UNITED STATES
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 June 30, 2002
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from ______ to ______.
Commission file number 0-6540.
OCEANIC EXPLORATION COMPANY
(Exact name of small business issuer as specified in its charter)
DELAWARE 84-0591071
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
7800 East Dorado Place, Suite 250, Englewood, CO 80111
(Address of principal executive offices)
(303) 220-8330
(Issuer's Telephone number)
---------------------------------------------------------
(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
--- ---
Shares outstanding at
July 31, 2002
9,916,154 Common $.0625 Par Value
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
OCEANIC EXPLORATION COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<Table>
<Caption>
ASSETS
June 30, 2002 December 31, 2001
------------- -----------------
Cash and cash equivalents $ 748,677 $ 2,462,692
Trade accounts receivable, net of allowance for doubtful
accounts of $12,585 and $7,968, respectively 179,062 273,544
Due from affiliates 10,599 14,340
Accounts receivable-miscellaneous 221,089 195,922
Prepaid expenses and other 70,569 85,038
------------- -----------------
Total current assets 1,229,996 3,031,536
------------- -----------------
Oil and gas property interests, full-cost method of accounting 39,000,000 39,000,000
Less accumulated amortization and depreciation (39,000,000) (39,000,000)
------------- -----------------
-- --
Furniture, fixtures and equipment 193,731 193,329
Less accumulated depreciation (102,195) (80,351)
------------- -----------------
91,536 112,978
Restricted cash 185,225 185,507
Goodwill, net of accumulated amortization of $73,534 (note 2) 346,659 346,659
Other intangible assets, net of accumulated amortization of
$112,500 and $87,500, respectively 37,500 62,500
------------- -----------------
$ 1,890,916 $ 3,739,180
============= =================
</Table>
(Continued)
2
OCEANIC EXPLORATION COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS CONTINUED
(UNAUDITED)
<Table>
<Caption>
LIABILITIES AND STOCKHOLDERS' EQUITY
June 30, 2002 December 31, 2001
------------- -----------------
Current liabilities:
Accounts payable $ 240,139 $ 321,965
Accounts payable to affiliates -- 60,000
United Kingdom taxes payable, including
accrued interest 511,057 495,156
Accrued expenses 181,674 179,916
------------- -----------------
Total current liabilities 932,870 1,057,037
Other non-current liabilities 25,476 26,736
------------- -----------------
Total liabilities 958,346 1,083,773
------------- -----------------
Stockholders' equity:
Preferred stock, $10 par value. Authorized
600,000 shares; none issued -- --
Common stock, $.0625 par value. Authorized
12,000,000 shares; 9,916,154 shares issued and
outstanding 619,759 619,759
Capital in excess of par value 155,696 155,696
Retained earnings 157,115 1,879,952
------------- -----------------
Total stockholders' equity 932,570 2,655,407
------------- -----------------
$ 1,890,916 $ 3,739,180
============= =================
</Table>
See accompanying notes to consolidated financial statements.
3
OCEANIC EXPLORATION COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<Table>
<Caption>
Three Months Ended Six Months Ended
June 30, June 30,
2002 2001 2002 2001
------------ ------------ ------------ ------------
Revenues:
Staffing revenue $ 486,305 578,452 $ 1,166,524 1,295,583
Interest income 6,484 52,301 14,700 129,767
Other 163,217 128,334 441,069 267,115
------------ ------------ ------------ ------------
656,006 759,087 1,622,293 1,692,465
------------ ------------ ------------ ------------
Costs and expenses:
Interest and financing costs 5,906 4,833 11,138 9,682
Exploration expenses (note 3) 458,635 306,343 1,128,213 336,829
Staffing direct costs 408,599 489,863 968,201 1,114,380
Amortization and depreciation 23,762 33,512 47,449 66,981
General and administrative 578,024 682,099 1,190,129 1,251,087
------------ ------------ ------------ ------------
1,474,926 1,516,650 3,345,130 2,778,959
------------ ------------ ------------ ------------
Loss before income taxes (818,920) (757,563) (1,722,837) (1,086,494)
Income tax benefit -- 34,815 -- 34,815
------------ ------------ ------------ ------------
Net loss $ (818,920) 722,748 (1,722,837) (1,051,679)
============ ============ ============ ============
Loss per common share $ (0.08) (0.07) (0.17) (0.11)
============ ============ ============ ============
</Table>
See accompanying notes to consolidated financial statements.
4
OCEANIC EXPLORATION COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<Table>
<Caption>
Six Months Ended
June 30,
2002 2001
------------ ------------
Cash flows from operating activities:
Net loss $ (1,722,837) (1,051,679)
Adjustments to reconcile net loss to cash
used in operating activities:
Amortization and depreciation 47,449 66,981
Loss on disposal of fixed assets 909 2,616
Changes in operating assets and liabilities:
Accounts receivable and due from affiliates 73,056 17,926
Prepaid expenses and other assets, including restricted cash 14,751 (3,436)
Accounts payable and due affiliates (141,826) 132,382
United Kingdom taxes payable, including accrued
interest payable and accrued expenses 17,659 112,082
Other non-current liabilities (1,260) --
------------ ------------
Cash used in operating activities (1,712,099) (723,128)
Cash flows from investing activities:
Purchase of fixed assets (2,216) (18,853)
Sale of fixed assets 300 --
------------ ------------
Cash used in investing activities (1,916) (18,853)
------------ ------------
Net decrease in cash (1,714,015) (741,981)
------------ ------------
Cash at beginning of period 2,462,692 5,475,156
------------ ------------
Cash at end of period $ 748,677 4,733,175
============ ============
</Table>
See accompanying notes to consolidated financial statements.
5
OCEANIC EXPLORATION COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2002
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The consolidated balance sheet as of December 31, 2001 that has been
derived from audited financial statements, and the unaudited interim
consolidated financial statements included herein, have been prepared pursuant
to the rules and regulations of the Securities and Exchange Commission. Certain
information and note disclosures normally included in annual financial
statements, prepared in accordance with accounting principles generally accepted
in the United States of America, have been condensed or omitted pursuant to
those rules and regulations, although Oceanic Exploration Company ("Oceanic" or
"the Company") believes that the disclosures made are adequate to make the
information presented not misleading. In the opinion of management, all
adjustments consisting of normal recurring accruals have been made which are
necessary for the fair presentation of the periods presented. Interim results
are not necessarily indicative of results for a full year. The information
included herein should be read in conjunction with the financial statements and
notes thereto included in the December 31, 2001 Form 10-KSB.
(2) GOODWILL
In July 2001, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards (SFAS) No. 142, "Goodwill and Other Intangible
Assets," which was adopted by the Company effective January 1, 2002. Under SFAS
No. 142, goodwill and intangible assets with indefinite useful lives will no
longer be amortized, but will instead be tested periodically for impairment.
SFAS No. 142 also requires that intangible assets with finite lives be amortized
over their respective estimated useful lives to their estimated residual values,
and reviewed periodically for impairment. As of January 1, 2002, goodwill
previously recorded in connection with the acquisition of Alliance, the net
balance of which was $346,659 as of December 31, 2001, will no longer be
amortized and will be reviewed for impairment at least annually. The Company has
completed its transitional impairment analysis and has determined there was no
impairment of goodwill as of January 1, 2002. There can be no assurance there
will not be an impairment of goodwill at a later date. Oceanic will continue to
monitor the carrying value of its goodwill and will record an impairment
write-down as required. The impact of adopting SFAS 142 in 2002 was a reduction
in expense during the first three and six months of 2002 of approximately
$10,500 and $21,000, respectively, as compared to the first three and six months
of 2001.
(3) EXPLORATION EXPENSES
As discussed in the December 31, 2001 Form 10-KSB, in 1974, Portugal
granted an exclusive offshore concession to Petrotimor Companhia de Petroleos,
S.A.R.L. ("Petrotimor"), a subsidiary of Oceanic, to explore for and develop oil
and gas in the Timor Gap area. On January
6
5, 1976, subsequent to Indonesia's unlawful invasion and occupation of East
Timor, Portugal agreed to a suspension of performance under the concession
agreement, based upon force majeure.
On December 11, 1989, Australia and Indonesia, ignoring Petrotimor's
rights under the concession from Portugal, signed the Timor Gap Treaty (the
"Treaty"), purporting to create a joint zone of cooperation whereby these two
countries could control the exploration and development of hydrocarbons in an
area over which both countries claimed rights. A portion of this area,
designated as Zone A, falls largely within the area where Petrotimor holds
rights under its concession agreement with Portugal. The Treaty created a Joint
Authority that purported to enter into production sharing contracts with various
companies who have carried out exploration activities.
During 1999, the people of East Timor voted for independence from
Indonesia and the United Nations initiated a transition of East Timorese
independence under the authority of the United Nations Transitional
Administration in East Timor. On August 30, 2001, East Timor elected
representatives to the Constituent Assembly to prepare a constitution for an
independent and democratic East Timor. A constitution was approved by the
Constituent Assembly and East Timor became an independent nation on May 20,
2002.
On August 21, 2001, Oceanic and Petrotimor issued a Statement of Claim
out of the Federal Court of Australia against the Commonwealth of Australia, the
Joint Authority established under the Treaty, and the Phillips Petroleum
companies operating within the Timor Gap area. Oceanic and Petrotimor claim that
the Treaty and the pursuant legislation of the Australian Parliament was illegal
for a number of reasons including: (1) the Treaty and the legislation sought to
claim significant portions of the continental shelf for Australia, which, under
international law, belonged to East Timor, and (2) the Treaty and the
legislation attempted to extinguish the property interest and rights granted by
the then legitimate sovereign power, Portugal, to Oceanic and Petrotimor,
without providing for just compensation. As the case involves complex issues of
international and Australian constitutional law, it is expected that it will
take a considerable period before the case is resolved.
In addition to the Statement of Claim issued in Australia, Oceanic has
submitted an application for an Expansion of Seabed Concession to the
transitional government in East Timor, which would, if granted, expand the 1974
Petrotimor concession to correspond with the offshore area East Timor is
entitled to claim under international law. The Company has received no response
to this application.
On March 23 and 24, 2002, Petrotimor sponsored a seminar in Dili, the
capital of East Timor, for the purpose of explaining to local government
representatives, and other interested parties, the maritime boundaries to which
East Timor is entitled under current international law and the substantial
economic benefits that would be derived by East Timor from claiming such
expanded boundaries.
During the six months ended June 30, 2002 and 2001, respectively, the
Company incurred expenses of $1,121,446 and $333,235, respectively, related to
its activities in the Timor Gap area which are included in exploration expense.
7
In connection with the Company's litigation over the Timor Gap area,
the Company was required to escrow certain funds in a separate bank account as
security for court costs in the event the Company's litigation proves
unsuccessful. The funds have been designated as restricted cash.
(4) INCOME TAXES
A valuation allowance was provided for the entire deferred income tax
asset attributable to the net operating loss incurred during the six months
ended June 30, 2002.
(5) INFORMATION CONCERNING BUSINESS SEGMENTS
The Company has operations in two business segments, oil and gas
exploration and employment operations. The Company's oil and gas exploration
activities have generally consisted of exploration of concessions through
various forms of joint arrangements with unrelated companies, whereby the
parties agree to share the costs of exploration, as well as the costs of, and
any revenue from, a discovery. The objective of the Company's employment
operations is to provide services consisting of executive search, professional
and technical placement, human resources consulting, site management and
contract staffing to companies primarily in the San Diego area.
The table below presents certain financial information for the
Company's operating segments as of and for the three and six months ended June
30, 2002 and 2001.
<Table>
<Caption>
OIL AND GAS
EXPLORATION,
INCLUDING EMPLOYMENT
THREE MONTHS ENDED JUNE 30, 2002 CORPORATE OPERATIONS TOTAL
- -------------------------------- ------------ ------------ ------------
Revenues 170,150 485,856 656,006
Loss before taxes (642,023) (176,897) (818,920)
Total assets 974,509 916,407 1,890,916
THREE MONTHS ENDED JUNE 30, 2001
- --------------------------------
Revenues 171,371 587,716 759,087
Loss before taxes (586,834) (170,729) (757,563)
Total assets 4,821,273 840,766 5,662,039
</Table>
8
<Table>
<Caption>
SIX MONTHS ENDED JUNE 30, 2002
- ------------------------------
Revenues 453,787 1,168,506 1,622,293
Loss before taxes (1,415,735) (307,102) (1,722,837)
Total assets 974,509 916,407 1,890,916
SIX MONTHS ENDED JUNE 30, 2001
- ------------------------------
Revenues 384,638 1,307,827 1,692,465
Loss before taxes (726,165) (360,329) (1,086,494)
Total assets 4,821,273 840,766 5,662,039
</Table>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Certain information in this Form 10-QSB includes "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. Readers can identify these
statements by words such as "may," "will," "expect," "anticipate," "estimate,"
"continue" or other similar words. These statements discuss future expectations,
contain projections of results of operations or financial condition or state
other forward-looking information and are based on certain assumptions and
analyses made by the Company in light of its experience and its perception of
historical trends, current conditions, expected future developments and other
factors it believes are appropriate in the circumstances. Such statements are
subject to a number of assumptions, risks and uncertainties, including such
factors as uncertainties in cash flow, expected acquisition benefits, the
volatility and level of oil and natural gas prices, production rates and reserve
replacement, reserve estimates, drilling and operating risks, competition,
litigation, environmental matters, the potential impact of government
regulations, fluctuations in the economic environment and other such matters,
many of which are beyond the control of the Company. Readers are cautioned that
forward-looking statements are not guarantees of future performance and that
actual results or developments may differ materially from those expressed or
implied in the forward-looking statements.
The following discussion and analysis should be read in conjunction
with Oceanic's Consolidated Financial Statements and Notes thereto as of
December 31, 2001 and June 30, 2002 and 2001 and for the respective periods then
ended.
LIQUIDITY AND CAPITAL RESOURCES
Oceanic has historically addressed long-term liquidity needs for oil
and gas exploration and development through the use of farm-out agreements.
Under such agreements, Oceanic sells a portion of its ownership interest in the
concession to an outside party who is then responsible for
9
the exploration activities. This is a strategy that Oceanic intends to continue
in the event it becomes feasible to proceed with further exploration in any of
the areas where the Company currently owns concessions.
Currently, primary sources of liquidity are cash and cash equivalents,
employment operations and management agreements. Cash needs are for the
operation of an employment agency, corporate expenses, costs associated with
actions relating to East Timor and the payment of trade payables. Operations of
the Company are presently being financed by internally generated cash flow and
cash and cash equivalents on hand. Oceanic is evaluating various financing
options that could include debt or equity. The capital expenditure budget is
periodically reviewed and is a function of necessity and available cash flow.
Cash Flow: Cash used in operating activities for the six months ended
June 30, 2002 and 2001 was $1,712,099 and $723,128, respectively. Ongoing legal
and professional fees associated with the litigation in the Australian courts
and the application for an Expansion of Seabed Concession in East Timor has
required substantial expenditures. During the six months ended June 30, 2002 and
2001, respectively, the Company incurred expenses of $1,121,446 and $333,235
related to legal and commercial activities in Australia and the Timor Gap area
which are included in exploration expense.
During the six months ended June 30, 2002, operations of the employment
agency in San Diego, California, produced a net loss of approximately $307,000,
and resulted in cash used in operating activities of approximately $165,500.
Staffing revenue generated by Alliance during the first six months of 2002
averaged approximately $194,500 per month compared to approximately $216,000
during the first six months of 2001.
Oceanic currently receives approximately $540,000 per year in
connection with services provided to Cordillera Corporation and San Miguel
Valley Corporation, pursuant to management agreements, compared to $448,000 for
the year ended December 31, 2001. In addition, Oceanic has management agreements
with Points Four World Travel, Inc. and Global Access Telecommunications, Inc.
that amount to approximately $205,000 per year. Amounts received under these two
contracts during the year ended December 31, 2001 was approximately $66,800.
Oceanic's Chairman of the Board and Chief Executive Officer is affiliated with
all these corporations. Amounts received under the management agreements are
based on costs relating to employee salaries and other operating expenses, plus
an additional fee of up to 5% of the total amount. Management fees, which are
included in other revenues, were approximately $373,000 for the six months ended
June 30, 2002 compared to approximately $235,000 for the six months ended June
30, 2001.
Oceanic had $748,677 in cash and cash equivalents and working capital
of $297,126 at June 30, 2002 compared with $2,462,692 in cash and cash
equivalents and working capital of $1,974,499 at December 31, 2001. Management
believes that working capital on hand at June 30, 2002, together with financing
currently being arranged, will be sufficient to fund the Company's operations
through December 31, 2002.
10
RESULTS OF OPERATIONS
THREE-MONTH COMPARISON
Total revenue for the three months ended June 30, 2002 is 14% less than
total revenue for the three months ended June 30, 2001. Staffing revenue is down
16% for the three months ended June 30, 2002 compared to the three months ended
June 30, 2001. The decrease in revenue is mainly due to loss of revenue from
Alliance's largest customer. Revenue from this customer amounted to $18,165 for
the three months ended June 30, 2002 compared to $191,574 for the same three
months in 2001. Alliances's net loss for the three months ended June 30, 2002
was $176,897 compared to a net loss of $170,729 for the three months ended June
30, 2001.
Interest income for the three months ended June 30, 2002 is
substantially less than the three months ended June 30, 2001 due to lower cash
balances and a decrease in interest rates.
Other revenue for the three months ended June 30, 2002 is 27% higher
than for the three months ended June 30, 2001, due to an increase in management
fees charged to Cordillera and San Miguel Valley Corporation and the addition of
management fees from Points Four World Travel, Inc. and Global Access
Telecommunications, Inc.
Exploration expenses for the three months ended June 30, 2002 are
$152,292 higher than during the comparable three months of 2001. The increase is
due to ongoing legal fees associated with the legal action commenced in
Australia, as described below, and the application to expand an offshore oil and
gas concession located in an area between Australia and East Timor known as the
Timor Gap.
In 1974 Portugal granted an exclusive offshore concession to Petrotimor
Companhia de Petroleos, S.A.R.L. ("Petrotimor"), a subsidiary of Oceanic, to
explore for and develop oil and gas in the Timor Gap area. On January 5, 1976,
subsequent to Indonesia's unlawful invasion and occupation of East Timor,
Portugal agreed to a suspension of performance under the concession agreement,
based upon force majeure.
On December 11, 1989, Australia and Indonesia, ignoring Petrotimor's
rights under the concession from Portugal, signed the Timor Gap Treaty,
purporting to create a joint zone of cooperation whereby these two countries
could control the exploration and development of hydrocarbons in an area over
which both countries claimed rights. A portion of this area, designated as Zone
A, falls largely within the area where Petrotimor holds rights under its
concession agreement with Portugal. The treaty created a Joint Authority that
purported to enter into production sharing contracts with various companies who
have carried out exploration activities.
11
During 1999 the people of East Timor voted for independence from
Indonesia and the United Nations initiated a transition of East Timorese
independence under the authority of the United Nations Transitional
Administration in East Timor. On August 30, 2001, East Timor elected
representatives to the Constituent Assembly to prepare a constitution for an
independent and democratic East Timor. A constitution has been approved by the
Constituent Assembly and East Timor became an independent nation on May 20,
2002.
On August 21, 2001, Oceanic and Petrotimor issued a Statement of Claim
out of the Federal Court of Australia against the Commonwealth of Australia, the
Joint Authority established under the Timor Gap Treaty and the Phillips
Petroleum companies operating within the Timor Gap area. Oceanic and Petrotimor
claim that the Timor Gap Treaty and the pursuant legislation of the Australian
Parliament was illegal for a number of reasons including: (1) the Treaty and the
legislation sought to claim significant portions of the continental shelf for
Australia, which under international law belonged to East Timor and (2) the
Treaty and the legislation attempted to extinguish the property interest and
rights granted by the then legitimate sovereign power, Portugal, to Oceanic and
Petrotimor, without providing for just compensation. As the case involves
complex issues of international and Australian constitutional law, it is
expected that it will take a considerable period before the case is resolved.
In addition to the Statement of Claim issued in Australia, Oceanic has
submitted an application for an Expansion of Seabed Concession to the
transitional government in East Timor, which would, if granted, expand the 1974
Petrotimor concession to correspond with the offshore area East Timor is
entitled to claim under international law. The company has received no response
to this application.
On March 23 and 24, 2002, Petrotimor sponsored a seminar in Dili, the
capital of East Timor, for the purpose of explaining to local government
representatives, and other interested parties, the maritime boundaries to which
East Timor is entitled under current international law and the substantial
economic benefits that would be derived by East Timor from claiming such
expanded boundaries.
Staffing direct costs are 17% less for the three months ended June 30,
2002 compared to the three months ended June 30, 2001. This is related to the
reduction in staffing revenue.
Amortization and depreciation for the three months ended June 30, 2002
is 29% less than the three months ended June 30, 2001. This is mainly due to
implementation of Statement of Financial Accounting Standards (SFAS) No. 142,
Accounting for Goodwill and Intangible Assets. Pursuant to SFAS 142, net
goodwill of $346,659 as of December 31, 2001, associated with the acquisition of
Alliance, is no longer being amortized but will be tested for impairment
annually. Oceanic has completed its transitional impairment analysis and has
determined there was no impairment of goodwill as of January 1, 2002. There can
be no assurance there will not be an impairment of goodwill at a later date.
Oceanic will continue to monitor the carrying value of its goodwill and will
record an impairment write-down as required. Amortization expense related to
12
goodwill was $10,505 during the three months ended June 30, 2001.
Total general and administrative costs for the three months ended June
30, 2002 are 15% less than for the three months ended June 30, 2001. This is
mainly due to the payment of severance to the outgoing President and Human
Resources Director of Alliance during the three months ended June 30, 2001.
SIX-MONTH COMPARISON
Total revenue for the six months ended June 30, 2002 is 4% less than
total revenue for the six months ended June 30, 2001. Staffing revenue is down
10% for the six months ended June 30, 2002 compared to the six months ended June
30, 2001. The decrease in revenue is mainly due to loss of revenue from
Alliance's largest customer. Revenue from this customer amounted to $235,832 for
the six months ended June 30, 2002 compared to $322,153 for the same six months
in 2001. Alliances's net loss for the six months ended June 30, 2002 was
$307,102 compared to a net loss of $360,329 for the six months ended June 30,
2001.
Interest income for the six months ended June 30, 2002 is substantially
less than the six months ended June 30, 2001 due to lower cash balances and a
decrease in interest rates.
Other revenue is 65% higher for the six months ended June 30, 2002
compared to the six months ended June 30, 2001 due to an increase in management
fees charged to Cordillera and San Miguel Valley Corporation and the addition of
management fees from Points Four World Travel, Inc. and Global Access
Telecommunications, Inc. Also included in other revenue for the six months ended
June 30, 2002 is $60,000 relating to the write-off of a previous accrual that
management believes is no longer due and payable.
Exploration expenses for the six months ended June 30, 2002 are
$791,384 higher than during the comparable six months of 2001. The increase is
due to ongoing legal fees associated with the legal action commenced in
Australia and the application to expand an offshore oil and gas concession
located in an area between Australia and East Timor known as the Timor Gap, as
described in the Three-Month Comparison.
Staffing direct costs are 13% less for the six months ended June 30,
2002 compared to the six months ended June 30, 2001. This is related to the
reduction in staffing revenue.
Amortization and depreciation for the six months ended June 30, 2002 is
29% less than the six months ended June 30, 2001. This is mainly due to
implementation of Statement of Financial Accounting Standards (SFAS) No. 142,
Accounting for Goodwill and Intangible Assets, as discussed in the Three-Month
Comparison. Amortization expense related to goodwill was $21,010 during the six
months ended June 30, 2001.
13
Total general and administrative costs for the six months ended June
30, 2002 are 5% less than for the six months ended June 30, 2001. During 2001
Oceanic made severance payments to the outgoing President and Human Resources
Director of Alliance.
PART II - OTHER INFORMATION
ITEM 1. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits filed herewith are listed below and attached to this Report.
The "Exhibit Number" refers to the Exhibit Table in Item 601 of
Regulation S-B.
Exhibit Number Name of Exhibit
10.1 Management Agreement with Points Four World
Travel, Inc. dated April 1, 2001
10.2 Office Building Lease with Sorrento Square, LLC
dated October 18, 2001
99 Certification of Chief Executive Officer and Chief
Financial Officer
(b) No reports on Form 8-K were filed during the quarter for which this
report is filed.
14
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.
OCEANIC EXPLORATION COMPANY
Date: August 14, 2002 /s/ Charles N. Haas
--------------- -------------------------------------
Charles N. Haas
President
Date: August 14, 2002 /s/ Phylis J. Anderson
--------------- -------------------------------------
Phylis J. Anderson
Treasurer and Chief Financial Officer
EXHIBIT INDEX
<Table>
<Caption>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
10.1 Management Agreement with Points Four World
Travel, Inc. dated April 1, 2001
10.2 Office Building Lease with Sorrento Square, LLC
dated October 18, 2001
99 Certification of Chief Executive Officer and Chief
Financial Officer
</Table>