U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________________ to ___________________
Commission File No. 2-72232
GREAT EASTERN ENERGY AND DEVELOPMENT CORPORATION
------------------------------------------------
(Exact name of small business issuer as specified in its charter)
COMMONWEALTH OF VIRGINIA 54-1082057
------------ -- -------- ----------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
5990 Greenwood Plaza Blvd., Suite 127
Greenwood Village, Colorado 80111-4708
(Address of principal executive offices)
Issuer's telephone number: (303) 773-6016
NONE
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report.)
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__
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date:
Common Stock, $.10 par value 18,844,245
- ---------------------------- ----------------------------
Class Outstanding at July 31, 1997
Transitional Small Business Disclosure Format: Yes ___ No _X_
<PAGE>
GREAT EASTERN ENERGY AND DEVELOPMENT CORPORATION AND SUBSIDIARIES
INDEX
Page
Number
------
PART I. Financial Information
Item 1. - Financial statements
Consolidated Balance Sheet....................... 3
Consolidated Statement of Operations............. 4
Consolidated Statement of Cash Flows............. 6
Notes to Consolidated Financial Statements....... 7
Item 2. - Management's Discussion and Analysis of
Financial Condition and Result of
Operations............................ 8
PART II. Other Information................................ 11
Signatures................................................ 12
2
<PAGE>
GREAT EASTERN ENERGY AND DEVELOPMENT CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEET
June 30, December 31,
1997 1996
ASSETS (Unaudited)
--------- --------
(In thousands)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents.................... $ 1,832 $ 1,580
Receivables, net of allowance for doubtful
accounts of $247 in 1997 and 1996........... 323 449
Prepaid expenses and other current assets.... 34 23
------ ------
Total current assets..................... 2,189 2,052
------ ------
OIL AND GAS PROPERTIES, at cost (accounted
for using the successful efforts method)
Proved oil and gas properties............... 9,645 9,514
Undeveloped leaseholds...................... 53 52
Pipeline equipment.......................... 1,348 1,346
Equipment inventory......................... 55 54
------ ------
11,101 10,966
Less accumulated depreciation, depletion,
amortization and impairment................ ( 9,875) ( 9,781)
------ ------
1,226 1,185
Properties held under installment sales, net
of accumulated depreciation, depletion and
amortization of $1,349 and $1,210,
respectively 861 1,000
------ ------
2,087 2,185
OTHER ASSETS, at cost, net of accumulated
depreciation and amortization of $428 and $423 105 84
------ ------
4,381 $4,321
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable................................ $ 18 $ 18
Accounts payable and accrued expenses........ 165 156
------ ------
Total current liabilities................ 183 174
------ ------
NOTES PAYABLE................................. 23 29
------ ------
COMMITMENTS AND CONTINGENT LIABILITIES
SHAREHOLDERS' EQUITY
Preferred stock, $10.00 par value, 4,000,000
shares authorized, none issued or outstanding
Common stock, $.10 par value, 40,000,000
shares authorized, 18,844,245 shares issued
and outstanding............................. 1,884 1,884
Additional paid-in capital................... 29,242 29,242
Accumulated deficit.......................... (26,951) (26,968)
Notes receivable - officers.................. - (40)
------ ------
4,175 4,118
----- -----
$4,381 $4,321
====== ======
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
3
<PAGE>
GREAT EASTERN ENERGY AND DEVELOPMENT CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
Three Months
Ended June 30,
--------------
1997 1996
---- ----
(In thousands, except
per share amounts)
<S> <C> <C>
REVENUES
Oil and gas sales........................ $ 191 $ 234
Gas transmission sales................... 287 264
Installment sales income (loss), net..... (18) (25)
Interest and other income................ 22 21
------ ------
482 494
------ ------
EXPENSES
Production costs......................... 72 61
Cost of gas transmission................. 208 222
Cost of pipeline relocation.............. - 2
Exploration costs........................ 50
Depletion, depreciation and amortization. 57 49
General and administrative............... 149 98
------ ------
536 432
------ ------
NET INCOME (LOSS)......................... $ (54) $ 62
====== ======
NET INCOME (LOSS) PER SHARE............... $ (.00) $ .00
====== ======
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING.............................. 18,844 18,844
====== ======
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
4
<PAGE>
GREAT EASTERN ENERGY AND DEVELOPMENT CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
Six Months
Ended June 30,
--------------
1997 1996
---- ----
(In thousands, except
per share amounts)
<S> <C> <C>
REVENUES
Oil and gas sales........................ $ 440 $ 444
Gas transmission sales................... 641 477
Income from pipeline relocation.......... - 498
Installment sales income (loss), net..... (22) (27)
Interest and other income................ 42 26
------ ------
1,101 1,418
EXPENSES
Production costs......................... 130 113
Cost of gas transmission................. 427 413
Cost of pipeline relocation.............. - 260
Exploration costs........................ 50
Depletion, depreciation and amortization. 111 96
General and administrative............... 366 223
------ ------
1,084 1,105
NET INCOME................................ $ 17 $ 313
====== ======
NET INCOME PER SHARE...................... $ .00 $ .02
====== ======
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING.............................. 18,844 18,844
====== ======
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
5
<PAGE>
GREAT EASTERN ENERGY AND DEVELOPMENT CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
Six Months
Ended March 31,
---------------
1997 1996
---- ----
(In thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income.................................. $ 17 $ 313
Adjustments to reconcile net income to net
cash provided by operating activities:
(Increase) decrease in accounts receivable 126 (190)
(Increase) decrease in other current assets (11) 111
Depletion, depreciation and amortization.. 111 96
Depletion, depreciation and amortization
charged against installment sales income
(loss), net.............................. 139 116
Increase in accounts payable and accrued
expenses................................. 9 (19)
Decrease in notes receivable - officers... 40 -
------ ------
Net cash provided by operating
activities............................. 431 427
------ ------
CASH FLOWS FROM INVESTING ACTIVITIES
Increase in certificates of deposit......... - (6)
Additions to oil and gas properties......... (135) (40)
Increase in other assets.................... (38) (18)
------ ------
Net cash used for investing activities.. (173) (64)
------ ------
CASH FLOWS FROM FINANCING ACTIVITIES
Repayments of debt.......................... (6) (5)
------ ------
INCREASE IN CASH............................. 252 358
CASH AT BEGINNING OF PERIOD.................. 1,580 439
------ ------
CASH AT END OF PERIOD........................ $1,832 $ 797
====== ======
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
6
<PAGE>
GREAT EASTERN ENERGY AND DEVELOPMENT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The interim financial data are unaudited; however, in the opinion of
Great Eastern Energy and Development Corporation and Subsidiaries ("Great
Eastern" or the "Company"), the interim data include all adjustments, consisting
only of normal recurring adjustments, necessary for a fair statement of the
results for the interim periods. These financial statements should be read in
conjunction with Great Eastern's December 31, 1996 audited consolidated
financial statements and notes thereto included in Form 10-KSB.
The consolidated financial statements include the accounts of Great
Eastern and its wholly-owned subsidiaries, Patton Oil Co., Zoandra Petroleum,
Inc. and Sycamore Valley Gathering, Ltd. All significant intercompany balances
and transactions have been eliminated in consolidation.
NOTE 2 - RELATED PARTY TRANSACTIONS
During the first quarter of fiscal 1997, the Company forgave a loan
receivable from an officer in the amount of $40,000. The forgiveness and
associated payroll taxes in the aggregate gross amount of $77,000 is reflected
as compensation under general and administrative expenses in the statement of
operations for the six months ended June 30, 1997.
NOTE 3 - SALE OF COMPANY
Caprito Gas Corporation filed a tender offer with the Securities and
Exchange Commission on July 11, 1997 for all of the Company's outstanding stock
at $0.22 per share. At the close of the tender offer on August 11, 1997,
17,168,833 shares, representing approximately 91 percent of the issued and
outstanding shares, had been tendered and accepted for payment by Caprito.
As stated in the tender offer, Caprito proposes a cash-out merger to
acquire the balance of the outstanding stock of Great Eastern in the near future
for the same consideration per share as was paid in the tender offer.
7
<PAGE>
GREAT EASTERN ENERGY AND DEVELOPMENT CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
- ---------------------
Second Quarter 1997 Compared to Second Quarter 1996.
---------------------------------------------------------
The Company's second quarter of fiscal 1997 operations reflected a net loss
of $54,000 as compared to net income of $62,000 for the corresponding quarter of
fiscal 1996. Decreased sales volumes from oil properties under waterflood and
decreased sales prices have resulted in decreased profits from oil and gas
operations of $119,000 in the second quarter of fiscal 1997 as compared to
$173,000 for the corresponding quarter of fiscal 1996.
An increase in production volumes from coalbed methane gas wells,
coupled with an increase in product prices, has resulted in an increase in gas
transmission sales. The increase in gas transmission sales volumes resulted in a
corresponding increase in the cost of gas, and the effect of cost containment
policies was a reduction to operating expenses. Natural gas transmission
operations reflected a profit of $79,000 for the second quarter of fiscal 1997
as compared to a profit of $42,000 for the corresponding quarter of fiscal 1996.
While conducting a mechanical integrity test on its No. 1-3 McIntyre
well located in Moffat County, Colorado, the Company was unable to disconnect
the tubing from the production packer and as a result had to abandon the
Shinarump formation where the well was completed. The well was recompleted as a
shut-in gas well in the Niobrara formation at a cost of $50,000.
A loss from installment sales of $18,000, net of depreciation,
depletion and amortization of $71,000, is reflected in the second quarter of
fiscal 1997 consolidated statement of operations as compared to a loss from
installment sales income of $25,000, net of depreciation, depletion and
amortization of $58,000 for the corresponding quarter of fiscal 1996.
General and administrative costs increased by $51,000 to $149,000
during the second quarter of fiscal 1997 as compared to $98,000 for the
corresponding quarter of fiscal 1996. The increase was primarily attributed to
expenses associated with the proposed sale of the Company.
No provision for income taxes was reflected in the second quarter 1997
consolidated statement of operations, as the Company has adequate net operating
loss carryforwards available to offset taxable income.
First Half 1997 Compared to First Half 1996.
---------------------------------------------
The Company's first half of fiscal 1997 operations reflected net income of
$17,000 as compared to net income of $313,000 for the corresponding half of
fiscal 1996. The $296,000 decline in net income resulted primarily from a
nonrecurring gain of $238,000 during fiscal 1996 as discussed below. Moderately
higher production costs have resulted in decreased profits from oil and gas
operations of $310,000 in the first half of fiscal 1997 as compared to $331,000
for the corresponding half of fiscal 1996.
8
<PAGE>
An increase in production volumes from coalbed methane gas wells,
coupled with an increase in product prices, has resulted in an increase in gas
transmission sales. The increase in gas transmission sales volumes resulted in a
corresponding increase in the cost of gas, and the effect of cost containment
policies was a reduction to operating expenses. Natural gas transmission
operations reflected a profit of $214,000 for the first half of fiscal 1997 as
compared to a profit of $64,000 for the corresponding half of fiscal 1996.
Management entered into a fixed-price contract whereby the Kansas
Department of Transportation agreed to pay the Company $498,000 to relocate
certain portions of its pipeline. Construction was completed during the first
half of fiscal 1996 at an aggregate cost of $260,000, and resulted in a profit
of $238,000 from the arrangement. There were no such transactions during the
corresponding half of fiscal 1997.
A loss from installment sales of $22,000, net of depreciation,
depletion and amortization of $139,000, is reflected in the first half of fiscal
1997 consolidated statement of operations as compared to a loss from installment
sales income of $27,000, net of depreciation, depletion and amortization of
$96,000 for the corresponding half of fiscal 1996.
General and administrative costs increased by $143,000 to $366,000
during the first half of fiscal 1997 as compared to $223,000 for the
corresponding half of fiscal 1996. The principal increase related to
compensation costs of $77,000 associated with the retirement of a certain
officer's obligation; the remaining increase was primarily attributed to
expenses associated with the proposed sale of the Company.
No provision for income taxes was reflected in the first half 1997
consolidated statement of operations, as the Company has adequate net operating
loss carryforwards available to offset taxable income.
Current Operations
- ------------------
Since January 1, 1997, the Company has drilled two development dry
holes; there has not been any exploratory drilling activities.
Liquidity and Capital Resources
- -------------------------------
Working Capital.
-------------------
The Company had working capital of $2,006,000 and $1,878,000 at June 30,
1997 and December 31, 1996, respectively. The Company has no bank debt and, with
the exception of one compressor, no oil and gas properties are pledged as
collateral. Management believes that the Company's liquidity is adequate to meet
operating activities for fiscal 1997. Oil and gas development activities, if
any, will be funded solely from excess cash generated from operations and from
proceeds generated from the installment sale of certain southeastern Kansas
coalbed methane gas properties.
Future Operations.
-------------------
Some selected developmental drilling for oil and gas may be conducted in
Kansas in 1997. No exploratory wells are scheduled to be drilled in 1997.
9
<PAGE>
Sale of Company.
----------------
Caprito Gas Corporation filed a tender offer with the Securities and
Exchange Commission on July 11, 1997 for all of the Company's outstanding stock
at $0.22 per share. At the close of the tender offer on August 11, 1997,
17,168,833 shares, representing approximately 91 percent of the issued and
outstanding shares, had been tendered and accepted for payment by Caprito.
As stated in the tender offer, Caprito proposes a cash-out merger to
acquire the balance of the outstanding stock of Great Eastern in the near future
for the same consideration per share as was paid in the tender offer.
On August 15, 1997, Great Eastern's Board of Directors met and appointed
Mr. Kevin O. Butler, Caprito's President and sole shareholder, to the Board.
Following Mr. Butler's appointment, Great Eastern's former Board resigned
enabling Mr. Butler to name a new Board for the Company. Mr. Donald G. Jumper
was replaced as President of the Company by Mr. Butler. Great Eastern's
operations will be relocated to Midland, Texas.
10
<PAGE>
PART II - OTHER INFORMATION
Item 4 - The Annual Meeting of the Stockholders of the Company was held on
May 29, 1997 at the offices of the Company in Greenwood Village,
Colorado. The following persons were elected to continue as
Directors of the Company and did in fact constitute the entire
Board of Directors until August 15, 1997, when all members
resigned commensurate with the sale of the company.
Edward S. Barr
Alex G. Campbell, Jr.
John I. Crews, Jr.
Donald G. Jumper
Sidney Buford Scott
William T. Young, Jr.
Items 1, 2, 3, 5 and 6 are not applicable.
11
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
GREAT EASTERN ENERGY AND
DEVELOPMENT CORPORATION
-----------------------
(Registrant)
Date: August 19, 1997 By: /s/ KEVIN O. BUTLER
-----------------------
Kevin O. Butler
Chief Executive Officer, President, Chief
Financial and Accounting Officer and
Director
12
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S.
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1
<CASH> 1,832
<SECURITIES> 0
<RECEIVABLES> 570
<ALLOWANCES> 247
<INVENTORY> 0
<CURRENT-ASSETS> 2,189
<PP&E> 13,844
<DEPRECIATION> 11,652
<TOTAL-ASSETS> 4,381
<CURRENT-LIABILITIES> 183
<BONDS> 23
0
0
<COMMON> 1,884
<OTHER-SE> 2,291
<TOTAL-LIABILITY-AND-EQUITY> 4,381
<SALES> 1,101
<TOTAL-REVENUES> 1,101
<CGS> 1,084
<TOTAL-COSTS> 1,084
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 17
<INCOME-TAX> 0
<INCOME-CONTINUING> 17
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 17
<EPS-PRIMARY> .00
<EPS-DILUTED> .00
</TABLE>
