<PAGE>
FORM 10-Q-SB
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
MARK ONE
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________
COMMISSION FILE NUMBER 0-9494
ASPEN EXPLORATION CORPORATION
- ------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
Delaware 84-0811316
- -------------------------------- -------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) I.D. Number)
Suite A, 7925 East Harvard Avenue, Denver, Colorado, 80231
- ------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(303) 337-3600
- ------------------------------------------------------------------------------
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 the number of shares outstanding of each of the Issuer's classes of
common stock as of the latest practicable date.
Class Outstanding at November 1, 1995
----------------- -------------------------------
Common stock,
$.005 par value 4,271,322
1
<PAGE>
Part One. FINANCIAL INFORMATION
Item 1. Financial Statements
ASPEN EXPLORATION CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
September 30, June 30,
1995 1995
------------ -----------
(Unaudited) (Audited)
<S> <C> <C>
Current Assets:
Cash and cash equivalents............. $ 221,911 $ 116,891
Precious metals....................... 855,658 718,388
Accounts receivable, trade............ 17,742 30,997
Prepaid expenses...................... 3,471 4,651
--------- ---------
Total current assets............... 1,098,782 870,927
--------- ---------
Investment in oil and gas properties,
at cost (full cost method of
accounting)............................ 1,054,574 1,031,693
Less accumulated depletion and
valuation allowance.................. (768,374) (760,874)
--------- ---------
286,200 270,819
--------- ---------
Property and equipment, at cost:
Furniture, fixtures and vehicles...... 135,147 135,147
Less accumulated depreciation......... (107,288) (104,348)
--------- ---------
27,859 30,799
--------- ---------
Undeveloped mining properties, at cost
less reserve for impairment of
$193,495............................... 18,987 11,633
--------- ---------
Cash surrender value, life insurance.... 143,710 129,627
--------- ---------
Organization cost,
Aspen Recursos de Mexico (Note 4)..... 28,274 29,187
--------- ---------
TOTAL ASSETS....................... $1,603,812 $1,342,992
========= =========
</TABLE>
(Statement Continues)
See notes to Consolidated Financial Statements
2
<PAGE>
ASPEN EXPLORATION CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
September 30, June 30,
1995 1995
----------- -----------
(Unaudited) (Audited)
<S> <C> <C>
Current liabilities:
Accounts payable and accrued
expenses............................. $ 54,465 $ 88,121
Advances from joint owners............ 123,114 -0-
Severance taxes payable (Note 5)...... 41,334 83,419
Due to related parties................ 7,212 9,207
---------- ----------
Total current liabilities............. 226,125 180,747
---------- ----------
Commitments and contingencies
(Note 5)
Stockholders' equity
(Note 5):
Common stock, $.005 par value:
Authorized: 50,000,000 shares
Issued: At September 30, 1995:
4,374,922 and 4,297,922 at June
30, 1995...........................
Outstanding: At September 30, 1995
4,271,322 and 4,194,322 at June
30, 1995.......................... 21,489 21,489
Capital in excess of par value........ 5,640,323 5,640,323
Accumulated deficit................... (4,237,371) (4,452,813)
---------- ----------
1,424,441 1,208,999
Less common stock in treasury, at
cost: 103,600 shares................ (46,754) (46,754)
---------- ----------
Total stockholders' equity............ 1,377,687 1,162,245
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY................................. $ 1,603,812 $ 1,342,992
========== ==========
See Notes to Consolidated Financial Statements
</TABLE>
3
<PAGE>
ASPEN EXPLORATION CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
----------------------
(unaudited)
1995 1994
---------- ----------
<S> <C> <C>
REVENUES:
- ---------
Oil and gas........................... $ 99,349 $ 97,710
Mineral............................... 236,825 231,758
Alaska mining tax exemption (Note 5) 45,000 -0-
Interest and other, net............... 6,268 123
--------- ---------
Total Revenues.......................... 387,442 329,591
--------- ---------
COSTS AND EXPENSES:
Oil and gas production................ 7,046 88,168
Depreciation, depletion and
amortization......................... 7,500 22,700
Selling, general and administrative. 157,454 171,618
--------- ---------
Total Costs and Expenses................ 172,000 282,486
--------- ---------
NET INCOME (LOSS)....................... $ 215,442 $ 47,105
========= =========
NET INCOME PER COMMON SHARE............. $.05 $.01
========= =========
Weighted average number of common
shares outstanding..................... 4,271,322 4,194,322
========= =========
</TABLE>
The accompanying notes are an integral
part of these statements.
4
<PAGE>
ASPEN EXPLORATION CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended September 30,
1995 1994
----------------- ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.............................. $ 215,442 $ 47,105
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Proceeds from sale of precious metals 99,554 203,937
Depreciation, depletion & amortization 11,928 26,434
Loss on sale of precious metals......... 9,765 11,228
(Increase) in precious metals........... (246,589) (242,986)
(Increase) decrease in accounts
receivable............................ 13,255 (3,553)
(Increase) decrease in prepaid expense 1,180 (6,534)
Increase (decrease) in accounts
payable and accrued expenses.......... 47,373 (1,358)
Increase (decrease) in due to related
parties............................... (1,995) 3,145
-------- --------
Net cash provided by operating
activities............................. 149,913 37,418
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Sales of oil & gas properties........... -0- 5,679
Purchase of oil & gas properties........ (22,881) -0-
Additions to undeveloped mining
properties............................ (7,354) (13,518)
Investment in subsidiaries.............. (575) (11,554)
Purchase of office equipment............ -0- (643)
Additions to cash surrender value....... (14,083) (14,067)
-------- --------
Net cash used in investing
activities............................. (44,893) (34,103)
-------- --------
NET INCREASE IN CASH.................... 105,020 3,315
-------- --------
CASH AND CASH EQUIVALENTS,
AT BEGINNING OF PERIOD................ 116,891 46,042
-------- --------
CASH AND CASH EQUIVALENTS,
AT END OF PERIOD...................... $ 221,911 $ 49,357
======== ========
</TABLE>
The accompanying notes are an integral
part of these statements.
5
<PAGE>
ASPEN EXPLORATION CORPORATION
Notes to Consolidated Financial Statements
(Unaudited)
September 30, 1995
Note 1 - Basis of Presentation
The accompanying unaudited, consolidated financial statements have been prepared
in accordance with Item 310 of Regulation S-B and do not include all of the
information and footnotes required by generally accepted accounting principles
for complete consolidated financial statements. In the opinion of management,
all adjustments (consisting of normal recurring adjustments) considered
necessary for a fair presentation have been included. Operating results for the
three months ended September 30, 1995 are not necessarily indicative of the
results that may be expected for the fiscal year ending June 30, 1996. These
statements should be read in conjunction with the consolidated financial
statements and notes thereto included in Form 10-K-SB for the fiscal year ended
June 30, 1995, which is available without cost from Aspen Exploration
Corporation upon request.
Note 2 - Net Income (Loss) per Common Share
Net income (loss) per common share is based on the weighted average number of
shares of common stock outstanding during the period.
Note 3 - Income Taxes
The Company adopted Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes", as of July 1, 1993. There was no material
cumulative effect of this change in accounting for income taxes as of July 1,
1993. At September 30, 1995 the Company had Net Operating Loss ("NOL")
carry-forwards for tax purposes of approximately $4,541,918 (expiring in the
years 1996 to 2008). In addition, the Company had tax credit carry-forwards
of approximately $36,000 (expiring in the years 1996 to 2001).
Deferred tax assets (liabilities) at September 30, 1995 are as follows:
Gross Deferred Tax Assets:
Net operating loss carry-forward.. $1,544,252
Valuation allowance for deferred
tax assets..................... (1,531,344)
----------
Net Deferred Tax Asset 12,908
----------
6
<PAGE>
Note 3 - Income Taxes (Continued)
Gross Deferred Tax Liabilities:
Depreciation and other property,
plant and equipment basis
differences..................... (12,908)
-----------
Net Deferred Tax Asset (Liabilities) $ -0-
===========
Deferred income taxes are recorded to reflect the tax consequences on future
years of differences between the tax basis of assets and liabilities and
their financial reporting amounts at each year end. Deferred income tax
assets are recorded to reflect the tax consequences on future years of income
tax carry-forward benefits, reduced by benefit amounts not expected to be
realized by the Company.
The components of income tax expenses for the quarter ended September 30,
1995 are as follows:
Current $56,119
Benefits of income
tax carry-forward (56,119)
Deferred -0-
-------
Income tax expense $ -0-
=======
The effective income tax rate applicable to the current provision before
applying the tax carry-forward benefit was 27%.
Note 4 - Organization Costs
During the first quarter ended September 30, 1994, the Company formed a
subsidiary (Aspen Recursos de Mexico, S.A. de C.V.), which is qualified to do
business in Mexico, so that the Company can pursue management's decision to
investigate and acquire interests in mineral prospects in Mexico. During the
quarter ended September 30, 1995, the Company began amortizing its costs to
organize its subsidiary and will continue to do so over the next 60 months.
As of September 30, 1995, the subsidiary had acquired no properties in
Mexico.
7
<PAGE>
Note 5 - Commitments and Contingencies
On September 11, 1995 (effective September 1, 1995) the Company issued shares
of common stock for services contributed to the Company to various directors,
employees and consultants as follows:
No. of
Name Position Shares
------------------------ ---------- ------
Lawton L. Clark Director 25,000
Robert F. Sheldon Director 25,000
Judith L. Shelton Employee 2,000
Ray K. Davis Consultant 25,000
------
77,000
======
The North Strand #1 well located in Kern County, California was spudded
(drilling commenced) on August 15, 1995. The total depth of 10,000' was
reached on August 24, 1995. The mud log recorded oil and gas shows while
drilling from two intervals located at depths below the surface of
approximately 9175' and 9700'. A full suite of electric logs was obtained
from 1,100' to 10,000'. Sidewall core samples were also taken across the
potential zones of interest. After careful analysis of the mud logs,
electric logs, and sidewall cores by the Company, an independent geologist,
an independent log analyst, and a sidewall core specialist, the decision was
made to install and cement production casing and attempt to complete the well
as an oil and gas producer.
It appeared that two potentially productive zones existed in the Stevens
formation which might contain sufficient porosity, permeability, and oil
saturations to produce hydrocarbons.
Completion operations commenced on the North Strand #1 well on September 24,
1995. The lower Stevens interval was perforated from 9706' to 9715'. This
zone was swab tested for 10 hours and recovered 109 barrels of fluid (31
barrels of high quality oil and 78 barrels of water). This equates to a
daily rate of 75 barrels of oil per day (BOPD) and 187 barrels of water per
day (BWPD). This zone was then isolated and the upper Stevens interval was
perforated from 9148' to 9150' and 9160' to 9166'. The swab test on this
zone yielded very high flow rates of approximately 500 barrels of fluid per
day (BFPD), the oil cuts averaged 12.5%. The well flowed for brief periods
from this zone. Both zones were then tested together at flow rates of 350
BFPD and an oil cut of 8.5%. The completion rig was released on October 6,
1995.
The Company has elected to pump test this well to further evaluate its
potential as an economic producing oil well. Rental surface equipment is
currently being installed and the Company plans to begin testing early in
November, 1995.
8
<PAGE>
Note 5 - Commitments and Contingencies (Continued)
The Company has a 10% working interest in the well and an estimated capital
commitment at September 30, 1995 of approximately $7,000.
The Grey Wolf #1 well located in Kern County, California was spudded
(drilling commenced) on October 10, 1995. The total depth of 4200' was
reached on October 20, 1995. The mud log recorded gas shows while drilling
from 3698' to 3708', 3715' to 3717', 3970' to 3973', and 4096' to 4098'. A
full suite of electric logs was run from 450' to 4200'. After careful
analysis of the mud logs and electric logs, the decision was made to install
and cement production casing and attempt to complete the well as a gas
producer.
The next phase of evaluation will include the running and cementing of 5 1/2"
production casing (completed), wellhead, 2 3/8" tubing, cement bond log,
perforating, pressure recording equipment, testing, supervision and other
miscellaneous items. If the well flows gas, the well will be tested to
estimate the future gas flow rates, pressures and ultimate recoverable
reserves. This information is crucial in determining if the investment
required to purchase the surface facilities and connect the well to the
Southern California Gas Company pipeline is justified. A gas processing
plant may be required to extract liquids from the gas.
The Company has an 18% working interest in the well and an estimated capital
commitment at September 30, 1995 ranging from approximately $46,000 to
$118,000, depending on whether the well is completed as a producer or plugged
and abandoned.
During January, 1995, the Company received notice from the State of Alaska
Department of Revenue for unpaid License Tax on Royalties from Mines and
Mining ("License Taxes") for the years 1991 through 1993. The Company has
contested these License Taxes and believes it is exempt from all, or
substantially all, of these taxes.
The State of Alaska Administrative Code, Title 15 Revenue, Chapter 65 Mining
License Tax, states in part that a corporation owning a mining property and
receiving royalty payments based on production from the property shall obtain
a mining license and be subject to the License Tax. The Tax Code provides
that the Department of Natural Resources will issue Certificates of Initial
Production as of the date which production begins for each new mining
operation. Based on the Certificate of Initial Production, the Department of
Revenue determines if an operation qualifies as a new mining operation and
may issue a Certificate of Exemption. The Certificate of Exemption qualifies
a mining operation to be exempt from the License Tax for three and one-half
years after production begins.
9
<PAGE>
Note 5 - Commitments and Contingencies (Continued)
Neither the operator of the Valdez Creek mine nor the Company filed the
required Affidavit of Initial Production with the Department of Natural
Resources to obtain a Certificate of Initial Production. A Certificate of
Exemption was never issued to the Company.
On August 3, 1995 the Company, through its lawyers in Anchorage, Alaska,
filed a letter and supporting documents with the Alaska Department of Natural
Resources requesting that they issue Certificates of Initial Production
retroactively to March, 1991, the date of first initial production, or Phase
I, and June, 1993, the date that Phase II (a new mining operation) began.
Pending the outcome of the Company's petition seeking relief from these
taxes, the Company recorded, as of June 30, 1995, a liability of $45,000,
which approximates the amount of taxes due under the second phase of the
Valdez Creek operations.
On October 30, 1995 the Alaska Department of Revenue notified the Company
that the Department of Natural Resources had issued Certificates of Initial
Production to the Department of Revenue. The Department of Revenue further
stated that no taxes were due for the period 1991 through September 30, 1995.
Accordingly, the $45,000 liability has been reversed and shown as income from
mining tax exemptions in the current period.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Liquidity and Capital Resources
- -------------------------------
As reflected in the balance sheet and statement of cash flows, cash and
equivalents increased by $105,020 for the three-month period, from $116,891 at
June 30, 1995 to $221,911 at September 30, 1995. The net cash provided by
operations for the three-month period ended September 30 totaled $149,913. Had
Registrant received cash rather than in-kind gold royalties, cash flow from
operating activities would have been $396,502 for the same three-month period.
Net cash used by investing activities for the three-month period ended September
30, 1995 totaled $44,893.
Working capital increased from $690,180 at June 30, 1995 to $872,657 at
September 30, 1995. Included in working capital at September 30 is $855,658 of
precious metals, primarily gold. As Registrant's precious metals are carried at
the lower of cost or market, fluctuations in market prices for precious metals
will affect the carrying amount of Registrant's precious metals and,
accordingly, Registrant's working capital. At September 30, 1995 the market
value of precious metals in inventory was $856,589 which exceeded the total book
value reflected on the balance sheet ($855,658). Therefore, no writedown of the
gold inventory was necessary at September 30, 1995.
10
<PAGE>
During the three-month period ended September 30, 1995, Cambior Alaska
("Cambior") continued mining operations on properties where Registrant owns
various mineral royalty interests. During the three-month period, Registrant
received approximately 748 troy ounces of raw gold from Cambior, valued at
$246,589. As Registrant's Valdez properties are carried at zero-dollar value on
the balance sheet, Registrant has no direct costs associated with in-kind
royalties. Registrant has been advised by Cambior that in-kind gold royalty
payments to Registrant terminated September 30, 1995 at which time Cambior
ceased operations on the Valdez Creek properties, except for continuing
reclamation requirements. Upon completion of mining restoration, Cambior will
reassign the Valdez Creek mining claims to Registrant. Registrant is
investigating the geology of both lode and placer gold deposits at Valdez Creek
and studies of remaining gold resources are being undertaken.
Registrant anticipates that production from its oil and gas properties and sales
of its in-kind gold royalties will provide adequate liquidity for the near term
future. However, should Registrant fail to replace the oil and gas reserves
sold during fiscal 1995 and gold production that ceased in September, 1995,
Registrant would likely experience difficulty meeting its financial commitments
beyond the fiscal period ending June 30, 1997.
Results of Operations
- ---------------------
Registrant's operations for the three-month period ended September 30, 1995
continued to be focused on the production of oil and gas, and the investigation
for possible acquisition of properties prospective for precious metals. In
addition, Registrant continued to receive in-kind gold royalties through
September 30, 1995 from its Valdez Creek, Alaska properties, and was drilling
two wildcat wells in Kern County, California.
Oil and gas revenue increased from $97,710 for the three months ended September
30, 1994 to $99,349 (or 1.6%) for three months ended September 30, 1995. This
increase was due to an increase in promotional fees and administrative overhead
fees of $52,500 and $26,039, respectively, charged to participants to acquire
and drill the North Strand #1 well in Kern County. This increase was almost
entirely offset by a reduction in oil and gas revenue and administrative fees
received by Registrant on producing properties sold in the fourth quarter of
fiscal year ended June 30, 1995.
Oil and gas production costs decreased from $88,168 at September 30, 1994 to
$7,046 at September 30, 1995, (a decrease of $81,122 or 92%). Substantially all
of this decrease was the result of Registrant's sale of high cost, poorly
performing oil and gas producing properties during the fourth quarter of fiscal
1995.
Depreciation, depletion and amortization declined from $22,700 at September 30,
1994 to $7,500 at September 30, 1995, a $15,200 reduction, or 67%. Again, the
decline was due to the sale of underperforming properties.
11
<PAGE>
Gold royalties received were fairly constant for the quarter ended September 30,
1995 as compared to September 30, 1994. Gold royalties amounted to 748 troy
ounces in 1995 and 722 troy ounces in 1994. Revenue from gold royalties was
$236,825 at September 30, 1995 compared to $231,758 at September 30, 1994.
As mentioned previously, Registrant has been advised by Cambior, operator of the
Valdez Creek mine, that in-kind gold royalty payments were terminated effective
September 30, 1995 and mining operations ceased as of that date.
With the cessation of mining operations and the elimination of gold royalties,
Registrant could experience operating losses in the future if it fails to
replace its current gold production.
During January, 1995, Registrant received notice from the State of Alaska
Department of Revenue for unpaid License Tax on Royalties from Mines and Mining
for the years 1991 through 1993. Registrant contested these License Taxes and
believed it to be exempt from these taxes. Pending the outcome of Registrant's
petition seeking relief from these taxes, Registrant recorded a liability of
$45,000 at June 30, 1995 for the estimated amount of the taxes due. On October
30, 1995 the Alaska Department of Revenue notified Registrant that it had
accepted its petition for relief and no taxes were due through September 30,
1995. Accordingly, Registrant reversed its recorded liability to the State of
Alaska and recorded revenue in the amount of $45,000 for the Alaska Mining
License Tax exemption.
Selling and general and administrative expenses for the three-month period ended
September 30, 1995 decreased $14,164 or 8.3%. This decrease was due primarily
to a decrease in consulting fees of approximately $24,100 and travel expenses of
$17,943 associated with a consulting geologist retained by Registrant to explore
for mining prospects in the western United States and Mexico. The services of
this geologist were discontinued in January of 1995. These decreases in
consulting and travel expense were offset by costs incurred to establish an oil
and gas exploration office in Bakersfield, California during the fourth quarter
of 1995. Salaries, vehicle expense, medical expense and office expense for the
California office were approximately $30,200 for the quarter ended September 30,
1995.
12
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, Registrant
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
ASPEN EXPLORATION CORPORATION
(Registrant)
/s/ R. V. BAILEY
_______________________________
By: R. V. Bailey,
November 8, 1995 Chief Executive Officer,
Principal Financial Officer
13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 221,911
<SECURITIES> 3,471<F1>
<RECEIVABLES> 54,742
<ALLOWANCES> (37,000)
<INVENTORY> 855,658
<CURRENT-ASSETS> 1,098,782
<PP&E> 1,189,721
<DEPRECIATION> (2,065,383)
<TOTAL-ASSETS> 1,603,812
<CURRENT-LIABILITIES> 226,125
<BONDS> 0
<COMMON> 5,661,812
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 1,603,812
<SALES> 336,174
<TOTAL-REVENUES> 387,442
<CGS> 0
<TOTAL-COSTS> 172,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 215,442
<INCOME-TAX> 0
<INCOME-CONTINUING> 215,442
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 215,442
<EPS-PRIMARY> .05
<EPS-DILUTED> .05
<FN>
<F1>Pre Paid Expense
</FN>
</TABLE>
