UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB/A
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 FOR THE QUARTERLY PERIOD ENDED March 31, 2001
( ) 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: 0-20915
Geo Petroleum, Inc.
(Exact name of small business issuer as specified in its charter)
California 33-0328958
- ---------- ----------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
18281 Lemon Drive, Yorba Linda, California, 92886
- --------------------------------------------------------------------------------
(Address of principal executive offices)
714.779.9897
------------
(Issuer's Telephone Number)
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practical date. As of March 31, 2001, there were
18,665,305 shares of the issuer's $.001 par value common stock issued and
outstanding.
1
INDEX TO QUARTERLY REPORT ON
FORM 10-QSB
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2001
PAGE
--------
PART I - FINANCIAL INFORMATION............................................3
Item 1. Financial Statements (Unaudited)
Balance Sheet at March 31, 2001
Statement of Operations for the three months ended March 31, 2001 and 2000
Statement of Cash Flows for the three months ended March 31, 2001 and 2000
Notes to the Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
PART II - OTHER INFORMATION...................................................14
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES....................................................................15
2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Geo Petroleum, Inc.
Financial Statements
(Unaudited)
As of March 31, 2001 and
For Each of the Three Month Periods Ended March 31, 2001 and 2000
3
Geo Petroleum, Inc.
Index to the Financial Statements
(Unaudited)
As of March 31, 2000 and
For Each of the Three Month Periods Ended March 31, 2001 and 2000
Financial Statements of Geo Petroleum, Inc.:
Balance Sheet (Unaudited) March 31, 2001.............................5
Statements of Operations (Unaudited) For Each of the Three
Month Periods Ended March 31, 2001 and 2000........................6
Statements of Shareholders' Equity (Unaudited) For the
Three Month Period Ended March 31, 2001............................7
Statements of Cash Flows (Unaudited) For Each of the Three
Month Periods Ended March 31, 2001 and 2000........................8
Notes to the Financial Statements........................................9
4
Geo Petroleum, Inc.
Balance Sheet
(Unaudited)
March 31, 2001
- --------------------------------------------------------------------------------
ASSETS
Current assets:
Cash and equivalents $ 11,632
Accounts receivable, net of allowance for
doubtful accounts of $0 69,331
Prepaid legal and consulting fees 120,488
Other prepaid expenses 8,856
---------------
Total current assets 210,307
---------------
Restoration and utility deposits 289,902
---------------
Property and equipment:
Oil and gas properties 274,226
Vehicles 36,884
Facilities and equipment 185,447
---------------
Total property and equipment 496,557
Less: accumulated depreciation and depletion (27,565)
---------------
Total property and equipment, net 468,992
---------------
Total assets $ 969,201
===============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable:
Trade and other $ 177,079
Related party 54,805
Accrued expenses 117,811
Line of credit - related party 85,000
Other liabilities 4,300
Note payable - other, current portion 19,316
---------------
Total current liabilities 458,311
Note payable - other, net of current portion
Accrued liabilites, related party
---------------
Total liabilities 458,311
---------------
Shareholders' equity:
Preferred stock; no par value; 100,000 shares
authorized; no shares issued and outstanding at March 31, 2001. -
Common stock; no par value; 50,000,000 shares
authorized; 18,665,305 shares issued and
outstanding at March 31, 2001. 11,472,542
Accumulated deficit (10,961,651)
---------------
Total shareholders' equity 510,891
---------------
Total liabilities and shareholders' equity $ 969,201
===============
The accompanying notes are an integral part of the financial statements.
5
Geo Petroleum, Inc.
Statements of Operations
(Unaudited)
For Each of the Three Month Periods Ended March 31, 2001 and 2000
- --------------------------------------------------------------------------------
For the Three Month Periods Ended March 31,
-------------------------------------------
2001 2000
--------------- --------------
Revenues:
Oil and gas sales $ 132 $ 330
Waste water disposal services 59,427 702
Other revenue 10,663
--------------- --------------
Total revenues 59,559 11,695
--------------- --------------
Expenses:
Lease operating expenses 121,679 46,825
Lease environmental remediation expenses 10,189 -
Depletion and depreciation 5,138 -
Professional fees 116,667 -
General and administrative 109,423 88,335
--------------- --------------
Total expenses 363,096 135,160
--------------- --------------
Loss from operations (303,537) (123,465)
--------------- --------------
Reorganization items:
Professional fees (5,403) (53,482)
--------------- --------------
Total reorganization items (5,403) (53,482)
--------------- --------------
Other income (expenses):
Interest income 2,305 1,781
Interest expense (1,127) (1,056)
--------------- --------------
Total other income (expense) 1,178 725
--------------- --------------
Loss before provision for income taxes (307,762) (176,222)
Provision for income taxes -
--------------- --------------
Net loss $ (307,762) $ (176,222)
=============== ==============
Net loss per share, basic and diluted $ (0.017) $ (0.010)
=============== ==============
The accompanying notes are an integral part of the financial statements.
6
Geo Petroleum, Inc.
Statements of Operations
(Unaudited)
For Each of the Three Month Periods Ended March 31, 2001 and 2000
- --------------------------------------------------------------------------------
Common Common Accumulated
Shares Stock Deficit Total
--------------- ---------------- ----------------- ---------------
Balance, December 31, 2000 $ 18,177,805 $ 11,225,293 $ (10,653,889) $ 571,404
Common shares issued 297,500 148,749 148,749
Common shares issued for services 215,000 98,500 98,500
Net loss (307,762) (307,762)
--------------- ---------------- ----------------- ---------------
Balance, March 31, 2001 $ 18,690,305 $ 11,472,542 $ (10,961,651) $ 510,891
=============== ================ ================= ===============
The accompanying notes are an integral part of the financial statements.
7
Geo Petroleum, Inc.
Statements of Cash Flows
(Unaudited)
For Each of the Three Month Periods Ended March 31, 2001 and 2000
- --------------------------------------------------------------------------------
For the Three Month Periods Ended March 31,
-----------------------------------------------
2001 2000
----------------- ----------------
Cash flows from operating activities:
Net loss $ (307,762) $ (176,222)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation 5,138 -
Provision for uncollectible accounts receivable - 4,069
Common shares issued for services 48,500 -
Decrease (increase) in assets:
Accounts receivable (35,370) 35,000
Prepaid expenses 54,884 3,634
Restoration and utility deposits 1,034 (30,031)
Note receivable 7,100 -
Increase (decrease) in liabilities:
Accounts payable - trade 16,178 68,796
Accrued expenses 26,175 (46,487)
Income tax payable - (3,839)
Other liabilities - (156,446)
----------------- ----------------
Net cash used in operating activities (184,123) (301,526)
----------------- ----------------
Cash flows provided by (used in) investing activities:
Purchases of facilities and equipment (972) (18,197)
Capital expenditures on oil and gas properties (12,915) -
----------------- ----------------
Net cash used in investing activities (13,887) (18,197)
----------------- ----------------
Cash flows provided by (used in) financing activities:
Proceeds from issuance of a note payable -
Proceeds from line of credit - related party -
Payments on notes payable (9,280) (6,405)
Net proceeds from the issuance of common stock 148,749 241,020
----------------- ----------------
Cash provided by financing activities 139,469 234,615
----------------- ----------------
Net increase (decrease) in cash (58,541) (85,108)
Cash and equivalents at beginning of year 70,173 436,916
----------------- ----------------
Cash and equivalents at end of year $ 11,632 $ 351,808
Supplemental Disclosures of Cash Flow Information
For the Three Month Periods Ended March 31,
-----------------------------------------------
2001 2000
---------------- ----------------
Interest paid - $ 1,058
Income taxes paid - -
Supplemental Disclosure of Non-Cash Investing and Financing Activities
Issuance of common stock for prepaid
legal fees:
Prepaid legal and consulting fees $ 50,000 -
Issuance of common stock $ (50,000) -
The accompanying notes are an integral part of the financial statements.
8
Geo Petroleum, Inc.
Notes to the Financial Statements
(Unaudited)
As of March 31, 2001 and
For Each of the Three Month Periods Ended March 31, 2001 and 2000
1. Description of the Company's Business
-------------------------------------
Geo Petroleum, Inc. (the "Company") is an oil and gas production company
founded in 1986 and incorporated in the State of California. The Company
engages in the development, production and management of oil and gas
properties. All of the Company's properties are located in California.
Certain of the wells on one of the Company's properties are used for waste
water disposal services.
2. Basis of Presentation
---------------------
In the opinion of the management of Geo Petroleum, Inc., the accompanying
unaudited condensed financial statements contain all adjustments,
consisting of only normal recurring adjustments, necessary to present
fairly its financial position as of March 31, 2001, the results of its
operations, shareholders' equity, and cash flows for the three month
periods ended March 31, 2001 and 2000. Certain information and footnote
disclosures normally included in financial statements prepared in
accordance with generally accepted principles have been condensed or
omitted pursuant to the rules and regulations promulgated by the Securities
and Exchange Commission. The statements should be read in conjunction with
the financial statements and footnotes for the year ended December 31, 2000
included in the Company's Form 10K-SB. The results of operations for the
interim period are not necessarily indicative of the results to be expected
for the full year.
3. Commitments and Contingencies
-----------------------------
Concentration of Credit Risk
Financial instruments, which potentially subject the Company to
concentrations of credit risk, consist primarily of cash and cash
equivalents and accounts receivable. The Company places its cash and cash
equivalents with high quality financial institutions. Exposure to losses on
accounts receivable is principally dependent on the individual customer's
financial condition, as credit sales are not collateralized. The Company
monitors its exposure to credit loss and reserves those accounts receivable
that it deems to be uncollectible.
Cash in Excess of Federal Deposit Insurance Corporation Insured Limits
The Company maintains its cash in bank deposit accounts, which, at times,
may exceed federally insured limits. Accounts are guaranteed by the Federal
Deposit Insurance Corporation ("FDIC") up to $100,000. At March 31, 2001,
the Company had approximately $11,970 in excess of FDIC insured limits. The
Company has not experienced any losses in such accounts.
9
3. Commitments and Contingencies, Continued
----------------------------------------
Risks of the Industry in Which the Company Operates
The Company participates in an industry that is characterized by
competitive pressure, changes in the prices of oil and gas on a world-wide
basis, federal, state, and local regulations governing production and
development of its oil and gas reserves and compliance with various
environmental laws and regulations. The Company's results of operations are
affected by a wide variety of factors, including world events, general
economic conditions, changes in average selling prices over the productive
life of oil and gas reserves, the timing of production from new and
existing proved developed and undeveloped reserves by the Company, its
competitors, and others, the ability to produce sufficient quantities of
oil and gas reserves in a timely manner, and the timely implementation of
new and alternative reserve recovery process technologies. Based on the
factors noted herein, the Company may experience substantial
period-to-period fluctuations in future operating results.
Minimum Royalties
The Company has commitments for minimum royalty payments on certain of its
oil and gas properties, which total approximately $36,000 annually.
Property Lease Risks
The Company's oil and gas leases on its Vaca Tar Sands and Rosecrans
properties contain provisions, which provide for minimum production
requirements and periods. The Company's failure to meet those minimum
requirements could result in a termination of the lease(s) and loss of all
its rights thereunder. However, the Company believes it is in compliance
with the lease(s) provisions and has not received notification from anyone
to the contrary.
4. Related Party Transactions
--------------------------
The Company rents on a month-to-month basis its office facilities at $5,000
per month from an entity that is wholly-owned by a company officer, who is
a major shareholder.
5. Loss Per Share
--------------
Basic and diluted loss per common share have been computed by dividing the
loss available to common shareholders by the weighted-average number of
common shares for the period.
10
5. Loss Per Share, Continued
-------------------------
The computations of basic and diluted loss per common share are as follows:
For the Three Month Periods Ended March 31,
-------------------------------------------
2001 2000
------------- -------------
Numerator:
Net loss available to common shareholders $ (307,762) $ (176,222)
Denominator:
Weighted-average shares basic and diluted 18,535,333 15,483,795
------------- ----------
Loss per common share, basic and diluted $ (0.017) $ (0.01)
============= ============
The following additional potential common shares were outstanding during
2001 and 2000, but were not included in the computation of diluted loss per
share, because to do so would have been antidilutive for the periods
presented.
For the Three Month Periods Ended March 31,
-------------------------------------------
2001 2000
------------- -------------
Shares of common stock issuable under:
Warrants 655,151 856,821
Options 4,000,000 4,000,000
-------------- -------------
Total shares of common stock issuable 4,655,151 4,856,821
============== =============
7. Stock and Warrant Transactions
------------------------------
Common Shares Sold to Private Investors
During the quarter ended March 31, 2001, the Company sold 297,500 shares of
its common stock at $0.50 per share to private investors and received total
cash proceeds of $148,749.
The Company issued 100,000 shares of its common stock for legal services
for the period from January 2001 through December 2001. The shares were
valued at the market price of the stock at the date the services were
agreed to be provided. In addition, the Company issued 90,000 common shares
that were valued at the fair value of the services of $36,000. Also, the
Company issued 25,000 common shares for services, which were valued based
on the market value of the shares at the date of issuance totaling $12,500.
11
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
This following information specifies certain forward-looking statements of
management of the company. Forward-looking statements are statements that
estimate the happening of future events and are not based on historical fact.
Forward-looking statements may be identified by the use of forward-looking
terminology, such as "may", "shall", "will", "could", "expect", "estimate",
"anticipate", "predict", "probable", "possible", "should", "continue", or
similar terms, variations of those terms or the negative of those terms. The
forward-looking statements specified in the following information have been
compiled by our management on the basis of assumptions made by management and
considered by management to be reasonable. Our future operating results,
however, are impossible to predict and no representation, guaranty, or warranty
is to be inferred from those forward-looking statements.
The assumptions used for purposes of the forward-looking statements specified in
the following information represent estimates of future events and are subject
to uncertainty as to possible changes in economic, legislative, industry, and
other circumstances. As a result, the identification and interpretation of data
and other information and their use in developing and selecting assumptions from
and among reasonable alternatives require the exercise of judgment. To the
extent that the assumed events do not occur, the outcome may vary substantially
from anticipated or projected results, and, accordingly, no opinion is expressed
on the achievability of those forward-looking statements. No assurance can be
given that any of the assumptions relating to the forward-looking statements
specified in the following information are accurate, and we assume no obligation
to update any such forward-looking statements.
Our Business. Geo Petroleum, Inc. is a California corporation formed in 1986
primarily to develop a large tar sand deposit in Ventura County, California and
to engage in the oil field waste disposal business. We are a minor factor in the
California oil and gas industry and face competition from numerous companies,
which have considerably more financial resources, property and manpower, than do
we. We are in a weak financial condition and must rely upon third party sources
of funds to conduct our proposed operations. Our Vaca Tar Sands and Rosecrans
properties each require significant cash expenditures to operate and develop.
During the year 2000, we produced and sold small amounts of oil from our Vaca
properties, none from our Rosecrans properties and steadily increased our
revenues from our Waste Disposal operations. The results of our operations for
the first quarter of 2001 are discussed below.
In 1998, we filed for protection under Chapter~11 of the U.S.~Bankruptcy Code.
In December, 1999 we emerged from bankruptcy under a plan which, among other
things, provided for the issuance of approximately 1,900,000~shares of our
common stock to our creditors and a change in our management. Pursuant to the
Plan of Reorganization, during the year 2000 we issued 803,674~shares of our
common stock to our creditors and we are required to issue an additional
1,096,326~shares to our creditors. We expect to issue such shares during the
first half of 2001. Present management was installed as part of our
reorganization. At the time of our bankruptcy filing, we had sold or otherwise
transferred a substantial portion of our oil and gas holdings and had interests
in approximately 2,230~gross acres (2,030~net acres) of oil and gas leases or
mineral rights, of which approximately 1,630~gross acres (1,410~net acres) were
developed for oil and gas production and approximately 600~gross and net acres
were undeveloped. After emerging from bankruptcy, our oil and gas holdings were
approximately 2,000~gross and 1,830~net acres.
Since we emerged from bankruptcy, our income from operations has not been
sufficient to maintain the Company. Our president does not receive cash
compensation. Were it not for the fact that we have sold equity during the year
2000, the Company would not be able to continue operating. At year-end 2000,
only our waste disposal facility was producing significant revenues.
Results of Operations. The following discussion and analysis for the two
quarters ended March 31, 2001 and March 31, 2000, are to be read in combination
with the Financial Statements presented elsewhere herein.
12
First quarter 2001 compared with first quarter 2000. During the quarter ended
March 31, 2001, we had a net loss of $307,762 compared to a net loss of $176,222
for the comparable 2000 period. Revenues from our waste disposal perations
increased from $702 for the 2000 period, to $59,427 for the first quarter of
2001. There were no revenues from oil and gas operations during the first
quarter of 2001 or 2000. We renewed limited operation of the Vaca Tar Sands Unit
during the last quarter of 2000 but ceased operations in December due to
excessive operating costs.
Lease operating expenses increased from $46,825 for the first quarter of 2000 to
$121,679 for the period in 2001. This increase is due to the fact that we had no
significant operations during the first quarter of 2000. Although activity
during 2001 was severely limited, the increase in lease operating costs reflects
this increase in activity. Salaries and wages nearly doubled in 2001 compared to
the same period in 2000. Also, as further discussed below, there was a
substantial increase in the cost of natural gas used in operations.
Lease environmental costs were incurred during the first quarter of 2001 in the
amount of $10,189. These represent costs incurred to begin cleaning up the
Rosecrans property to allow for future operation.
General and administrative expenses increased from $88,335 for the period in
2000 to $109,423 for 2001. This increase is due primarily to the fact that our
operations were just beginning during 2000 as we emerged from bankruptcy in
December 1999. Also, legal and accounting expenses for the first quarter of 2001
were greater than the same period in 2000 because the annual audit and SEC
filings were accomplished on a timely basis in 2001. Most of these expenses were
accrued during the final quarter of 2000 as we successfully completed all
delinquent filing requirements. These costs are reflected on the Statement of
Operations as Professional Fees in the amount of $116,667. We expect these
expenses to decrease substantially in the future.
Reorganization items decreased from $53,482 in 2000 to $5,403 in 2001 as the
bankruptcy proceedings were complete and minimal ongoing costs were incurred in
2001.
Capital Resources and Liquidity
Financial position. As of March 31, 2001, our working capital was $(247,904)
compared to $2,745 as of March 31, 2000. Working capital was provided during the
first quarter of 2001 by the infusion of additional equity in the amount of
$234,749. This additional capital combined with $33,074 of additional current
liabilities was used to offset the first quarter operating loss of $295,262.
We spent the first quarter of 2001 searching for new financing opportunities to
facilitate resumption of operations on the Rosecrans property, and to provide
funding for possible new acquisitions. A letter agreement with Virginia Capital
Corp. has been signed to assist us with our ongoing efforts to obtain both
equity and/or debt financing.
Inflation. In recent years inflation has not had a significant impact on our
operations or financial condition.
Trends. Two trends have had a significant impact on our operations. First the
price of crude oil rose to a high of $34.12 per barrel in 2000 and has remained
high in 2001. The high spot price for NYMEX sweet crude was $32.19 in January,
2001. Forecasts predict future oil prices to remain in the range between 25$ and
$32 per barrel. The other significant trend is the rapid increase in the price
of natural gas. As a purchaser of natural gas for operations, the sharp rise in
gas prices has resulted in curtailment of production on the Vaca Tar Sands Unit.
Last winter (October 2000-March 2001) natural gas prices at the wellhead
averaged $5.74 per thousand cubic feet, more than double the previous winter's
price. Natural gas prices began climbing last summer primarily in response to
low levels of underground gas storage. Compared to this time last year, storage
levels are still low. As a result, spot prices are currently averaging about
$5.00 per thousand cubic feet. We currently have no gas production; however, we
are investigating possible acquisitions that could produce natural gas for
either sale or to reduce operating costs on the Vaca Tar Sands Unit.
13
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
From time to time, we may be involved in legal proceedings, including those
arising from our operations and the amounts due suppliers or royalty owners.
None of such proceedings are generally considered material to our operations or
financial condition.
Item 2. Changes in Securities.
During the first quarter of 2001, we sold a total of 297,000 shares of our
common stock for net proceeds to the company of $148,750. The shares were sold
in reliance on an exemption from the registration and prospectus delivery
requirements of the Securities Act of 1933 specified in Section 4(2) of the Act.
The Company issued 100,000 shares of its common stock for legal services for the
period from January 2001 through December 2001. The shares were valued at the
market price of the stock at the date the services were agreed to be provided.
In addition, the Company issued 90,000 common shares that were valued at the
fair value of the services of $36,000. Also, the Company issued 25,000 common
shares for services which were valued based on the market value of the shares
at the date of issuance totaling $12,500.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to Vote of Security Holders
No matters were submitted for a vote of our security holders during the first
quarter of 2001.
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
2. Plan of Reorganization of Geo Petroleum, Inc. dated October 12, 1999,
and confirmed by the U.S. Bankruptcy Court for the Central District of
California, Santa Barbara Division, on December 15, 1999, was previously
filed as an exhibit to our Annual Report on Form 10-KSB for the year ended
December 31, 1999 and is incorporated herein by this reference.
3. Our Articles of Incorporation, and the First, Second and Third
Amendments to our Articles of Incorporation, as well as our Bylaws, were
filed as exhibits to our Form 10 Registration Statement dated June 6, 1996
and are incorporated herein by this reference.
4. Not applicable
9. Not applicable
10. None
11. Included in financial statements in Part I, Item 1 above.
15. Included in financial statements in Part I, Item 1 above.
18. Not applicable
19. None
22. Not applicable
23. Not applicable
14
24. Not applicable
(b)We did not file any reports on Form 8-K during the first quarter of 2001.
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant caused this amended report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Geo Petroleum, Inc.,
a California corporation
May 21, 2001 By: /s/ Dennis Timpe
------------------------------------------
Dennis Timpe
Its: President and a Director
15