U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
/X/ Quarterly report under Section 13 or 15(d) of the Securities Exchange
Act of 19934 for the quarterly period ended June 30, 2000.
/ / Transition report under section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from ____________ to
__________.
COMMISSION FILE NUMBER: 0-9474
POTOMAC ENERGY CORPORATION
(FORMERLY MIDWESTERN RESOURCES, INC.)
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
OKLAHOMA 73-1088064
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
3168 BEL AIR DRIVE
LAS VEGAS, NEVADA 89109
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (702) 792-8404
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act during the past 12 months (or such
shorter period that the registrant was required to file such reports), and has
been subject to such filing requirements for the past 90 days. Yes [X] No [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
As of August 18, 2000 18,609,297 shares of issuer's Common Stock, $.01 par
value per share, were outstanding. This reflects stock issued as a result of
recent events subsequent to the period ending March 31, 2000. - See Item 2.
Management's Discussion and Analysis or Plan of Operations.
TRANSITIONAL SMALL BUSINESS DISCLOSURE
FORMAT (CHECK ONE):
Yes [ ] No [X]
<PAGE>
TABLE OF CONTENTS
PART I-FINANCIAL INFORMATION
Item 1. Financial Statements Independent Accountants' Report
Consolidated Balance Sheets, June 30, 2000 (Unaudited) and
December 31, 1999 (Audited)
Consolidated Statements of Operations and Accumulated Deficit
for the Six Months Ended June 30, 2000 (Unaudited), the Period
from Inception (April 7, 1997)to June 30, 2000, the and the
Six Months Ended June 30, 1999 (Unaudited)
Consolidated Statements of Cash Flows for the Six Months Ended
June 30, 2000(Unaudited), the Period from Inception (April 7,
1997) to June 30, 2000, and the Six Months Ended June 30, 1999
(Unaudited)
Notes to Consolidated Financial Statements (June 30, 2000
Information is Unaudited)
Item 2. Management's Discussion and Analysis or Plan of Operations
PART II-OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities and Use of Proceeds
Item 3. Submission of Matters to a Vote of Security Holders
Item 4. Other Information
Item 5. Exhibits and Reports on Form 8-K
Signatures
<PAGE>
PART I-FINANCIAL INFORMATION
Item 1. Financial Statements Independent Accountants' Report
POTOMAC ENERGY CORPORATION
Formely Butte Coal, Inc.
(A Development Stage Company)
Financial Statements
June 30, 2000, and December 31, 1999
WILLIAMS & WEBSTER PS
Certified Public Accountants
Bank of America Financial Center
W 601 Riverside, Suite 1940
Spokane, WA 99201
(509) 838-5111
<PAGE>
POTOMAC ENERGY CORPORATION
(A DEVELOPMENT STAGE COMPANY)
C O N T E N T S
ACCOUNTANT'S REVIEW REPORT 1
FINANCIAL STATEMENTS
Consolidated Balance Sheets 2
Consolidated Statements of Operations 4
Statements of Stockholders' Equity 5
Consolidated Statements of Cash Flows 8
NOTES TO FINANCIAL STATEMENTS 9
<PAGE>
The Board of Directors
Potomac Energy Corporation
Las Vegas, Nevada
ACCOUNTANT'S REVIEW REPORT
We have reviewed the accompanying consolidated balance sheet of Potomac Energy
Corporation (a development stage company formerly known as Butte Coal, Inc.)
as of June 30, 2000, and the related consolidated statements of operations
and, stockholders' equity, and cash flows for the six months ended June 30,
2000, and for the period from October 22, 1999 (inception) through June 30,
2000. These financial statements are the responsibility of the Company's
management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data and making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit in
accordance with generally accepted auditing standards, the objective of which
is the expression of an opinion regarding the financial statements.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the accompanying financial statements in order for them to
be in conformity with generally accepted accounting principles.
The balance sheet for the year ended September 30, 1999 was audited by other
auditors whose report dated July 19, 2000 expressed an unqualified opinion on
those statements.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 10 to the
financial statements, the Company's significant operating losses raise
substantial doubt about its ability to continue as a going concern.
Management's plans regarding those matters are also described in Note 10. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
/S/ Williams & Webster, P.S.
Williams & Webster, P.S.
Certified Public Accountants
Spokane, Washington
August 21, 2000
<PAGE>
POTOMAC ENERGY CORPORATION
FORMERLY BUTTE COAL, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
June 30, December 31,
2000 1999
------------- -------------
(Unaudited)
ASSETS
CURRENT ASSETS
Cash $ 437 $ -
Accounts receivable 1,498 -
Marketable securities 290,000 -
------------- -------------
Total Current Assets 291,935 -
------------- -------------
OIL, GAS AND COAL PROPERTIES
Oil and gas properties 561,418 -
Coal properties 1,857,000 1,857,000
------------- -------------
Total Oil, Gas and Coal Properties 2,418,418 1,857,000
------------- -------------
PROPERTY AND EQUIPMENT
Furniture and equipment 15,037 -
Office Equipment 59,109 -
Leasehold improvements 6,912 -
Less accumulated depreciation (28,425) -
------------- -------------
Total Property and Equipment 52,633 -
------------- -------------
OTHER ASSETS
Deposits 4,061 -
------------- -------------
TOTAL ASSETS $ 2,767,047 $ 1,857,000
============= =============
See accompanying notes and accountant's review report
2
POTOMAC ENERGY CORPORATION
FORMERLY BUTTE COAL, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
June 30, December 31,
2000 1999
------------- -------------
(Unaudited)
LIABILITIES
CURRENT LIABILITIES
Bank overdraft $ 20,204 $ -
Accounts payable 101,050 -
Accrued taxes 4,003 -
Accrued interest 35,484 -
Notes payable - 36,940
Current portion of capital lease obligations 8,766 -
------------- -------------
Total Current Liabilities 169,507 36,940
------------- -------------
COMMITMENTS AND CONTINGENCIES 300,000 -
------------- -------------
LONG TERM LIABILITIES
Capital lease obligations net of current portion 3,050 -
------------- -------------
STOCKHOLDERS' EQUITY
Preferred stock, series A, $0.001 par value,
20,000,000 shares authorized, no shares
issued and outstanding - -
Common stock, $0.01 par value, 50,000,000
shares authorized, 16,751,774 and 18,727,644
shares issued and outstanding, respectively 187,277 167,518
Additional paid-in capital 2,694,700 1,767,482
Accumulated deficit during development stage (587,487) (114,940)
------------- -------------
Total Stockholders' Equity 2,294,490 1,820,060
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,767,047 $ 1,857,000
============= =============
See accompanying notes and accountant's review report
3
<PAGE>
<TABLE>
<CAPTION>
POTOMAC ENERGY CORPORATION
FORMERLY BUTTE COAL, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Period From
Three Months Three Months Six Months Six Months Inception
Ended Ended Ended Ended (June 29, 1993)
June 30, June 30, June 30, June 30, To
2000 1999 2000 1999 June 30, 2000
-------------- --------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
REVENUES $ - $ - $ - $ - $ -
COST OF REVENUES - - - - -
-------------- --------------- ------------- ------------- ---------------
GROSS PROFITS - - - - -
-------------- --------------- ------------- ------------- ---------------
GENERAL AND ADMINISTRATIVE
EXPENSE
Consulting 198 - 198 - 198
Depreciation 4,622 - 4,622 - 4,622
Exploration expenses 300,000 - 300,000 - 300,000
Lease expenses 14,776 14,776 14,776 14,776 51,716
Legal and professional fees 26,706 - 26,706 - 26,706
Salaries 42,840 - 42,840 - 42,840
Other general and
administrative expenses 64,277 - 64,277 - 64,277
-------------- --------------- ------------- ------------- ---------------
Total General and
Administrative Expenses 453,419 14,776 453,419 14,776 490,359
-------------- --------------- ------------- ------------- ---------------
NET LOSS FROM OPERATIONS (453,419) (14,776) (453,419) (14,776) (490,359)
-------------- --------------- ------------- ------------- ---------------
OTHER INCOME (EXPENSES)
Write off of organization
expense - (78,000) - (78,000) (78,000)
Interest expense (19,128) - (19,128) - (19,128)
-------------- --------------- ------------- ------------- ---------------
Total Other Income
(Expenses) (19,128) (78,000) (19,128) (78,000) (97,128)
-------------- --------------- ------------- ------------- ---------------
NET LOSS BEFORE PROVISION
FOR TAXES (472,547) (92,776) (472,547) (92,776) (587,487)
PROVISION FOR TAXES - - - - -
-------------- --------------- ------------- ------------- ---------------
NET LOSS $ (472,547) $ (92,776) $ (472,547) $ (92,776) $ (587,487)
============== =============== ============= ============= ===============
BASIC AND DILUTED EARNINGS
PER SHARE $ (0.03) $ Nil $ (0.03) $ Nil $ (0.03)
============== =============== ============= ============= ===============
BASIC AND DILUTED WEIGHTED
AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 18,727,644 16,751,774 18,727,644 16,751,774 16,802,438
============== =============== ============= ============= ===============
See accompanying notes and accountant's review report.
4
</TABLE>
<PAGE>
POTOMAC ENERGY CORPORATION
FORMERLY BUTTE COAL, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Accumulated
Preferred Stock Deficit
Common Stock Series A Additional During the Total
----------------------- ------------------------ Paid-in Development Stockholders'
Shares Amount Shares Amount Capital Stage Equity
----------- ----------- ----------- ------------ ------------ -------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1993 - $ - - $ - $ - $ - $ -
Common stock issued for
coal property at $0.11
per share 16,751,774 167,518 - - 1,767,482 - 1,935,000
Net loss for the year
ended December 31, 1993 - - - - - (3,694) (3,694)
----------- ----------- ----------- ------------ ------------ -------------- ------------
Balance, December 31, 1993 16,751,774 167,518 - - 1,767,482 (3,694) 1,931,306
Net loss for the year
ended December 31, 1994 - - - - - (3,694) (3,694)
----------- ----------- ----------- ------------ ------------ -------------- ------------
Balance, December 31, 1994 16,751,774 167,518 - - 1,767,482 (7,388) 1,927,612
Net loss for the year
ended December 31, 1995 - - - - - (3,694) (3,694)
----------- ----------- ----------- ------------ ------------ -------------- ------------
Balance, December 31, 1995 16,751,774 $ 167,518 - $ - $ 1,767,482 $ (11,082) $ 1,923,918
See accompanying notes and accountant's review report.
5
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
POTOMAC ENERGY CORPORATION
FORMERLY BUTTE COAL, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF STOCKHOLDERS' EQUITY
Accumulated
Preferred Stock Deficit
Common Stock Series A Additional During the Total
----------------------- ------------------------ Paid-in Development Stockholders'
Shares Amount Shares Amount Capital Stage Equity
----------- ----------- ----------- ------------ ------------ -------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance brought forward 16,751,774 $ 167,518 - $ - $ 1,767,482 $ (11,082) $ 1,923,918
Net loss for the year ended
December 31, 1996 - - - - - (3,694) (3,694)
----------- ----------- ----------- ------------ ------------ -------------- ------------
Balance, December 31, 1996 16,751,774 167,518 - - 1,767,482 (14,776) 1,920,224
Net loss for the year
ended December 31, 1997 - - - - - (3,694) (3,694)
----------- ----------- ----------- ------------ ------------ -------------- ------------
Balance, December 31, 1997 16,751,774 167,518 - - 1,767,482 (18,470) 1,916,530
Net loss for the year
ended December 31, 1998 - - - - - (3,694) (3,694)
----------- ----------- ----------- ------------ ------------ -------------- ------------
Balance, December 31, 1998 16,751,774 167,518 - - 1,767,482 (22,164) 1,912,836
Net loss for the year
ended December 31, 1999 - - - - - (92,776) (92,776)
----------- ----------- ----------- ------------ ------------ -------------- ------------
Balance, December 31, 1999 16,751,774 167,518 - - 1,767,482 (114,940) 1,820,060
See accompanying notes and accountant's review report.
6
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
POTOMAC ENERGY CORPORATION
FORMERLY BUTTE COAL, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF STOCKHOLDERS' EQUITY
Accumulated
Preferred Stock Deficit
Common Stock Series A Additional During the Total
----------------------- ------------------------ Paid-in Development Stockholders'
Shares Amount Shares Amount Capital Stage Equity
----------- ----------- ----------- ------------ ------------ -------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, brought forward 16,751,774 $ 167,518 - $ - $ 1,767,482 $ (114,940) $ 1,820,060
Stockholder loans converted
to additional paid in
capital - - - - 51,716 - 51,716
Reverse Acquisition treated
as recapitalization 1,975,870 19,759 - - 875,502 - 895,261
Net loss for the period
ended June 30, 2000
(unaudited) - - - - - (472,547) (472,547)
----------- ----------- ----------- ------------ ------------ -------------- ------------
Balance, June 30, 2000
(Unaudited) 18,727,644 $ 187,277 - $ - $ 2,694,700 $ (587,487) $ 2,294,490
=========== =========== =========== ============ ============ ============== ============
See accompanying notes and accountant's review letter.
7
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
POTOMAC ENERGY CORPORATION
FORMERLY BUTTE COAL, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Period From
Six Months Six Months Inception
Ended Ended (June 29, 1993)
June 30, June 30, to June 30,
2000 1999 2000
-------------- ------------- --------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (472,547) $ (92,776) $ (565,323)
Adjustments to reconcile net loss
Depreciation 4,622 - 4,622
Write off of organization expenses - 78,000 78,000
Lease expenses paid by stockholders 14,776 14,776 29,552
Exploration expenses 300,000 - 300,000
Decrease (increase) in current assets
Accounts receivable (1,498) - (1,498)
Deposits (4,061) - (4,061)
Increase (decrease) in current liabilities
Bank overdraft 20,204 - 20,204
Accounts payable 101,050 - 101,050
Accrued taxes 4,003 - 4,003
Accrued interest 35,484 - 35,484
Current portion of capital lease obligations 8,766 - 8,766
-------------- ------------- --------------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES 10,799 - 10,799
-------------- ------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of oil and gas properties (561,418) - (561,418)
Purchase of property and equipment (57,255) - (57,255)
Purchase of investments (290,000) - (290,000)
-------------- ------------- --------------
NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES (908,673) - (908,673)
-------------- ------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from capital lease obligations 3,050 - 3,050
Stock issued during reorganization 895,261 - 895,261
-------------- ------------- --------------
CASH PROVIDED (USED) BY FINANCING ACTIVITIES 898,311 - 898,311
-------------- ------------- --------------
NET INCREASE (DECREASE) IN CASH 437 - 437
CASH, BEGINNING OF PERIOD - - -
-------------- ------------- --------------
CASH, END OF PERIOD $ 437 $ - $ 437
============== ============= ==============
SUPPLEMENTAL INFORMATION
Interest, paid in cash $ - $ - $ -
Taxes, paid in cash $ - $ - $ -
See accompanying notes and accountant's review report.
8
</TABLE>
<PAGE>
POTOMAC ENERGY CORPORATION
FORMERLY BUTTE COAL, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
Butte Coal, Inc. (hereinafter "Butte") was incorporated under the laws of the
State of Utah on October 22, 1990. The Company emerged from dormancy on June
29, 1993 when it exchanged 16,751,774 shares of its common stock for 100%
control of coal properties in Garfield County, Utah. The Company has been in
the development stage since acquisition of these properties and is also
involved in identifying, investigating, exploring, developing and operating
oil and gas properties.
On April 1, 2000, Potomac Energy Corporation (hereinafter "Potomac") completed
an agreement and plan of reorganization with Butte. In this reorganization,
Potomac issued 16,751,744 shares of its common stock for all of the
outstanding common stock of Butte, thereby passing control of Potomac to the
stockholders of Butte. Pursuant to the plan of reorganization, Butte became a
wholly owned subsidiary of Potomac.
The acquisition was accounted for as a recapitalization of Butte with Butte as
the acquirer, because the shareholders of Butte controlled the Company
immediately after the acquisition. As part of the transaction, the assets and
liabilities of Butte were then transferred to Potomac, and Butte was
effectively dissolved. There was no adjustment to the carrying value of the
assets or liabilities of Butte in the exchange as the market value
approximated the net carrying value. Potomac is the surviving entity for
accounting purposes.
Development Stage Enterprise
----------------------------
Potomac is a development stage enterprise and has yet to generate revenues.
Oil and gas exploration and development is speculative in nature and, as such,
involves a high degree of risk. The Company plans to spend significant
amounts on the acquisition and exploration of properties. These costs will
require the Company to raise additional capital through debt or equity
financing. Such additional financing may require the encumbrance of Company
assets or agreements with other parties where others pay some of the costs of
exploration in exchange for an interest in the property. The Company has
acquired interests in properties internationally. Such plans have additional
risks because, in some cases, the country where the acquisition occurs may be
considered politically and/or economically unstable.
9
<PAGE>
POTOMAC ENERGY CORPORATION
FORMERLY BUTTE COAL, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies of Potomac Energy Corporation
is presented to assist in understanding the Company's financial statements.
The financial statements and notes are representations of the Company's
management, which is responsible for their integrity and objectivity. These
accounting policies conform to generally accepted accounting principles and
have been consistently applied in the preparation of the financial statements.
Estimates
----------
The preparation of 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 financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates. Significant estimates
include depreciation, depletion, and amortization of proved oil and gas
reserves. Oil and gas reserve estimates used as the basis for depletion are
inherently imprecise and are expected to change as future information becomes
available.
Accounting Method
-----------------
The Company's financial statements are prepared using the accrual method of
accounting.
Cash Equivalents
----------------
The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents.
Coal Properties
---------------
Costs of acquiring, exploring and developing coal properties are capitalized
by project area. Costs to maintain the rights and leases are expensed as
incurred. When a property reaches the production state, the related
capitalized costs will be amortized, using the units of production method on
the basis of periodic estimates of ore reserves.
Mineral properties are periodically assessed for impairment of value and any
losses are charged to operations at the time of impairment.
Should a property be abandoned, its capitalized costs are charged to
operations. The Company charges to operations the allocable portion of
capitalized costs attributable to properties sold. Capitalized costs are
allocated to properties sold based on the proportion of claims sold to the
claims remaining within the project area.
10
<PAGE>
POTOMAC ENERGY CORPORATION
FORMERLY BUTTE COAL, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(Continued)
Impaired Asset Policy
----------------------
In March 1995, the Financial Accounting Standards Board issued a statement
titled "Accounting for Impairment of Long-lived Assets." In complying with
this standard, the Company reviews its long-lived assets quarterly to
determine if any events or changes in circumstances have transpired which
indicate that the carrying value of its assets may not be recoverable. The
Company does not believe any further adjustments are needed to the carrying
value of its assets at June 30, 2000.
Financial Accounting Standards
------------------------------
The Company has adopted the fair value accounting rules to record all
transactions in equity instruments for goods or services.
Change in Accounting Policies
-----------------------------
During the year ended December 31, 1999, the Company changed its method of
accounting for organization costs to conform to the requirements of Statement
on Position 98-5, which requires start-up and organization costs to be
expensed as incurred. The effect of the change was to increase net loss for
the year ended December 31, 1999, by $78,000 (nil per share). The change has
no effect on prior years.
Derivative Instruments
----------------------
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This standard establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. It
requires that an entity recognize all derivatives as either assets or
liabilities in the balance sheet and measure those instruments at fair value.
At June 30, 2000, the Company has not engaged in any transactions that would
be considered derivative instruments or hedging activities.
Interim Financial Statements
----------------------------
The interim financial statements as of and for the three months ended June 30,
2000 included herein have been prepared for the Company without audit. They
reflect all adjustments, which are, in the opinion of management, necessary to
present fairly the results of operations for these periods. All such
adjustments are normal recurring adjustments. The results of operations for
the periods presented are not necessarily indicative of the results to be
expected for the full fiscal year.
11
<PAGE>
POTOMAC ENERGY CORPORATION
FORMERLY BUTTE COAL, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(Continued)
Development Stage
-----------------
The Company is in the development stage and has not commenced the sale of any
products.
Principles of Consolidation:
---------------------------
The consolidated financial statements include the accounts of the Company; its
wholly-owned subsidiary, Potomac Exploration Acquisition Corporation (PEAC),
an Oklahoma corporation; Potomac's wholly-owned subsidiary, Potomac Energy
(BVI), Ltd., a British Virgin Islands corporation; and Magdalena Energia, LLC,
a Texas limited liability company and Butte Coal, Inc. All material
intercompany accounts and transactions have been eliminated.
Fair Value of Financial Instruments
------------------------------------
The recorded amounts of cash, accounts receivable, and accounts payable
approximate fair value because of the short-term maturity of these items.
Investment Securities
---------------------
Investments, consisting of equity securities of private and small public
companies, are stated at current market value. The Company classifies its
marketable debt securities as "held to maturity" if it has the positive intent
and ability to hold the securities to maturity. All other marketable debt
securities are classified as "available for sale". Securities classified as
"available for sale" are carried in the financial statements at fair value.
Realized gains and losses, determined using the specific identification method
are included in earnings; unrealized holding gains and losses are reported as
a separate component of Stockholders' Equity. Securities classified as held
to maturity are carried at amortized cost. There were no investment
securities owned by the Company as of the balance sheet date.
Property and Equipment
----------------------
Property and equipment is stated on the basis of cost. Maintenance and
repairs are charged to expense. Renewals and betterments, which substantially
extend the useful life of property, are capitalized. Accumulated allowances
for depreciation of furniture, equipment, and leasehold improvements retired,
or otherwise disposed of, are eliminated from the accounts on disposition.
Profits and losses resulting from such disposition are included in income.
Depreciation is computed using the straight-line method over the estimated
useful lives of the assets (seven to ten years).
12
<PAGE>
POTOMAC ENERGY CORPORATION
FORMERLY BUTTE COAL, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Oil and Gas Interests
---------------------
The Company follows the full-cost method of accounting for oil and natural gas
properties. Under this method, all costs incurred in the exploration,
acquisition, and development, including unproductive wells, are capitalized in
separate cost centers for each country. Such capitalized costs include
contract and concession acquisition, geological, geophysical, and other
exploration work, drilling, completing and equipping oil and gas wells,
constructing production facilities and pipelines, and other related costs.
The capitalized costs of oil and gas properties in each cost center are
amortized on composite units of production method based on future gross
revenues from proved reserves. Sales or other dispositions of oil and gas
properties are normally accounted for as adjustments of capitalized costs.
Gain or loss is not recognized in income unless a significant portion of a
cost center's reserves is involved. Capitalized costs associated with
acquisition and evaluation of unproved properties are excluded from
amortization until it is determined whether proved reserves can be assigned to
such properties or until the value of the properties is impaired. If the net
capitalized costs of oil and gas properties in a cost center exceed an amount
equal to the sum of the present value of estimated future net revenues from
proved oil and gas reserves in the cost center and the lower or cost of fair
value of properties not being amortized, both adjusted for income tax effects,
such excess is charged to expense.
Since the Company has not produced any oil or gas, a provision for depletion
has not been made.
Income Taxes
------------
At June 30, 2000, the Company had net operating loss carryforwards of
approximately $587,000 that may be offset against future taxable operating
income through 2014. No tax benefit has been reported in the financial
statements, as the Company believes there is a significant chance the net
operating loss carryforwards will expire unused. Accordingly, the potential
tax benefits of the net operating loss carryforwards are offset by a valuation
allowance of the same amount.
One of the Company's subsidiaries is a foreign corporation and is subject to
the income tax laws of the various countries in which it may operate. Branch
income from interests obtained through the association agreements in Colombia,
South America are subject to Colombian corporate income tax at a rate of 35%,
as well as a 7% remittance tax on funds transferred to the United States.
13
<PAGE>
POTOMAC ENERGY CORPORATION
FORMERLY BUTTE COAL, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Foreign Currency Translation
----------------------------
The majority of all costs associated with foreign operations are paid in U.S.
dollars as opposed to the local currency of the operations; therefore, the
reporting and functional currency is the U.S. dollar. Gains and losses from
foreign currency transactions are recognized in current net income.
Monetary items are translated using the exchange rate in effect at the Balance
Sheet date; non-monetary items are translated using historical exchange rates.
Revenues and expenses are translated at the average rates in effect on the
dates they occur. No material gains or losses were incurred during the
periods presented.
Loss Per Share
---------------
Loss per share was computed by dividing the net loss by the weighted average
number of shares outstanding during the year. The weighted average number of
shares was calculated by taking the number of shares outstanding and weighting
them by the amount of time they were outstanding. Outstanding warrants were
not included in the computation of loss per share because the exercise price
of the outstanding warrants is higher than the market price of the stock,
thereby causing the warrants to be antidulutive.
NOTE 3 - JOINT INTEREST OPERATIONS
Potomac has entered into a joint venture agreement with Seven Seas Petroleum
Colombia (Seven Seas), a branch of Seven Seas Petroleum, Inc., which is a
Canadian corporation. Seven Seas has obtained association contracts for oil
and gas reserves identified through preliminary investigation in the middle
Magdalena Valley Basin in Central Colombia, South America. Seven Seas has
been accepted by Ecopetrol, the state owned oil company in Colombia, to
administer the association contracts covering certain properties known as the
Rosa Blance and Montecristo Blocks. Seven Seas owns a 75 percent interest and
Potomac owns a 25 percent interest with Seven Seas designated as the operator.
As of December 31, 1999, no proven reserves were attributable to these
contract areas.
14
<PAGE>
POTOMAC ENERGY CORPORATION
FORMERLY BUTTE COAL, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000
NOTE 3 - JOINT INTEREST OPERATIONS (Continued)
In April 1998, the Company entered into an agreement to undertake a
feasibility study for the mining of coal and generation of electricity in the
Guaduas Field located in Central Colombia, South America. The agreement with
the General Manager of Global Drilling de Colombia, provided for an interest
in coal contracts in the area once the project's feasibility had been
established. The general manager holds association contracts with the state
agency of Colombia that oversees the production of coal. In December 1998,
the Company organized a wholly owned subsidiary, Magdalena Energia, LLC, a
Texas limited liability company, to manage its coal and generation of energy
interests located in Colombia. As of December 31, 1999, the Company has
terminated its pursuit of this project due to insufficient coal reserves. All
costs incurred to date have been charged to expense.
NOTE 4 - RELATED PARTY TRANSACTIONS
The Company's predecessor, Potomac Energy (Bermuda), Ltd. was managed by BV
Operating, Ltd., an Oklahoma corporation, in accordance with a consulting
agreement. BV Operating, Ltd. (BV) is owned by common stockholders of
Potomac. Potomac paid a fixed rate of $30,000 per month to BV. BV was
responsible for costs and expenses of all offices, salaries, and wages plus
applicable burdens and expenses except for directly chargeable items. The
direct charges included labor costs and benefits for field employees employed
on the joint property in Colombia, professional contract services, maintenance
and repair of equipment, insurance, travel and other necessary expenses. The
contract terminated as a result of the reorganization.
Potomac (Bermuda) and Potomac (BVI)'s offices are managed by a stockholder.
The Company pays a fee to the stockholder of $1,500 per month, paid quarterly.
The agreement between these parties is cancelable without notice.
NOTE 5 - COMMON STOCK
During the year ended December 31, 1993, the Company issued 16,751,774 shares
of its common stock for acquisition of coal properties. The shares were
valued at their fair market value on the date of issuance.
15
<PAGE>
POTOMAC ENERGY CORPORATION
FORMERLY BUTTE COAL, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000
NOTE 5 - COMMON STOCK (Continued)
In April 2000, the Company issued 1,975,870 shares of its common stock in a
reverse merger acquisition and plan of reorganization. The shares were valued
at their fair market value on the date of issuance.
NOTE 6 - PREFERRED STOCK
During 1999, the Company created a series of preferred stock with a $.001 par
value, designated as Series A Convertible Preferred Stock. The preferred
stock is not entitled to any dividends. The holders of the preferred stock
are entitled to one and one-half votes per share on any matter brought before
the holders of common stock.
The preferred stockholders have the right to convert their shares into one and
one-half shares of common stock for each share of preferred stock. The
Company may redeem the preferred stock at a price of 20% preference per share
at any time after eighteen months from the date of issuance.
Upon liquidation, dissolution, or winding up of the Corporation, holders of
preferred stock shall be entitled to receive 120% of the original purchase
price plus any declared dividends before any distributions are made to common
stock holders.
As of the date of these financial statements, no shares of the Company's
preferred stock were issued and outstanding.
NOTE 7 - CAPITALIZED LEASES
In 1998, the Company acquired telephone and computer equipment in the amount
of $46,379 that is subject to long-term capital leases. At June 30, 2000. the
future minimum lease payments for these capital leases are as follows for the
years ending on December 31:
2000 $ 8,766
2001 3,050
-----------
11,816
===========
16
<PAGE>
POTOMAC ENERGY CORPORATION
FORMERLY BUTTE COAL, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000
NOTE 8 - OPERATING LEASES
During 1998, the Company entered into a lease for office space in Oklahoma
City for a term of five years. At June 30, 2000, minimum lease payments
remaining under this lease are as follows for the years ending on December 31:
2000 $47,800
2001 49,674
2002 50,612
2003 25,306
NOTE 9 - INVESTMENTS
In November 1999, Potomac acquired a 9% interest in Dolphin Industries, Inc.
for $290,000. During 1999, Dolphin acquired an abandoned oil refinery in
western Oklahoma. As of May 9, 2000, the refinery was completing its
renovations and hoped to be in operation by the end of May. Dolphin is also a
development stage enterprise and its existence depends upon the completion of
its renovations, obtaining adequate funding for a reliable supply of crude
oil, and acquisition of sales contracts.
NOTE 10 - GOING CONCERN
As shown in the accompanying financial statements, the Company has no
revenues, has incurred a net loss of $472,547 for the six-month period ended
June 30, 2000 and an accumulated deficit of $587,487 since inception. These
factors indicate that the Company may be unable to continue in existence. The
financial statements do not include any adjustments related to the
recoverability and classification of recorded assets, or the amounts and
classification of liabilities that might be necessary in the event the Company
cannot continue in existence.
The Company's management has strong beliefs that significant and imminent
private placements will generate sufficient cash for the Company to operate
for the next few years. The Company also believes that mergers with other
companies will generate cash sufficient to assume its obligations.
17
<PAGE>
POTOMAC ENERGY CORPORATION
FORMERLY BUTTE COAL, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000
NOTE 11 - SUBSEQUENT EVENTS
Energas Resources, Inc.
-----------------------
On June 2, 2000, the Company executed a stock and asset exchange agreement
with Energas Resources, Inc., an Oklahoma based publicly traded Canadian
corporation. Under the terms of the agreement, Potomac is to exchange its
wholly-owned subsidiary, Potomac Energy (BVI), Ltd., (whose major assets are
25% interests in the Colombian Rosablanca and Montescristo Association
contracts), and a 9% interest in Dolphin Industries, Inc., (whose major asset
is the Thomas Refinery), for 380,000 shares of restricted common stock of
Energas plus 2,000,000 warrants. The two-year warrants are convertible to
2,000,000 shares of common stock with a strike price for the first year of
$1.50 and for the second year of $1.72.
Although the Energas transaction was not yet consummated, the Company still
plans to sell these assets.
Gayland Coal, Inc.
------------------
On July 24, 2000, the Company entered into a plan of reorganization with
Gayland Coal, Inc., a firm whose principal asset is a nonoperating steam
turbine generating plant. The plan of reorganization calls for the Company to
issue 14,449,000 shares of its common stock to shareholders of Gayland in
exchange for all the outstanding stock of Gayland. The merger acquisition was
finalized on July 31, 2000.
NOTE 12 - OIL AND GAS INFORMATION
Capitalized costs at June 30, 2000 relating to the Company's oil and gas
activities consist of unproved properties in Columbia and are stated at
$561,418 in these financial statements. Exploration costs incurred to date
exceed $300,000.
NOTE 13 - COMMITMENTS AND CONTINGENCIES
The Company has been notified that its share of exploration expenses related
to its Colombian oil and gas properties for the six months ended June 30, 2000
will be in excess of $300,000. As of the date of this report, however, no
invoice had been received. The $300,000 is reflected as commitments and
contingencies in these financial statements.
18
<PAGE>
CAUTIONARY STATEMENT RELATING TO FORWARD LOOKING INFORMATION
Certain statements in this Report and the documents referenced herein
constitute "forward-looking statements" within the meaning of Section 21E of
the Securities Exchange Act of 1934, as amended. Certain, but not necessarily
all, of such forward-looking statements can be identified by the use of
forward-looking terminology such as "believes," "expects," "may," "will,"
"should" or "anticipates" or the negative thereof or other variations thereon
or comparable terminology, or by discussions of strategies that involve risks
and uncertainties. Such forward-looking statements involve known and unknown
risks, uncertainties and other factors which may cause the actual results,
levels of activity, performance or achievements of Potomac Energy Corporation,
or industry results, to be materially different from any future results,
levels of activity, performance or achievements expressed or implied by such
forward-looking statements. As a result of the foregoing and other factors, no
assurance can be given as to future results, levels of activity and
achievements and neither Potomac Energy Corporation nor any other person
assumes responsibility for the accuracy and completeness of these statements.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following discussion should be read in conjunction with the audited
consolidated financial statements and notes thereto appearing elsewhere in
this Report. The Company filed a Form 8-K on August 11, 2000
outlining changes in control and ownership of the Company, and a Form 8-K on
August 21, 2000, relating to a change in the Company's certifying accountant.
The following information should be read in conjunction with of the Company's
recently filed reports.
RECENT EVENTS
On August 8, 2000 a certificate of merger was filed with the Oklahoma
Secretary of State merging Gayland Coal, Inc., a Utah corporation ("Gayland"),
into Potomac Energy Corporation, an Oklahoma corporation (Acquisition
Corporation) and became a wholly owned subsidiary of Potomac Energy
Corporation. Potomac was the surviving constituent corporation (the
Merger-Acquisition). The Acquisition was completed in accordance with the
Agreement and Plan of Reorganization and between Potomac Energy Corporation
and Gayland Coal, Inc. dated July 28, 2000 (the Merger Agreement). The
parties desire the transaction to qualify as a tax-free reorganization under
Section 368 (a)(1)(B) of the Internal Revenue Code of 1986, as amended.
Pursuant to the Merger Agreement, (i) Potomac Energy Corporation (the Company)
agreed to issue and deliver 14,499,000 shares of the Company=s common stock to
the shareholders of Gayland.
On August 15, the Company's Board of Directors accepted the resignation
of Smith Carney & Company, P.C. as the Company's certifying accountants and
appointed Williams & Webster, P.S. as the Company's new certifying
accountants.
RESULTS OF OPERATIONS
The following discussion and analysis of results of operations
discussed below are for the period ending June 30, 2000.
The Company is a development stage company that during the period
ending June 30, 2000, did not have any revenue and incurred a net loss of
$472,547. In 1999, for the period ending June 30, the net loss was $92,776. In
the future and as a result of the change of control of the Company, it is
anticipated that the Company will not derive its income from revenues
generated by oil, gas or coal sales, but rather from its investments in and
sales from emerging growth companies which the Company either owns or has an
interest. There is no assurance that the Company will have revenues from oil,
gas or coal sales in the future. The Company generated no interest income
during 1999 or 1998. For the period ending June 30, 2000, the Company
continued to fulfill it's work commitments on the Rosablanca and Montecristo
Association Contracts and entered a Definitive Agreement to acquire Butte
Coal, Inc., and in connection therewith incurred $26,706 in professional fees
and consulting expenses and incurred miscellaneous expenses of $300,000. This
versus the period ending June 30, 1999 expenses of $0 for professional and
consulting fees and $0 for miscellaneous expenses. Other than the activities
associated with obtaining the fulfilling the required work commitments of the
Rosablanca and Montecristo Association Contracts, Potomac only activity was in
pursuit of the Merger-Acquisition with Butte Coal, Inc.
If the Company is unsuccessful in divesting its energy related assets
as currently planned, then the Company will continue to follow its original
plan of exploration and development for oil and gas in accordance with its
joint venture agreements. Should this be the case, the Company will continue
to be subject to certain economic factors beyond its control, specifically:
Oil, Gas and Coal Price Fluctuations, Seasonality and Inflation. The relative
impact of these factors are reviewed below.
EFFECTS OF RELATED ENERGY (OIL, GAS AND COAL) PRICE FLUCTUATIONS
In the event the Company's exploration activities result in
significant production of crude oil, natural gas or coal the Company's
operations and the value of its assets, including producing and non-producing
assets, will be subject to the effects of fluctuations in crude oil, natural
gas and coal prices. As a result of the instability and volatility of prices
and the surplus of crude oil and natural gas, and current market conditions
within the oil and gas industry, financial institutions have become more
selective in the energy lending area and have reduced the %age of existing
reserves that may qualify for the borrowing base to support energy loans.
In the future, the Company anticipates that should it be unable to
sell its energy related assets, then its principal source of cash flows, if
any, will be from the production and sale of crude oil, natural gas and coal
reserves that are depleting assets. Cash flows from production sales depends
upon the quantity of production and the price obtained for such production.
Generally, an increase in prices allows a company to finance its operations to
a greater extent with internally generated funds, may allow a company to
obtain equity financing more easily or on better terms and lessens the
difficulty of attracting financing alternatives available to a company from
industry partners and non-industry investors. However, price increases
heighten the competition for energy association contracts, leases and other
contractual arrangement, increase the costs of exploration and development
activities, and because of potential price declines, increase the risks
associated with the purchase of producing properties while prices are at
higher levels.
A decline in oil, gas and coal prices (i) reduces internally
generated cash flows which in turn reduces the funds available for exploration
for and replacement of reserves, (ii) increases the difficulty of obtaining
equity financing and worsens the terms on which such financing may be
obtained, (iii) reduces the number of available oil, gas and coal properties
on reasonable economic terms, (iv) may result in the expiration of oil, gas
and coal contractual interests based upon the potential reserves in relation
to exploration and development costs, (v) results in marginally productive
oil, gas and coal mines being abandoned as non-commercial, and (vi) increases
the difficulty of attracting financing alternatives available from industry
partners and non-industry investors. However, price declines reduce the
competition for oil, gas and coal interests and, correspondingly, reduce the
prices paid for such interests or result in obtaining such interests on more
favorable terms. Furthermore, exploration and production costs generally
decline, although the decline may not be at the same rate of decline of energy
prices.
SEASONALITY
It is anticipated that the results of operations of the Company will
be somewhat seasonal due to seasonal fluctuations in the price for crude oil,
natural gas, coal and electrical kilowatts. Historically, crude oil prices
have been generally higher in the third and fourth quarters and natural gas
prices have been generally higher in the fourth quarter. Electrical kilowatts
tend to be higher in the third quarter. Due to these seasonal price
fluctuations, it is anticipated that results of operations for individual
quarterly periods may not be indicative of results that may be realized on an
annual basis.
INFLATION AND CHANGES IN PRICES
Inflation principally affects the costs required to drill, complete
and operate oil and gas wells as well as mine coal. In recent years inflation
has had a minimal effect on such costs. However, increases and decreases in
drilling or mining activities, which generally a linked to crude oil, natural
gas and coal price increases and decreases, have resulted in the increase and
decrease of exploration, development and exploitation costs on an
industry-wide basis.
LIQUIDITY AND CAPITAL RESOURCES
Potomac has financed its development state activities through the
sale of equity securities and does not have any borrowing facilities or
arrangements in place to fund its capital commitments. For the period ending
June 30, 2000, net cash provided by operating activities totaled $10,799
versus the same period in 1999 which totaled $0, net cash used by investing
activities for the period ending June 30, 2000 was $908,673 versus 1999 which
was $0 and net cash provided by financing activities for the period ending
June 30, 2000 totaled $898,311 versus 1999 which used $0. As of June 30, 2000
the Company had positive working capital of $122,428 compared to no working
capital at June 30, 1999.
Under the terms of the Rosablanca and Montecristo Association
Contracts, the Company has certain minimum work commitments on a joint venture
basis with Seven Seas, the Company's share of such costs is estimated to be
approximately $750,000. In addition to the minimum work commitments, the
Company had established a 24-month plan of development of the Rosablanca and
Montecristo Blocks. The Company's working capital figure at June 30, 2000
appears to be jeopardized by the Company's share of the Colombian work
commitments required, more than any other single factor, the Board of the
Company to take action to find a suitable merger candidate that would protect
the shareholders investment and provide the possibility of future liquidity.
The Company anticipates that the costs of development of the Rosablanca and
Montecristo Blocks will be funded by a third party that acquires these
properties as disposed by the Company. Additionally, the Company hopes to
receive additional monies from the sale and disposition of its interests in
Dolphin Industries, Inc. and, as of June 30, 2000, Butte Coal, Inc. The
Company may attempt to fund the future cash requirements of the Company
through the offering of either equity and debt securities and, although
unlikely, borrowings. There is no assurance that any such funding will be
available or on terms acceptable to the Company.
PLAN OF OPERATION
The Company as a result of the Merger-Acquisition and the change in
voting and management control has developed the following plan of operation
to be followed during the next nine to twelve months.
1. Sell all of its existing energy related assets for either cash,
stock, some combination thereof or some other consideration
which provides greater future value and opportunity to the
Company's shareholders.
2. Evaluate both financially and materially emerging growth
companies, both public and private, and acquire majority
ownership in these companies or enter in to joint venture
arrangements with these companies.
3. Provide on-going management and financial support to the
companies either wholly acquired or acquired an interest in, to
enable the same to expand and further develop their operations,
markets and sales to the benefit of the Company.
4. Identify and hire both new executive management and general
administration personnel who will contribute to the focus of the
Company's goals and objectives.
5. Identify, elect and appoint such officers and directors as
needed to meet the Company's goals and objectives.
FUTURE CASH REQUIREMENTS
As mentioned, the Company hopes to derive monies from the sale and
disposition of its interests in its Colombian assets, Dolphin Industries, Inc.
and Butte Coal, Inc. There is no assurance as of the date of this report that
these sales will be completed or the timing of such transactions. The Company
may attempt to fund the future cash requirements of the Company through the
offering of either equity and debt securities and, although unlikely,
borrowings. SunStar Holdings, Inc. is the single largest shareholder of the
Company after the acquisition of BCI and the reorganization of the Company.
SunStar Holdings, Inc. may elect to fund the Company's cash requirements until
such time that the Company is able to become self sustaining as a result of
its investments and or sale of its assets. However, there is no assurance that
SunStar Holdings, Inc. or its sole shareholder, Mrs. Theolene D. Moon will be
capable of meeting such requirements now or in the future.
The Company does have and it is estimated will continue to have
certain on-going financial commitments that include employee payroll, payroll
tax, office rent, professional, legal and consulting fees as well as general
overhead and administration. Currently, these obligations roughly equal
$30,000 per month. Additionally, going forward, the Company may incur certain
one time charges related to the reorganization. The Company currently does not
have sufficient cash to meet these obligations without obtaining additional
funds from either an equity and debt offering or the issuance of corporate
notes, the like of which has been recently used to sustain the Company. There
is no assurance that any such funding will be available to the Company.
PART II
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 4. OTHER INFORMATION
None.
ITEM 5. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS:
1.1 Agreement and Plan of Merger, amongst Registrant, Gayland Coal,
Inc. and Potomac Energy Corporation, Fred Young, Winfield Moon,
Jr. dated July 28, 2000, incorporated by reference to Registrant's
Form 8-K, dated July 28, 2000, filed with the Securities and Exchange
Commission on August 11, 2000
2.1 Association Contract between Empresa Colombiana De Petroleos and Seven
Seas Petroleum Colombia, the Rosablanca sector, dated November 19,
1997, incorporated by reference to Registrant's Form 10-KSB Annual
Report for the year ended December 31, 1997.
2.2 Association Contract between Empresa Colombiana De Petroleos
and Seven Seas Petroleum Colombia, the Montecristo sector,
dated November 19, 1997, incorporated by reference to
Registrant's Form 10-KSB Annual Report for the year ended
December 31, 1997.
2.3 Letter of Intent between Potomac Energy Corporation and The
GHK Company L.L.C., dated February 27, 1997, incorporated by
reference to Registrant's Form 10-KSB Annual Report for the
year ended December 31, 1997.
2.4 Basic Contract of Small Carbon Exploration/Exploitation
between Ecocarbon and Erasmo Alfredo Almanza LaTorre, dated
July 10, 1998, incorporated by reference to Registrant's Form
10-KSB Annual Report for the year ended December 31, 1998.
2.5 Agreement of Association between Dr. Erasmo Almanza LaTorre
and Carbones de Guaduas, Ltd., dated April 6, 1998,
incorporated by reference to Registrant's Form 10-KSB Annual
Report for the year ended December 31, 1998.
2.6 Letter Agreement between Arena Power, L.P. and Registrant,
dated December 2, 1998, incorporated by reference to
Registrant's Form 10-KSB Annual Report for the year ended
December 31, 1998.
2.7 Potomac Energy Corporations Investment Compensation Agreement
between the Company and Dolphin Industries dated November 19,
1999, incorporated by reference to the Registrant's Form
10-KSB for the year ended December 31, 1999.
2.8 Potomac Energy Corporations Merger Agreement and Plan of
Reorganization (Amended and Restated) with Butte Coal, Inc.
dated March 31, 2000, incorporated by reference to the
Registrant's Form 8-K dated June 26, 2000.
3.1 Subsidiaries of Registrant, incorporated by reference to
Registrant's Form 10-KSB Annual Report for the year ended
December 31, 1998 which remain unchanged to date.
4.1 Potomac Energy Corporation Non-Qualified Stock Option Plan
adopted January 28, 1998, incorporated by reference to
Registrant's Form 10-KSB Annual Report for the year ended
December 31, 1998.
5.0 Potomac Energy Corporation Rights and Powers Designation for
the Preferred Stock dated July 19, 1999, incorporated by
reference to the Registrant's Form 10-QSB for the period ended
September 30, 1999.
6.0 Butte Coal, Inc. & World Link Capital, LLC. Agreement dated
September 19, 1999, now expired, incorporated by reference to
the Registrant's Form 10-KSB for the year ended December 31,
1999.
7.0 Energas Resources, Inc. and Potomac Stock and Asset Exchange
Agreement, dated June 2, 2000, incorporated by reference to
the Registrant's Form 10-KSB for the year ended December 31,
1999.
16 Letter re: Change of Accountants, incorporated by reference from
Registrant's Form 8-k dated August 11, 2000, and filed with the
Securities and Exchange Commission on August 21, 2000.
(b) REPORTS ON FORM 8-K.
The Company filed a report on Form 8-K identifying changes in control
and ownership of the registrant on August 11, 2000.
The Company filed a report on Form 8-K reporting a change in the
Company's certifying accountant on August 21, 2000.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
Registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
POTOMAC ENERGY CORPORATION
(Formerly Midwestern Resources, Inc.)
(Registrant)
By: /s/ Fred W. Young
--------------------------------------------------
Fred W. Young
President and Chief Executive Officer
Date: August 21, 2000
