U. S. Securities and Exchange Commission
Washington, D. C. 20549
FORM 10-QSB
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2004
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE EXCHANGE ACT
For the transition period from _____ to _____.
Commission File No. 0-9458
Eagle Exploration Company
(Exact name of registrant as specified in its character)
Colorado 84-0804143
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(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
1801 Broadway, Suite 810, Denver, Colorado 80202
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(Address and zip code of principal executive offices)
Registrant's telephone number, including area code: (303) 296-3677
Indicated by check mark whether the registrant (1) filed all reports
required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No ___.
Indicate the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date:
Class Number of Shares
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Common stock 3,072 836
Transitional Small Business Disclosure format: (Check one) Yes ___ No X .
EAGLE EXPLORATION COMPANY AND SUBSIDIARIES
INDEX TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
PART I FINANCIAL INFORMATION
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Item 1
Condensed Consolidated Balance Sheets - September 30, 2004 (unaudited), and March 31, 2004
Unaudited Condensed Consolidated Statements of Operations - Three and Six Months Ended September 30, 2004, and 2003
Unaudited Condensed Consolidated Statements of Cash Flows - Six Months Ended September 30, 2004, and 2003
Notes to Unaudited Condensed Consolidated Financial Statements
Item 2
Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3
Controls and Procedures
PART II
OTHER INFORMATION
Item 6
Exhibits and Reports on Form 8-K
SIGNATURES
PART I - FINANCIAL INFORMATION
Item 1
EAGLE EXPLORATION COMPANY AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
September 30, March 31,
2004 2004
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(Unaudited)
Assets
Current assets
Cash and cash equivalents ..................................................... $ 765,749 $ 264,257
Certificates of deposits ...................................................... -- 200,000
Marketable securities ......................................................... 344,685 458,406
Accounts receivable ........................................................... 6,003 4,891
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Total current assets .................................................... 1,116,437 927,554
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Office furniture, equipment and other, net of accumulated depreciation of
$199,289 and $195,408 at September 30, 2004 and March 31, 2004, respectively .. 56,729 56,925
Real estate held for sale ........................................................ -- 298,525
Equity investment in LLC ......................................................... 212,739 212,739
Other assets ..................................................................... 24,837 24,837
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Total non-current assets ................................................ 294,305 593,026
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Total assets ..................................................................... $ 1,410,742 $ 1,520,580
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Liabilities and Stockholders' Equity
Current liabilities
Accounts payable .............................................................. $ 7,565 $ 7,565
Deposits, deferred revenue and other .......................................... 11,387 11,387
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Total current liabilities ............................................... 18,952 18,952
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Stockholders' equity
Common stock, no par value; authorized 10,000,000 shares;
3,072,836 shares issued and outstanding ...................................... 6,632,998 6,632,998
Accumulated deficit ........................................................... (5,272,346) (5,176,228)
Unrealized holding loss on investments available for sale ..................... 31,138 44,858
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Total stockholders' equity .............................................. 1,391,790 1,501,628
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Total liabilities and stockholders' equity ....................................... $ 1,410,742 $ 1,520,580
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See notes to unaudited condensed consolidated financial statements.
EAGLE EXPLORATION COMPANY AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Operations
For the Three Months Ended For the Six Months Ended
September 30, September 30,
-------------------------- --------------------------
2004 2003 2004 2003
----------- ----------- ----------- -----------
Revenue
Oil and gas ...................................... $ 12,684 $ 14,727 $ 18,819 $ 34,653
----------- ----------- ----------- -----------
Total revenue .............................. 12,684 14,727 18,819 34,653
----------- ----------- ----------- -----------
Expenses
Depreciation ..................................... 2,407 3,059 3,881 4,985
General and administrative expense ............... 76,140 56,705 122,190 107,236
----------- ----------- ----------- -----------
Total expense .............................. 78,547 59,764 126,071 112,221
----------- ----------- ----------- -----------
Loss from operations ................................ (65,863) (45,037) (107,252) (77,568)
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Other income (expense)
Interest and dividend income ..................... 1,935 1,667 15,012 12,129
Realized loss on sale of investments
available-for-sale ............................. -- -- (6,230) --
Realized gain on sale of real estate held for sale 2,352 -- 2,352 --
Miscellaneous income ............................. -- -- -- 4,531
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Total other income ......................... 4,287 1,667 11,134 16,660
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Net loss before other comprehensive income (loss) ... (61,576) (43,370) (96,118) (60,908)
----------- ----------- ----------- -----------
Other comprehensive income (loss)
Unrealized gain (loss) on investments
available-for-sale ............................. 10,426 (9,040) (13,720) 10,784
----------- ----------- ----------- -----------
Comprehensive loss .................................. $ (51,150) $ (52,410) $ (109,838) $ (50,124)
=========== =========== =========== ===========
Basic and diluted weighted average common shares
outstanding ...................................... 3,072,836 3,072,836 3,072,836 3,072,836
=========== =========== =========== ===========
Basic and diluted loss per common share ............. $ (0.017) $ (0.017) $ (0.036) $ (0.016)
=========== =========== =========== ===========
See notes to unaudited condensed consolidated financial statements.
EAGLE EXPLORATION COMPANY AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Cash Flows
For the Six Months Ended
September 30,
----------------------------------------
2004 2003
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Cash flows from operating activities
Net loss $ (96,118) $ (60,908)
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Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation 3,881 4,985
Loss on disposal of investments available-for-sale 6,230 -
Gain on disposal of real estate held for sale (2,352) -
Gain on trade-in of vehicle - (4,531)
Change in assets and liabilities:
Decrease in accounts receivable (1,112) 4,895
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6,647 5,349
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Net cash flows used in operating activities (89,471) (55,559)
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Cash flows from investing activities
(Purchase) redemption of certificates of deposit 200,000 (375,000)
Purchase of office furniture, equipment and other (3,685) (22,342)
Proceeds from the sale of assets - 6,500
Purchase of investment available-for-sale (50,000) -
Proceeds from the sale for investments available-for-sale 143,771 -
Proceeds from real estate held for sale 300,877 2,750
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Net cash flows provided by (used in) investing activities 590,963 (388,092)
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Net increase (decrease) in cash and cash equivalents 501,492 (443,651)
Cash and cash equivalents, beginning of year 264,257 720,331
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Cash and cash equivalents, end of quarter $ 765,749 $ 276,680
================ ================
Supplemental disclosure of cash flow information:
The change in unrealized gain (loss) on investments available-for-sale for the six months ended September 30, 2004 and
September 30, 2003 was $(13,720) and $10,784, respectively.
See notes to unaudited condensed consolidated financial statements.
Notes to Unaudited Condensed Consolidated Financial Statements
Opinion of Management
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1. The financial information furnished reflects all adjustments, which are, in
the opinion of management, necessary for a fair presentation of the consolidated
financial position at September 30, 2004, and March 31, 2004, and of the
condensed consolidated statements of operations and condensed consolidated
statements of cash flows for the three and six months ended September 30, 2004,
and 2003. The results of operations and statements of cash flows for the periods
presented are not necessarily indicative of those to be expected for the entire
year.
2. The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information. Accordingly, they do not include all of the
information and footnotes required by generally accepted account principles. For
further information refer to the audited consolidated financial statements and
notes thereto for the year ended March 31, 2004, included in the Company's
10-KSB filed with the Securities and Exchange Commission on July 14, 2004.
Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operation
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Financial Condition, Liquidity and Capital Resources
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The Company's cash at September 30, 2004 was $765,749 as compared to cash for
the year ended March 31, 2004 of $264,257. This increase of $501,492 was
attributed to the redemption of $200,000 in certificates of deposit and proceeds
from the sale of the Company's interest in a commercial lot in Thornton,
Colorado, for approximately $300,000. At September 30, 2004 marketable
securities were $344,685 compared to March 31, 2004 marketable securities were
$458,406. The Company's investment in Verizon Trust Certificates was also
redeemed in the period ended September 30, 2004.
Stockholder's equity decreased from $1,501,628 at March 31, 2004 to $1,391,790
at September 30, 2004 or $109,838. The Company incurred an unrealized loss on
investments available-for-sale for the period ended September 30, 2004 of
$13,720 and a net loss before other comprehensive income of $96,118.
As reported in its Annual Report of Form 10-KSB for the fiscal year ended March
31, 2004, Eagle Development Company, a wholly owned subsidiary of Eagle
Exploration Company ("the Company") owns a 25% membership interest in, and is
co-manager of, Buffalo Highlands, LLC, a Colorado limited liability company
formed on August 20, 2001, ("the LLC"). The LLC owns an option ("First Option")
to purchase approximately 420 acres of undeveloped land in Adams County,
Colorado, immediately north of Denver, Colorado.
The First Option provided for a $25,000 earnest money payment and five $200,00
option payments from the LLC to the landowners. The first of these payments was
made in August of 2001, the second payment was made on August 20, 2002, the
third payment was made on January 15, 2003, the fourth payment was made by a
homebuilder through the escrow described below on January 15, 2004, and the
remaining payment is due December 31, 2004. The First Option period can be
extended thereafter under certain conditions through December 31, 2008 by the
payment each six months of $100,000 plus interest. All option payments are
non-refundable. The earnest money and all option payments may be applied toward
the $5,000,000 purchase price of the land if the First Option is exercised.
In accordance with its plan, the LLC entered into an option agreement ("Second
Option") with an unaffiliated national homebuilder. The Second Option
essentially assigned the First Option to the homebuilder, and required the
homebuilder, to the extent it continued, to escrow with a title company
semi-annual payments in the amount of $234,000, which amount was subsequently
amended to $134,000 at the time the second option payment was due and may be
applied to its purchase price, as consideration for the assignment. The
homebuilder also agreed to pay the remaining option payment under the First
Option and pay all entitlement, zoning and development costs.
On September 3, 2004, the homebuilder notified the LLC that it had elected to
terminate the Second Option and all other agreements between the parties,
including an agreement with the project consultants whose work to date was
assigned to the LLC. This work completed the engineering and planning with
respect to the property necessary to submit the PUD zone document for city
approval. The LLC understands the city staff has recommended approval of this
document for a planning commission hearing scheduled for September 8, 2004 and a
city council hearing scheduled for November 1, 2004.
The homebuilder also agreed to release $168,000, which was being held in escrow
to the LLC. The LLC intends to proceed with the scheduled hearings, and subject
to zoning approval, pay the $200,000 option payment due in December 2004, and
begin negotiations with other homebuilders who have expressed an interest in the
property.
There can be no assurance that the LLC will be successful in obtaining all of
the many local, county and state approvals, permits and licenses required to
commence development of the land subject to the option. In addition, the LLC
faces risks outside its control, including, city approval of final plat, title
defects, inability to obtain adequate water and sanitation facilities, general
economic conditions, changes in interest rates and infrastructure problems.
Finally, there can be no assurance that the LLC can find other parties to
develop the property within the time periods remaining under the First Option.
Results of Operations
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For the Six Months Ended September 30, 2004, Compared to the Six Months Ended
September 30, 2003.
For the six months ended September 30, 2004, the Company's total oil and gas
revenue was $18,819 as compared to $34,653 for the six months ended September
30, 2003. This decrease is primarily due to a shut in well. Other income
including interest and dividend income was $11,134 for the period ended
September 30, 2004 and $16,660 for the period ended September 30, 2003.
Total expense for the six months ended September 30, 2004 was $126,071 as
compared to $112,221 for the six months ended September 30, 2003. This increase
in expense was due to workover costs for a well. Unrealized loss on investments
available-for-sale for the period ended September 30, 2004 was $13,720 and for
the period ended September 30, 2003 the Company had an unrealized gain on
investments available-for-sale of $10,784. This resulted in a comprehensive loss
of $109,838 and $50,124 for the period ended September 30, 2004 and 2003,
respectively.
Item 3: Controls and Procedures
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As of the end of the period covered by this report, the Company conducted an
evaluation, under the supervision and with the participation of the principal
executive officer and principal financial officer, of the Company's disclosure
controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934 (the "Exchange Act"). Based on this evaluation,
the principal executive officer and principal financial officer concluded that
the Company's disclosure controls and procedures are effective to ensure that
information required to be disclosed by the Company in reports that it files or
submits under the Exchange Act is recorded, processed, summarized and reported
within the time periods specified in Securities and Exchange Commission rules
and forms. There was no change in the Company's internal control over financial
reporting during the Company's most recently completed fiscal quarter that has
materially affected or is reasonably likely to materially affect the Company's
internal control over financial reporting.
In connection with the audit of the year ended March 31, 2004, there were no
"Reportable Events" within the meaning of Item 304(a)(1)(v) of Regulation S-K.
However, there is a lack of segregation of duties that is considered to be a
weakness in the Registrant's internal controls relating to the adequacy of
staffing and size of the accounting and finance department.
PART II - OTHER INFORMATION
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Item 6. Exhibits
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(a) Exhibits
Exhibit 31.1 Certification of President and Chief Financial Officer Pursuant to
18 USC Section 1350, as adopted pursuant to section 302 of the Sarbanes-Oxley
Act of 2002
Exhibit 31.2 Certification of Secretary and Vice President of Operations
Pursuant to 18 USC Section 1350, as adopted pursuant to section 302 of the
Sarbanes-Oxley Act of 2002
Exhibit 32.1 Certification of President and Chief Financial Officer Pursuant to
18 USC Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley
Act of 2002
Exhibit 32.2 Certification of Secretary and Vice President of Operations
Pursuant to 18 USC Section 1350, as adopted pursuant to section 906 of the
Sarbanes-Oxley Act of 2002
(b) No reports on Form 8-K have been filed during the quarter ended September
30, 2003.
SIGNATURES
Pursuant to the requirements 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.
EAGLE EXPLORATION COMPANY
(Registrant)
By: /s/ Raymond N. Joeckel
----------------------
Raymond N. Joeckel
President and Chief Financial Officer
By: /s/ Paul M. Joeckel
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Secretary and Vice President Operations
Date: November 15, 2004
