U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] Quarterly Report under Section 13 or 15(d) of the Securities Exchange Act
of 1934 for the Quarterly Period Ended September 30, 1995
[ ] Transition Report under Section 13 or 15(d) of the Securities Exchange Act
of 1934 for the Transition Period from __________ to _________
Commission file number 0-10006
METRO CAPITAL CORPORATION
(Exact name of small business issuer as specified in its charter)
Wyoming 84-0839926
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
716 College View Drive, Riverton, WY 82501
(Address of principal executive offices) (Zip Code)
(307) 856-3800
(Issuer's telephone number)
Check whether the issuer (1) 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
The number of shares of the Issuer's $.01 par value common stock outstanding as
of November 6, 1995 was 1,649,455.
Transitional Small Business Disclosure Format
(Check one):
Yes No X
METRO CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1995
(Unaudited)
Current Assets :
Cash and cash equivalents $ 22,866
Marketable securities 1,847,302
Accounts receivable, with no allowance for doubtful accounts:
Trade 11,228
Interest and other receivables 76,729
87,957
Notes receivable 85,000
Prepaid expenses 9,486
Total current assets 2,052,611
Property and Equipment:
Gas royalty interests 1,067,051
Land and building 506,002
Oil property 219,890
Furniture and fixtures 63,969
Vehicles and equipment 42,015
1,898,927
Less accumulated depreciation and amortization (817,120)
1,081,807
Investments 312,954
Notes Receivable 23,019
Other Assets, net 1,748
Total Assets $ 3,472,139
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Note payable $ 39,472
Accounts payable and accrued expenses 110,941
Total current liabilities 150,413
Stockholders' Equity:
Preferred stock, $.50 par value; 3,000,000 shares
authorized, no shares issued --
Common stock, $.01 par value; 6,000,000 shares
authorized; 2,700,689 issued 27,007
Capital in excess of par value 3,030,711
Unrealized holding gain 683,271
Retained earnings 1,316,799
Less: Treasury stock, at cost, 1,101,234 shares (1,736,062)
Total stockholders' equity 3,321,726
Total Liabilities and Stockholders' Equity $ 3,472,139
See accompanying notes to these consolidated financial statements.
METRO CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the Three Months For the Six Months
Ended September 30, Ended September 30,
1995 1994 1995 1994
REVENUES:
Gas royalty revenue $ 14,263 $ 22,420 $ 29,088 $ 37,809
Oil sales 6,155 8,696 18,107 21,220
Other product revenue 533 -- 892 --
Well overhead fees 792 1,260 1,780 2,520
21,743 32,376 49,867 61,549
COSTS AND EXPENSES:
Oil and gas production 26,069 22,313 39,585 56,883
Operating expenses 165,140 149,378 275,354 256,729
Depreciation and amortization 39,269 41,760 78,550 83,521
Abandoned leases -- -- -- 7,627
230,478 213,451 393,489 404,760
LOSS FROM OPERATIONS (208,735) (181,075) (343,622) (343,211)
OTHER CREDITS (CHARGES):
Interest income 13,100 16,200 26,692 31,820
Dividend income 5,124 11,040 10,249 18,863
Rental income 2,535 4,935 5,070 9,870
Gain on sale of marketable
securities 47,265 7,445 54,676 7,656
Equity in partnership losses (7,749) (14,600) (20,764) (14,600)
Other -- (5,141) -- (5,141)
60,275 19,879 75,923 48,468
NET LOSS $(148,460) $(161,196) $(267,699) $(294,743)
NET LOSS PER COMMON SHARE $ (.09) $ (.10) $ (.17) $ (.18)
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING 1,599,455 1,599,097 1,599,455 1,600,384
See accompanying notes to these consolidated financial statements.
METRO CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
September 30,
1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (267,699) $ (294,743)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 78,550 83,521
Equity in partnership losses 20,764 14,600
Abandoned leases -- 7,627
Gain on sale of marketable securities (54,676) (7,656)
Stock bonus compensation -- 24,800
Changes in operating assets and liabilities:
(Increase) decrease in:
Trade receivables 10,033 (11,788)
Interest and other receivables (63,675) 12,060
Prepaid expenses 6,791 3,573
Other assets -- (680)
Increase (decrease) in -
Accounts payable and accrued expenses 58,169 (6,234)
Net cash (used in) operating activities (211,743) (174,920)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of marketable securities (122,108) (141,031)
Proceeds from sale of marketable securities 197,736 389,932
Proceeds from notes receivable 3,278 1,520
Funds advanced under notes receivable -- (5,000)
Purchase of property and equipment (9,003) (12,867)
Net cash provided by investing activities 69,903 232,554
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings 40,000 --
Principal payments on borrowings (528) --
Treasury stock acquired -- (35,351)
Net cash provided by (used in) financing
activities 39,472 (35,351)
Increase (decrease) in Cash and Cash Equivalents $(102,368) $ 22,283
Cash and Cash Equivalents, beginning of period 125,234 40,387
Cash and Cash Equivalents, end of period $ 22,866 $ 62,670
See accompanying notes to these consolidated financial statements.
METRO CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(Unaudited)
l. Basis of Presentation
The consolidated financial statements included herein are unaudited. In the
opinion of management, all adjustments, consisting of normal recurring
accruals, have been made which are necessary for a fair presentation of the
financial position of the Company at September 30, 1995 and the results of
operations and cash flows for the six month periods ended September 30, 1995
and 1994. Quarterly results are not necessarily indicative of expected
annual results because of the impact of fluctuations in prices received for
oil and natural gas and other factors. Certain amounts have been
reclassified to conform with the current period's presentation. For a more
complete understanding of the Company's operations and financial position,
reference is made to the consolidated financial statements of the Company,
and related notes thereto, filed with the Company's annual report on Form
10-KSB for the year ended March 31, 1995.
2. Marketable Securities
Marketable securities are classified as available-for-sale based on
management's intent. Cash proceeds and net gains from the sale of
available-for-sale securities are as follows:
Three Months Ended Six Months Ended
September 30, September 30,
1995 1994 1995 1994
Gross proceeds $ 86,424 $ 132,446 $ 197,736 $ 389,932
Net gains:
Gross gains 53,920 7,445 61,549 10,219
Gross losses (6,655) -- (6,873) (2,563)
The net unrealized holding gain on available-for-sale securities included as
a separate component of stockholders' equity increased by $154,335 for the
six months ended September 30, 1995.
3. Loss Per Share
The computations of loss per share are based on the weighted average number
of common shares outstanding during each period. Common stock options
outstanding were not included in the computations since their effect is
anti-dilutive.
METRO CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED SEPTEMBER 30, 1995
(Unaudited)
4. Subsequent Events
In October 1995, the Company entered into an agreement with Karlton Terry
Oil Company and its principals to acquire oil and gas properties consisting
of both developed and undeveloped acreage. Under terms of the agreement,
which is subject to shareholder approval, the Company will issue 7.7 million
shares of Class B Common Stock, representing 80% of its voting securities,
in exchange for the properties. All assets of the Company will be
transferred to a wholly-owned subsidiary, except for $700,000 cash and a
minor oil property. The Class B Common Stock is restricted from
participating in any distribution or other disposition of the subsidiary
assets. 7.25 million shares of Class B Common Stock are convertible into
Common Stock after three years; and 450,000 shares of Class B Common
stock are immediately convertible. Upon completion of the transaction, the
Company will be managed by the principals of Karlton Terry Oil Company and
the subsidiary will be managed by the current management of the Company.
In October 1995, the Company awarded 30,000 shares of the Company's Common
Stock from the 1987 Stock Bonus Plan to officers and employees. Nonemployee
directors were awarded 20,000 shares of the Company's Common Stock. The
Company also granted options to acquire 70,000 shares of Common Stock from
the 1992 Stock Option Plan to officers, employees and directors of which
45,000 are exercisable at $1.50 per share and 25,000 at $1.65 per share.
METRO CAPITAL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Three Months Ended September 30, 1995 Compared to 1994
The Company's gas royalty revenue decreased by approximately 36% for the three
months ended September 30, 1995 over the comparable period in 1994 due to
decreases in production volume and average sales price. The gas processing
plant which commenced operations on March 30, 1995 to process "sour gas" from
two Madison wells had lower production volume in August 1995 due to plant
maintenance work. The Company's oil sales decreased approximately 29% over the
comparable period in 1994 due to decreases in production volume and average
sales price. The production volume decreased due to wells shut-in for
maintenance and repairs in August 1995 which resulted in no oil sales. The
other product revenue relates to the sale of sulphur as a by-product from the
gas processing plant.
The production volumes and average sales prices during the periods were as
follows:
Three Months Ended
September 30,
1995 1994
Oil and condensate (barrels) 401 551
Average sales price per barrel $15.35 $15.79
Natural gas (mcf) 12,020 13,011
Average sales price per mcf $ 1.19 $ 1.72
Average oil production cost per barrel was $57.68 for the three months ended
September 30, 1995 compared to $35.71 for the comparable period in 1994. The
average oil production cost per barrel was high in 1995 and 1994 due to repairs
and maintenance on certain wells which occurred in both periods. These costs
increased the average oil production cost per barrel by $45.31 in 1995 and
$24.68 in 1994. The wells within the field may require additional workover
expenditures in future periods.
The Company's royalty interests in "sour gas" production are subject to plant
processing costs (depreciation and operating costs) and severance and ad
valorem taxes. The processing deduction attributable to an individual product
(methane, sulphur or CO2) will not exceed 90 percent of the revenue received
for that product, net of severance tax deductions. The Company and other
royalty owners are presently negotiating with the plant operator to eliminate
certain processing costs which may not be in accordance with applicable state
rules and regulations. Production from the Company's other natural gas royalty
interests ("sweet gas") do not incur any production costs other than severance
and ad valorem taxes.
Operating expenses for the three months ended September 30, 1995 increased
approximately 11% over the comparable period in 1994 due to legal and
accounting expenditures in connection with the proposed acquisition of oil and
gas assets from Karlton Terry Oil Company.
Depreciation and amortization decreased approximately 6% for the three months
ended September 30, 1995 over the comparable period in 1994 due to a reduction
in property and equipment.
Interest and dividend income for the three months ended September 30, 1995
decreased approximately 33% over the comparable period in 1994 due to changes
in portfolio mix and sales of marketable securities.
Rental income decreased approximately 49% for the three months ended September
30, 1995 over the comparable period in 1994 due to nonrenewal of an office
lease by a lessee.
The equity in partnership losses of $7,749 represents the Company's 19% share
of operating losses for the three months ended September 30, 1995 in a golf
driving range, miniature golf and batting facility.
Six Months Ended September 30, 1995 Compared to 1994
The Company's gas royalty revenue decreased by approximately 23% for the six
months ended September 30, 1995 over the comparable period in 1994 due
primarily to a lower average sales price. The Company's oil sales decreased by
approximately 15% over the comparable period in 1994 due primarily to lower
production volume.
The production volumes and average sales prices during the periods were as
follows:
Six Months Ended
September 30,
1995 1994
Oil and condensate (barrels) 1,110 1,362
Average sales price per barrel $16.31 $15.79
Natural gas (mcf) 23,498 21,377
Average sales price per mcf $ 1.24 $ 1.76
Average oil production cost per barrel was $28.53 for the six months ended
September 30, 1995 compared to $38.24 for the comparable period in 1994. The
average production cost per barrel includes $16.89 for repairs and maintenance
in 1995 compared to $29.76 in 1994. The wells within the field may require
additional workover expenditures in future periods.
Operating expenses for the six months ended September 30, 1995 increased
approximately 7% over the comparable period in 1994 due to legal and accounting
expenditures in connection with the proposed acquisition of oil and gas assets
from Karlton Terry Oil Company.
Depreciation and amortization decreased approximately 6% for the six months
ended September 30, 1995 over the comparable period in 1994 due to a reduction
in property and equipment.
Interest and dividend income for the six months ended September 30, 1995
decreased approximately 27% over the comparable period in 1994 due to changes
in portfolio mix and sales of marketable securities.
Rental income decreased approximately 49% for the six months ended September
30, 1995 over the comparable period in 1994 due to nonrenewal of an office
lease by a lessee. The office space remains vacant as of September 30, 1995.
The equity in partnership losses of $20,764 represents the Company's 19% share
of operating losses for the six months ended September 30, 1995 in a golf
driving range, miniature golf and batting facility.
FINANCIAL CONDITION
Net cash used in operations of $211,743 for the six months ended September 30,
1995 was the result of a net loss of $267,699 decreased by non-cash net
expenses of $44,638 (comprised of depreciation and amortization, equity in
partnership losses and gain on sale of marketable securities) and changes in
operating assets and liabilities of $11,318. Net cash used in operations of
$174,920 for the six months ended September 30, 1994 was the result of a net
loss of $294,743 decreased by non-cash net expenses of $122,892 (comprised of
depreciation and amortization, equity in partnership losses, gain on sale of
marketable securities and abandoned leases) and changes in operating assets and
liabilities of $3,069.
Net cash provided by investing activities by the Company was $69,903 and
$232,554 for the six months ended September 30, 1995 and 1994, respectively.
During the six months ended September 30, 1995, the Company utilized the net
cash proceeds of $75,628 from the purchase and sale of marketable securities
for capital expenditures of $9,003 and operating activities. In addition, the
Company borrowed $40,000 for operating activities. During the six months ended
September 30, 1994, the Company utilized the net cash proceeds of $248,901 from
the purchase and sale of marketable securities for capital expenditures of
$12,867, the purchase of treasury stock for $35,351 and operating activities.
The Company's material commitments for capital expenditures in the next twelve
months will be in conjunction with the development of the real estate located
in Colorado. The amount of such commitment is not known at this time but it is
expected that any expenditures will be funded by internal sources.
The Company may make additional purchases of its common stock from time to
time. The shares repurchased are being held as treasury shares which affords
the Company greater financial flexibility to respond to business opportunities
that might arise.
In addition to its real estate and oil and gas operations, the Company is
reviewing other business opportunities. Subsequent to September 30, 1995, the
Company entered into an Asset Purchase Agreement with Karlton Terry Oil Company
and its principals to acquire oil and gas assets for shares of Class B common
stock of Metro representing 80% of shares of common stock to be issued and
outstanding. The Asset Purchase Agreement is subject to approval by Metro's
stockholders. (See Note 4 "Subsequent Events" included with the unaudited
consolidated financial statements.)
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Default 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
Exhibit 27. Financial Data Schedule (submitted only in
electronic format)
b. Reports on Form 8-K
The following report on Form 8-K was filed by Metro:
Date of Report Item Reported Financial Statements Filed
August 25, 1995 Item 5 None
SIGNATURES
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.
METRO CAPITAL CORPORATION
(Registrant)
Date: November 6, 1995 By: /s/ Robert E. Thrailkill
Robert E. Thrailkill
President
(Principal Executive Officer)
Date: November 6, 1995 By: /s/ John A. Alsko
John A. Alsko
Vice President-Finance
(Principal Financial and
Accounting Officer)