SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED March 31, 2006
COMMISSION FILE NO. 0-09482
COLORADO WYOMING RESERVE COMPANY
(Exact Name of Small Business Issuer as Specified in its Charter)
Wyoming | 83-0246080 |
| (State or other jurisdiction | (IRS Employer |
| of incorporation) | Identification No.) |
751 Horizon Court, Suite 205, Grand Junction, Colorado | 81506 | |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: (970) 255-9995
Check whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 o
There were 12,137,694 shares of the Registrant's $.01 par value common stock outstanding as of May 12, 2006.
Transitional Small Business Disclosure: Yes o No x
COLORADO WYOMING RESERVE COMPANY
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED BALANCE SHEET
March 31, 2006
| CURRENT ASSETS: | ||||
| Cash and cash equivalents | $ | 50,268 | ||
| Accounts receivable | - | |||
| Total current assets | 50,268 | |||
| PROPERTY AND EQUIPMENT: | ||||
| Unproved oil and gas properties | 62,570 | |||
| Other property and equipment | 14,914 | |||
| Less accumulated depreciation, other property and equipment | (14,841 | ) | ||
| Net property and equipment | 62,643 | |||
| Other | 1,960 | |||
| Total assets | $ | 114,871 | ||
| CURRENT LIABILITIES: | ||||
| Trade accounts payable | $ | 67,928 | ||
| Other accrued liabilities | 256,811 | |||
| Related party payables: | ||||
| On account | 823,868 | |||
| Convertible Notes | 280,000 | |||
| Notes payable | 25,000 | |||
| Total current liabilities | 1,453,607 | |||
| EQUITY | ||||
| Common Stock, $.01 par value: authorized- | ||||
| 75,000,000 shares; issued and outstanding- | ||||
| 12,037,694 | 120,377 | |||
| Additional paid-in capital | 5,687,676 | |||
| Warrants | 148,100 | |||
| Accumulated deficit: | ||||
| Before entering the development stage | (4,441,242 | ) | ||
| After entering the development stage | (2,853,647 | ) | ||
| Total Equity | (1,338,736 | ) | ||
| Total liabilities and equity | $ | 114,871 | ||
The accompanying notes are an integral part of these financial statements.
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COLORADO WYOMING RESERVE COMPANY
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF OPERATIONS
(UNAUDITED)
| QUARTERS ENDED | NINE MONTHS ENDED | PERIOD FROM | ||||||||||||||
| MARCH 31, | MARCH 31, | JANUARY 1, 1999 | ||||||||||||||
| 2006 | 2005 | 2006 | 2005 | TO MARCH 31, 2006 | ||||||||||||
| REVENUES | $ | -- | $ | -- | $ | -- | $ | -- | $ | -- | ||||||
| EXPENSES | ||||||||||||||||
| Exploration cost | 35,972 | 215 | 35,972 | 11,822 | 747,308 | |||||||||||
| Depreciation, | ||||||||||||||||
| depletion and amortization | -- | -- | -- | 6,320 | ||||||||||||
| General and administrative | 128,759 | 106,085 | 330,109 | 263,574 | 1,999,540 | |||||||||||
| Total expenses | 164,731 | 106,300 | 366,081 | 275,396 | 2,753,168 | |||||||||||
| Operating loss | (164,731 | ) | (106,300 | ) | (366,081 | ) | (275,396 | ) | (2,753,168 | ) | ||||||
| OTHER INCOME (EXPENSE) | ||||||||||||||||
| Interest income (expense), net | (5,350 | ) | (3,322 | ) | (16,050 | ) | (9,966 | ) | (99,248 | ) | ||||||
| Loss on sale of assets | -- | -- | -- | -- | (1,231 | ) | ||||||||||
| Income (Loss) before income taxes | (170,081 | ) | (109,622 | ) | (382,131 | ) | (285,362 | ) | (2,853,647 | ) | ||||||
| Provision for income taxes | -- | -- | -- | -- | -- | |||||||||||
| Net loss | $ | (170,081 | ) | $ | (109,622 | ) | $ | (382,131 | ) | $ | (285,362 | ) | $ | (2,853,647 | ) | |
| Basic and diluted loss per share | $ | (0.01 | ) | $ | (0.01 | ) | $ | (0.03 | ) | $ | (0.03 | ) | ||||
| Outstanding shares | 12,037,694 | 10,807,694 | 12,037,694 | 10,807,694 | ||||||||||||
The accompanying notes are an integral part of these financial statements.
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COLORADO WYOMING RESERVE COMPANY
(A DEVELOPMENT STAGE ENTERPRISE)
CASH FLOW STATEMENTS
| NINE MONTHS ENDED | PERIOD FROM | |||||||||
| MARCH 31, | JANUARY 1, 1999 | |||||||||
| 2006 | 2005 | TO MARCH 31, 2006 | ||||||||
| Cash flows from operating activities: | ||||||||||
| Net loss | $ | (382,131 | ) | $ | (285,361 | ) | $ | (2,853,647 | ) | |
| Adjustments to reconcile net loss to net used in | ||||||||||
| operating activities: | ||||||||||
| Depletion, depreciation and amortization | -- | 6,300 | ||||||||
| Loss on asset sale | -- | -- | 1,231 | |||||||
| Amortization of note payable discount | -- | -- | 35,000 | |||||||
| Loss from joint venture investment | -- | -- | ||||||||
| Exploration cost paid by joint venture -- 361,767 | ||||||||||
| Equity issued as compensation | -- | -- | 95,600 | |||||||
| Changes in current assets and liabilities: | ||||||||||
| Receivables | 3,126 | |||||||||
| Payables | 135,818 | 221,920 | 1,106,851 | |||||||
| Other | (416 | ) | ||||||||
| Net cash (used in) operating activities | (246,313 | ) | (63,441 | ) | (1,244,188 | ) | ||||
| Cash flows from investing activities: | ||||||||||
| Additions to unproved properties | (35,972 | ) | -- | (46,544 | ) | |||||
| Unproved property cost recovery | 191,467 | |||||||||
| Asset purchases | -- | -- | (1,269 | ) | ||||||
| Proceeds from asset sale | -- | -- | (2,354 | ) | ||||||
| Net cash (used in) provided by investing activities | (35,972 | ) | -- | 141,300 | ||||||
| Cash flows from financing activities: | ||||||||||
| Sale of common stock | 315,000 | 50,000 | 1,149,456 | |||||||
| Advances from joint venture | -- | -- | 130,509 | |||||||
| Borrowings under credit agreement | -- | -- | -- | |||||||
| Repayment of joint venture advances | -- | |||||||||
| Notes payable | -- | |||||||||
| Repayment of notes payable | -- | -- | (130,000 | ) | ||||||
| Net cash provided by financing activities | 315,000 | 50,000 | 1,149,965 | |||||||
| Net increase (decrease) in cash and equivalents | 32,715 | (13,441 | ) | 47,077 | ||||||
| Cash and equivalents at beginning of period | 17,553 | 30,317 | 3,191 | |||||||
| Cash and equivalents at end of period | $ | 50,268 | $ | 16,876 | $ | 50,268 | ||||
The accompanying notes are an integral part of these financial statements.
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COLORADO WYOMING RESERVE COMPANY
("CWYR" or the "Company")
(unaudited)
Periods Ended March 31, 2006 and 2005
1. INTERIM FINANCIAL STATEMENTS
The accompanying financial statements are unaudited. However, in the opinion of management, the accompanying financial statements reflect all adjustments necessary for a fair presentation.
Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to the Securities and Exchange Commission's rules and regulations. Management believes the disclosures made are adequate to make the information not misleading and suggests that these financial statements be read in conjunction with the Company's June 30, 2005 Form 10-KSB.
2. DEVELOPMENT STAGE ENTERPRISE; PLAN OF OPERATIONS; STRATEGY
The Company has no operating revenues as a result of its December 1998 sale of its producing properties. Accordingly, as of January 1, 1999, the Company has re-entered the development stage.
The Company is an oil and natural gas exploration company with a geographical focus in the Rocky Mountain region of the western United States. The Company's primary objective is the acquisition of interests in undeveloped oil and gas properties, and the location and development of economically attractive accumulations of hydrocarbons in such properties through the use of a highly-integrated, interpretive approach to the application of three-dimensional (3D) geophysical data (seismic data acquired and processed to yield a three-dimensional picture of the subsurface). The Company's acquisitions of undeveloped oil and gas properties are accomplished primarily by the acquisition of direct mineral leasehold interests from private, state and federal lands. The Company's Southwest Lisbon property is currently in production and once payout is achieved the Company will begin to have operating income.
The Company is a 3D Seismic exploration and production company focused on the Paradox Basin of Southeast Utah. CWYR has defined seven structures, after four years of seismic science and the expenditure of approximately $5 million on science, acreage and drilling, by it and its partners. After payout, the Company shall own 10.6% of structures one and two with structure one under development. Structure one is producing into a sales pipeline. Structures three through six, where the Company owns 42.5% working interest, remain to be drilled. Structure seven is in the acquisition phase and the Company would own 42.5% of these to be acquired structures. The Company anticipates additional 3D Seismic work around the identified structures. The Company would like to expand its current 16,640 acre 3D Seismic shoot generated in the years 2000 to 2002 by an additional 64,000 acres, in the future, in order to look for additional structures. Finally, it is worth noting that structures two through seven need to be drilled.
In years 2000 to 2002 the Company acquired 68,000 acre leases and then shot, processed and interpreted 16,640 acres, state of the art 3D Seismic shoot. In 2003 the interpretation of the shoot was perfected. In 2004, the Partners and the Company drilled two, 3D Science confirming wells, in May and December respectively, on structure one. In 2005 the Company and Partners caused the Pipeline Contract and hook-up of two wells on structure one. The Company anticipates an aggressive posture in pursuit of this area.
The Company is currently focusing its exploratory efforts on its mineral interests in approximately 22,640 gross leased acres (approximately 9,622 net leased acres) in the central Paradox Basin of southeastern Utah (the "Paradox Basin Project" or the "Project").
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On March 3, 2005, the Company confirmed its proprietary 3D Seismic Science with two exploratory successes at its Paradox Basin Exploration Project in Southeast Utah. The science, four years under development, has been confirmed by the completion of the Federal 1-31 and the Evelyn Chambers wells on the Southwest Lisbon structure, 3 ½ miles southwest of the 155 million barrel oil equivalent Lisbon Field in the same Mississippian formation. Both wells tested in the range of 2 MMCFD in the formation analogous to the productive formation at Lisbon. The wells are awaiting pipeline contract and hook-up.
The Company owns 10.6% APO of this 700-acre structure and 10.6% of the surrounding 8,960 acres. Further additional seismic work in light of this successful discovery is anticipated on the structure.
The Company owns 42 ½ % of two other, 3D delineated, structures in the Paradox Basin Project. Additionally, the Company will have 42 ½ % of two other, tentatively identified, structures in the area.
On July 21, 2005 the Company announced that it had received BLM approval to drill a third well on its previously 3D seismic identified Southwest Lisbon structure in the Paradox Basin Exploration Project in Southeast Utah.
The initial two successful wells are currently being production tested.
The Company also stated that there is the possibility that up to a total of 12 to 16 wells from multiple zones on the Southwest Lisbon structure can be drilled.
The Company anticipates an extensive 3D seismic shooting program and drilling on its currently identified structures.
The Company plans an extensive 3D seismic shooting and drilling program in other parts of the Paradox Basin.
CURRENT DEVELOPMENT:
Colorado Wyoming Reserve Company (OTC Bulletin Board: CWYR) announced today, May 25, 2006 that it has acquired a 42 ½% interest in an additional 6,000 acres underneath and bordering its 3D Seismic Shoot in Southeast Utah.
CWYR is a 3D Seismic driven exploration and production company focused in Southeast Utah. The Company’s 3D Seismic science was confirmed in 2004 with the successful discovery of the Southwest Lisbon Field that is currently under development. The Southwest Lisbon Field is 3 miles from the Lisbon Field.
The acquisition of the 6,000 acres raises the Company’s acreage position in the area to 22,640 acres. The acquired acreage borders the Company’s 16,640-acre 3D Seismic Shoot. The Shoot covering some of the acquired 6,000 acres shows a geological similarity to the Lisbon field, 8 miles away. The Lisbon field has produced over 150 million barrels of oil equivalent since its discovery in 1960.
Additional 3D Seismic Shooting is planned for later this year and the Company anticipates 3 test wells in the area in 2007.
Commenting on the strategic importance of the acreage acquisition, Kim M. Fuerst, the Company’s President and CEO stated simply, “We like the odds…”.
A 29-page corporate overview slide presentation in MS Word format is available upon request.
Additional information may be found at: www.coloradowyomingreserve.com
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3. COMMITMENTS AND CONTINGENCIES
The Company entered into an employment contract with Mr. Fuerst on October 1, 1996 pursuant to which Mr. Fuerst received a salary of $10,000 per month and was granted incentive stock options to purchase up to 500,000 shares of the Company's Common Stock at an exercise price of $1.00 per share (repriced to $.25 per share in May 1999). The contract had an initial term of three years commencing October 1, 1996 and is renewed automatically for succeeding periods of one year unless terminated. The Contract may be terminated by Mr. Fuerst upon 90-days prior written notice to the Company and by the Company without prior notice to Mr. Fuerst for cause (as defined in the contract). In May 1999, Mr. Fuerst's salary was reduced to $5,000 per month pursuant to an amendment to his employment agreement.
At May 12, 2006, the Company had no revenues. These factors raise substantial doubts about the Company's ability to continue as a going concern without raising significant additional capital.
4. LOSS PER SHARE
Basic and diluted earnings per share are the same, as the effect of warrants and options is antidilutive.
UNCERTAINTY OF FORWARD-LOOKING INFORMATION
This quarterly report on Form 10-QSB includes statements that are not purely historical and are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements involve risks and uncertainties that could cause actual results to differ from projected results. Such statements address activities, events or developments that the Company expects, believes, projects, intends or anticipates will or may occur, including such matters as its ability to raise capital sufficient enough to repay outstanding indebtedness, to fund its share of maintaining and marketing the Project and to participate in future Paradox Basin activities, the Company's use of proceeds from any financing or sale of its interest, the Company's beliefs regarding results of the Seismic survey and the next phase of development, volatility of common Stock prices, anticipated lack of revenues, anticipated losses, plans to market the Project to third parties and the effect of the application of certain accounting rules. Factors that could cause actual results to differ materially ("Cautionary Disclosures") include, among others: general economic conditions, the market price of oil and natural gas, concentration of the Company's properties in a small area in the Paradox Basin, the timing and results of the seismic shoot to be conducted under the farmout agreement, the success or failure in finding commercial quantities of oil and gas, the strength and financial resources of the Company's competitors, climatic conditions, environmental risks, the results of financing efforts and regulatory developments and the factors identified in the Company's Annual Report on Form 10-KSB for the fiscal year ended June 30, 2005, under the caption "Business-Risk Factors.". Many of such factors are beyond the Company's ability to control or predict. All forward-looking statements included in this Form 10-QSB are based on information available to the Company on the date hereof. Although the Company believes that the assumptions and expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct or that the Company will take any actions that may presently be planned. All forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by the Cautionary Disclosures.
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None.
A total of 100,000 shares were issued at $0.50 per share for a total of $50,000 to an accredited private investor. The investor was also granted 50,000 warrants valid for a period of three years to purchase stock at $1.00 per share. The Board authorized the issuance of 1,000,000 shares in lieu of amounts owed for services rendered resulting in a cancellation of $250,000 of liabilities. An additional 30,000 shares were issued for a $15,000 short term loan. The Board also extended for another period of five years the 500,000 options previously granted to Mr. Kim Fuerst at $0.25 which are set to expire on October 18, 2006. The new expiry date for these 500,000 options shall be October 18, 2011. The Board authorized the issuance of 150,000 shares consequent to the exercise by a consultant of 150,000 options granted her previously at $0.25 for services rendered.
Whereas the Company is now ready to embark on its fund-raising efforts, the Board felt the need to provide the President and CEO additional help and it was decided that Mr. Rafiq Sayed be appointed the Chief Operating Officer and be made responsible for co-ordinating and executing the day to day operations.
The Board also approved the granting to Janfra Partners a total of 400,000 options to acquire stock at $1.00 per share valid for three years.
In recognition of the work performed to date the Board authorized the issuance of three million shares to Messrs. Kim Fuerst, Rafiq Sayed and Waseem Sayed to be vested over three years.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
None.
(a) Exhibits
31.1 Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1 Certification of Chief Executive Officer Pursuant to U.S.C. 18, Section 1350.
32.2 Certification Chief Financial Officer Pursuant to U.S.C. 18, Section 1350.
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In accordance with the requirements of the Exchange Act, the Registrant caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
COLORADO WYOMING RESERVE COMPANY
| Dated: May 12, 2006 | By: /s/ KIM M. FUERST | |
| Kim M. Fuerst | ||
| President, Chief Executive Officer and Treasurer | ||
| (Principal Executive Officer) | ||
| By: /s/ Rafiq A. Sayed | ||
| Rafiq A. Sayed | ||
| Chief Financial Officer | ||
| (Principal Financial Officer) |
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