U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB/A
AMENDMENT NO. 1
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
Commission File Number: 0-21313
PONTOTOC PRODUCTION, INC.
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(Exact name of small business issuer as specified in its charter)
Nevada 84-1349552
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(State of other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
808 East Main, Ada, Oklahoma 74820
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(Address of principal executive offices including zip code)
(580) 436-6100
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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 preceding 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___
As of November 1, 2000, 5,213,695 shares of common stock, $.0001 par value per
share, were outstanding.
Transitional Small Business Disclosure Format (check one): Yes___ No X
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INDEX
PAGE
NUMBER
Part I. Financial Information
Item 1. Financial Statements
Balance Sheets as of September 30, 2000
and March 31, 2000 3
Statement of Earnings - Six Months Ended
September 30, 2000 and 1999 4
Statement of Earnings - Three Months Ended
September 30, 2000 and 1999 5
Statements of Cash Flows - Six Months Ended
September 30, 2000 and September 30, 1999 6
Notes to Financial Statements 8
Item 2. Management's Discussion and Analysis of
Financial Conditions and Results of Operations 11
Part II. Other Information 13
Signature Page 14
2
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PONTOTOC PRODUCTION, INC.
BALANCE SHEETS
SEPTEMBER 30, 2000 (UNAUDITED)
AND MARCH 31, 2000
ASSETS September 30,
2000 March 31,
(Unaudited) 2000
------------- -----------
CURRENT ASSETS
Cash and cash equivalents $ 648,070 $1,773,797
Trading securities 1,799 4,723
Accounts receivable, net 1,675,372 700,376
Other current assets 1,008,885 17,915
------------ ----------
Total current assets 3,334,126 2,496,811
PROPERTY AND EQUIPMENT-AT COST, net 690,621 397,587
OIL AND GAS PROPERTIES-AT COST, net,
using the full cost method 20,567,241 5,816,147
NOTE RECEIVABLE-AFFILIATE - 7,800
OTHER 198,019 170,461
----------- ----------
$24,790,007 $8,888,806
=========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 245,164 $ 91,960
Accrued and other current liabilities 76,778 24,239
Income taxes payable 178,671 230,917
Deferred income taxes 587,249 266,146
----------- ----------
Total current liabilities 1,087,862 613,262
LONG-TERM DEBT, less current maturities 8,595,996 -
DEFERRED INCOME TAXES 5,719,717 882,219
COMMITMENTS AND CONTINGENCIES - -
STOCKHOLDERS' EQUITY
Common stock - $.0001 par value;
authorized 100,000,000 shares;
issued and outstanding, 5,213,695
and 5,176,445 shares 521 517
Additional paid-in capital 4,169,496 3,980,550
Retained earnings 5,216,415 3,412,258
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9,386,432 7,393,325
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$24,790,007 $8,888,806
=========== ==========
The accompanying note is an integral part of these statements.
3
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PONTOTOC PRODUCTION, INC.
STATEMENT OF EARNINGS - UNAUDITED
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
2000 1999
Operating revenues ---- ----
Oil and gas sales $4,880,594 $1,993,699
Well supervision fees and
overhead reimbursements 141,180 49,914
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5,021,774 2,043,613
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Operating costs and expenses
Production 1,402,348 765,079
Depreciation, depletion, and amortization 416,456 150,070
General, administration, and other 285,195 169,532
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2,103,999 1,084,681
Earnings from operations 2,917,775 958,932
Other income (loss) 17,259 160,566
Interest expense (268,488) (82,078)
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Earnings before income taxes 2,666,546 1,037,420
Provision for income taxes 862,390 310,098
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$1,804,156 $ 727,322
========== ==========
Net Earnings Per Share:
Basic $ .35 $ .15
========== ==========
Diluted $ .35 $ .15
========== ==========
Weighted average common shares outstanding:
Basic 5,186,580 4,697,190
========== ==========
Diluted 5,222,655 4,837,271
========== ==========
The accompanying note is an integral part of these statements.
4
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PONTOTOC PRODUCTION, INC.
STATEMENT OF EARNINGS - UNAUDITED
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
2000 1999
Operating revenues ---- ----
Oil and gas sales $2,852,758 $1,123,110
Well supervision fees and
overhead reimbursements 81,140 28,578
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2,933,898 1,151,688
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Operating costs and expenses
Production 778,345 385,411
Depreciation, depletion, and amortization 254,564 75,030
General, administration, and other 151,542 82,871
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1,184,451 543,312
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Earnings from operations 1,749,447 608,376
Other income (loss) 9,052 114,702
Interest expense (197,848) (34,955)
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Earnings before income taxes 1,560,651 688,123
Provision for income taxes 530,621 219,279
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$1,030,030 $ 468,844
========== ==========
Net Earnings Per Share:
Basic $ .20 $ .10
========== ==========
Diluted $ .20 $ .10
========== ==========
Weighted average common shares outstanding:
Basic 5,196,605 4,719,165
========== ==========
Diluted 5,241,557 4,817,873
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The accompanying note is an integral part of these statements.
5
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PONTOTOC PRODUCTION, INC.
STATEMENTS OF CASH FLOWS-UNAUDITED
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
2000 1999
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Increase (Decrease) in Cash and Cash Equivalents
Cash flows from operating activities
Net earnings $ 1,804,156 $ 727,322
Adjustments to reconcile net earnings to
net cash provided by operating activities
Depreciation, depletion, and amortization 416,456 150,070
Deferred income taxes 547,476 -
Net (earnings) loss of investee 8,707 (67,869)
Non-cash compensation 8,869 -
Gain on sale of property and equipment (2,485) -
Change in assets and liabilities
(Increase) decrease in:
Accounts receivable, net (853,121) (201,063)
Other current assets (855,049) -
Accounts payable 31,353 76,530
Accrued and other current liabilities 38,648 (27,897)
Income taxes payable (52,246) 310,098
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Net cash provided by operating activities 1,092,764 967,191
Cash flows from investing activities
Payment of note receivable affiliate 7,800 35,000
Purchase of property and equipment (267,972) (288,761)
Proceeds on sale of property and equipment 11,413 -
Purchase of business net of cash acquired (9,999,980) -
Oil and gas property dispositions 15,000 1,052,050
Oil and gas property additions (726,998) (756,695)
Other - (352)
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Net cash provided by (used in)
investing activities (10,960,737) 41,242
Cash flows from financing activities
Borrowings 10,391,712 277,076
Repayment of borrowings (1,795,716) (1,620,893)
Sale of common stock, net of offering costs 146,250 450,000
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Net cash provided by (used in)
financing activities 8,742,246 (893,817)
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NET INCREASE(DECREASE)IN CASH AND CASH EQUIVALENTS (1,125,727) 114,616
Cash and cash equivalents at beginning of period 1,773,797 271,170
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Cash and cash equivalents at end of period $ 648,070 $ 385,786
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The accompanying notes are an integral part of these statements.
6
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Supplemental Cash Flow Information
Cash paid during the period for:
Interest $ 269,488 $ 82,078
Income taxes 367,161 -
Non-cash Investing Activities:
On June 1, 2000 the Company purchased all of the capital stock of Oklahoma
Basic Economy Corporation and the working interest of Oklahoma Basic Economy
Corporation's partner's for $10,000,000 in cash.
Fair Market Value of assets acquired $14,611,105
Less liabilities assumed (4,611,125)
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Cash paid net of cash acquired $ 9,999,980
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The accompanying note is an integral part of these statements.
7
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PONTOTOC PRODUCTION, INC.
NOTES TO FINANCIAL STATEMENTS - UNAUDITED
SEPTEMBER 30, 2000
NOTE A - NATURE OF OPERATIONS AND BASIS OF PRESENTATION
The major operations of Pontotoc Production, Inc. (the "Company") consist of
exploration, production, and sale of crude oil and natural gas in the United
States with an area of concentration in shallow reserves in the vicinity of
Pontotoc County, Oklahoma. Other business segments are not a significant
factor in the Company's operation.
The interim financial statements included herein have been prepared by the
Company without audit. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted; however, the
Company believes that the disclosures are adequate to make the information
presented not misleading. In the opinion of the Company, all adjustments
necessary to present fairly the financial position of Pontotoc Production,
Inc. as of September 30, 2000 and March 31, 2000, and the results of
operations and cash flows for the six months ended September 30, 2000 and
1999, have been included and are of a normal, recurring nature. The results
of operations for such interim periods are not necessarily indicative of the
results for the full year. It is suggested that these interim financial
statements be read in conjunction with the Company's March 31, 2000 audited
financial statements.
Certain reclassifications were made to the September 30, 1999 financial
statements to conform to the September 30, 2000 presentation.
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Note B- COMMON SHARE OUTSTANDING AND EARNINGS PER COMMON SHARE
The following reconciles earnings (numerator) and shares (denominator) used in
the computation of basic and diluted earnings per share:
Six Months Ended September 30
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2000 1999
---------------- ----------------
Numerator
Net Earnings $1,804,156 $ 727,322
Denominator
Weighted average shares outstanding,
basic 5,186,580 4,697,190
Effect of dilutive securities
Stock Options 36,075 140,081
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Denominator for earnings per share
assuming dilution 5,222,655 4,837,271
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Earnings per share, basic $ 0.35 $ 0.15
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Earnings per share, assuming dilution $ 0.35 $ 0.15
========== ==========
Three Months Ended September 30
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2000 1999
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Numerator
Net Earnings $1,030,030 $ 468,844
Denominator
Weighted average shares outstanding,
basic 5,196,605 4,719,165
Effect of dilutive securities
Stock Options 44,952 98,708
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Denominator for earnings per share
assuming dilution 5,241,557 4,817,873
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Earnings per share, basic $ 0.20 $ 0.10
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Earnings per share, assuming dilution $ 0.20 $ 0.10
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NOTE C - ACQUISITIONS
On June 1, 2000, the Company closed on the acquisition of Oklahoma Basic
Economy Corporation ("OBEC") and the working interest of OBEC's partners for
$10,000,000. Included in the purchase were interests in approximately 49 oil
and gas leases located in the following counties: Pontotoc, Pottawatomie, and
Seminole. The purchase also included two workover rigs, and miscellaneous oil
field equipment which relates to the ongoing production of the oil and gas
properties.
The following presents unaudited pro forma results of operations for the six
and three months ended September 30, 2000 and 1999 as if the acquisition had
been consummated immediately prior to April 1, 2000 and 1999. These pro forma
results are not necessarily indicative of future results.
Pro Forma (Unaudited)
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Six Months Ended
September 30,
2000 1999
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Revenues $5,695,983 $3,360,439
========== ==========
Net Income $1,988,853 $1,215,481
========== ==========
Earnings per common share
Basic $ .38 $ .26
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Diluted $ .38 $ .25
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Three Months Ended
September 30,
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Pro Forma
(Unaudited)
2000 1999
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Revenues $2,933,898 $1,861,395
========== ==========
Net Income $1,030,030 $ 468,844
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Earnings per common share
Basic $ .20 $ .10
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Diluted $ .20 $ .10
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MANAGEMENT'S DISCUSSION AND ANALYSIS
OF THE CONSOLIDATED STATEMENTS OF OPERATIONS
RESULTS OF OPERATIONS - THREE MONTHS ENDED SEPTEMBER 30, 2000, COMPARED TO THE
THREE MONTHS ENDED SEPTEMBER 30, 1999
Operating revenue for the three months ended September 30, 2000,
increased $1,782,210 (155%) from the comparable period of 1999 due to higher
oil and gas production and higher oil and gas prices. On June 1, 2000 the
Company closed on the acquisition of OBEC and the working interests of OBEC's
partners. Included in the purchase were interests in approximately 49 oil and
gas leases.
Other income decreased $105,650 from the comparable period in 1999 due to
a decrease in the Company's share of revenue from their investment in Pontotoc
Gathering, LLC and a decrease in gain on disposition of assets.
Production costs for the three months ended September 30, 2000, increased
$392,934 (102%) from the comparable period of 1999 due primarily to the
additional oil and gas properties from OBEC.
Depreciation, depletion and amortization increased $179,534 (239%) as
compared to the same period in the prior year, due to additional oil and gas
properties and equipment acquired in the OBEC acquisition.
General and administrative costs increased $68,671 (83%) for the three
months ended September 30, 2000, from the comparable period of 1999 due to an
increase in investor relations and contract expenses.
RESULTS OF OPERATIONS - SIX MONTHS ENDED SEPTEMBER 30, 2000, COMPARED TO SIX
MONTHS ENDED SEPTEMBER 30, 1999
Operating revenue for the six months ended September 30, 2000, increased
$2,978,161 (146%) from the comparable period of 1999, due to higher oil and
gas production and higher prices. On June 1, 2000 the Company closed on the
acquisition of OBEC and the working interests of OBEC's partners. Included in
the purchase were interests in approximately 49 oil and gas leases.
Other income decreased $143,307 from the comparable period in 1999 due to
a decrease in the Company's share of revenue from their investment in Pontotoc
Gathering LLC and a decrease in gain from disposition assets.
Production costs for the six months ended September 30, 2000, increased
$637,269 (83%) due primarily to the additional oil and gas properties from the
OBEC acquisition.
Depreciation, depletion and amortization increased $266,386 (177%) as
compared to the same period in the prior year, due to additional oil and gas
properties and equipment acquired in the OBEC acquisition.
General and administrative costs for the six months ended September 30,
2000, increased $115,663(68%) from the comparable period of 1999 due to an
increase in investor relations and contract expenses.
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LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital was $2,246,264 at September 30, 2000, as
compared to $1,883,549 at March 31, 2000. The increase in working capital is
due to an increase in earnings and an increase in other assets, which includes
a deferred loss of $754,420 on hedging activities.
During the six months ended September 30, 2000, cash generated by
operating activities was $1,092,764 compared to cash generated of $967,191 for
the six months ended September 30, 1999.
Cash flows used in investing activities during the six months ended
September 30, 2000, were $(10,960,737) compared to $41,242 from investing
activities for the comparable period of 1999. During the first six months of
2000, the Company spent $726,998 on the purchase of additional oil and gas
properties and recompletions and $10,000,000 on the purchase of all of the
outstanding stock on OBEC and the working interest of OBEC's partners. Also,
the Company purchased $267,972 of property and equipment.
Cash flows from financing activities during the six months ended
September 30, 2000, were $8,742,268 compared to $(893,817) used in financing
activities during the comparable period of 1999. The Company borrowed
$10,391,712 and repaid $1,795,716 during the six months ended September 30,
2000.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
None.
ITEM 2. CHANGES IN SECURITIES.
During the three months ended September 30, 2000, 29,250 stock options
were exercised at $5.00 per share for a total of $146,250.
During the three months ended September 30, 2000, the Company issued
8,000 share of its common stock to one person pursuant to an amended
consulting agreement for services to be rendered through July, 2003. With
respect to this transaction, the Company relied on Section 4(2) of the Act.
The investor signed an agreement in which he represented that he was
purchasing the shares for investment only and not for the purpose of resale or
distribution. The appropriate restriction legends were placed on the
certificates and stop transfer orders were issued to the transfer agent.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On September 27, 2000, the Company held an Annual Meeting of Shareholders
at which James Robby Robson, Jr., Todd Robson, James Robson, Sr., Brian K.
Gourley, Timothy A. Jurek and Lyle P. Phillips were each reelected to the
Board of Directors. In addition, the Company's shareholders ratified the
appointment of Grant Thornton LLP as the Company's auditors. The following
sets forth the votes cast for, against or withheld, as well as the number of
abstentions and any broker non-votes, as to each of the matters presented at
the meeting:
ELECTION OF DIRECTORS
NOMINEES FOR WITHHELD
James Robby Robson, Jr. 4,159,024 6,601
Todd Robson 4,159,024 6,601
James Robson, Sr. 4,159,024 6,601
Brian K. Gourley 4,159,024 6,601
Timothy A. Jurek 4,159,024 6,601
Lyle P. Phillips 4,159,024 6,601
APPOINTMENT OF GRANT THORNTON LLP
FOR AGAINST ABSTAIN
4,161,875 3,500 250
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ITEM 5. OTHER INFORMATION
On October 2, 2000 the Company closed on the acquisition of the interest
in six oil and gas properties from R.H.S. and C&L Drilling, Co., Inc. for
$972,000. The purchase was funded by an advance under the Company's bank
credit agreement.
During the month of October, the Company hedged an additional 6,000
barrels of oil per month through May 2002 at an average price of approximately
$29.83 per barrel. The Company will have an average 14,000 barrels per month
hedged through May of 2002 at an average price over the life of the hedges of
$26.34 per barrel.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits have been filed with this report:
Exhibit 27 - Financial Data Schedule (previously filed)
(b) Reports on Form 8-K - none.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Amendment to be signed on its behalf by the
undersigned, thereunto duly authorized.
PONTOTOC PRODUCTION, INC.
Date: November 6, 2000 By:/s/ James Robby Robson, Jr.
James Robby Robson, Jr.
President
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