SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
For Quarter Ended Commission File Number
October 31, 1995 1-7965
CASPEN OIL, INC.
(Exact name of registrant as specified in its charter)
Nevada 75-1325831
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
777 S. Wadsworth Boulevard
Irongate 3, Suite 201
Lakewood, CO 80226
(Address or principal executive offices)
(303) 987-0925
(Registrant's telephone number, including area code)
(Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities and 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 requirement for the past 90 days.
Yes X No
As of October 31, 1995, the Registrant had 18,092,200 shares of Common Stock
outstanding.
Transitional Small Business Disclosure Format: Yes ; No X
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CASPEN OIL, INC.
AND SUBSIDIARIES
FORM 10-QSB
October 31, 1995
PART I - FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements:
Condensed Consolidated Balance Sheets.................................1
Condensed Consolidated Statements of Operations.......................2
Condensed Consolidated Statement of Shareholders' Equity..............3
Condensed Consolidated Statements of Cash Flows.......................4
Notes to Condensed Consolidated Financial Statements..................5
Item 2. Management's Discussion and Analysis or
Plan of Operation...................................................6-7
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders...................8
Item 6. Exhibits and Reports on Form 8-K......................................8
Signatures.....................................................................9
CASPEN OIL, INC.
AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Unaudited)
October 31, July 31,
1995 1995
------------ ------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 143,149 $ 464,876
Accounts receivable and prepaid expenses, net of
allowance for doubtful accounts 189,231 327,038
Notes receivable 8,346 8,346
340,726 800,260
PROPERTY AND EQUIPMENT, AT COST
Oil and gas properties, full cost method of accounting 19,768,352 19,626,347
Other 240,830 240,830
20,009,182 19,867,177
Less accumulated depletion, depreciation and amortization 16,708,446 16,659,765
3,300,736 3,207,412
OTHER
Investments 833,520 833,520
Notes receivable, related party noncurrent 66,622 42,223
Notes receivable, noncurrent 48,045 48,045
Other 1,950 1,950
950,137 925,738
TOTAL ASSETS $ 4,591,599 $ 4,933,410
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable $ 1,547,500 $ 1,597,500
Accounts payable 633,473 956,116
Accrued expenses 546,374 523,973
Note payable, other 10,000 10,000
2,737,347 3,087,589
LONG-TERM LIABILITIES
Accrued expenses 66,667 66,667
Note payable, other 20,000 20,000
86,667 86,667
SHAREHOLDERS' EQUITY
Convertible preferred stock:
Series A 600,000 600,000
Series C 300,000 300,000
Series E 125,000 125,000
Common stock 180,922 180,922
Additional paid-in capital 21,091,871 21,091,871
Accumulated deficit (20,520,498) (20,528,929)
1,777,295 1,768,864
Less treasury stock 9,710 9,710
1,767,585 1,759,154
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 4,591,599 $ 4,933,410
See accompanying notes to condensed consolidated financial statements.
1
CASPEN OIL, INC.
AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Unaudited)
Three months ended
October 31,
1995 1994
--------- ---------
REVENUE
Oil and gas sales $ 194,464 $ 303,912
Overhead income 11,541 14,668
Interest income 3,986 6,222
Other 38,785 228,343
248,776 553,145
COSTS AND EXPENSES
Production and operating 117,080 163,993
Depletion, depreciation, and amortization 48,681 103,144
General and administrative 74,584 156,883
Interest expense -- 30,122
240,345 454,142
NET INCOME 8,431 99,003
DIVIDEND REQUIREMENTS ON PREFERRED STOCK 269,775 269,955
LOSS APPLICABLE TO COMMON STOCK $(261,344) (170,952)
LOSS PER COMMON SHARE $ (.01) $ (.01)
See accompanying notes to condensed consolidated financial statements
2
CASPEN OIL, INC.
AND SUBSIDIARIES
Condensed Consolidated Statement of Shareholders' Equity
(Unaudited)
Preferred Stock Common Stock Additional Accumu- Total
paid-in lated Treasury shareholders'
Series Shares Amount Shares Amount capital deficit stock equity
Balance at July 31, 1995 A 600,000 $600,000 18,092,222 $ 180,922 $21,091,871 $(20,528,929) $( 9,710) $1,759,154
C 300,000 300,000
E 125,000 125,000
Net Income for the three months ended
October 31, 1995 8,431 8,431
Balance at October 31, 1995
Series A 600,000 $600,000 18,092,222 $ 180,922 $21,091,871 $(20,520,498) $( 9,710) $1,767,585
Series C 300,000 $300,000
Series E 125,000 $125,000
3
CASPEN OIL, INC.
AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Three months ended
October 31,
-----------------------
1995 1994
--------- --------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 8,431 $ 99,003
Adjustments to reconcile net income
to net cash used in operating activities:
Depletion, depreciation, and amortization 48,681 103,144
Changes in operating assets and liabilities:
Decrease in accounts receivable
and prepaid expenses 137,807 132,019
Increase in other assets (24,399) -
Decrease in notes/accounts payable and accrued expenses (350,242) (374,626)
NET CASH USED IN
OPERATING ACTIVITIES (179,722) ( 40,460)
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from disposition of property and equipment 914 -
Purchase of property and equipment, net of property
sales and well credits (142,919) ( 631)
NET CASH USED IN INVESTING ACTIVITIES (142,005) ( 631)
CASH FLOWS FROM FINANCING ACTIVITIES
Sale of treasury stock for working capital - 207,694
Purchase of treasury stock - ( 100)
NET CASH PROVIDED BY FINANCING ACTIVITIES - 207,594
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (321,727) 166,503
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 464,876 628,955
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 143,149 $ 795,458
See accompanying notes to condensed consolidated financial statements.
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CASPEN OIL, INC.
AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
Three Months Ended October 31, 1995
(1) Basis of Presentation
The condensed interim consolidated financial statements included herein
are unaudited but in the opinion of management reflect all adjustments
(consisting of normal recurring accruals) necessary for a fair
presentation of the financial position of the Company at October 31,
1995, and the results of operations for the three month periods ended
October 31, 1995, and 1994. Interim results are not necessarily
indicative of expected annual results because of the impact of prices
obtained for oil and gas and other factors. These condensed
consolidated financial statements should be read in conjunction with
the consolidated financial statements of the Company, and related notes
thereto, included in its annual report on Form 10-KSB.
(2) Daiwa Bank, Ltd. Loan
In December 1990, at the request of Daiwa, the Company sold property,
which was mortgaged to Daiwa, for approximately $5,200,000. From the
proceeds of the sale, Daiwa received the total $5,200,000. Daiwa
applied $4,700,000 to the reduction of principal. Simultaneously, the
Company executed a 30-month extension note in the amount of $2,000,000,
with the guarantee by Daiwa that, upon payment of $500,000 in June
1993, the note would be renewed or restructured. Daiwa recognized that
the Company would be unable to make the $500,000 principal payment in
June 1993 and therefore returned $500,000 from the December 1990 sale
of property to the Company.
In June 1993, after the Company paid interest for thirty (30) months of
approximately $425,000, Daiwa refused to accept the $500,000 principal
reduction payment offered by the Company and refused to renew or
restructure the note claiming no legal obligation to do so and citing
its decision to divest itself of oil and gas loans.
On July 9, 1993, the Company received a demand notice from Daiwa for
$1,997,500 in payment of the loan balance remaining on the $15,000,000
Credit Revolver established by Daiwa in late 1988. On February 17,
1994, the Company sold certain oil and gas properties for $300,000 the
proceeds of which were used to reduce the bank debt principal to
$1,697,500.
As of October 31, 1995, the Company has voluntarily reduced the
outstanding principal balance to $1,547,500.
The Company has attempted to resolve the loan dispute. The Company
expects one of two developments between the Company and Daiwa in fiscal
year 1996: (a) the Company and Daiwa reach an agreement to reduce to
zero the outstanding loan balance inclusive of interest (However, there
can be no assurance that Daiwa will agree to do so, nor can there be
any assurance that Daiwa will not proceed to foreclose on the oil and
gas properties which secure the debt.); or (b) litigation results in
which the Company asserts lender liability claims for refusal to renew
the credit as represented, and Daiwa asserts claims for default
interest and attorneys' fees. Under the second alternative, the Company
estimates legal fees in the range of $150,000 in fiscal years
1996-1997.
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CASPEN OIL, INC.
AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis or Plan of Operation
The following discussion of the Company's financial condition and results of
operations should be read in conjunction with the condensed consolidated
financial statements included in this report and the consolidated financial
statements and notes contained in the Company's annual report on Form 10-KSB for
the fiscal year ended July 31, 1995.
Liquidity and Capital Resources
During the three months ended October 31, 1995, the working capital deficit
increased from July 31, 1995, by approximately $59,000. This increase is due
largely to the reduction of severance tax liability, due to settlement with
Torch Operating Company. Motion for dismissal of the litigation with Torch is to
be filed with the Louisiana federal district court in December 1995; and to the
pay down of certain outstanding trade payables, as well as principal loan
reduction to the Daiwa Bank debt of $50,000.
The Company's current liabilities exceed current assets by $2,346,621 at October
31, 1995. The working capital deficit at October 31, 1995, is due primarily to
the $1,547,500 of the Company's debt due to Daiwa Bank which matured in June
1993 (See Note 2) and to outstanding trade and note payables of an approximate
$850,000.
The Company anticipates that given its current cash position and assuming a
satisfactory resolution of the Daiwa matter, it will have sufficient working
capital to meet its obligations during the ensuing fiscal year.
6
CASPEN OIL, INC.
AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis or Plan of Operation, Continued
Results of Operations
Oil and gas revenues were substantially lower in the three months ended October
31, 1995, as compared to the three months ended October 31, 1994. This was
primarily attributable to higher gas prices in 1994, as well as oil production
at the Vermilion Bay lease has decreased slightly over 1994.
The Company experienced lower gas prices in the three months ended October 31,
1995, compared with those received in the same period last year, whereas
slightly higher oil prices were experienced in the first three months of fiscal
year 1995 when compared with the same period last year. Average oil and gas
prices received in the three months ended October 31, 1995, were approximately
$16.00 per barrel of oil and $1.35 per MCF gas as compared to approximately
$15.80 per barrel of oil and $1.49 per MCF gas for the three months ended
October 31, 1994.
The Company reported a net income of $8,431 for the three months ended October
31, 1995, compared to a net income of $99,003 for the three months ended October
31, 1994. This is primarily due to higher oil and gas revenues and comparatively
lower production and operating expenses for the three months ended October 31,
1994, as compared with the three months ended October 31, 1995. Oil and gas
revenues approximated $194,000 for the three months ended October 31, 1995,
while revenues for the same period in 1994 approximated $304,000. Production and
operating expenses for the quarter ended October 31, 1995, were approximately
$117,000, as compared to the quarter ended October 31, 1994, which were
approximately $164,000. The increase in lease operating expenses to 60 percent
of oil and gas sales from 54 percent generally reflects the activities detailed
above with respect to the decrease in oil and gas revenues for the three months
ended October 31, 1995.
General and administrative expenses for the three months ended October 31, 1995,
decreased by approximately $82,000 from the corresponding three months ended
October 31, 1994. This decrease primarily related to lower costs of merger and
acquisition activities, including legal and accounting costs.
Series A Preferred Stock Cumulative Dividends In Arrears
The terms of the Series A Shares provide that no dividends may be paid on the
Common Shares or Series C or E Preferred Shares while dividends on the Series A
Shares are in arrears. The Company has not paid any dividends on the Series A
Shares since June 30, 1988. As of October 31, 1995, dividends on the Company's
Series A Shares are in arrears $15.74 per share for a total of $9,435,752.
7
CASPEN OIL, INC.
AND SUBSIDIARIES
Part II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits - none
(b) Reports on Form 8-K - none
8
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.
CASPEN OIL, INC.
December 18, 1995 By:/s/ Gary N. Davis
--------------------------
Gary N. Davis, Treasurer
9