UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2001
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ACT
OF 1934
For the transition period from to.
Commission File No. 1-6336
--------------------------
Petrominerals Corporation
-------------------------
(Exact name of registrant as specified in its charter)
Delaware
------------------------------
95-2573652
----------
(State or other jurisdiction of incorporation (I.R.S. Employer Identification
No.)
or organization)
27241 Burbank, Foothill Ranch, California 92610-2500
----------------------------------------------------
(Address of principal executive offices)
(949) 588-2645
---------------
(Registrant's telephone number, including area code)
Check whether the Registrant (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities 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.
[ ] [X]
No Yes
The number of shares of Registrant's common stock outstanding at September 30,
2001 was 1,159,404.
PETROMINERALS CORPORATION
INDEX
Page
----
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets at September 30, 2001 and December 31, 2000 1
Statements of Operations for the Three and Nine Months Ended
September 30, 2001 and 2000 2
Statements of Cash Flows for the Nine Months Ended
September 30, 2001 and 2000 3
Notes to Financial Statements 4
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 5
PART II - OTHER INFORMATION 7
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
PETROMINERALS CORPORATION
FORM 10-QSB
FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 2001
To the Board of Directors
Petrominerals Corporation
Foothill Ranch, California
We have reviewed the accompanying balance sheet of Petrominerals Corporation as
of September 30, 2001, and the related statements of operations for the three
and nine months then ended, and the statements of cash flows for the nine months
then ended, in accordance with Statements on Standards for Accounting and Review
Services issued by the American Institute of Certified Public Accountants. All
information included in these financial statements is the representation of the
management of Petrominerals Corporation.
A review consists principally of inquiries of Company personnel and analytical
procedures applied to financial data. It is substantially less in scope than an
audit in accordance with auditing standards generally accepted in the United
States of America, the objective of which is the expression of an opinion
regarding the financial statements taken as a whole. Accordingly, we do not
express such an opinion.
Based on our review, with the exception of the matters described in the
following paragraph, we are not aware of any material modifications that should
be made to the accompanying financial statements in order for them to be in
conformity with accounting principles generally accepted in the United States of
America.
Management has elected to omit, in accordance with SEC regulations pertaining to
the filing of the 10-QSB, substantially all of the disclosures and the statement
of shareholders' equity required by accounting principles generally accepted in
the United States of America. If the omitted disclosures and the statement of
shareholders' equity were included in the financial statements, they might
influence the user's conclusions about the Company's financial position, results
of operations, and cash flows. Accordingly, these financial statements are not
designed for those who are not informed about such matters.
BROWN ARMSTRONG RANDALL
REYES PAULDEN & McCOWN
ACCOUNTANCY CORPORATION
Bakersfield, California
November 8, 2001
PART I - FINANCIAL INFORMATION
ITEM 1. UNAUDITED FINANCIAL STATEMENTS
--------------------------------
PETROMINERALS CORPORATION
BALANCE SHEETS
(Dollars in thousands, except par value data)
September 30, December 31,
2001 2000
--------------- -------------
(Unaudited) (Audited)
ASSETS
- ---------------------------------------------------------
Current Assets
Cash and cash equivalents $ 1,539 $ 1,787
Accounts receivable, net 113 64
Prepaid expenses 10 30
--------------- -------------
Total Current Assets 1,662 1,881
Restricted Cash 25 25
Property and Equipment, net (including oil and
gas properties accounted for on the successful
efforts method) 630 379
Notes Receivable and Other Assets 60 25
--------------- -------------
Total Assets $ 2,377 $ 2,310
=============== =============
LIABILITIES AND STOCKHOLDERS' EQUITY
- ---------------------------------------------------------
Current Liabilities
Accounts payable $ 137 $ 13
Accrued liabilities 9 3
Royalties payable 11 11
--------------- -------------
Total Current Liabilities 157 27
Long-Term Liabilities
Note payable 100 -
--------------- -------------
Total Liabilities 257 27
--------------- -------------
Stockholders' Equity
Preferred stock:
$.10 par value, 2,900,000 shares authorized;
no shares issued and outstanding - -
Common stock:
$.80 par value, 20,000,000 shares authorized;
1,159,404 shares issued and outstanding at
September 30, 2001 and 1,059,404 shares issued
and outstanding at December 31, 2000, respectively 928 848
Capital in excess of par value 633 563
Retained earnings 559 872
--------------- -------------
Total Stockholders' Equity 2,120 2,283
--------------- -------------
Total Liabilities and Stockholders' Equity $ 2,377 $ 2,310
=============== =============
See accompanying notes to financial statements.
1
PETROMINERALS CORPORATION
STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
For the Three For the Nine
Months Ended Months Ended
September 30, September 30,
-------------------------- --------------------------
2001 2000 2001 2000
------- ------- ------- -------
Revenues
Oil and gas $ 86 $ 86 $ 246 $ 258
Other income 62 26 213 93
------- ------- ------- -------
Total Revenues 148 112 459 351
------- ------- ------- -------
Costs and Expenses
Oil and gas 131 73 387 271
Depreciation, depletion
and amortization - - 2 2
General and administrative 96 107 371 346
Other expense 11 20 12 27
------- ------- ------- -------
Total Costs and Expenses 238 200 772 646
------- ------- ------- -------
Net Loss $ (90) $ (88) $ (313) $ (295)
======= ======= ======= =======
Net loss per share $(0.08) $(0.08) $(0.29) $(0.28)
======= ======= ======= =======
Weighted average common
shares outstanding 1,063 1,059 1,063 1,059
======= ======= ======= =======
See accompanying notes to financial statements.
2
PETROMINERALS CORPORATION
STATEMENTS OF CASH FLOWS
(In thousands)
For the Nine
Months Ended
September 30,
---------------------------
2001 2000
------- -------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (313) $ (295)
Adjustments to reconcile net loss
to net cash used from operating activities:
Depreciation, depletion and amortization 2 2
Changes in operating working capital:
(Increase) decrease in accounts receivable (49) (24)
(Increase) decrease in prepaid 20 21
(Decrease) increase in accounts payable 124 (151)
(Decrease) increase in accrued liabilities 6 -
------- -------
Net Cash Used by Operating Activities (210) (447)
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (3) (315)
Collection from notes receivable - 361
Purchase of partnership interest (35) -
------- -------
Net Cash Used by Investing Activities (38) 46
------- -------
Net Decrease in Cash and Cash Equivalents (248) (401)
Cash and Cash Equivalents at beginning of period 1,812 2,153
------- -------
Cash and Cash Equivalents at end of period $1,564 $1,752
======= =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Noncash Investing and Financing Activities
- ----------------------------------------------
In September 2001, the Company incurred debt of $100,000 and issued 100,000
shares of common stock with a value of $150,000 in connection with acquisition
of real property.
See accompanying notes to financial statements.
3
PETROMINERALS CORPORATION
NOTES TO FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 2001 AND 2000
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
-----------------------
The financial information included herein is unaudited; however, such
information reflects all adjustments (consisting solely of normal recurring
adjustments) which are, in the opinion of management, necessary for a fair
statement of results for the interim periods. The results of operations for the
nine month period ended September 30, 2001 are not necessarily indicative of the
results to be expected for the full year.
The accompanying financial statements do not include footnotes and certain
financial presentations normally required under accounting principles generally
accepted in the United States of America; and, therefore, should be read in
conjunction with the Company's Annual Report on Form 10-KSB for the year ended
December 31, 2000.
Certain reclassifications have been made to the 2000 financial statements to
conform to the presentation used in 2001.
NOTE 2 - PER SHARE COMPUTATIONS
------------------------
Per share computations are based upon the weighted average number of common
shares outstanding during each year. Common stock equivalents are not included
in the computations since their effect would be anti-dilutive.
NOTE 3 - NOTE PAYABLE AND ISSUANCE OF COMMON STOCK
-----------------------------------------------
On September 20, 2001, the Company issued a promissory note in the amount of
$100,000 and issued an additional 100,000 shares of common stock at $1.50 per
share to a third party in exchange for ownership in a piece of real property.
The note bears interest at 6% per annum and all principal and interest is due
and payable on September 20, 2004. Interest will be accrued commencing on the
first day of each month starting October 1, 2002. The third party has the option
to convert the principal balance into Petrominerals Corporation common stock at
$1.50 per share within the first twenty-four months of the term of the note.
4
ITEM 2 - MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
-----------------------------------------------------------------
RESULTS OF OPERATIONS
-- --------------
FINANCIAL CONDITION
- --------------------
As discussed in the Company's Annual Report on Form 10-KSB for the year ended
December 31, 2000, the Company had sold substantially all of its oil and gas
properties in 1998 to an unrelated party. The Company did retain an interest in
two small oil properties and has subsequently completed an acquisition of a 25%
interest in a Wyoming gas field. In addition, Petrominerals disposed of its
wholly owned subsidiary Hydro-Test International, Inc. (Hydro-Test) a New Mexico
Corporation acquired in 1993, through a voluntary petition for Chapter 7
bankruptcy on December 20, 2000. As a result of the higher commodity prices,
net cash flow increased from a negative cash flow of approximately $(401,000)
for the first nine months of 2000 to a negative cash flow of approximately
$(248,000) for the same period in 2001. The current low level of cash flow is
mainly resulting from normal general and administrative costs while the Company
continues to review acquisition and merger opportunities.
Nine months ended September 30, 2001 as compared with the nine months ended
- --------------------------------------------------------------------------------
September 30, 2000
- --------------------
The Company has recorded oil and gas sales revenues of $246,000 for the nine
months ended September 30, 2001 versus $258,000 for the same period in 2000. In
addition, Petrominerals realized other income of approximately $148,000 in the
first nine months of 2001 from a production payment related to the sale of oil
properties in 1998. As a result, the Company has recorded total revenues of
$459,000 for the nine months ended September 30, 2001 versus $351,000 for the
same period in 2000. Net realized oil prices decreased from $25.11 per barrel
for the nine months ended September 30, 2000 to $23.51 for the same period in
2001. Operating expenses were $387,000 for the nine months ended September 30,
2001 versus $271,000 for the same period in 2000. General and administrative
expenses increased to $371,000 for the nine months ended September 30, 2001
versus $346,000 for the same period in 2000. As a result, net loss increased
from $295,000 for the first nine months of 2000 to $313,000 for the same period
in 2001.
BUSINESS REVIEW
Oil and Gas Segment
- ----------------------
In 1998 the Company sold substantially all of its oil and gas properties to an
unrelated party. The Company initiated a plan to use the proceeds to either
purchase additional oil and gas producing assets or merge with another company.
Pursuant to this plan, the Company completed the acquisition of a 25% interest
in the Smith Ranch natural gas field located in southwest Wyoming for
approximately $102,000 in cash. In addition to reviewing merger alternatives,
management is currently focusing its efforts on utilizing its cash balance for
the acquisition of additional oil and gas producing properties.
5
- ------
BUSINESS REVIEW (Continued)
- ----------------
Wyoming Venture
- ----------------
In September 1999, the Company completed the acquisition of a 25% interest in
the approximately 6,000 acre Smith Ranch natural gas field in Southwest Wyoming.
The area contains prospects for both conventional and coal seam gas production.
At this time, five wells have been completed. Of these, two are producing
conventional gas, two conventional wells are shut-in awaiting improved market
conditions and one has been completed in the Fort Union coal. Using test data
obtained from this well and other information, the Company and its partners are
currently conducting an extensive technical and economic evaluation of the coal
seam gas prospects in the field. Preliminary results are encouraging.
Santa Clarita Area
- --------------------
As a result of the 1998 sale, the Company retained a 53% working interest in the
Castaic Hills Unit, a 100% working interest in a nearby oil well and a 100%
working interest in 2 producing oil wells in the nearby Hasley Canyon field.
Current net production from the 11 active wells on these leases is approximately
35 barrels per day (bopd).
As additional consideration for the 1996 sale, the Company received a production
payment under which it is paid monthly an amount equal to one half the
difference between a defined posted price and $13.50 per barrel multiplied by
the number of barrels produced. Revenue from this production payment for the
nine month period ended September 30, 2001 was approximately $148,000 and is
reflected in the statement of operations as other income. The production
payment currently has a carrying value of zero.
Hillcrest Beverly Oil Corporation Acquisition
- --------------------------------------------------
On March 10, 2000, the Company signed a non-binding letter of intent to purchase
100% of the outstanding stock of Hillcrest Beverly Oil Corporation (HBOC) from a
private Nevada corporation. Subsequent to the end of the second quarter, the
Company notified the seller that it would not continue its pursuit of this
acquisition because the seller was unable to fulfill certain obligations and
representations. (See Legal Proceedings, Item 1).
6
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
------------------
The Company is not a party to nor is its property the subject of any material
legal proceedings other than ordinary routine litigation incidental to its
business, or which is covered by insurance, except as previously disclosed in
the Company's Annual Report on Form 10-KSB for the year ended December 31, 2000.
ITEM 2. CHANGES IN SECURITIES
-----------------------
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
----------------------------------
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
-----------------------------------------------------------
None.
ITEM 5. OTHER INFORMATION
------------------
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
-------------------------------------
(a) Exhibits - none
(b) Reports on Form 8-K - none
7
SIGNATURES
Pursuant to the requirement 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.
PETROMINERALS CORPORATION
- --------------------------
(Registrant)
/s/ Morris V. Hodges
- -----------------------
Morris V. Hodges
President, CEO & Chief Financial Officer