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 December 31, 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
Indicate 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 -
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March 31, 2004, and December 31, 2004 (Unaudited)
Unaudited Condensed Consolidated Statements of Operations -
Three and Nine Months Ended December 31, 2004 and 2003
Unaudited Condensed Consolidated Statements of Cash Flows -
Nine Months Ended December 31, 2004 and 2003
Notes to Unaudited Condensed Consolidated Financial Statements
Item 2 Management's Discussion and Analysis of
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Financial Condition and Results of Operations
Item 3 Controls and Procedures
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PART II OTHER INFORMATION
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Item 6 Exhibits and Reports on Form 8-K
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SIGNATURES
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PART I FINANCIAL INFORMATION
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Item 1
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EAGLE EXPLORATION COMPANY AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
December 31, March 31,
2004 2004
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(Unaudited)
Assets
Current assets
Cash and cash equivalents ..................................................... $ 711,011 $ 264,257
Marketable securities ......................................................... 352,977 458,406
Certificates of deposit ....................................................... -- 200,000
Accounts receivable ........................................................... 5,800 4,891
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Total current assets ...................................................... 1,069,788 927,554
Office furniture, equipment and other, net of accumulated depreciation of
$201,696 and $195,408 at December 31, 2004 and March 31, 2004, respectively .... 54,332 56,925
Real estate held for sale ........................................................ -- 298,525
Investment in option to purchase real estate ..................................... 231,489 212,739
Other assets ..................................................................... 24,837 24,837
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Total assets ..................................................................... $ 1,380,436 $ 1,520,580
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Liabilities and Stockholders' Equity
Current liabilities
Accounts payable .............................................................. $ 7,565 $ 7,565
Deposits, deferred revenue and other .......................................... 12,421 11,387
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Total current liabilities ............................................... 19,986 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 ........................................................... (5,312,897) (5,176,228)
Unrealized holding gain on investments available for sale ..................... 40,349 44,858
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1,360,450 1,501,628
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Total liabilities and stockholders' equity ....................................... $ 1,380,436 $ 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 For the Nine
Months Ended Months Ended
December 31, December 31,
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2004 2003 2004 2003
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Revenue
Oil and gas ........................... $ 9,446 $ 30,587 $ 28,265 $ 45,314
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Total revenue ....................... 9,446 30,587 28,265 45,314
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Expenses
Depreciation .......................... 2,407 3,921 6,288 8,906
General and administrative ............ 58,542 62,484 180,732 169,720
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Total expense ....................... 60,949 66,405 187,020 178,626
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Loss from operations ..................... (51,503) (35,818) (158,755) (133,312)
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Other income
Interest and dividend income .......... 10,952 11,617 25,964 23,746
Realized loss on sale of investments
available-for-sale .................. -- -- (6,230) --
Realized gain on sale of real estate
held for sale ....................... -- -- 2,352 --
Miscellaneous income .................. -- 251 -- 4,782
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Total other income ................. 10,952 11,868 22,086 28,528
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Net loss before other comprehensive income
(loss) ................................. (40,551) (23,950) (136,669) (104,784)
Other comprehensive income (loss)
Unrealized gain (loss) on investments
available-for-sale .................. 9,211 24,573 (4,509) 35,357
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Comprehensive income (loss) .............. (31,340) 623 (141,178) (69,427)
=========== =========== =========== ===========
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 .. $ (.01) $ (.01) $ (.05) $ (.02)
=========== =========== =========== ===========
See notes to unaudited condensed consolidated financial statements.
EAGLE EXPLORATION COMPANY AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Cash Flows
For the Nine Months Ended
December 31,
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2004 2003
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Cash flows from operating activities
Net loss .................................................................. $(136,669) $(104,784)
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Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation ............................................................ 6,288 8,906
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:
Accounts receivable ................................................... (909) 7,155
Deposits, deferred revenue and other .................................. 1,034 1,639
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10,291 13,169
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Net cash flows used in operating activities ......................... (126,378) (91,615)
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Cash flows from investing activities
Redemption (purchase) of certificates of deposit, net ..................... 200,000 (300,000)
Purchase of office furniture and equipment ................................ (3,685) (22,342)
Purchase of investment in option to purchase real estate .................. (18,750) (10,000)
Purchase of investments available-for-sale ................................ (50,000) --
Proceeds from the sale of investments available-for-sale .................. 144,690 --
Proceeds from the sale of assets .......................................... -- 6,500
Proceeds from real estate held for sale ................................... 300,877 2,750
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Net cash flows used in (provided by) investing activities ........... 573,132 (323,092)
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Net increase (decrease) in cash and cash equivalents ......................... 446,754 (414,707)
Cash and cash equivalents, beginning of year ................................. 264,257 720,331
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Cash and cash equivalents, end of quarter .................................... $ 711,011 $ 305,624
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Supplemental disclosure of cash flow information:
The change in unrealized loss (gain) on investments available-for-sale for
the nine months ended December 31, 2004 and December 31, 2003 was ($4,509)
and $35,357, respectively.
See notes to unaudited condensed consolidated financial statements.
EAGLE EXPLORATION COMPANY AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements
Opinion of Management
1. The financial information furnished reflects all adjustments, which are, in
the opinion of management, necessary for a fair presentation of the
financial position at December 31, 2004 and March 31, 2004 and of the
unaudited condensed consolidated statements of operations for the three and
nine months ended December 31, 2004 and 2003 and the unaudited condensed
consolidated statements of cash flows for the nine months ended December
31, 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 accounting
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 Operations
Financial Condition, Liquidity and Capital Resources
The Company's cash and cash equivalents at December 31, 2004 was $711,011 as
compared to cash for the year ended March 31, 2004 of $264,257. This increase of
$446,754 was attributed to the redemption of $200,000 in certificates of deposit
and proceed from the sale of the Company's interest in a commercial lot in
Thornton, Colorado, for approximately $300,000. At December 31, 2004, marketable
securities were $352,977 compared to marketable securities of $458,406 at March
31, 2004. This decrease is due Company's investment in Verizon Trust
Certificates being called.
Stockholders' equity decreased from $1,501,628 at March 31, 2004 to $1,360,450
at December 31, 2004 or $141,178. The Company incurred an unrealized loss on
investments available-for-sale of $4,509 and a net loss of $136,669 for the nine
months ended December 31, 2004.
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 $200,000
option payments from the LLC to the landowners. The first of these payments was
made in August, 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
fifth payment was made in December, 2004. The First Option period can be
extended thereafter under certain conditions through December 31, 2008, by the
payment each six month 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 $235,000, 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 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
For the Nine Months Ended December 31, 2004, Compared to the Nine Months Ended
December 31, 2003.
For the nine months ended December 31, 2004, the Company's total oil and gas
revenue was $28,265 as compared to $45,314 for the nine months ended December
31, 2003. Other income, including interest and dividend income, was $22,086 for
the nine months ended December 31, 2004 and $28,528 for the nine months ended
December 31, 2003.
Total expense for the nine months ended December 31, 2004, was $187,020 as
compared to $178,626 for the nine months ended December 31, 2003. Unrealized
loss on investments available-for-sale for the nine months ended December 31,
2004 was $4,509 compared to an unrealized gain on investments available-for-sale
of $35,357 for the nine months ended December 31, 2003. This resulted in a
comprehensive loss of $141,178 and $69,427 for the period ended December 31,
2004, and 2003, respectively.
Item 3: Controls and Procedures
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 Commissions 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
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Item 6. Exhibits and reports on Form 8-K
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Exhibit 31.1 Certification Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
Exhibit 31.2 Certification Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
Exhibit 32.1 Certification Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002
Exhibit 32.2 Certification Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002
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
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Raymond N. Joeckel
President/Chief Financial Officer
By: /s/ Paul M. Joeckel
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Secretary/Vice President Operations
Date: February 11, 2005
