UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
X Quarterly Report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the quarterly period ended
June 30, 2003; or
__ Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the transition period
from ________________ to _______________.
Commission File Number 0-18596
AMERICAN NATURAL ENERGY CORPORATION
- --------------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
OKLAHOMA 73-1605215
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S employer
incorporation of organization) identification no.)
7030 SOUTH YALE, SUITE 404, TULSA, OKLAHOMA 74136
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(Address of principal executive offices, zip code)
(918) 481-1440
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(Issuer's Telephone Number, Including Area Code)
Check whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the issuer was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes |X| No |_|
Indicate by check mark whether the registrant is an
accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
Yes |_| No |X|
APPLICABLE ONLY TO CORPORATE ISSUERS:
As of August 25, 2003, 26,054,546 shares of the Registrant's Common
Stock, $0.01 par value, were outstanding.
AMERICAN NATURAL ENERGY CORPORATION
QUARTERLY REPORT ON FORM 10-QSB
INDEX
PART I - FINANCIAL INFORMATION
Page
----
Item 1. Financial Statements (unaudited)
Condensed Consolidated Balance Sheets - June 30, 2003 3
and December 31, 2002
Condensed Consolidated Statements of Operations - 4
Three Months and Six Months Ended June 30, 2003 and
June 30, 2002
Condensed Consolidated Statements of Cash Flows - 5-6
Three Months and Six Months Ended June 30, 2003 and
June 30, 2002
Notes to Condensed Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis or Plan of 14
Operations
Item 3. Controls and Procedures 21
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 21
2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AMERICAN NATURAL ENERGY CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
JUNE 30, 2003 DECEMBER 31, 2002
$ $
------------- -----------------
ASSETS
Current assets:
Cash and cash equivalents 56,319 86,295
Accounts receivable - net 1,204,762 357,127
Prepaid expenses 130,958 28,291
Marketable securities -- 192,947
Oil inventory 23,155 53,228
----------- -----------
Total current assets 1,415,194 717,888
Proved oil and natural gas properties, net of accumulated depletion, depreciation,
amortization and impairment of $7,453,488 and $6,960,678 2,828,421 1,089,200
Unproved oil and natural gas properties 3,210,307 2,710,994
Equipment and other fixed assets, net of accumulated depreciation of
$139,942 and $76,706 694,245 742,672
Deferred expenses 11,035 --
----------- -----------
Total assets 8,159,202 5,260,754
----------- -----------
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable and accrued liabilities 4,269,598 1,894,267
Accrued interest 56,407 314,275
Notes payable 4,558,192 500,000
Current portion of long-term debt -- 3,961,887
----------- -----------
Total current liabilities 8,884,197 6,670,429
Production payments (Note 7) 1,290,847 --
Asset retirement obligation (Note 5) 1,362,000 --
----------- -----------
2,652,847 --
----------- -----------
Total liabilities 11,537,044 6,670,429
----------- -----------
Stockholders' deficit:
Common stock
Authorized - 100,000,000 shares with par value of $0.01
Issued - 26,054,546 (2002 - 25,199,846) 260,545 251,998
Additional paid-in capital 7,758,331 7,427,503
Accumulated deficit, since January 1, 2002 (in conjunction with the quasi-
Reorganization stated capital was reduced by an accumulated deficit of
$2,015,495) (12,215,516) (8,730,517)
Accumulated other comprehensive income (loss) 818,798 (358,659)
----------- -----------
Total stockholders' (deficit) (3,377,842) (1,409,675)
----------- -----------
Total liabilities and stockholders' (deficit) 8,159,202 5,260,754
----------- -----------
The accompanying notes are an integral part of these condensed
consolidated financial statements.
3
AMERICAN NATURAL ENERGY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
For the three-month and six-month periods ended June 30, 2003 and June 30, 2002
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
--------------------------- -------------------------
2003 2002 2003 2002
$ $ $ $
---- ---- ---- ----
Revenues:
Oil and gas sales 476,617 2,831 713,944 2,831
Operations income 6,542 -- 9,351 --
Interest and other income 1,408 3,231 1,408 166,593
----------- ----------- ----------- -----------
484,567 6,062 724,703 169,424
----------- ----------- ----------- -----------
Expenses:
Lease operating expense 169,203 24,941 316,356 34,181
Production taxes 18,795 -- 27,883 --
Depletion, depreciation and
amortization 278,995 5,905 507,643 8,905
General and administrative 555,839 356,939 864,650 731,920
Foreign exchange loss 789,773 377,595 1,339,521 281,224
Interest 102,950 3,008 168,913 3,008
Impairment of oil and gas properties -- -- 152,064 --
Gain on sale of marketable securities -- -- (172,788) (284,018)
Loss on sale of fixed assets -- 3,280 -- 3,280
----------- ----------- ----------- -----------
Total expenses 1,915,555 771,668 3,204,242 778,500
----------- ----------- ----------- -----------
Loss before cumulative effect of
accounting change (1,430,988) (765,606) (2,479,539) (609,076)
----------- ----------- ----------- -----------
Cumulative effect of accounting
change (Note 5) -- -- (1,005,460) --
----------- ----------- ----------- -----------
Net loss (1,430,988) (765,606) (3,484,999) (609,076)
----------- ----------- ----------- -----------
Other comprehensive income (loss) -
net of tax:
Unrealized gain (loss) on marketable
securities -- 162,864 13,870 (261,321)
Foreign exchange translation 789,189 378,895 1,336,375 242,490
Reclassification adjustment for gain
on sale of marketable securities
included in net income -- -- (172,788) (212,933)
----------- ----------- ----------- -----------
Other comprehensive income (loss) 789,189 541,759 1,177,457 (231,764)
Comprehensive loss (641,799) (223,847) (2,307,542) (840,840)
----------- ----------- ----------- -----------
Basic and diluted loss per share
before cumulative effect of
accounting change (0.05) (0.03) (0.10) (0.02)
----------- ----------- ----------- -----------
Cumulative effect of accounting
change -- -- (0.04) --
----------- ----------- ----------- -----------
Net loss per share (0.05) (0.03) (0.14) (0.02)
----------- ----------- ----------- -----------
Weighted average number of shares
outstanding - basic and diluted 26,054,546 25,199,846 25,690,007 25,187,552
----------- ----------- ----------- -----------
The accompanying notes are an integral part of these condensed
consolidated financial statements.
4
AMERICAN NATURAL ENERGY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
For the three-month and six-month periods ended June 30, 2003 and June 30, 2002
THREE MONTHS ENDED JUNE 30, SIX MONTH ENDED JUNE 30,
--------------------------- ------------------------
2003 2002 2003 2002
$ $ $ $
---- ---- ---- ----
Cash flows from operating activities:
Income (loss) for the period (1,430,988) (765,606) (3,484,999) (609,076)
Non cash items:
Depreciation, depletion and amortization 278,995 5,905 507,643 8,905
Foreign exchange (gain) loss 789,773 377,595 1,339,521 281,224
Gain on sale of marketable securities -- -- (172,788) (284,018)
Loss on sale of fixed asset -- 3,280 -- 3,280
Impairment of oil and gas properties -- -- 152,064 --
Cumulative effect of accounting change -- -- 1,005,460 --
Non cash compensation expense 9,844 23,625 39,375 23,625
Changes in assets and
liabilities:
Accounts receivables 182,303 (7,410) (847,635) 205,067
Oil inventory 4,505 -- (1,737) --
Prepaid expenses and other assets 26,918 (56,816) 47,044 (32,285)
Accounts payable, accrued liabilities
and interest 627,487 588,270 2,431,820 1,168,237
---------- ---------- ---------- ----------
Net cash provided by (used in)
operating activities 488,837 168,843 1,015,768 764,959
---------- ---------- ---------- ----------
Cash flows from investing activities:
Proceeds from sale of marketable
securities -- -- 208,051 2,439,905
Proceeds from the sale of oil and gas
properties 261,544 -- 461,544 --
Purchase of marketable securities -- -- -- (163,600)
Purchase and development of oil and gas
properties (1,610,543) (1,579,699) (2,735,910) (3,823,766)
Purchase of fixed assets (1,889) (91,092) (14,809) (167,924)
---------- ---------- ---------- ----------
Net cash provided by (used in)
investing activities (1,350,888) (1,670,791) (2,081,124) (1,715,385)
---------- ---------- ---------- ----------
Cash flows from financing activities:
Issuance of notes payable -- -- 2,500,000 --
Payments of notes payable (82,244) -- (2,832,244) --
Production payments issued 771,460 -- 1,538,456 --
Production payments (166,452) -- (166,452) --
Issuance of capital stock -- -- -- 11,719
---------- ---------- ---------- ----------
Cash provided by financing activities 522,764 -- 1,039,760 11,719
Effect of exchange rate changes on cash (584) (3,717) (4,380) (47,603)
---------- ---------- ---------- ----------
Increase (decrease) in cash and cash
equivalents (339,871) (1,505,665) (29,976) (986,310)
Cash beginning of period 396,190 1,636,650 86,295 1,117,295
---------- ---------- ---------- ----------
Cash end of period 56,319 130,985 56,319 130,985
---------- ---------- ---------- ----------
The accompanying notes are an integral part of these condensed
consolidated financial statements.
5
AMERICAN NATURAL ENERGY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (CONTINUED)
For the three-month and six-month periods ended June 30, 2003 and June 30, 2002
THREE MONTHS ENDED JUNE 30, SIX MONTH ENDED JUNE 30,
--------------------------- ------------------------
2003 2002 2003 2002
$ $ $ $
---- ---- ---- ----
Supplemental disclosures:
Interest paid 132,896 -- 141,396 --
Non cash operating activities
Capitalized interest included in
unproved properties 89,444 68,170 172,289 134,477
Non cash financing activities
Common shares issued in conjunction with
issuance of notes payable -- -- 300,000 --
Accounts payable refinanced as notes
payable 203,823 -- 203,823 --
Prepaid expenses financed 160,746 -- 160,746 --
Accrued interest refinanced upon
modification of debt -- -- 331,728 --
The accompanying notes are an integral part of these condensed
consolidated financial statements.
6
AMERICAN NATURAL ENERGY CORPORATION
Notes to Consolidated Financial Statements (Unaudited)
June 30, 2003 and 2002
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1 SIGNIFICANT ACCOUNTING POLICIES
The accounting policies and methods followed in preparing these unaudited
condensed consolidated financial statements are those used by American
Natural Energy Corporation (the "Company") as described in Note 1 of the
notes to consolidated financial statements included in the Annual Report
on Form 10-KSB. However, the unaudited consolidated financial statements
for the three-month and six-month periods ended June 30, 2003 and 2002 do
not conform in all respects to the disclosure and information that is
required for annual consolidated financial statements. These interim
consolidated financial statements should be read in conjunction with the
most recent annual consolidated financial statements of the Company.
In the opinion of management, all adjustments considered necessary for
fair statement have been included in these interim condensed consolidated
financial statements. Operating results for the three-month and six-month
periods ended June 30, 2003 are not indicative of the results that may be
expected for the full year ending December 31, 2003.
The Company has elected to follow APB No. 25, "Accounting for Stock Issued
to Employees" and related interpretations in accounting for its employee
stock options. Under APB No. 25, compensation expense is recognized for
the difference if any, on the date of the grant, between the estimated
fair value of the Company's stock and the amount the employee must pay to
acquire the stock. Compensation expense is recognized immediately for past
services and rateably for future services over the option-vesting period.
Compensation expense has been recognized for any grants to individuals who
do not meet the definition of employee.
The Company accounts for equity instruments issued in exchange for the
receipt of goods or services from other than employees in accordance with
SFAS No. 123 and the conclusions reached by the Emerging Issues Task Force
in Issue No. 96-18, "Accounting for Equity Instruments That Are Issued to
Other Than Employees for Acquiring or in Conjunction with Selling, Goods
or Services" (EITF 96-18). Costs are measured at the estimated fair market
value of the consideration received or the estimated fair value of the
equity instruments issued, whichever is more reliably measurable. The
value of equity instruments issued for consideration other than employee
services is determined on the earlier of a performance commitment or
completion of performance by the provider of goods or services as defined
by EITF 96-18. The following table illustrates the effect on net income
and earnings per share as if the Company had applied the fair value
recognition provisions of FASB Statement No. 123, "Accounting for
Stock-Based Compensation," to stock-based employee compensation.
7
AMERICAN NATURAL ENERGY CORPORATION
Notes to Consolidated Financial Statements (Unaudited)
June 30, 2003 and 2002
- -------------------------------------------------------------------------------
Three Months Ended, June 30 Six Months Ended, June 30
--------------------------- -------------------------
2003 2002 2003 2002
$ $ $ $
---- ---- ---- ----
Net loss as reported (1,430,988) (765,606) (3,484,999) (609,076)
Pro forma compensation expense,
net of tax (17,173) (78,138) (34,346) (142,390)
---------- ---------- ---------- ----------
Pro forma net loss (1,448,161) (843,744) (3,519,345) (751,466)
---------- ---------- ---------- ----------
Basic and diluted loss per share
As reported (0.05) (0.03) (0.14) (0.02)
Compensation expense, net of tax -- -- -- --
---------- ---------- ---------- ----------
Pro forma (0.05) (0.03) (0.14) (0.02)
---------- ---------- ---------- ----------
For purposes of the pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period, which is
two years. Because our stock options vest over two years and additional
awards may be made each year, the above pro forma disclosures may not be
representative of the effects on pro forma net income for future quarters.
2 EARNINGS (LOSS) PER SHARE
Basic earnings (loss) per share is computed by dividing net income or loss
(the numerator) by the weighted average number of shares outstanding
during the period (the denominator). The computation of diluted earnings
per share is the same as for basic earnings per share except the
denominator is increased to include the weighted average additional number
of shares that would have been outstanding if previously granted stock
options had been exercised, unless they are anti-dilutive.
The numerators and denominators used in calculating basic and diluted
earnings per share were as follows:
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------ ----------------
2003 (1) 2002 (1) 2003 (2) 2002 (2)
$ $ $ $
-------- -------- -------- --------
Numerator - net income (loss)
before cumulative effect of
accounting change
Basic and diluted (1,430,988) (765,606) (2,479,539) (609,076)
Cumulative effect of accounting
change -- -- (1,005,460) --
8
AMERICAN NATURAL ENERGY CORPORATION
Notes to Consolidated Financial Statements (Unaudited)
June 30, 2003 and 2002
- -------------------------------------------------------------------------------
Net income (loss) - basic and
diluted (1,430,988) (765,606) (3,484,999) (609,076)
Denominator - weighted average
number of shares outstanding
Basic and diluted 26,054,546 25,199,846 25,690,007 25,187,552
-------------------
(1) The denominator excludes the effect of 1,750,000 outstanding
potentially dilutive options and warrants at a weighted
average price of $0.33 per share due to the net loss.
(2) The denominator excludes the effect of 1,950,000 outstanding
potentially dilutive options and warrants at a weighted
average price of $0.33 per share due to the net loss.
3 REORGANIZATION
On January 18, 2002, the shareholders of Gothic Resources, Inc. (Gothic)
approved an arrangement under Section 192 of the Canada Business
Corporation Act with its subsidiary, American Natural Energy Corporation
(ANEC), whereby all of the Gothic shareholders exchanged their shares of
common stock for shares of common stock of ANEC and Gothic became a
subsidiary of ANEC. On that date, the shareholders also approved the
reduction of the stated capital of Gothic by the amount of the accumulated
deficit of $2,015,495. This transaction has been accounted for as a
quasi-reorganization. Gothic may be deemed a predecessor of the Company.
4 RECENT ACCOUNTING PRONOUNCEMENTS
Statement of Financial Accounting Standards No. 141, Business Combinations
(FAS 141) and Statement of Financial Accounting Standards, No. 142,
Goodwill and Intangible Assets (FAS 142) were issued by the Financial
Accounting Standards Board (FASB) in June 2001 and became effective for us
on July 1, 2001 and January 1, 2002, respectively. FAS 141 requires all
business combinations initiated after June 30, 2001 to be accounted for
using the purchase method. Additionally, FAS 141 requires companies to
disaggregate and report separately from goodwill certain intangible
assets. FAS 142 establishes new guidelines for accounting for goodwill and
other intangible assets. Under FAS 142, goodwill and certain other
intangible assets are not amortized, but rather are reviewed annually for
impairment. The FASB, the Securities and Exchange Commission (SEC) and
others continue to discuss the appropriate application of FAS 141 and 142
to oil and gas mineral rights held under lease and other contractual
arrangements representing the right to extract such reserves. Depending on
the outcome of such discussions, these oil and gas mineral rights held
under lease and other contractual arrangements representing the right to
extract such reserves for both undeveloped and developed leaseholds may be
classified separately from oil and gas properties, as intangible assets on
our balance sheets. In addition, the disclosures required by FAS 141 and
142 relative to intangibles would be included in the notes to financial
statements. Historically, we, like many
9
AMERICAN NATURAL ENERGY CORPORATION
Notes to Consolidated Financial Statements (Unaudited)
June 30, 2003 and 2002
- -------------------------------------------------------------------------------
other oil and gas companies, have included these oil and gas mineral
rights held under lease and other contractual arrangements representing
the right to extract such reserves as part of the oil and gas properties,
even after FAS 141 and 142 became effective.
As applied to companies like us that have adopted full cost accounting for
oil and gas activities, we understand that this interpretation of FAS 141
and 142 would only affect our balance sheet classification of proved oil
and gas leaseholds acquired after June 30, 2001 and our unproved oil and
gas leaseholds. Our results of operations and cash flows would not be
affected, since these oil and gas mineral rights held under lease and
other contractual arrangements representing the right to extract such
reserves would continue to be amortized in accordance with full cost
accounting rules.
At June 30, 2003 and December 31, 2002, we had undeveloped leaseholds of
approximately $3.2 million and $2.7 million, respectively, that would be
classified on our balance sheet as "intangible undeveloped leasehold" and
developed leaseholds of an estimated net book value of $1.6 million and
$830,000 at June 30, 2003 and December 31, 2002, respectively, that would
be classified as "intangible developed leaseholds", if we applied the
interpretation currently being discussed.
We will continue to classify our oil and gas mineral rights held under
lease and other contractual rights representing the right to extract such
reserves as tangible oil and gas properties until further guidance is
provided.
In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities". SFAS 146 is effective for
exit or disposal activities initiated after December 31, 2002. We do not
expect the adoption of this standard to have any impact on our financial
position or results of operations.
In April 2003, the FASB issued Statement of Financial Accounting Standards
No. 149, "Amendment of Statement 133 on Derivative Instruments and Hedging
Activities" (FAS 149). FAS 149 amends and clarifies financial accounting
and reporting for derivative instruments, including certain derivative
instruments embedded in other contracts (collectively referred to as
derivatives) and for hedging activities under FAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities". This pronouncement is
effective for contracts entered into or modified after June 30, 2003, and
for hedging relationships designated after that date. The Company
currently has no derivatives or hedging activities, therefore, we do not
expect the implementation of FAS 149 will have any effect on our financial
opposition, results of operations, or cash flows.
In May 2003, the FASB issued Statement on Financial Accounting Standards
No. 150, Accounting for Certain Financial Instruments with Characteristics
of both Liabilities and Equity ("SFAS 150"). SFAS 150 establishes
standards regarding the classification and measurement of certain
financial instruments with characteristics of both liabilities and equity.
It requires that an issuer classify a financial instrument that is within
its scope as a liability (or an asset in some circumstances). Many of
those instruments were previously classified as equity. SFAS 150 will be
effective for us starting in the quarter ended September 30, 2003. We do
not expect the application of SFAS 150 to have a material effect on our
financial position, results of operations or cash flow.
10
AMERICAN NATURAL ENERGY CORPORATION
Notes to Consolidated Financial Statements (Unaudited)
June 30, 2003 and 2002
- -------------------------------------------------------------------------------
5 ASSET RETIREMENT OBLIGATIONS
Effective January 1, 2003, the Company adopted SFAS No. 143, Accounting
for Asset Retirement Obligations. This statement applies to obligations
associated with the retirement of tangible long-lived assets that result
from the acquisition, construction and development of the assets.
SFAS 143 requires that the fair value of a liability for a retirement
obligation be recognized in the period in which the liability is incurred.
For oil and gas properties, this is the period in which an oil or gas well
is acquired or drilled. The asset retirement obligation is capitalized as
part of the carrying amount of the asset at its discounted fair value. The
liability is then accreted each period until the liability is settled or
the asset is sold, at which time the liability is reversed and any gain or
loss resulting from the settlement of the obligation is recorded.
We identified and estimated all of our asset retirement obligations for
tangible, long-lived assets as of January 1, 2003. These obligations were
for plugging and abandonment costs for depleted oil and gas wells. Prior
to the adoption of SFAS 143, we included an estimate of our asset
retirement obligations related to our oil and gas properties in our
calculation of oil and gas depreciation, depletion and amortization
expense. Upon adoption of SFAS 143, we recorded the discounted fair value
of our expected future obligations of $1.4 million and recorded an
increase in unproved properties of $0.4 million. The cumulative effect of
the change in accounting principles was a $1.0 million loss which was
recorded in the condensed consolidated statement of operations for the
quarter ended March 31, 2003. Had SFAS 143 been adopted as of January 1,
2002, the Company's net income for the six-month and three-month periods
ended June 30, 2002 would have decreased by $69,586 and $35,249 and there
would have been no effect on the reported earnings per share. The effect
of SFAS 143 for the six-month and three month periods ended June 30, 2003
was an increase in the net loss before cumulative effect of accounting
change of $71,851 and $35,119, respectively.
The components of the change in our asset retirement obligations are shown
below. Information for the quarters ended March 31, 2002 and June 30, 2002
is shown on a pro forma basis.
For the Quarters Ended
----------------------
2003 2002
$ $
---- ----
Asset retirement obligations, January 1 1,435,460 1,292,538
Additions and revisions 9,385 --
Settlements and disposals (157,082) --
Accretion expense 36,732 34,337
---------- ----------
Asset retirement obligations,
March 31 1,324,495 1,326,875
Additions and revisions 2,386 --
Settlements and disposals -- --
Accretion expense 35,119 35,249
---------- -----------
Asset retirement obligations, June 30 1,362,000 1,362,124
---------- -----------
11
AMERICAN NATURAL ENERGY CORPORATION
Notes to Consolidated Financial Statements (Unaudited)
June 30, 2003 and 2002
- -------------------------------------------------------------------------------
6 NOTES PAYABLE
The Company borrowed $2,500,000 from Quest Capital Corporation, as
successor to Quest Investment Corporation (collectively "Quest") in the
form of a note payable due October 31, 2003. Interest is payable monthly
at an annual rate of 12% (effective rate 22.0%). The note is
collateralized by a mortgage on all oil and gas properties of the Company.
The Company also issued 688,000 shares of its stock to Quest as additional
consideration. A director of the Company is also a director of Quest.
On March 12, 2003 the Company also entered into a refinancing transaction
with Bank One whereby Bank One was paid $2,250,000 and the Company
received a partial release of collateral held by Bank One resulting from
the ANEC/Couba Reorganization Plan. Additionally, the Company entered into
a note payable with Bank One for the remaining balances due pursuant to
the Plan in the amount of $1,715,134. The note is due December 31, 2003
and bears interest at the Bank One prime rate plus 2%, currently 6.25%,
payable quarterly. The note is collateralized by oil and gas assets of the
Company and is subordinated to the Quest financing and net profits
production payments owed to TransAtlantic Petroleum (USA) Corp (See Note
7).
7 PRODUCTION PAYMENT FINANCING
On March 12, 2003, we entered into a funding arrangement with
TransAtlantic Petroleum (USA) Corp. ("TransAtlantic") whereby
TransAtlantic agreed to advance to us up to $2.0 million, of which up to
$1.8 million is to be used to fund our share of the drilling and
completion costs for the four initial wells we drill in St. Charles
Parish, Louisiana ("Subject Wells"). In exchange, TransAtlantic received a
production payment payable out of 75% of the net revenues from the Subject
Wells, and, upon repayment, a 10% working interest in such wells. In
addition, TransAtlantic received a 10% interest in our Bayou Couba lease
and our lease with the State of Louisiana ("Subject Leases"). Further,
TransAtlantic has the right to acquire a 10% participation in any
additional interests we acquire in the 23.138 square mile Bayou Couba salt
dome development area, including any interests acquired through our area
of mutual interest joint development agreement with ExxonMobil Corp. Our
obligations to TransAtlantic are collateralized by a lien against our
interest in the Subject Wells and their hydrocarbon production. At June
30, 2003 we had drawn a total of $2,000,000, including the $200,000 not
specifically identified with the drilling of the Subject Wells. Imputed
interest on the $2,000,000 drawn amounted to $461,544, which was recorded
as a discount on the production payments liability, with a corresponding
reduction in the value of proved and unproved oil and natural gas
properties, representing the sale of the 10% working interest in the
Subject Leases and Subject Wells. The discount is accreted to interest
expense, using the units of production method. As of June 30, 2003 the
outstanding balance of the production payment loan was $1,451,745, of
which $160,898 attributable to produced volumes is included in accounts
payable and accrued liabilities.
A current director and a former director of the Company are current
directors of TransAtlantic. Therefore, this transaction represents a
related party transaction.
12
AMERICAN NATURAL ENERGY CORPORATION
Notes to Consolidated Financial Statements (Unaudited)
June 30, 2003 and 2002
- -------------------------------------------------------------------------------
8 LIQUIDITY AND CAPITAL RESOURCES
The Company has no current borrowing capacity with any lender. The Company
has sustained substantial losses in the first two quarters of 2003 and for
the year 2002, totaling approximately $3.5 million and $8.6 million, has a
stockholders' deficit of $3.4 million and $1.4 million at June 30, 2003
and December 31, 2002, a working capital deficiency of approximately $7.5
million including current amounts due under borrowings of approximately
$4.7 million all of which lead to questions concerning the ability of the
Company to meet its obligations as they come due. The Company also has a
need for substantial funds to develop its oil and gas properties.
The accompanying financial statements have been prepared on a going
concern basis which contemplates continuity of operations, realization of
assets and liquidation of liabilities in the ordinary course of business.
As a result of the losses incurred and current negative working capital,
there is no assurance that the carrying amounts of assets will be realized
or that liabilities will be liquidated or settled for the amounts
recorded. The ability of the Company to continue as a going concern is
dependent upon adequate sources of capital and the ability to sustain
positive results of operations and cash flows sufficient to continue to
explore for and develop its oil and gas reserves.
In the ordinary course of business, the Company makes substantial capital
expenditures for the exploration and development of oil and natural gas
reserves. Historically, the Company has financed its capital expenditures,
debt service and working capital requirements with the proceeds of debt
and private offering of its securities. Cash flow from operations is
sensitive to the prices the Company receives for its oil and natural gas.
A reduction in planned capital spending or an extended decline in oil and
gas prices could result in less than anticipated cash flow from operations
and an inability to sell more of its common stock or refinance its debt
with current lenders or new lenders, which would likely have a further
material adverse effect on the Company.
Management's plan is to raise additional capital through the private sale
of its common stock, however, it currently has no firm commitment from any
potential investors. Management anticipates using the proceeds to repay
its debt and fund its exploration plan, including potential exploration in
the ExxonMobil joint development area.
13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
GENERAL
We are engaged in the acquisition, development, exploitation and
production of oil and natural gas. Our revenues and profitability can be
expected to be dependent, to a significant extent, upon prevailing spot market
prices for oil and natural gas. Additionally, our revenues and profitability can
be expected to be dependent upon the quantities of oil and natural gas produced
and sold. Prices for oil and natural gas are subject to wide fluctuations in
response to changes in supply of and demand for oil and natural gas, market
uncertainty and a variety of additional factors that are beyond our control.
Such factors include political conditions, weather conditions, government
regulations, the price and availability of alternative fuels and overall
economic conditions.
Prior to December 31, 2001, our principal activities, including those
of our predecessor, Gothic Resources, Inc., involved very limited oil and
natural gas exploration in the southern United States. We also invested in
shares of other public oil and gas exploration companies resulting in material
capital gains. Since December 31, 2001, we have engaged in several transactions
which we believe will enhance our oil and natural gas development, exploitation
and production activities and our ability to finance further activities.
On December 31, 2001, we acquired the assets and capital stock of Couba
Operating Company ("Couba"). Couba, organized in 1993, was primarily engaged in
the production of oil from properties located in St. Charles Parish, Louisiana.
Couba's principal acreage is the subject of a lease (the "Bayou Couba Lease")
under which Couba owned a 72% working interest in 1,319.991 gross acres. There
are 58 well bores of varying depths located on the property. In addition, the
assets include a gathering system covering approximately 25 miles located on the
Bayou Couba Lease and various production facilities, geological data, well logs
and production information. The information includes 3-D seismic information
completed in 1997. The seismic information relates to an area of approximately
23.5 square miles that includes the Bayou Couba lease, among other acreage.
Production from the wells commenced in 1941 and only oil and non-commercial
quantities of natural gas were produced. Natural gas has never been produced in
commercial quantities, and all gas production wells from the original
development of the property were plugged.
On January 22, 2002, we completed a corporate reorganization which
resulted in our domestication as a corporation into the U.S. from Canada.
In February 2002, we leased 1,729 acres from the State of Louisiana
giving us in excess of 3,000 acres under lease, all within the boundaries of the
3-D seismic data acquired as a part of the Couba transaction described above.
In November 2002, we entered into a four-year joint development
agreement with ExxonMobil Corp. relating to both our Couba properties and
additional properties owned by ExxonMobil Corp. The agreement creates an area of
mutual interest ("AMI") covering approximately 8,400 acres, all within the 23.5
square mile 3-D seismic area and calls for both
14
parties to make available for development, leases and/or mineral interests each
owns within the AMI. Both parties may propose wells for drilling and the
non-proposing party may elect whether or not to participate, with that election
affecting only the proposed location. If both parties elect to participate in
the proposed well, the interest in the well will be shared equally. Each party
is responsible for its share of costs to develop the acreage within the AMI.
Operations of the wells are at the election of the ExxonMobil Corp. but we
anticipate that we will drill and operate most wells within the AMI. In March
2003, we assigned a 10% participation right in this AMI to Trans-Atlantic
Petroleum Corp. in partial consideration for a $2.0 million financing. This
transaction is further described below under the caption, "How We Have Financed
Our Activities."
In February 2003, we commenced drilling of the first of four planned
well locations on the Couba properties. Drilling of the third well on the
property commenced in April, 2003 and on the fourth well in May 2003. The third
and fourth wells were completed in June, 2003. At June 30, 2003, cumulative
production from all four (2.06 net ) wells was approximately 950 (315 net)
barrels per day.
Our financial statements have been prepared on a going concern basis
which contemplates continuity of operations, realization of assets and
liquidation of liabilities in the ordinary course of business. We have no
current borrowing capacity with any lender. We had a loss of $3.5 million during
the six months ended June 30, 2003 and had a working capital deficiency of $7.5
million, and a shareholder deficit of $3.4 million as of that date. We have
sustained substantial losses during the years ended December 31, 2002 and 2001,
totaling approximately $8.7 million and $1.0 million, respectively, a
shareholders' deficit of $1.4 million at December 31, 2002, a working capital
deficiency of approximately $6.0 million including current amounts due under
borrowings of approximately $4.5 million, and negative cash flow from operations
in each of 2002 and 2001, all of which lead to questions concerning our ability
to meet our obligations as they come due. We also have a need for substantial
funds to develop our oil and gas properties. As a result of the losses incurred
and current negative working capital and other matters described above, there is
no assurance that the carrying amounts of our assets will be realized or that
liabilities will be liquidated or settled for the amounts recorded. Our ability
to continue as a going concern is dependent upon adequate sources of capital and
the ability to sustain positive results of operations and cash flows sufficient
to continue to explore for and develop our oil and gas reserves.
The independent accountants' report on our financial statements as of
and for the year ended December 31, 2002 includes an explanatory paragraph which
states that we have sustained substantial losses, a shareholders' deficit, a
working capital deficiency and negative cash flow from operations in each of
2002 and 2001 that raise substantial doubt about our ability to continue as a
going concern.
In the ordinary course of business, we have made and expect to continue
to make substantial capital expenditures for the exploration and development of
oil and natural gas reserves. In the past, we have financed our capital
expenditures, debt service and working capital requirements with the proceeds of
debt and private offerings of our securities. Our cash flow from operations is
sensitive to the prices we receive for our oil and natural gas. A reduction in
planned capital spending or an extended decline in oil and gas prices could
result in less than
15
anticipated cash flow from operations and a lessened ability to sell more of our
common stock or refinance our debt with current lenders or new lenders, which
would likely have a further material adverse effect on us.
A COMPARISON OF OPERATING RESULTS FOR THE SIX MONTHS ENDED JUNE 30, 2003 AND
JUNE 30, 2002
We incurred a net loss of $3,484,999 in the six months ended June 30,
2003 compared to a net loss of $609,076 for the same period in 2002. During the
six months ended June 30, 2003, our revenues were comprised of oil and gas sales
and operations income totaling $723,295. We had interest and other income in
2003 of $1,408 compared with interest and other income of $166,593 in 2002. We
had no oil and gas sales in the six months ended June 30, 2002. Other income in
2002 of $166,593 principally represents the recovery of accounts receivable
written off in prior periods.
Our total expenses were $3,204,242 for the six months ended June 30,
2003 as compared to $778,500 for the six months ended June 30, 2002. Our general
and administrative expenses in 2003 were $864,650 compared to $731,920 in 2002.
Lease operating expenses of $316,356, production taxes of $27,883 and depletion,
depreciation and amortization of $507,643 in 2003 increased from $34,181, $0,
and $8,905, respectively in 2002 reflecting the increase in operating activity.
In 2003, we had a gain on the sale of marketable securities of
$172,788 and a foreign exchange loss of $1,339,521. In 2002, we had a gain on
the sale of marketable securities of $284,018 and a foreign exchange loss of
$281,224.
We also had a charge for the cumulative effect of an accounting change
resulting from the application of Statement of Financial Accounting Standards
No. 143, Accounting for Asset Retirement Obligations, in the amount of
$1,005,460. We had no comparable charge in 2002.
LIQUIDITY AND CAPITAL RESOURCES
A COMPARISON OF CASH FLOW FOR THE SIX MONTHS ENDED JUNE 30, 2003 AND JUNE 30,
2002
Our net cash provided by operations was $1,015,768 for the six months
ended June 30, 2003 as compared to net cash provided by operations of $764,959
for 2002. Cash provided by operating activities was impacted in 2003 by a gain
of $172,788 on the sale of marketable securities and a foreign currency exchange
loss of $1,339,521, which did not affect our cash position. Depletion,
depreciation and amortization was $507,643 in 2003, resulting from commenced oil
and gas operations, compared to $8,905 in 2002. Accounts receivable, accounts
payable and accrued liabilities increased significantly in 2003 over 2002
because of the expanded scope of our activities. We also incurred a non cash
impairment of our oil and gas properties in the amount of $152,064, resulting
from ceiling test write-down, in 2003 and no comparable amount in 2002.
16
We used $2,081,124 of net cash in investing activities during the six
months ended June 30, 2003 compared to net cash used of $1,715,385 in 2002. The
2003 cash used in investing activities includes $2,735,910 for the purchase and
development of oil and gas properties compared to $3,823,766 in 2002. Proceeds
from the sale of marketable securities, net of cash expended on purchases of
marketable securities, were $208,051 in 2003 compared to approximately
$2,276,000 in 2002.
Our net cash provided by financing activities for the six months ended
June 30, 2003 was $1,039,760 compared to $11,719 provided in 2002. Current six
month activity was the result of new financing from Quest Investment Corporation
and TransAtlantic Petroleum (USA) Corp. and repayments to a private investor and
Bank One.
CRITICAL ACCOUNTING POLICIES
We consider accounting policies related to stock options, oil and gas
properties, and income taxes to be critical accounting policies. These policies
are summarized in Management's Discussion and Analysis or Plan of Operations in
our Annual Report on Form 10-KSB for the year ended December 31, 2002, except
for our accounting policy related to stock options which is summarized in Note 1
to the notes to the consolidated financial statements included in our Annual
Report on Form 10-KSB.
HOW WE HAVE FINANCED OUR ACTIVITIES
On August 2, 2002, we borrowed $500,000 from a private investor. The
borrowing had a stated interest rate of 12% (effective rate of 22.0%) and was
due on December 6, 2002 , or out of the proceeds of a financing or sale or
change of control of the company if occurring earlier. It was secured by a
pledge of the shares of First Calgary Petroleum Ltd. that we owned. On February
14, 2003, we issued to the lender 166,700 shares of our common stock as
additional consideration for making the loan. The loan was repaid on March 12,
2003 out of the proceeds of our sale of the remaining shares of First Calgary
Petroleum Ltd. that we owned.
On March 12, 2003, we entered into a funding arrangement with
TransAtlantic Petroleum (USA) Corp., whereby TransAtlantic agreed to advance to
us up to $2.0 million, of which up to $1.8 million was to be used to fund our
share of the drilling and completion costs for the four initial wells we drilled
in St. Charles Parish, Louisiana. In exchange, TransAtlantic received a $2.0
million production payment payable out of 75% of the net revenues from the
initial four wells and, upon payment of the $2.0 million, it is to receive a 10%
working interest in those four wells and a 10% working interest in our Bayou
Couba lease and our lease with the State of Louisiana. Further, TransAtlantic
was granted the right to acquire a 10% participation in any additional interests
we acquire in the 23.138 square mile Bayou Couba salt dome development area,
including any interests acquired through our area of mutual interest joint
development agreement with ExxonMobil Corp. Our obligations to TransAtlantic are
collateralized by a lien
17
against our interest in our four initial wells and their hydrocarbon production.
At June 30, 2003, we had drawn a total of $2,000,000, including $1,800,000 used
to fund our share of the drilling and completion costs. Imputed interest on the
$2,000,000 drawn amounted to $461,544, which was recorded as a discount on the
production payment liability, with a corresponding reduction in the value of
proved and unproved oil and natural gas properties, representing the sale, upon
payout of the production payment, of the 10% working interest in our four
initial wells and in the Bayou Couba and State of Louisiana leases. The discount
is accreted to interest expense, using the units of production method. As of
June 30, 2003, the outstanding balance of the production payment was $1,451,745,
of which $160,898 attributable to produced volumes is included in accounts
payable and accrued liabilities. At June 30, 2003, all available funds had been
advanced for development of our four initial wells. Brian Bayley, a Director of
our company, is also a Director of TransAtlantic.
We also completed, in March 2003, a $2.5 million borrowing for working
capital and repayment of secured debt. The $2.5 million is due to be repaid on
October 31, 2003 and bears interest at 12% per annum, (effective rate 22.0%)
calculated monthly. The loan is secured by a senior lien against all our oil and
gas properties and undeveloped leaseholds. The lender also received 688,000
shares of our common stock as additional consideration for the loan. The lender
is Quest Investment Corporation. Brian Bayley, one of our Directors, is a
Director and the Chief Executive Officer of Quest Investment Corporation. We
agreed to register the 688,000 shares under the Securities Act of 1933, as
amended, by July 22, 2003 to enable the resale of such shares. We have requested
an extension of the date by which the sale of such shares is to be registered.
Also in March 2003, we refinanced our indebtedness owing to Bank One
Michigan, NA. ("Bank One"). Bank One was repaid $2.25 million and received our
junior secured note in the principal amount of approximately $1.7 million. Bank
One subordinated its lien against substantially all our assets to the loan of
Quest Investment Corporation described above. The loan bears interest at Bank
One's prime rate plus 2%, payable quarterly. The note matures on December 31,
2003.
FUTURE CAPITAL REQUIREMENTS AND RESOURCES
Our capital requirements relate to the acquisition, exploration,
enhancement, development and operation of oil and natural gas properties. In
general, because our oil and natural gas reserves will be depleted by production
over time, the success of our business strategy is dependent upon a continuous
acquisition, exploitation, enhancement, and development program. In order to
achieve profitability and generate cash flow, we are dependent upon acquiring or
developing additional oil and natural gas properties or entering into joint oil
and natural gas well development arrangements.
We currently expect that available cash and, subject to the success of
management's plans to raise additional capital not currently available to us,
the proceeds from the private or public sale of debt or equity securities, will
be sufficient to fund debt service requirements and planned capital expenditures
for our existing properties through 2003. However, we may need to
18
raise additional capital to fund capital expenditures and development of our oil
and natural gas assets, which capital may not be available to us in the future.
In order to acquire and develop additional oil and gas reserves, we
will require additional capital which is currently not available to us. Our
business strategy requires us to obtain additional financing and our failure to
do so can be expected to adversely affect our ability to grow our revenues, oil
and gas reserves and achieve and maintain a significant level of revenues and
profitability. There can be no assurance we will obtain this additional funding.
Such funding may be obtained through the sale of equity securities or by
incurring additional indebtedness. Although we are currently actively seeking to
raise additional equity or debt capital, we currently have no specific plans or
agreements with investors regarding raising this additional capital. Without
such funding, our revenues will continue to be limited and it can be expected
that our operations will not be profitable. In addition, any additional equity
funding that we obtain may result in material dilution to the current holders of
our common stock.
We intend, as opportunities arise, to evaluate the acquisition and
development of additional leasehold interests. We are unable at this time to
state whether or where any such additional properties may be acquired, to
estimate the purchase price for any properties we may acquire or to state the
terms on which financing for these purposes can be obtained.
Under the terms of our loan agreement with Quest Investment
Corporation, we owe $2.5 million maturing on October 31, 2003 and under the
terms of our loan agreement with Bank One, we owe approximately $1.7 million
maturing on December 31, 2003. We are currently seeking to arrange for a sale of
shares of our common stock in a private offering of securities, a portion of the
proceeds from which sale are intended to be used to repay this indebtedness.
There can be no assurance that we will be successful in raising this additional
capital on terms acceptable to us or that the terms of such transaction may not
result in material dilution to our existing stockholders.
ACCOUNTING MATTERS
Statement of Financial Accounting Standards No. 141, Business
Combinations (FAS 141) and Statement of Financial Accounting Standards, No. 142,
Goodwill and Intangible Assets (FAS 142) were issued by the Financial Accounting
Standards Board (FASB) in June 2001 and became effective for us on July 1, 2001
and January 1, 2002, respectively. FAS 141 requires all business combinations
initiated after June 30, 2001 to be accounted for using the purchase method.
Additionally, FAS 141 requires companies to disaggregate and report separately
from goodwill certain intangible assets. FAS 142 establishes new guidelines for
accounting for goodwill and other intangible assets. Under FAS 142, goodwill and
certain other intangible assets are not amortized, but rather are reviewed
annually for impairment. The FASB, the Securities and Exchange Commission (SEC)
and others continue to discuss the appropriate application of FAS 141 and 142 to
oil and gas mineral rights held under lease and other contractual arrangements
representing the right to extract such reserves. Depending on the outcome of
such discussions, these oil and gas mineral rights held under lease and other
contractual arrangements representing the right to extract such reserves for
both undeveloped and developed leaseholds may be classified separately from oil
and gas properties, as intangible
19
assets on our balance sheets. In addition, the disclosures required by FAS 141
and 142 relative to intangibles would be included in the notes to financial
statements. Historically, we, like many other oil and gas companies, have
included these oil and gas mineral rights held under lease and other contractual
arrangements representing the right to extract such reserves as part of the oil
and gas properties, even after FAS 141 and 142 became effective.
As applied to companies like us that have adopted full cost accounting
for oil and gas activities, we understand that this interpretation of FAS 141
and 142 would only affect our balance sheet classification of proved oil and gas
leaseholds acquired after June 30, 2001 and our unproved oil and gas leaseholds.
Our results of operations and cash flows would not be affected, since these oil
and gas mineral rights held under lease and other contractual arrangements
representing the right to extract such reserves would continue to be amortized
in accordance with full cost accounting rules.
At June 30, 2003 and December 31, 2002, we had undeveloped leaseholds
of approximately $ 3.2 million and $2.7 million, respectively, that would be
classified on our condensed consolidated balance sheets as "intangible
undeveloped leasehold" and developed leaseholds of an estimated net book value
of $1.6 million and $830,000 at June 30, 2003 and December 31, 2002,
respectively, that would be classified as "intangible developed leaseholds" if
we applied the interpretation currently being discussed.
We will continue to classify our oil and gas mineral rights held under
lease and other contractual rights representing the right to extract such
reserves as tangible oil and gas properties until further guidance is provided.
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995
With the exception of historical matters, the matters we discussed
below and elsewhere in this Report are "forward-looking statements" as defined
under the Securities Exchange Act of 1934, as amended, that involve risks and
uncertainties. The forward-looking statements appear in various places including
under the headings Item 1. Financial Information and Item 2. Management's
Discussion and Analysis or Plan of Operation. These risks and uncertainties
relate to our capital requirements, business strategy, ability to raise capital
and fund our oil and gas well drilling and development plans, our ability to
fund the repayment of our outstanding indebtedness, our ability to attain and
maintain profitability and cash flow and continue as a going concern, our
ability to increase our reserves of oil and gas through drilling activities and
acquisitions, our ability to enhance and maintain production from existing wells
and successfully develop additional producing wells, our access to debt and
equity capital and the availability of joint venture development arrangements,
our ability to remain in compliance with the terms of any agreements pursuant to
which we borrow money and to repay the principal and interest when due, our
estimates as to our needs for additional capital and the times at which
additional capital will be required, our expectations as to our sources for this
capital and funds, our ability to successfully implement our business strategy,
our ability to identify and integrate successfully any additional producing oil
and gas properties we acquire and operate such properties profitably, our
ability to maintain compliance with covenants of our loan documents and other
20
agreements pursuant to which we issue securities or borrow funds and to obtain
waivers and amendments when and as required, our ability to borrow funds or
maintain levels of borrowing availability under our borrowing arrangements, our
ability to meet our budgeted capital expenditures, our statements and estimates
about quantities of production of oil and gas as it implies continuing
production rates at those levels, proved reserves or borrowing availability
based on proved reserves and our future net cash flows and their present value.
Readers are cautioned that the risk factors described in our
registration statement on Form 10-SB and other reports filed with the
Commission, as well as those described elsewhere in this Report, in some cases
have affected, and in the future could affect, our business plans and actual
results of operations and could cause our actual consolidated results during
2003 and beyond, to differ materially from those expressed in any
forward-looking statements made by or on our behalf.
Our common shares have no trading market in the United States, and
there can be no assurance as to the liquidity of any markets that may develop
for our common shares, the ability of the holders of common shares to sell their
common shares in the United States or the price at which holders would be able
to sell their common shares. Any future trading prices of the common shares will
depend on many factors, including, among others, our operating results and the
market for similar securities.
ITEM 3. CONTROLS AND PROCEDURES
Under the supervision and with the participation of our management,
including Michael K. Paulk, our President, and Steven P. Ensz, our Vice
President, Finance, we have evaluated our disclosure controls and procedures as
of the end of the period covered by this report, and, based on their evaluation,
Mr. Paulk and Mr. Ensz have concluded that these controls and procedures are
effective. There were no significant changes in our internal controls or in
other factors that could significantly affect these controls subsequent to the
date of their evaluation.
Disclosure controls and procedures are our controls and other
procedures that are designed to ensure that information required to be disclosed
by us in the reports that we file or submit under the Exchange Act is recorded,
processed, summarized and reported, within the time periods specified in the
Securities and Exchange Commission's rules and forms. Disclosure controls and
procedures include, without limitation, controls and procedures designed to
ensure that information required to be disclosed by us in the reports that we
file or submit under the Exchange Act is accumulated and communicated to our
management, including Mr. Paulk and Mr. Ensz, as appropriate to allow timely
decisions regarding required disclosure.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
21
2.0 Second Amended Joint Plan of Reorganization Proposed by Couba
Operating Company, American Natural Energy Corporation and
Gothic Resources Inc. filed in the United States Bankruptcy
Court, Western District of Oklahoma. Case No. 00-11837-W
(Chapter 11)(1).
2.1 Order Confirming Plan, filed November 16, 2001 with U.S.
Bankruptcy Court, Western District of Oklahoma(2)
3.1 Certificate of Incorporation of American Natural Energy
Corporation, formerly named Dayton Energy Corporation(1)
3.2 Certificate of Amendment filed March 23, 2001(2)
3.3 Certificate of Amendment filed December 20, 2001(2)
10.2 Loan Agreement dated August 2, 2002 between Middlemarch
Partners Limited and the Registrant(2)
10.3 Leasehold Acquisition and Development Agreement with The Wiser
Oil Company(2)
10.4 Assignment of Oil, Gas and Mineral Lease dated as of February
18, 2002 relating to State Lease Number 17353(2)
10.5 Loan Agreement effective as of March 12, 2003 between
Registrant and Bank One, N.A.(2)
10.6 Loan Agreement dated March 12, 2003 between Registrant and
Quest Investment Corporation(2)
10.7.1 Production Payment Purchase and Sale Agreement between
Registrant and TransAtlantic Petroleum (USA) Corp. dated March
10, 2003(2)
10.7.2 Production Payment Conveyance from Registrant to TransAtlantic
Petroleum (USA) Corp. dated March 10, 2003(2)
10.7.3 Purchase and Exploration Agreement between Registrant and
TransAtlantic Petroleum (USA) Corp. dated March 10, 2003(2)
21.0 Subsidiaries of the Registrant
NAME JURISDICTION OF ORGANIZATION
---- ----------------------------
Gothic Resources Inc. Canada Business Corporations Act
Couba Operating Company Oklahoma
31.1 Certification of President and Chief Executive Officer
Pursuant to Rule 13a-14(a)(3)
31.2 Certification of Chief Financial Officer Pursuant to Rule 13a-
14(a)(3)
32.1 Certification of President and Chief Executive Officer
Pursuant to Section 1350 (furnished, not filed)(3)
32.2 Certification of Chief Financial Officer Pursuant to Section
1350 (furnished, not filed)(3)
- ----------------------------
(1) Filed as an exhibit to registration statement on Form 10-SB filed August
12, 2002.
(2) Filed as an exhibit to Amendment No. 1 to registration statement on Form
S-B.
(3) Filed or furnished herewith.
22
(b) Reports on Form 8-K
We filed the following Current Reports on Form 8-K in response to the
Items named:
Report Date Item
----------- ----
April 30, 2003 Item 7. Financial Statements and Exhibit
(Press Release dated April 30, 2003)
23
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.
AMERICAN NATURAL ENERGY CORPORATION
-----------------------------------
(Registrant)
Date: September 2, 2003 /S/ Michael K. Paulk
------------------------------------------
Michael K. Paulk
President and Chief Executive Officer
/S/ Steven P. Ensz
------------------------------------------
Steven P. Ensz
Principal Financial and Accounting Officer
24