<PAGE>
UNITED STATES
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 DECEMBER 31, 1995
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
EXCHANGE ACT
For the transition period from ________ to ________
Commission file number 0-6540
OCEANIC EXPLORATION COMPANY
------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
DELAWARE 84-0591071
--------------- ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5000 SOUTH QUEBEC STREET, SUITE 450, DENVER, CO 80237
------------------------------------------------------
(Address of principal executive offices)
(303) 220-8330
------------------------------------------------------
(Issuer's Telephone number)
------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by 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.
[ X ] Yes [ ] No
Shares outstanding at Common $.0625 Par Value
February 7, 1996
3,915,154
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2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
OCEANIC EXPLORATION COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
DECEMBER 31, MARCH 31,
1995 1995
------------ ------------
<S> <C> <C>
Cash $ 332,678 154,628
Receivables:
Affiliates 5,277 2,237
Other 6,311 9,633
------------ -----------
11,588 11,870
Prepaid expenses 1,819 4,347
Restricted cash - 15,629
------------ -----------
Total current assets 346,085 186,474
------------ -----------
Oil and gas property
interests, full-cost method
of accounting -- Greece 39,000,000 39,000,000
Less accumulated amortization,
depreciation and
valuation allowance (37,835,414) (37,629,909)
------------ -----------
1,164,586 1,370,091
------------ -----------
Other assets 331 757
------------ -----------
$ 1,511,002 1,557,322
------------ -----------
------------ -----------
</TABLE>
(Continued)
<PAGE>
3
OCEANIC EXPLORATION COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS, CONTINUED
<TABLE>
<CAPTION>
LIABILITIES AND
STOCKHOLDER'S DEFICIT
DECEMBER 31, MARCH 31,
1995 1995
------------ ------------
<S> <C> <C>
Current liabilities:
Notes payable to affiliate
(note 2) $ 1,484,759 2,000,000
Accounts payable 255,277 181,879
Accounts payable to affiliate 60,000 60,000
United Kingdom taxes payable,
including accrued interest 408,958 408,958
Accrued expenses 119,746 90,487
------------ ------------
Total current liabilities 2,328,740 2,741,324
------------ ------------
Deferred income taxes (note 4) 719,095 808,062
Other noncurrent liabilities 16,929 15,217
------------ ------------
Total liabilities 3,064,764 3,564,603
------------ ------------
Stockholders' deficit:
Common stock, $.0625 par value.
Authorized 12,000,000 shares;
issued and outstanding
3,915,154 shares 244,697 244,697
Capital in excess of par value 6,665 6,665
Accumulated deficit (1,805,124) (2,258,643)
------------ ------------
Total stockholders' deficit (1,553,762) (2,007,281)
------------ ------------
Contingencies (note 3)
$ 1,511,002 1,557,322
------------ ------------
------------ ------------
</TABLE>
See accompanying notes to consolidated financial statements.
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4
OCEANIC EXPLORATION COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
NINE MONTHS ENDED THREE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
-------------------- -------------------
1995 1994 1995 1994
---------- -------- --------- -------
<S> <C> <C> <C> <C>
Revenues:
Oil and gas sales -
Greece (note 3) $1,468,120 550,000 1,468,120 183,334
Other 370,944 208,930 168,701 69,573
---------- -------- --------- -------
1,839,064 758,930 1,636,821 252,907
---------- -------- --------- -------
Costs and expenses:
Interest and
financing costs 118,127 92,944 40,085 33,964
Exploration
expenses 25,508 97,644 (419) 22,990
Amortization and
depreciation 205,505 240,567 68,505 80,189
General and
administrative 538,123 443,695 190,200 136,711
---------- -------- --------- -------
887,263 874,850 298,371 273,854
---------- -------- --------- -------
Income (loss)
before income
taxes 951,801 (115,920) 1,338,450 (20,947)
Income tax expense
(note 4) 498,282 120,882 557,482 40,686
---------- -------- --------- -------
Net income (loss) $ 453,519 (236,802) 780,968 (61,633)
---------- -------- --------- -------
---------- -------- --------- -------
Income (loss) per
common share $ .12 (.06) .20 (.02)
---------- -------- --------- -------
---------- -------- --------- -------
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
5
OCEANIC EXPLORATION COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
DECEMBER 31,
-----------------------
1995 1994
--------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 453,519 (236,802)
Adjustments to reconcile net
income (loss) to net cash
provided by (used in) operating
activities:
Amortization and depreciation 205,505 240,567
Deferred income tax benefit (88,967) (99,118)
Decrease (increase) in
receivables 282 (315,698)
Decrease (increase) in
restricted cash 15,629 (324)
Decrease in prepaid expenses
and other assets 2,954 525
Increase (decrease) in accounts
payable and accounts
payable to affiliates 73,398 (19,853)
Increase in accrued expenses 29,259 4,419
Increase in other noncurrent
liabilities 1,712 3,200
--------- --------
Net cash provided by (used in)
operating activities 693,291 (423,084)
--------- --------
Cash flows from financing activities:
Borrowings from (repayments to)
affiliates, net (515,241) 500,000
--------- --------
Net cash (used in) provided
by financing activities (515,241) 500,000
--------- --------
Net increase in cash 178,050 76,916
Cash at beginning of period 154,628 48,928
--------- --------
Cash at end of period $ 332,678 125,844
--------- --------
--------- --------
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
6
OCEANIC EXPLORATION COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The consolidated balance sheet as of March 31, 1995, which has been
derived from audited statements, and the unaudited interim consolidated
financial statements included herein have been prepared pursuant to the rules
and regulations of the Securities and Exchange Commission. Certain
information and note disclosures normally included in annual financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to those rules and
regulations, although the Registrant believes that the disclosures made are
adequate to make the information presented not misleading. In the opinion of
management, all adjustments consisting of normal reoccurring accruals have
been made which are necessary for the fair presentation of the periods
presented. The accounting policies of the Registrant are set forth in the
financial statements and notes thereto and are included in the Registrant's
latest annual report on Form 10-KSB. It is suggested that these consolidated
financial statements be read in conjunction with that document.
(2) NOTES PAYABLE
Notes payable to affiliate at December 31 and March 31, 1995 represent
borrowings under a $2,000,000 line of credit established in favor of the
Registrant by NWO Resources, Inc. (NWO), the parent company of International
Hydrocarbons, the Registrant's majority stockholder. On September 19, 1995,
the Registrant entered into a Modification Agreement with NWO, modifying the
existing line of credit arrangement between the Registrant and NWO. Prior to
entering into the Modification Agreement, the NWO line of credit provided for
cumulative draws of up to $2,000,000 with interest payable monthly on the
outstanding balance at the greater of the U.S. bank prime lending rate or
1-3/4% above the 30-day LIBOR in effect on the date of each draw against the
line of credit. Draws under the line of credit are evidenced by promissory
notes which were originally payable no later than January 1, 1996 with
interest at annual rates of 7% to 9%. Cumulative draws on the NWO line of
credit had reached $2,000,000 by February 15, 1995. The line of credit is
secured by the Registrant's net earnings interest in certain oil and gas
producing areas offshore Greece. At the time the Modification Agreement was
entered into, the Registrant was in default under the terms of the line of
credit as it had not made its interest payments for May, June, July and
August 1995.
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7
The Modification Agreement provides as follows:
1. Except as provided below, NWO will forebear on collection until
December 31, 1996 of the interest and principal on the $2,000,000
of promissory notes evidencing draws on the NWO line of credit
("Oceanic Notes") which it holds from the Registrant.
2. Any monies collected by the Registrant from Denison Mines Limited
(Denison) either before or after December 31, 1996 will first be
applied to paying accrued interest on the Oceanic Notes. After
all accrued interest has been paid, and prior to December 31,
1996, the Registrant will be permitted to use up to $200,000 of
monies collected from Denison for working capital purposes. All
remaining collections from Denison will be applied first to
accrued interest and then to reducing principal on the Oceanic
Notes.
3. The Security Agreement between the Registrant and NWO will be
amended to provide that NWO has a full security interest in all
proceeds from the Registrant's lawsuit against Denison and any
existing and future Registrant receivables from Denison.
4. The interest rate on the Oceanic Notes is adjusted to 8.25%.
5. The Registrant agrees to diligently pursue its lawsuit against
Denison.
6. The Registrant will use its best efforts to file a Registration
Statement with the Securities and Exchange Commission with
respect to the rights offering described below and use its best
efforts to cause the Registration Statement to become effective
by December 31, 1995, subsequently extended by sixty (60) days
pursuant to an Extension Agreement dated December 27, 1995.
7. In order to enable the Registrant to diligently pursue its
lawsuit against Denison, NWO agrees to make advances to the
Registrant for ongoing legal fees as reflected in statements
received by the Registrant subsequent to August 1, 1995 in
connection with the Denison litigation up to an estimated
$100,000 in litigation expenses. As of December 31, 1995, the
Registrant has borrowed $52,857 for legal fees. This amount is
included as a current liability in the accompanying financial
statements.
8. The Registrant agrees to reimburse NWO for such advances up to an
estimated $100,000 together with interest thereon computed at the
annual rate of 10% upon receipt of the proceeds of the rights
offering or January 31, 1996, whichever occurs earlier.
<PAGE>
8
On November 27, 1995, the Registrant received $810,522 from Denison
representing unpaid revenues on its net earnings interest. These revenues
cover the period from January 1, 1993 through October 31, 1995, and are
calculated under the terms of the license agreement as amended in 1993.
Pursuant to the Modification Agreement, the Registrant retained $200,000 from
the payment received from Denison. On November 30, 1995 the Registrant paid
NWO $610,522. $92,402 was applied to accrued interest and $518,120 was
applied to the loan leaving an outstanding loan balance of $1,481,880. Future
payments by Denison for the Registrant's 15% net earnings interest will also
be applied to the Registrant's obligations to NWO pursuant to the
Modification Agreement. As of December 31, 1995, the outstanding balance
under the line of credit was $1,484,759, which includes $52,837 of advances
for legal fees.
(3) OIL AND GAS SALES - GREECE
Effective January 1, 1993, the operator of the Greek properties
negotiated an agreement with the Greek government which amended the original
license agreement. The amendment provides for a sliding scale for calculating
the operator's recoverable costs and expenses and for the calculation of the
Greek royalty interest based on the annual adjusted gross income from
operations on a calendar year basis. Denison Mines Ltd., the working interest
owner who has the contractual obligation to the Registrant for the 15% net
earnings interest, has asserted that the calculation of the amounts due to
the Registrant should be based on the amended agreement with the Greek
government. The Registrant disagrees with this interpretation and has
commenced legal action in Canada seeking a declaration by the Court that
amounts due the Registrant attributable to its 15% net earnings interest be
calculated based on the terms of the license agreement before the 1993
amendment. The Registrant is seeking damages of approximately $5,000,000 for
the period from January 1, 1993 through March 31, 1994, plus damages since
that date and undetermined future damages. The Registrant estimates that
damages for unpaid revenues for the period from April 1, 1994 through
December 31, 1995, are approximately $7,500,000. The Registrant's counsel is
unable to conclude that the likelihood of an adverse determination in the
litigation with Denison is remote. In addition, if the Registrant obtains a
favorable judgment against Denison, there is no assurance that the Registrant
will be able to collect the judgment due to Denison's current financial
condition. While the Registrant believes it has a reasonable possibility of
prevailing in the litigation, the ultimate outcome of the matter cannot
presently be determined. Accordingly, no amounts have been recorded in the
accompanying financial statements for current revenues or damages, if any,
that may ultimately be awarded to the Registrant.
When the legal action against Denison commenced, Denison suspended
payments for the Registrant's net earnings interest. Denison also asserted a
counterclaim for $4,700,000 against the Registrant for alleged past
overpayments by Denison. As the
<PAGE>
9
working interest owner had ceased remitting payments to the Registrant for
its 15% net earnings interest, the Registrant had not recorded any revenues
for Greece for the year ended March 31, 1995. A revenue accrual had been made
for the nine months ended December 31, 1994 but was subsequently reversed in
the financial statements for the year ended March 31, 1995. On November 27,
1995, the Registrant received $810,522 from Denison representing unpaid
revenues on the net earnings interest. These revenues cover the period from
January 1, 1993 through October 31, 1995, and are calculated under the terms
of the license agreement as amended in 1993. This payment was made in
connection with the agreement of Denison to withdraw the counterclaim filed
by Denison against the Registrant. As of December 1995, Denison resumed
monthly revenue payments to the Registrant for its net earnings interest as
calculated under the terms of the amended license agreement. The Registrant
will continue to pursue its litigation against Denison challenging Denison's
position that the calculation of the net earnings interest should be based on
the amended license agreement. The trial date, initially reported to be
February 1996, has been tentatively rescheduled to April 29, 1996.
(4) INCOME TAXES
Income tax expense (benefit) consists of the following:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
1995 1994
------------ ------------
<S> <C> <C>
Current:
Foreign - Greece $ 587,249 220,000
Deferred:
Foreign - Greece (88,967) (99,118)
--------- -------
Total income tax
expense $ 498,282 120,882
======== =======
</TABLE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
The Registrant's principal source of revenue is from its net earnings
interest in an oil and gas concession located offshore Greece. Payments to the
Registrant for its net earnings interest were suspended in 1994 when the
Registrant commenced legal action against Denison. Prior to that time the
revenues from the net earnings interest varied. The fluctuations in revenues in
recent years are in part due to fluctuations in oil prices. The average per
barrel price for oil production underlying the net earnings
<PAGE>
10
interest was $14.47, $12.38 and $15.65 for the years ended March 31, 1995,
1994 and 1993, respectively.
Due to high Greek income taxes and royalties in combination with
declining production levels, low oil prices and increasing operating costs,
the consortium operating the Greek properties believed that the Greek
operation was at its economic breakeven point. As a result, Denison and its
partners commenced negotiations in 1992 with senior Greek government
officials to obtain relief from the high level of government taxes and
royalties. On February 23, 1993, the consortium reached an agreement with the
Greek Government resulting in an amendment to the license agreement known as
Law 98/1975 which regulates the operation of the field. The amendment was
ratified by the Greek Parliament on June 23, 1993 and was retroactive to
January 1, 1993.
The amendment provides for a sliding scale for both the cost recovery
factor and the Greek royalty interest based on the annual adjusted gross
income from operations on a calendar year basis. The new law also provides
for a reduction in the effective Greek income tax rate from 50% to 40%.
In addition, the new law required Denison and its partners to spend $15
million during 1993 and 1994 on infill drilling in order to enhance the
recoverability of the hydrocarbons. In March 1994, the consortium announced
the discovery of a new oil field by the drilling of the Prinos North-2 well.
According to Denison's 1994 Annual Report, two oil bearing zones were flow
tested with a 30 meter upper section flowing at about 3,200 barrels per day
and a 7 meter lower section flowing at 150 barrels per day. Oil in place was
calculated at about 18 million barrels of which 5 million may be recoverable.
The crude from this discovery has an API gravity of about 25 degrees,
contains about 7% sulphur and may have a selling value of between $1.50 and
$4.00 per barrel less than Prinos crude. As a result of recent increases in
oil prices, Denison has indicated that the consortium is considering
development of Prinos North if an acceptable agreement can be reached among
working interest owners.
Denison, who has the contractual obligation to pay the Registrant's net
earnings interest, has asserted that the calculation of the amounts due the
Registrant should be based on the amended agreement with the Greek
government. The Registrant disagrees with this interpretation and has
commenced legal action seeking a declaration by the Court that amounts due
the Registrant attributable to its net earnings interest be calculated based
on the terms of the license agreement prior to the 1993 amendment. The
Registrant is seeking damages of approximately $5,000,000 for the period from
January 1, 1993 through March 31, 1994 plus damages since that date and
undetermined future damages. The Registrant estimates that damages for unpaid
revenues for the period from April 1, 1994, through December 31, 1995, are
approximately $7,500,000.
<PAGE>
11
On November 27, 1995, the Registrant received $810,522 from Denison
representing unpaid revenues for its net earnings interest. These revenues
cover the period from January 1, 1993 through October 31, 1995, and are
calculated under the terms of the license agreement as amended in 1993. This
payment was made in connection with the agreement of Denison to withdraw the
counterclaim filed by Denison against the Registrant. As of December 1995,
Denison has resumed monthly revenue payments to the Registrant for its net
earnings interest as calculated under the terms of the amended license
agreement.
Pursuant to the Modification Agreement, the Registrant retained $200,000
from the payment received from Denison. On November 30, 1995 the Registrant
paid NWO $610,522. $92,402 was applied to accrued interest and $518,120 was
applied to the loan leaving an outstanding balance under the line of credit
of $1,481,880. Future payments by Denison for the net earnings interest will
also be applied to the Registrant's obligations to NWO pursuant to the
Modification Agreement. As of December 31, 1995, the outstanding balance
under the line of credit was $1,484,759, which includes $52,837 of advances
for legal fees. The Registrant does not believe that the payments made for
the net earnings interest as calculated under the terms of the amended
license agreement at current production and price levels will be sufficient
to repay the obligations owed to NWO.
The Registrant also receives revenues from sales of seismic data gathered
in its oil and gas exploration and development activities. That revenue is
sporadic and is not sufficient to fund the Registrant's ongoing operations.
During the nine-month period ended December 31, 1995, the Registrant recorded
approximately $36,700 of revenue from the sale of seismic data.
The Registrant currently receives approximately $322,000 per year in
connection with services it renders to Cordillera Corporation and San Miguel
Valley Corporation pursuant to management agreements providing for
reimbursement of costs for actual time and expenses incurred in activities
conducted on behalf of those entities. The amounts received under the
management agreements are a reimbursement for employee salaries and other
operating expenses.
Denison's reduced payments to the Registrant under the net earnings
interest has resulted in the Registrant's inability to fulfill its financial
obligations as they become due and therefore the Registrant faces potential
insolvency. Accordingly, the Registrant's auditors have issued an opinion on
the Registrant's financial statements for the year ended March 31, 1995 that
includes an explanatory paragraph discussing the uncertainty regarding the
Registrant's ability to continue as a going concern. The financial statements
do not contain any adjustments that may be necessary if the Registrant is
unable to continue as a going concern. In addition to the uncertainty of the
Registrant's
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12
ability to continue as a going concern, the auditor's report also includes an
explanatory paragraph regarding the uncertainty associated with the legal
action against Denison and indicates that no provision for any liability or
loss that may result upon adjudication has been recognized in the financial
statements for the year ended March 31, 1995.
When payments for the net earnings interest were suspended, the Registrant
funded its operations through draws against the line of credit established
with NWO. Prior to the end of fiscal year 1995, the Registrant's credit line
was exhausted. During the first half of fiscal year 1996, the Registrant had
no resources to make monthly interest payments on the advances under the line
of credit.
On September 19, 1995, the Registrant entered into the Modification
Agreement with NWO. The Modification Agreement provides for limited funding
of litigation expenses and provides temporary relief from any collection
actions by NWO. The Modification Agreement also allows the Registrant to
retain up to $200,000 of any proceeds received for its net earnings interest
for general working capital purposes. The Modification Agreement does not
provide any further funding for operating expenses of the Registrant other
than limited funding of the litigation with Denison.
On October 6, 1995, the Registrant filed a Form SB-2 Registration
Statement with the Securities and Exchange Commission registering shares of
common stock to be issued to stockholders pursuant to a rights offering.
Under the terms of the rights offering, the Registrant is offering to the
holders of its common stock, the right to subscribe for additional shares at
a purchase price of $.10 per share on the basis of 1.5325 shares of common
stock for each share held as of January 16, 1996. A total of approximately
6,000,000 shares of common stock is being offered in the aggregate to all
stockholders. The Registration Statement was declared effective January 19,
1996 and copies of the corresponding prospectus and subscription documents
were subsequently mailed to stockholders. The rights will expire February 23,
1996. The Registrant anticipates that it will raise approximately $530,100,
net of offering costs, in connection with the rights offering.
The Registrant has obtained the commitment of International Hydrocarbons,
the Registrant's principal stockholder, to subscribe to any unsubscribed
shares under the rights offering provided that the Registrant used its best
efforts to obtain an effective registration statement from the Securities and
Exchange Commission by December 31, 1995, subsequently extended by sixty (60)
days pursuant to an Extension Agreement dated December 27, 1995.
Future operations of the Registrant, estimated reimbursement to NWO of
current advances for legal fees, including estimated accrued interest, up to
$100,000, and payment of accounts payable
<PAGE>
13
will be funded by the rights offering and the $200,000 retained by the
Registrant from the Denison payment. The Registrant estimates that the
funding provided from the rights offering will be sufficient to fund the
litigation with Denison through June 30, 1996, the date prior to which the
Registrant anticipates a judgment will be rendered in the litigation, and to
fund limited operations through December 1996. The trial date, initially
reported to be February 1996, has been tentatively rescheduled to April 29,
1996. Even if a judgment in the Registrant's favor is obtained, of which there
is no assurance, there can be no assurance that the Registrant would be able
to collect that judgment and, if able to collect, when the judgment would be
actually collected. Until recently, it appeared, based on Denison's public
filings, that the financial stability of Denison was questionable and that
Denison continued to operate at the sufferance of its secured creditors.
Denison announced on October 16, 1995 that Denison's Board had approved a Plan
of Arrangement which, among other things, incorporates agreements restructuring
the debt held by Denison's major lenders, the Toronto Dominion Bank, Bank of
America Canada, and the Canadian Mortgage and Housing Corporation. In a press
release dated December 21, 1995, Denison announced that it had obtained the
final order of the Ontario Court of Justice, General Division approving its
Plan of Arrangement. The press release indicated that as a result of the
contribution of all stakeholders, Denison has been preserved as a going
concern and its capital structure has been substantially improved. The court
approval of the Plan may increase the likelihood that Denison would have assets
available for satisfaction of a judgment in favor of the Company. However, the
Company does not have sufficient information to determine whether any assets
of Denison are unsecured and available for satisfaction of a judgment in favor
of the Company. Unless funds are collected as a result of the litigation with
Denison and the revenue stream is resumed under the net earnings interest as
calculated under the license agreement prior to the 1993 amendment, the
Registrant will be required to obtain some additional source of capital, in
addition to the rights offering described herein, to fund continuing
operations past December 1996 and pay off the NWO loan and accrued interest
when due on December 31, 1996.
If the judgment is not favorable, the Registrant would likely still have
its net earnings interest, however, the revenue stream will likely be
substantially reduced. If such unfavorable outcome occurs, the Registrant
does not believe that the payments made for the net earnings interest as
calculated under the terms of the amended license agreement at current
production and price levels will be sufficient to repay the obligations owed
to NWO. In that event, the Registrant may be forced to liquidate its assets,
and in such case, little if any assets will be available for distribution to
shareholders.
If the litigation with Denison is resolved in the Registrant's favor and
payments are resumed under the net earnings interest as calculated under the
license agreement prior to the 1993 amendment,
<PAGE>
14
that revenue should be sufficient to fund on-going operations and limited new
exploration activities. All revenues from the net earnings interest will be
initially applied to repay the Registrant's obligations to NWO under the
Modification Agreement. There is no assurance as to how long the Prinos
property will continue to produce oil and gas and, accordingly, how long the
Registrant can expect revenue from its net earnings interest.
The financial statements do not include any adjustments that might result
from the uncertainties described above.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In November, 1995, Denison Mines, Ltd. agreed to withdraw its counterclaim
filed against the Registrant in connection with the litigation between the
parties in the Ontario Court (General Division) of Ontario, Canada. See the
Registrant's Form 10-KSB for the fiscal year ended March 31, 1995, for a more
detailed discussion of these legal proceedings.
The trial date, initially reported to be February 1996, has been tentatively
rescheduled to April 29, 1996.
ITEM 2. CHANGE IN SECURITIES
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5. OTHER INFORMATION
The Registrant has failed in several respects to maintain the minimum
standards for maintaining its listing as a Tier II Security on the Pacific
Stock Exchange (the "Exchange"). On August 25, 1995, the Registrant was
notified that it was subject to the initiation of delisting procedures. Its
listing status was reviewed by the Exchange at a meeting of the Equity
Listing Committee (the "Committee") held on October 3, 1995. The Registrant
was informed that the Committee had decided to delist its common stock. The
Registrant's common stock was suspended from trading on October 4, 1995. The
Committee based its decision upon the Registrant's deficiencies with respect
to the following components of the Exchange's listing maintenance
requirements: net tangible assets of at least $500,000, aggregate market
value of publicly held shares of at least $500,000, a minimum bid price per
share of at least $1, and the Committee's serious doubts about the
Registrant's ability to meet the requirements for an ongoing concern. On
December 8, 1995, representatives of the Registrant appealed the decision to
delist the stock before the Board Appeals Committee of the Exchange. Finding
no compelling evidence to
<PAGE>
15
recommend that the October 3, 1995, decision of the Committee be revised, the
decision to delist was upheld and affirmed. The delisting of the Registrant
from the Exchange will likely have an adverse effect on the market value of
the common stock.
On January 24, 1996 the National Association of Securities Dealers, Inc.
approved the right for the Registrant's common stock to be quoted on the OTC
Bulletin Board under the symbol OCEX.U.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits filed herewith are listed below and if not located in another
previously filed registration statement or report, are attached to this
Report at the pages set out below. The "Exhibit Number" below refers to the
Exhibit Table in Item 601 of Regulation S-B. Those reports previously filed
with the Securities and Exchange Commission as required by Item 601 of
Regulation S-B are incorporated herein by reference, in accordance with the
provisions of Rule 12b-32, to the reports or registration statements
identified below.
EXHIBIT NUMBER NAME OF EXHIBIT LOCATION
- -------------- --------------- --------
10.1 Extension Agreement with Exhibit 10.23 on
NWO Resources, Inc. dated Form SB-2,
December 27, 1995 Amendment 2,
January 3, 1996
File # 33-63277
(b) Two reports on Form 8-K were filed during the quarter for which this
Report is filed.
On November 30, 1995, Form 8-K was filed which reported the receipt of
$810,522 from Denison Mines Ltd. representing unpaid revenues on the
Registrant's 15% net earnings interest in certain oil and gas producing areas
offshore Greece.
On December 28, 1995, Form 8-K was filed which reported the delisting of
the Registrant's common stock from the Pacific Stock Exchange.
<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.
OCEANIC EXPLORATION COMPANY
Date: February 8, 1995 /s/ Charles N. Haas
----------------------- -------------------------------
Charles N. Haas
President
Date: February 8, 1995 /s/ Diana J. Peters
----------------------- -------------------------------
Diana J. Peters
Treasurer and
Chief Financial Officer
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM
10-QSB FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1995 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-END> DEC-31-1995
<CASH> 332,678
<SECURITIES> 0
<RECEIVABLES> 11,588
<ALLOWANCES> 0
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<CURRENT-ASSETS> 346,085
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244,697
0
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