U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] Quarterly Report under Section 13 or 15(d) of the Securities Exchange Act
of 1934 for the Quarterly Period Ended June 30, 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 0-10006
AMERICAN RIVERS OIL COMPANY
---------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Wyoming 84-0839926
------------------------------- ----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
700 East Ninth Avenue, Suite 106, Denver, CO 80203
- -------------------------------------------- ---------
(Address of principal executive offices) (Zip Code)
(303) 832-1117
(Issuer's telephone number)
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
--- ---
The number of shares outstanding as of August 7, 1996 of the issuer's $.01 par
value Common Stock and $.01 par value Class B Common Stock were 2,851,770 and
7,267,820, respectively.
Transitional Small Business Disclosure Format
(Check one):
Yes No X
----- -----
<PAGE>
AMERICAN RIVERS OIL COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
JUNE 30, 1996
(Unaudited)
ASSETS
------
Current Assets :
Cash $ 5,433
Oil and gas sales receivable 104,291
Accounts receivable, joint interest owners 4,510
Prepaid expenses 5,708
----------
Total current assets 119,942
Oil and Gas Properties, at cost, using
successful efforts method:
Proved properties 3,737,210
Less accumulated depreciation,
depletion and amortization (158,630)
----------
Net oil and gas properties 3,578,580
Investment in Bishop Capital Corporation 2,025,613
Other Assets 1,391
----------
$ 5,725,526
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current Liabilities:
Payable to major Class B shareholder $ 58,704
Payable to Bishop Capital Corporation:
Note 100,000
Other 10,634
Notes payable to bank 430,000
Current maturities of long-term debt 6,600
Accounts payable and accrued expenses 130,280
----------
Total current liabilities 736,218
Long-Term Debt, less current maturities 70,584
Deferred Income Taxes 183,400
Stockholders' Equity:
Preferred stock, $.50 par value; 5,000,000 shares
authorized; no shares issued --
Common stock, $.01 par value; 20,000,000 shares
authorized; 3,953,004 issued 39,530
Class B common stock, $.01 par value; 8,000,000 shares
authorized; 7,267,820 issued and outstanding 72,678
Additional paid-in capital 7,071,356
Accumulated deficit (712,178)
Less treasury stock, at cost,
1,101,234 of common shares (1,736,062)
----------
Total stockholders' equity 4,735,324
-----------
$ 5,725,526
===========
See accompanying notes to these consolidated financial statements.
<PAGE>
AMERICAN RIVERS OIL COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the Three Months
Ended June 30,
1996 1995
---------- ---------
REVENUE:
Oil and gas sales $ 166,518 $ 26,408
Operator fees 1,500 2,250
--------- ---------
Total revenue 168,018 28,658
EXPENSES:
Oil and gas production costs 72,964 12,650
General and administrative 128,063 30,541
Depreciation, depletion and amortization 34,000 8,490
--------- ---------
Total expenses 235,027 51,681
--------- ---------
LOSS FROM OPERATIONS (67,009) (23,023)
OTHER EXPENSE:
Equity in loss of
Bishop Capital Corporation 109,169 --
Interest expense 9,174 5,244
--------- ---------
118,343 5,244
--------- ----------
LOSS BEFORE INCOME TAXES (185,352) (28,267)
DEFERRED INCOME TAX BENEFIT 68,000 10,500
--------- ---------
NET LOSS $(117.352) $ (17,767)
========= =========
NET LOSS PER SHARE:
Common stock $ (.03)
=========
Class B common stock $ (.01)
=========
AVERAGE NUMBER OF SHARES OUTSTANDING:
Common stock 2,851,770
=========
Class B common stock 7,267,820
=========
See accompanying notes to these consolidated financial statements.
<PAGE>
AMERICAN RIVERS OIL COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
June 30,
-------------------------------
1996 1995
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (117,352) $ (17,767)
Adjustments to reconcile net
loss to net cash provided by (used in)
operating activities:
Depreciation, depletion and amortization 34,000 8,490
Equity in loss of Bishop
Capital Corporation 109,169 --
Deferred income tax benefit (68,000) (10,500)
Changes in operating assets and liabilities:
(Increase) decrease in:
Accounts receivable:
Oil and gas (46,496) (20,437)
Joint interest billings 2,468 (9,910)
Other assets 3,175 --
Increase (decrease) in:
Payable to Class B shareholder 4,000 --
Payable to Bishop Capital Corporation (12,945) --
Accounts payable and accrued expenses (15,788) 54,991
---------- ----------
Net cash provided by (used in)
operating activities (107,769) 4,867
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition and development
costs for oil and gas properties (424,551) (3,980)
Proceeds from sale of oil and gas property 8,000 --
---------- ----------
Net cash used in investing activities (416,551) (3,980)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings 547,000 --
Principal payments on borrowings (17,522) (8,139)
Owners' contributions -- 7,252
--------- ----------
Net cash provided by (used in)
financing activities 529,478 (887)
--------- ----------
Increase in Cash 5,158 --
Cash, beginning of period 275 --
---------- ----------
Cash, end of period $ 5,433 $ --
========== ==========
Supplemental Information:
Cash paid for interest $ 6,862 $ 5,244
========== ==========
See accompanying notes to these consolidated financial statements.
<PAGE>
AMERICAN RIVERS OIL COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
In October 1995, Metro Capital Corporation (Metro) and Karlton Terry Oil
Company (KTOC)entered into an Asset Purchase Agreement whereby KTOC agreed
to exchange certain oil and gas properties ( the "Contributed Properties")
for a total of 7,717,820 shares of Class B common stock of Metro, which
represented 80% of the issued and outstanding voting securities of Metro.
On November 29, 1995, the shareholders of Metro approved this transaction
and the closing occurred on December 8, 1995. The shareholders also
approved changing the name of the Company from Metro to American Rivers Oil
Company (AROC). At the closing date, additional working interests in the
KTOC oil and gas properties (the " Option Properties") were acquired for
cash, a portion of the Class B common shares issued in the transaction, and
other consideration.
The unaudited consolidated balance sheet at June 30, 1996 reflects AROC's
investment in Bishop using the equity method (See Note 2). The unaudited
consolidated statements of operations and cash flows for the three months
ended June 30, 1996 include the operations of the Contributed Properties,
the Option Properties and the operating results of Bishop utilizing the
equity method of accounting.
The unaudited consolidated statements of operations and cash flows for the
three months ended June 30, 1995 include the operating results and cash
flows related to the Contributed Properties and include an allocation of
KTOC's general and administrative expenses based on KTOC's activities
related to the Contributed Properties compared to its overall activities.
The net amounts required to fund such activities are presented as a capital
contribution from KTOC.
In the opinion of management, all adjustments, consisting of normal
recurring accruals, have been made which are necessary for a fair
presentation of the financial position of the Company at June 30, 1996 and
the results of operations and cash flows for the three month periods ended
June 30, 1996 and 1995. Quarterly results are not necessarily indicative of
expected annual results because of the impact of fluctuations in prices
received for oil and natural gas and other factors. For a more complete
understanding of the Company's operations and financial position, reference
is made to the consolidated financial statements of the Company, and
related notes thereto, filed with the Company's annual report on Form
10-KSB for the year ended March 31, 1996, previously filed with the
Securities and Exchange Commission.
2. Investment in Bishop Capital Corporation
Bishop is being operated autonomously by the prior management of Metro
pursuant to the terms of separate Operating, Management and Voting
Agreements. Since the Company does not exercise control over Bishop's
operations, the investment is accounted for by the equity method.
<PAGE>
AMERICAN RIVERS OIL COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Following is a summary of condensed unaudited financial information pertaining
to Bishop.
June 30,
1996
----------
Balance sheet data:
Current assets $ 1,020,000
Noncurrent assets 1,272,000
Current liabilities (257,000)
Unrealized holding gain (9,000)
----------
Company's equity in net assets $ 2,026,000
=========
Three Months
Ended
June 30, 1996
-------------
Operations data:
Revenue $ 16,000
Costs and expenses (160,000)
Gain on sale of marketable securities 25,000
Other income (expense) 10,000
----------
Net loss $ (109,000)
==========
Company's equity in Bishop's loss $ (109,000)
==========
3. Notes Payable
The payable to a major Class B shareholder includes a note payable of
$17,000 which is unsecured and bears interest at 10%.
The note payable of $100,000 to Bishop Capital Corporation, a wholly-owned
subsidiary, bears interest at 10% and is collateralized by producing oil
and gas properties in Louisiana.
The notes payable to a bank consist of an unsecured $30,000 note which
bears interest at 9.75% and a $400,000 note which bears interest at the
Wall Street Journal Prime Rate plus 1% (currently 9.25%) and is
collateralized by 6,596,375 shares of the Company's Class B common stock
owned by officers, directors and Karlton Terry Oil Company and is
personally guaranteed by two individuals who are officers and directors of
the Company. Subsequent to June 30, 1996, the two notes were combined into
a new note for $608,742 with the additional proceeds utilized to acquire
additional producing oil and gas properties. The new note currently bears
interest at 9.25%.
<PAGE>
AMERICAN RIVERS OIL COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
4. Net Loss Per Share
The computation of net loss per share is based on the rights of each class
of common stock. The Class B common stock is not entitled to participate in
any distribution of shares or assets of Bishop until such shares are
converted into common stock beginning June 1998. Accordingly, the common
shares were allocated 100% of the Bishop's loss and a pro rata percentage
of the remaining consolidated loss based on the ratio of common shares
outstanding to total common and Class B shares outstanding. The Class B
common shares were allocated the remaining pro rata percentage of the loss.
<PAGE>
AMERICAN RIVERS OIL COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The accompanying unaudited consolidated statements of operations and cash
flows for the three months ended June 30, 1995 only include the operations
of the Contributed Properties. Additionally, they include an allocation of
Karlton Terry Oil Company's (KTOC) general and administrative expenses
based on KTOC's activities related to the Contributed Properties compared
to its overall activities. The following discussion and analysis should be
read in conjunction with the Company's unaudited consolidated financial
statements and notes thereto.
RESULTS OF OPERATIONS
Revenue
The Company's oil and gas sales revenue increased by $140,000 in the
quarter ended June 30, 1996 compared to the corresponding quarter in 1995.
Production volumes for oil and natural gas also increased significantly in
the current quarter compared to the corresponding quarter in 1995. The
revenue and production volume increases are primarily attributable to the
acquisition of producing oil and natural gas properties in the
Denver-Julesburg Basin in the fourth quarter of fiscal year ended March 31,
1996 and in the current quarter. The average sales price of oil increased
14% and the average sales price of natural gas decreased by 7% in the
quarter ended June 30, 1996 compared to the corresponding quarter in 1995.
The production volumes and average sales prices during the periods were as
follows:
Three Months Ended
June 30,
--------------------
1996 1995
------ ------
Oil production (barrels) 4,419 1,242
Average sales price per barrel $20.63 $18.04
Natural gas production (mcf) 45,106 2,210
Average sales price per mcf $ 1.67 $ 1.80
Expenses
Oil and gas production costs increased $60,000 in the quarter ended June
30, 1996 compared to the corresponding quarter in 1995 due primarily to
production expenses associated with the newly-acquired Denver-Julesburg
Basin properties. The increase included $12,000 of costs related to the
Company complying with new Environmental Protection Agency (EPA)
regulations which require firewalls around all storage tanks and the
backfilling of existing drilling pits. The Company will incur additional
costs complying with the new EPA regulations and anticipates compliance by
the end of the second quarter. On a BOE basis (BOE means barrel of oil
equivalent, using a conversion ratio of six mcf of natural gas to one
barrel of oil), production costs decreased approximately 22% in the first
quarter of 1996 to $6.11 per BOE from $7.86 per BOE in the first quarter of
1995. The decrease is attributable to lower production costs associated
with the Denver-Julesburg Basin properties.
<PAGE>
General and administrative expenses increased by $97,000 in the first
quarter of 1996 compared to the corresponding quarter in 1995. The increase
is due to increases in salaries, professional fees and other expenses
associated with a public company.
Depreciation, depletion and amortization expense increased by $25,000 in
the current quarter compared to the corresponding quarter in 1995 due to
increased production volumes.
The equity in loss of Bishop Capital Corporation (an unconsolidated
wholly-owned subsidiary) represents the Company's equity in Bishop's
operations for the three months ended June 30, 1996.
Interest expense increased by $3,900 for the current quarter of 1996 over
the corresponding quarter of 1995 due to a higher average amount of debt
outstanding.
FINANCIAL CONDITION
At June 30, 1996, the Company had a working capital deficit of $616,000.
The following summary table reflects the Company's cash flows for the three
months ended June 30, 1996 and 1995:
Three Months Ended
June 30,
------------------------
1996 1995
---------- ---------
Net cash provided by (used in)
operating activities $ (108,000) $ 4,800
Net cash used in investing activities (416,000) (3,900)
Net cash provided by (used in)
financing activities 529,000 (900)
The Company had a net use of cash in operating activities of $108,000 in
the first quarter of 1996 compared to net cash provided by operating
activities of $4,800 in the first quarter of 1995. The decrease is
primarily due to the payment of accounts payable and accrued expenses of
$100,000 from proceeds of a loan from Bishop Capital Corporation.
Net cash used in investing activities of $416,000 in the first quarter of
1996 resulted from the acquisition of additional working interests in
producing oil and gas properties in the Denver-Julesburg Basin from
unrelated third parties and a major Class B shareholder. Net cash used in
investing activities of $3,900 in the first quarter of 1995 resulted from
capital expenditures on the Sparkle #1 well.
Net cash provided by financing activities of $529,000 in the first quarter
of 1996 resulted from bank borrowings of $430,000 and borrowings from
Bishop Capital Corporation of $100,000. In addition, the Company borrowed
$17,000 from a major Class B shareholder. Net cash used in financing
activities of $900 in the first quarter of 1995 is due to principal
payments on borrowings of $8,100 offset by owners' contributions of $7,200.
The Company's oil and gas strategy is and will continue to be the
acquisition and development of leases underlying large rivers and lakes in
known oil and gas fields (the "River Leases"). The Company is acquiring
<PAGE>
producing cash flow properties in the Denver-Julesburg Basin to augment and
diversify its strategy on the River Leases. The Company will also review
and consider acquiring or participating in other oil and gas projects which
management may expect will increase the cash flow and/or add to the
long-term financial stability of the Company.
A substantial portion of the Company's oil and gas reserves are Proved
Undeveloped Reserves and the estimated expenditures to develop these
properties amount to $1,321,000. Successful development and production of
such reserves cannot be assured. Additional drilling will be necessary in
future years both to maintain production levels and to define the extent
and recoverability of existing reserves. There is no assurance that present
oil and gas wells of the Company will continue to produce at current or
anticipated rates of production, that development drilling will be
successful, that production of oil and gas will commence when expected, or
that there will be favorable markets for oil and gas which may be produced
in the future.
The Company's development plans include the drilling of offsets to the
existing river wells as a preliminary priority while gradually drilling new
wells under previously undrilled river projects at the rate of three to
five wells per year. It is estimated that capital of $1,700,000 will be
required to: (i) meet operating capital requirements; (ii) carry out
management's plans to drill three to five development wells in fiscal 1997;
(iii) purchase existing producing oil and gas wells; and (iv) repay
outstanding debt. The assets transferred to Bishop Capital Corporation as
part of the acquisition are not available for use by the Company. To meet
these requirements, management is conducting a private placement of up to
1,800,000 shares of the Company's common stock for gross proceeds of
$1,800,000. As of June 30, 1996, the Company received proceeds of $520,887
(net of commissions and other offering expenses). The offering is
continuing and the Company may receive up to $1,262,500 of additional
proceeds (before deduction of commissions and other offering costs). If the
maximum proceeds from this offering are raised, the Company believes that
the net proceeds would be sufficient to fund planned activities through at
least the end of fiscal 1997. If the maximum proceeds are not raised,
management may seek alternative financing arrangements, including
additional bank financing and/or the promotion of drilling arrangements to
oil industry partners and other investors. There is no assurance that the
bank financing or the promotion of drilling arrangements to industry
partners and other investors will occur. No commitments have been received
for any such financing or drilling arrangements. If such financing is not
obtained or alternate drilling arrangements completed, the Company could
experience significant cash flow problems. In such case, the Company may
have to promote a well by selling a portion of its leasehold acreage. While
management believes obtaining financing through industry partner promotion
is a viable means to fund development, it is not the preferred alternative
since it results in a lower share of the related proved reserves and cash
flows.
Subsequent to June 30, 1996, the Company borrowed an additional $178,742
from a bank for the acquisition of producing oil and gas properties in the
Denver-Julesburg Basin. This borrowing and $430,000 from earlier borrowings
were combined into one note payable of $608,742 with a maturity date of
September 1996. The new note is collateralized by 6,596,375 shares of the
Company's Class B common stock owned by officers, directors and Karlton
Terry Oil Company and is personally guaranteed by two individuals who are
officers and directors of the Company. The Company is currently negotiating
with the bank for a $1,000,000 line of credit which would be utilized for
the acquisition of producing oil and gas properties.
<PAGE>
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
None
Item 2. Changes in Securities
---------------------
On June 26, 1996, a Special Meeting of Shareholders was held and the
shareholders approved a proposal to amend the Articles of Incorporation to
eliminate the supervoting provision of the Class B Common Stock and provide
the same voting terms as the Company's common stock, one share one vote.
The Articles of Amendment to the Articles of Incorporation were filed
subsequent to June 30, 1996.
Item 3. Default Upon Senior Securities
------------------------------
None
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
a. A Special Meeting of Shareholders was held on June 26, 1996 to
consider and take action on a proposal to amend the Articles of
Incorporation to eliminate the supervoting provision of the
Class B Common Stock and provide the same voting terms of the
Company's Common Stock, one share one vote.
For 7,824,654
Against 168
Abstained 2,386
Item 5. Other Information
-----------------
None
Item 6. Exhibits and Reports on Form 8-K
---------------------------------
a. Exhibits
Exhibit 27. Financial Data Schedule (submitted only in
electronic format)
b. Reports on Form 8-K
None
<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.
AMERICAN RIVERS OIL COMPANY
(Registrant)
Date: August 7, 1996 By: /s/ Karlton Terry
------------------------------------
Karlton Terry
President
(Principal Executive Officer)
Date: August 7, 1996 By: /s/ Jubal Terry
------------------------------------
Jubal Terry
Vice President and Acting
Chief Financial Officer
(Principal Financial Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> JUN-30-1996
<CASH> 5,433
<SECURITIES> 0
<RECEIVABLES> 108,801
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 119,942
<PP&E> 3,737,210
<DEPRECIATION> 158,630
<TOTAL-ASSETS> 5,725,526
<CURRENT-LIABILITIES> 736,218
<BONDS> 0
0
0
<COMMON> 112,208
<OTHER-SE> 4,623,116
<TOTAL-LIABILITY-AND-EQUITY> 5,725,526
<SALES> 166,518
<TOTAL-REVENUES> 168,018
<CGS> 72,964
<TOTAL-COSTS> 235,027
<OTHER-EXPENSES> 109,169
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,174
<INCOME-PRETAX> (185,352)
<INCOME-TAX> 68,000
<INCOME-CONTINUING> (117,352)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (117,352)
<EPS-PRIMARY> (.03)
<EPS-DILUTED> (.03)
</TABLE>
