SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the Fiscal Year ended: SEPTEMBER 30, 2000
OR
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. 0-9295
WINCO PETROLEUM CORPORATION
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(Exact Name of Registrant as Specified in its Charter)
COLORADO 84-0794604
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(State or Other Jurisdiction of (I.R.S. Employer Identification Number)
Incorporation or Organization)
3118 CUMMINGS
GARDEN CITY, KANSAS 67846
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(Address of Principal Executive Offices, Including Zip Code)
Registrants Telephone Number, Including Area Code: (316) 275-2963
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.
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
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As of January 10, 2001, 41,152,606 shares of Common Stock were outstanding,
and the aggregate market value of the Common Stock of Winco Petroleum
Corporation held by nonaffiliates was not able to be ascertained as no
trading market exists for the Registrant's Common Stock.
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-B is not contained herein, and will not 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 the issuer's revenues for its most recent fiscal year. $ 318,321
Documents incorporated by reference: NONE.
This Form 10-KSB consists of 53 pages. The Exhibit Index begins on page 25.
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PART I
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FORWARD-LOOKING STATEMENTS
This report on Form 10-KSB contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended (the
"Securities Act"), and Section 21E of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), including statements regarding, among
other items, (i) the Company's growth strategies, (ii) anticipated trends
in the Company's business and its future results of operation, (iii) market
conditions in the oil and gas industry, (iv) the ability of the Company to
make and integrate its acquisition of RCS and (v) environmental matters and
the impact of governmental regulation. These forward-looking statements
are based largely on the Company's expectations and are subject to a number
of risks and uncertainties, many of which are beyond the Company's control.
Actual results could differ materially from those implied by these forward-
looking statements as a result of, among other things, a decline in oil and
natural gas production, a decline in oil and natural gas prices, incorrect
estimations of required capital expenditures, increases in the cost of
drilling, completion and oil and gas gathering, an increase in the cost of
production and operations, an inability to meet growth projections, and/or
changes in general economic conditions. Actual results could materially
differ and could be adversely affected by the information set forth under
the headings "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and "Business and Properties." In light of
these risks and uncertainties, there can be no assurance that actual
results will be as projected in the forward-looking statements.
ITEM 1. DESCRIPTION OF BUSINESS.
---------------------------------
GENERAL
Winco Petroleum Corporation ("Winco" or "the Company"), is a Colorado
corporation organized on June 21, 1979. Winco was formed primarily for the
purpose of exploration, development, and production of oil and gas. The
Company investigates potential opportunities to develop, drill and/or
participate in the development of new oil and gas properties and/or acquire
producing oil and gas properties in the Mid-Continent region of the United
States. Its current activities include identifying and drilling between
one (1) to five (5) oil and gas properties a year on its own behalf or with
other industry partners.
As more fully described below under "Recent Developments," in
connection with the proposed merger with Business Products, Inc., the oil
and gas assets and liabilities of the Company will be spun off to a new
corporation. Each Winco shareholder as of the record date of the special
meeting to approve the merger will receive his or her proportionate share
interest in the shares of the new corporation. The new corporation will
conduct the oil and gas operations previously conducted by the Company. In
the event the merger is not approved, Winco will continue its current oil
and gas operations in its present corporate structure.
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RECENT DEVELOPMENTS
On August 18, 2000, the Company entered into a Merger Agreement (the
"Agreement") with Winco Merger Corporation ("WMC"), Winco Spin-off
Corporation ("WSC") and Business Products, Inc., doing business as Rush
Creek Solutions ("RCS"). The Agreement provides that the following
transactions will occur in the following order. First, in order to
accomplish the merger, the Company will create WMC and WSC as wholly-owned
subsidiaries of the Company. Second, immediately prior to the merger, and
upon the terms and subject to the conditions set forth in the Agreement,
all of the assets, liabilities and obligations of the Company will be
transferred to and assumed by WSC, one of the Company's newly-created and
wholly-owned subsidiaries. All of the shares of common stock in WSC will
be distributed by the Company to the Company's shareholders in conjunction
with the filing and effectiveness of a Form 10-SB by WSC. Following the
distribution of all of the WSC shares, WSC will no longer be a subsidiary
of the Company but will be an independent entity, conducting the oil and
gas operations previously conducted by the Company. Third, prior to the
merger, the Company will effect a reverse stock split of its common stock
on a one (1) for eighty (80) basis. After the execution of the Agreement,
this ratio was readjusted to a one (1) for forty (40) basis. Pursuant to
the reverse stock split, each forty (40) shares of currently outstanding
common stock of the Company will be combined into one (1) share of new
common stock of the Company. Following the reverse stock split, the Company's
shareholders will own approximately 1,028,815 shares of common stock of the
Company. Fourth, according to the terms of the Agreement, RCS will merge
with and into WMC, the Company's other newly-created and wholly-owned
subsidiary. Following the merger of RCS and WMC, the separate corporate
existence of RCS will cease and WMC will continue as the surviving party in
the merger, and as a wholly-owned subsidiary of the Company. Pursuant to
the Agreement, the RCS shareholders will receive common stock in the Company
in exchange for the cancellation of their RCS common stock. RCS shareholders
will receive approximately 12,688,719 shares of the Company's common stock,
subject to future adjustment based on the final reverse stock split ratio.
The Agreement provides that none of the events just described shall occur
unless each of the events shall have occurred in the order described above.
Following the merger, shareholders of RCS will own approximately
ninety-two and one-half percent (92.5%) of the Company and the current
shareholders of the Company will retain an ownership of approximately seven
and one-half percent (7.5%) in the Company. The Company will remain a
public company, however it will conduct the business of Rush Creek
Solutions, a regional integrated technology service provider in network
design, communications and integration. The former business of the Company
will be conducted by WSC. The current officers and directors of the
Company will resign on the effective date of the merger and will be
replaced by officers and directors to be named by the RCS shareholders.
RCS is a closely held corporation, and substantially all of the common
stock of RCS is owned by Mike St. John, President of RCS, Anton St. John,
the founder of RCS, and the Anton St. John Trust.
As described above, as a result of the merger, current Company
shareholders' ownership interest in the Company, which will become the
business of RCS, will be substantially diluted.
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However, as a result of the spin-off and distribution of WSC shares,
current Company shareholders will maintain their current ownership interest
in the Company's oil and gas business as represented by WSC common stock to
be issued. The current officers and directors of the Company will become
the officers and directors of WSC and will be responsible for running the
oil and gas operations of WSC.
The Agreement contains numerous representations, warranties and
covenants by all parties. A complete description of all warranties,
representations and covenants is set forth in the Agreement included as an
Exhibit to this Report.
The Agreement is subject to shareholder approval and the filing of a
definitive proxy statement with the Securities and Exchange Commission in
connection with the Company's special meeting of shareholders. The
transaction is expected to be completed and the closing to occur in the
first quarter of 2001.
RCS was formed in 1975 and is located in Littleton, Colorado. RCS is
a regional integrated technology service provider in network design,
communications and integration. In 1999, RCS expanded its service area by
opening an office in Seattle, Washington. RCS's current business strategy
is to continue to add profitable, technical services to its current set of
services and to attract new contracts and major accounts.
BUSINESS STRATEGY
Winco's objective, or if the merger is consummated WSC's objective, is
to increase reserves, production, cash flow, earnings and net asset value
per share. To accomplish this objective, the Company intends to acquire
and/or drill and complete, on its own behalf and with other industry
partners, from one (1) to five (5) oil and gas prospects per year. Winco
will identify and acquire or develop these prospects each year with a view
to taking advantage of industry advances in seismic, drilling and other
technologies as well as management's oil and gas experience in Kansas and
Oklahoma. Of the projected new prospects, one (1) or two (2) may be
intended as higher potential, higher risk prospects. As indicated above,
Winco intends to approach its prospects in a way that will allow it to
control its costs and risks. It is possible that significant expenditures
required of the Company in connection with the future exploration
activities will require additional funding from outside sources in the form
of debt or equity. There can be no assurance such funding is or will be
available to the Company for this purpose.
OPERATIONS
As of September 30, 2000, Winco or American Warrior, Inc., an
affiliate entity, acts as operator for almost all of Winco's producing
wells. By operating its producing properties in this manner, Winco
believes it has greater control over its expenses and the timing of
exploration and development of such properties. Winco, directly or through
American Warrior, Inc., presently operates wells which represent about 76%
of Winco's proved reserves.
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CUSTOMERS AND MARKETS
Winco had two major customers, Cooperative Refining, LLC and ENRON Oil
Trading and Transportation, which each purchased over 10% of the Company's
total oil and gas production for the years ended September 30, 2000 and
1999. Currently, the prices at which the Company sells its oil and gas are
set unilaterally by the individual buyers based upon prevailing market
prices paid to oil and gas producers in that area.
During fiscal 1999, Winco acquired 100% working interest and
operations of four oil leases, the Coady Hill, Holl, and Michel A all in
Russell County, Kansas and the Gage A in Barton County, Kansas. These
leases have a total of fourteen (14) producing oil wells and two salt water
disposal wells. This acquisition was in the normal course of business and
was consistent with Winco's policy and strategies. While no acquisitions
were made in the fiscal year ended September 30, 2000, Winco continues to
be aware of and consider other oil and gas properties which are available
or may become available for purchase.
Winco's business is not seasonal in nature, except to the extent that
weather conditions at certain times of the year may affect Winco's access
to its oil and gas properties and its ability to drill oil and gas wells.
The impact of inflation on Winco's activities is minimal. While gas prices
have historically fluctuated between winter and summer seasons, changes in
the market during the last few years have made such fluctuations
unpredictable. For instance, because there are gas storage facilities
around the country which are filled during the summer, prices may be higher
during some spring or summer months than during some winter months if
temperatures are relatively warmer than usual.
COMPETITION
The Company competes with numerous other companies and individuals,
including many that have significantly greater resources, in virtually all
facets of its business. Such competitors may be able to pay more for
desirable leases and to evaluate, bid for and purchase a greater number of
properties than the financial or personnel resources of the Company permit.
The ability of the Company to increase reserves in the future will be
dependent on its ability to select and acquire suitable producing
properties and prospects for future exploration, development and
production. The availability of a market for oil and natural gas
production depends upon numerous factors beyond the control of producers,
including but not limited to the availability of other domestic or imported
production, the locations and capacity of pipelines, and the effect of
federal and state regulation on such production. Domestic oil and natural
gas must compete with imported oil and natural gas, coal, atomic energy,
hydroelectric power and other forms of energy. The Company does not hold
a significant competitive position in the oil and gas industry.
GOVERNMENT REGULATION OF THE OIL AND GAS INDUSTRY
GENERAL
The Company's business is affected by numerous governmental laws and
regulations, including energy, environmental, conservation, tax and other
laws and regulations relating to the
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energy industry. Changes in any of these laws and regulations could have
a material adverse effect on the Company's business. In view of the many
uncertainties with respect to current and future laws and regulations,
including their applicability to the Company, the Company cannot predict
the overall effect of such laws and regulations on its future operations.
FEDERAL REGULATION OF THE OIL AND GAS INDUSTRY. The Federal Energy
Regulatory Commission ("FERC") regulates interstate transportation of
natural gas under the Natural Gas Act and regulates the maximum selling
prices of certain categories of gas sold in "first sales" in interstate and
intrastate commerce under the Natural Gas Policy Act. Effective January 1,
1993, the Natural Gas Wellhead Decontrol Act deregulated natural gas prices
for all "first sales" of natural gas, which includes sales by the Company
of its own production. As a result, all sales of the Company's natural gas
produced in the U.S. may be sold at market prices, unless otherwise
committed by contract.
The Company's gas sales are affected by regulation of intrastate and
interstate gas transportation. In an attempt to promote competition, the
FERC has issued a series of orders which have altered significantly the
marketing and transportation of natural gas. The Company believes that
these changes have generally improved access to transportation and have
enhanced the marketability of natural gas production. To date, the Company
has not experienced any material adverse effect on gas marketing as a
result of these FERC orders, however, subsequent to the afore-mentioned
sale of its Wyoming properties, the Company does not currently have any
natural gas production and the Company cannot predict what new regulations
may be adopted by the FERC and other regulatory authorities, or what effect
subsequent regulations may have on future gas marketing, if any.
The Company is also subject to laws and regulations concerning
occupational safety and health. It is not anticipated that the Company
will be required in the near future to expend amounts that are material in
the aggregate to the Company's overall operations by reason of occupational
safety and health laws and regulations. However, inasmuch as such laws and
regulations are frequently changed, the Company is unable to predict the
ultimate cost of compliance.
STATE REGULATION. The Company's operations are also subject to
regulation at the state level. Such regulation includes requiring permits
for the drilling of wells, maintaining bonding requirements in order to
drill or operate wells and regulating the location of wells, the method of
drilling and casing wells, the surface use and restoration or properties
upon which wells are drilled, the plugging and abandoning of wells and the
disposal of fluids used in connection with operations. The Company's
operations are also subject to various conservation laws and regulations.
These include the size of drilling and spacing units or proration units and
the density of wells which may be drilled and the unitization or pooling of
oil and gas properties. In addition, state conservation laws establish
maximum rates of production from oil and gas wells, generally prohibit the
venting or flaring of gas and impose certain requirements regarding the
ratability of production. State regulation of gathering facilities
generally includes various safety, environmental, and in some
circumstances, nondiscriminatory take requirements, but does not generally
entail rate regulation. These regulatory burdens may affect profitability,
and the Company is unable to predict the future cost or impact of complying
with such regulations.
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ENVIRONMENTAL MATTERS. Extensive federal, state and local laws
affecting oil and natural gas operations, including those carried on by the
Company, regulate the discharge of materials into the environment or
otherwise protect the environment. Numerous governmental agencies issue
rules and regulations to implement and enforce such laws which are often
difficult and costly to comply with and which carry substantial penalties
for failure to comply. Some laws, rules and regulations relating to the
protection of the environment may, in certain circumstances, impose "strict
liability" for environmental contamination, rendering a person liable for
environmental damages, cleanup costs and, in the case of oil spills in
certain states, consequential damages without regard to negligence or fault
on the part of such person. Other laws, rules and regulations may restrict
the rate of oil and natural gas production below the rate that would
otherwise exist or even prohibit exploration or production activities in
environmentally sensitive areas. In addition, state laws often require
some form of remedial action to prevent pollution from former operations,
such as closure of inactive pits and plugging of abandoned wells.
Legislation has been and continues to be proposed in Congress from time to
time that would reclassify certain exempt oil and gas exploration and
production wastes as "hazardous wastes." This reclassification would make
such wastes subject to more stringent handling, disposal and clean-up
requirements. If such legislation were to be enacted, it could have a
significant impact on the operating costs of the Company, as well as the
oil and gas industry in general. Initiatives to further regulate the
disposal of oil and gas wastes are also pending in certain states and may
include initiatives at county, municipal and local government levels.
These various initiatives could have a similar impact on the Company. The
regulatory burden on the oil and natural gas industry increases its cost of
doing business and consequently affects its profitability.
Compliance with these environmental requirements, including financial
assurance requirements and the costs associated with the cleanup of any
spill, could have a material adverse effect upon the capital expenditures,
earnings or competitive position of the Company and its subsidiaries. The
Company believes that it is in substantial compliance with current
applicable environmental laws and regulations and that continued compliance
with existing requirements will not have a material adverse impact on the
Company. Nevertheless, changes in environmental law have the potential to
adversely affect the Company's operations. For example, the U.S.
Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA"), also known as the "superfund" law, imposes liability, without
regard to fault or the legality of the original conduct, on certain classes
of persons with respect to the release of a "hazardous substance" into the
environment. These persons include the owner or operator of the disposal
site or sites where the release occurred and companies that disposed or
arranged for the disposal of the hazardous substance found at the site.
Persons who are or were responsible for releases of hazardous substances
under CERCLA may be subject to joint and several liability for the costs of
cleaning up the hazardous substances that have been released into the
environment and for damages to natural resources, and it is not uncommon
for neighboring landowners and other third parties to file claims for
personal injury or property damages allegedly caused by the hazardous
substance released into the environment. Under CERCLA, certain oil and gas
materials and products are, by definition, excluded from the term
"hazardous substances." At least two federal courts have recently held
that certain wastes associated with the production of crude oil may be
classified as hazardous substances under CERCLA. Similarly, under the
federal Resource, Conservation and Recovery Act ("RCRA") certain oil and
gas materials and wastes are exempt from the definition of "hazardous
wastes." This exemption continues to be subject to judicial interpretation
and increasingly stringent state regulation. During the normal course of
its operations, the Company generates or has generated in
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the past exempt and non-exempt wastes, including hazardous wastes, that are
subject to the RCRA and comparable state statutes. The U.S. Environmental
Protection Agency ("EPA") and various state agencies continue to promulgate
regulations that limit the disposal and permitting options for certain
hazardous and non-hazardous wastes.
Although the Company maintains insurance against some, but not all, of
the risks described above, including insuring the costs of clean-up
operations, public liability and physical damage, there is no assurance
that such insurance will be adequate to cover all such costs, that such
insurance will continue to be available in the future or that such
insurance will be available at premium levels that justify its purchase.
The occurrence of a significant event not fully insured or indemnified
against could have a material adverse effect on the Company's financial
condition and operations.
TITLE TO PROPERTIES
As is customary in the oil and gas industry, only a preliminary title
examination is conducted at the time leases of properties believed to be
suitable for drilling operations are acquired by the Company. Prior to the
commencement of drilling operations, a thorough title examination of the
drill site tract is conducted by independent attorneys. Once production
from a given well is established, the Company prepares a division order
title report indicating the proper parties and percentages for payment of
production proceeds, including royalties. The Company believes that titles
to its leasehold properties are good and defensible in accordance with
standards generally acceptable in the oil and gas industry.
EMPLOYEES
At September 30, 2000 and 1999, the Company did not have any full-time
employees. Services on a part-time basis were provided by employees of
American Warrior, Inc., a company affiliated by common ownership of some of
Winco's common stock.
CERTAIN RISKS
UNCERTAINTY OF RESERVE INFORMATION AND FUTURE NET REVENUE ESTIMATES.
There are numerous uncertainties inherent in estimating quantities of
proved oil and natural gas reserves and their values, including many
factors beyond the Company's control. Estimates of proved developed
reserves, which comprise a significant portion of the Company's reserves
are by their nature uncertain. The reserve information set forth in this
Form 10-KSB represents estimates only. Although the Company believes such
estimates to be reasonable, reserve estimates are imprecise by nature and
may materially change as additional information becomes available.
Estimates of oil and natural gas reserves, by necessity, are
projections based on geologic and engineering data, and there are
uncertainties inherent in the interpretation of such data as well as the
projection of future rates of production and the timing of development
expenditures. Reserve engineering is a subjective process of estimating
underground accumulations of oil and natural gas that are difficult to
measure. The accuracy of any reserve estimate is a function of the quality
of available data, engineering and geological interpretation and judgment.
Estimates of economically recoverable oil and natural gas reserves and
future net cash flows necessarily depend upon a number
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of variable factors and assumptions, such as historical production from the
areas compared with production from other producing areas, the assumed
effects of regulations by governmental agencies and assumptions governing
future oil and natural gas prices, future operating costs, severance and
excise taxes, development costs and work over and remedial costs, all of
which may in fact vary considerably from actual results. For these
reasons, estimates of the economically recoverable quantities of oil and
natural gas attributable to any particular group of properties,
classifications of such reserves based on risk of recovery, and estimates
of the future net cash flows expected therefrom may vary substantially.
Any significant variance in the assumptions could materially affect the
estimated quantity and value of the reserves. Actual production, revenues
and expenditures with respect to the Company's reserves will likely vary
from estimates, and such variances may be material.
SPECULATIVE NATURE OF OIL AND GAS EXPLORATION. The business of
exploring for and, to a lesser extent, of developing oil and gas properties
is an inherently speculative activity that involves a high degree of
business and financial risk. Property acquisition decisions generally are
based on various assumptions and subjective judgments that are speculative.
Although available geological and geophysical information can provide
information with respect to the potential of an oil or gas property, it is
impossible to predict accurately the ultimate production potential, if any,
of a particular property or well. Moreover, the successful completion of
an oil or gas well does not ensure a profit on the Company's investment
therein. A variety of factors, both geological and market-related, can
cause a well to become uneconomic or marginally economic.
OPERATING HAZARDS. The oil and natural gas business involves certain
operating hazards such as well blowouts, craterings, explosions,
uncontrollable flows of oil, natural gas or well fluids, fires, formations
with abnormal pressures, pipeline ruptures or spills, pollution, release of
toxic gas and other environmental hazards and risks, any of which could
result in substantial losses to the Company. Federal and state regulation
of natural gas and oil production and transportation, tax and energy
policies, changes in supply and demand and general economic conditions all
could adversely affect the Company's ability to produce and market its oil
and natural gas. In addition, the Company may be liable for environmental
damage caused by previous owners of property purchased or leased by the
Company. As a result, substantial liabilities to third parties or
governmental entities may be incurred, the payment of which could reduce or
eliminate the funds available for exploration, development or acquisitions
and result in losses to the Company. In accordance with customary industry
practices, the Company maintains insurance against some, but not all, of
such risks and losses. The Company carries business interruption insurance
in varying amounts based upon the estimated time to cause the covered
facilities to become operational. The Company may elect to self-insure if
management believes that the cost of insurance, although available, is
excessive relative to the risks presented. The occurrence of an event that
is not covered, or not fully covered, by insurance could have a material
adverse effect on the Company's financial condition and results of
operations. In addition, pollution and environmental risks generally are
not fully insurable.
NO DIVIDENDS. The Company has never declared or paid any cash
dividends to the holders of Common Stock and has no present intention to
pay cash dividends to such holders in the foreseeable future.
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ITEM 2. DESCRIPTION OF PROPERTY
--------------------------------
OPERATIONS
The Company or affiliate entities is primarily responsible for
drilling, evaluation and production activities associated with various
properties and for negotiating the sales of oil and gas production from the
properties. As of September 30, 2000, the Company or its affiliates was
serving as operator for 17 producing wells owned by the Company. This
represents approximately 76% of the Company's proved reserves.
The Company believes that, as operator, it is in a better position to
control costs, safety, and timeliness of work as well as other critical
factors affecting the economics of a well or a property, including
maintaining good community relations.
OFFICES
Winco maintains its principal executive offices at 3118 Cummings,
Garden City, Kansas 67846, and its telephone number is (316) 275-2963. The
office space is owned by American Warrior, Inc. and no rent was charged or
paid during the fiscal years of 2000 and 1999. The Company will not be
required to pay any rent in the foreseeable future.
OIL AND GAS RESERVES
The table below sets forth the Company's quantities of proved
reserves, as estimated by independent petroleum engineers, McCartney
Engineering, all of which are located in the continental U.S., and the
present value of estimated future net revenues from these reserves on a
non-escalated basis discounted at 10 percent per year for the period
indicated. Reserve estimates are inherently imprecise and are subject to
revisions based on production history, results of additional exploration
and development, prices of oil and gas and other factors outside the
Company's control.
Year Ended
September 30,
------------------------------
2000 1999
Estimated Proved Gas Reserves (MCF) 0 0
Estimated Proved Oil Reserves (Bbls) 48,601 124,241
Present Value of Future Net Revenues
(before future income tax expense) 476,760 627,820
Reference should be made to Supplemental Oil and Gas Information on
Pages F-8 and F-9 of this Annual Report on Form 10-KSB for additional
information pertaining to the Company's proved oil and gas reserves.
During fiscal 2000, the Company did not file any reports that include
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estimates of total proved net oil or gas reserves with any federal agency
other than the Securities and Exchange Commission.
PRODUCTION
The following table sets forth the Company's net oil and gas
production for the periods indicated.
Year Ended
September 30
------------------------------
2000 1999
Natural Gas (MCF) 0 0
Crude Oil & Condensate (Bbls) 15,913 15,427
AVERAGE SALES PRICES AND PRODUCTION COSTS
The following table sets forth the average gross sales price and the
average production cost per unit of oil produced, including production
taxes, for the periods indicated. For purposes of calculating production
cost per equivalent barrel, Mcf's of gas have been converted at a ratio of
six Mcf's of gas for each barrel of oil:
Year Ended
September 30
-----------------------------
2000 1999
Average Sales Price
Gas (per MCF) N/A 2.16
Oil (per Bbl) 26.81 13.08
Average Production Cost Per
Equivalent Barrel 11.78 7.21
PRODUCING WELLS AND DEVELOPMENT ACREAGE
The following table sets forth, as of September 30, 2000 and 1999, the
approximate number of gross and net producing oil and gas wells and their
related developed acres owned by Winco. Productive wells are producing
wells and wells capable of production, including shut-in wells. Developed
acreage consists of acres spaced or assignable to productive wells.
PRODUCING WELLS
----------------------------------- DEVELOPED ACRES
OIL GAS GROSS NET
-------------- --------------
GROSS NET GROSS NET
2000 18 12.73 0 0 1,535 941
1999 18 12.73 0 0 1,535 941
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UNDEVELOPED ACREAGE
At September 30, 2000 and 1999, the Company did not hold undeveloped
acreage.
DRILLING ACTIVITIES
The Company had no drilling activities for the years ended September 30,
2000 and 1999. The Company's drilling activities, when conducted, are on a
contract basis with independent drilling contractors.
PRINCIPAL PROPERTIES
The following table summarizes Winco's principal properties:
<TABLE>
<CAPTION>
Start Remaining(1)
Lease Wells County/State Field Zone Depth Date Life Reserves
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Everett 1 Ness, KS Aldrich Mississippi 4,500 2/56 8 11,962
Gano 1-17 1 Kearny, KS Lakin NW Mississippi 5,200 10/84 7 7,295
Hofmeister 1 Barton, KS Beaver Lansing, KC 3,090 6/97 7 9,593
Madsen 1 Converse, WY Mikes Draw Teapot 7,136 2/84 10 11,595
All Others 14 Various 8,156
-----------------------------------------------------------------------------------------
Total 48,601
======
</TABLE>
________________
(1) Remaining life and reserves are as determined by independent petroleum
engineers, whose report is contained in the exhibits hereto.
ITEM 3. LEGAL PROCEEDINGS
--------------------------
The Company is not involved in any material pending legal proceedings
to which the Company is a party or to which any of its property is subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
--------------------------------------------------------------
The Company did not hold an annual meeting of its shareholders during
the most recent fiscal year. However, the Company anticipates holding a
special meeting of its shareholders in early 2001 to approve a proposed
reverse stock split, spin-off and merger with RCS, elect directors and
conduct such business as may properly come before the meeting. Shareholders
will be provided proxy materials upon the announcement of the special
meeting by the Board of Directors and notice thereof.
12
<PAGE>
PART II
-------
ITEM 5. MARKET FOR WINCO'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
------------------------------------------------------------------------
(a) PRINCIPAL MARKET OR MARKETS The Company's common stock, no par
value, is traded in the national over-the counter market and quotes for
such common stock are reported by the National Association of Securities
Dealers, Inc. on its "pink sheets" under the symbol "WNCO". The range of
high and low bid prices for each quarterly period during the two most
recent fiscal years ended September 30, 2000 and 1999 are reported as follows:
Quarter Ended High Low
------------- ---- ---
December 31, 1998 No quote No quote
March 31, 1999 No quote No quote
June 30, 1999 No quote No quote
September 30, 1999 No quote No quote
December 31, 1999 No quote No quote
March 31, 2000 No quote No quote
June 30, 2000 No quote No quote
September 30, 2000 No quote No quote
There is no trading market for Winco's Common Stock and management is
only aware of certain limited transfers among a few shareholders. On
December 15, 2000, the Company is unaware of any trading activity.
(b) SECURITY HOLDERS The approximate number of security holders of
record of the Company's no par value common stock as of September 30, 2000
was approximately 2,440.
(c) DIVIDENDS Holders of Common stock are entitled to receive such
dividends as may be declared by the Company's Board of Directors. No
dividends have been paid with respect to the Company's common stock. The
Company anticipates that future earnings will be retained for the
development of its business and that no cash dividends will be declared or
paid in the foreseeable future.
(d) CURRENT CAPITALIZATION The Company has one class of stock,
Common, of which 50,000,000 shares are authorized for issuance. As of
September 30, 2000, 41,152,606 shares are issued and outstanding.
13
<PAGE>
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
-------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30, 2000 VS. SEPTEMBER 30, 1999
----------------------------------------------------
RECENT DEVELOPMENTS
See "Recent Developments" under Item 1 of this Report for a
description of the contemplated merger between Winco and RCS.
RESULTS OF OPERATIONS
The Company had a net loss for the year ended September 30, 2000
totaling $36,339 compared to net income of $11,399 at September 30, 1999.
Operations provided a gain after depreciation and depletion of $84,765, due
to higher oil prices. Unusually higher general and administrative costs
offset operating revenues to result in the net loss.
REVENUES
Oil and gas sales for the year ended September 30, 2000 totaled
$318,321 compared to revenues of $142,448 for the year ended September 30,
1999. Oil production increased from 15,427 barrels to 15,913 barrels, a
net increase of 486 barrels or 3.15%. The significant increase in revenues
resulted from this increase in production, along with an improvement in oil
prices, from an average in 1999 of $13.08 per barrel to an average of
$26.81 in 2000. The improvement in oil prices accounted for about $163,000
of the $175,893 increase in revenues. The Company shut-in four of its wells
during the year ended September 30, 2000.
The Company has had very little gas production (less than 1% of total
sales), particularly since the sale of the Wyoming properties as of January 1,
1998, and has determined that no significant gas imbalances have been
incurred either for or against the Company's account. Based on production
levels and revenues received from those interests in gas properties which
the Company owns or has owned, no significant imbalances have resulted.
COSTS AND EXPENSES
Oil and gas production costs for the year ended September 30, 2000
totaled $193,182, a 113.16% (or $102,552) increase from the costs of
$90,630 for the year ended September 30, 1999. The increased costs were a
result of more operations during the year and additional costs associated
with the maintenance, repair and improvement of wells to assure optimum
production.
General and administrative expenses totaled $120,104 at September 30,
2000, compared to $23,423 at September 30, 1999, a total increase of
412.76%. This increase was primarily due to an increase of $56,938 in
professional fees, which was incurred in relation to the Company's pending
merger, and $31,834 in compensation expense, which was incurred in the
issuance of stock held in Treasury to directors and officers.
14
<PAGE>
Depreciation, depletion and amortization costs for the year ended
September 30, 2000 totaled $40,374, an increase of $14,285 (or 54.75%) from
the costs of $26,089 for the year ended September 30, 1999. This increase
resulted from higher costs amortized in 2000 due to the units of production
calculation for cost depletion.
Exploration costs and dry hole costs were not incurred during fiscal
years September 30, 2000 and 1999.
OTHER INCOME (LOSS)
Other income (loss) for the year ended September 30, 2000, was
$(1,000), a decrease of $10,093 from the year ended September 30, 1999
amount of $9,093, which was primarily due to interest on cash balances in
interest-bearing accounts in the prior year and a non-recurring gain of
$2,000 on recovery and sale of equipment.
LIQUIDITY AND CAPITAL RESOURCES
During the year ended September 30, 2000, the Company's working
capital increased from $312,488 at September 30, 1999 to $349,807 at
September 30, 2000. The increase of $37,319 was primarily the result of
working capital provided by operations.
The Company anticipates revenues from operations of its wells to be
sufficient for its working capital needs. Substantially all of the cash
balances held by the Company are available for the acquisition of
additional oil and gas producing properties and/or drilling of new wells.
Opportunities to acquire producing properties may not be as practical since
oil prices have substantially improved from their lowest levels. While the
Company will continue to monitor and consider any such opportunities, it
may find opportunities for drilling of new wells to be more practical.
YEAR ENDED SEPTEMBER 30, 1999 VS. SEPTEMBER 30, 1998
----------------------------------------------------
RESULTS OF OPERATIONS
The Company had net income for the year ended September 30, 1999
totaling $11,399 compared to net income of $8,453 at September 30, 1998.
Operations reflected a small gain after depreciation and depletion, in
spite of lower than average oil prices. The fourteen wells acquired in
1997 and 1999 operate more efficiently than those in Wyoming which the
Company sold as of January 1, 1998. Lower operating costs and an
improvement in oil prices in the last quarter contributed to a small
improvement in net income.
REVENUES
Oil and gas sales for the year ended September 30, 1999 totaled
$142,448 compared to revenues of $109,109 for the year ended September 30,
1998. Oil production increased from 13,628 barrels to 15,427 barrels, a
net increase of 1,799 barrels or 13.20%. These changes in revenue and
fluctuation in production resulted primarily from the purchase of four
additional oil properties and
15
<PAGE>
the sale of the five Wyoming properties, which produced oil and gas.
During a period of significantly lower than normal oil prices, the Company
elected to sell only oil production in excess of storage capacity on the
leases and to shut-in five of the wells until prices recovered. As of
September 30, 1999, all of the Company's leases were producing oil, though
some individual wells may have remained shut-in on leases where at least
one other well was producing.
The Company has had very little gas production (less than 1% of total
sales), particularly since the sale of the Wyoming properties as of January 1,
1998, and has determined that no significant gas imbalances have been
incurred either for or against the Company's account. Based on production
levels and revenues received from those interests in gas properties which
the Company owns or has owned, no significant imbalances have resulted.
COSTS AND EXPENSES
Oil and gas production costs for the year ended September 30, 1999
totaled $90,630, an 8.64% (or $8,576) decrease from the costs of $99,206
for the year ended September 30, 1998. The decreased costs were primarily
a result of restricted operations during the year.
General and administrative expenses totaled $23,423 at September 30,
1999, compared to $33,338 at September 30, 1998, a total decrease of
29.74%. This decrease was due to reductions of costs as a result of
limiting activity while oil prices were depressed.
Depreciation, depletion and amortization costs for the year ended
September 30, 1999 totaled $26,089, a decrease of $37,626 (or 59.05%) from
the costs of $63,715 for the year ended September 30, 1998. This decrease
resulted from higher costs amortized in 1998 due to the units of production
calculation for cost depletion and an additional charge due to the
"capitalization ceiling" determined by the Company's reserve study.
Exploration costs and dry hole costs were not incurred during fiscal
years September 30, 1999 and 1998.
OTHER INCOME (LOSS)
Other income (loss) for the year ended September 30, 1999, was $9,093,
a decrease of $86,510 from the year ended September 30, 1998 amount of
$95,603, primarily due to the gain on sale included in 1998. Other income not
specified on the income statement includes a recovery and sale of equipment
for $2,000 in 1999 and an adjustment for disposition of equipment inventory
of ($21,296) in 1998. These items were considered unusual and not
anticipated to be recurring.
LIQUIDITY AND CAPITAL RESOURCES
During the year ended September 30, 1999, the Company's working
capital decreased from $345,492 at September 30, 1998 to $312,488 at
September 30, 1999. The decrease of $33,004 was primarily the result of
working capital used to acquire additional oil properties.
The Company anticipates revenues from operations of its wells to be
sufficient for its working capital needs. Substantially all of the cash
balances held by the Company are available for the acquisition of additional
oil and gas producing properties. The Company anticipates that there
16
<PAGE>
will continue to be opportunities to acquire producing properties as many
operators were affected by an extended period of low oil prices. Even
though oil prices have substantially improved from their lowest levels,
many such operators find that they do not have sufficient resources to
invest to bring all of their properties back to the levels of production of
which they are capable.
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
----------------------------------------------------
See Part IV, page F-1 of this Report.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
------------------------------------------------------------------------
FINANCIAL DISCLOSURE
--------------------
Not Applicable.
17
<PAGE>
PART III
--------
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
---------------------------------------------------------------------
(a)(b) IDENTIFICATION OF DIRECTORS, EXECUTIVE OFFICERS AND
SIGNIFICANT EMPLOYEES
The following sets forth certain information with respect to the
officers and directors of Winco.
Name Age Position
---- --- --------
Cecil O'Brate (1) 72 President, Chief Executive
Officer and a Director since 1996
Daniel Lee Dalke (1) 50 Secretary, Treasurer, Chief
Financial Officer and a Director
since 1996
G. Allen Nelson 77 Director since 1989
____________________
(1) Elected officers and directors of Winco on July 3, 1996.
TERMS OF OFFICE. The directors of Winco are elected to hold office
until the next annual meeting of shareholders and until their respective
successors have been elected and qualified. Officers of Winco are elected
by the Board of Directors and hold office until their successors are
elected and qualified.
MEETINGS OF DIRECTORS AND SHAREHOLDERS. The Board of Directors met
twice during the fiscal year ended September 30, 2000. No Shareholders
Meeting was held during the fiscal year ended September 30, 2000 due to the
impending shareholder meeting in 2001. A special meeting of the Board of
Directors was held on August 18, 2000 to approve management's decision to
enter into a merger agreement between the Company and Rush Creek Solutions,
Inc. and grant a restricted stock bonus to directors. Pursuant to the
merger agreement, the company would also need to affect a reverse stock
split and spin-off the existing assets. The Company will hold a Special
Meeting of the Shareholders in 2001 to vote on the stock split, spin-off
and merger. Such meeting will be held as soon as possible after SEC
approval of proxy materials to be provided to the shareholders, including
a copy of this report and announcement of the meeting by the Board of
Directors and notice thereof.
Winco currently has no audit or compensation committee; however, prior
to June 2001, an audit committee comprised of independent directors will be
established.
Biographical information concerning each director and executive
officer, including business experience for the past five years is as follows:
18
<PAGE>
CECIL O'BRATE has been Chief Executive Officer and President of
American Warrior, Inc., a Kansas corporation involved in oil and gas
development, since 1984. He has also been Chief Executive Officer and
President of Mid-Continent Resources, Inc., a Kansas corporation involved
in oil and gas development, since 1984. Mr. O'Brate has also been Chief
Executive Officer and President of Palmer Mfg. & Tank, Inc., a Kansas
corporation manufacturing storage vessels for various industries, since
1966. Mr. O'Brate also holds investments in other closely-held
corporations involved in farming and implement dealerships. Mr. O'Brate
devotes part-time to Winco, not exceeding 20% of his time.
DANIEL LEE DALKE has been Assistant Secretary-Treasurer and Controller
of American Warrior, Inc., Mid-Continent Resources, Inc. and Palmer Mfg.
& Tank, Inc. since 1984. Mr. Dalke holds a degree in accounting from
Wichita State University and is a Certified Public Accountant. Mr. Dalke
devotes part-time to Winco, not exceeding 20% of his time.
G. ALLEN NELSON was the Secretary of Winco from 1989 to 1996. Mr.
Nelson holds a degree in geology from the University of Texas. He has been
a member of the American Association of Petroleum Geologists since 1948,
and an active member since 1954. Mr. Nelson is also an active member of
the Rocky Mountain Association of Geologists, the Wyoming Geological
Association, and the East Anshutz Ranch Field Unit Arbitration Panel. Mr.
Nelson is an independent consulting geologist.
(c) FAMILY RELATIONSHIPS
There are no family relationships between or among any officers and
directors.
(d) INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS
No officer, director, significant employee, promoter or control person
of Winco has been involved in any event of the type described in Item
401(d) of Regulation S-B during the past five years.
ITEM 10. EXECUTIVE COMPENSATION.
---------------------------------
(a)(b) GENERAL AND SUMMARY COMPENSATION TABLE
The following sets forth all compensation paid or accrued by Winco for
services rendered during fiscal years ended September 30, 1998, 1999 and
2000 by its Chief Executive Officer. No other executive officers received
a salary and other compensation which exceeded $100,000 during any year.
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
------------------------------------------- -----------------------------------------------
Name and Restricted
Principal Other Annual Stock Options/ LTIP All Other
Position Year Salary Bonuses Compensation Awards SARS Payouts Compensation
-------- ---- ------ ------- ------------ ------ ---- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Cecil O'Brate, 2000 $ 0 $ 0 $ 4,000 $ 15,700(1) $ 0 $ 0 $ 0
President and 1999 0 $ 0 2,000 0 0 0 0
Chief Executive 1998 0 $ 0 1,850 0 0 0 0
Officer
</TABLE>
19
<PAGE>
_______________
(1) Mr. O'Brate was granted 625,485 shares of the Company's Common Stock
valued at $.025 per share.
(c) OPTION/SAR GRANTS TABLE
There were no options to purchase shares of Common Stock granted to
the Executive Officers of Winco listed in the Executive Compensation Table
during Winco's last fiscal year.
(d) AGGREGATED OPTION/SAR EXERCISE AND FISCAL YEAR-END OPTIONS/SAR
VALUE TABLE
Not applicable.
(e) TERM INCENTIVE PLAN ("LTIP") AWARDS TABLE
Not applicable.
(f) COMPENSATION OF DIRECTORS
STANDARD ARRANGEMENTS. All Directors are reimbursed for reasonable
out-of-pocket expenses incurred related to Board duties assigned and in
connection with attending Board and Shareholders' meetings.
OTHER ARRANGEMENTS. There are no other arrangements pursuant to which
Winco's Directors receive compensation from the Company for services as
Directors, however, in August 2000 the Board of Directors granted Cecil
O'Brate 625,485 shares of the Company's Common Stock as a stock bonus. In
addition, the Board of Directors granted Daniel Dalke and Allen Nelson
330,000 and 50,000 shares of Common Stock, respectively. All shares were
valued at $.025 per share respectively.
(g) EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND
CHANGE-IN-CONTROL ARRANGEMENTS
None.
(h) REPORTING ON REPRICING OF OPTIONS/SARS
Not Applicable.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
------------------------------------------------------------------------
(a)(b) SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of September 30, 2000, the
ownership of the Company's Common Stock by (i) each Director of the
Company, (ii) all Executive Officers and Directors of the Company as a
group, and (iii) all persons known by the Company to own more than 5% of
the Company's Common Stock:
20
<PAGE>
Beneficial Ownership (1)
------------------------------
Name Number of Shares Percentage
---- ---------------- ----------
Cecil O'Brate 18,393,353 (2) 44.70%
P.O. Box 399
Garden City, KS 67846
Daniel Lee Dalke 330,000 0.80%
P.O. Box 399
Garden City, KS 67846
Mid-Continent Resources, Inc. 836,921 2.03%
P.O. Box 399
Garden City, KS 67846
G. Allen Nelson 58,300 .14%
1645 Court Place, Suite 302
Denver, CO 80202
Betty Lee Winkler 7,049,300 17.13%
775 Ivanhoe Street
Denver, CO 80220
American Warrior, Inc. 16,949,947 41.19%
P.O. Box 399
Garden City, KS 67846
All Directors and Officers 18,773,353 (3) 45.62%
as a Group (4 persons) (2)
______________________________
(1) Calculated pursuant to Rule 13-d-3(d) of the Securities Exchange Act
of 1934. Unless otherwise stated below, each such person has sole
voting and investment power with respect to all such shares. Under
Rule 13d-3(d), shares not outstanding which are subject to options,
warrants, rights or conversion privileges exercisable within 60 days
are deemed outstanding for the purpose of calculating the number and
percentage owned by such person, but are not deemed outstanding for
the purpose of calculating the percentage owned by each other person
listed.
(2) Cecil O'Brate is the President, a director and the majority
shareholder of American Warrior, Inc. and Mid-Continent Resources,
Inc. and therefore may be deemed to be the beneficial owner of the
shares owned by them, in addition to 606,485 shares, which he owned
directly.
(3) Includes 16,949,947 shares owned by American Warrior, Inc., and
836,921 shares owned by Mid-Continent Resources, Inc., as to which
Cecil O'Brate, a Director and Officer of Winco, may be deemed to have
beneficial ownership by virtue of being a Director and Officer of
American Warrior, Inc., as well as those shares owned directly by
Cecil O'Brate, Daniel Dalke and G. Allen Nelson.
21
<PAGE>
(c) CHANGES IN CONTROL
No understandings, arrangements or agreements are known by management
at this time which would result in a change in control of the Company.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
--------------------------------------------------------
(a)(b) TRANSACTIONS WITH MANAGEMENT AND OTHERS
The Company's Board of Directors and its officers are subject to
certain provisions of Colorado law which are designed to eliminate or
minimize the effects of certain potential conflicts of interest. In
addition, the Board of Directors has adopted a policy that provides that
any transaction between the Company and an interested party must be fully
disclosed to the Board of Directors, and that a majority of the directors
not otherwise interested in the transaction (including a majority of
disinterested directors) must make a determination that such transaction is
fair, competitive, commercially reasonable and on terms and conditions not
less favorable to the Company than those available from unaffiliated third
parties.
American Warrior, Inc. ("AWI") is an oil and gas company wholly-owned
by Cecil O'Brate, President and a Director of the Company. Further, Daniel
Dalke, Secretary-Treasurer of the Company is employed by AWI. AWI owns
41.19% of the Company and provides various services on behalf of the
Company. AWI operates most of the wells owned by the Company, for which
AWI receives an operator's charge that is commensurate with charges by
other operators in the same areas. AWI also provides on behalf of the
Company office space, for which no rent is charged or paid, and personnel
services, for which only nominal payment is made.
Mid-Continent Resources, Inc. ("MCR") also operates a well on behalf
of the Company. MCR is 50% owned by AWI and Cecil O'Brate and Daniel Dalke
serve in the same offices and capacity for MCR as AWI.
(c) PARENTS OF WINCO
None.
(d) TRANSACTIONS WITH PROMOTERS
Information required by Item 404 of Regulation S-B is not required to
be presented inasmuch as the Company has been organized for more than five
years.
(e) COMPLIANCE WITH SECTION 16 OF THE SECURITIES EXCHANGE ACT OF 1934,
AS AMENDED
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's Directors and Officers, and persons who own more than 10% of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange
Commission ("SEC"). Officers, directors and greater than 10% stockholders
are required by SEC regulation to furnish the Company with copies of all
Section 16(a) forms they file.
22
<PAGE>
Based solely on the Company's view of the copies of such forms
received by it during the fiscal year ended September 30, 2000, and written
representations that no other reports were required, the Company believes
that each person who, at any time during such fiscal year, was a director,
officer, or beneficial owner of more than 10% of the Company's Common Stock
complied with all Section 16(a) filing requirements during such fiscal year
or prior fiscal year.
23
<PAGE>
PART IV
-------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
---------------------------------------------------------------------------
The following documents are filed as part of this report:
(1) FINANCIAL STATEMENTS The following financial statements are filed as
part of this report:
Page
----
Reports of Independent Certified Public
Accountants F-1
Balance Sheets - September 30, 2000 and 1999 F-2
Statements of Operations for the years ended
September 30, 2000 and 1999 F-3
Statements of Stockholders' Equity for the
years ended September 30, 2000 and 1999 F-4
Statements of Cash Flows for the years ended
September 30, 2000 and 1999 F-5
Notes to Financial Statements F-6 to F-15
All Schedules are omitted because they are not required, inapplicable,
or the information is included in the financial statements or notes thereto.
(3)(a) EXHIBITS
--------
19.0 Reserve Report prepared by McCartney Engineering, Inc.
23.0 Consent of Independent Certified Accountants
(b) REPORTS ON FORMS 8-K The Company filed a report on Form 8-K
September 1, 2000 reporting under Item 2 "Acquisition or Disposition of
Assets."
24
<PAGE>
WINCO PETROLEUM CORPORATION
FINANCIAL STATEMENTS
SEPTEMBER 30, 2000 AND 1999
WITH
INDEPENDENT AUDITORS' REPORT
<PAGE>
WINCO PETROLEUM CORPORATION
FINANCIAL STATEMENTS
September 30, 2000 and 1999
TABLE OF CONTENTS
-----------------
Page
--------
Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . 1
Financial Statements:
Balance Sheets. . . . . . . . . . . . . . . . . . . . . . . . . 2
Statements of Operations. . . . . . . . . . . . . . . . . . . . 3
Statements of Stockholders' Equity. . . . . . . . . . . . . . . 4
Statements of Cash Flows. . . . . . . . . . . . . . . . . . . . 5
Notes to Financial Statements . . . . . . . . . . . . . . . .6 - 15
<PAGE>
INDEPENDENT AUDITORS' REPORT
----------------------------
Board of Directors
WINCO PETROLEUM CORPORATION
We have audited the accompanying balance sheets of Winco Petroleum
Corporation as of September 30, 2000 and 1999, and the related statements
of operations, stockholders' equity, and cash flows for the years then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Winco Petroleum
Corporation as of September 30, 2000 and 1999, and the results of its
operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.
/s/ ALLEN, GIBBS & HOULIK, L.C.
November 20, 2000
F-1
<PAGE>
WINCO PETROLEUM CORPORATION
BALANCE SHEETS
September 30, 2000 and 1999
ASSETS
------
<TABLE>
<CAPTION>
2000 1999
----------- -----------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 302,799 $ 273,172
Accounts receivable 25,411 28,127
Accounts receivable - related party 50,665 48,970
----------- -----------
Total current assets 378,875 350,269
----------- -----------
PROPERTY AND EQUIPMENT
Investment in oil and gas properties,
at cost (full cost method) 336,096 336,096
Furniture, fixtures, and vehicles, at cost 22,698 22,698
----------- -----------
358,794 358,794
Less accumulated depreciation, depletion,
and amortization 178,179 137,805
----------- -----------
180,615 220,989
----------- -----------
OTHER ASSETS -- 1,000
----------- -----------
$ 559,490 $ 572,258
=========== ===========
</TABLE>
<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<TABLE>
<CAPTION>
2000 1999
----------- -----------
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable:
Trade $ 9,084 $ 2,334
Related party 19,984 35,447
----------- -----------
Total current liabilities 29,068 37,781
----------- -----------
STOCKHOLDERS' EQUITY
Common stock, no par value; 50,000,000 shares
authorized; 41,152,606 shares issued and
outstanding; (24,000 and 1,285,485 shares held
in Treasury) 307,000 307,000
Additional paid-in capital 1,293,520 1,292,920
Deficit (1,069,495) (1,033,156)
----------- -----------
531,025 566,764
Less treasury stock at cost 603 32,287
----------- -----------
Total stockholders' equity 530,422 534,477
----------- -----------
$ 559,490 $ 572,258
=========== ===========
</TABLE>
The accompanying notes are an integral
part of these financial statements.
F-2
<PAGE>
WINCO PETROLEUM CORPORATION
STATEMENTS OF OPERATIONS
Years Ended September 30, 2000 and 1999
<TABLE>
<CAPTION>
2000 1999
----------- -----------
<S> <C> <C>
Oil and gas sales $ 318,321 $ 142,448
----------- -----------
Costs and expenses:
Lease operating, including production taxes 193,182 90,630
Depreciation, depletion, and amortization 40,374 26,089
General and administrative 120,104 23,423
----------- -----------
353,660 140,142
----------- -----------
OPERATING (LOSS) INCOME (35,339) 2,306
----------- -----------
Other (expense) income:
Interest income -- 7,093
Loss on sale of assets (1,000) --
Other -- 2,000
----------- -----------
(1,000) 9,093
----------- -----------
(LOSS) INCOME BEFORE TAXES (36,339) 11,399
Income tax expense (benefit) -- --
----------- -----------
NET (LOSS) INCOME $ (36,339) $ 11,399
=========== ===========
NET (LOSS) INCOME PER COMMON SHARE $ -- $ --
(weighted average shares outstanding =========== ===========
of 41,152,606)
</TABLE>
The accompanying notes are an integral
part of these financial statements.
F-3
<PAGE>
WINCO PETROLEUM CORPORATION
STATEMENTS OF STOCKHOLDERS' EQUITY
Years Ended September 30, 2000 and 1999
<TABLE>
<CAPTION>
Common Stock
Issued
----------------------- Additional
Number of Paid-in Treasury
Shares Amount Capital Deficit Stock Total
---------- ---------- --------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance,
September 30, 1998 41,152,606 $ 307,000 $1,288,520 $(1,044,555) $(31,312) $519,653
Services contributed -- -- 4,400 -- -- 4,400
Treasury stock
purchased (average
($.025 per share) -- -- -- -- (975) (975)
Net income -- -- -- 11,399 -- 11,399
---------- --------- ---------- ---------- -------- --------
Balance,
September 30, 1999 41,152,606 307,000 1,292,920 (1,033,156) (32,287) 534,477
Services contributed -- -- 600 -- -- 600
Treasury stock
issued ($.025
per share) -- -- -- -- 31,834 31,834
Treasury stock
purchased (average
$.03 per share) -- -- -- -- (150) (150)
Net loss -- -- -- (36,339) -- (36,339)
---------- --------- ---------- ---------- -------- --------
Balance,
September 30, 2000 41,152,606 $ 307,000 $1,293,520 $(1,069,495) (603) $530,422
========== ========= ========== ========== ======== ========
</TABLE>
The accompanying notes are an integral
part of these financial statements.
F-4
<PAGE>
WINCO PETROLEUM CORPORATION
STATEMENTS OF CASH FLOWS
Years Ended September 30, 2000 and 1999
<TABLE>
<CAPTION>
2000 1999
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net (loss) income $ (36,339) $ 11,399
Adjustments to reconcile net (loss) income to net
cash (used in) provided by operating activities:
Services contributed 600 4,400
Depreciation, depletion, and amortization 40,374 26,088
Loss on sale of assets 1,000 --
Stock compensation 31,834 --
Change in current assets and current liabilities:
Accounts receivable 2,716 (8,963)
Accounts receivable - related party (1,695) (29,836)
Accounts payable - trade 6,750 (2,846)
Accounts payable - related party (15,463) 19,619
----------- -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 29,777 19,861
----------- -----------
Cash flows from investing activities:
Purchase of investment in oil and
gas properties and office equipment -- (73,916)
----------- -----------
NET CASH USED IN INVESTING ACTIVITIES -- (73,916)
----------- -----------
Cash flows from financing activities:
Purchase of treasury stock (150) (975)
----------- -----------
NET CASH USED IN FINANCING ACTIVITIES (150) (975)
----------- -----------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 29,627 (55,030)
Cash and cash equivalents, beginning of year 273,172 328,202
----------- -----------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 302,799 $ 273,172
=========== ===========
</TABLE>
The accompanying notes are an integral
part of these financial statements.
F-5
<PAGE>
WINCO PETROLEUM CORPORATION
NOTES TO FINANCIAL STATEMENTS
1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS - Winco Petroleum Corporation (Company),
incorporated on June 21, 1979, is engaged in the business of acquiring
and developing interests in domestic oil and gas properties, primarily
in Kansas and southeastern Wyoming.
Subsequent to September 30, 2000, the Company filed a proxy statement
with the Securities and Exchange Commission disclosing that the Board
of Directors of the Company unanimously approved: (1) a merger of a
newly formed subsidiary of the Company with an independent corporation
engaged in telecommunications business (Merger) and (2) the spin-off
of the Company's oil and gas assets (Spin-off) into a newly formed
company, Winco Spin-off Corporation (WSC). The transactions attendant
to the Merger and the Spin-off are complex; however, after the
transactions, the stockholders of the Company will have received
approximately 7.5% of the outstanding stock of the corporation engaged
in the telecommunications business, and the stockholders of the
Company will continue to own their proportionate interest in WSC,
which will own the Company's oil and gas assets. The Merger is
expected to close in the first quarter of 2001.
The Company's costs related to the Merger and Spin-off are being
charged to expense as incurred.
CASH AND CASH EQUIVALENTS - The Company considers all highly liquid
investments with a maturity of three months or less when purchased to
be cash equivalents.
The Company places its cash with high quality credit institutions. At
times, deposits may be in excess of federally insured limits. The
Company has not experienced losses in any such accounts and believes
it is not exposed to any significant credit risk on cash and cash
equivalents.
OIL AND GAS PROPERTIES - The Company follows the "full-cost" method of
accounting for developed oil and gas properties. Under this method,
all costs associated with property acquisition, exploration, and
development activities are capitalized in one cost center, including
internal costs that can be identified with those activities. For 2000
and 1999, there were no internal costs of exploration and development
incurred. No gains or losses are recognized on the sale or abandonment
of oil and gas properties, unless it involves the disposition of
significant reserves in which case the gain or loss is recognized in
income.
The Company's producing oil and gas properties are accounted for at
cost, in a discreet pool applicable to such properties, within the
Company's single, full-cost center. The Company has not incurred any
development costs in 2000 and 1999. Production costs, including
workover costs, incurred to maintain or increase levels of production
are charged to expense as incurred.
(Continued)
F-6
<PAGE>
WINCO PETROLEUM CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Continued)
1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
Depreciation, depletion, and amortization of the full-cost center are
computed using a unit of production method based on proved reserves as
determined annually by the Company and independent engineers.
Consideration is given to anticipated costs of abandonment; however,
the Company has determined on the basis of past history and experience
that such costs are offset by the recoverable value of salvaged
equipment. An additional depletion, depreciation, and amortization
provision is made if the total capitalized costs of oil and gas
properties in the cost center exceed the "capitalization ceiling."
After such a provision, the capitalized cost of oil and gas properties
does not exceed the sum of: (1) the present value of future net
revenues from estimated production of proved oil and gas reserves
applicable to such cost center, (2) the cost of properties not being
amortized, if any, (3) the carrying value of the cost center's
unproved properties, if any, and (4) the income tax effects, if any,
related to differences between book and tax basis of properties.
Based on independent engineers' estimates, the provision for
depreciation, depletion, and amortization on a per equivalent barrel
basis was approximately $1.55 and $.24 for 2000 and 1999, respectively.
The Company has had very little gas production (less than 1% of total
sales), particularly since the sale of the Wyoming properties as of
January 1, 1998, and has determined that no significant gas imbalances
have been incurred either for or against the Company's account. Based
on production levels and revenues received from those interests in
gas properties which the Company owns or has owned, no significant
imbalances have resulted.
FURNITURE, FIXTURES, AND VEHICLES - Furniture, fixtures, and vehicles
are depreciated using accelerated methods over estimated useful lives
ranging from three to seven years.
INCOME TAXES - The Company provides deferred income taxes for
intangible drilling and developmental costs and other costs incurred
that enter into the determination of taxable income and accounting
income in different periods when applicable. The excess of statutory
depletion over cost depletion for income tax purposes will be
recognized as a permanent difference in the period in which the excess
occurs.
The Company recognizes deferred tax assets and liabilities for future
tax consequences of events that have previously been recognized in the
Company's financial statements or tax returns. The measurement of
deferred tax assets and liabilities is based on provisions of enacted
tax laws. The effects of future changes in tax laws or rates have not
been anticipated.
EARNINGS PER COMMON SHARE - Earnings per common share is computed
utilizing the weighted average number (41,152,606 in 2000 and 1999) of
common shares outstanding.
(Continued)
F-7
<PAGE>
WINCO PETROLEUM CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Continued)
1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
ESTIMATES - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect: (1) the reported amounts of
assets and liabilities, (2) disclosures such as contingencies, and (3)
the reported amounts of revenues and expenses included in such
financial statements. Actual results could differ from those estimates.
2. OIL AND GAS ACTIVITIES
Oil and Gas Operations
----------------------
Information relating to the Company's oil and gas operations,
including costs incurred in such, is summarized below:
<TABLE>
<CAPTION>
Years Ended September 30,
---------------------------
2000 1999
----------- -----------
<S> <C> <C>
Capitalized costs:
Property acquisition costs $ -- $ 73,916
----------- -----------
Production costs:
Lease operating costs 187,452 85,041
Production and transportation taxes 5,730 3,150
Ad valorem taxes -- 2,439
----------- -----------
193,182 90,630
----------- -----------
$ 193,182 $ 164,546
=========== ===========
</TABLE>
Capitalized Costs
-----------------
Capitalized costs associated with oil and gas producing activities and
related accumulated depreciation, depletion, and amortization are as
follows:
<TABLE>
<CAPTION>
September 30,
---------------------------
2000 1999
----------- -----------
<S> <C> <C>
Proved properties $ 336,096 $ 336,096
Unproved properties -- --
----------- -----------
336,096 336,096
----------- -----------
Accumulated depreciation, depletion, and
amortization 155,842 115,469
----------- -----------
Net capitalized costs $ 180,254 $ 220,627
=========== ===========
</TABLE>
(Continued)
F-8
<PAGE>
WINCO PETROLEUM CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Continued)
2. OIL AND GAS ACTIVITIES (CONTINUED)
Major Customers
---------------
The Company's oil and gas sales consisted of sales to unaffiliated
purchasers primarily as follows:
Years Ended September 30,
-----------------------------
2000 1999
---------- ----------
Purchaser
A $ 161,01 $ 96,48
B 131,73 13,931
C 24,88 31,702
----------- -----------
$ 317,16 $ 142,119
=========== ===========
% to total oil and gas sales 99.78 99.77%
=========== ===========
Oil produced from the Company's wells is sold to major purchasers (e.g.
EOTT, Cooperative Refining and Equiva or Texaco). Proceeds from such
sales are paid by the purchaser to the operators of the respective
properties as agents on behalf of the Company. The operators offset the
costs of operation for the respective properties and distribute to the
Company the net remaining revenues attributable to its interest. The
operators for most of the Company's properties are American Warrior, Inc.
and Mid-continent Resources, Inc., which are affiliated with the Company
by common ownership and management.
Properties Acquired
-------------------
On April 14, 1999, the Company acquired 100% of the working interest
and operations of four oil leases in Kansas for $73,916. These leases
have 14 producing oil wells that are expected to contribute to the
Company's cash flow and net income.
3. RELATED PARTIES
As of September 30, 2000 and 1999, the Company had no employees.
Administrative and operations management services are provided to the
Company by American Warrior, Inc. (AWI), an oil and gas operating
company affiliated with the Company. AWI owns 41.52% of the Company.
Further, the majority stockholder and CEO of AWI is the CEO and
President of the Company, and the Assistant Secretary-Treasurer of AWI
is the Company's Secretary and Treasurer. The following services were
provided to the Company for the amounts indicated:
2000 1999
--------------- ---------------
Service Hours Amount Hours Amount
---------------- ----- ------ ----- ------
Administration 40 $ 4,000 20 $ 2,000
Accounting 60 3,600 40 2,400
-------- --------
$ 7,600 $ 4,400
======== ========
(Continued)
F-9
<PAGE>
WINCO PETROLEUM CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Continued)
3. RELATED PARTIES (CONTINUED)
The above services were accounted for as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
Cash paid to related parties $ 7,000 $ --
Contributed services (additional paid-in capital) 600 4,400
----------- -----------
$ 7,600 $ 4,400
=========== ===========
</TABLE>
Management believes the method of allocating these administrative accounting
costs to the Company are reasonable and would approximate similar costs
if operated as an unaffiliated entity. Additionally, the Company occupies
a partial room in the offices of AWI and does not pay rent or other
occupancy costs. Because of the insignificance of these amounts,
occupancy costs are not reflected in these financial statements.
In August 2000, the Board of Directors approved and the Company issued
(for no consideration) 1,266,485 shares of stock to the officers of the
Company. The stock was issued from treasury stock and was recorded as
compensation expense in the amount of $31,834.
At September 30, 2000 and 1999, the Company had amounts receivable from
affiliates for oil sales not yet distributed (revenues received by the
operators on behalf of the Company, but not yet remitted to the
Company) in the amounts of $50,665 and $48,970, respectively, and amounts
payable to affiliates for the purchase of a working interest in an oil and
gas property and for operating expenses in the amounts of $19,984 and
$35,447, respectively. The Company owns undivided working interests in
oil and gas properties; it has not historically been the operator of such
properties, instead relying on other operators. As of September 30, 2000
and 1999, most of the Company's oil and gas production is operated by AWI
or affiliates of AWI (Operating Affiliates). Accordingly, the Company
executes customary transactions with its Operating Affiliates, as
appropriate, relative to certain oil and gas sales, most operating
expenses, and some general and administrative expenses.
4. INCOME TAXES
A reconciliation between the actual income tax expense and income taxes
computed by applying the statutory federal income tax rate to earnings
before income taxes is as follows:
<TABLE>
<CAPTION>
2000 1999
----------- -----------
<S> <C> <C>
Computed income tax (benefit) expense at 34% $ (1,532) $ 3,876
Utilization of net operating loss carryforwards
(change in valuation allowance) 1,532 (3,876)
----------- -----------
$ -- $ --
=========== ===========
</TABLE>
(Continued)
F-10
<PAGE>
WINCO PETROLEUM CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Continued)
4. INCOME TAXES (CONTINUED)
The net deferred tax assets (liabilities) include the following components:
<TABLE>
<CAPTION>
2000 1999
----------- -----------
<S> <C> <C>
Deferred tax assets
Depletion, depreciation, and amortization $ 67,000 $ 75,000
Net operating loss carryforward 249,000 258,400
----------- -----------
Net deferred tax asset 316,000 333,400
Valuation allowance (316,000) (333,400)
----------- -----------
Net deferred tax asset (liability) $ -- $ --
=========== ===========
</TABLE>
During the years ended September 30, 2000 and 1999, the Company
recorded a valuation allowance of $316,000 and $333,400, respectively,
on the deferred tax assets to reduce the total to an amount management
believes will ultimately be realized. Realization of deferred tax
assets is dependent upon sufficient future taxable income during the
period that deductible temporary differences and carryforwards are
expected to be available to reduce taxable income.
The Company has federal net operating loss carryforwards for regular
income tax purposes at September 30, 2000 as follows:
Year net operating loss carryforward expires
--------------------------------------------
2001 89,721
2002 63,660
2003 115,138
2004 105,661
2005 74
2006 17,770
2007 34,960
2008 57,939
2009 67,927
2010 66,169
2011 54,259
2019 27,201
2020 32,721
-----------
733,200
===========
(Continued)
F-11
<PAGE>
WINCO PETROLEUM CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Continued)
5. OFF-BALANCE-SHEET RISK
The Company's future production revenues, development costs, and
production expenses are dependent on economic and operating
conditions, such as pricing and production taxes, which can be
volatile, and are not within the Company's control. For example, at
November 30, 2000, the price of crude oil generally received by the
Company was approximately $32.25 per Bbl. versus $31.54 at September 30,
2000.
6. UNAUDITED OIL AND GAS RESERVE INFORMATION
The reserve estimates presented as of September 30, 2000 and 1999 were
prepared by independent petroleum consultants. Management cautions
that there are many uncertainties inherent in estimating proved
reserve quantities and in projecting future production rates and the
timing of development expenditures. In addition, reserve estimates of
new discoveries that have little production history are more imprecise
than those of properties with more production history. Accordingly,
these estimates are expected to change as future information becomes
available.
Proved oil and gas reserves are the estimated quantities of crude oil,
condensate, natural gas, and natural gas liquids that geological and
engineering data demonstrate with reasonable certainty to be
recoverable in future years from known reservoirs under existing
economic and operating conditions.
Proved developed oil and gas reserves are those reserves expected to
be recovered through existing wells with existing equipment and
operating methods.
(Continued)
F-12
<PAGE>
WINCO PETROLEUM CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Continued)
6. UNAUDITED OIL AND GAS RESERVE INFORMATION (CONTINUED)
Net quantities of proved reserves and proved developed reserves of
crude oil (including condensate) and natural gas (all of which are
located within the United States) are as follows:
RESERVE QUANTITY INFORMATION
For the Years Ended September 30, 2000 and 1999
Proved Reserves Oil (Bbls)
---------------------------------- ----------
Estimated quantity, September 30, 1998 68,300
Estimate of reserves in new wells
purchased in 1999 39,164
Revisions of previous estimates 32,177
Production (15,400)
--------
Estimated quantity, September 30, 1999 124,241
Revisions of previous estimates (59,741)
Production (15,900)
--------
Estimated quantity, September 30, 2000 48,600
========
Proved Reserves
-------------------------------
Developed Undeveloped Total
--------- ----------- -----
Oil (Bbls)
September 30, 1999 124,241 -- 124,241
September 30, 2000 48,600 -- 48,600
The following table sets forth a standardized measure of the
discounted future net cash flows attributable to the Company's proved
oil and gas reserves. Future cash inflows were computed by applying
year-end prices of oil and gas to the estimated future production of
proved oil and gas reserves. The future production and development
costs represent the estimated future expenditures (based on current
costs) to be incurred in developing and producing the proved reserves,
assuming continuation of existing economic conditions. Future income
tax expenses were computed by applying statutory income tax rates to
the difference between pre-tax net cash flows relating to the
Company's proved oil and gas reserves and the tax basis of proved oil
and gas properties and available net operating loss carryforwards,
reduced by investment tax credits. Discounting the annual net cash
inflows at 10% illustrates the impact of the time value of money on
these future cash inflows.
(Continued)
F-13
<PAGE>
WINCO PETROLEUM CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Continued)
6. UNAUDITED OIL AND GAS RESERVE INFORMATION (CONTINUED)
STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS
AND CHANGES THEREIN RELATING TO PROVED OIL AND GAS RESERVES
AT SEPTEMBER 30,
<TABLE>
<CAPTION>
2000 1999
----------- -----------
<S> <C> <C>
Future cash inflows $ 1,471,200 $ 2,609,061
Future production and development costs (852,300) (1,547,373)
----------- -----------
Future net cash flows 618,900 1,061,688
10% annual discount for estimated timing of
cash flows (142,100) (433,868)
----------- -----------
Standardized measure of discounted future
net cash flows $ 476,800 $ 627,820
=========== ===========
</TABLE>
Following are the principal sources of change in the standardized
measure of discounted future net cash flows during the years ended
September 30:
<TABLE>
<CAPTION>
2000 1999
----------- -----------
<S> <C> <C>
Standardized measure of discounted future net
cash flows, beginning $ 627,820 $ 172,800
----------- -----------
Sales and transfers of oil and gas produced,
net of production costs (125,100) (51,800)
Net changes in prices and production costs 159,080 299,520
Acquisition of reserves -- 121,000
Revisions of previous quantity estimates (185,000) 86,300
----------- -----------
(151,020) 455,020
----------- -----------
Standardized measure of discounted future
net cash flows, ending $ 476,800 $ 627,820
=========== ===========
</TABLE>
(Continued)
F-14
<PAGE>
WINCO PETROLEUM CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Continued)
6. UNAUDITED OIL AND GAS RESERVE INFORMATION (CONTINUED)
ESTIMATED FUTURE NET REVENUES FROM
PROVED RESERVES OF OIL AND GAS
(Based on current prices and current cost)
Proved Total
Developed Proved
Fiscal Year Ending September 30, Reserves Reserves
-------------------------------- ---------- ----------
2001 $ 144,500 $ 144,500
2002 120,700 120,700
2003 97,400 97,400
Remainder 256,300 256,300
---------- ----------
$ 618,900 $ 618,900
========== ==========
PRESENT VALUE OF FUTURE NET CASH FLOWS
OF PROVED RESERVES DISCOUNTED AT 10% PER YEAR
<TABLE>
<CAPTION>
September 30,
---------------------------
2000 1999
----------- -----------
<S> <C> <C>
Proved developed $ 476,800 $ 627,820
Proved undeveloped -- --
----------- -----------
Total proved $ 476,800 $ 627,820
=========== ===========
</TABLE>
F-15
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
WINCO PETROLEUM CORPORATION
Date: January 15, 2001 By /s/ Cecil O'Brate
------------------------------------
Cecil O'Brate, President, Chief
Executive Officer, and Director
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Cecil O'Brate, and each of them, as
true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution for him or her and in his or her name,
place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this report, and to file the same,
with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said attorneys-
in-fact and agents, and each of them, full power and authority to do and
perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he or she
might or could do in person, hereby ratifying and confirming all which said
attorneys-in- fact and agents or any of them, or their or his or her
substitutes or substitutes, may lawfully do, or cause to be done by virtue
hereof.
Pursuant to the requirements of 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 date indicated.
Date: January 15, 2001 By /s/ Cecil O'Brate
----------------------------------
Cecil O'Brate, President, Chief
Executive Officer, and Director
Date: January 15, 2001 By /s/ Daniel Lee Dalke
----------------------------------
Daniel Lee Dalke, Secretary,
Treasurer, Principal Financial
Officer and Director
Date: January 15, 2001 By /s/ G. Allen Nelson
----------------------------------
G. Allen Nelson, Director
25
