SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the fiscal year ended March 31, 1997
----------------
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
Commission File No. 0-9458
------
Eagle Exploration Company
---------------------------
(Name of small business issuer in its charter)
Colorado 84-0804143
----------
(State or other jurisdiction of (I.R.S. Employer ID Number)
incorporation or organization)
1801 Broadway, Suite 700, Denver, Colorado, 80202
-------------------------------------------------------
(Address and zip code of principal executive offices)
Registrant's telephone number, including area code: (303) 296-3677
---------------
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, No Par Value
------------------------------
(Title of Class)
Indicate by check mark 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
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
-----
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-KSB or any amendment to this Form 10-KSB [X]
State Registrant's revenues for its most recent fiscal year. $76,367
-------
At June 26, 1997, 3,072,836 shares of common stock, no par value, (the
Registrant's only class of voting stock) were outstanding. The aggregate
market value of the 1,554,714 common shares of Registrant held by
nonaffiliates was approximately $291,509 at June 26, 1997, based on the mean
between the bid and asked prices on the OTC Bulletin Board. See Item 5 herein
for additional information in this regard.
This report consists of 27 pages. The exhibit index appears on page 12.
PART I
Item 1. Description of Business.
- ------------------------------------
Nature of Business and Management's Plan
- ---------------------------------------------
Eagle Exploration Company's primary operations previously included the
purchase and development of residential real estate. The Company's operations
also previously included engaging in oil and gas exploration and production
activities, acquiring whole or partial interests in oil and gas leases, and
farming out or reselling all or part of its interest in these leases to other
companies in the oil and gas industry. The Company sold all land held for
development during the year ended March 31, 1995. Currently, the Company has
no plans to acquire additional land for development and sale but is
investigating various potential acquisitions and other business opportunities.
1997 Activities
- ----------------
Eagle's Landing, LLC, is a limited liability company organized under the
laws of the State of Colorado on or about May 25, 1994, (the "LLC"). The
purpose of the LLC was to develop, lease and sell an apartment house project
located in Jefferson County, Colorado.
As discussed in the Company's previous reports, the Company acquired a
40 percent membership interest in the LLC, which is the owner of a 176 unit
apartment complex. On December 12, 1995, the LLC held its annual meeting.
Among other resolutions the members of the LLC unanimously approved non
recourse permanent financing for the apartment complex in the amount of $11
million subject to certain covenants by the developer. In January of 1996
permanent financing for the project was closed. The $9.2 million construction
loan, approximately $825,000 of cost overruns, and closing costs were paid by
the title company from the permanent loan proceeds.
The developer who assigned the interest in the LLC to the Company on May
26, 1995, challenged the Company's 40 percent ownership. On January 25, 1996,
the Company was served with a summons and complaint by the developer of the
project. He filed this action to obtain a declaration from the court that the
transaction between the parties was in substance, a real estate loan. The
complaint alleged that the assignment was intended to secure the payment of an
obligation affecting an interest in real property, and as a result the
assignment did not constitute a conveyance and subsequently the Company was
not entitled to possession of the property without instituting foreclosure
proceedings. The Company and its legal counsel believed it was unlikely that
the courts would rule in favor of the developer's claim. However, management
attempted to settle the matter.
Out of court settlement negotiations were unsuccessful and management
instructed the Company's legal counsel to proceed in defending the Company's
ownership in the LLC. Subsequent to the fiscal year ended March 31, 1996, the
Company through its counsel motioned the court for summary judgment. Shortly
after the plaintiff's receipt of this motion, the Company was contacted by the
plaintiff requesting that the lawsuit be dismissed. The Company's legal
counsel prepared a Notice and Stipulation of Dismissal with Prejudice, with
the parties stipulating that the Company is the owner and holder of a 40
percent membership interest in the LLC effective May 26, 1995. On June 24,
1996, the Company received from the LLC approximately $320,000. This payment
was to represent the Company's share of loan proceeds resulting from the
difference between the construction loan and the permanent financing.
Disputes between the Company and the manager have continued during the past
fiscal year.
During fiscal 1997, the Company brought suit against the manager of the
LLC alleging breach of the operating agreement, breach of contract, breach of
fiduciary duty, conversion and gross negligence. In summary the complaint
alleges that the manager has failed to provide adequate financial information
to the members, has failed to accept bona-fide offers to sell the project as
was originally contemplated, has made improper distributions to himself and
related entities, and has engaged in self-dealing. It is anticipated that
this dispute and resultant litigation will continue to require virtually all
of management's time and that the Company's ability to acquire other
opportunities or merge with another company will be materially and adversely
impaired pending resolution of the litigation.
Due to the litigation, satisfactory financial information was not given
to the Company. Therefore, this report has not incorporated the financial
information concerning the Company's ownership in the LLC. If the necessary
audited financial information concerning the LLC is obtained, the Company will
file an amended report on Form 10-KSB/A.
Employees
- ---------
At June 26, 1997, the Company had two full-time employees. The Company
has and may retain independent consultants from time to time on a limited
basis.
Item 2. Properties.
- -----------------------
The Company's assets consist of a 40 percent interest in the LLC, cash,
office furniture and equipment, and very minor interests in oil and gas
properties including one lease operated by the Company.
Item 3. Legal Proceedings.
- -------------------------------
See Item 1. "1997 Activities" immediately above.
Item 4. Submission of Matters to a Vote of Security Holders.
- ------------------------------------------------------------------------
No matter was submitted during the fourth quarter of fiscal 1997 to a
vote of the Company's security holders.
<PAGE>
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
- ------------------------------------------------------------------------------
Matters.
- --------
The table below presents the range of high and low bid quotations for
the Company's common stock on a calendar quarter basis as reported in the OTC
Bulletin Board. The Company's trading symbol is EGXP. There is little or no
trading in the Company's common stock, hence the quotations set forth below
may not represent actual transactions and do not represent transactions in any
material number of the Company's shares.
<TABLE>
<CAPTION>
Bid
---------
High Low
---- ---
<S> <C> <C>
1995
- ----
2nd Quarter $.30 $.22
3rd Quarter $.50 $.3125
4th Quarter $.50 $.3125
1996
- ----
1st Quarter $.50 $.3125
2nd Quarter $.30 $.22
3rd Quarter $.2825 $.1575
4th Quarter $.25 $.125
1997
- ----
1st Quarter $.25 $.125
</TABLE>
As of June 26, 1997, the Company had approximately 555 holders of record
of its common stock.
Holders of common stock are entitled to receive such dividends as may be
declared by the Company's Board of Directors. No dividends on its common
stock have been paid by the Company, nor does the Company anticipate that such
dividends will be paid in the foreseeable future.
<PAGE>
Item 6. Management's Discussion and Analysis of Financial Condition and
- ------------------------------------------------------------------------------
Results of Operations.
- ------------------------
Financial Condition, Liquidity and Capital Resources
- ---------------------------------------------------------
Cash, temporary cash investments and certificates of deposit at March
31, 1997 were $704,055 as compared to $41,387 for the period ended March 31,
1996, an increase of approximately 94 percent or $662,668. This was primarily
due to the collection of a note receivable of $500,000 and a return of
$320,539 of the Company's initial investment in a limited liability company,
Eagle's Landing, LLC. The Company's reduction of its initial investment in
the LLC occurred through the disbursement of permanent loan proceeds that
exceeded construction and loan closing costs.
Results of Operations
- -----------------------
Fiscal 1997 Compared with Fiscal 1996
- ------------------------------------------
Total revenues for the year ended March 31, 1997, were $76,367 as
compared to $137,165 for the prior fiscal period because the Company earned
less interest income on its cash and cash equivalent investments. The Company
reported a net loss of $251,767 for the year ended March 31, 1997, and as
compared to a net loss of $884,160 for the year ended March 31, 1996, as
reported in the 10-KSB/A. Although operating expenses were about the same
during the two fiscal years, the Company wrote off a note receivable of
$600,000 during fiscal 1996.
The Company's net loss for fiscal 1997 reflects its share of losses
incurred by the LLC (see Item 3. above) of approximately $106,000. As
discussed above, audited financial statements for the LLC are not available,
hence its loss could be greater, thereby increasing the Company's operating
loss for fiscal 1997.
It must be noted in this regard that the Company's independent auditors
are unable to express an opinion on the Company's financial statements for
fiscal 1997. See "Auditors' Report" in the Financial Statements under Item 7
below.
Item 7. Financial Statements.
- ----------------------------------
See pages F-1 through F-12.
Item 8. Changes in and Disagreements with Accountants on Accounting and
- ------------------------------------------------------------------------------
Financial Disclosure.
- ----------------------
The disclosure requirements of Item 304 of Regulation SB are not
applicable.
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
- ------------------------------------------------------------------------------
Compliance with Section 16(a) of the Exchange Act.
- ---------------------------------------------------------
The following are the directors and executive officers of the Company.
<TABLE>
<CAPTION>
Raymond N. Paul M. M. D.
Joeckel(1) Joeckel(1) Young
---------- ---------- -----
<S> <C> <C> <C>
Director Since October, October, February,
1979 1979 1990
Position(s) with President & Secretary & Director
the Company Director Director
Age 71 45 71
</TABLE>
(1) Messrs. Raymond N. Joeckel and Paul M. Joeckel, the Company's only
executive officers, have served as the Company's President and Secretary,
respectively, since December, 1979. The executive officers of the Company
hold office until their death, resignation, or removal by the Board of
Directors. There is no arrangement or understanding between any director or
officer or any other person or persons pursuant to which he was or is to be
selected as a director or an officer. Paul M. Joeckel is the son of Raymond
N. Joeckel.
Raymond N. Joeckel attended Los Angeles City College and the
University of Southern California in programs which did not lead to degrees.
He received an LL.B. degree from Southwestern University, Los Angeles,
California in 1950. Mr. Joeckel joined Shell Oil Company as a landman in 1950
and became Land Manager for the Rocky Mountain region for Shell Oil Company in
1962. He remained in that position until 1969 at which time he became an
independent oil and gas operator dealing primarily in oil and gas leases.
Paul M. Joeckel received a B.A. degree in Economics from Colorado
State University in 1976. During 1976 and until 1977, Mr. Joeckel was
self-employed as an independent landman. From June, 1977 until joining the
Company on a full-time basis in January, 1980, he was employed as a senior
landman by Diamond Shamrock Corporation.
M. D. Young received a B.A. degree in Geology from Vanderbilt University
in 1951 at Nashville, Tennessee. From 1952 to 1960 Mr. Young worked for Gulf
Oil Corporation as an Area Geologist. Subsequently he has been a consultant
to various companies in the industry. Mr. Young has also been a working
interest owner in many wildcat wells in the Rocky Mountains. Mr. Young is a
member of the American Association of Petroleum Geologists.
No director serves as a member of the Board of Directors of any other
company with a class of equity securities registered under the Securities
Exchange Act of 1934 or any company registered as an investment company under
the Investment Company Act of 1940. See Item 11. for information as to
compliance with Section 16(a) of the Exchange Act.
Item 10. Executive Compensation.
- -------------------------------------
The following information shows the compensation of the named executive
officers for each of the Company's last two fiscal years.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term Compensation
-----------------------------------
Annual Compensation
----------------------------------------------------------
Name Other All
and Annual Restricted Other
Principal Compen- Stock Options/ LTIP Compen-
Position Year Salary Bonus sation* Awards SARs Payouts sation
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Raymond N. 1997 N/A N/A $1,983 N/A N/A N/A N/A
Joeckel 1996 N/A N/A $2,115 N/A N/A N/A N/A
President
Paul M. 1997 $75,000 N/A $4,220 N/A N/A N/A N/A
Joeckel 1996 $75,000 N/A $3,590 N/A N/A N/A N/A
Secretary
</TABLE>
* Other annual compensation does not include the amount attributable to
Company cars that the officers are allowed to use.
It is anticipated that salary payments to officers by the Company during
the next fiscal year for services in all capacities will not exceed the amount
set forth above.
There are no stock and/or other compensatory plans or arrangements by
which the Company compensates its directors for services as directors, other
than a director's fee of $100 per meeting of directors.
The Company provides medical insurance for all of its full-time employees
and executive officers.
Item 11. Security Ownership of Certain Beneficial Owners and Management.
- ------------------------------------------------------------------------------
The following table sets forth information, as of June 26, 1997,
regarding the common stock ownership of those persons known by the Company to
be the beneficial owner of more than 5% of its common stock, its directors,
and its officers and directors as a group. All of stock listed below is no
par value common stock.
<TABLE>
<CAPTION>
Name & Address of Amount and Nature of Percent of
Beneficial Owner Beneficial Ownership Class
- ----------------- --------------------- -------
<S> <C> <C>
Paul M. Joeckel (1) 171,141 shares 5.57%
4437 Christensen Circle Direct
Littleton, CO 80123
M. D. Young 500 shares -0-
800 Pearl Street, #406 Direct
Denver, CO 80203
Paul M. Joeckel, Trustee 1,346,481 shares 43.83%
Joeckel Family Trust Direct
1801 Broadway, Suite 700
Denver, CO 80202
Norman K. Brown 299,641 shares 9.75%
801 Broadway, Suite 808 Direct
Seattle, WA 98122
All officers and 1,518,122 shares 49.40%
directors as a group Direct
</TABLE>
(1) Does not include 21,000 shares owned by Mr. Joeckel's wife of which he
disclaims beneficial ownership.
The Company knows of no arrangements which could at a subsequent date
result in a change in control of the Company.
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange
Act") requires the Company's directors and officers and persons who own more
than ten percent of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
(the "SEC"). Directors, officers and greater than ten-percent shareholders
are required by the SEC regulation to furnish the Company with copies of all
Section 16(a) reports filed.
Based solely on its review of the copies of the reports it received from
persons required to file, the Company believes that during the period ended
March 31, 1997, all filing requirements applicable to its officers, directors
and greater than ten-percent shareholders were complied with.
Item 12. Certain Relationships and Related Transactions.
- ----------------------------------------------------------------
There were no transactions during this fiscal year required to be
reported hereunder.
PART IV
Item 13. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
- ------------------------------------------------------------------------------
(a) (1) and (2) Financial Statements and Schedules:
--------------------------------------
See "Index to Consolidated Financial Statements" on page F-1.
<TABLE>
<CAPTION>
Item No.
Per S-K Document as Form 10-KSB Exhibit Reference
- -------- ----------------------------------- ---------
<S> <C> <C>
(2) Plan of purchase, sale, reorganization -None-
arrangement, liquidation or succession
(3) Articles of Incorporation and By-Laws *
(4) Instruments defining the rights of -None-
security holders, including indentures
(5) Opinion re: legality -None-
(7) Opinion re: liquidation preference -None-
(8) Opinion re: tax matters -None-
(9) Voting trust agreement -None-
(10) Material contracts
Agreement - Meadows at Westwoods *
Operating Agreement - Meadows at Westwoods *
Promissory Note - Meadows at Westwoods ***
Assignment of Membership Interest - Eagle's
Landing, LLC
Operating Agreement - Eagle's Landing, LLC ****
(11) Statement re: computation of per * *
share earnings
(12) Statement re: computation of ratios -None-
(13) Annual report to security holders, Form -None-
10-Q or quarterly report to security
holders
(14) Material Foreign Patents -None-
(15) Letter re: unaudited interim financial -None-
statements
(16) Letter re: change in certifying -None-
accountants
(17) Letter re: director's resignations -None-
(18) Letter re: change in accounting -None-
principles
(19) Previously unfiled documents -None-
(20) Reports to securities holder -None-
(21) Other documents or statements -None-
to security holder
(22) Subsidiaries of the Registrant *
(23) Published report regarding matters -None-
submitted to vote of security holders
(24) Consents of experts and counsel -None-
(25) Power of attorney -None-
(26) Statement of eligibility of trustee -None-
(27) Financial data schedule -99-
(28) Information from reports furnished -None-
to state insurance regulatory
authorities
* Previously filed documents incorporated herein by reference to the
Company's Registration Statement on Form S-1 (No. 2-67971) effective September
14, 1980, and the Company's Reports on Form 10-K for the fiscal year ended
March 31, 1994, and previous years.
** Not required, since information is ascertainable from the basic
consolidated financial statements.
*** Filed with the Company's Annual Report on Form 10-KSB for the fiscal
year ended March 31, 1995.
**** Filed with the Company's Annual Report on Form 10-KSB for the fiscal
year ended March 31, 1996.
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of
1934, the Registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
EAGLE EXPLORATION COMPANY
By /s/ Raymond N. Joeckel
-----------------------------
Raymond N. Joeckel
President
Date: June 26, 1997
In accordance with the Securities Exchange Act of 1934, this report has
been signed below by the following persons on behalf of the Registrant and in
the capacities and on the dates indicated.
Date
- ----
June 26, 1997 /s/ Raymond N. Joeckel
Raymond N. Joeckel
Principal Executive,
Accounting and Financial
Officer and a director
June 26, 1997 /s/ Paul M. Joeckel
Paul M. Joeckel
Secretary and a director
June 26, 1997 /s/ M.D. Young
M. D. Young
A director
EAGLE EXPLORATION COMPANY
FINANCIAL STATEMENTS AND
INDEPENDENT AUDITORS' REPORT
MARCH 31, 1997
EAGLE EXPLORATION COMPANY AND SUBSIDIARIES
TABLE OF CONTENTS
-----------------
Page
----
Independent Auditors' Report F - 2
Consolidated Financial Statements
Consolidated Balance Sheet as of March 31, 1997 F - 4
Consolidated Statements of Operations for the Years
Ended March 31, 1997 and 1996 F - 5
Consolidated Statement of Stockholders' Equity for
the Years Ended March 31, 1997 and 1996 F - 6
Consolidated Statements of Cash Flows for the Years Ended
March 31, 1997 and 1996 F - 7
Notes to Consolidated Financial Statements F - 8
F - 1
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
Eagle Exploration Company
Denver, Colorado
We were engaged to audit the accompanying balance sheet of Eagle Exploration
Company and Subsidiaries as of March 31, 1997 and the related statements of
operations, stockholders' equity and cash flows for the year then ended.
These consolidated financial statements are the responsibility of the
Company's management.
We are unable to obtain audited financial statements supporting the Company's
investment in a limited liability company (LLC) stated at $119,420 at March
31, 1997 or its equity in earnings or losses of the LLC, as described in Note
4 to the consolidated financial statements; nor were we able to satisfy
ourselves as to the carrying value of the investment in the LLC or the equity
in its earnings or losses by other auditing procedures.
Since the Company has not received audited financial statements for the LLC
and we were not able to apply other auditing procedures to satisfy ourselves
as to the carrying value of the investment or the results of its operations,
the scope of our work was not sufficient to enable us to express, and we do
not express, an opinion on these consolidated financial statements.
/s/ Ehrhardt Keefe Steiner & Hottman PC
Ehrhardt Keefe Steiner & Hottman PC
May 28, 1997
Denver, Colorado
F-2
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
Eagle Exploration Company
Denver, Colorado
We have audited the accompanying consolidated statements of operations,
stockholders' equity, and cash flows of Eagle Exploration Company and
Subsidiaries for the year ended March 31, 1996. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatements. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall consolidated financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated results of operations and
cash flows of Eagle Exploration Company and subsidiaries for the year ended
March 31, 1996, in conformity with generally accepted accounting principles.
/s/Ehrhardt Keefe Steiner & Hottman PC
Ehrhardt Keefe Steiner & Hottman PC
May 16, 1996
Denver, Colorado
F - 3
EAGLE EXPLORATION COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
MARCH 31, 1997
ASSETS
Current assets
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Cash and cash equivalents $510,055
Certificates of deposit 194,000
Other receivables 4,938
--------
Total current assets 708,993
--------
Office furniture, equipment and other,
net of $222,096 of accumulated 33,378
depreciation
Other assets
Investment in limited liability company 119,420
(Notes 4 and 5)
Other 26,638
--------
Total other assets 146,058
--------
Total assets $888,429
========
</TABLE>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
<TABLE>
<CAPTION>
<S> <C>
Accounts payable $ 18,648
Deposits, deferred revenue and other 9,318
------------
Total current liabilities 27,966
------------
Commitments and contingencies (Notes 2
and 4)
Stockholders' equity
Common stock, no par value; authorized
10,000,000 shares; 3,072,836 shares 6,632,998
issued and outstanding
Accumulated deficit (5,772,535)
------------
860,463
------------
Total liabilities and stockholders' $ 888,429
============
equity
See notes to consolidated financial statements.
F - 4
EAGLE EXPLORATION COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
</TABLE>
<TABLE>
<CAPTION>
For the Year Ended
March 31,
--------------------
1997 1996
-------------------- -----------
<S> <C> <C>
Revenues (Note 3)
Interest income $ 39,039 $ 97,470
Other income 37,328 39,695
-------------------- -----------
76,367 137,165
-------------------- -----------
Expenses
Equity in loss on investment in LLC 106,743 179,585
(Notes 4 and 5)
Depreciation 12,775 18,329
Write-off of note receivable (Note 2) - 600,000
Other operating expenses 208,616 223,411
-------------------- -----------
328,134 1,021,325
-------------------- -----------
Loss before income taxes (251,767) (884,160)
Provision for income taxes (Note 3) - -
-------------------- -----------
Net loss $ (251,767) $ (884,160)
==================== ===========
Net loss per share $ (.08) $ (.29)
==================== ===========
Weighted average number of shares 3,072,836 3,072,836
==================== ===========
outstanding
See notes to consolidated financial statements.
F - 5
EAGLE EXPLORATION COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED MARCH 31, 1997 AND 1996
</TABLE>
<TABLE>
<CAPTION>
Common Stock Total
---------------------- Accumulated Stockholders'
Shares Amount Deficit Equity
------------ ------------ --------------- -----------
<S> <C> <C> <C> <C>
Balances - March 31,
1995 3,072,836 $ 6,632,998 $ (4,636,608) $1,996,390
Net (loss) for the year - - (884,160) (884,160)
------------ ------------ --------------- -----------
Balance - March 31,
1996 3,072,836 6,632,998 (5,520,768) 1,112,230
Net (loss) for the year - - (251,767) (251,767)
------------ ------------ --------------- -----------
Balance - March 31,
1997 3,072,836 $ 6,632,998 $ (5,772,535) $ 860,463
============ ============ =============== ===========
</TABLE>
See notes to consolidated financial statements.
F - 6
EAGLE EXPLORATION COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Year Ended
March 31,
--------------------
1997 1996
-------------------- -----------
<S> <C> <C>
Cash flows from operating activities
Net loss $ (251,767) $ (884,160)
-------------------- -----------
Adjustments to reconcile net loss to net
cash used by operating activities -
Equity in loss on investment in LLC 106,743 179,585
Depreciation 12,775 18,329
Write-off of note receivable - 600,000
Change in assets and liabilities -
Receivables (1,116) (366)
Other assets (3,251) -
Accounts payable (18,603) 28,514
Deposits, deferred revenue and (943) (4,661)
-------------------- -----------
other
95,605 821,401
-------------------- -----------
Net cash used by operating (156,162) (62,759)
-------------------- -----------
activities
Cash flows from investing activities
(Purchase) redemption of certificates (194,000) 1,018,913
of deposit
Purchases of office furniture and
equipment (1,709) (4,534)
Payments (advances) on notes receivable 500,000 (600,000)
Investment in limited liability company - (726,287)
Distribution from LLC 320,539 -
-------------------- -----------
Net cash used by investing
activities 624,830 (311,908)
-------------------- -----------
Net (increase) decrease in cash and cash
equivalents 468,668 (374,667)
Cash and cash equivalents, beginning of
year 41,387 416,054
-------------------- -----------
Cash and cash equivalents, end of year $ 510,055 $ 41,387
==================== ===========
</TABLE>
See notes to consolidated financial statements.
F - 7
EAGLE EXPLORATION COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- ------------------------------------------------------------------------------
Nature of Business and Management's Plans
- ----------------------------------------------
Eagle Exploration Company's primary operations have included the purchase and
development of residential real estate and engaging in oil and gas exploration
and production activities, acquiring whole or partial interests in oil and gas
leases, and farming out or reselling all or part of its interest in these
leases to other companies in the oil and gas industry. Currently, the Company
has no plans to acquire additional land for development and sale nor has it
identified oil and gas investment opportunities.
Principles of Consolidation
- -----------------------------
The consolidated financial statements include the accounts of Eagle
Exploration Company and its wholly owned subsidiaries (hereinafter the
Company) after elimination of all significant intercompany accounts and
transactions. The following is a listing of the wholly owned subsidiaries of
Eagle Exploration Company, Colorado Eagle Exploration Company, Emsen Energy,
Inc., Eagle Development Company and Overland Energy, Inc.
Use of Estimates
- ------------------
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
consolidated financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
Fair Value of Financial Instruments
- ---------------------------------------
The carrying amounts of financial instruments including cash and cash
equivalents, certificates of deposit, receivables and accounts payable
approximated fair value as of March 31, 1997 because of the relatively short
maturity of these instruments.
Cash and Cash Equivalents
- ----------------------------
The Company considers all highly liquid investments purchased with an original
maturity of three months or less to be cash equivalents. The effect of
exchange rate changes on cash flows is not material.
Property and Equipment
- ------------------------
Property and equipment are recorded at cost. The Company depreciates its
office furniture and equipment over an estimated useful life of five years
using straight-line and accelerated methods.
Investment in Limited Liability Company
- -------------------------------------------
The Company accounts for its 40 percent investment in a limited liability
company using the equity method of accounting.
Loss Per Share
- ----------------
Loss per common share is computed based on the weighted average number of
shares outstanding during each year.
Income Taxes
- -------------
The Company calculates and records the amount of taxes payable or refundable
currently or in the future years for temporary differences between the
consolidated financial statement basis and income tax based on the current
enacted tax laws.
NOTE 2 - NOTE RECEIVABLE
- ----------------------------
In July, 1995, the Company advanced $600,000 to a third party in the form of a
note receivable. The note bore interest at 45% and was collateralized by
180,000 shares of stock of a small cap NASDAQ company. The holder defaulted
on the note and the Company exercised its rights to the collateral, which it
later discovered, was allegedly illegally obtained. On February 2, 1996, the
Company obtained a judgment against the holder for the principal balance of
the note plus interest for a total amount of $757,794 and an additional $1.2
million under the Colorado conversion of property statute. The Company
wrote-off the note balance during 1996 and has not accrued the judgments.
NOTE 3 - INCOME TAXES
- -------------------------
There was no provision for income taxes due to the operating losses.
Reconciliations between the statutory federal income tax expense (benefit)
rate as a percentage of loss before income taxes is as follows:
<TABLE>
<CAPTION>
<S> <C>
March 31,
1997 1996
Statutory federal income tax expense rate 34% 34%
Federal net operating losses utilized (34) (34)
Effective income tax expense -% -%
</TABLE>
At March 31, 1997, the Company has net operating loss carryforwards for federal
and state income tax purposes as follows:
<TABLE>
<CAPTION>
Net Operating Year of
Losses Expiration
--------------------------------- ------------
<S> <C>
$1,040,000 2000
1,482,000 2001
1,162,000 2002
426,000 2003
464,000 2004
1,000 2005
33,000 2006
- 2007
97,000 2011
862,000 2012
----------
$5,567,000
==========
</TABLE>
The Company has an approximately $1,900,000 deferred tax asset as a result of
the net operating losses assuming a 34% effective tax rate. There is
uncertainty as to whether the Company will generate sufficient revenues in the
future to utilize the net operating loss carryforwards and therefore 100% of
the deferred tax asset resulting from the net operating loss carryforwards has
been fully impaired.
NOTE 4 - INVESTMENT IN LIMITED LIABILITY COMPANY
- -------------------------------------------------------
The Company has filed a lawsuit against the managing member of the LLC
relating to the managing partners delaying and/or refusing to sell the
property of the LLC and other matters relating to transactions entered into by
the managing partner. The audited financial statements for the LLC as
required by generally accepted accounting principles and Registration S-X of
the Securities Act of 1933 related to separate financial statements of a
significant subsidiary were not available due to the above litigation. As a
result, the Company has recorded its share of income or loss of the LLC based
on compiled financial statements provided by the LLC which is summarized in
the balance sheet and statement of operations of the LLC below.
The following is a condensed unaudited balance sheet and statement of
operations for the LLC as of December 31, 1996:
CONDENSED BALANCE SHEET
DECEMBER 31, 1996
(UNAUDITED)
Assets
<TABLE>
<CAPTION>
<S> <C>
Cash and cash equivalents $ 199,870
Tenant receivables 18,560
Prepaid expenses 5,523
Property and equipment, net 10,408,438
Other assets, net 163,995
------------
$10,796,386
============
Liabilities and Members' Equity
Accounts payable and accrued liabilities $ 501,297
Mortgage payable 10,891,681
------------
11,392,978
Members' deficit (596,592)
------------
$10,796,386
============
CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(UNAUDITED)
Revenues $ 1,698,062
Operating expenses (1,149,374)
Other expenses, net (815,545)
------------
$ (266,857)
============
</TABLE>
NOTE 5 - SIGNIFICANT FOURTH QUARTER ADJUSTMENT
- ----------------------------------------------------
In the fourth quarter for the year ended March 31, 1997, the Company made the
following adjustment to the financial statements:
The unaudited net loss for the LLC for the year ended December 31, 1996 vaired
from the quarterly unaudited interim financial information received by the
Company from the LLC which indicated net income through September 30, 1996.
Therefore, the Company recorded an adjustment of $331,477 to reduce the
Company's equity in the LLC's operations to 40% of the year ended December 31,
1996 unaudited loss of $266,857 (Note 4).
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 510,055
<SECURITIES> 194,000
<RECEIVABLES> 4,938
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 708,993
<PP&E> 255,474
<DEPRECIATION> 222,096
<TOTAL-ASSETS> 888,429
<CURRENT-LIABILITIES> 27,966
<BONDS> 0
0
0
<COMMON> 6,632,998
<OTHER-SE> (5,772,535)
<TOTAL-LIABILITY-AND-EQUITY> 888,429
<SALES> 0
<TOTAL-REVENUES> 76,367
<CGS> 0
<TOTAL-COSTS> 328,134
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (251,767)
<INCOME-TAX> 0
<INCOME-CONTINUING> (251,767)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (251,767)
<EPS-PRIMARY> (.08)
<EPS-DILUTED> (.08)
</TABLE>
