U. S. SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-Q-SB
(MARK ONE)
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1996
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE TRANSITION PERIOD FROM ______ TO_______
Commission File Number 0-9494
ASPEN EXPLORATION CORPORATION
- --------------------------------------------------------------------------------
Delaware 84-0811316
- ------------------------------- -------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) I.D. Number)
2050 S. Oneida Street, Suite 208, Denver, Colorado, 80224
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(Address of Principal Executive Offices) (Zip Code)
(303) 639-9860
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7925 E. Harvard Ave., Suite A, Denver, Colorado, 80231
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(Former Address of Executive Offices)
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 [ 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 May 1, 1996
- ---------------- --------------------------
Common stock, 4,321,322
$.005 par value
1
<PAGE>
Part One. FINANCIAL INFORMATION
Item 1. Financial Statements
ASPEN EXPLORATION CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31, June 30,
1996 1995
----------- ---------
(Unaudited) (Audited)
Assets
- ------
Current assets:
Cash and equivalents ..................... $ 38,481 $ 116,891
Precious metals .......................... 358,541 718,388
Accounts receivable ...................... 73,360 30,997
Prepaid expenses and other ............... 6,209 4,651
---------- ----------
Total current assets ................... 476,591 870,927
---------- ----------
Investment in oil and gas properties,
at cost (full cost method of
accounting) Note 5 ....................... 1,405,658 1,031,693
Less accumulated depreciation, depletion,
amortization and valuation allowance ... (803,695) (760,874)
---------- ----------
Net oil and gas properties ............. 601,963 270,819
---------- ----------
Property and equipment, at cost:
Furniture, fixtures and vehicles ......... 136,751 135,147
Less accumulated depreciation and
amortization ........................... (91,934) (104,348)
---------- ----------
Net property and equipment ............. 44,817 30,799
---------- ----------
Undeveloped mining properties, at cost
less reserve for
impairment of $193,495 ................... 18,987 11,633
---------- ----------
Organization cost - Aspen Recursos de
Mexico (Note 4) .......................... 25,361 29,187
---------- ----------
Cash Surrender Value, life insurance ....... 171,878 129,627
---------- ----------
TOTAL ASSETS ........................... $1,339,597 $1,342,992
========== ==========
(Statement Continues)
See notes to Consolidated Financial Statements
2
<PAGE>
ASPEN EXPLORATION CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Continued)
March 31, June 30,
1996 1995
----------- ---------
(Unaudited) (Audited)
Liabilities and Stockholders' Equity
- ------------------------------------
Current liabilities:
Accounts payable & accrued expenses ....... $ 59,940 $ 88,121
Advances from joint owners ................ 117,258 -0-
Severance taxes payable (Note 6) .......... 21,553 83,419
Due to related parties .................... 5,216 9,207
---------- ----------
Total liabilities ........................... 203,967 180,747
---------- ----------
Stockholders' equity:
Common stock, $.005 par value:
Authorized: 50,000,000 shares
Issued: At March 31, 1996:
4,424,922 and 4,297,922 at June
30, 1995 ............................ 21,489 21,489
Outstanding: At March 31, 1996
4,321,322 and 4,194,322 at June
30, 1995 ............................
Capital in excess of par value .......... 5,640,323 5,640,323
Accumulated deficit ..................... (4,479,428) (4,452,813)
---------- ----------
1,182,384 1,208,999
Less common stock in treasury,
at cost: 103,600 shares .............. (46,754) (46,754)
---------- ----------
Total stockholders' equity .............. 1,135,630 1,162,245
--------- ---------
Total liabilities and stockholders'
equity. .................................. $1,339,597 $1,342,992
========== ==========
The accompanying notes are an integral
part of these statements.
3
<PAGE>
<TABLE>
<CAPTION>
ASPEN EXPLORATION CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Nine Months Ended
March 31, March 31,
------------------ -----------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
- ---------
Oil and gas ..................... $ 47,749 $ 78,507 $ 243,026 $ 260,740
Mineral ......................... -0- 252,120 246,589 753,769
Alaska mining tax
exemption (Note 6) ............ -0- -0- 45,000 -0-
Interest and other, net ......... (1,232) 541 4,213 1,146
--------- --------- --------- ---------
Total Revenues .................... 46,517 331,168 538,828 1,015,655
--------- --------- --------- ---------
Costs and expenses:
- -------------------
Oil & gas production ............ 18,905 59,876 39,790 206,247
Loss on sale of
precious metals ................ 6,519 -0- 52,835 -0-
Depreciation, depletion
and amortization ............... 23,109 8,000 55,588 52,000
Mineral Severance tax ........... -0- 45,000 -0- 45,000
Selling, general and
administrative ................. 141,407 135,576 417,230 448,373
--------- --------- --------- ---------
Total Costs & Expenses ............ 189,940 248,452 565,443 751,620
--------- -------- --------- ---------
NET INCOME (LOSS) ................. $(143,423) $ 82,716 $ (26,615) $ 264,035
========= ========= ========= =========
Net Income per share .............. $ (.03) $ .02 $ (.01) $ .06
========= ========= ========= =========
Weighted average number of
common shares outstanding ........ 4,321,322 4,194,274 4,258,917 4,194,322
========= ========= ========= =========
The accompanying notes are an integral
part of these statements.
4
</TABLE>
<PAGE>
ASPEN EXPLORATION CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine months ended March 31,
1996 1995
----------------- ---------
Cash flows from operating activities:
Net income (Loss) ........................ $ (26,615) $ 264,035
Adjustments to reconcile net
income to net cash provided
by operating activities:
Proceeds from sale of precious metals .... 553,601 496,367
Depreciation, depletion & amortization ... 55,588 63,799
Loss on sale of precious metals 52,835 27,423
Receipt of precious metals ............... (246,589) (781,422)
Decrease in accounts receivable .......... (42,363) 26,526
Increase in prepaid expenses ............. (1,558) (3,936)
Increase (Decrease) in accounts payable
and accrued expenses ................... 27,211 (7,048)
Abandonment of mining properties ......... -0- 10,835
Increase (Decrease) in payable to
related parties ........................ (3,991) (697)
Sale of company vehicles ................. -0- 5,700
--------- ---------
Net cash provided by operating
activities ............................. 368,119 101,582
--------- ---------
(Statement Continues)
5
<PAGE>
ASPEN EXPLORATION CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(Continued)
Nine months ended March 31,
1996 1995
----------------- ---------
Cash flows from investing activities:
Sale of oil and gas properties ............ -0- 9,000
Additions to undeveloped mining
properties .............................. (7,354) -0-
Purchase of oil & gas properties .......... (373,965) (322)
Investment in foreign subsidiaries
"Aspen Recursos de Mexico" ............... (649) (24,185)
Additions to office equipment and
vehicles ................................ (22,310) (114)
Additions to cash surrender value ......... (42,251) (39,955)
--------- ---------
Net cash used in investing activities ..... (446,529) (55,576)
--------- ---------
Net (decrease) increase in cash ........... (78,410) 46,006
--------- ---------
Cash and cash equivalents,
at beginning of period ................. 116,891 46,042
--------- ---------
Cash and cash equivalents, at end of
period ................................. $ 38,481 $ 92,048
========= =========
The accompanying notes are an integral
part of these statements.
6
<PAGE>
ASPEN EXPLORATION CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
March 31, 1996
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
nine months ended March 31, 1996 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 March 31, 1996 the Company had Net Operating Loss ("NOL") carry-forward
for tax purposes of approximately $4,901,953 (expiring in the years 1996 to
2009). In addition, the Company had tax credit carry- forward of approximately
$36,000 (expiring in the years 1996 to 2001).
Deferred tax assets (liabilities) at March 31, 1996 are as follows:
Gross Deferred Tax Assets:
Net operating loss carry-forward.. $1,666,664
Valuation allowance for deferred
tax assets..................... (1,666,664)
----------
Net Deferred Tax Asset ........ -0-
----------
7
<PAGE>
Note 3 - Income Taxes (Continued)
Gross Deferred Tax Liabilities:
Depreciation and other property,
plant and equipment basis
differences..................... -0-
----------
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.
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 March 31, 1996, the subsidiary was pursuing but had not acquired any
properties in Mexico.
Note 5 - Oil and Gas Properties
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. While drilling was under way, the mud log recorded oil and
gas shows from two intervals located at depths below the surface of
approximately 9175' and 9700'. These shows were confirmed by electric logs and
sidewall cores.
Completion operations commenced on the North Strand #1 well on September 24,
1995. The lower Stevens interval was perforated from 9706' to 9715'. The Company
elected to pump test this well to further evaluate its potential as an economic
producing oil well. The well was pump tested from the lower Stevens interval
only (9706' to 9715') since this zone had a more favorable oil cut than the
upper zone. During 31 days of production which commenced on December 23, 1995
and ended on January 26, 1996 (with 4 days of down time due to a pump change),
the well produced 303 barrels of oil and 5,945 barrels of water. This is an
average of 10 BOPD and 192 BWPD (5% oil cut) which is an uneconomic rate. On
April 22, 1996 the well was plugged and abandoned.
8
<PAGE>
Note 5 - Oil and Gas Properties (Continued)
The Company has a 10% working interest in the well and an estimated capital
investment at March 31, 1996 of approximately $137,000.
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, production casing was cemented in the hole and the well was
perforated from 3698' to 3708' and 3714' to 3717'.
The well was flow tested on a 1/4" positive choke for a 10 day period in an
effort to determine if the stabilized production rate was sufficient to justify
the expense of surface and pipeline facilities. At the end of the flow period,
the well was producing approximately 300 MCFPD of high quality (1054 BTU) gas.
The well was then shut in for a pressure build up to determine if the post
production shut-in pressure would return to the initial shut-in pressure of
1400#. The current pressure in the well is 1160# and still slowly increasing.
The Company has an 18% working interest in the well and an actual capital
investment at March 31, 1996 of approximately $108,000. The Company may spend an
additional $10,000 depending on whether the well is completed as a producer or
plugged and abandoned. Negotiations are under way to sell some of the gas from
this well to nearby farmers, who may use the gas to power pumps and other
equipment.
The Company entered into a purchase and sale agreement with Capitol Oil
Corporation, an unaffiliated third party, to purchase all of Capitol's interest
in certain producing properties for cash. This agreement was signed on November
9, 1995, effective November 1, 1995. Closing of the purchase and sale agreement
was on January 10, 1996. The acquired production consists of two producing oil
wells, one producing gas well, and two shut-in wells that will be plugged and
abandoned or converted to salt water disposal wells. The acquisition is located
in Kern County, California. The Company has been designated operator of the
properties.
The total purchase price of the acquired properties was $925,000, of which the
Company has 20% of the working interest acquired, for $185,000.
Based on an engineering estimate prepared by the Company's in-house staff, net
oil reserves acquired by the Company were calculated to be approximately 18,800
barrels of proved producing reserves and 37,800 BOE (barrels oil equivalent) of
proved behind pipe reserves. All behind pipe zones are scheduled to commence
production after depletion of the current producing zone in each well. In
addition to the proved producing and proved behind pipe zones, there also exists
approximately 680 acres which contain several high quality drilling locations.
9
<PAGE>
Note 5 - Oil and Gas Properties (Continued)
Capitol held these producing properties and the equipment thereon for the
exploration and production of oil and gas for the revenues derived thereof. The
Company intends to hold these properties and use them for the same purpose.
Note 6 - Mining Properties
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. 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 for the nine months ended March 31, 1996.
Note 7 - Disclosure of Certain Significant Risks and Uncertainties
Nature of Operations
Aspen Exploration Corporation (hereinafter "the Company") was incorporated under
the laws of the State of Delaware on February 28, 1980 for the primary purpose
of acquiring, exploring and developing oil and gas and other mineral properties.
The consolidated financial statements include the Company and its wholly-owned
subsidiaries, Aspen Gold Mining Company, formerly Aspen Gold Refining
Corporation, and Aspen Recursos de Mexico. Aspen Gold Mining Company is
currently inactive and Aspen Recursos de Mexico operations to date have
consisted of its organization and geological investigation of certain areas in
Mexico.
During fiscal 1995, the Company continued its operation of various producing oil
and gas properties. During fiscal 1995, 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 may pursue management's recommendation of investigating and
acquiring interests in mineral prospects in Mexico and Central America. The
Company also continued efforts initiated in earlier years to pursue its interest
in mineral projects in Russia.
10
<PAGE>
Note 7 - Disclosure of Certain Significant Risks and Uncertainties (Continued)
The Company owns leasehold or royalty interests in producing oil and gas
properties in California, Colorado, Michigan, Montana, North Dakota, Oklahoma,
Texas and Wyoming, and leasehold and royalty interests in mining properties in
Alaska.
The Company engages in a broad range of activities associated with the oil and
gas business in an effort to develop oil and gas reserves. The Company's primary
areas of interest are in the states of California, Montana, North Dakota, Texas
and Wyoming.
During the last few fiscal years, the Company's major emphasis has been on
production from its oil and gas properties. During the nine-months ended March
31, 1996, the Company participated in the drilling of one oil well and one gas
well, as well as the acquisition of two producing properties, all located in
Kern County, California. During fiscal 1995, the Company sold a major portion of
its production in Montana, North Dakota and Texas.
In the minerals portion of the Company's business, the Company continued its
ongoing search for possible acquisition and exploration of undeveloped mining
properties in Alaska, seeking precious metals, primarily gold, but no Alaska
properties were acquired during the current, or the previous, fiscal year.
Continuing efforts are made to interest other companies in developing properties
with the Company.
Use of Estimates
Reserve calculations by independent petroleum engineers involve the estimation
of future net recoverable reserves of oil and gas and the timing and amount of
future net revenues to be received therefrom. Those estimates are based on
numerous factors, many of which are variable and uncertain. Reserve estimators
are required to make numerous judgments based upon professional training,
experience and educational background. The extent and significance of the
judgments in themselves are sufficient to render reserve estimates inherently
imprecise. Since reserve determinations involve estimates of future events,
actual production, revenues and operating expenses may not occur as estimated.
Accordingly, it is common for the actual production and revenues later received
to vary from earlier estimates. Estimates made in the first few years of
production from a property are generally not as reliable as later estimates
based on a longer production history. Reserve estimates based upon volummetric
analysis are inherently less reliable than those based on lengthy production
history. Also, potentially productive gas wells may not generate revenue
immediately due to lack of pipeline connections and potential development wells
may have to be abandoned due to unsuccessful completion techniques. Hence,
reserve estimates may vary from year to year.
11
<PAGE>
Note 7 - Disclosure of Certain Significant Risks and Uncertainties (Continued)
Concentration of Customers
In the oil and gas segment of the Company's business, two purchasers in the nine
months ended March 31, 1996 and two purchasers in fiscal 1995 represented sales
in excess of 10% of the Company's total oil and gas revenues. The availability
of oil and gas purchasers is such, however, that any buyer discontinuing
purchases from the Company could almost assuredly be replaced by another buyer.
In the mineral segment of the Company's business, in-kind royalties paid by
Cambior USA (operator of the Valdez Creek mining property), represented 100% of
the Company's total mineral revenues for the fiscal year ended June 30, 1995 and
the nine months ended March 31, 1996. The termination by Valdez Creek Mining
Company of its mining operations will have a material adverse effect on the
Company's business. Cambior, the operator of the Valdez Creek mining property,
notified the Company that it ceased mining operations effective June 30, 1995.
Gold processing, however, continued through September, 1995. The surface area of
the mine will be restored by the fall of 1996, and Cambior will reassign all its
interest in the mining claims to the Company. The Company is currently
evaluating the possibility of continued mining operations on the property, but
has made no decision to do so.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
As reflected on the balance sheet and statement of cash flows, cash and
equivalents decreased by $78,410 from $116,891 at June 30, 1995 to $38,481 at
March 31, 1996. The decrease in cash and cash equivalents for the nine-month
period ended March 31, 1996 was caused by: (1) payment of normal operating
expenses in excess of revenue for the current quarter and (2) net cash used in
investing activities. Cash and equivalents increased by $46,006 from $46,042 to
$92,048 for the same period a year earlier. The net cash provided by operations
for the nine-month period ended March 31, 1996 was $368,119 and the net cash
provided by operations for the nine-month period ended March 31, 1995 was
$101,582. Had Registrant received cash rather than in-kind gold royalties, cash
flow from operating activities would have been $614,708 for the nine-month
period ended March 31, 1996 as compared to $883,004 for the nine-month period
ended March 31, 1995, a decrease of 30.4%.
Precious metals inventory decreased by approximately $359,847, and this is
indicative of the sale of gold to finance operations. In the past, Registrant
could anticipate further production from Valdez Creek operations to restore
inventory. That production has been terminated and Registrant cannot anticipate
any further production or payment of royalties under the terms of the existing
agreement.
12
<PAGE>
Net cash used by investing activities for the nine-month period ended March 31,
1996 totaled $446,529, primarily from the drilling of two wells and the
acquisition of five wells in Kern County, California. Working capital decreased
$417,556 from $690,180 at June 30, 1995 to $272,624 at March 31, 1996, a 60.5%
decrease. This decrease in working capital at March 31, 1996 is due primarily to
the reduction of gold inventory by $359,847 (50%), used for the acquisition of
producing properties and the drilling of exploratory wells; and the increase of
advances from joint owners of $117,258. These advances will be used to drill 2
exploratory wells during the fourth quarter of 1996. The decrease in working
capital was offset by an increase of accounts receivable of $42,363 (136%) from
$30,997 to $73,360 and a decrease in accounts payable and severance taxes
payable of $90,047, or 52.5%. Included in working capital at March 31, 1996, is
$358,541 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 March 31, 1996, the market
value of precious metals in inventory was $369,850 which exceeded the total book
value reflected on the balance sheet ($358,541). Therefore, no writedown of the
gold inventory was necessary at March 31, 1996.
Although Registrant achieved a positive cash flow from operations, that was due
primarily to the sales of gold and the increase in accounts payable as reflected
on the statement of cash flows. Registrant recognized a negative cash flow from
investing activities, primarily as a result of its purchase of oil and gas
properties and the drilling of 2 exploratory wells. Sales of gold are expected
to continue to provide a source of capital to Registrant through the end of the
current fiscal year, but Registrant will have to develop other sources of
revenues and financing to finance operations in the future. In the event that
Registrant is unable to locate other sources of revenue, Registrant anticipates
that it will have to curtail portions of its current operations after September
30, 1996.
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.
13
<PAGE>
Registrant anticipates that production from its oil and gas properties and sales
of its in-kind gold royalties currently held in inventory 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. Registrant
has initiated a uranium lands acquisition program based on extensive geological
data gathered by Registrant's president since 1969. Registrant anticipates a
positive cash flow from these activities in calendar 1996, but there is no
assurance this will happen.
Results of Operations
Registrant's operations for the nine-month period ended March 31, 1996 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 drilled two wildcat wells in
Kern County, California. Registrant also acquired working interests in two
producing oil and gas properties in Kern County, California effective November
1, 1995.
Precious metals income were $-0- and $246,589 for the three and nine months
ended March 31, 1996 compared to $252,120 and $753,769 for the three- and
nine-month periods a year earlier. This decline in precious metals revenue is
due to the cessation of operations at the Valdez Creek Mine and Registrant's
receipt of in-kind gold shipments ceased, effective September 30, 1995.
The three-month result of operations, a loss of approximately $143,423, compared
to net loss of $26,600 for the nine-month period is indicative of the negative
impact the closing of the Valdez Creek Mine has had on Registrant. These results
will likely continue for the near term unless Registrant can replace its lost
gold production.
Oil and gas revenues decreased $30,758 for the three-month period ended March
31, 1996 from $78,507 at March 31, 1995 to $47,749 at March 31, 1996, a 39%
decrease. For the nine months ended March 31, 1996, oil and gas revenues
decreased $17,714 from $260,740 at March 31, 1995 to $243,026 at March 31, 1996,
a 6.7% decrease. This decrease was due to a reduction in oil and gas revenues
and administrative fees received by Registrant on producing properties sold in
the fourth quarter of fiscal year ended June 30, 1995. The decrease was
partially offset by increased promotional fees and administrative overhead fees
of $149,325 received in the first and second quarters of fiscal 1996.
Oil and gas production costs decreased by $40,971 and $166,457 to $18,905 and
$39,790 for the three-and nine-month periods ended March 31, 1996. This is a
decrease of 68.4% and 80.1%, respectively. Substantially all of this decrease
was the result of Registrant's sale of high cost, poor performing oil and gas
producing properties during the fourth quarter of fiscal 1995.
14
<PAGE>
Depreciation, depletion and amortization expense of $23,109 and $55,588 for the
three- and nine- month periods ended March 31, 1996 represent an increase of
$15,109 and $3,588 for the three- and nine-months ended March 31, 1996. The
increase in depletion expense represents an increase in the asset base from the
acquisition of properties in Kern County, California effective November 1, 1995
and the sale of underperforming properties in fiscal 1995.
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, general and administrative expenses increased by $5,831 for the three
months ended March 31, 1996 and decreased $31,143 (6.9%) for the nine months
ended March 31, 1996. This increase for the three-month period and decrease for
the nine-month period were due primarily to a decrease in consulting fees of
approximately $45,000 and travel expenses of $16,000 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, 1995. During the nine months ended March 31, 1995,
Registrant wrote off costs associated with the abandonment of the Sand Springs
project in Nevada in the amount of $26,700 and increased its reserve for bad
debts by $17,000. These decreases 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 and office expense for the
California office were approximately $106,000 for the nine months ended March
31, 1996.
15
<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,
May 3, 1996 Chief Executive Officer,
Principal Financial Officer
16
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM 3/31/96
10Q-SB AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> JUN-30-1996 JUN-30-1996
<PERIOD-END> MAY-31-1996 MAY-31-1996
<CASH> 38,481 0
<SECURITIES> 6,209<F1> 0
<RECEIVABLES> 110,360 0
<ALLOWANCES> (37,000) 0
<INVENTORY> 358,541 0
<CURRENT-ASSETS> 476,591 0
<PP&E> 1,542,409 0
<DEPRECIATION> (895,629) 0
<TOTAL-ASSETS> 1,339,597 0
<CURRENT-LIABILITIES> 203,967 0
<BONDS> 0 0
0 0
0 0
<COMMON> 5,661,812 0
<OTHER-SE> 0 0
<TOTAL-LIABILITY-AND-EQUITY> 1,339,597 0
<SALES> 47,749 489,615
<TOTAL-REVENUES> 46,517 538,828
<CGS> 0 0
<TOTAL-COSTS> 189,940 565,443
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> (143,423) (26,615)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (143,423) (26,615)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (143,423) (26,615)
<EPS-PRIMARY> (.03) (.01)
<EPS-DILUTED> (.03) (.01)
<FN>
<F1>TAG 1 - PREPAID EXPENSES
</FN>
</TABLE>
