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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
Date of Report March 31, 2000
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OCEANIC EXPLORATION COMPANY
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(Exact name of Registrant as specified in its charter)
Delaware 0-6540 84-0591071
- ---------------------------- ------------ -------------------
(State or other jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification No.)
5000 South Quebec Street, Suite 450, Denver, Colorado 80237
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(Address of principal executive offices)
(303) 220-8330
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(Registrant's telephone number)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
Oceanic Exploration Company (the "Registrant") hereby amends and supplements its
current report on Form 8-K originally filed with the Securities and Exchange
Commission (the "Commission") on April 14, 2000, describing the acquisition by
the Registrant of the employment operations and certain assets of Alliance
Services Associates, Inc., the wholly owned subsidiary of Alliance Staffing
Associates, Inc. (collectively "Alliance") on March 31, 2000.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
The following financial statements, pro forma financial information, and
exhibits are filed as part of this report:
(a) Financial Statements of Businesses Acquired
Financial Statements of Alliance Staffing Associates
o Independent Auditor's Report
o Balance Sheets -- December 31, 1999 and 1998
o Statements of Operations for the years ended December
31, 1999 and 1998
o Statements of Cash Flows for the years ended December
31, 1999 and 1998
o Notes to Consolidated Financial Statements
(b) Pro Forma Financial Statements
o Unaudited Pro Forma Consolidated Statement of
Operations for the three months ended March 31, 2000
o Unaudited Pro Forma Consolidated Statement of
Operations for the twelve months ended December 31,
1999
o Notes to Unaudited Pro Forma Consolidated Financial
Statements
(c) Exhibits
o None
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ALLIANCE STAFFING ASSOCIATES, INC.
AND SUBSIDIARY
Consolidated Financial Statements
December 31, 1999 and 1998
(With Independent Auditors' Report Thereon)
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INDEPENDENT AUDITORS' REPORT
The Board of Directors
Oceanic Exploration Company:
We have audited the accompanying consolidated balance sheets of Alliance
Staffing Associates, Inc. and subsidiary (as defined in note 1) (the Company) as
of December 31, 1999 and 1998, and the related consolidated statements of
operations and cash flows for the years then ended. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Alliance Staffing
Associates, Inc. and subsidiary as of December 31, 1999 and 1998, and the
results of their operations and their cash flows for the years then ended in
conformity with generally accepted accounting principles.
KPMG LLP
Denver, Colorado
May 17, 2000
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ALLIANCE STAFFING ASSOCIATES, INC.
AND SUBSIDIARY
Consolidated Balance Sheets
(As defined in note 1)
December 31, 1999 and 1998
ASSETS 1999 1998
----------- -----------
Current assets:
Cash $ 39,570 307,185
Accounts receivable 279,621 298,082
Accounts receivable from major customer (note 6) 42,285 216,821
Receivable from affiliate (note 7) 118,548 130,242
Prepaid expenses and other assets 77,413 39,913
----------- -----------
Total current assets 557,437 992,243
Property and equipment:
Equipment 16,202 16,202
Computers and office equipment 280,607 260,095
Furniture and fixtures 8,836 8,836
----------- -----------
Net property and equipment 305,645 285,133
Less: accumulated depreciation and amortization (209,075) (157,930)
----------- -----------
96,570 127,203
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$ 654,007 1,119,446
=========== ===========
LIABILITIES AND NET INVESTMENT OF STOCKHOLDERS
Current liabilities:
Notes payable to Sorrento West Properties, Inc. (note 3) $ 373,693 283,693
Accounts payable 13,418 26,447
Accrued expenses 116,707 168,745
----------- -----------
Total current liabilities 503,818 478,885
Net transactions with stockholders (note 2) 150,189 640,561
----------- -----------
$ 654,007 1,119,446
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See accompanying notes to consolidated financial statements.
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ALLIANCE STAFFING ASSOCIATES, INC.
AND SUBSIDIARY
Consolidated Statements of Operations
(As defined in note 1)
Years ended December 31, 1999 and 1998
1999 1998
----------- -----------
Staffing revenue $ 3,847,822 8,719,744
Cost of goods sold 3,263,014 7,592,241
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Gross profit from operations 584,808 1,127,503
General and administrative expenses 998,535 958,236
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Income (loss) from operations (413,727) 169,267
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Other income (expense):
Gain on sale of fixed assets -- 13,651
Interest expense (24,925) (20,383)
----------- -----------
(24,925) (6,732)
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Income (loss) before income taxes (438,652) 162,535
Income tax benefit (expense) (note 4) 51,000 (51,000)
----------- -----------
Net income (loss) $ (387,652) 111,535
=========== ===========
See accompanying notes to consolidated financial statements.
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ALLIANCE STAFFING ASSOCIATES, INC.
AND SUBSIDIARY
Consolidated Statements of Cash Flows
(As defined in note 1)
Years ended December 31, 1999 and 1998
1999 1998
--------- ---------
Cash flows from operating activities:
Net income (loss) $(387,652) 111,535
Adjustments to reconcile net income (loss) to net cash provided
(used) by operating activities:
Depreciation and amortization 51,145 50,872
Gain on sale of fixed assets -- (13,651)
Changes in operating assets and liabilities:
Accounts receivable 204,691 151,312
Prepaid expenses and other assets (37,500) 1,246
Accounts payable (13,029) 18,040
Accrued expenses (52,038) (52,334)
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Net cash provided (used) by operating activities (234,383) 267,020
--------- ---------
Cash flows from investing activities:
Purchases of property and equipment (20,512) (71,900)
Proceeds from sale of assets -- 19,400
--------- ---------
Net cash used in investing activities (20,512) (52,500)
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Cash flows from financing activities:
Net transactions with stockholders (102,720) (32,992)
Proceeds from note payable 90,000 50,000
--------- ---------
Net cash provided (used) by financing activities (12,720) 17,008
--------- ---------
Net increase (decrease) in cash and cash equivalents (267,615) 231,528
Cash and cash equivalents at beginning of year 307,185 75,657
--------- ---------
Cash and cash equivalents at end of year $ 39,570 307,185
========= =========
Supplemental disclosure of cash flow information:
Cash paid during the year for interest $ 11,255 29,599
========= =========
Cash paid during the year for taxes $ 17,425 33,575
========= =========
See accompanying notes to consolidated financial statements.
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ALLIANCE STAFFING ASSOCIATES, INC.
AND SUBSIDIARY
Notes to Consolidated Financial Statements
December 31, 1999 and 1998
(1) BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) ORGANIZATION AND BASIS OF PRESENTATION
Alliance Staffing Associates, Inc. (the Company), a Delaware
corporation, was established in 1992 to provide personnel on a
temporary payrolling and direct placement basis to General
Atomics, its affiliates and other companies that focused on
government contracting. In 1998, General Atomics discontinued
utilizing Alliance Staffing as their temporary staffing
provider.
In 1993, Alliance Services Associates (Alliance Services), a
California corporation, was established to expand the services
of Alliance Staffing Associates to commercial companies
throughout San Diego. Alliance Services is a wholly owned
subsidiary of the Company which initially focused on providing
industrial workers to the community, but based on changes in
the San Diego economy, has shifted its focus to administrative
and customer service.
In March 2000, Oceanic Exploration Company (Oceanic) acquired
the employment operations and certain specific assets of the
Company from the stockholders of the Company (the
Stockholders).
The accompanying consolidated financial statements of the
Company have been derived from historical financial statements
of the Company based upon assumptions and allocations
management believe represent a reasonable basis for presenting
the historical financial position, results of operations and
cash flows from operations of the Company acquired by Oceanic.
This presentation is intended to provide a reasonable
representation of the historical financial information of the
acquired operations and excludes certain activities of the
Company that were not acquired by Oceanic. Accordingly, the
Company's financial statements do not present the financial
position and results of operations of the former company.
(b) CASH AND CASH EQUIVALENTS
The Company considers cash on hand and amounts due on demand
from banks to be cash and cash equivalents.
(c) PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost. Depreciation is
calculated using the straight-line method over the estimated
useful lives of the assets ranging from 5 to 7 years.
(d) INCOME TAXES
The Company provides for income taxes using the asset and
liability method of accounting for income taxes. Under the
asset and liability method, deferred tax assets and
liabilities are recognized for the future tax consequences
attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their
respective tax bases and net operating loss carryforwards.
Deferred tax assets and liabilities are measured using enacted
income tax rates expected to apply to taxable income in the
years in which those differences
(Continued)
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ALLIANCE STAFFING ASSOCIATES, INC.
AND SUBSIDIARY
Notes to Consolidated Financial Statements
December 31, 1999 and 1998
are expected to be recovered or settled. Under the asset and
liability method, the effect on deferred tax assets and
liabilities of a change in income tax rates is recognized in
the results of operations in the period that includes the
enactment date.
(e) REVENUE RECOGNITION
The Company recognizes revenue as services are performed.
Customers are invoiced weekly.
(f) COST OF GOODS SOLD
Cost of goods sold includes the direct cost of temporary
employees, including the payroll costs, workers compensation
liability insurance and employer payroll taxes.
(g) ADVERTISING EXPENSE
Advertising is charged to expense as incurred and was
approximately $47,462 and $50,717 for the years ended December
31, 1999 and 1998, respectively.
(h) USE OF ESTIMATES
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial
statements and reported amounts of sales and expenses during
the reporting period. Actual results could differ
significantly from those estimates.
(i) IMPAIRMENT OF LONG-LIVED ASSETS AND ASSETS TO BE DISPOSED OF
The Company accounts for long-lived assets in accordance with
the provisions of Statement of Financial Accounting Standards
No. 121, Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed Of (SFAS No. 121).
SFAS No. 121 requires impairment losses to be recorded on
long-lived assets whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is
measured by a comparison of the carrying amount of an asset to
future net cash flows expected to be generated by the asset.
If such assets are considered to be impaired, the impairment
to be recognized is measured by the amount by which the
carrying amount of the assets exceeds the fair value of the
assets. No impairment losses have been recognized by the
Company.
(Continued)
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ALLIANCE STAFFING ASSOCIATES, INC.
AND SUBSIDIARY
Notes to Consolidated Financial Statements
December 31, 1999 and 1998
(2) NET TRANSACTIONS WITH STOCKHOLDERS
Net operating losses incurred by the Company have been reflected as
reductions in net transactions with stockholders in the balance sheets.
The net transactions with stockholders consist of both cash and
non-cash amounts. Changes in the net transactions with stockholders for
the years ended December 31, 1999 and 1998 were as follows:
1999 1998
--------- ---------
Net transactions with stockholders - beginning $ 640,561 562,018
of year
Transactions with stockholders, net (102,720) (32,992)
Net income (loss) (387,652) 111,535
--------- ---------
Net transactions with stockholders - end
of year $ 150,189 640,561
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(3) NOTES PAYABLE TO SORRENTO WEST PROPERTIES, INC.
The notes payable of $373,693 are payable to Sorrento West Properties,
Inc., (Sorrento West) on demand with interest accruing at 8% per annum
on the unpaid balance of the principal amount. Sorrento West is
controlled by the father of the shareholders of the Company. The notes
are secured by substantially all of the assets of the Company. Interest
payments are due annually and Alliance may also pay any portion of the
notes or interest at any time.
(4) INCOME TAXES
The provision for income taxes consisted of the following:
1999 1998
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Current income taxes benefit (expense):
Federal $ 48,000 (48,000)
State 3,000 (3,000)
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$ 51,000 (51,000)
======== ========
The provision for income taxes is different from that which would be
obtained by applying the statutory federal income tax rate due to state
taxes payable and the change in the valuation allowance.
(Continued)
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ALLIANCE STAFFING ASSOCIATES, INC.
AND SUBSIDIARY
Notes to Consolidated Financial Statements
December 31, 1999 and 1998
At December 31, 1999 and 1998, the tax effects of temporary differences
that give rise to significant portions of the deferred tax assets and
liabilities are as follows:
1999 1998
-------- --------
Deferred tax assets:
Net operating loss carryforwards $ 73,000 --
Property and equipment 1,300 600
-------- --------
74,300 600
Valuation allowance (74,300) (600)
-------- --------
Net deferred tax assets $ -- --
======== ========
The valuation allowance for deferred tax assets as of December 31, 1999
and 1998 was $74,300 and $600, respectively. The net change in the
valuation allowance for the years ended December 31, 1999 and 1998 was
an increase of $73,700 and $500, respectively.
At December 31, 1999, the Company had net operating loss carryforwards
of approximately $215,000. If not utilized, the tax net operating
losses will expire during the period from 2000 through 2020.
(5) LEASES
The Company leases office space and certain equipment under operating
leases which expire through November 2001. The Company has an option to
extend the lease for additional periods. Rent expense for the year
ended December 31, 1999 and 1998 was approximately $53,775 and $57,875,
respectively. Future minimum lease payments under non-cancelable
operating leases are as follows:
2000 $ 56,668
2001 47,327
--------
$103,995
========
(Continued)
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ALLIANCE STAFFING ASSOCIATES, INC.
AND SUBSIDIARY
Notes to Consolidated Financial Statements
December 31, 1999 and 1998
(6) MAJOR CUSTOMER
The company received revenue in the amount of $899,604 and $4,987,408
in 1999 and 1998, respectively from General Atomics and its affiliates
(General Atomics). General Atomics is controlled by the father of the
shareholders of the Company.
(7) RELATED PARTY TRANSACTIONS
Related party transactions consist of accounts receivable from Points
Four World Travel Service (Points Four) related to payments made on
behalf of Points Four, an affiliate of the Company in the amount of
$118,548 and $130,242 as of December 31, 1999 and 1998, respectively.
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OCEANIC EXPLORATION COMPANY
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
On March 31, 2000, Oceanic Exploration Company (the "Registrant") purchased the
employment operations and certain assets of Alliance Services Associates, Inc.,
the wholly owned subsidiary of Alliance Staffing Associates, Inc. (collectively
"Alliance") for $581,000. The acquisition was accounted for using the purchase
method of accounting in the Registrant's Form 10-QSB, filed with the Securities
and Exchange Commission on May 12, 2000, for the three months ended March 31,
2000.
The following unaudited pro forma consolidated statements of operations for the
three months ended March 31, 2000 and for the twelve months ended December 31,
1999, assumes the acquisition of Alliance had occurred on January 1, 1999 and
include the historical unaudited consolidated statements of operations for
Registrant for the year ended December 31, 1999 and the quarter ended March 31,
2000, adjusted for the pro forma effects of the acquisition.
The unaudited pro forma consolidated statements are not necessarily indicative
of the results of operations that would actually have occurred if the
transaction had been consummated as of January 1, 1999. These statements should
be read in conjunction with the historical financial statements and related
notes thereto of the Registrant, in its annual report on Form 10-K and Alliance
financial statements included herein.
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OCEANIC EXPLORATION COMPANY
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2000
HISTORICAL HISTORICAL
OCEANIC ALLIANCE
EXPLORATION STAFFING PRO FORMA PRO FORMA
COMPANY ASSOCIATES ADJUSTMENTS CONSOLIDATED
------------ ------------ ------------ ------------
Revenue:
Net profits interest proceeds $ 6,739,342 -- -- $ 6,739,342
Interest income 2,037,999 -- -- 2,037,999
Staffing income -- 1,033,450 -- 1,033,450
Other income 258,904 -- -- 258,904
------------ ------------ ------------ ------------
9,036,245 1,033,450 -- 10,069,695
Cost of goods sold:
Staffing direct costs -- 856,088 -- 856,088
------------ ------------ ------------ ------------
Gross profit from operations 9,036,245 177,362 -- 9,213,607
------------ ------------ ------------ ------------
Costs and expenses:
Interest and financing costs 14,914 8,472 14,780 (1) 38,166
Exploration expenses 3,480 -- -- 3,480
Amortization and depreciation 160 10,728 23,005 (2) 33,893
General and administrative 245,057 277,657 8,750 (3) 531,464
------------ ------------ ------------ ------------
263,611 296,857 46,535 607,003
------------ ------------ ------------ ------------
Income (loss) before income taxes 8,772,634 (119,495) (46,535) 8,606,604
Income tax expense (249,178) -- -- (249,178)
------------ ------------ ------------ ------------
Net income (loss) $ 8,523,456 (119,495) (46,535) $ 8,357,426
============ ============ ============ ============
Basic and diluted income per common share $ 0.84
============
See accompanying notes to unaudited pro forma
consolidated financial statements.
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OCEANIC EXPLORATION COMPANY
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1999
HISTORICAL HISTORICAL
OCEANIC ALLIANCE
EXPLORATION STAFFING PRO FORMA PRO FORMA
COMPANY ASSOCIATES ADJUSTMENTS CONSOLIDATED
----------- ----------- ----------- ------------
Revenue:
Interest income $ 1,434 -- -- $ 1,434
Staffing income -- 3,847,822 -- 3,847,822
Other income 566,997 -- -- 566,997
----------- ----------- ----------- -----------
568,431 3,847,822 -- 4,416,253
Cost of goods sold:
Staffing direct costs -- 3,263,014 -- 3,263,014
----------- ----------- ----------- -----------
Gross profit from operations 568,431 584,808 -- 1,153,239
----------- ----------- ----------- -----------
Costs and expenses:
Interest and financing costs 120,057 24,925 59,120(1) 204,102
Exploration expenses 14,021 -- -- 14,021
Amortization and depreciation 48,140 51,145 92,019(2) 191,304
General and administrative 910,434 947,390 35,000(3) 1,892,824
----------- ----------- ----------- -----------
1,092,652 1,023,460 186,139 2,302,251
----------- ----------- ----------- -----------
Loss before income taxes (524,221) (438,652) (186,139) (1,149,012)
Income tax benefit 33,202 51,000 -- 84,202
----------- ----------- ----------- -----------
Net Loss $ (491,019) (387,652) (186,139) $(1,064,810)
=========== =========== =========== ===========
Basic and diluted loss per common share $ (0.11)
===========
See accompanying notes to unaudited pro forma
consolidated financial statements.
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OCEANIC EXPLORATION COMPANY AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
(A) Basis of Presentation
The unaudited Pro Forma Consolidated Statement of Operations for the
three months ended March 31, 2000, includes the unaudited historical
results of operations for Oceanic Exploration Company and Alliance
Staffing Associates for the three months ended March 31, 2000, adjusted
for the pro forma effects of the acquisition assuming acquisition
occurred on January 1, 1999.
The unaudited Pro Forma Consolidated Statement of Operations for the
twelve months ended December 31, 1999, includes the audited historical
results of operations for the nine months ended December 31, 1999 and
the unaudited historical results of operations for the three months
ended March 31, 1999 for Oceanic Exploration Company and the audited
results of operations for Alliance Staffing Associates for the twelve
months ended December 31, 1999, adjusted for the pro forma effects of
the acquisition assuming acquisition occurred on January 1, 1999.
1) For the purpose of this pro forma presentation, it has been
assumed that the costs of acquisition would have been financed
if the transaction had taken place on January 1, 1999.
Interest was calculated using total acquisition costs of
$716,605, at an interest rate of 8.25%, the same rate paid by
Oceanic Exploration Company on other debt during the same
period.
2) To record depreciation and amortization expense on acquired
assets. Amortization of the excess of acquisition cost over
fair value of net assets acquired is based on a 10-year useful
life.
3) To record increased compensation costs related to employment
contracts with management that were entered into as part of
the acquisition.
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SIGNATURE
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 hereunto duly authorized.
OCEANIC EXPLORATION COMPANY
Date 6/13/00 By /s/ Charles N. Haas
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President