Sales | $ | 556,141 | $ | 2,282,048 | $ | 1,174,212 | $ | 5,034,795 | $ | 975,933 | $ | 904,494 | $ | 2,150,145 | $ | 5,939,289 | ||||||||||||||
Sale of Leases | 137,677 | 18,005 | 137,677 | 18,005 | 173,420 | - | 311,097 | 18,005 | ||||||||||||||||||||||
Other Income | 90,119 | 109,568 | 173,582 | 208,983 | 79,856 | 124,194 | 253,438 | 333,178 | ||||||||||||||||||||||
783,937 | 2,409,621 | 1,485,471 | 5,261,783 | 1,229,209 | 1,028,688 | 2,714,680 | 6,290,472 | |||||||||||||||||||||||
Costs and Expenses | ||||||||||||||||||||||||||||||
Oil & Gas Lease Operating Expenses | 515,195 | 789,234 | 1,043,398 | 1,385,267 | 436,640 | 709,047 | 1,480,038 | 2,094,314 | ||||||||||||||||||||||
Workover Expenses | 43,998 | 87,982 | 43,998 | 160,407 | 27,830 | 35,862 | 71,828 | 196,269 | ||||||||||||||||||||||
Severance & Ad Valorem Taxes | 31,129 | 132,125 | 65,195 | 286,237 | 121,486 | 103,617 | 186,681 | 389,854 | ||||||||||||||||||||||
Expired Leases and Abandonments | 45,348 | 9,925 | 45,348 | 9,925 | ||||||||||||||||||||||||||
Depletion & Depreciation | 684,361 | 381,660 | 1,395,927 | 782,636 | 827,021 | 453,736 | 2,222,948 | 1,236,372 | ||||||||||||||||||||||
ARO Accretion | 11,031 | - | 21,781 | - | 10,222 | - | 32,003 | - | ||||||||||||||||||||||
General & Administrative: | ||||||||||||||||||||||||||||||
Salaries & Benefits | 201,935 | 135,068 | 403,495 | 321,613 | 261,056 | 133,284 | 664,551 | 454,744 | ||||||||||||||||||||||
Legal & Professional | 648,979 | 193,129 | 776,830 | 313,639 | 120,921 | 44,481 | 897,751 | 358,272 | ||||||||||||||||||||||
Other General & Administrative | 126,406 | 40,295 | 272,371 | 211,784 | 106,019 | 173,336 | 378,390 | 384,738 | ||||||||||||||||||||||
Interest, net of capitalized interest of $132,375 and $151,343 for the three months ended 9/30/09 and 9/30/08, respectively and $254,273 and $312,919 for the six months ended 9/30/08 and 9/30/08, respectively | - | 2,900 | - | 2,900 | ||||||||||||||||||||||||||
Interest, net of capitalized interest of $129,357 and $170,196 for the three months ended 12/31/09 and 12/31/08, respectively and $383,630 and $482,494 for the nine months ended 12/31/09 and 12/31/08, respectively | - | 880 | - | 3,780 | ||||||||||||||||||||||||||
2,263,034 | 1,762,393 | 4,022,995 | 3,464,483 | 1,956,543 | 1,664,168 | 5,979,538 | 5,128,268 | |||||||||||||||||||||||
Other Income (Expense) | ||||||||||||||||||||||||||||||
Interest Income | 13,934 | 40 | 27,904 | 61,246 | (9,467 | ) | 4,966 | 18,437 | 66,211 | |||||||||||||||||||||
Loss on Equity Method Investments | - | (142,395 | ) | - | (142,395 | ) | - | - | - | (142,395 | ) | |||||||||||||||||||
Hedging Gain (Loss) | (103,643 | ) | (93 | ) | (103,643 | ) | (6,746 | ) | (7,307 | ) | - | (110,950 | ) | (6,746 | ) | |||||||||||||||
Income (Loss) from continuing operations before income taxes | (1,568,806 | ) | 504,780 | (2,613,263 | ) | 1,709,405 | (744,108 | ) | (630,514 | ) | (3,357,371 | ) | 1,079,274 | |||||||||||||||||
Income Tax Benefit (Expense) | 351,944 | (211,323 | ) | 691,988 | (632,941 | ) | 307,324 | 220,290 | 999,312 | (412,651 | ) | |||||||||||||||||||
Net Income (Loss) | $ | (1,216,862 | ) | $ | 293,457 | $ | (1,921,275 | ) | $ | 1,076,464 | $ | (436,784 | ) | $ | (410,224 | ) | $ | (2,358,059 | ) | $ | 666,623 | |||||||||
Basic & Diluted Loss per Common Share | $ | (0.02 | ) | $ | 0.00 | $ | (0.02 | ) | $ | 0.01 | $ | (0.01 | ) | $ | (0.01 | ) | $ | ( 0.03 | ) | $ | 0.01 | |||||||||
Weighted Average Common Shares Outstanding | 80,998,912 | 80,181,310 | 80,722,483 | 80,181,310 | 81,643,912 | 80,181,310 | 80,998,912 | 80,181,310 | ||||||||||||||||||||||
Six Months Ended | Nine Months Ended | |||||||||||||
September 30, 2009 (unaudited) | September 30, 2008 (unaudited) | December 31, 2009 (unaudited) | December 31, 2008 (unaudited) | |||||||||||
Operating Activities: | ||||||||||||||
Net (Loss) Income | $ | (1,921,275 | ) | $ | 1,076,464 | $ | (2,358,059 | ) | $ | 666,623 | ||||
Adjustments to reconcile net (loss) income to cash from operating activities: | ||||||||||||||
Income Tax (Benefit) Expense | (691,988 | ) | 632,941 | (999,312 | ) | 412,651 | ||||||||
Depletion, Depreciation, & Amortization | 1,395,927 | 782,636 | 2,222,948 | 1,236,372 | ||||||||||
Loss on Equity Method Investment | - | 142,395 | - | 142,395 | ||||||||||
Stock based compensation | 146,171 | 53,880 | 273,475 | 53,880 | ||||||||||
Non-employee stock based compensation | 580,500 | - | 580,500 | - | ||||||||||
ARO Accretion | 43,274 | - | 32,003 | - | ||||||||||
Salvage Proceeds in Excess of Plugging Costs | - | (50,290 | ) | |||||||||||
Changes in Operating Assets and Liabilities | ||||||||||||||
Changes in Accrued Liabilities | 26,826 | 86,086 | 8,095 | (270,409 | ) | |||||||||
Change in Inventory | 5,069 | (3,983 | ) | 4,117 | (11,066 | ) | ||||||||
Change in Related Party Receivables/Payables | 194,691 | (1,149,370 | ) | 105,781 | (741,859 | ) | ||||||||
Changes in Other Receivables | (25,794 | ) | - | 9,353 | - | |||||||||
Changes in Hedging Activity | 145,925 | 6,746 | 130,958 | 6,746 | ||||||||||
Changes in Royalties Payable | - | 29,462 | ||||||||||||
Change in Revenue Receivables | (45,173 | ) | (343,971 | ) | (334,781 | ) | 293,777 | |||||||
Changes in Accounts Payable | 37,433 | 208,985 | 110,284 | (58,533 | ) | |||||||||
Net Cash provided (used) from operating activities | (108,414 | ) | 1,522,271 | (214,638 | ) | 1,680,287 | ||||||||
Investing Activities: | ||||||||||||||
Oil & Gas Drilling, Completing and Leasehold Acquisition Costs | (1,062,046 | ) | (4,843,315 | ) | (1,441,647 | ) | (7,724,800 | ) | ||||||
ARO on Properties Acquired or Drilled | 25,335 | - | ||||||||||||
ARO on Sold Properties | (32,607 | ) | - | |||||||||||
Change in Related Party Payable related to drilling | - | 2,170,131 | 597,768 | (1,547,136 | ) | |||||||||
Investment in Other Depreciable Assets | (150,513 | ) | (365,936 | ) | (181,201 | ) | (458,569 | ) | ||||||
Note Receivable Collections (Advances) | - | 6,611 | ||||||||||||
Note Receivable (Advances) | (112,991 | ) | - | |||||||||||
Note Receivable Collections | 553,537 | 801,691 | ||||||||||||
Net Cash used in investing activities | (1,212,559 | ) | (3,032,509 | ) | (591,806 | ) | (8,928,814 | ) | ||||||
Financing Activities | ||||||||||||||
Notes Payable (Payments) Advances | 1,000,000 | 702,505 | 1,000,000 | 7,565,231 | ||||||||||
Loan Costs | - | (503,340 | ) | |||||||||||
Related Party Note (Payments) | (200,000 | ) | (250,750 | ) | ||||||||||
Related Party Note Advances | - | 500,000 | 200,000 | - | ||||||||||
Net Cash provided from financing activities. | 1,000,000 | 1,202,505 | ||||||||||||
Net Cash provided from financing activities | 1,000,000 | 6,811,141 | ||||||||||||
Net Decrease in cash | (320,973 | ) | (307,733 | ) | 193,556 | (437,386 | ) | |||||||
Cash - Beginning of the period | 426,430 | 592,665 | 426,430 | 592,665 | ||||||||||
Cash - End of the period | $ | 105,457 | $ | 284,932 | $ | 619,986 | $ | 155,279 | ||||||
Six Months Ended | Nine Months Ended | |||||||||||
September 30, 2009 (unaudited) | September 30, 2008 (unaudited) | December 31, 2009 (unaudited) | December 31, 2008 (unaudited) | |||||||||
Supplemental Disclosure of Cash Flow Information | ||||||||||||
Cash paid during period for: | ||||||||||||
Interest Interest | $ | 118,709 | $ | 195,386 | ||||||||
Interest | $ | 423,959 | $ | 290,898 | ||||||||
Income Taxes | $ | - | $ | - | $ | - | $ | - | ||||
Non Cash Investing and Financing Activities | ||||||||||||
Warrants Issued | $ | - | $ | 36,967 | $ | - | $ | 36,967 | ||||
Stock Based Consulting Fees | $ | 580,500 | $ | - | $ | 580,500 | $ | - | ||||
Settlement Period | Monthly Volumes | Fixed Price | Price Floor | Price Ceiling | Monthly Volumes | Fixed Price | Price Floor | Price Ceiling | ||||||||||||||||
Crude Oil Swaps | ||||||||||||||||||||||||
10/01/09 - 12/31/09 | 2,000 | BBLS | $ | 70.40 | N/A | N/A | ||||||||||||||||||
12/01/09 - 12/31/09 | 2,000 | BBLS | $ | 70.40 | N/A | N/A | ||||||||||||||||||
Natural Gas Swaps | ||||||||||||||||||||||||
10/01/09 - 12/31/09 | 20,000 | MMBTU | $ | 4.205 | N/A | N/A | ||||||||||||||||||
1/01/10 - 6/30/10 | 20,000 | MMBTU | $ | 5.54 | N/A | N/A | 20,000 | MMBTU | $ | 5.54 | N/A | N/A | ||||||||||||
Crude Oil Collars | ||||||||||||||||||||||||
1/01/10 - 12/31/10 | 2,000 | BBLS | N/A | $ | 65.00 | $ | 85.00 | 2,000 | BBLS | N/A | $ | 65.00 | $ | 85.00 | ||||||||||
Natural Gas Collars | ||||||||||||||||||||||||
7/1/10 - 12/31/10 | 20,000 | MMBTU | N/A | $ | 5.50 | $ | 6.50 | 20,000 | MMBTU | N/A | $ | 5.50 | $ | 6.50 |
• | Level 1 - Quoted prices for identical instruments in active markets; |
• | Level 2 - Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets; and |
• | Level 3 - Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. |
Type of Contract | Balance Sheet Location | Estimated Fair Value | Balance Sheet Location | Estimated Fair Value | ||||||||||
Crude Oil Swaps | Other Current Liabilities | $ | 2,104 | Other Current Liabilities | $ | 8,406 | ||||||||
Natural Gas Swaps | Other Current Liabilities | 82,860 | Other Current Liabilities | 6,858 | ||||||||||
Crude Oil Collars | Other Current Liabilities | 16,273 | Other Current Liabilities | 121,208 | ||||||||||
Natural Gas Collars | Other Current Liabilities | 19,632 | Other Current Liabilities | (5,514 | ) | |||||||||
Total Current Derivative Liabilities | Total Current Derivative Liabilities | $ | 120,869 | Total Current Derivative Liabilities | $ | 130,958 | ||||||||
Crude Oil Collars | Other Non-Current Liabilities | $ | 5,424 | Other Non-Current Liabilities | $ | - | ||||||||
Natural Gas Collars | Other Non-Current Liabilities | 19,632 | Other Non-Current Liabilities | - | ||||||||||
Total Non-Current Derivative Liabilities | Total Non-Current Derivative Liabilities | $ | 25,056 | Total Non-Current Derivative Liabilities | $ | - | ||||||||
Total Derivative Liabilities | 145,925 | 130,958 | ||||||||||||
1) | Repay the borrowing base deficiency; | |
2) | Pledge additional oil and gas properties as collateral such that the borrowing base deficiency is cured; | |
3) | Repay the borrowing base deficiency in six monthly installments; or | |
4) | Cure the borrowing base deficiency by a combining the second and third options. |
1) | The Company's failure to comply with leverage ratio requirements for the fiscal quarters ended June 30, 2009 and September 30, 2009; | |
2) | The Company's failure to comply with the interest coverage ratio requirements for the fiscal quarters ended June 30, 2009 and September 30, 2009; and |
Fiscal Years Ending March 31, | Fiscal Years Ending March 31, | |||||||||||||||||||||||||||||
2010 | 2011 | 2012 | Thereafter | Total | 2010 | 2011 | 2012 | Thereafter | Total | |||||||||||||||||||||
Office Lease Payments | $ | 53,200 | $ | - | $ | - | $ | - | $ | 53,200 | $ | 13,300 | $ | - | $ | - | $ | - | $ | 13,300 | ||||||||||
Notes Payable - Related Parties | - | - | - | 3,518,924 | 3,518,924 | - | - | - | 3,518,924 | 3,518,924 | ||||||||||||||||||||
Senior Secured Note Payable | - | - | 10,800,000 | - | 10,800,000 | - | 3,200,000 | 7,600,000 | - | 10,800,000 | ||||||||||||||||||||
$ | 53,200 | $ | - | $ | 10,800,000 | $ | 3,518,924 | $ | 14,372,124 | $ | 13,300 | $ | 3,200,000 | $ | 7,600,000 | $ | 3,518,924 | $ | 14,332,224 | |||||||||||
REOSTAR ENERGY CORPORATION | |
By /s/ Scott D. Allen | |
Scott D. Allen, Chief Financial Officer (Principal Financial Officer and duly authorized signatory) | |