U.S. SECURITIES AND EXCHANGE COMMISSION
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, 1998
[ ] Transition Report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the Transition Period from __________ to _________
Commission file number 0-10006
American Rivers Oil Company
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(Exact name of small business issuer as specified in its charter)
Wyoming 84-0839926
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
700 East Ninth Avenue, Suite 106, Denver, CO 80203
- -------------------------------------------- -----
(Address of principal executive offices) (Zip Code)
(303) 832-1117
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(Issuer's telephone number)
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
The number of shares outstanding as of August 14, 1998 of the issuer's $.01 par
value Common Stock and $.01 par value Class B Common Stock were 3,615,770 and
7,267,820, respectively.
Transitional Small Business Disclosure Format
(Check one):
Yes No X
AMERICAN RIVERS OIL COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Unaudited)
JUNE 30, 1998
ASSETS
------
Current Assets:
Cash and equivalents $ 42,872
Oil and gas sales receivable 12,217
Accounts receivable, affiliates 150,000
Prepaid expenses and other 13,899
-----------
Total current assets 218,988
Oil and Gas Properties, at cost, using
successful efforts method:
Proved properties 336,191
Less accumulated depreciation and depletion (209,480)
-----------
Net oil and gas properties 126,711
-----------
Other assets 4,187
-----------
Total Assets $ 349,886
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LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current Liabilities:
Current maturities of long-term debt $ 7,000
Accounts payable and accrued expenses 60,146
Payable to related parties 12,425
-----------
Total current liabilities 79,571
Long-term Debt, less current maturities 68,846
Commitments and Contingencies (Notes 3 and 9)
Stockholders' Equity:
Preferred stock, $.50 par value; 5,000,000 shares
authorized; no shares issued --
Common stock, $.01 par value; 20,000,000 shares
authorized; 4,713,004 shares issued 47,130
Class B common stock, $.01 par value; 8,000,000 shares
authorized; 7,267,820 shares issued and outstanding 72,678
Additional paid-in capital 6,193,893
Accumulated deficit (4,382,490)
Less treasury stock, at cost, 1,101,234 common shares (1,729,742)
-----------
Total stockholders' equity 201,469
-----------
Total Liabilities and Stockholders' Equity $ 349,886
===========
See accompanying notes to these consolidated financial statements.
2
AMERICAN RIVERS OIL COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
FOR THE 3 MONTHS ENDED
JUNE 30,
--------------------------
1998 1997
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Revenue:
Oil and gas sales $ 18,871 $ 187,087
Operator fees -- 1,500
----------- -----------
Total revenue 18,871 188,587
Expenses:
Oil and gas production costs 21,043 110,573
Exploration costs 972 3,127
General and administrative 82,929 144,713
Depreciation and depletion 10,600 24,000
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Total expenses 115,544 282,413
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Loss from Operations (96,673) (93,826)
Other Income (Expense):
Gain on sale of oil and gas properties 205,174 --
Equity in loss of Bishop Capital Corporation -- (95,263)
Interest expense (9,884) (24,515)
----------- -----------
Income (Loss) Before Income Taxes 98,617 (213,604)
Income taxes:
Income taxes 33,500
Tax benefit of net operating loss carry forward (33,500)
Deferred Income Tax Benefit -- 43,900
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Net Income (loss) $ 98,617 $ (169,704)
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Net Income (Loss) Per Share:
Common stock $ .00 $ (.03)
=========== ===========
Class B common stock $ .01 $ (.01)
=========== ===========
Weighted Average Number of Shares Outstanding:
Common stock 3,611,770 3,614,715
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Class B common stock 7,267,820 7,267,820
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See accompanying notes to these consolidated financial statements
3
AMERICAN RIVERS OIL COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
FOR THE 3 MONTHS ENDED
MARCH 31,
----------------------------
1998 1997
---- ----
Cash Flows From Operating Activities:
Net income (loss) $ 98,617 $(169,704)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation, depletion and amortization 10,745 24,000
Equity in loss of Bishop Capital Corporation -- 95,263
Gain on sale of oil and gas properties (205,174) --
Deferred income tax benefit -- (43,900)
Issuance of treasury stock for services -- 5,000
Changes in operating assets and liabilities:
(Increase) decrease in:
Oil and gas sales receivable 68,660 3,302
Prepaid expenses and other (1,177) (14)
Accounts receivable affiliates (150,000)
Increase (decrease) in:
Payable to related parties (42,894) --
Accounts payable and accrued expenses (96,312) (20,003)
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Net cash used in operating activities (317,535) (106,056)
Cash Flows from Investing Activities:
Capital expenditures for property and equipment -- (8,292)
Proceeds from sale of property and equipment 900,327 18,148
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Net cash provided by (used in) investing activities 900,327 9,856
Cash Flows from Financing Activities:
Proceeds from borrowings -- --
Principal payments on borrowings (540,000) (321)
--------- ---------
Net cash provided by (used in) financing activities (540,000) (321)
--------- ---------
Net Increase (Decrease) in Cash and Equivalents 42,792 (96,521)
Cash and Equivalents, beginning of period 80 136,267
--------- ---------
Cash and Equivalents, end of period $ 42,872 $ 12,921
========= =========
Supplemental Cash Flow Information:
Cash paid for interest $ 9,884 $ 24,515
========= =========
Cash paid for income taxes $ -- $ --
========= =========
See accompanying notes to these consolidated financial statements
4
AMERICAN RIVERS OIL COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
In the opinion of management, all adjustments, consisting of normal
recurring accruals, have been made which are necessary for a fair
presentation of the of the financial position of the Company at June 30,
1998 and the results of operations and cash flows for the three month
periods ended June 30, 1998 and 1997. Quarterly results are not necessarily
indicative of the expected annual results because of the impact of
fluctuations in prices received for oil and natural gas and other factors.
For a more complete understanding of the Company's operations and financial
position, reference is made to the consolidated financial statements of the
Company, and related notes thereto, filed with the Company's annual report
on Form 10-KSB for the year ended March 31, 1998, previously filed with the
U.S. Securities and Exchange Commission.
Certain reclassifications have been made to the 1997 financial statements
to conform to the presentation in 1998. The reclassifications had no effect
on the 1997 net loss.
2. Sale of Oil and Gas Properties
On June 4, 1998, Company entered into an agreement to sell the Company's
Colorado oil and gas properties with an effective date of March 1, 1998, in
order to provide liquidity and to repay short-term bank debt. The Company
realized proceeds from the disposition of these properties in the amount of
$900,327. The proceeds were used as follows:
Bank debt $540,000
Payables to related parties 42,894
Advances to affiliates 150,000
Accounts payable and working capital 167,434
--------
$900,327
========
3. Spin-off of Bishop Capital Corporation in 1997
On June 20, 1997 the Company distributed on a pro rata basis, the
outstanding common stock of Bishop Capital Corporation to its common
shareholders.
4. Net Income (Loss) Per Share
The computation of net income or loss per share is based on the rights of
each class of common stock. The Class B common stock is not entitled to
participate in any distribution of shares or assets of Bishop Capital
Corporation. Accordingly, through June 20, 1997, the common shares were
allocated 100% of the (then subsidiary's) loss and a pro rata percentage of
the remaining consolidated earnings or loss based on the ratio of common
shares outstanding to total common and Class B shares outstanding. The
Class B common shares were allocated the remaining pro rata percentage of
the loss.
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AMERICAN RIVERS OIL COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
the Company's unaudited consolidated financial statements and notes
thereto.
Forward-Looking Statements
The Company believes that this report contains certain forward-looking
statements, as defined in the Private Securities Litigation Reform Act of
1995, including, without limitation, statements containing the words
"believes," "anticipates," "estimates," "expects," "may" and words of
similar import, or statements of management's opinion. Such forward-looking
statements involve known and unknown risks, uncertainties and other factors
which may cause the actual results, performance or achievements of the
Company to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements.
Results of Operations
Three Months Ended June 30, 1998 Compared to 1997
The Company's oil and gas sales revenue decreased by $168,000 or 81% in the
quarter ended June 30, 1998 compared to the corresponding quarter in 1997.
The primary factor in the decrease is attributed to the sale of the
Colorado properties referred to in note 2 to the financial statements. In
the comparable quarter of 1997 the revenues associated with the Colorado
property was $80,000. The production volume for oil decreased by 97% (5,266
barrels) and natural gas production volume decreased 89% (46,746 mcf) in
the current quarter compared to the corresponding quarter in 1997. The
average sales price of oil decreased 37% and the average sales price of
natural gas increased 25% for quarter ended June 30, 1998 compared to the
corresponding quarter in 1997.
The production volumes and average sales prices during the periods were as
follows:
Three Months Ended
June 30,
----------------------
1998 1997
---- ----
Oil production (barrels) 145 5,411
Average sales price per barrel $ 11.50 $ 18.35
Natural gas production (mcf) 8,422 52,157
Average sales price per mcf $ 2.10 $ 1.68
Oil and gas production costs decreased by $89,500 compared to the
corresponding quarter in 1997, principally due to the sale of the Colorado
properties. On a BOE basis (BOE means barrel of oil equivalent, using a
conversion ratio of six mcf of natural gas to one barrel of oil),
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production costs per BOE were $13.59 compared to $7.84 for the comparable
quarter of 1997. Production costs on a BOE increased because the production
costs on the two remaining properties are spread over a smaller base and
operating costs were incurred on the Company's Sparkle well in Kentucky
even though the well was shut in during the quarter.
General and administrative expenses decreased by $62,000 or 44% for the
quarter ended June 30, 1998 compared to the corresponding quarter in 1997
and is due primarily to decreases corporate overhead.
Depreciation, depletion and amortization expense decreased by $13,400 or
55% in the current quarter compared to the corresponding quarter in 1997
due to decreased production volume because of the sale of the Colorado
property.
Exploration expenses decreased because of the decline in exploration
activities.
Since the distribution of Bishop Capital Corporation shares related to the
spin-off was completed in June 1997, the operations of Bishop subsequent to
the distribution date are no longer included in the Company's consolidated
statement of operations.
Interest expense decreased by $14,600 or 60% for the current quarter of
19987 over the corresponding quarter of 1997 due to a lower average amount
of debt outstanding.
FINANCIAL CONDITION
At June 30, 1998, the Company had working capital of $139,000.
As a result of the Colorado property sale in June 1998, in which a net gain
of approximately $205,000 was realized, the Company's future net cash flow
from oil and gas operations will decrease significantly. The Colorado
properties represented approximately 72% of gross production revenues in
fiscal 1998. The Company also repaid its bank line-of-credit from the net
proceeds of the sale in the amount of $540,000.
The following summary table reflects the Company's cash flows for the three
months ended June 30, 1998 and 1997:
Three Months Ended
June 30,
----------------------
1998 1997
---- ----
Net cash used in operating activities $(317,000) $(106,000)
Net cash provided by (used in)
investing activities (900,000) 9,000
Net cash provided (used in) by
financing activities (540,000) --
Net cash used in operating activities increased by $210,000 for the three
months ended June 30, 1998 primarily due to an increase in accounts
receivable affiliates and a decrease in oil and gas sales and related
receivables compared to the 1997 period.
Net cash provided by investing activities of $900,000 for the three months
ended June 30, 1998 resulted from sales of Colorado DJ Basin wells to
unrelated third parties.
7
Net cash used in financing activities of $540,000 for the three months
ended June 30, 1997 resulted from the payment of the Company's line of
credit in full.
Operating Strategy
The Company has sold a significant portion of its producing properties to
meet its current obligations including eliminating its bank debt. The
Company's operating objective is to increase value through pursuing merger
or acquisition opportunities with a substantial, stable company. The
Company is currently negotiating with a candidate, Royal Scott Minerals,
Inc, a public company listed on the London Stock Exchange. Royal Scott
Minerals has purchased options from Francarep, Inc. Jubal Terry, and Art
and Music Outreach for Kids with the view to acquire their shares in
connection with a potential transaction. The Company cannot predict whether
any agreement may be reached, the timing of the contemplated transaction or
the results of the transaction if any agreement is reached
In view of the Company's lack of liquidity, if the contemplated merger does
not take place, the Company's value and future potential could be
considerably diminished.
General
Many of the factors which may affect the Company's future operating
performance and long-term liquidity are beyond the Company's control,
including, but not limited to, oil and natural gas prices, the availability
and attractiveness of properties for acquisition, the adequacy and
attractiveness of financing and operational results. The Company is
examining alternative sources of long-term capital, including bank
borrowings, the issuance of debt instruments and the sale of equity
securities of the Company. Availability of these sources of capital and,
therefore, the Company's ability to execute its operating strategy will
depend upon a number of factors, some of which are beyond the control of
the Company.
8
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Default Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
Exhibit 27. Financial Data Schedule (submitted only in
electronic format)
b. Reports on Form 8-K
None
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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.
AMERICAN RIVERS OIL COMPANY
(Registrant)
Date: August 14, 1998 By: /s/ Karlton Terry
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Karlton Terry
President
(Principal Executive Officer)
Date: August 14, 1998 By: /s/ Karlton Terry
----------------------------------
Karlton Terry
President and Acting
Chief Financial Officer
(Principal Financial Officer
10