ELINK\FILING\10QSBSEC
US SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
Quarterly report pursuant section 13 or 15(d) of the Securities Exchange Act of
1934
For the quarterly period ended: March 31, 1999
Commission file number: 000-29722
Aurora Energy, Ltd.
(Exact name of small business issuer as
specified in its charter)
NEVADA 91-1780941
(State or other jurisdiction (IRS Employer
of incorporation) Identification No.)
3760 N. US-31 South, Traverse City, MI 49684
(Address of principal executive offices)
(616) 941-0073
(Issuer's telephone number)
N/A
(Former name, former address and former fiscal year, if changed since last
report)
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
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE
YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution
of securities under a plan confirmed by court.
Yes x No
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of ech of the issuer's classes of common
equity, as of the latest practicable date: 8,691,697
Transitional Small Business Disclosure Format (check one); Yes No X
Part I - Financial Information
Item 1 - Financial Statements
AURORA ENERGY, LTD. and SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31, December 31
ASSETS 1999 1998
Current assets
Cash and cash equivalents $ 273,320 $ 13,967
Accounts receivable 282,516 415,732
Prepaid expenses 6,534 9,802
Total current assets 562,370 439,501
Oil and gas properties, using full cost
accounting
Properties not subject to amortization 764,764 1,818,043
Properties being amortized 1,327,824 233,831
Total 2,092,588 2,051,874
Less accumulated amortization 39,403 25,379
Oil and gas properties, net 2,053,185 2,026,495
Investment in oil and gas partnerships 132,885 138,026
Property and equipment, net 62,098 60,592
Total assets 2,810,538 $ 2,664,614
See accompanying notes.
March 31, December 31,
LIABILITIES AND STOCKHOLDERS' EQUITY 1999 1998
Current liabilities
Accounts payable $ 532,231 $ 626,074
Program designated funds 98,751 --
Current portion of capital lease obligations 58,626 14,739
Short-term bank borrowings 620,000 610,000
Accrued expenses 30,457 23,212
Total current liabilities 1,340,065 1,274,025
Capital lease obligations, net of current portion 220,480 19,087
Notes payable - affiliates 6,640 --
Total liabilities 1,567,185 1,293,112
Stockholders' equity
Common stock, $.001 par value; 500,000,000
shares authorized; 8,691,697 shares
issued and outstanding 8,692 8,692
Additional paid-in capital 1,869,073 1,869,073
Accumulated deficit (634,412) (506,263)
Total stockholders' equity 1,243,353 1,371,502
Total liabilities and stockholders' equity $ 2,810,538 $ 2,664,614
See accompanying notes.
AURORA ENERGY, LTD. and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998
1999 1998
Revenues
Oil and gas sales $ 31,395 $ 604
Equity in loss of investee partnerships (5,142) (46,349)
Interest income 1,098 7,542
Other revenue 24,351 (3,396)
Total revenues 51,702 (41,599)
Expenses
General and administrative 100,500 147,196
Production and lease operating 43,967 2,523
Depreciation and amortization 16,334 2,196
Interest 19,050 1,498
Total expenses 179,851 153,413
Net loss $ (128,149) $ (195,012)
Net loss per basic and diluted common share $ (.01) (.02)
See accompanying notes.
AURORA ENERGY, LTD. and CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
Additional
Common Stock Paid in Accumulated
Shares Amount Capital Deficit Totals
Balances at
December 31, 1998 8,691,697 $8,692 $1,869,073 $(506,263) $1,371,502
Net loss -- -- -- (128,149) (128,149)
Balance at
March 31, 1999 8,691,697 $8,692 $1,869,073 $(634,412) $1,243,353
See accompanying notes.
AURORA ENERGY, LTD. and CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND MARCH 31, 1998
1999 1998
Cash flows from operating activities:
Net loss $(128,149) $(195,012)
Adjustments to reconcile net loss to net
cash used in
operating activities:
Depreciation and amortization 16,334 2,196
Equity in loss of investee partnership 5,142 46,349
Changes in operating assets and liabilities
net of effects in 1999 from purchase of
Consolidated Exploration Co., LLC and
Indigas, LLC:
Accounts receivable 133,920 (162,315)
Prepaid expenses 3,268 3,666
Accounts payable (93,843) 132,291
Accrued expense 7,245 435
Net cash used in operating activities (56,083) (172,390)
Cash flows from investing activities
Capital expenditures for oil and gas
Properties (377,428) (37,356)
Capital expenditures for investee partnerships -- (80,773)
Proceeds from sale of oil and gas properties 336,383 --
Cash acquired from purchase of Consolidated -- --
Exploration Co., LLC and Indigas, LLC 104,656 --
Capital expenditures for property and
Equipment (117) (5,360)
Net cash provided by (used in) investing
Activities 63,494 (123,489)
Cash flows from financing activities
Proceeds from the sale of common stock -- 198,170
Short term bank borrowings 10,000 --
Proceeds of capital lease cash draws 250,000 --
Advances from investors -- 95,600
Payments made to reduce capital lease
Obligations (8,058) (2,282)
Net cash provided by financing activities 251,942 291,488
Net increase in cash and cash equivalents 259,353 (4,391)
Cash and cash equivalents, beginning of period 13,967 518,408
Cash and cash equivalents, end of period $273,320 $514,017
See accompanying notes.
AURORA ENERGY, LTD. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The Consolidated Balance Sheets as of March 31, 1999 and December 31,
1998, the Consolidated Statements of Operations for the three month
periods ending March 31, 1999 and March 31, 1998, the Consolidated
Statement of Changes in Stockholder's Equity and the Consolidated
Statements of Cash Flows for the three month periods ended March 31,
1999 and March 31, 1998 have been prepared by the Company. In the
opinion of management, all adjustments (which include only
reclassifications and normal recurring adjustments) necessary to present
fairly the balance sheet, results of operations, changes in
stockholder's equity, and cash flows at March 31, 1999 and for all
periods presented, have been made.
Certain information and footnote disclosures normally included in the
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. It is suggested
that these condensed consolidated financial statements be read in
conjunction with the financial statements and notes thereto included in
the Company's 1998 Annual Report. The results of operations for the
three-month period ended March 31, 1999 are not necessarily indicative
of the operating results for the full year.
Loss Per Share
Loss per share is computed at March 31, 1999 and March 31, 1998 using
the weighted average number of common shares outstanding during the
period (8,691,697 and 8,563,582 respectively) determined pursuant to
Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings
Per Share". This Statement requires a dual presentation and
reconciliation of "basic" and "diluted" per share amounts. Diluted
reflects the potential dilution of all common stock equivalents. Since
the assumed exercise of common stock options would be antidilutive, such
exercise is not assumed for purposes of determining diluted loss per
share. Accordingly, diluted and basic per share amounts are equal.
2. ACCOUNTING AND FINANCIAL REPORTING
The Company no longer considers itself in the developmental stage as the
Paxton Quarry Project, of which the Company owns a 29% working interest,
began revenue distributions during the first quarter of 1999. As this
project is part of the planned principal operations of the Company,
developmental stage presentation of accounting data is no longer
applicable.
AURORA ENERGY, LTD. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
3. SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING ACTIVITIES
Effective January 1, 1999, the Company acquired from principals William
Deneau and John Miller, Jr., 100% of their membership interests in
Consolidated Exploration Co, LLC (Conexco) and Indigas Energy, LLC
(Indigas) in exchange for the issuance of 1.44% overriding royalty
interests in the Company's Crossroads Project. Since the purchased
entities were wholly owned by Deneau and Miller, and thus remained under
the same control after acquisition by the Company as before acquisition,
the acquisitions were accounted for in a manner similar to a pooling of
interests. Notes payable of $3,320 each were issued to Deneau and
Miller which equaled the book value of the purchased entities and
quantified the value of the royalty interests.
The following presents the balance sheets of Conexco and Indigas as of
the date of their acquisition by the Company at January 1, 1999:
Conexco Indigas
ASSETS January 1, 1999 January 1, 1999 Totals
Current assets
Cash $ 88,004 $ 16,652 $ 104,656
Accounts receivable -- 703 703
Total current assets 88,004 17,355 105,359
Other assets
Organizational costs (net) 32 -- 32
Total assets $ 88,036 $ 17,355 $ 105,391
LIABILITIES
Program designated funds
(equals total liabilities) $ 82,100 $ 16,651 $ 98,751
Member's equity:
Membership contributions 500 500 1,000
Distributions (91,967) (18,800) (110,767)
Retained earnings 97,403 19,004 116,407
Total member's equity 5,936 704 6,640
Total liabilities and
member's equity $ 88,036 $ 17,355 $ 105,391
Form 10-QSB for the three month period ended March 31, 1999
Part I, Item 2
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND THE
RESULTS OF OPERATIONS
Results of Operations
During the first quarter of 1999, the Company operations have focused on
bringing the various projects and programs that it had developed in 1998
into production.
The Michigan Antrim production in the Paxton Quarry project began
distributing revenues in the first quarter. The Company owns 29%
interest in the project. The Paxton Quarry production revenues are a
significant step in covering our general and administrative costs. The
project is expanding to 16 wells, however, which is requiring additional
investment.
The Company continued developing the Crossroads project with additional
leasing, right of way acquisitions, arranging financing of the
facilities and gathering system and making contracts with transportation
systems to get the gas to market. The Company currently owns 50% of the
project and is the operator.
Liquidity and Financial Condition
The Company's financing efforts in the first quarter of 1999 were
concentrated on procuring the funds necessary to bring the Crossroads
Project on line. In that regard, the Company executed capital lease
agreements for the Crossroads central processing facility and gathering
system totaling $350,000. As of March 31, 1999, the Company had drawn
$250,000 of the $350,000. The final $100,000 was received April 15,
1999. In addition, the Company sold 17% of its working interest in the
Crossroads project for $336,383 cash, reducing the Company?s interest in
the project to 50%.
The Company rescinded a letter of credit previously issued as a blanket
drilling bond to the State of Michigan which was held against the
National City line of credit, providing a net $70,000 addition to the
available line of credit since the first of the year. The capital
leases, sale of working interests and the freeing up of the previously
unavailable credit line assure that the Company will be able to complete
Phase One of the Crossroads project. And despite some first quarter
delays in acquiring right-of-way for the pipeline connecting the
Company's Crossroads facility to NIPSCO's major pipeline, the project is
currently scheduled to begin gas sales this June.
The first quarter of 1998 saw the Company with considerably smaller
liabilities and cash of over $500,000. Over the last twelve months the
Company has invested the cash in various projects, as well as, covering
general and administrative expenses. In April of 1998, the Company
established a line of credit with National City Bank in the amount of
$750,000. The funds obtained through the line of credit were primarily
used in acquiring mineral leases and funding exploratory projects in
Ohio, Indiana and Michigan.
The Company contracted to acquire from affiliates the interests in two
small companies (Indigas Energy, L.L.C. and Consolidated Exploration,
L.L.C.) which own and manage leaseholds in Indiana and Kentucky.
Approximately 200,000 acres of leasehold in a primarily New Albany Shale
prospect area were acquired. Both entities are Michigan limited
liability companies.
During this quarter, the Company's transfer agent was acquired by
American Securities Transfer & Trust, Inc. (ASTT) located in Denver,
Colorado. ASTT has been in business since 1969 and are the ninth
largest US transfer agent. They are owned by Scotiabank Group, one of
the largest international banks in Canada. This change should bring an
improvement in service to the Company and its stockholders.
Form 10-QSB for the three month period ended March 31, 1999
Part II, Item 1
LEGAL PROCEEDINGS
There are no pending legal proceedings.
Part II, Item 2
CHANGES IN SECURITIES
There are no changes in securities.
Part II, Item 3
DEFAULTS UPON SENIOR SECURITIES
N/A
Part II, Item 4
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders during
the first quarter of 1999.
Part II, Item 5
OTHER INFORMATION
None
Part II, Item 6
INDEX TO EXHIBITS
(2) Plan of acquisition None
(3) (i) Restated Articles of Incorporation
Incorporated by reference from Form 10-QSB
For period ended September 30, 1997
(ii) Bylaws
Incorporated by reference from Form 10-QSB
For period ended September 30, 1997
(4) Instruments defining the rights of
Security holders
Incorporated by reference from Form 10-SB
(10) Material contracts
Incorporated by reference from Form 10-SB
P Equipment Lease Agreement, Gage Leasing
P Equipment Lease Agreement, Major Gathering Co.
P Acquisition of Consolidated Exploration, L.L.C.
P Acquisition of Indigas Energy, L.L.C.
P Master Purchase/Sale Agreement with Northern
Indiana Public Service Company
P Agreement to Acquire Working Interest - Dubuc
P Agreement for Crossroads Project - Burkhardt
(11) Statement regarding computation of per
Share earnings None
(15) Letter on unaudited interim financial
Information None
(18) Letter on change in accounting Principles None
(22) Published report regarding matters
Submitted to vote None
(24) Power of Attorney None
(27) Financial Data Schedule
(99) Additional Exhibits None
SIGNATURES
In accordance with the requirements on the Exchange Act,
the registrant caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Date: May 14, 1999 AURORA ENERGY, LTD.
BY: /s/ William W. Deneau
William W. Deneau, President
[ARTICLE] 5
[MULTIPLIER] 1
[PERIOD-TYPE] 3-MOS
[FISCAL-YEAR-END] DEC-31-1998
[PERIOD-END] MAR-31-1999
[CASH] 273,320
[SECURITIES] 0
[RECEIVABLES] 282,516
[ALLOWANCES] 0
[INVENTORY] 0
[CURRENT-ASSETS] 562,370
[PP&E] 74,020
[DEPRECIATION] 11,954
[TOTAL-ASSETS] 2,810,538
[CURRENT-LIABILITIES] 1,340,065
[BONDS] 227,120
[PREFERRED-MANDATORY] 0
[PREFERRED] 0
[COMMON] 8,692
[OTHER-SE] 1,869,073
[TOTAL-LIABILITY-AND-EQUITY] 2,810,538
[SALES] 31,395
[TOTAL-REVENUES] 51,702
[CGS] 43,967
[TOTAL-COSTS] 43,967
[OTHER-EXPENSES] 116,834
[LOSS-PROVISION] 0
[INTEREST-EXPENSE] 19,050
[INCOME-PRETAX] (128,149)
[INCOME-TAX] 0
[INCOME-CONTINUING] 0
[DISCONTINUED] 0
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] (128,149)
[EPS-PRIMARY] (.01)
[EPS-DILUTED] (.01)