<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the fiscal year ended December 31, 1996 Commission File
Number 0-9394
BLACK DOME ENERGY CORPORATION
----------------------------------------------------
(Exact name of registrant as specified in its charter)
Colorado 84-0808397
-------------------------------- ------------------
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
1536 Cole Boulevard, Suite 325
Golden, Colorado 80401
------------------------------------- -------
(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area code: (303) 231-9059
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, No Par Value
--------------------------
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No ___
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K 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-K or any
amendment to this Form 10-K. [ X ]
As of March 21, 1997, 73,755 shares of no par value common stock (the
registrant's only class of voting stock) were outstanding, the market value
of which is currently indeterminable because of a lack of trading market for
the shares.
Documents incorporated by reference:
None.
This Form 10-K consists of 38 pages. Exhibits are indexed at
page 36.
Page 1
<PAGE>
PART I
ITEM 1. BUSINESS
- ------- --------
(a) General Development of Business. Black Dome Energy Corporation
-------------------------------------
(referred to herein as the "Company" or "Black Dome"), was incorporated
under the laws of the State of Colorado on December 12, 1979, and maintains
its principal executive offices at 1536 Cole Boulevard, Suite 325, Golden,
Colorado 80401. Throughout its existence, Black Dome has been an oil and
gas company engaged in the exploration for oil and gas, the purchase of
producing oil and gas properties, the sale of portions of the producing oil
and gas properties and the operation of producing oil and gas leases. At a
meeting held on December 16, 1996, the shareholders adopted a resolution
authorizing the dissolution of the Company, and on January 7, 1997, Articles
of Dissolution were filed with the Office of the Colorado Secretary of
State. Since December 16, 1996, the business of the Company has been
generally limited to the liquidation of assets, the satisfaction of
liabilities and the winding up of the Company's affairs.
During the fiscal year ended December 31, 1996, the Company was engaged
in the business of exploring for, developing and acquiring interests in
producing oil and gas leases for the purpose of resale of a portion of the
working interest to industry participants, or for the addition of reserves
for its own account. The Company acquired and retained the operation of the
oil and gas production from those leases.
During the fiscal year ended December 31, 1996, the Company's revenues
attributable to its overall income were derived primarily from the sale of
oil and gas from its producing oil and gas leases.
Until the sale of substantially all of its oil and gas assets to an
unaffiliated entity (which occurred effective December 31, 1996), the
Company owned working interests in certain properties located solely in the
continental United States. A more detailed description of these properties
and reserves is set forth in Item 2 hereof.
(b) Financial Information About Industry Segments. The Company has
---------------------------------------------------
been engaged in business in only one industry segment, namely the exploration
for oil and gas, production of oil and gas and the development of oil and gas
properties. Therefore, no information is provided with respect to any other
industry segment.
(c) (1) Narrative Description of Business. The Company was involved
-------------------------------------------
in the exploration, development and purchase and production of oil and gas
properties as a general partner, joint venturer, or for its own account, and
as an oil and gas lease operator. The Company's activities have in the
past included the formation of joint ventures and drilling programs. It is
anticipated, however, that the Company's future business will be limited to
the satisfaction of its liabilities and other obligations, and to the winding
up of its affairs. Management expects to complete this process as
expeditiously as possible and currently intends to cause a final liquidating
distribution to be made to the Company's shareholders prior to the completion
of the current fiscal year.
Page 2
<PAGE>
(i) Principal Products Produced and Services Rendered. The Company's
--------------------------------------------------
principal products during the fiscal year ended December 31, 1996 were
natural gas, crude oil and oilfield operations and supervision. Crude oil
and natural gas were sold to various purchasers, which generally service the
areas in which the producing wells were located. The Company operated oil
and gas properties for its own account and for the account of other working
interest owners in the property.
(ii) Status of New Products or Industry Segments. There has been no
---------------------------------------------
public announcement of, and no information otherwise has been made public
about, a new product or industry segment which would require the investment
of a material amount of the Company's assets or which otherwise is material.
(iii) Sources and Availability of Raw Materials. The existence of
------------------------------------------
commercial oil and gas reserves was essential to the ultimate realization of
value from the Company's properties and thus may be considered a raw material
essential to the Company's business during the past fiscal years. The
acquisition, exploration, development, production, and sale of oil and gas
are subject to many factors which are outside the Company's control. These
factors include national and international economic conditions, availability
of drilling rigs, casing, pipe, and other equipment and supplies, proximity
to and capacity of pipelines, the supply and price of other fuels, and the
regulation of prices, production, transportation, and marketing by the
Department of Energy and other federal and state governmental authorities.
These factors have not materially hindered nor adversely affected the
business of the Company in the past and since the Company has disposed of all
of its oil and gas assets and is in the process of dissolving, it is unlikely
that these factors will have a material adverse effect on the Company in the
future.
(iv) Patents, Trademarks, Licenses, Franchises and Concessions. The
----------------------------------------------------------
Company does not own any patents, trademarks, licenses, franchises or
concessions, except oil and gas leases and other interests granted by private
landowners, the loss of any one of which could have a material impact on the
Company.
(v) Seasonal Nature of Business. The Company's business has not been
----------------------------
seasonal in nature, except to the extent that natural gas prices have tended
to fluctuate on a seasonal basis and development of its oil and gas
properties and its ability to drill oil and gas wells and the availability of
drilling rigs and other equipment, were occasionally more restricted at
calendar year end due to increased demand from tax-sheltered drilling
programs conducted by others.
(vi) Working Capital Items. It was the practice of the Company as
----------------------
well as others similarly situated in the industry to attempt to retain
working capital in order to participate in the purchase of producing
properties and the drilling and development of properties via partnerships,
joint ventures and other arrangements, and to acquire significant blocks of
undeveloped properties for future development and/or exploration. Working
capital was not needed to meet rapid delivery requirements of customers, or
to assure the Company of continuous allotments of goods from suppliers.
(vii) Major Customers. During fiscal 1996, three customers accounted
----------------
for 10% or more (individually) of total oil and gas sales: GPM Gas
Corporation, 38%, Boyd Rosene and Associates, 28% and Helmerich & Payne Energy
Page 3
<PAGE>
Services, Inc., 20%. During 1996, the Company sold oil and/or gas to eight
(8) customers. No revenues were received in connection with foreign
governments in which the Company acted as a producer. As the Company has
disposed of its properties and is currently engaged in a dissolution, it no
longer sells any oil or gas products and therefore no longer has any
customers.
(viii) Backlog. The Company has no backlog due to the nature of its
--------
business, nor is backlog material to an understanding of the Company's
business.
(ix) Renegotiation or Termination of Government Contracts. The Company
-----------------------------------------------------
has no material portion of its business which may be subject to renegotiation
of profits or termination of contracts or subcontracts at the election of
government.
(x) Competitive Conditions. The purchase of existing producing
-----------------------
properties and exploration, development and production of oil and gas are
subject to considerable competition, and the Company was faced with strong
competition from major and medium sized oil and gas companies and other
independent operators. The principal methods of competition in the industry
for the acquisition of producing oil and gas properties and leases are
industry sales packages and the solicitation, bidding and auctioning of
individual producing properties, and the payment of bonus payments at the
time of acquisition of leases. The Company had an insignificant competitive
position in the oil and gas industry.
(xi) Research and Development. The Company was engaged in finding and
-------------------------
producing oil and gas, and no funds were allocated to product research and
development in the conventional sense. Since its inception, the Company has
not had any customer or government sponsored research activities relating to
the development of new products, services or techniques or the improvement
of existing products, services or techniques.
(xii) Environmental Protection. The Company, as a former owner and
-------------------------
operator of oil and gas properties, is subject to various federal, state and
local laws and regulations relating to the discharge of materials into, and
protection of, the environment. These laws and regulations, among other
things, impose liability on the Company for the cost of pollution clean-up
resulting from operations, subject the Company to liability for pollution
damages, require suspension or cessation of operations in affected areas and
impose restrictions on the injection of liquids into subsurface aquifers that
may contain groundwater.
Page 4
<PAGE>
Environmental requirements may necessitate significant capital outlays
which may materially affect the Company's earnings and potential earnings and
could cause material changes in its form of business. The Company has made
and may be required to continue to make expenditures in its efforts to comply
with these requirements which it believes are necessary business costs in the
oil and gas industry. As of December 31, 1996, the Company is not aware of
any existing environmental claims which would have a material adverse effect
upon its capital expenditures, earnings or competitive position.
There is no assurance, however, that existing laws or regulations or
changes in or additions to laws or regulations regarding the protection of
the environment will not adversely affect the Company. It is impossible to
determine whether or to what extent the amount of the Company's liquidating
distribution may be affected by environmental laws; however, management does
not believe that such laws have had a material adverse effect on the
Company's financial position or results of operations.
(xiii) Employees. The Company currently has one full-time salaried
----------
employee who performs clerical and administrative services, one part-time
contract employee who performs accounting services, and one full-time
employee who performs executive functions (but whose compensation was
terminated pursuant to his request effective June 30, 1996) and one contract
engineer employed on a retainer basis who are directly engaged in its
activities. It is currently anticipated that the salaries for both the
full-time salaried employee and the part-time contract employee will be
terminated effective June 30, 1997. To the extent necessary, the Company
will contract on an hourly basis to have services performed on its behalf
after June 30, 1997.
(d) Financial Information About Foreign and Domestic Operations and
---------------------------------------------------------------
Export Sales. The Company has no material operations in foreign
- -------------
countries and no material portion of its sales or revenues is derived from
customers in foreign countries.
ITEM 2. PROPERTIES.
- ------- -----------
(a) Office Facilities. The Company's offices are located at 1536
------------------
Cole Boulevard, Suite 325, Golden, Colorado 80401. The Company pays
$1,372.00 monthly rental for the use of office facilities. The Company
believes that its present offices are suitable and adequate for its present
operations.
(b) (1) Reserves. Proved developed and undeveloped oil and gas
---------
reserves of the Company at December 31, 1996 and December 31, 1995 were
computed by Joseph R. Albi, Jr., a consulting petroleum engineer and former
Executive Vice President of the Company. Proved developed and undeveloped
oil and gas reserves of the Company at December 31, 1995 and December 31,
1994 were audited by Donald M. Osmus, a consulting Petroleum Engineer. No
audit services were performed on behalf of the Company for the fiscal year
ended December 31, 1996.
All of the Company's reserves were located in the continental United
States and the majority of the properties comprising these reserves were
operated by Black Dome Energy Corporation.
Page 5
<PAGE>
<TABLE>
<CAPTION>
Reserve Category
----------------------------------------------------------
Proved Developed Proved Undeveloped Total Proved
(1) (2)
---------------- ---------------- -----------------
December 31, (Bbls)* (Mcf)** (Bbls)* (Mcf)** (Bbls)* (Mcf)**
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
1994 9,355 2,031,425 -- -- 9,355 2,031,425
1995 9,825 1,431,318 -- 52,256 9,825 1,483,574
1996 6,987 1,380,932 -- 68,889 6,987 1,449,821
</TABLE>
(*) Refers to barrels consisting of 42 U.S. gallons.
(**) Refers to a volume of 1,000 cubic feet under prescribed conditions of
pressure and temperature and represents the basic unit for measuring
the volume of natural gas.
(1) Proved Developed Reserves. These are proved reserves which can
--------------------------
be expected to be recovered through existing wells with existing equipment
and operating methods. This classification includes:
(i) Proved Developed Producing Reserves. These are proved developed
------------------------------------
reserves which are expected to be produced from existing completion
interval(s) now open for production in existing wells; and
(ii) Proved Developed Non-Producing Reserves. These are proved
----------------------------------------
developed reserves which exist behind the casing of existing wells, or at
minor depths below the present bottom of such wells, which are expected to
be produced through these wells in the predictable future, where the cost of
making such oil and gas available for production should be relatively small
compared to the cost of a new well.
Additional oil and gas expected to be obtained through the application
of fluid injection or other improved recovery techniques for supplementing
the natural forces and mechanisms of primary recovery are included as
"Proved Developed Reserves" only after testing by a pilot project or after
the operation of an installed program has confirmed through production
response that increased recovery will be achieved.
(2) Proved Undeveloped Reserves. These are proved reserves which are
----------------------------
expected to be recovered from new wells on undrilled acreage, or from
existing wells where a relatively major expenditure is required for
recompletion. Reserves on undrilled acreage are limited to those drilling
units offsetting productive units, which are reasonably certain of production
when demonstrated with certainty that there is continuity of production
from the existing productive formation. Estimates for proved undeveloped
reserves may be attributable to acreage for which an application of fluid
injection or other improved recovery technique is used or contemplated only
where such techniques have been proved effective by actual tests in the area
and in the same reservoir.
Present Value of Estimated Future Net Revenues from Proved Developed
--------------------------------------------------------------------
and Proved Undeveloped Oil and Gas Reserves. The table below presents, as of
- --------------------------------------------
the end of 1996, 1995 and 1994, the present value of the estimated future net
revenues attributable to proved developed reserves and proved undeveloped
reserves discounted at an annual rate of ten percent (10%) per year.
Page 6
<PAGE>
<TABLE>
<CAPTION>
Present Value of Future
Net Revenues (dis- Future Net Revenues
counted at 10%) as of Proved Proved Total
December 31, Developed Undeveloped Proved
- ------------------------- ----------- ------------- --------
<S> <C> <C> <C>
1994 $1,281,621 $ 0 $1,281,621
1995 $1,175,279 $ 21,037 $1,196,316
1996 $2,470,181 $148,150 $2,618,331
</TABLE>
While it is reasonable to anticipate that the prices received from the
future sale of production may be higher or lower than the prices used in
the evaluation described above, and the operating and other costs relating
to such production may increase above existing levels, such increases in
prices and costs have been omitted from consideration in making these
evaluations in accordance with rules adopted by the Securities and Exchange
Commission.
The Company emphasizes that reserve estimates and rates of production
are inherently imprecise and that estimates of new discoveries and
non-producing and/or undeveloped reserves are more imprecise than those of
mature producing oil and gas properties. Accordingly, the estimates are
subject to change as further information becomes available.
For additional information concerning oil and gas revenues, see Note
6 to the Financial Statements.
(b) (2) Reserves Reported to Other Agencies. The Company did not
------------------------------------
file any oil or gas reserve estimates with, or include such estimates in
reports to, any other federal governmental authority or agency within its
last fiscal year.
(b) (3) (i) Production. The following table shows the Company's net
-----------
quantities of oil (including condensate and natural gas liquids) and of gas
produced for each of the Company's past three fiscal years:
<TABLE>
<CAPTION>
Net Oil and Gas Production
Year Ended December 31,
----------------------------
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Gas (Mcf) 237,963 261,562 309,210
Oil/Condensate (Barrels) 1,724 1,382 2,747
</TABLE>
The Company has no long-term supply or similar arrangements with
foreign governments or authorities and, as the Company has disposed of its
properties and is currently engaged in dissolution, does not anticipate
having any such arrangements in the future.
(b) (3) (ii) Average Sales Price and Production Costs. The average
-----------------------------------------
sales prices (including transfers) and production costs per barrel of oil and
Mcf of gas received by the Company for the fiscal years ended December 31,
1996, 1995 and 1994, were as follows. Equivalent barrels of production were
calculated on the basis of 6 Mcf equals 1 Barrel.
Page 7
<PAGE>
<TABLE>
<CAPTION>
Oil (Per Bbl) Gas (Per Mcf) Production (MCF)
Year Ended Sales Sales Costs of
December 31, Price Price Equivalent Bbls
------------ ------------ ----------- ---------------
<S> <C> <C> <C>
1996 $19.31 2.40 $4.96
1995 $17.10 $1.45 $4.24
1994 16.97 1.83 6.21
</TABLE>
(b) (4) Productive Wells and Acreage. The following tables set
-----------------------------
forth the Company's: (i) total gross and net productive oil and gas wells,
and (ii) total gross and net developed acreage, both as of December 31, 1996:
(i) Productive Oil and Gas Wells. As of December 31, 1996, the Company
-----------------------------
owned an interest in 23 oil and/or gas properties, 18 of which were
operated by the Company. The following depicts the number of gross and net
oil and gas wells producing or capable of production in which the Company
owned an interest at the end of the last fiscal period.
Total Wells (Gross)* Total Wells (Net)**
Oil Gas Total Oil Gas Total
--- --- ----- --- ----- -----
December 31, 1996 2 21 23 1.03 15.30 16.33
The above numbers reflect an increase of two (2) gross wells (.66 net
wells) which were recognized in 1996 (back-in of non-consent interest in a
Dewey County, Oklahoma well in which the Company did not participate in the
drilling of and the initiation of sales from one Harper County, Oklahoma well
in which the Company held an overriding royalty interest).
(*) A "gross well or acre" is a well or acre in which a working interest
is owned. The number of gross wells or acres is the total number of wells or
acres in which a working interest is owned.
(**) A "net well or acre" exists when the sum of the fractional
ownership working interests in gross wells or acres equals one. The number
of net wells or acres is the sum of fractional working interests owned in
gross wells or acres, expressed as whole numbers and fractions thereof.
(ii) Developed Acreage. The following depicts the number of gross
------------------
and net developed acres in which the Company owned an interest at the end of
the Company's last fiscal year.
Gross Acres Net Acres
----------- ---------
December 31, 1996 9,191 6,078
(b) (5) Undeveloped Acreage. The following table sets forth
information regarding undeveloped acreage in which the Company had an
interest at December 31, 1996.
Location Gross Acres Net Acres
-------- ----------- ---------
Kansas 160 105
Texas 28 10
--- ---
Total 188 115
Page 8
<PAGE>
As of the date of December 31, 1996, the Company's total undeveloped
acreage was held by production and was not subject to expiration until the
producing well or wells which it held was/were non-commercial or plugged and
abandoned.
(b) (6) Drilling Activity. The following summarizes the drilling
activity of the Company during each of the last three fiscal years.
<TABLE>
<CAPTION>
Year Ended Total Development Exploratory
December 31, Wells Oil Gas Dry Oil Gas Dry
------------ ----- --- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C>
1996 -
Gross Wells 0 0 0 0 0 0 0
Net Wells 0 0 0 0 0 0 0
1995 -
Gross Wells 1 0 0 1 0 0 0
Net Wells .4 0 0 .4 0 0 0
1994 -
Gross Wells 0 0 0 0 0 0 0
Net Wells 0 0 0 0 0 0 0
</TABLE>
(b) (7) Present Activities. No oil and/or gas properties were
-------------------
acquired or drilled by the Company in 1996; however, revenues from two
additional properties were recognized during 1996 as a result of (i) the
back-in of a non-consent interest position in a gas well located in Dewey
County, Oklahoma in which the Company did not participate in the drilling of
and (ii) the initiation of sales from a Harper County, Oklahoma gas well in
which the Company held an overriding royalty interest. The Company
participated in the unsuccessful drilling of one (1) gross well (.4 net well)
during the fourth quarter of 1995. Two (2) gross wells (1.73 net wells) in
which the Company held an interest were plugged and abandoned during 1995.
No additional oil and/or gas properties were acquired by the Company during
1996.
(b) (8) Delivery Commitments. As of March 21, 1997, the Company was
---------------------
not obligated to provide a fixed and determinable quantity of oil or gas in
the future pursuant to existing contracts or agreements, nor has the Company
had any significant delivery commitments since its inception on December 12,
1979.
ITEM 3. LEGAL PROCEEDINGS.
- ------- ------------------
There are no current legal proceedings concerning the Company and
there are none pending, except that Black Dome has been named as a defendant
in litigation concerning an alleged indebtedness resulting from a guarantee
not to exceed $25,000 which Black Dome gave for the indebtedness of
Deane J. Writer, Jr. to Capital Federal Savings and Loan Association. The
alleged assignee of underlying debt, Federal Financial Corporation, has
filed an action against a number of defendants, including Black Dome, in the
District Court of the City and County of Denver, Colorado, Case No.
96-CV-5728. Black Dome believes it has potentially valid defenses, but, in
light of the small amount at controversy, intends to attempt to negotiate a
reasonable settlement of the matter in cooperation with the other defendants.
Management otherwise intends to vigorously defend the claims asserted against
Black Dome. No prediction of the outcome can reasonably be made at this
initial stage of the litigation.
Page 9
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------- ---------------------------------------------------
On December 16, 1996, the Company held a special meeting of its
shareholders at which the only matter voted upon was the proposed dissolution
of the Company. At the meeting, 60,134 votes were cast in favor of
dissolution and 298 votes were cast against. In addition, 348 shares
abstained from voting on the proposal and "zero" broker non-votes were cast
at the meeting.
PART II
-------
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
- ------- -----------------------------------------------------
STOCKHOLDER MATTERS
-------------------
(a) Market Information. From October 1980 through November 12, 1984,
-------------------
Black Dome's common stock was traded on the over-the-counter market under
the symbol "BDEC" and the quotes were carried by NASDAQ during that period of
time. NASDAQ voluntarily withdrew "BDEC" from the system on November 12,
1984 due to the depressed price of the stock. Since that date there has been
sporadic trading in the Company's stock. At the present time, there are no
market makers listed in the "pink sheets," and there have been no recorded
public trades of the Company's common stock for at least the past two years.
(b) Holders. As of March 31, 1997, there were approximately 1,616
--------
record holders of the Company's common stock.
(c) Dividends. Holders of common stock are entitled to receive such
----------
dividends as may be declared by Black Dome's Board of Directors. No
dividends have been paid with respect to Black Dome's common stock and no
dividends are anticipated to be paid in the foreseeable future.
ITEM 6. SELECTED FINANCIAL DATA.
- ------- ------------------------
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Total Revenues $624,314 $441,384 $762,655 $677,537 $616,351
Oil and Gas Sales 605,454 402,627 592,513 647,328 537,162
Other Revenue 18,860 38,757 170,172 30,209 79,189
Net Income (loss) 394,413 (210,598) (23,449) 6,338 61,208
Net Income (loss)
per share 5.35* (2.86)* (.32)* .16* .91*
Total Assets 703,160 411,046 718,918 1,040,364 612,748
Obligations -- -- -- 120,000 60,000
Deferred Comp. 122,500 160,000 100,000 180,000
Bank Debt - LOC -- 84,987 132,724 223,987 --
</TABLE>
* Earnings per share are restated to reflect the 1 for 1001 reverse stock
split approved by shareholders on September 2, 1994.
Page 10
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
- ------- -----------------------------------------------------------
AND RESULTS OF OPERATIONS.
--------------------------
Liquidity and Capital Resources
- -------------------------------
Working capital (which incorporates current and deferred obligations)
increased by $191,038 during the year ended December 31, 1996, due primarily
to higher prices received from sales of natural gas products. This increase
in working capital during 1996 followed a previous slight increase of $2,136
during 1995 and an increase of $84,031 during 1994. As a source of
additional working capital, the Company obtained a $300,000 line of credit
with a lending institution in October 1992 which was secured with 10
producing natural gas wells in Clark County, Kansas. As of December 31,
1994, a total of $132,724 was borrowed from this line of credit. During
1995, the Company restructured the debt obligations associated with the
outstanding balance of the line of credit. As of December 31, 1995, the
Company had bank debt obligations of $84,987 tied to an 8.5% note which was
then scheduled to mature on March 31, 1997. This obligation was paid in
full during the fiscal year ended December 31, 1996.
Because the Company's oil and gas properties continued to deplete
(decrease in value) as they produced (which contributed to losses incurred by
the Company during 1994 and 1995), management reached a conclusion during
1996 that, unless the Company was to successfully complete a liquidation
of its oil and gas assets in the immediate future, it would inevitably
suffer recurring losses from future operations as its properties continued
to decline in production.
As the subject properties would have eventually become worthless had
the status quo been permitted to continue for an unreasonable period of time,
the Board of Directors made a special determination that it would be in the
best interests of all of the Company's shareholders to authorize the
immediate dissolution of the Company and to liquidate its assets for cash in
one or more commercially reasonable transactions while there was still a
sufficient value to allow for a distribution to be made to shareholders after
all of the Company's liabilities were paid. Accordingly, a plan to dissolve
the Company was approved by the shareholders on December 16, 1996, and on
February 21, 1997 the Company sold substantially all of its oil and gas
assets (effective December 31, 1996) to an unaffiliated entity for
$921,250.00 in cash, subject to adjustment as to certain items after
consummation of the transaction.
After payment of its obligations, claims and expenses and making
provision or establishing reserves for the payment of future liabilities,
the Company will distribute the remaining cash proceeds from the sale of its
assets to the shareholders in proportion to their holdings of common stock.
The Company intends to make this distribution at the earliest practicable
date after all of the Company's liabilities are paid. It is the goal of the
Board of Directors to cause all of such remaining proceeds to be paid out to
shareholders in a single distribution during the current fiscal year.
Prior to distribution, it is anticipated that all cash proceeds from
the sale not needed to meet current obligations and liabilities will be held
by the Company and deposited in an insured moneymarket account or invested in
obligations of (or obligations guaranteed by) the United States Government or
any agency thereof, or time deposits or certificates of deposit issued by any
bank or trust company organized under the laws of the United States or any
state thereof in such amounts and with such maturities as are deemed
appropriate by the Board of Directors.
Page 11
<PAGE>
Although it is possible that more than one distribution will be made to
shareholders, it is anticipated that all of the remaining proceeds will be
distributed at once in order to minimize expenses.
The Company currently has no commitments for capital expenditures.
Results of Operations
- ---------------------
Higher received natural gas prices resulted in net income (before
income taxes) from operations of $56,413 (or $.77 per share) for the year
ended December 31, 1996. Lower received natural gas prices, payment of a
portion of deferred compensation, declining production without reserve
replacement and significant depreciable and depletable costs resulted in a
loss of $210,598, or $2.86/share in 1995. These same factors (combined with
unsuccessful workover costs of two wells in Oklahoma and the costs associated
with restructuring the Company) contributed to a loss of $44,498, or $0.61
per share in 1994.
As discussed above, a plan to dissolve the Company was approved by
the shareholders on December 16, 1996, and on February 21, 1997 the Company
sold substantially all of its oil and gas assets (effective December 31,
1996) to an unaffiliated entity for $921,250.00 in cash, subject to
adjustment as to certain items after consummation of the transaction. As
the Company's business activities are currently limited to the winding up of
its affairs and completing its dissolution, it is anticipated that its
expenses of operations will be substantially different, but will generally
decrease during the next fiscal year.
The Company's current office lease will expire in June, 1997, at
which time it is anticipated that the Company's activities in connection with
its dissolution will be significantly curtailed, and the Company's remaining
records moved to Mr. Huff's personal residence. It is unlikely that any
salaries for clerical staff (the Company currently pays no other salaries)
will continue past June 30, 1997; however, the Company plans to contract with
Ms. Tish Hartman, the Company's Corporate Secretary (and possibly one or more
others), on an hourly basis should clerical staff be required to conclude the
dissolution after that time.
Changes in Prices, Costs and Impact of Inflation
- ------------------------------------------------
Current economic trends still indicate that costs of conducting
business activities will not rise as rapidly as they have during the
preceding inflationary years. Neither inflation nor increasing costs are
expected to have any material impact on the Company's current dissolution.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
- ------- --------------------------------------------
Page 12
<PAGE>
The Board of Directors and Stockholders
Black Dome Energy Corporation
Evergreen, Colorado
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have audited the balance sheet of Black Dome Energy Corporation as of
December 31, 1996 and 1995 and the related statements of income,
stockholders' equity, and cash flows for the three years ended December 31,
1996, 1995, and 1994. 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 audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the 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 Black Dome Energy
Corporation as of December 31, 1996 and 1995 and the results of its
operations and its cash flows for the three years ended December 31, 1996,
1995, and 1994 in conformity with generally accepted accounting principles.
As discussed in Note 1 to the financial statements, in 1995, the Company
elected to change its method of accounting for depreciation of lease and
well equipment from the straight line method to the unit of production
method and the financial statements have been restated to reflect the change.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has suffered recurring losses from
operations which raise substantial doubt about the Company's ability
to continue as a going concern. Management's plans in regard to these
matters are also described in Note 1. The financial statements do not
include any adjustments that might result from the outcome of this
uncertainty.
BY(Signature) /s/ Haliburton, Hunter & Associates P.C.
Littleton, Colorado
(Date) March 24, 1997
Page 13
<PAGE>
BLACK DOME ENERGY CORPORATION
-----------------------------
Balance Sheet
-------------
<TABLE>
<CAPTION>
December 31,
-----------------------
1996 1995
---- ----
Assets
------
<S> <C> <C>
Current assets:
Cash $ 128,220 $ 63,008
Accounts receivable:
Joint interest owners 623 10,158
Oil and gas sales 103,034 69,772
Other --- 200
------- -------
Total current assets 231,877 143,138
------- -------
Property and equipment, at cost:
Oil and gas properties, net (successful
efforts method) 161,511 220,994
Other property and equipment, net of
accumulated depreciation of $59,481
and $58,367, respectively --- 1,988
Inventory of well equipment 9,772 44,926
------- -------
171,283 267,908
------- -------
Deferred income tax asset 300,000 ---
------- -------
$ 703,160 $ 411,046
=========== ===========
</TABLE>
See accompanying notes to financial statements
Page 14
<PAGE>
<TABLE>
<CAPTION>
Liabilities and Stockholders' Equity
------------------------------------
<S> <C> <C>
Current liabilities:
Note payable, bank $ --- $ 84,987
Accounts payable, trade 99,431 78,581
Accounts payable, officer 9,600 9,600
Accrued interest --- 662
Deferred compensation 122,500 160,000
------- -------
Total current liabilities 231,531 333,830
------- -------
Commitments and Contingencies
Stockholders' equity:
Common stock, no par value. Authorized
10,000,000 shares; issued and outstanding
73,755 shares 292,415 292,415
Additional paid-in capital 1,895,938 1,895,938
Accumulated deficit (1,716,724) (2,111,137)
----------- -----------
471,629 77,216
----------- -----------
$ 703,160 $ 411,046
========== ===========
</TABLE>
Page 15
<PAGE>
BLACK DOME ENERGY CORPORATION
-----------------------------
Statement of Income
-------------------
<TABLE>
<CAPTION>
December 31,
-------------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Revenue:
Oil and gas sales $ 605,454 402,627 592,513
Operating income 11,356 38,034 19,879
Gain (loss) on property disposition --- --- 142,582
Interest income 1,206 366 2,413
Other income (loss) 6,298 357 4,998
------- ------- -------
624,314 441,384 762,655
------- ------- -------
Costs and expenses:
Oil and gas production 172,285 166,262 300,236
Production and windfall profit taxes 32,861 22,737 37,136
Depreciation, depletion and amortization 81,549 199,519 92,219
Exploration expense --- 10,110 216
Write-off non-productive wells --- 15,438 65,955
Interest 5,200 14,250 17,739
General and administrative 238,006 223,666 272,603
------- ------- -------
529,901 651,982 786,104
------- ------- -------
Earnings (loss) before income taxes 94,413 (210,598) (23,449)
Provision for income tax 38,000 --- ---
------- --------- --------
Net earnings (loss) before income tax
benefit 56,413 (210,598) (23,449)
Income tax benefit 338,000 --- ---
------- -------- ------
Earnings (loss) before cumulative
affect of a change in accounting
principle $ 394,413 (210,598) (23,449)
---------- --------- --------
Cumulative effect on prior years
(to December 31, 1994) of changing
to a different depreciation method --- 109,523 ---
Net earnings (loss) 394,413 (320,121) (23,449)
========= ========= ========
Earnings (loss) per share before
income tax benefit $ .77 (2.86) (.32)
Earnings per share from income
tax benefit $ 4.58 --- ----
--------- -------- -------
Earnings (loss) per common share
before cumulative effect of a change
in accounting principle (1) $ 5.35 (2.86) (.32)
Cumulative effects on prior years
(to December 31, 1994) of changing
to a difference depreciation method --- (1.49) ---
Net earnings (loss) per common share 5.35 (4.35) (.32)
==== ====== =====
Weighted average number of shares 73,755 73,605 72,866
====== ====== ======
Proforma amounts assuming the new
depreciation method is applied
retroactively:
Income (loss) before effect of changing a
depreciation method $ 394,413 (210,598) (23,449)
Retroactive application of changing
depreciation methods --- --- (20,999)
------- --------- --------
Net income (loss) after retroactive change 394,413 (210,598) (44,448)
======= ========= ========
Earnings per common share after
retroactive application of changing
depreciation method and income tax
benefit $ 5.35 (2.86) (.61)
========= ====== =====
</TABLE>
(1) Calculated after one-for-1,001 share reverse split
See accompanying notes to financial statements
Page 16
<PAGE>
BLACK DOME ENERGY CORPORATION
-----------------------------
Statement of Stockholders' Equity
---------------------------------
<TABLE>
<CAPTION>
Common Stock Total
------------------ Additional Accumulated Stock-
Stated Paid-in Earnings holders'
Shares Value Capital (Deficit) Equity
---------- --------- --------- ---------- --------
<S> <C> <C> <C> <C> <C>
Balance at December
31, 1993 67,500,000 $ 283,040 1,898,495 (1,767,567) 413,968
Stock issued in lieu
of annual
compensation 7,500,000 9,375 --- --- 9,375
Contribution of
office space for
the six months
ended June 30, 1994 6,000 6,000
Reverse split of stock
one-for-1,001, and
retirement of
treasury stock (74,926,545) --- (8,557) --- (8,557)
Net loss for year --- --- --- ( 23,449) (23,449)
----------- ------- --------- ----------- --------
Balance at December
31, 1994 73,455 292,415 1,895,938 (1,791,016) 397,337
--------- ------- --------- ----------- -------
Stock issued to
employees
for bonus 300 --- --- --- ---
Net loss for year --- --- --- (320,121) (320,121)
------ --------- --------- ---------- ---------
Balance at December
31, 1995 73,755 $ 292,415 1,895,938 (2,111,137) 77,216
------ --------- --------- ----------- --------
Net income for year --- --- --- 394,413 394,413
------ --------- --------- ----------- -------
Balance at December
31, 1996 73,755 $ 292,415 1,895,938 (1,716,724) 471,629
====== ========= ========= =========== =======
</TABLE>
See accompanying notes to financial statements
Page 17
<PAGE>
BLACK DOME ENERGY CORPORATION
-----------------------------
Statement of Cash Flows
-----------------------
<TABLE>
<CAPTION>
December 31,
----------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $ 394,413 (320,121) (23,449)
Depreciation, depletion, amortization 81,549 199,519 92,219
Cumulative effect of accounting change --- 109,523 ---
(Gain) loss on property dispositions --- --- (142,852)
Write-off non-producing properties --- 15,438 65,955
Office space contributed --- --- 6,000
Changes in assets and liabilities:
(Increase) decrease in receivables (23,527) 18,056 16,444
Increase (decrease) in accounts payable 20,850 (676) (133,552)
(Decrease) increase in other liabilities (662) 662 ---
Decrease (increase) in other assets (300,000) 2,294 729
(Decrease) increase in deferred
compensation (37,500) 60,000 (80,000)
-------- ------ --------
Net cash provided (used) by
operating activities 135,123 84,695 (198,506)
------- ------ ---------
Cash flows from investing activities:
Proceeds from property dispositions --- --- 164,424
Purchase of equipment (20,078) (36,374) (59,698)
Purchase of well equipment inventory,
net of (transfers) to wells and write-off
of obsolete inventory 35,154 8,995 (20,115)
------ ----- --------
Net cash provided by (used in)
investing activities 15,076 (27,379) 84,611
------ -------- ------
Cash flows from financing activities:
Decrease in line-of-credit --- (41,215) (91,263)
(Decrease) in notes payable (84,987) (6,522) ---
Issuance of common stock --- --- 9,375
Acquisition of Treasury stock --- --- (8,557)
------- ------- -------
Net cash (used in) financing activities (84,987) (47,737) 226,787
-------- -------- -------
Increase (decrease) in cash 65,212 9,579 130,412
Cash balance at beginning of year 63,008 53,429 127,357
------ ------ -------
Cash balance at end of year $ 128,220 63,008 257,769
========= ====== =======
</TABLE>
* In 1995, the line-of-credit was converted to a note payable in the amount
of $91,509. See Note 11 to financial statements. Interest of $5,200 was
paid in 1996, $14,250 in 1995 and $17,739 in 1994.
See accompanying notes to financial statements
Page 18
<PAGE>
BLACK DOME ENERGY CORPORATION
-----------------------------
Notes to Financial Statements
December 31, 1996 and 1995
--------------------------
1. Summary of Significant Accounting Policies:
- -----------------------------------------------
Operations of the company
-------------------------
Black Dome Energy Corporation was incorporated as a Colorado corporation on
December 12, 1979 and was in the development stage through 1980. The Company
is involved in exploration for oil and gas and the acquisition, development,
and operation of oil and gas leasehold interests.
During the relevant period, income from oil and gas sales was recognized
as deliveries were made to the purchasers and operating income was recognized
as services were performed in the management and operations of the producing
properties.
At the December 1996 Stockholders' Meeting, the stockholders approved
disposition of its oil and gas properties. In reviewing the Statement of
Financial Accounting Standards No. 121, paragraph 19, it was determined that
no loss will be incurred in the disposition.
Property and equipment and depreciation, depletion, and amortization
--------------------------------------------------------------------
The Company follows the successful-efforts method of accounting for oil and
gas exploration and development costs. Under this method, lease acquisition
costs and exploration and development costs attributable to the finding and
development of proved reserves are capitalized. Exploratory dry hole costs
and other nonproductive oil and gas activities are expensed. Costs of
nonproductive leases are charged to expense when abandoned or substantially
impaired, based upon a property-by-property evaluation. Capitalized costs
relating to producing properties are depleted or depreciated on the
units-of-production method based on the total of proved reserves.
Expenditures for repairs and maintenance costs and delay rentals are charged
to expense as incurred; renewals and betterments are capitalized. The cost
and related accumulated depreciation, depletion, or amortization of property
sold or otherwise retired are eliminated from the accounts; and gains or
losses on dispositions are reflected in the consolidated statement of
operations. Furniture, office equipment, and an automobile are depreciated
using the straight-line method of depreciation over the estimated useful
lives of the assets.
Depreciation of lease and well equipment has been computed by the units of
production method in 1995 and 1996. Depreciation is recorded only on well
equipment that has been placed in service. Depreciation of lease and
well equipment in prior years, beginning in 1980, was computed by the
straight line method. The new method of depreciation was adopted in 1995 to
better recognize the matching of revenues and depreciation expenses and has
been applied retroactively to equipment acquisitions of prior years. The
effect of the change in 1995, was to decrease income by approximately $56,000
(or $.76 per share). The adjustment of $109,523 to apply retroactively
the new method is included in the net loss for 1995. The pro forma amounts
shown on the income statement have been adjusted for the effect of
retroactive application on depreciation.
Inventory
---------
Inventory of lease and well equipment is valued at the lower of cost or
market. Cost is determined by either the specific identification method or
average cost method depending on the nature of the inventory item.
Income taxes
------------
The Company accounts for income taxes using tax-liability method in
accordance with Financial Accounting Standards Board Statement No. 109.
Page 19
<PAGE>
BLACK DOME ENERGY CORPORATION
-----------------------------
Notes to Financial Statements, Continued
December 31, 1996 and 1995
--------------------------
1. Summary of Significant Accounting Policies:
- -----------------------------------------------
Gain (loss) per share
---------------------
Gain (loss) per common share is computed on the basis of the weighted
average number of shares of common stock and common stock equivalents
outstanding during the year. There were 73,755 shares outstanding at
December 31, 1996 and 1995.
Basis of presentation and going concern
---------------------------------------
The accompanying financial statements have been prepared on a going-concern
basis which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. The financial statements do
not include any adjustments relating to the recoverability and
classification of recorded assets amounts or the amount and classification of
liabilities that might be necessary should the Company be unable to
continue as a going concern. The Company's continuation as a going concern
is dependent upon its ability to generate sufficient cash flow to meet
its obligations on a timely basis, to obtain additional financing as may be
required, and to increase sales to a level where the Company becomes
profitable. The Company's management believes it will not be able to attain
these goals. As a result, the Company disposed of its producing properties
at a value in excess of its book value.
At the December 1996 stockholders' meeting, the Board of Directors of the
Company were authorized to arrange a sale of the oil and gas producing
properties and to then proceed with liquidation of the Company.
Subsequent to the year end in February 1997, the Company completed a sale
of its producing properties effective December 31, 1996, at a gross sales
price of $921,250.
The Company has reviewed the Statements of Financial Accounting Standards
No. 121 and 123 and believes that there will be no impact on its financial
statements.
2. Oil and Gas Operations:
- ---------------------------
Information related to the Company's oil and gas operations is summarized
as follows:
<TABLE>
<CAPTION>
December 31,
1996 1995 1994
-----------------------------
<S> <C> <C> <C>
Capitalized costs:
Proved oil and gas properties $906,235 885,006 866,280
------- ------- -------
906,235 885,006 866,280
------- ------- -------
Accumulated depletion, depreciation
and amortization 744,724 664,012 362,781
------- ------- -------
$161,511 220,994 502,499
======= ======= =======
Costs incurred in oil and gas
producing activities:
Exploration costs --- 10,110 216
Production costs 205,146 188,999 337,372
Depreciation, depletion, and
amortization expense 81,549 199,519 92,219
------- ------- -------
$286,695 398,628 429,807
======== ======= =======
Sales of oil and gas, net of
production costs $318,759 $ 3,999 $162,706
======== ======= ========
</TABLE>
Page 20
<PAGE>
BLACK DOME ENERGY CORPORATION
-----------------------------
Notes to Financial Statements, Continued
December 31, 1996 and 1995
--------------------------
3. Income Taxes:
- -----------------
The Company reports income for financial statements and income tax
reporting on the same basis of accounting.
The Financial Accounting Standards Board issued Statement No. 109,
"Accounting for Income Taxes", which employs an asset and liability approach
for income taxes, the objective of which is to recognize the amount of
current and deferred tax payable at the date of the financial statements
using the provisions of enacted tax laws. The Company has applied the
provisions of Statement 109 in the accompanying financial statements.
The deferred tax and related valuation allowance for the loss carryforwards
are calculated at the end of each year as follows:
<TABLE>
<CAPTION>
1996 1995 1994 Prior Years
---- ---- ---- -----------
<S> <C> <C> <C> <C>
Loss Carryforward
for tax purposes $ 1,060,000 1,155,000 945,000 920,000
========= ========= ======= =======
Deferred tax asset
(40 percent) 424,000 462,000 378,000 368,000
Valuation allowance
equal to amount which
the deferred tax
exceeds the deferred
tax liability 124,000 462,000 378,000 368,000
--------- ------- ------- -------
Net deferred tax asset $ 300,000 --- --- ---
========= ======== ======= =======
</TABLE>
Income tax benefit is calculated as follows using a 40% tax rate. Benefit
from estimated gain of $750,000 on sale of all of the corporate oil and gas
properties. An additional benefit of $38,000 was realized on the current
year pretax profits of $94,413, making a total tax benefit of $338,000.
4. Employment Contracts:
- -------------------------
On December 31, 1994, the Company entered into an employment contract with
E.J. Huff as President of Black Dome for the three years ending December 31,
1997 with annual compensation of $100,000 for 1995; $125,000 for 1996 and
$150,000 for 1997. The agreement was terminated effective July 1, 1996.
5. Major Customers:
- --------------------
During the year ended December 31, 1996, sales of oil and gas to three
customers totaled approximately $230,000, $170,000, and $120,000. During the
year ended December 31, 1995, sales of oil and gas to two customers totaled
approximately $295,000 and $52,000. During the year ended December 31, 1994,
sales of oil and gas to two major customers were $336,000 and $154,000.
Page 21
<PAGE>
BLACK DOME ENERGY CORPORATION
-----------------------------
Notes to Financial Statements
December 31, 1996 and 1995
--------------------------
6. Supplementary Oil and Gas Information (Unaudited):
- ------------------------------------------------------
Changes in proved oil and gas reserves:
<TABLE>
<CAPTION>
1996 1995 1994
Oil Gas Oil Gas Oil Gas
(Bbls) (Mcf) (Bbls) (Mcf) (Bbls) (Mcf)
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
Proved reserves:
Balance at
beginning
of year 9,825 1,483,574 9,355 2,031,425 34,990 2,669,089
Properties sold --- --- --- --- (19,247) (227,135)
Additions to and
revisions of
previous
estimates (1,114) 204,210 1,852 (286,289) (3,641) (101,313)
Production (1,724) (237,963) (1,382) (261,562) (2,747) (309,216)
Balance at end ------- ---------- ------- ---------- ------- ----------
of year 6,987 1,449,821 9,825 1,483,574 9,355 2,031,425
<CAPTION>
Proved developed reserves:
<S> <C> <C>
Balance at December 31, 1994 9,355 2,031,425
Balance at December 31, 1995 9,825 1,431,318
Balance at December 31, 1996 6,987 1,380,932
<CAPTION>
Future net cash flows from proved oil and gas reserves:
Future net cash flows at
December 31, 1996
Total Proved
Proved Developed
Reserves Reserves
December 31, -------- ---------
------------
<S> <C> <C>
1997 $ 666,205 $ 666,205
1998 557,683 545,853
1999 501,450 449,042
Remainder 2,090,085 1,924,435
--------- ---------
$ 3,815,423 $ 3,585,535
=========== ===========
<CAPTION>
Present value of future net cash flows (discounted at 10%):
Proved
Proved Developed
December 31, -------- ---------
------------
<S> <C> <C>
1994 1,281,621 1,281,621
1995 1,196,316 1,175,279
1996 2,618,331 2,470,181
</TABLE>
Page 22
<PAGE>
BLACK DOME ENERGY CORPORATION
-----------------------------
Notes to Financial Statements
December 31, 1996 and 1995
--------------------------
6. Supplementary Oil and Gas Information (Unaudited), Continued:
- -----------------------------------------------------------------
Changes in present value of estimated future net cash flows from proved oil
and gas reserves:
<TABLE>
<CAPTION>
December 31,
1996 1995 1994
---------- ----------- -----------
<S> <C> <C> <C>
Present value at beginning of
period $ 1,196,316 $ 1,218,621 $ 2,739,716
Additions and revisions,
net of future estimated
development and productions
costs and net of
properties sold 1,740,774 (18,306) (1,295,389)
Sales of oil and gas, net of
lifting costs (318,759) (3,999) (162,706)
---------- ---------- ----------
Present value at end of period $ 2,618,331 $ 1,196,316 $ 1,281,621
=========== =========== ===========
<CAPTION>
Summary of oil and gas producing activities on the basis of Reserve
Recognition Accounting (RRA):
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Additions and revisions to present value
(discounted at 10%) of estimated future
net revenues of proved oil and gas reserves:
Additions, net of estimated future
development and production costs $ --- $ 21,037 $ ---
Revisions to estimates of reserves
proved in prior years:
Changes in prices, net of production
costs and taxes 1,086,180 31,256 (66,517)
Other revisions (86,695) (142,649) (217,515)
Accretion of discount 711,290 86,357 (1,011,337)
--------- --------- -----------
Total additions and revisions 1,740,774 (3,999) (1,295,389)
Less evaluated acquisition, exploration
and development costs incurred --- --- ---
Additions and revisions under evaluated
costs 1,740,774 (3,999) (1,295,389)
Provision for income taxes --- --- ---
--------- ------- -----------
Results of oil and gas producing activities
on the basis of reserve recognition
accounting $1,740,774 $(3,999) $(1,295,389)
========== ======== ============
</TABLE>
Page 23
<PAGE>
BLACK DOME ENERGY CORPORATION
-----------------------------
Notes to Financial Statements, Continued
December 31, 1996 and 1995
--------------------------
6. Supplementary Oil and Gas Information (Unaudited), Continued:
- -----------------------------------------------------------------
Changes in prices subsequent to December 31, 1996, resulted in a decrease
in the above valuation as of the date of the report resulting in an adjusted
present value of $898,494, resulting primarily from a reduction in gas prices
from $4.04 to $2.00 per MCF.
The following accounting policies have been used in preparing the
Reserve Recognition Accounting (RRA) presentation. The summary of oil and
gas producing activities on the basis of RRA was prepared based on the rules
of the Securities and Exchange Commission (SEC).
Under RRA, earnings are recognized as proved reserves are found based on
the estimated present value of such reserves, computed as described below.
Subsequent revisions to the RRA valuation of proved reserves are included
in earnings as they occur. Proved reserves are those quantities of oil and
gas which can be expected, with little doubt, to be recoverable commercially
at current prices and costs under existing operating methods.
The proved reserves and related valuations were computed by J. R. Albi, Jr.
in accordance with the rules of the SEC. Estimated future net revenues were
computed by applying current prices received by the Company to estimated
future production of reserves, less estimated future development and
production costs and windfall profit taxes based on current costs. A
discount factor of 10% was applied to the estimated future revenues to
compute the estimated present value of proved oil and gas reserves. This
valuation procedure does not necessarily result in an estimate of the fair
market value of the Company's oil and gas properties.
Totals of proved reserves are inherently imprecise estimates and are
continually subject to revision based on production history, results of
additional exploration and development, price changes, and other factors.
The pretax income (loss) reflected in the primary financial statements for
oil and gas producing activities corresponds to the pretax income (loss) on
the basis of Reserve Recognition Accounting of $1,740,774 in 1996, $128,323
in 1995 and $(1,202,954) in 1994, respectively.
"Additions to reserves" are the result of current acquisitions and
development activities. Increases in prices are the approximate effect on
the RRA valuation of proved reserves due to price changes. Other revisions
represent the net effect of all revisions to estimated quantities of proved
reserves. Accretion of discount was computed by multiplying 10% times the
present value of future net revenues as of the beginning of the year,
adjusted to reflect downward revisions.
Evaluated acquisition, exploration, development, and production costs
include current and estimated future costs associated with the current year
reserve additions. Such expenses include property acquisitions, well costs,
lease rentals, and abandonments. The cost of acquiring unproved properties
and drilling exploratory wells are deferred until the properties are
evaluated and determined to be either productive or nonproductive, at which
time they are charged to expense. There were no deferred acquisition and
exploration costs at December 31, 1996 or 1995.
The provision for income taxes is based on the "liability" method computed
by applying the current statutory income tax rate to the difference between
the year end RRA valuation of proved reserves and the tax basis in the
properties less estimated investment tax credits and statutory depletion
associated with future development costs.
7. Commitments and Contingencies:
- ----------------------------------
There were no commitments or contingencies known to management at December
31, 1996.
Page 24
<PAGE>
BLACK DOME ENERGY CORPORATION
-----------------------------
Notes to Financial Statements, Continued
December 31, 1996 and 1995
--------------------------
8. Environmental Liabilities:
- ------------------------------
The company's oil and gas operations are subject to various federal, state,
and local laws and regulations regarding environmental and ecological
matters. These laws and regulations, among other things, impose liability
on the Company, as a lessee under an oil and gas lease for the cost of
pollution clean-up resulting from operations, subject the lessee to liability
for pollution damages, require suspension or cessation of operations in
affected areas and impose restrictions on the injection of liquids into
subsurface aquifers that may contain groundwater.
As of December 31, 1996, the Company was not aware of any environmental
claims which would have a material impact upon the Company's financial
position or results of operations.
9. Subsequent events:
- ----------------------
In February 1997, the Company sold substantially all of its oil and gas
properties at a price of $921,250. At the shareholders' meeting in December
1996, the Board of Directors was directed to locate a buyer for the oil and
gas properties and to subsequently liquidate the Company. The Board of
Directors estimates a period of three to nine months to complete the
liquidation.
10. Line-of-Credit and Bank Debt:
- ----------------------------------
In October, 1992, as a source for additional working capital, the Company
obtained a $300,000 line-of-credit with a lending institution, secured with
10 producing natural gas wells in Clark County, Kansas. As of December 31,
1994, a total of $132,724 was borrowed from the line-of-credit. During 1995,
the Company reconstructed the debt obligations associated with the
outstanding balance of the line-of-credit. As of December 31, 1995, the
Company had bank debt obligations of $84,987 tied to an 8.5% note which
matures on March 31, 1997. The note was paid in full in 1996.
11. Value of Office Space and Rental Expense:
- ----------------------------------------------
During the year ended December 31, 1993, and for the six months ended June
30, 1994, the Company was provided office space by the Company President.
The value of the space provided in amounts of $12,000 in 1993, and $6,000 in
1994, have been recorded as an expense in the financial statements for those
years and as a capital contribution.
Page 25
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING
- ------- -----------------------------------------------------------
AND FINANCIAL DISCLOSURE.
-------------------------
None applicable.
PART III
--------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
- -------- ---------------------------------------------------
The Company's bylaws provide that the Board of Directors shall consist
of not less than three nor more than five members. All members of the
Board of Directors will hold office until the dissolution of the Company is
completed, or until their earlier death, resignation or removal.
Executive Officers are elected at the first meeting of the Board of
Directors following the Annual Meeting of Shareholders. It is anticipated
that all of the current officers and directors of the Company will continue
to serve in their present capacities until such time as the dissolution of
the Company is completed.
The following table sets forth the name and age of each Executive
Officer and/or Director, indicating all positions and offices with the
Company presently held by him, and the period during which he has served as
an officer or as a member of the Board of Directors:
<TABLE>
<CAPTION>
Period Served
Other Positions and as Officer
Offices Held with or Director
Name Age the Company of the Company
----------- --- ----------------- --------------
<S> <C> <C> <C>
Edgar J. Huff 73 Chairman of the Board, President and
President and Director, December
Treasurer 1979 to present;
Treasurer,November
1984 to Present
Joseph R. Albi, Sr. 65 None Director, February
1985 to present
Robert C. Huff 46 None Director, November
1987 to present;
Secretary March 1985
to September 2, 1994
James E. Huff 42 None Director, November
1987 to present
Tish M. Hartman 36 Secretary - September 2, 1994 to
Present
</TABLE>
The principal occupation and employment during the last five years and
business experience of each Executive Officer and/or Director of Black Dome
Energy Corporation, are set forth below.
Page 26
<PAGE>
Edgar J. Huff: President and Chairman of the Board of Directors of the
Company since December, 1979, and Treasurer since November, 1984. Mr. Huff
is also the President and Chief Executive Officer and is one of the majority
stockholders of Clayton Corporation, a family-owned independent oil and gas
company since January, 1972. Mr. Huff is a graduate of Texas Tech University
with a B.S. degree in Petroleum Engineering, and has been continuously active
in the oil and gas industry as a consulting geologist, petroleum engineer,
independent oil operator, Company President and major stockholder of several
oil and gas companies during the period of time between 1949 to the present.
Joseph R. Albi, Sr.: Member of the Board of Directors of the Company since
February, 1985. Mr. Albi is a graduate of Regis College with a B.S. degree
in Business Administration. He has owned and operated a Denver real estate
development and corporate financial consulting business from 1965 to the
present. Mr. Albi is a former member of the Colorado House of
Representatives, a past Vice President of the Rocky Mountain Better
Business Bureau and was selected by presidential appointment to be the
Federal Region VIII Administrator for the American Revolution Bicentennial
Administration. Mr. Albi served as a member on the Board of Directors of
the Denver Metro Sewer District #1 from 1979 to 1984, and on the Board of
Directors of Energy Resources of North Dakota, Inc. from 1980 until 1985.
Mr. Albi is retired with the rank of Brigadier General USAF Reserve where his
position was Mobilization Assistant to the USAF Chief of Security Police.
Robert C. Huff: Member of the Board of Directors of the Company since
November 1987. Mr. Huff held the position of Secretary of the Company from
March 1985 to September 2, 1994. From June of 1979 through December of 1991,
he was employed in various capacities (most recently as Manager, Facilities
Operations) for Atlantic Richfield Company. From December, 1991 through
November 1993, Mr. Huff was the President and owner of Clayton Consulting,
Inc., a privately-held facilities management consulting firm. From November
of 1993 to October 1995, Mr. Huff served as Facilities Manager with the
Dial Corporation located in Scottsdale, Arizona. Since October 1995 to the
present time, he has been and currently is employed by Hilti Corporation, an
international company with western hemisphere headquarters in Tulsa,
Oklahoma, as Director of Administrative Operations. He is a Certified
Facilities Manager certified by the International Facilities Management
Association ("IFMA"). Mr. Huff is a 1972 graduate of the University of
Colorado with a degree in business, and a 1974 graduate of Colorado State
University with a degree in Industrial Construction Management.
James E. Huff: Member of the Board of Directors of the Company since
November 1987. Mr. Huff worked continuously and extensively in the oil and
gas industry from 1977 to 1986, first as a landman for a major oil and gas
company, and later as an independent landman, consultant and manager of his
own exploration office in North Dallas, Texas. From June 1986 to February
1990 Mr.Huff was employed by Electronic Data Systems Corporation as a
regional marketing director, southwestern region USA, in Plano, Texas.
Since February 1990 Mr. Huff has been employed by Computer Science
Corporation in the Dallas, Texas area. In September 1994, Mr. Huff accepted
a transfer to Houston, Texas where he opened the CSC Consulting office. At
the present time, he is a partner in CSC Consulting and Manager of the CSC
Consulting Houston, Texas office. Mr. Huff graduated from the University of
Colorado in 1977 with a degree in business administration.
Page 27
<PAGE>
Tish M. Hartman: Ms. Hartman has been employed in the oil and gas industry
with Black Dome Energy Corporation since April 18, 1985 in the capacity of
Administrative Assistant to Edgar J. Huff. Ms. Hartman held the position of
Assistant Corporate Secretary from July 22, 1985 to September 1, 1994, and
has held the position of Corporate Secretary from September 2, 1994 through
the present. Ms. Hartman does not perform policy making or similar functions
for the Company.
There is no family relationship between any Director or nominee for
Director of the Company and any other Director or Executive Officer of the
Company, except that Messrs. Robert C. Huff and James E. Huff are brothers
and the children of Edgar J. Huff.
DIRECTORS' MEETINGS
During 1996 there were four Directors' meetings held. Each Director
was paid $100 per day for his attendance at such meetings.
ITEM 11. EXECUTIVE COMPENSATION.
- -------- -----------------------
Executive Compensation
- ----------------------
The following tabular information includes all plan and non-plan
compensation paid to the Company's president and all other executive officers
whose total annual salary and bonus is $100,000 or more for the Company's
last three completed fiscal years:
<TABLE>
<CAPTION>
SUMMARY COMPENSATION
Annual Comp. Long-Term Comp.
--------------------------- -----------------------
Awards Payouts
Other Rest. Securities
Name and Annual Stock underlying LTIP All
Principal Salary Bonus Comp. Awards Options Payouts Other
Position Year ($) ($) ($) ($) (#) ($) Comp.
- --------- ---- ------ ----- ------ ------ -------- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Edgar J.
Huff 1996 62,500* 0 0 0 0 0 $100,000(1)
(President,
CEO, 1995 100,000* 0 0 0 0 0 0
Treasurer
and 1994 60,000 9,600(2) 0 0 0 0 0
Chairman
of the (3)
Board)
Joseph R.
Albi, 1996 0(4) 0 0 0(4) 0 0 0
Jr.
(Exec.
Vice 1995 0(4) 0 0 0(4) 0 0 0
President) 1994 35,000(4) 0 0 3,023(4) 0 0 0
</TABLE>
* See Employment Contracts and Termination of Employment and Change
of Control Arrangements (Page 31).
(1) During the fiscal year ended December 31, 1996, Mr. Huff received
payment of $100,000 out of a total of $222,500 in deferred compensation that
was due to him for services performed during previous years. The remaining
$122,500 was paid to him subsequent to the fiscal year end. No further
amounts are due and Mr. Huff has agreed to serve without charge until the
Company's dissolution has been completed.
Page 28
<PAGE>
(2) Mr. Huff's Employment Contract dated May 11, 1991 also provides
for the payment of an annual bonus in the amount of $9,600. Mr. Huff's
1993 earned bonus of $9,600 was not paid as of December 31, 1993; however, it
was paid during fiscal year 1994. During fiscal 1994, Mr. Huff received the
1993 earned bonus which was paid in stock and cash. The earned bonus of
$9,600 for 1994 due in January 1995 was paid subsequent to December 31,
1996.
(3) In 1994, the Board of Directors of the Company authorized the
issuance of 7,500,000 shares of no par value restricted common stock, plus a
cash payment of $225.00 to Mr. Huff as payment of the contractual bonus of
$9,600 earned by Mr. Huff for the calendar year 1993. The Board of
Directors determined the price of $0.00125 per share to be a fair and
reasonable value to the Company for such shares when considering, among
other things, the current net tangible book value of the Company's assets,
its existing debt obligations, the current lack of any existing trading
market for the Company's shares, the absence of any market makers for the
Company's shares, the lack of any ascertainable market value for the
Company's common stock, and the restricted nature of the shares to be issued.
(4) On July 1, 1991, the Company entered into a three-year Employment
Contract with Mr. Joseph R. Albi, Jr. which provided for annual compensation
of $60,000 per year ($5,000/month) and the issuance of 7,256,000 shares of
the restricted no par value Common Stock of the Company valued at $.00125
per share or $9,070. The shares were restricted for the term of Mr. Albi's
contract which began on July 1, 1991 and ended on June 30, 1994 and were
forfeitable as follows: If Mr. Albi left the employ of the Company prior to
June 30, 1992, all of the shares would be forfeited; prior to June 30, 1993,
two-thirds of the shares would be forfeited; and prior to June 30, 1994, one-
third of the shares would be forfeited. Mr. Albi left the employ of the
Company on June 30, 1994 and became vested in the entire 7,256,000 shares of
restricted no par value common stock of the Company.
Page 29
<PAGE>
Compensation of Directors
- -------------------------
Standard Arrangements. Directors of the Company receive a fee of
$100 per meeting for their attendance at meetings of the Company's Board of
Directors, and are entitled to reimbursement for reasonable travel expenses.
During 1996, an aggregate of $1,300 was paid to all of the Company's
Directors for their attendance at meetings.
Other Arrangements. There are no other arrangements pursuant to which
the Company's Directors receive compensation from the Company for services
as Directors.
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
Individual Grants Pot. Realizable
----------------------------
Number of Value at
Securities % of Total Assumed Rates of
Underlying Options Stock Price App.
Options Granted to Exercise Exp. for Opt. Term.
Name Granted Employees Price Date 5%($) 10%($)
- ------------ -------- ---------- -------- ----- -------- ------
Edgar J. Huff 0(1) 0 0 0 0 0
(1) No stock options have been issued by the Company during 1996. As
of December 31, 1996, the Company does not have a stock option plan
available to any employee and/or director of the Company.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options at Options at
Shares 12/31/96 12/31/96
Acquired on Value Exercisable/ Exercisable/
Name Exercise(#) Realized($) Unexercisable Unexercisable
Edgar J. Huff 0(1) 0 0 0
(1) No stock options were exercised during fiscal year 1996. As of
December 31, 1996, the Company does not have a stock option plan available to
any employee and/or director of the Company.
As of December 31, 1996, the Company does not have an Incentive Stock
Option Plan available to its employees and/or directors.
Page 30
<PAGE>
LONG TERM INCENTIVE PLAN ("LTIP") AWARDS TABLE
The following table sets forth each award made to a named executive
officer in the last completed fiscal year under any LTIP:
LONG-TERM INCENTIVE PLANS - AWARDS IN LAST FISCAL YEAR
Estimated Future Payouts
under Non-Stock Price-Based Plans
---------------------------------
(a) (b) (c) (d) (e) (f)
Number of Performances or
Shares,Units Other Period Until
or Other Maturation or Threshold Target Maximum
Name Rights (#) Payout ($ or #) ($ or #) ($ or #)
- ------------- ----------- --------------- --------- -------- --------
Edgar J. Huff -0- N/A -0- -0- -0-
On May 1, 1993, the Board of Directors of the Company adopted an IRS
approved (Model Form 5035-A) Salary Deferred Simplified Employee Pension Plan
(SAR-SEP) allowing eligible salaried employees to contribute (through
elective deferrals) a portion of their salary on a before tax basis to
individual IRA accounts set up on behalf of the Company. Should employee
contributions be such that the Plan is deemed "top-heavy" for any Plan year
(as defined by the IRS), the Company will be required to contribute an amount
to non-key employees (not to exceed 3% of their annual compensation) for that
plan year. During the fiscal year ended December 31, 1996, the Company
contributed $666 to the IRA accounts of non-key employees to satisfy
"top-heavy" Plan requirements for the year 1996.
Other Compensation
- ------------------
No other compensation (not covered by the above categories)was paid
or distributed during the last fiscal year to any executive officer of the
Company.
Employment Contracts and Termination of Employment and Change of Control
- ------------------------------------------------------------------------
Arrangement
- -----------
Effective December 31, 1994, the Board of Directors approved a new
three-year employment agreement with the President of the Company, Mr. Edgar
J. Huff, for his continued services. The Agreement became effective January
1, 1995. It is a standard employment agreement with standard disability,
death and term clauses, providing for a deferred salary of $100,000 for the
year 1995 to be paid on January 5, 1996, a deferred salary of $125,000 for
the year 1996 to be paid on January 5, 1997 and a deferred salary of $150,000
for the year 1997 to be paid on January 5, 1998. The agreement further
provides for the Company to carry insurance on the life of Mr. Huff in the
amount of $250,000. Premiums are to be paid by the Company and such sum
shall be payable to the Company in the event of Mr. Huff's demise during the
term of the Employment Agreement. The Employment Agreement further provides
that, should there not be sufficient cash each year as provided in the
agreement so that the lump sum is not available, then Mr. Huff may be paid
with any class of the Company's stock as may be mutually agreed between Mr.
Huff and the Company; provided, however, that there shall be deducted from
all compensation paid to Mr. Huff, such sums, including, but without
limitation to, social security, income tax withholding and unemployment
insurance, as the Company is by law obligated to do. On June 30, 1996, the
subject Employment Agreement was terminated at Mr. Huff's request and he has
Page 31
<PAGE>
agreed to continue to serve as the Company's President without charge until
such time as the dissolution of the Company has been completed.
The Company has no compensatory plan or arrangement, including
payments to be received from the Company, with respect to any individual
named above for the latest or the next preceding fiscal year, if
such plan or arrangement results or will result from the resignation,
retirement or any other termination of such individual's employment with the
Company, or from a change in control of the Company or a change in the
individual's responsibilities following a change in control.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
- -------- ---------------------------------------------------
MANAGEMENT.
-----------
The following table sets forth as of March 21, 1997, information with
respect to the ownership of the Company's No Par Value Common Stock by each
person, including any "group" as that term is defined in Section 13(d) (3)
of the Securities Exchange Act of 1934, known by the Company to own
beneficially more than five percent of its outstanding equity securities,
and by its Directors and Officers individually and by its Officers and
Directors as a group. Information as to beneficial ownership is based upon
statements furnished to the Company by such persons.
Page 32
<PAGE>
<TABLE>
<CAPTION>
Amount and
Nature of
Name and Address Beneficial Percent
of Beneficial Owner Title of Class Ownership(1) of Class
- -------------------- -------------- ------------ --------
<S> <C> <C> <C>
Edgar J. Huff(2) Common Stock 43,698 59.25%
1536 Cole Blvd., Ste 325 (No Par Value)
Golden, CO 80401
James E. Huff(3) Common Stock 1,099 1.49%
2414 Briar Ridge Dr. (No Par Value)
Houston, TX 77057
Robert C. Huff(3) Common Stock 999 1.35%
9930 S. 87th E. Ave. (No Par Value)
Tulsa OK 74133
Joseph R. Albi, Sr.(3) Common Stock 300 .41%
P.O. Box 5271, T.A. (No Par Value)
Denver, CO 80217
Tish M. Hartman(4) Common Stock 400 .54%
1536 Cole Blvd., Ste 325 (No Par Value)
Golden, CO 80401
Officers and/or Common Stock 46,496 63.04%
Directors as a (No Par Value)
Group (5 persons)
</TABLE>
(1) All beneficial owners have sole voting and investment power
over shares indicated in the table.
(2) President, Treasurer and Director of the Company.
(3) Director of the Company
(4) Corporate Secretary
Edgar J. Huff currently controls the Company by virtue of his ownership
of 59.25% of the Company's outstanding Common Stock. There is no arrangement
known to the Company, including any pledge by any person of securities of
the Company or any of its parents, the operation of which may at a
subsequent date result in a change in control of the Company.
Page 33
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
- -------- -----------------------------------------------
Transactions with Management and Others
- ---------------------------------------
No Director or Executive Officer of the Company, nominee for election
as a Director, security holder who is known to the Company to own of record
or beneficially more than 5% of any class of the Company's voting
securities, or any relative or spouse of any of the foregoing persons, or
any member of the immediate family of any such persons, has had any
transaction, or series of similar transactions, since the beginning of the
Company's last fiscal year, or has any currently proposed transaction, or
series of similar transactions, to which the Company was or is to be a party,
in which the amount involved exceeds $60,000 and in which any of such
persons had or will have any direct or indirect material interest.
Related Party Transactions
- --------------------------
All cash and note obligations to Clayton Corporation, a company
controlled by Edgar J. Huff, from Black Dome Energy Corporation were paid to
Clayton Corporation in fiscal 1994.
Certain Business Relationships
- ------------------------------
No director or nominee for director is, or during the last fiscal year
has been, an executive officer of, or owns, or during the last fiscal year
has owned, of record or beneficially in excess of ten percent equity interest
in, any business or professional entity that has made during the Company's
current fiscal year, payments to the Company for property or services in
excess of five percent of (i) the Company's consolidated gross revenues for
its last full fiscal year, or (ii) the other entity's consolidated
gross revenues for its last full fiscal year.
No director or nominee for director is, or during the last fiscal year
has been, an executive officer of or owns, or during the last fiscal year
has owned, of record or beneficially in excess of ten percent equity interest
in, any business or professional entity to which the Company has made during
the Company's last full fiscal year, or proposes to make during the Company's
current fiscal year, payments for property or services in excess of five
percent of (i) the Company's consolidated gross revenues for its last full
fiscal year, or (ii) the other entity's consolidated gross revenues for its
last full fiscal year.
No director or nominee for director is, or during the last fiscal
year has been, an executive officer of, or owns, or during the last fiscal
year has owned, of record or beneficially, in excess of ten percent
equity interest in, any business or professional entity to which the Company
was indebted at the end of the Company's last full fiscal year in the
aggregate amount in excess of five percent of the Company's total
consolidated assets at the end of such fiscal year.
No director or nominee for director is, or during the last fiscal
year has been, a member of, or of counsel to, a law firm that the Company
has retained during the last fiscal year or proposes to retain during the
current fiscal year where the dollar amount of such fees paid to such law
firm exceeded five percent of such law firm's gross revenues for its past
fiscal year.
Page 34
<PAGE>
No director or nominee for director is, or during the last fiscal year
has been, a partner or executive officer of any investment banking firm that
has performed services for the Company, other than as a participating
underwriter in a syndicate, during the last fiscal year or that the Company
proposes to have performed during the current year.
There are no other relationships that the Company is aware of between
a director or nominee for director and the Company that are substantially
similar in nature and scope to those relationships listed above.
Indebtedness of Management
- --------------------------
No director or executiveofficer of the Company, nominee for election
as a director, any member of the immediate family of such persons,
corporation or organization (other than the Company or a majority-owned
subsidiary of the Company) of which any of such persons is an executive
officer or partner or is, directly or indirectly, the beneficial owner of
10% or more of any class of equity securities, or any trust or other estate
in which any of such persons has a substantial beneficial interest or as to
which such person serves as a trustee or in a similar capacity, has been
indebted to the Company at any time since the beginning of the Company's
last fiscal year in an amount in excess of $60,000.
Page 35
<PAGE>
PART IV
-------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
- -------- ------------------------------------------------------
FORM 8-K.
---------
a) (1) The following financial statements are filed as part of this
report:
Report of Independent Certified Public Accountants
Financial Statements:
Balance Sheets, December 31, 1996 and 1995
Statements of Operations for the years ended December 31,
1996, 1995 and 1994
Statement of Shareholders' Equity for the years ended
December 31, 1996, 1995 and 1994
Statement of Cash Flows for the years ended December 31,
1996, 1995 and 1994
Notes to Financial Statements
Schedule V - Property, Plant and Equipment
Schedule VI - Accumulated Depreciation, Depletion and
Amortization of Property, Plant and Equipment
Schedules other than those listed above have been omitted
since they either are not required or are not applicable.
Sequential
(a) (3) Exhibits: Page Number
--------- -----------
3 Articles of Incorporation and
Bylaws (incorporated by
reference to Registration
Statement on Form S-1, SEC
File No. 2-67734) --
24 Consent of Joseph R. Albi, Jr. 38
27 Finacial Data Schedule 39
(b) No reports on Form 8-K were filed by Black Dome during the last
quarter of the period covered by this report.
Page 36
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated this 28th day of March, 1997.
(Registrant) BLACK DOME ENERGY CORPORATION
BY(Signature) /s/Edgar J. Huff
(Name and Title) Edgar J. Huff, President,
Chief Executive Officer,
Chief Financial Officer and
Principal Accounting Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons on behalf of the Company
and in the capacities and on the dates indicated.
Name and Capacity
BY(Signature) /s/Edgar J. Huff
(Date) March 28, 1997
(Name and Title) Edgar J. Huff, Director
BY(Signature) /s/Joseph R. Albi,Sr.
(Date) March 28, 1997
(Name and Title) Joseph R. Albi, Sr., Director
BY(Signature) /s/Robert C. Huff
(Date) March 28, 1997
(Name and Title) Robert C. Huff, Director
BY(Signature) /s/James E. Huff
(Date) March 28, 1997
(Name and Title) James E. Huff, Director
Page 37
<PAGE>
JOSEPH R. ALBI, JR.
P.O. BOX 26022
HIGHLANDS RANCH, CO 80163-0022
March 30, 1997
I, Joseph R. Albi, Jr., hereby consent to the use of and/or reference to my
report estimating Black Dome Energy Corporation's reserves and revenues as of
January 1, 1997 in the Annual Report on Form 10-K of Black Dome Energy
Corporation. I also consent to the reference to my name in the Annual Report
on Form 10-K. The estimated reserves and revenues attributable to certain
Black Dome Energy Corporatin leasehold presented in my report were based on
an engineering evaluation utilizing data supplied by Black Dome Energy
Corporation.
Sincerely,
BY(Signture) /s/ Joseph R. Albi, Jr.
Joseph R. Albi, Jr.
B.S. Petroleum Engineering
Colorado School of Mines, 1982
M.S. Mineral Economics
Colorado School of Mines, 1986
Page 38
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 128,220
<SECURITIES> 0
<RECEIVABLES> 103,657
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 231,877
<PP&E> 161,511
<DEPRECIATION> 59,481
<TOTAL-ASSETS> 703,160
<CURRENT-LIABILITIES> 231,531
<BONDS> 0
0
0
<COMMON> 73,755
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 703,160
<SALES> 605,454
<TOTAL-REVENUES> 624,314
<CGS> 0
<TOTAL-COSTS> 529,901
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,200
<INCOME-PRETAX> 56,413
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 338,000
<CHANGES> 0
<NET-INCOME> 394,413
<EPS-PRIMARY> 5.35
<EPS-DILUTED> 5.35
</TABLE>
