U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB/A
(Amendment No. 1)
X Annual report under Section 13 or 15(d) of the Securities Exchange Act of 1934
(No fee required, effective October 7, 1996.)
For the fiscal year ended December 31, 1996.
Transition report under Section 13 or 15(d) of the Securities Exchange Act of
1934 (No fee required)
For the transition period from _________ to ____________.
Commission File Number: 0-9435
ENERGY PRODUCTION COMPANY
----------------------------------------------
(Name of Small Business Issuer in Its Charter)
Colorado 84-0811034
-------- ----------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1703 Edelweiss Drive
Cedar Park, Texas 78613
----------------- -----
(Address of Principal Executive Offices) (Zip Code)
(512) 250-8692
--------------
(Issuer's Telephone Number, Including Area Code)
Securities registered under Section 12(b) of the Exchange Act:
(None)
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, $.01 Par Value
----------------------------
Title of Class
Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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 No X
Check if disclosure of delinquent filers in response to Item 405 of Regulation
S-B is not contained in this form, and no disclosure will be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [ X ]
The issuer's revenues for its most recent fiscal year were $2,000.00.
As of June 1, 1997, 30,961,778 shares of the Registrant's common stock, par
value $.01 per share, were outstanding. The aggregate market value of the voting
stock held by non-affiliates of the Registrant at June 1, 1997, was $1,423.38.
Documents Incorporated by Reference: None.
<PAGE>
Preliminary Note
This Amendment No. 1 ("Amendment No. 1") to Form 10-KSB amends the original
report ("Original Report") on Form 10-KSB for the fiscal year ended December 31,
1996 for Energy Production Company, a Colorado corporation (the "Company"). This
Amendment No. 1 is filed to disclose the steps taken by the Company to satisfy
any possible failure of the Company to properly approve the issuance by the
Company of 44,038,222 shares of the Company's common stock, par value $0.01 per
share ("Common Stock"), to Bass Petroleum, Inc., a Texas corporation ("BPI"), in
consideration of the cash payment by BPI of $5,000, and assignment by BPI to the
Company of certain oil and gas properties located in Texas, which the Company
believes are valued at $40,000 (the "Stock Issuance"). The Company and BPI have
agreed to rescind the Stock Issuance. Accordingly, all consideration given by
BPI to the Company has been returned to BPI and the certificate representing
44,038,222 shares of Common Stock has been surrendered by BPI to the Company.
This Amendment No. 1 deletes all references to the Stock Issuance, the
consideration received by the Company from BPI and the increase in issued and
outstanding shares of Common Stock caused by the Stock Issuance. The financial
statements attached to this Amendment No. 1 have also been revised to delete
such references. This Amendment No. 1 also more accurately describes the $20,000
Management Fee paid to Robert Watson, Inc. in light of the rescission of the
Stock Issuance.
PART I
ITEM 1 - BUSINESS
General
The Company is an independent oil and gas producer which was formed in March
1980 for the primary purpose of identifying, acquiring, revitalizing, and
enhancing the production of mature oil and natural gas fields located primarily
in the mid-continent and Rocky Mountain region. Since inception, the Company has
been a developmental stage company with no material operations that has devoted
substantially all of its efforts to establishing its business, and beginning in
December 1986, the Company sold all of its oil and gas assets and operations.
Since December 1986, the Company has not engaged in any oil and gas operations,
nor does the Company presently have the requisite personnel, equipment, or
finances to operate. Since the 1986 fiscal year, as a primary result of the
Company's lack of business operations, the Company has failed to file the
required reports and other filings required to be filed with the Securities and
Exchange Commission in accordance with the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). The Company intends to become current with regard
to its reporting requirements pursuant to the applicable provisions of the
Exchange Act, and through strategic acquisitions of identified oil and gas
properties, the Company believes that it will be able to commence business
operations although its planned operations have not yet commenced.
<PAGE>
The principal offices of the Company are located at 1703 Edelweiss Drive,
Cedar Park, Texas 78613, and its telephone number is (512) 250-8692.
Recent Developments
In May 1997, the controlling shareholder of the Company sold 16,728,000 shares
of Common Stock to BPI in consideration of the cash payment of $45,000 by BPI.
To date, BPI owns an aggregate of 16,728,000 shares of the Company's Common
Stock, constituting approximately 54% of all of the issued and outstanding
shares of Common Stock of the Company.
Business Strategy
The Company intends to merge with or acquire a company actively involved in oil
and gas exploration, development and operations with existing revenues and
operating properties. Once such acquisition or merger is complete, the Company's
activities will focus on the acquisition of producing oil and gas properties.
Such acquisitions will be based on an analysis of the properties' current cash
flow and the Company's ability to profit from the acquisition. The Company's
acquisitions will include leasehold and other working interests in exploration
areas.
The Company will also seek to identify promising areas for the exploration of
oil and gas through the use of outside consultants and the expertise of the
Company. This identification will include collecting and analyzing geological
and geophysical data for exploration areas. Once promising properties are
identified, the Company will attempt to acquire the properties either for
drilling oil and natural gas wells, using independent contractors for drilling
operations, or for sale to third parties.
Market for Oil and Gas
The demand for oil and gas is dependent upon a number of factors, including the
availability of other domestic production, crude oil imports, the proximity and
size of oil and gas pipelines in general, other transportation facilities, the
marketing of competitive fuels, and general fluctuations in the supply and
demand for oil and gas. The Company has not generated any revenues from the sale
of oil and gas during its past three fiscal years. The Company intends to sell
of all of its production to traditional industry purchasers, such as pipeline
and crude oil companies, who have facilities to transport the oil and gas from
the wellsite.
<PAGE>
Competition
The oil and gas industry is highly competitive in all aspects. The Company will
be competing with major oil companies, numerous independent oil and gas
producers, individual proprietors, and investment programs. Many of these
competitors possess financial and personnel resources substantially in excess of
those which are available to the Company and may, therefore, be able to pay
greater amounts for desirable leases and define, evaluate, bid for and purchase
a greater number of potential producing prospects than the Company's own
resources permit. The Company's ability to generate resources will depend not
only on its ability to develop existing properties but also on its ability to
identify and acquire proven and unproven acreage and prospects for further
exploration.
Environmental Matters and Government Regulations
The Company's operations are subject to numerous federal, state and local laws
and regulations controlling the discharge of materials into the environment or
otherwise relating to the protection of the environment. Such matters have not
had a material effect on operations of the Company to date, but the Company
cannot predict whether such matters will have any material effect on its capital
expenditures, earnings or competitive position in the future.
The production and sale of crude oil and natural gas are currently subject to
extensive regulations of both federal and state authorities. At the federal
level, there are price regulations, windfall profits tax, and income tax laws.
At the state level, there are severance taxes, proration of production, spacing
of wells, prevention and clean-up of pollution and permits to drill and produce
oil and gas. Although compliance with their laws and regulations has not had a
material adverse effect on the Company's operations, the Company cannot predict
whether its future operations will be adversely effected thereby.
Employees
At December 31, 1996, the Company had three employees, and the Company currently
has one employee.
ITEM 2 - PROPERTIES
The Company owns no significant properties other than oil and gas properties.
The Company owned no oil and gas properties during the 1994, 1995 and 1996
fiscal years. As of June 1, 1997, the Company had no sales, no drilling
activity, no operations, no production and no delivery commitments.
The office space for the Company's executive offices at 1703 Edelweiss Drive,
Cedar Park, Texas 78613, is currently provided by the majority shareholder at no
cost to the Company.
<PAGE>
Revenues Reported To Other Agencies
The Company filed no estimates of total, proved net oil or gas reserves and
included no such estimates in any reports to any federal authority or agency
since the beginning of the last fiscal year.
Production
During the last three fiscal years, the Company had no operations and no
production.
Productive Wells And Acreage
For the last three fiscal years, the Company had no productive wells or acreage.
Underdeveloped Acreage
For the last three fiscal years, the Company had no underdeveloped acreage.
Drilling Activity
The Company had no drilling activity in each of the last three fiscal years.
Present Activities
As of June 1, 1997, the Company had no drilling, waterflood installation,
pressure maintenance operations, or other related operations.
Delivery Commitments
As of June 1, 1997, and for the last three years, the Company had no delivery
commitments.
PART II
ITEM 5 - MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock was quoted in the NASDAQ System until February 22,
1984, when the Company's Common Stock was deleted from the NASDAQ System due to
an insufficient number of active market makers. Since that date, the Company's
Common Stock has experienced only limited trading and its prices are quoted
irregularly in the National Quotation Bureau's "Pink Sheets". Information
regarding bid prices and closing bids has been obtained from the National
Quotation Bureau. The following quotations, where quotes were available, reflect
<PAGE>
inter-dealer prices, without retail mark-up, mark-down or commission and may not
necessarily represent actual transactions.
FISCAL 1995 CLOSING BID
----------- -----------
HIGH LOW
---- ---
First Quarter (1) .0001 .0001
Second Quarter .0001 .0001
Third Quarter .0001 .0001
Fourth Quarter .0001 .0001
FISCAL 1996
-----------
HIGH LOW
---- ---
First Quarter .0001 .0001
Second Quarter .0001 .0001
Third Quarter .0001 .0001
Fourth Quarter .0001 .0001
FISCAL 1997
-----------
HIGH LOW
---- ---
First Quarter .0001 .0001
Second Quarter .0001 .0001
- -------------------
(1) Closing Bid prices for the first quarter of 1995 were unavailable. The
prices provided are Bid Prices.
At June 1, 1997, the approximate number of holders of record of the Company's
Common Stock was 792. The Company has not paid any dividends on its Common Stock
and does not expect to do so in the foreseeable future.
Recent Sales Of Unregistered Securities
The Company has not sold any unregistered securities within the past three
years.
ITEM 7 - FINANCIAL STATEMENTS
The information required is included in this report as set forth in the "Index
to Financial Statements."
Index to Financial Statements
Report of Independent Public Accountants F-1
Balance Sheets F-2
Statement of Operations F-3
Statement of Changes in Stockholders' Equity F-4
Statement of Cash Flows F-5
Notes to Financial Statements F-6
Notes to Financial Statements F-7
<PAGE>
ITEM 11 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the persons known to the Company to own
beneficially more than five percent of the outstanding shares of Common Stock as
of December 31, 1996 and information as of December 31, 1996, with respect to
the ownership of Common Stock by each director and executive officer of the
Company. In all cases, the owners have sole voting and investment powers with
respect to the shares.
Name and Address of Amount and Nature
Beneficial Owner of Beneficial Owner Percent of Class
- ------------------- ------------------- ----------------
Robert N. Watson, Jr.(1) 16,728,000 (3) 54%
P.O. Box 202650
Austin, Texas 78720
William G. Watson(1) 0 0
P.O. Box 202650
Austin, Texas 78720
Linda R. Watson (1) 0 0
P.O. Box 202650
Austin, Texas 78720
Robert Watson, Inc. (2) 16,728,000 54%
P.O. Box 202650
Austin, Texas 78720
(1) Resigned as Directors and Officers effective May 22, 1997.
(2) Sold to Bass Petroleum, Inc. on May 22, 1997.
(3) Mr. Watson is the beneficial owner of these shares based upon his ownership
of one hundred percent (100%) of the common stock of Robert Watson, Inc.
The following table sets forth the persons known to the Company to own
beneficially more than five percent of the outstanding shares of Common Stock as
of June 1, 1997 and information as of June 1, 1997, with respect to the
ownership of Common Stock by each director and executive officer of the Company.
Unless otherwise indicated, the owners have sole voting and investment powers
with respect to the shares.
<PAGE>
Bass Petroleum, Inc. 16,728,000 54%
1703 Edelweiss
Cedar Park, Texas 78613
Ray D. Reaves 16,728,000(1) 54%
1703 Edelweiss
Cedar Park, Texas 78613
All Officers, Directors and 16,728,000 54%
Five Percent Shareholders
as a group
- -----------------------
(1) Mr. Reaves is the beneficial owner of these shares based upon his position
as Chairman, Chief Executive Officer, Chief Financial Officer, Director and
owner of approximately 60% of the common stock of BPI; Mr. Reaves' voting
and investment powers with respect to the Company's Common Stock are
limited by his position as Director and shareholder of BPI.
ITEM 12 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company entered into an annual management agreement with its controlling
shareholder, Robert Watson, Inc., in 1987 and renewed the agreement each year
until December 1996. The agreement called for an amount reached by mutual
agreement of the Company and the shareholder to be paid each year. The Company
paid management fees of $0 in 1996, $0 in 1995, and $1,500 in 1994.
As of December 31, 1996, 1995 and 1994, the Company had a receivable from Robert
Watson, Inc. in the amount of $20,000 ("Receivable"). This Receivable bore
interest at 10% and was due on demand. In connection with the successful
completion of the transfer of the management of the Company to BPI, the Company
paid a $20,000 management fee ("Management Fee") to Robert Watson, Inc. The
Receivable was repaid in May 1997 by offsetting the Management Fee.
The Company intends to acquire all of the outstanding shares of BPI, the
majority shareholder of the Company, in a share exchange. Ray D. Reaves,
Director, President, Chairman, Chief Executive Officer and Chief Financial
Officer of the Company, is Chairman, Chief Executive Officer, Chief Financial
Officer, and Director of BPI and owns approximately 60% of the common stock of
Bass Petroleum, Inc. Such acquisition is subject to any required approvals for
the shareholders and Board of Directors of the Company and BPI. There can be no
assurance that such acquisition will be successful.
<PAGE>
ITEM 13 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Financial Statements of the Company as set forth under Item 7 of this
Report on Form 10-KSB.
<PAGE>
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.
ENERGY PRODUCTION COMPANY
(Registrant)
By: /s/ Ray Reaves
--------------------------
Ray Reaves, President
Date: October 16, 1997
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ Ray Reaves
---------------------------
Ray Reaves, President, Chief Executive Officer, Chairman,
Chief Financial Officer
Date: October 16, 1997
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH
REPORTS FILED PURSUANT TO SECTION 15(d) OF THE
EXCHANGE ACT BY NON-REPORTING ISSUERS
No annual report or proxy material has been sent to security holders. Proxy
material, which is to be furnished to security holders subsequent to the filing
of the annual report on this form, shall be furnished to the Commission when it
is sent to security holders.
<PAGE>
INDEPENDENT AUDITOR'S REPORT
The Board of Directors
Energy Production Company
We have audited the accompanying balance sheets of Energy Production Company as
of December 31, 1996, 1995 and 1994 and the related statements of operations,
changes in stockholders' equity and cash flows for each of the years then ended.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on the financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Energy Production Company as of
December 31, 1996, 1995 and 1994 and the results of its operations and its cash
flows for each of the years then ended, in conformity with generally accepted
accounting principles
HEIN + ASSOCIATES LLP
Dallas, Texas
July 1, 1997, except Note 4 which
is dated October 10, 1997
F-1
<PAGE>
ENERGY PRODUCTION COMPANY
NOTES TO FINANCIAL STATEMENTS
BALANCE SHEETS
ASSETS
<TABLE>
<S> <C> <C> <C>
DECEMBER 31,
------------------------------------
1996 1995 1994
---------- ---------- ---------
CURRENT ASSETS:
Cash $ 874 $ 1,272 $ 1,041
Receivable from related party - current 20,000 - -
---------- ---------- ----------
Total current assets 20,874 1,272 1,041
OIL AND GAS PROPERTIES - - -
RECEIVABLE FROM RELATED PARTY - 20,000 20,000
---------- ---------- ----------
Total assets $ 20,874 $ 21,272 $ 21,041
========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES-
Accounts payable $ 65 $ 65 $ 65
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value; 75,000,000
shares authorized, 30,961,778 shares issued
and outstanding 309,618 309,618 309,618
Additional paid-in capital 1,794,373 1,794,373 1,794,373
Accumulated deficit (2,083,182) (2,082,784) (2,083,015)
----------- ---------- ----------
Total stockholders' equity 20,809 21,207 20,976
----------- ---------- ----------
Total liabilities and stockholders' equity $ 20,874 $ 21,272 $ 21,041
=========== =========== ===========
</TABLE>
See accompanying notes to these financial statements.
F-2
<PAGE>
ENERGY PRODUCTION COMPANY
NOTES TO FINANCIAL STATEMENTS
ENERGY PRODUCTION COMPANY
STATEMENTS OF OPERATIONS
<TABLE>
<S> <C> <C> <C> <C>
YEARS ENDED DECEMBER 31,
1996 1995 1994
------------ ------------ ------------
INTEREST INCOME $ 2,000 $ 2,000 $ 2,000
GENERAL AND ADMINISTRATIVE EXPENSES 2,398 1,769 3,184
------------ ------------ ------------
NET INCOME (LOSS) (398) 231 (1,184)
============ ============ ============
NET LOSS PER SHARE * * *
============ ============ ============
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 30,961,778 30,961,778 30,961,778
============ ============ ============
</TABLE>
* Less than $.01 per share
See accompanying notes to these financial statements.
F-3
<PAGE>
ENERGY PRODUCTION COMPANY
NOTES TO FINANCIAL STATEMENTS
ENERGY PRODUCTION COMPANY
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM JANUARY 1, 1994 THROUGH DECEMBER 31, 1996
<TABLE>
<S> <C> <C> <C> <C> <C>
Additional
Common Stock Paid-in Accumulated
Shares Amount Capital Deficit Total
----------- ----------- ----------- ----------- -----------
Balance, January 1, 1994 30,961,778 $ 309,618 $ 1,794,373 $(2,081,831) $ 22,160
Net loss -- -- -- (1,184) (1,184)
----------- ----------- ----------- ----------- -----------
Balance, December 31, 1994 30,961,778 309,618 1,794,373 (2,083,015) 20,976
Net income -- -- -- 231 231
----------- ----------- ----------- ----------- -----------
Balance, December 31, 1995 30,961,778 309,618 1,794,373 (2,082,784) 21,207
Net loss -- -- -- (398) (398)
----------- ----------- ----------- ----------- -----------
Balance, December 31, 1996 30,961,778 $ 309,618 $ 1,794,373 $(2,083,182) $ 20,809
=========== =========== =========== =========== ===========
</TABLE>
See accompanying notes to these financial statements.
F-4
<PAGE>
ENERGY PRODUCTION COMPANY
NOTES TO FINANCIAL STATEMENTS
ENERGY PRODUCTION COMPANY
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31,
-----------------------------
1996 1995 1994
------- ------- -------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (398) $ 231 $(1,184)
------- ------- -------
NET CHANGE IN CASH (398) 231 (1,184)
CASH AT BEGINNING OF YEAR 1,272 1,041 2,225
------- ------- -------
CASH AT END OF YEAR $ 874 $ 1,272 $ 1,041
======= ======= =======
See accompanying notes to these financial statements.
F-5
<PAGE>
ENERGY PRODUCTION COMPANY
NOTES TO FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS
Energy Production Company (the "Company") was incorporated under the laws
of the State of Colorado on March 11, 1980 and completed an initial
public offering in November 1980. From 1980 to 1986, the Company was
engaged in the acquisition, operation and development of oil and gas
properties. In December 1986, the Company began to divest its remaining
oil and gas assets and operations and has been relatively inactive since
that time.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Income Taxes
------------
Income taxes are provided for the tax effects of transactions
reported in the financial statements and consist of taxes
currently due plus deferred taxes related primarily to differences
between the financial and income tax reporting bases of assets and
liabilities. Deferred tax assets and liabilities represent the
future tax return consequences of those differences, which will
either be taxable or deductible when the assets and liabilities
are recovered or settled. The Company has no deferred tax assets
or liabilities December 31, 1996, 1995 or 1994, except as
described below.
The Company had substantial Federal income tax net operating loss
carryforwards (NOL) available at December 31, 1996, 1995 and 1994.
However, following a change in control of the Company in December
1986 and again in May 1997, use of the NOL is severely limited.
The deferred tax asset resulting from the NOL is fully reserved.
(b) Statements of Cash Flows
------------------------
For purposes of the statement of cash flows, the Company considers
cash on deposit and all highly liquid investments with original
maturities of three months or less to be cash equivalents.
(c) Net loss Per Common Share
-------------------------
Net loss per common share has been computed based upon the
weighted average number of common shares outstanding during each
year.
(d) Use of Estimates
----------------
The preparation of the Company's financial statements in
conformity with generally accepted accounting principles requires
the Company's management to make estimates and assumptions that
affect the amounts reported in these financial statements and
accompanying notes. Actual results could differ from those
estimates.
3. RELATED PARTY TRANSACTIONS
As of December 31, 1996, 1995 and 1994, the Company had a receivable from
the controlling shareholder in the amount of $20,000. This unsecured
receivable bore interest at 10% and was due on demand. The receivable was
repaid in May 1997 by offsetting a management fee as described in Note 4.
See accompanying notes to these financial statements.
F-6
<PAGE>
ENERGY PRODUCTION COMPANY
NOTES TO FINANCIAL STATEMENTS
The Company entered into an annual management agreement with its
controlling shareholder in 1987 and renewed the agreement each year until
December 1996. The agreement called for an amount reached by mutual
agreement of the Company and the shareholder to be paid each year. The
Company paid management fees of $0, $0 and $1,500 for the years ended
December 31, 1996, 1995 and 1994, respectively.
4. SUBSEQUENT EVENTS
In May 1997, the Company's controlling shareholder sold his shares to
Bass Petroleum, Inc. (Bass) and the Company issued 44,038,222 shares of
its common stock to Bass in exchange for two oil and gas properties
valued at a total of $40,000, and $5,000 in cash. The oil and gas
properties were valued by management based upon an independent reserve
report.
In connection with the successful transfer of management to Bass, the
Company paid a $20,000 management fee to the old controlling shareholder.
In October 1997, the Company rescinded the sale of 44,038,222 shares of
its common stock to Bass. The shares were returned to the Company from
Bass in exchange for the return of the purchase price.
See accompanying notes to these financial statements.
F-7
<PAGE>
