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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSBT
(Mark one)
[ ] Annual Report under Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the fiscal year ended __________.
[X] Transition Report under Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the transition period from April 1, 1999 to December 31, 1999.
Commission file number 0-6540.
OCEANIC EXPLORATION COMPANY
(Name of small business issuer in its charter)
<TABLE>
<S> <C>
DELAWARE 84-0591071
(State of Incorporation) (I.R.S. Employer Ident. No.)
</TABLE>
5000 South Quebec Street, Suite 450, Denver, Colorado 80237
(303) 220-8330
(Address and telephone number of principal executive offices)
Securities registered under Section 12(b) of the Exchange Act:
<TABLE>
<S> <C>
Title of class Name of exchange on which registered
COMMON STOCK ($.0625 PAR VALUE) NOT APPLICABLE
</TABLE>
Securities registered under Section 12(g) of the Exchange Act:
NONE
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the 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
--- ---
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [ X ]
Issuer's revenues for nine months ended December 31, 1999 $420,551
As of March 1, 2000, the aggregate market value of the voting stock held by
non-affiliates of the Registrant, computed by reference to the average of the
bid and ask price on such date was $1,771,270.
As of March 1, 2000 the Registrant had outstanding 9,916,154 shares of common
stock ($.0625 par value).
An index of the documents incorporated herein by reference and/or annexed as
exhibits to this Report appears on pages 37 through 40.
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ITEM 1. BUSINESS
Oceanic Exploration Company (the "Registrant", also called the "Company" in some
parts of this Report, which terms include its subsidiaries) was incorporated in
1969 and is engaged in the business of acquiring oil and gas concessions
covering large blocks of acreage and in conducting exploration activities
thereon, including seismic and other geophysical evaluation and exploratory
drilling where appropriate. The Registrant conducts its operations directly or
through wholly-owned subsidiaries. The term "concession" is used herein to mean
exploration, development and production rights with respect to a specific area,
which rights may be created by agreement with a government, governmental agency
or corporation. When a discovery of oil or gas occurs, the Registrant will
pursue the development of reserves and the production of oil or gas to the
extent considered economically feasible and may finance development by farming
out or selling a portion of its interest in the discovery. The Registrant's
property interests are located in the North Aegean Sea, offshore Greece and in
the East China Sea. The Registrant has identified a prospect in Bolivia, has
prepared a preliminary plan for exploration, but is unable to proceed until
arrangements can be made with the current license holder. Since 1994, the
Registrant has not been able to participate in exploration and development,
other than limited activities in Bolivia to the extent that funding is
available, and has concentrated its efforts on the litigation regarding its
property interest in the North Aegean Sea. (see Item 2 "Properties-Greece.")
The Registrant's only significant source of revenue, its 15% net profits
interest in certain oil and gas producing areas offshore Greece (also called
"Prinos Interest" in some parts of this Report), has been the subject of
litigation. In June 1994, the Registrant commenced legal action against Denison
Mines, Ltd. ("Denison"), the company having the contractual obligation to pay
the Prinos Interest. The Registrant was seeking a declaration by the Ontario
Court of Justice (General Division) in Toronto, Canada (the "Court") that
amounts due the Registrant attributable to its Prinos Interest (see Item 2
"Properties-Greece.") in certain oil and gas producing areas offshore Greece be
calculated based on the terms of the License Agreement prior to a 1993 amendment
agreed to by the consortium and the Greek government. In September 1996, the
lawsuit went to trial. In December 1996, the Registrant received notification
that the Court had rendered a judgment in the Registrant's favor. The defendant
subsequently filed a Notice of Appeal requesting that the judgment be set aside.
The Appellate Court hearing before the Ontario Court of Appeal was held in June,
1999. On December 16, 1999, the Registrant received notification that the
Appellate Court had upheld the lower court's decision. At December 31, 1999,
however, Denison still had the option to apply for leave to further appeal to
the Supreme Court of Canada. This option was effective until February 14, 2000,
sixty days from the date of the December 16, 1999 decision. Therefore, at
December 31, 1999, the amounts due to the Registrant were not determinable and
the collectibility of the judgment was still questionable. Accordingly, no
amounts have been recorded in the Registrant's December 31, 1999 financial
statements for revenue relating to the Registrant's claim for amounts due under
its net profits interest.
Subsequent to December 31, 1999, Denison and the Registrant reached agreement
whereby Denison would pay the net profits interest as ordered by the Court. The
Registrant received $8,614,789 and
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$15,868 on January 27, 2000 and February 9, 2000, respectively, from the
defendant. This amount consisted of $6,739,342 (net of Greek taxes) for net
profits interest payments from January 1, 1993 through December 31, 1997,
$118,255 for court costs and accrued interest of $1,773,060 (net of Canadian
withholding taxes).
In December 1998, the Registrant was notified by Denison that April 1, 1998
through March 31, 1999 would be the final year of production for the Prinos
property. In the final year of production, Denison is entitled to 100% cost
recovery; consequently, the Registrant did not receive any net profits interest
payments for this period. The revenue recorded for the year ended March 31, 1999
pertains to January through March 1998 which had previously been withheld by
Denison. Subsequently, it was determined that calendar year 1998 was the final
year of production for the Prinos property. Therefore, net profits interest
payments to the Registrant were only payable through December 31, 1997.
Effective March 31, 1999, the consortium operating the Greek properties
relinquished its license to operate the Prinos oil field in Greece. However, the
consortium retained its exploration rights in an area of the Aegean Sea over
which there has been an ongoing ownership dispute between Greece and Turkey.
Should the dispute be resolved and the consortium drill and successfully develop
any additional prospects, the Registrant would be entitled to once again receive
its 15% net profits interest, applicable to Denison's working interest.
Upon commencement of the litigation, payments under the Prinos Interest were
suspended. The Registrant funded its operations through draws against the
$2,000,000 line of credit initially established with NWO Resources, Inc.
("NWO"), an affiliate of International Hydrocarbons ("IH"), the Registrant's
principal stockholder. In October 1998, the note was assigned from NWO to IH.
In April 1999, an Extension Agreement was executed allowing the Registrant to
draw additional amounts as needed for working capital up to $1,500,000. In
addition, the Registrant was not required to make interest payments as of
December 31, 1999. Principal and accrued interest were due on demand by IH.
Effective June 30, 1999, the Registrant was notified that IH would no longer be
able to provide financing pursuant to its line of credit arrangement. Instead,
all future advances were to be provided by NWO pursuant to a new line of credit
arrangement. Therefore, effective July 1, 1999, the Registrant signed a new
promissory note to NWO, which allowed the Registrant to draw amounts as needed
for working capital up to $300,000. Interest payments to NWO are due monthly and
principal is due on March 31, 2000 or earlier, if such demand is made by NWO.
As of December 31, 1999, the outstanding loan balances were $1,202,636 and
$155,000 to IH and NWO, respectively. The Registrant paid off the outstanding
principal and accrued interest balances of $1,202,636 and $180,381,
respectively, to IH and the outstanding principal balance of $175,000 to NWO on
February 1, 2000.
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The Registrant's business activities involve only one industry segment, oil and
gas exploration and development. Financial information relating to the
Registrant's business and an explanation of the same may be found in Items 6 and
7 of this Report.
The Registrant employs eight people, seven of whom are full-time employees. The
full-time employees also provide services to two related entities pursuant to
management agreements entered into by the Registrant and those entities. (see
Item 12 "Certain Relationships and Related Transactions.")
The Registrant's principal executive offices are located at 5000 South Quebec
Street, Suite 450, Denver, Colorado 80237, and its telephone number is (303)
220-8330.
(a) MODE OF OPERATION
Historically, the Registrant has generally undertaken exploration of concessions
through various forms of joint arrangements with unrelated companies, whereby
the parties agree to share the costs of exploration, as well as the costs of and
any revenue from a discovery. Such arrangements do not always equate the
proportion of expenditures undertaken by a party with the share of revenues to
be received by such party.
The Registrant has usually obtained concessions directly from a government or
governmental agency and has then entered into arrangements with other
participants whereby the Registrant has received cash payments and has had its
share of exploration expenditures paid (either before or after being expended)
in whole or in part by other participants.
Since inception, sales of partial interest in its concessions have been part of
the Registrant's normal course of business and have provided funds for the
acquisition of further concessions and for exploration of existing concessions.
In order to maintain its concessions in good standing, the Registrant is usually
required to expend substantial sums for exploration and, in many instances, for
surface rentals or other cash payments. Additionally, the development of any
discoveries made upon concessions in which the Registrant holds an interest
generally involve the expenditure of substantial sums of money. The Registrant
has, in the past, satisfied required expenditures on its concessions. The
Registrant cannot be certain that its revenues in the future will be sufficient
to satisfy expenditures required to be made on its concessions and continues to
pursue other opportunities from alternative sources which would enhance its
liquidity.
(b) COMPETITION
The oil and gas industry is competitive, and the Registrant must compete with
many long-established companies having far greater resources and operating
experience. Furthermore, the demand for financing of oil and gas and mineral
exploration and development programs substantially exceeds
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the available supply, and the Registrant competes with other exploration and
development companies of far greater means for the available funds. Because of
the Registrant's financial condition prior to receiving the funds from Denison,
the Registrant has not been able to participate in exploration and development
activities.
ITEM 2. PROPERTIES
The Registrant holds various interests in concessions or leases for oil and gas
exploration which are listed below. Oil and gas property interests as reflected
in the accompanying financial statements include costs attributable only to the
Greek interest. Costs on all other foreign concessions described below have been
charged to expense in prior years.
GREECE: In the past, the Registrant has had the right to receive proceeds from
the Prinos Interest payable by Denison from the proceeds of production of oil
and gas from certain concession areas totaling approximately 430,000 acres in
the North Aegean Sea, offshore Greece. "Development areas" for the Prinos Oil
Field covering 23,390 gross acres and for the Kavala Gas Field covering 11,787
gross acres have been defined by the Greek government and given "development
status." The term of each "development" license is 26 years, with an automatic
10-year renewal. The remaining exploration area adjoining Prinos and South
Kavala covers 153,316 acres and an exploration area east of the island of Thasos
covers an additional 243,367 acres. At December 31, 1999, the Prinos Interest is
subject to liens in favor of IH and NWO, which liens secure payment of the
amounts due to IH and NWO by the Registrant.
Daily production from the Prinos/South Kavala Fields averaged 6,507 barrels of
oil and 91 tons of sulphur during the period from April 1, 1998 through November
29, 1998, including production for Prinos North averaging 1,681 barrels of oil
per day. The Prinos oil field was shut in in November 1998 primarily because of
lower oil prices and declining production.
Due to high Greek income taxes and royalties in combination with declining
production levels, low oil prices and increasing operating costs, the consortium
believed that the Greek operation was at its economic break-even 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 provided 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 provided
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 in infill drilling in order to enhance the recoverability
of the hydrocarbons. In April 1996, the consortium signed another agreement with
the Greek government ("Second Supplemental Agreement") setting out the terms
under which the drilling at Prinos North was to proceed. In
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August 1996, production commenced in the Prinos North oil field at 3,500 barrels
per day. Denison has been calculating payment of the Registrant's net profits
interest from Prinos North after consideration of the Second Supplemental
Agreement and a June 1996 Ministerial Decision. The Registrant disagreed with
this approach and notified Denison of such.
Denison, who has the contractual obligation to pay the Prinos Interest, asserted
that the calculation of the amounts due the Registrant should be based on the
amended 1993 agreement with the Greek government. The amended agreement provided
for higher cost recoveries than the License Agreement before the 1993 amendment.
If higher cost recoveries are used in calculating the amount due under the
Prinos Interest, the amount will be significantly lower than the amount
calculated under the License Agreement before the 1993 amendment. The Registrant
disagreed with this interpretation and commenced legal action seeking a
declaration by the Court that amounts due the Registrant attributable to its
Prinos Interest be calculated based on the terms of the License Agreement before
the 1993 amendment. The trial began in September 1996. In December 1996, the
Registrant received a favorable judgment from the Court. However, Denison filed
a Notice of Appeal requesting that the judgment be set aside. The Appellate
Court hearing before the Ontario Court of Appeal was held in June, 1999. On
December 16, 1999, the Registrant received notification that the Appellate Court
had upheld the lower court's decision. At December 31, 1999, however, Denison
still had the option to apply for leave to further appeal to the Supreme Court
of Canada. This option was effective until February 14, 2000, sixty days from
the date of the December 16, 1999 decision. Therefore, at December 31, 1999, the
amounts due to the Registrant were not determinable and the collectibility of
the judgment was still questionable. Accordingly, no amounts have been recorded
in the Registrant's December 31, 1999 financial statements for revenue relating
to the Registrant's claim for amounts due under its net profits interest.
Subsequent to December 31, 1999, Denison and the Registrant reached agreement
whereby Denison would pay the net profits interest as ordered by the Court. The
Registrant received $8,614,789 and $15,868 on January 27, 2000 and February 9,
2000, respectively, from the defendant. This amount consisted of $6,739,342 (net
of Greek taxes) for net profits interest payments from January 1, 1993 through
December 31, 1997, $118,255 for court costs and accrued interest of $1,773,060
(net of Canadian withholding taxes).
In December 1998, the Registrant was notified by Denison that April 1, 1998
through March 31, 1999 would be the final year of production for the Prinos
property. In the final year of production, Denison is entitled to 100% cost
recovery; consequently, the Registrant did not receive any net profits interest
payments for this period. The revenue recorded for the year ended March 31, 1999
pertains to January through March 1998, which amounts had previously been
withheld by Denison. Subsequently, it was determined that calendar year 1998 was
the final year of production for the Prinos property. Therefore, net profits
interest payments to the Registrant were only payable through December 31, 1997.
Effective March 31, 1999, the consortium operating the Greek properties
relinquished its license to operate the Prinos oil field in Greece. However, the
termination of this license does not affect the extensive exploration area east
of Thassos Island where no exploration is currently permitted due to territorial
disputes between Greece and Turkey. This exploration area is believed to have
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excellent potential; however, it is impossible to determine at this time when
exploration activities might be commenced in that area. Should the dispute be
resolved and the consortium drill and successfully develop any additional
prospects, the Registrant would be entitled to once again receive its 15% net
profits interest, applicable to Denison's working interest. However, as the
Registrant considers this unlikely under current circumstances, the Registrant
has fully depleted its investment in Greece.
REPUBLIC OF CHINA (TAIWAN): The Registrant holds a 22.23% working interest in a
concession located north of Taiwan in the East China Sea, covering 3,706,560
gross acres. The exploration license for this concession had a nominal term
extending to 1979, requiring exploration activity and minimum expenditures.
Preparations for initial exploratory drilling were suspended in 1977 under a
claim of force majeure, pending resolution of a territorial dispute among the
Republic of China (Taiwan), the Government of Japan and the People's Republic of
China. The Chinese Petroleum Corporation (Taiwan) has agreed to suspend
obligations under this concession until December 31, 1999.
During fiscal 1990, the Registrant entered into a farmout agreement with two
United Kingdom companies conveying two-thirds of its original 66.67% interest in
the concession.
Due to the uncertainty of sovereignty in the area, no immediate development
expenditures, as required under the terms of the concession agreement, are
anticipated.
In fiscal year 1994, the Registrant reported that the People's Republic of China
was indicating its intention to open up adjacent concession areas for bidding
and that a resolution to the sovereignty issues may result. Nothing has occurred
in the nine months ended December 31, 1999 to indicate that the lifting of the
current force majeure status is imminent.
BOLIVIA: The Registrant has conducted a preliminary exploration study of a
10,500 square kilometer area located in the eastern part of the country near the
Paraguayan border, pursuant to a work study program with Y.P.F.B., the
government-controlled agency having responsibility for oil and gas exploration
in Bolivia. The Registrant had preliminarily agreed to the terms of an
operations contract pertaining to such area; however, prior to reaching
agreement with Y.P.F.B., the hydrocarbons law was changed to give the National
Secretariat of Energy jurisdiction over oil and gas exploration. Pursuant to the
new law, the area was offered for competitive bidding. An Argentine company was
awarded the bid and they are currently drilling in this area. Depending upon the
results of the well, the Registrant may explore further opportunities in this
area.
ITEM 3. LEGAL PROCEEDINGS
The Registrant commenced an action in the Ontario Court (General Division),
Canada, against Denison. The Registrant claimed that Denison has failed since
January 1, 1993 to pay the Registrant the full amount of the Prinos Interest
(including Prinos North) pursuant to an agreement dated
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August 30, 1976, which is to be calculated on the basis of the terms of the
License Agreement.
The trial, which began on September 30, 1996, was concluded two weeks later. On
December 13, 1996, the Registrant received notification that the Court had
issued a judgment in its favor. Specifically, the Court found that Denison is
obligated to pay the Registrant its 15% net profits interest in accordance with
the terms of the License Agreement prior to the 1993 amendment. First, the Court
ordered Denison to pay approximately $6,100,000 including interest to the
Registrant for the period January 1, 1993 through December 13, 1996. Second, the
Court ordered Denison to make payments to the Registrant subsequent to December
13, 1996, also calculated based on the terms of the original License Agreement.
Lastly, the Court awarded court costs to the Registrant which were anticipated
to be approximately $107,000 plus interest.
Subsequent to receiving the judgment from the Court, Denison filed a Notice of
Appeal requesting that the judgment be set aside based on its belief that the
trial judge erred in her interpretation of the respective contracts. As a
result, any orders for the payment of money were stayed pending the appeal. The
Appellate Court hearing before the Ontario Court of Appeal was held on June 14
and 15, 1999.
On December 16, 1999, the Registrant received notification that the Appellate
Court had upheld the lower court's decision. At December 31, 1999, however,
Denison still had the option to apply for leave to further appeal to the Supreme
Court of Canada. This option was effective until February 14, 2000, sixty days
from the date of the December 16, 1999 decision. Therefore, at December 31,
1999, the amounts due to the Registrant were not determinable and the
collectibility of the judgment was still questionable. Accordingly, no amounts
have been recorded in the Registrant's December 31, 1999 financial statements
for revenue relating to the Registrant's claim for amounts due under its net
profits interest.
Subsequent to December 31, 1999, Denison and the Registrant reached agreement
whereby Denison would pay the net profits interest as ordered by the Court. The
Registrant received $8,614,789 and $15,868 on January 27, 2000 and February 9,
2000, respectively, from the defendant. This amount consisted of $6,739,342 (net
of Greek taxes) for net profits interest payments from January 1, 1993 through
December 31, 1997, $118,255 for court costs and accrued interest of $1,773,060
(net of Canadian withholding taxes).
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
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PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
COMMON STOCK: Subject to the rights of holders of any series of Preferred Stock
which may from time to time be issued, holders of Common Stock are entitled to
one vote per share on matters acted upon at any shareholders' meeting, including
the election of directors, and to dividends when, as and if declared by the
Board of Directors out of funds legally available therefor. There is no
cumulative voting and the Common Stock is not redeemable. In the event of any
liquidation, dissolution or winding up of the Registrant, each holder of Common
Stock is entitled to share ratably in all assets of the Registrant remaining
after the payment of liabilities and any amounts required to be paid to holders
of Preferred Stock, if any. Holders of Common Stock have no preemptive or
conversion rights and are not subject to further calls or assessments by the
Registrant. All shares of Common Stock now outstanding are and will be fully
paid and non-assessable.
The Registrant's Common Stock is not currently listed on any exchange. However,
it is quoted on the OTC Bulletin Board under the symbol OCEX.U.
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Per the OTC Bulletin Board, the range of bid prices in the Registrant's Common
Stock over the nine month transition period and the previous two fiscal years
(which are not necessarily representative of actual transactions) are set out
below.
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<CAPTION>
Nine Month Period
Ended Fiscal Year Fiscal Year
Three Months December 31, 1999 Ended March 31, 1999 Ended March 31, 1998
Ended High Low High Low High Low
------------- ------------------ -------------------- --------------------
<S> <C> <C> <C>
June 30 .07 .06 .40 .09 .55 .50
September 30 .10 .06 .25 .13 .55 .40
December 31 .19 .06 .16 .06 .44 .38
March 31 n/a n/a .09 .06 .44 .40
</TABLE>
The Registrant uses all available funds for working capital purposes and has
never paid a dividend. Registrant's management does not anticipate paying
dividends in the future. As of March 1, 2000, the number of record holders of
the Registrant's common stock was 461.
PREFERRED STOCK: The Board of Directors of the Registrant, without further
action by the stockholders, is authorized to issue the shares of Preferred Stock
in one or more series and to determine the voting rights, preferences as to
dividends, and the liquidation, conversion, redemption and other rights of each
series. The issuance of a series with voting and conversion rights may adversely
affect the voting power of the holders of Common Stock. The issuance of
Preferred Stock may have the effect of delaying, deferring or preventing a
change in control of the Registrant without further action by the shareholders.
The Registrant has no present plans to issue any shares of Preferred Stock.
TRANSFER AGENT: The Registrant's Transfer Agent is Chase Mellon Shareholder
Services, 400 South Hope Street, Fourth Floor, Los Angeles, California
90071-3401.
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ITEM 6. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Registrant's principal source of revenue has been from its
Prinos Interest. 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. There were no sales of seismic data during the nine month periods
ended December 31, 1999 or 1998 or the years ended March 31, 1999, 1998 or 1997.
The Registrant currently receives approximately $556,000 per year in connection
with services it renders to Cordillera Corporation and San Miguel Valley
Corporation pursuant to management agreements providing for payments to the
Registrant based on costs for actual time and expenses incurred in activities
conducted on behalf of those entities. The amounts received under the management
agreements are costs relating to employee salaries and other operating expenses.
When payments under the Prinos Interest were suspended in 1994, the Registrant
funded its operations through draws against the line of credit initially
established with NWO. In October 1998, this line of credit was transferred from
NWO to IH, the Registrant's majority shareholder. In April 1999, the Registrant
executed an Extension Agreement with IH allowing the Registrant to draw up to
$1,500,000 for working capital purposes. Under the terms of the Extension
Agreement, the Registrant was not required to make any principal or interest
payments as of December 31, 1999. However, all principal and interest were due
upon demand by IH. Effective June 30, 1999, the Registrant was notified that IH
would no longer be able to provide financing pursuant to its line of credit
arrangement. Instead, all future advances were to be provided by NWO pursuant to
a new line of credit arrangement. Therefore, effective July 1, 1999, the
Registrant signed a new promissory note to NWO, which allowed the Registrant to
draw amounts as needed for working capital up to $300,000. Interest payments to
NWO are due monthly and principal is due on March 31, 2000 or earlier, if such
demand is made by NWO.
As of December 31, 1999, the outstanding loan balances were $1,202,636 and
$155,000 payable to IH and NWO, respectively. The Registrant paid off the
outstanding principal and accrued interest balances of $1,202,636 and $180,381,
respectively, to IH and the outstanding principal balance of $175,000 to NWO on
February 1, 2000.
Net profits interest payments received by the Registrant for January 1, 1993
through March 31, 1998 applicable to the Prinos property have been the subject
of litigation. In June 1994, the Registrant commenced legal action against
Denison Mines, Ltd., the company having the contractual obligation to pay the
net profits interest. The Registrant was seeking a declaration by the Court that
amounts due the Registrant attributable to its interest be calculated based on
the terms of the License Agreement prior to a 1993 amendment agreed to by the
consortium and the Greek government. In September 1996, the lawsuit went to
trial. In December 1996, the Registrant received notification
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that the Court had rendered a judgment in the Registrant's favor. The defendant
subsequently filed a Notice of Appeal requesting that the judgment be set aside.
The Appellate Court hearing before the Ontario Court of Appeal was held in June,
1999. On December 16, 1999, the Registrant received notification that the
Appellate Court had upheld the lower court's decision. At December 31, 1999,
however, Denison still had the option to apply for leave to further appeal to
the Supreme Court of Canada. This option was effective until February 14, 2000,
sixty days from the date of the December 16, 1999 decision. Therefore, at
December 31, 1999, the amounts due to the Registrant were not determinable and
the collectibility of the judgment was still questionable. Accordingly, no
amounts have been recorded in the Registrant's December 31, 1999 financial
statements for revenue relating to the Registrant's claim for amounts due under
its net profits interest.
Subsequent to December 31, 1999, Denison and the Registrant reached agreement
whereby Denison would pay the net profits interest as ordered by the Court. The
Registrant received $8,614,789 and $15,868 on January 27, 2000 and February 9,
2000, respectively, from the defendant. This amount consisted of $6,739,342 (net
of Greek taxes) for net profits interest payments from January 1, 1993 through
December 31, 1997, $118,255 for court costs and accrued interest of $1,773,060
(net of Canadian withholding taxes).
In December 1998, the Registrant was notified by Denison that April 1, 1998
through March 31, 1999 would be the final year of production for the Prinos
property. In the final year of production, Denison is entitled to 100% cost
recovery; consequently, the Registrant did not receive any net profits interest
payments for this period. The revenue recorded for the year ended March 31, 1999
pertains to January through March 1998, which amounts had previously been
withheld by Denison. Subsequently, it was determined that calendar year 1998 was
the final year of production for the Prinos property. Therefore, net profits
interest payments to the Registrant were only payable through December 31, 1997.
As previously discussed, subsequent to December 31, 1999, the Registrant reached
an agreement whereby Denison would pay the net profits interest. The Registrant
received the related funds and repaid the outstanding debt to IH and NWO. As a
result, it is currently in the process of pursuing investment opportunities. In
March, 2000, the Registrant has had discussions regarding an acquisition of the
assets of Alliance Services Associates, Inc. ("Alliance") for $581,000. Alliance
is an employment agency located in San Diego, California. It is currently
unclear if these discussions will lead to the consummation of a transaction. The
Registrant is currently in the process of pursuing additional investment
opportunities; however, no definitive plans have been made.
12
<PAGE> 13
RESULTS OF OPERATIONS
The Registrant reported net losses of $337,857, $298,781, $451,943, $222,323 and
$219,274 for the nine month periods ended December 31, 1999 and 1998 and for the
years ended March 31, 1999, 1998 and 1997, respectively.
The following table summarizes the primary components of changes in net income
before the provision for income taxes for the relevant periods:
<TABLE>
<CAPTION>
NINE MONTHS
ENDED YEAR ENDED MARCH 31,
DECEMBER 31 ------------------------------
1999 1999 1998 1997
----------- ---- ---- ----
<S> <C> <C> <C> <C>
Oil and gas sales:
Calculation of Greek
revenues (1) -- $ 70,100 $ 51,200 (122,700)
Greek revenues received in 1996
applicable to prior years -- -- -- (895,000)
Production (decline) increase (1) (127,152) (241,800) (442,600) 226,500
Price (decrease) increase (1) -- (126,200) (127,400) 157,900
--------- --------- --------- ---------
(127,152) (297,900) (518,800) (633,300)
(Increase) reduction in
depreciation and
depletion charges 142,500 356,836 (210,192) (40,030)
Increase (reduction) in
other revenues 62,446 190,141 14,087 (185,389)
(Increase) reduction in
interest & financing costs (18,775) (10,715) 25,550 51,377
(Increase) reduction in
in general and administrative and
other (101,445) (175,741) 99,989 (74,899)
--------- --------- --------- ---------
Increase (decrease) in
income before taxes $ (42,426) $ 62,621 $(589,366) $(882,241)
========= ========= ========= =========
</TABLE>
(1) Based upon information received from the operator.
13
<PAGE> 14
One of the most significant factors in the fluctuations of net income between
the periods is the fact that the Registrant received no oil and gas revenue
pertaining to April 1, 1998 through December 31, 1999. Initially, Denison had
declared the period from April 1, 1998 to March 31, 1999 as the final year (see
Item 2 "Properties-Greece"). The revenue received in the fiscal year ended March
31,1999 was for January through March 1998, which had previously been withheld
by Denison. Subsequently, however, final year, for which the Registrant would
receive no net profits interest payments, was determined to be January 1, 1998
through December 31, 1998. In addition, other factors include variances in oil
and gas prices received, and production declines in 1998 and 1997 from the
Prinos and South Kavala fields in Greece, offset in part by a production
increase in 1997 due to the successful completion of Prinos North and infill
drilling. The Prinos field was eventually shut-in in November 1998. The
provision for depletion increased from $336,643 for the year ended March 31,
1997 to $546,835 for the year ended March 31, 1998, then decreased to $190,000
for the year ended March 31, 1999 and $0 for the nine months ended December 31,
1999 as a result of reductions in the estimated future net revenues attributable
to the Prinos Interest and the property being fully depleted at December 31,
1999. Fluctuations in other revenues are primarily attributable to management
fees (see Item 12 "Certain Relationships and Related Transactions").
Fluctuations in interest expense relate to increases and decreases in borrowings
from shareholder and affiliates. General and administrative expenses have
increased since May 1998 due to the addition of employees (see Item 12 "Certain
Relationships and Related Transactions").
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<TABLE>
<CAPTION>
INDEX PAGE
<S> <C>
Independent Auditors' Report 16
Consolidated Balance Sheets 17
Consolidated Statements of
Operations and Accumulated Deficit 18
Consolidated Statements of
Cash Flows 19
Notes to Consolidated Financial Statements 20-27
</TABLE>
14
<PAGE> 15
OCEANIC EXPLORATION COMPANY
AND SUBSIDIARIES
Consolidated Financial Statements
December 31, 1999 and March 31, 1999
(With Independent Auditors' Report Thereon)
15
<PAGE> 16
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Oceanic Exploration Company:
We have audited the accompanying consolidated balance sheets of Oceanic
Exploration Company and subsidiaries as of December 31, 1999, March 31, 1999 and
1998, and the related consolidated statements of operations and accumulated
deficit and cash flows for the nine months ended December 31, 1999 and the years
ended March 31, 1999, 1998 and 1997. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion the consolidated financial statements referred to above present
fairly the financial position of Oceanic Exploration Company and subsidiaries as
of December 31, 1999, March 31, 1999 and 1998, and the results of their
operations and their cash flows for the nine months ended December 31, 1999 and
the years ended March 31, 1999, 1998 and 1997 in conformity with generally
accepted accounting principles.
KPMG LLP
Denver, Colorado
March 10, 2000
16
<PAGE> 17
OCEANIC EXPLORATION COMPANY
AND SUBSIDIARIES
Consolidated Balance Sheets
<TABLE>
<CAPTION>
MARCH 31,
DECEMBER 31, --------------------------
ASSETS 1999 1999 1998
----------- ----------- -----------
<S> <C> <C> <C>
Cash $ 66,462 23,337 38,601
Accounts receivable 1,780 1,680 3,006
Due from affiliates 8,662 7,857 5,753
Prepaids and other 2,205 1,552 1,482
----------- ----------- -----------
Total current assets 79,109 34,426 48,842
Oil and gas property interests, full-cost method
of accounting (note 2) 39,000,000 39,000,000 39,000,000
Less accumulated amortization, depreciation
and valuation allowance (39,000,000) (39,000,000) (38,810,000)
----------- ----------- -----------
-- -- 190,000
Other assets 1,440 1,920 2,560
----------- ----------- -----------
$ 80,549 36,346 241,402
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Note payable to shareholder (note 3) $ 1,202,636 1,092,636 --
Note payable to affiliate (note 3) 155,000 -- 842,636
Accounts payable 162,131 179,038 205,823
Accounts payable to affiliates 60,000 60,000 60,000
United Kingdom taxes payable, including
accrued interest 507,249 490,403 486,959
Accrued expenses 299,419 172,809 71,868
----------- ----------- -----------
Total current liabilities 2,386,435 1,994,886 1,667,286
Deferred income taxes (note 4) 12,533 22,022 102,735
----------- ----------- -----------
Total liabilities 2,398,968 2,016,908 1,770,021
Stockholders' deficit (note 5):
Preferred stock, $10 par value. Authorized
600,000 shares; none issued -- -- --
Common stock, $.0625 par value. Authorized
12,000,000 shares; 9,916,154 shares issued
and outstanding 619,759 619,759 619,759
Capital in excess of par value 155,696 155,696 155,696
Accumulated deficit (3,093,874) (2,756,017) (2,304,074)
----------- ----------- -----------
Total stockholders' deficit (2,318,419) (1,980,562) (1,528,619)
----------- ----------- -----------
Commitments and contingencies (notes 2 and 6)
$ 80,549 36,346 241,402
=========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
17
<PAGE> 18
OCEANIC EXPLORATION COMPANY
AND SUBSIDIARIES
Consolidated Statements of Operations and Accumulated Deficit
<TABLE>
<CAPTION>
NINE MONTHS ENDED
DECEMBER 31, YEAR ENDED MARCH 31,
-------------------------- -----------------------------------------
1999 1998 1999 1998 1997
----------- ----------- ----------- ----------- -----------
(unaudited)
<S> <C> <C> <C> <C> <C>
Revenue:
Oil and gas sales (note 2) $ -- 127,152 127,152 425,094 943,895
Other (note 6) 420,551 358,105 505,985 315,844 301,757
----------- ----------- ----------- ----------- -----------
420,551 485,257 633,137 740,938 1,245,652
----------- ----------- ----------- ----------- -----------
Costs and expenses:
Interest and financing costs 93,876 75,101 101,282 90,567 116,117
Exploration expenses 10,082 5,443 9,382 31,392 13,464
Amortization and depreciation -- 142,500 190,000 546,835 336,643
General and administrative 663,939 567,133 814,268 616,559 734,477
----------- ----------- ----------- ----------- -----------
767,897 790,177 1,114,932 1,285,353 1,200,701
----------- ----------- ----------- ----------- -----------
(Loss) income before
income taxes (347,346) (304,920) (481,795) (544,415) 44,951
Income tax benefit (expense)
(note 4) 9,489 6,139 29,852 322,092 (264,225)
----------- ----------- ----------- ----------- -----------
Net loss (337,857) (298,781) (451,943) (222,323) (219,274)
Accumulated deficit at beginning
of year (2,756,017) (2,304,074) (2,304,074) (2,081,751) (1,862,477)
----------- ----------- ----------- ----------- -----------
Accumulated deficit at end
of year $(3,093,874) (2,602,855) (2,756,017) (2,304,074) (2,081,751)
=========== =========== =========== =========== ===========
Loss per common share $ (0.03) (0.03) (0.05) (0.02) (0.02)
=========== =========== =========== =========== ===========
Weighted average number of
common shares outstanding 9,916,154 9,916,154 9,916,154 9,916,154 9,916,154
=========== =========== =========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
18
<PAGE> 19
OCEANIC EXPLORATION COMPANY
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
NINE MONTHS ENDED
DECEMBER 31, YEAR ENDED MARCH 31,
------------------------- -------------------------------------
1999 1998 1999 1998 1997
----------- ----------- ----------- ----------- -----------
(unaudited)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss $(337,857) (298,781) (451,943) (222,323) (219,274)
Adjustments to reconcile net loss to net
cash used in operating activities:
Amortization and depreciation -- 142,500 190,000 546,835 336,643
Deferred income tax benefit (9,489) (57,000) (80,713) (492,130) (113,333)
Increase in accounts receivable and due
from affiliates (905) (2,959) (778) (3,304) (2,007)
(Increase) decrease in prepaid expenses
and other assets (173) (160) 570 (2,614) 72
(Decrease) increase in accounts payable (16,907) (50,813) (26,785) 22,571 (44,596)
Increase in United Kingdom taxes payable,
including accrued interest payable, and
accrued expenses 143,456 118,330 104,385 19,689 35,287
--------- --------- --------- --------- ---------
Net cash used in operating activities (221,875) (148,883) (265,264) (131,276) (7,208)
--------- --------- --------- --------- ---------
Cash flows from financing activities -
borrowings from (repayments to) shareholder
and affiliates, net 265,000 140,000 250,000 (31,838) (433,727)
--------- --------- --------- --------- ---------
Net increase (decrease) in cash 43,125 (8,883) (15,264) (163,114) (440,935)
Cash at beginning of year 23,337 38,601 38,601 201,715 642,650
--------- --------- --------- --------- ---------
Cash at end of year $ 66,462 29,718 23,337 38,601 201,715
========= ========= ========= ========= =========
Interest paid $ 3,315 -- -- 52,226 95,459
========= ========= ========= ========= =========
Foreign income taxes paid $ -- 26,430 26,430 178,000 369,467
========= ========= ========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
19
<PAGE> 20
OCEANIC EXPLORATION COMPANY
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1999 and March 31, 1999 and 1998
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) GENERAL
Oceanic Exploration Company (the Company) is principally engaged
in a worldwide search for oil and gas reserves. The Company's
investment in oil and gas properties consists primarily of a
non-operated net profit interest in proven reserves offshore
Greece (the Prinos Property). Effective March 31, 1999, the
Consortium operating the Greek property relinquished its license
pertaining to the development area to the Greek government. In
calendar year 1998, all oil sales were to the Hellenic Aspropyrgos
Refinery near Athens under a contract based on a combined product
price and a market based formula. Amounts paid to the Company for
its net profits interest were remitted in U.S. dollars.
(b) PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the
Company and its wholly owned domestic and foreign subsidiaries.
All significant intercompany balances and transactions have been
eliminated in consolidation.
(c) OIL AND GAS PROPERTIES
Oil and gas properties are accounted for using the full-cost
method of accounting in accordance with the rules prescribed by
the Securities and Exchange Commission (SEC). Under this method,
all acquisition, exploration and development costs are capitalized
on a country-by-country basis as incurred. Gains or losses on
disposition of oil and gas properties are recognized only when
such dispositions involve significant reserves within the
individual country cost pools.
Capitalized costs less related accumulated amortization may not
exceed the sum of (1) the present value of future net revenue from
estimated production, computed using current prices and costs and
a discount rate of 10%; plus (2) the cost of properties not being
amortized, if any; plus (3) the lower of cost or fair value of
unproved properties included in costs being amortized; less (4)
income tax effects related to differences in the book and tax
basis of oil and gas properties. Any excess costs are recorded as
additional depletion expense.
The Company's offshore Greece oil and gas property interests
represented a 15% net profit interest in such properties.
Accordingly, depletion of oil and gas properties was computed
using the future net revenue method. Depletion expense has been
calculated based on the Company's estimate of the revenue due for
its net profits interest (see note 2).
20 (Continued)
<PAGE> 21
OCEANIC EXPLORATION COMPANY
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1999 and March 31, 1999 and 1998
The rate of depreciation, depletion and amortization as a
percentage of gross revenue (net of Greek income taxes) for Greece
is as follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
DECEMBER 31, YEAR ENDED MARCH 31,
-------------------------------- --------------------------------------------------
1999 1998 1999 1998 1997
-------------- -------------- -------------- -------------- --------------
(unaudited)
<S> <C> <C> <C> <C> <C>
Greece 0% 187% 249% 214% 59%
</TABLE>
Because the Company's interest in the offshore Greece oil and gas
property was a net profit interest and not a working interest, the
Company was only entitled to receive information regarding current
monthly production quantities and net revenue. Consequently,
certain reserve information regarding the operations of the
property is unavailable to the Company (see note 7).
The cost of undeveloped properties is excluded from amortization
pending a determination of the existence of proved reserves. Such
undeveloped properties are assessed periodically for impairment.
The amount of impairment, if any, is added to the costs to be
amortized. At December 31, 1999 and 1998 and March 31, 1999, 1998
and 1997, all capitalized costs were subject to amortization.
(d) INCOME TAXES
Income taxes are provided for using the asset and liability method
of accounting for income taxes. Under the asset and liability
method, deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. Deferred tax assets
and liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. Under the
asset and liability method, the effect on deferred tax assets and
liabilities of a change in tax rates is recognized in operations
in the period that includes the enactment date.
(e) LOSS PER SHARE
Loss per share is based on the weighted average number of common
shares outstanding during the period.
(f) ESTIMATES
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that effect the reported amounts of
assets and liabilities and disclosures of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
21 (Continued)
<PAGE> 22
OCEANIC EXPLORATION COMPANY
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1999 and March 31, 1999 and 1998
(g) RECLASSIFICATIONS
Certain amounts for the year ended March 31, 1999 have been
reclassified to conform to the nine months ended December 31, 1999
presentation.
(2) OIL AND GAS SALES AND SUBSEQUENT EVENT
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. The working interest owner who
has the contractual obligation to the Company for the 15% net profits
interest asserted that the calculation of the amounts due to the Company
should be based on the amended agreement with the Greek government. The
Company disagreed with this interpretation and commenced a legal action
in Canada seeking a declaration by the Ontario Court of Justice (General
Division) in Toronto, Canada (the Court) that amounts due the Company
attributable to its 15% net profits interest be calculated based on the
terms of the license agreement before this amendment. In December 1996,
the Company received notification that the Court had rendered a judgment
in the Company's favor. The Court ordered the working interest owner to
pay approximately $6,100,000 including interest to the Company for the
period from January 1, 1993 through December 13, 1996 and to make
payments to the Company subsequent to December 13, 1996 also based on the
terms of the original license agreement. The Court also awarded court
costs to the Company.
The defendant subsequently filed a Notice of Appeal requesting that the
judgment be set aside. The Appellate Court hearing before the Ontario
Court of Appeal was held in June 1999. On December 16, 1999, the Company
received notification that the Appellate Court had upheld the lower
court's decision. At December 31, 1999, however, the defendant still had
the option to apply for leave to further appeal to the Supreme Court of
Canada. This option was effective until February 14, 2000, sixty days
from the date of the December 16, 1999 decision. Therefore, at December,
31, 1999, the amounts due to the Company were not determinable and
collectibility of the judgment was still questionable. Accordingly, no
amounts have been recorded in the Company's financial statements for
revenue relating to the Company's claim for amounts due under its net
profits interest.
Subsequent to December 31, 1999, the Company and the defendant reached an
agreement whereby the defendant would pay the net profits interest as
ordered by the Court. The Company received $8,614,789 and $15,868 on
January 27, 2000 and February 9, 2000, respectively, from the defendant.
This amount consisted of $6,739,342 (net of Greek taxes) for net profits
interest payments from January 1, 1993 through December 31, 1997,
$118,255 for court costs and accrued interest of $1,773,060 (net of
Canadian withholding taxes).
22 (Continued)
<PAGE> 23
OCEANIC EXPLORATION COMPANY
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1999 and March 31, 1999 and 1998
In December 1998, the Company was notified by the working interest owner
that April 1, 1998 through March 31, 1999 would be the final year of
production for the Prinos property. In the final year of production, the
working interest owner is entitled to 100% cost recovery; consequently,
the Company did not receive any net profits interest payments for this
period. The revenue recorded for the year ended March 31, 1999 pertains
to the period from January through March 1998 which had previously been
withheld by the operator. Subsequently, it was determined that calendar
year 1998 was the final year of production for the Prinos property.
Effective March 31, 1999, the consortium operating the Greek properties
has relinquished its license to operate the Prinos oil field in Greece.
However, they have retained the exploration rights in the area of the
Aegean Sea over which there has been an ongoing ownership dispute between
Greece and Turkey. Should the dispute be resolved and the consortium
drill and successfully develop any additional prospects, the Company
would be entitled to once again receive its 15% net profits interest
applicable to the working interest owner's share. However, as the Company
considers this to be unlikely under current circumstances, the Company
has fully depleted its investment in Greece.
(3) NOTES PAYABLE TO SHAREHOLDER AND AFFILIATE
Notes payable to shareholder and affiliate represents borrowings under
agreements with IH, the Company's majority shareholder and its
affiliates. In October 1998, the note was assigned to IH from NWO
Resources, Inc., an affiliate of IH. In April 1999, an Extension
Agreement was executed allowing the Company to draw additional amounts as
needed for working capital up to $1,500,000. Interest continues to accrue
at 8.25%. In addition, the Company was not required to make interest
payments at December 31, 1999. Principal and accrued interest are,
however, due upon demand by IH. In June 1999, the Company was notified
that effective June 30, 1999, IH would no longer be able to provide
financing pursuant to the line of credit arrangement. Instead, all future
advances were to be provided by NWO pursuant to a new line of credit
arrangement. Therefore, effective July 1, 1999, the Company signed a new
promissory note to NWO which allowed the Company to draw amounts as
needed for working capital up to $300,000. Advances under the NWO line of
credit will accrue interest at 8.25%, with interest payments due monthly.
Principal is due on March 31, 2000 or earlier, if such demand is made by
NWO. If the Company is unable to repay either note upon demand for
payment, principal and accrued interest shall bear interest at a rate of
12% per annum after such due date.
On February 1, 2000, the Company repaid all principal and accrued
interest balances outstanding to IH and NWO.
23 (Continued)
<PAGE> 24
OCEANIC EXPLORATION COMPANY
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1999 and March 31, 1999 and 1998
(4) INCOME TAXES
Income tax benefit (expense) consists of the following:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
DECEMBER 31, YEAR ENDED MARCH 31,
------------------- --------------------------------
1999 1998 1999 1998 1997
-------- -------- -------- -------- --------
(unaudited)
<S> <C> <C> <C> <C> <C>
Current:
Foreign - Greece $ -- (50,861) (50,861) (170,038) (377,558)
-------- -------- -------- -------- --------
Deferred:
Foreign - Greece -- 57,000 76,000 218,734 134,658
U.S federal 9,489 -- 4,713 273,396 (21,325)
-------- -------- -------- -------- --------
Total deferred
income tax benefit
9,489 57,000 80,713 492,130 113,333
-------- -------- -------- -------- --------
Total income tax
benefit $ 9,489 6,139 29,852 322,092 (264,225)
======== ======== ======== ======== ========
</TABLE>
The reconciliation between tax expense computed by multiplying pretax
income by the U.S. federal statutory tax rate of 34% and the reported
amount of income tax expense is as follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
DECEMBER 31, YEAR ENDED MARCH 31,
------------------- --------------------------------
1999 1998 1999 1998 1997
-------- -------- -------- -------- --------
(unaudited)
<S> <C> <C> <C> <C> <C>
Computed at U.S.
statutory tax rate $(118,098) (103,673) (163,810) (185,101) 15,283
Increase in the valuation
allowance 122,948 89,473 99,039 64,980 26,924
Effect of Greek
operations, including
foreign tax credits -- 7,629 7,629 25,506 56,634
Adjustment of taxes
provided in prior years
and other, net (14,339) 432 27,290 (227,477) 165,384
--------- -------- -------- -------- --------
Income tax benefit
(expense) $ (9,489) 6,139 (29,852) (322,092) 264,225
========= ======== ======== ======== ========
</TABLE>
Greek income taxes are withheld from oil and gas revenue payments to the
Company. The effective Greek income tax rate applicable to the Company's
15% net profits interest was reduced from 50% to 40% effective January 1,
1993 with respect to the Prinos and Prinos North development areas. The
50% tax rate remains effective for areas outside the development area.
24 (Continued)
<PAGE> 25
OCEANIC EXPLORATION COMPANY
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1999 and March 31, 1999 and 1998
At December 31, 1999 and March 31, 1999 and 1998, the Company's
significant components deferred tax assets and liabilities are as
follows:
<TABLE>
<CAPTION>
MARCH 31,
DECEMBER 31, -------------------
1999 1999 1998
----------- --------- --------
<S> <C> <C> <C>
Deferred tax assets:
Net operating loss carryforwards $197,350 86,000 --
Oil and gas properties, principally due to
differences in depreciation and depletion
and impairment 364,681 359,005 352,396
Other 143,769 137,847 131,417
-------- -------- --------
705,800 582,852 483,813
Valuation allowance (705,800) (582,852) (483,813)
-------- -------- --------
Deferred liabilities:
Greek oil and gas properties, principally
due to differences in depreciation and
depletion and impairment -- -- (76,000)
Other (12,533) (22,022) (26,735)
-------- -------- --------
(12,533) (22,022) (102,735)
-------- -------- --------
Net deferred tax liabilities $ 12,533 22,022 102,735
======== ======== ========
</TABLE>
At December 31, 1999, the Company had net operating loss carryforwards of
approximately $284,000. If not utilized, the tax net operating losses
will expire in 2014.
(5) COMMON STOCK
The Company adopted an incentive plan in June 1976 which reserved 500,000
shares of common stock for stock options and 200,000 shares for stock
grants to be awarded to Company officers, directors, and employees,
including certain eligible consultants. At December 31, 1999, no stock
options or grants were outstanding. At that date, 223,500 shares were
available for future stock option awards and 115,626 shares were
available for future stock grants.
(6) RELATED PARTY TRANSACTIONS
The Company provides management services under a cost sharing arrangement
to Cordillera Corporation (Cordillera), the beneficial controlling
shareholder of the Company, and to San Miguel Valley Corporation (SMVC),
an affiliate of Cordillera, under agreements providing for payments to
the Company based on costs for actual time and expenses incurred on
Cordillera and SMVC activities. During the nine months ended December 31,
1999 and 1998, and the years ended March 31, 1999, 1998 and 1997 such
fees amounted to approximately $417,000, $352,000, $486,000, $306,000 and
$278,000, respectively, and have been included as other revenue in the
accompanying consolidated statements of operations.
25 (Continued)
<PAGE> 26
OCEANIC EXPLORATION COMPANY
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1999 and March 31, 1999 and 1998
The Company contributes for all qualified employees amounts for the
defined contribution pension plan and 401(k) plan administered by
Cordillera. Contributions to the pension plan are based on a percentage
of employee compensation ranging from 6% to 11.7%. The Company is
required to match employee contributions to the 401(k) plan to the extent
of 6% of annual compensation. During the nine months ended December 31,
1999 and 1998, and the fiscal years ended March 31, 1999, 1998 and 1997
the Company recorded $54,351, $46,593, $65,830, $50,468 and $39,886,
respectively, as pension expense under these plans.
The Company leases 2,562 square feet of space in an office building owned
by Sorrento West Properties, Inc., a company indirectly owned and
controlled by an officer and director of the Company. Rent payments for
the nine months ended December 31, 1999 and 1998, and the fiscal years
ended March 31, 1999, 1998 and 1997 were $34,188, $34,674, $47,323,
$42,380 and $29,463, respectively. Future minimum lease payments are
$7,259 for fiscal year ended December 31, 2000.
(7) SUPPLEMENTAL FINANCIAL DATA - OIL AND GAS PRODUCING ACTIVITIES
(UNAUDITED)
The following information is presented in accordance with Statement of
Financial Accounting Standards No. 69, Disclosure about Oil and Gas
Producing Activities, (SFAS No. 69).
(a) OIL AND GAS REVENUE
Results of operations from oil and gas producing activities in
Greece for the nine months ended December 31, 1999 and 1998, and
the fiscal years ended March 31, 1999, 1998 and 1997 are as
follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
DECEMBER 31, YEAR ENDED MARCH 31,
------------------- --------------------------------
1999 1998 1999 1998 1997
-------- -------- -------- -------- --------
(unaudited)
<S> <C> <C> <C> <C> <C>
Oil and gas sales -- 127,152 127,152 425,094 943,895
Amortization and
depreciation -- (142,500) (190,000) (546,835) (336,643)
Greek income
taxes paid -- (50,861) (50,861) (170,038) (377,558)
-------- -------- -------- -------- --------
-- (66,209) (113,709) (291,779) 229,694
======== ======== ======== ======== ========
</TABLE>
The Company's gross revenues are burdened only by Greek income taxes. The
Company had no production costs since its property interest was a net
profit interest.
26 (Continued)
<PAGE> 27
OCEANIC EXPLORATION COMPANY
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1999 and March 31, 1999 and 1998
(b) INFORMATION REGARDING PROVED OIL AND GAS RESERVES
The Company's interest in the oil and gas property offshore Greece
consisted of a contractual right to receive a 15% "net profits
interest." Because the Company had a net profits interest and not
a working interest in this property, the Company was only entitled
to receive information regarding current monthly production
quantities and net revenue. Consequently, certain information
regarding the operations of the property is unavailable to the
Company. Therefore, the Company was not in a position to estimate
the potential future production and/or present value of future net
revenues attributable to its Greek property.
27
<PAGE> 28
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT COMPLIANCE WITH
SECTION 16(a) OF THE EXCHANGE ACT
The following table sets forth the names and ages of the members of the
Registrant's Board of Directors and its executive officers, and sets forth the
position with the Registrant held by each:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
James Neal Blue 64 Director; Chairman of the Board and Chief
Executive Officer of the Registrant
Charles N. Haas 62 Director and President of the Registrant
John L. Redmond 69 Director and Vice President, International
Exploration of the Registrant
Gene E. Burke, M.D. 70 Director
Sidney H. Stires 70 Director
Janet A. Holle 48 Vice President/Secretary of the Registrant
Lori A. Brundage 36 Treasurer and Chief Financial Officer of the
Registrant
</TABLE>
Directors of the Registrant hold these positions until their respective
successors are elected and qualified. The current directors, except for John L.
Redmond, were elected in 1982 and no meeting of the stockholders has been held
since that date. Mr. Redmond was appointed in 1994 by the remaining directors to
fill a vacancy on the Board of Directors.
James N. Blue. Mr. Blue has been a director and officer of the Registrant since
1981. He is also Chairman of General Atomics in San Diego, California and
President of Cordillera Corporation in Denver, Colorado.
Charles N. Haas. Mr. Haas has been a director and officer of the Registrant
since 1981.
28
<PAGE> 29
John L. Redmond. Mr. Redmond has been a director of the Registrant since 1994.
He has been Vice President, International Exploration of the Registrant since
1990.
Gene E. Burke, M.D.. Dr. Burke has been a director of the Registrant since 1972.
He has been a physician in sole practice in Houston, Texas during that time.
Sidney H. Stires. Mr. Stires has been a director of the Registrant since 1980.
During that time Mr. Stires has been the President of Stires , O'Donnell & Co.,
Inc., an investment banking company in New York, New York.
On August 11, 1998, an SEC Administrative Judge entered an order finding that
Stires, O'Donnell & Company, Incorporated, ("Stires, O'Donnell") and Sidney H.
Stires willfully violated, and willfully aided and abetted the violation by
certain promoters, the antifraud provision of the Federal Securities laws. The
Judge further found that Stires, O'Donnell failed to supervise its employees as
required by Federal Securities law in connection with the proposed sale of
non-existent Securities known as "Euro-GICs". A civil penalty of $300,000 was
imposed on Stires, O'Donnell and a civil penalty of $100,000 was imposed on Mr.
Stires. In addition, Mr. Stires was suspended from activity as a securities
dealer for 90 days. Mr. Stires paid his fine and has served his suspension. On
June 24, 1999, the Commission issued an Order reducing the $300,000 civil
penalty to $150,000 and otherwise declaring the decision final.
Janet A. Holle. Ms. Holle has been an officer of the Registrant since 1987.
Lori A. Brundage. Ms. Brundage has been an officer of the Registrant since 1996.
Since 1989, she had held the positions of Accounting Manager and Senior
Accountant for the Denver Technological Center, a real estate development
company in Denver, Colorado.
29
<PAGE> 30
ITEM 10. EXECUTIVE COMPENSATION
The following information summarizes compensation paid by Registrant to James N.
Blue, Chief Executive Officer and Charles N. Haas, President.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term Compensation
------------------------------------
Annual Compensation Awards Payout
--------------------------------------- ------------------------------------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Name Other Restricted
and Annual Stock LTIP All Other
Principal Fiscal Salary Bonus Compen- Award(s) Options/ Payouts Compen-
Position Year (1) ($) ($) sation ($) ($) SARs (#) ($) sation ($)
- ------------- ----------------- --------- ----- ---------- ------------ -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
James N. Blue Transition Period 45,000(2) -- -- -- -- -- --
Chairman of 1999 60,000(2) -- -- -- -- -- --
the Board 1998 60,000(2) -- -- -- -- -- --
and Chief 1997 60,000(2) -- -- -- -- -- --
Executive
Officer
Charles N. Haas 116,564(3) -- -- -- -- -- 16,495(3)(5)
President Transition Period 157,586(3) -- -- -- -- -- 21,804(3)(5)
1999 157,956(3) 25,000 -- -- -- -- 23,836(3)(5)
1998 158,086(3) (4) -- -- -- -- 21,988(3)(5)
1997
</TABLE>
(1) The Registrant changed its fiscal year to December 31 from March 31,
effective December 31, 1999. Accordingly, fiscal years 1999, 1998 and
1997 refer to the 12 months ended March 31. The transition period
refers to the nine months ended December 31, 1999.
(2) Monthly officer's fee of $5,000.
(3) A portion of the salary and compensation paid to Mr. Haas has been
reimbursed based on cost sharing arrangements with other companies.
(see Item 12 "Certain Relationships and Related Transactions.")
(4) A $25,000 bonus originally awarded by the Board of Directors in 1983
was paid in August 1997.
(5) The Registrant is a participant in the Cordillera and Affiliated
Companies' Money Purchase Pension Plan and 401(k) Plan, covering all
qualified employees of the Registrant. The pension plan is a
non-contributory defined contribution plan. Registrant contributions to
this plan are based on 6% of total compensation not exceeding the limit
established annually for the Federal Insurance Contribution Act (FICA)
and 11.7% of compensation in excess of this limit up to a maximum of
$160,000. Vesting begins after two years of service at a rate of 20%
annually with full vesting subsequent to five years of service or upon
retirement, death or permanent disability. The 401(k) plan provides for
discretionary employee contribution of up to 10% of annual pre-tax
earnings, subject to the maximum amount established annually under
Section 401(k) of the Internal Revenue Code. The Registrant is required
to match contributions to the extent of 6% of annual employee
compensation. Employer contributions to the plan vest immediately.
30
<PAGE> 31
Members of Registrant's board of directors who are not employees of the
Registrant or any of its affiliates receive directors' fees of $500 per month.
Members of the board of directors who are employees do not receive directors'
fees. Mr. Blue receives a monthly fee of $5,000 for services as an officer of
the Registrant.
There are no employment contracts outstanding at this time. In fiscal 1983, the
Board of Directors authorized a bonus of $25,000 to the president of the
Registrant, which was paid in August 1997.
The Registrant has no compensation committee. James N. Blue and Charles N. Haas
participated in all deliberations concerning executive officer compensation.
31
<PAGE> 32
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of March 1, 2000 there were issued and outstanding 9,916,154 shares of Common
Stock, which are the Registrant's only class of voting securities. Holders of
Common Stock are entitled to one vote per share on each matter upon which
shareholders may be entitled to vote.
The following table sets forth information regarding shares of Common Stock of
the Registrant beneficially owned as of March 1, 2000 by: (i) each person known
by the Registrant to beneficially own 5% or more of the outstanding Common
Stock, (ii) each director, (iii) each person named in the summary compensation
table and (iv) all officers and directors as a group.
<TABLE>
<CAPTION>
Nature of Percentage of
Names and Addresses of Officers, Amount of Beneficial Voting
Directors and Principal Shareholders Common Stock Ownership Securities
- ------------------------------------ ------------ --------- --------------
<S> <C> <C> <C>
Allen & Company 824,200 Sole voting and 8.3%
and various affiliates (1) investment power
711 Fifth Avenue
New York, NY 10022
International Hydrocarbons (2) 4,912,178 Sole voting and 49.5%
c/o John E. Jones investment power
5000 S. Quebec Street, Suite 450
Denver, CO 80237
International Cordillera Limited 545,800 Sole voting and 5.5%
c/o WITC investment power
8082 S. Niagara Way
Englewood, CO 80112
James N. Blue (3) (4) None N/A N/A
5000 S. Quebec St., Suite 450
Denver, CO 80237
Charles N. Haas (3) None N/A N/A
5000 S. Quebec St., Suite 450
Denver, CO 80237
Sidney H. Stires (3) 30,000 As Trustee less than 1%
12 East 44th Street
New York, NY 10017
Gene E. Burke, M.D. (3) None N/A N/A
3555 Timmons, # 680
Houston, TX 77027
</TABLE>
32
<PAGE> 33
<TABLE>
<CAPTION>
Nature of Percentage of
Names and Addresses of Officers, Amount of Beneficial Voting
Directors and Principal Shareholders Common Stock Ownership Securities
- ------------------------------------ ------------ --------- --------------
<S> <C> <C> <C>
John L. Redmond (3) None N/A N/A
5000 S. Quebec St., Suite 450
Denver, CO 80237
All Directors and Officers 30,000 less than 1%
as a group (7 persons)
</TABLE>
(1) The information regarding Common Stock owned by Allen & Company is
based on the information contained in the Amendment No. 1 to Schedule
13D dated April 20, 1987 filed by the persons and entities identified
below, which reports the following ownership of the Common Stock (not
adjusted for the issuance of 6,001,000 shares of Common Stock pursuant
to the Rights Offering):
<TABLE>
<CAPTION>
Names Common Shares Percentages
- ----- ------------- -----------
<S> <C> <C>
Allen & Company 165,000 1.7%
American Diversified Enterprises, Inc. 232,500 2.3%
Herbert Anthony Allen, 47,917 .5%
Susan Kathleen Wilson and Herbert
Allen as Successor Trustees of Trust
created by Herbert Allen pursuant to
Agreement dated 12/1/64
Terry Allen Kramer and Irwin H. Kramer, 70,000 .7%
as Trustees U/A for Issuer of
Terry Allen Kramer pursuant to
Agreement dated 4/5/63
Toni Allen Goutal 55,500 .6%
Angela Frances Allen Kramer 43,700 .4%
Nathaniel Charles Allen Kramer 56,000 .6%
Bruce Allen 20,000 .2%
C. Robert Allen, IV 5,000 .1%
John Godwin Allen 5,000 .1%
Luke Andrew Allen 5,000 .1%
Thaddeus Mack Allen 5,000 .1%
</TABLE>
33
<PAGE> 34
<TABLE>
<CAPTION>
Names Common Shares Percentages
- ----- ------------- -----------
<S> <C> <C>
Evelyn Henry 52,000 .5%
Marjorie Bisgood 59,500 .6%
Bradley Roberts 2,083 *
</TABLE>
* Less than .1%
(2) International Hydrocarbons is a wholly-owned subsidiary of Ohio Gas
Company which is a wholly-owned subsidiary of NWO. Mr. Blue is
president and a director both of International Hydrocarbons and NWO. He
is also president and a major stockholder of Cordillera Corporation
("Cordillera"), the major stockholder of NWO. Through Cordillera and
affiliates, Mr. Blue beneficially holds approximately 11% of the common
stock of IH.
(3) Director of the Registrant
(4) Does not include shares owned by International Hydrocarbons.
International Hydrocarbons is a wholly-owned subsidiary of Ohio Gas
Company which is a wholly-owned subsidiary of NWO. Mr. Blue is
president and a director of both International Hydrocarbons and NWO. He
is also president and major stockholder of Cordillera, the major
stockholder of NWO. Through Cordillera and affiliates, Mr. Blue
beneficially holds approximately 11% of the common stock of IH.
ITEM 12 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
INTERNATIONAL HYDROCARBONS AND NWO RESOURCES, INC. LINES OF CREDIT
As of December 31, 1999, the Registrant had lines of credit totaling $1,500,000
with IH, the Registrant's principal stockholder and $300,000 with NWO, an
affiliate of IH. Both lines of credit were secured by the Registrant's Prinos
Interest and any and all funds to be received under the Registrant's judgment
against Denison. In October 1998, the $1,500,000 line of credit, initially with
NWO, was transferred to IH. In April 1999, the Registrant executed an Extension
Agreement whereby IH allowed the Registrant to draw up to $1,500,000 for general
working capital purposes. In addition, the Registrant was not required to make
monthly interest payments. Principal and accrued interest were due upon demand
by IH. Effective June 30, 1999, the Registrant was notified that IH would no
longer be able to provide financing pursuant to the $1,500,000 line of credit
arrangement. Instead, all future advances were to be provided by NWO pursuant to
a new line of credit. Therefore, effective July 1, 1999, the Registrant signed a
new promissory note to NWO, which allowed the Registrant to draw amounts as
needed for working capital up to $300,000. Interest payments to NWO are due
monthly and principal is due on March 31, 2000 or earlier, if such demand is
made by NWO. As of December 31, 1999, the outstanding loan balances were
$1,202,636 and $155,000 to IH and NWO, respectively.
34
<PAGE> 35
The Registrant paid off the outstanding principal and accrued interest balances
of $1,202,636 and $180,381, respectively, to IH and the outstanding principal
balance of $175,000 to NWO on February 1, 2000.
Cordillera is the major stockholder of NWO, an affiliated company of IH. Mr.
Blue, the Chairman of the Board and Chief Executive Officer of the Registrant,
is president and a major stockholder of Cordillera. Through Cordillera and
affiliates, Mr. Blue beneficially holds approximately 11% of the common stock of
IH.
MANAGEMENT AGREEMENTS
The Registrant has a cost sharing arrangement under which it provides management
services to Cordillera and to San Miguel Valley Corporation (SMVC), an affiliate
of Cordillera, pursuant to agreements providing payments to the Registrant based
on costs for actual time and expenses incurred on Cordillera and SMVC
activities. For the nine months ended December 31, 1999 and 1998, and years
ended March 31, 1999, 1998 and 1997 such fees amount to approximately $417,000,
$352,000, $486,000, $306,000, and $278,000, respectively. Mr. Blue, the Chairman
of the Board and Chief Executive Officer of the Registrant, is president and a
major stockholder of Cordillera.
OFFICER FEES
Mr. Blue receives officers' fees of $5,000 per month for his services as
Chairman of the Board and Chief Executive Officer of the Registrant. Mr. Blue is
president and a director of International Hydrocarbons, the Registrant's
principal stockholder. He is also president and a major stockholder of
Cordillera, the major stockholder of NWO. Through Cordillera and affiliates, Mr.
Blue beneficially holds approximately 11% of the common stock of IH.
EMPLOYEE BENEFIT PLANS
Cordillera has a defined contribution pension plan and a 401(k) plan covering
all qualified employees of the Registrant. Contributions to the pension plan are
based on a percentage of employee compensation ranging from 6% to 11.7%. The
Registrant is required to match employee 401(k) contributions to the extent of
6% of annual compensation. For the nine months ended December 31, 1999 and 1998,
and the years ended March 31, 1999, 1998, and 1997, the Registrant recorded
$54,351, $46,593, $65,830, $50,468 and $39,886, respectively, as pension and
401(k) expense under these plans. Mr. Blue, the Chairman of the Board and Chief
Executive Officer of the Registrant, is president and a major stockholder of
Cordillera.
LEASE OF CORPORATE HEADQUARTERS
The Registrant leases 2,562 square feet of space in an office building located
at 5000 South Quebec Street, Denver, Colorado. The building is owned by Sorrento
West Properties, Inc., a company indirectly owned and controlled by Mr. Blue,
the Chairman of the Board and Chief Executive Officer of the Registrant, and his
family. Rent payments for the nine months ended December 31, 1999 and 1998, and
years ended March 31, 1999, 1998 and 1997 were $34,188, $34,674, $47,323,
$42,380 and $29,463, respectively. These payments include adjustments for the
Registrant's proportionate share of operating expenses. As the Registrant's
current lease expires February 28, 2000, lease
35
<PAGE> 36
payments are estimated to be $7,259 for the year ended December 31, 2000.
Effective March 1, 2000, the Registrant extended their current lease on a month
to month basis at the rate of $3,629.50 per month. The Registrant believes that,
with respect to the lease of its corporate headquarters, it obtained terms no
less favorable than what could have been obtained from unrelated parties in
arms-length transactions.
BONUS
In fiscal 1983, the Board of Directors authorized a bonus of $25,000 to the
president of the Registrant, which was paid in August 1997.
ITEM 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. Financial statements filed as part of this Report in Item 7 are as
follows:
Independent Auditors' Report
Consolidated Balance Sheets - December 31, 1999, March 31, 1999 and
1998
Consolidated Statements of Operations and Accumulated Deficit - Nine
months ended December 31, 1999 and 1998 and years ended March 31, 1999,
1998 and 1997
Consolidated Statements of Cash Flows - Nine months ended December 31,
1999 and 1998 and years ended March 31, 1999, 1998 and 1997
Notes to Consolidated Financial Statements
36
<PAGE> 37
2. 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.
<TABLE>
<CAPTION>
Exhibit Number Name of Exhibit Location
-------------- --------------- --------
<S> <C> <C>
3.1 Articles of Incorporation Page 58 of Report on
(including all amendments) Form 10-K for year
ended September 30, 1980
3.2 Bylaws (including all Page 15 of Form 8
amendments) (Amendment No. 1 to
10-K Report) dated
June 1, 1982
10.1 Memorandum of Agreement dated Report on Form 10-K for
June 30, 1976 between Oceanic year ended September 30, 1976
Exploration Company and Denison
Mines Limited
10.2 Letter Agreement dated July 28, Report on Form 10-K for
1976 amending Agreement of year ended September 30, 1976
June 30, 1976
10.3 Amendment dated August 27, 1976 Report on Form 10-K for
to Agreement of June 30, 1976 year ended September 30, 1976
10.4 Farm-out Agreement with Page 38 of the Report
Enterprise Oil Exploration on Form 10-KSB for the
Limited and NMX Resources year ended March 31, 1995
(Overseas) Limited dated
September 22, 1989
10.5 Letter Agreement with Page 54 of the Report
Enterprise Oil Exploration on Form 10-KSB for the
Limited and NMX Resources year ended March 31, 1995
(Overseas) Limited dated
September 22, 1989
</TABLE>
37
<PAGE> 38
<TABLE>
<CAPTION>
Exhibit Number Name of Exhibit Location
- -------------- --------------- --------
<S> <C> <C>
10.6 Letter of Indemnification with Page 62 of the Report
Enterprise Oil Exploration on Form 10-KSB for the
Limited and NMX Resources year ended March 31, 1995
(Overseas) Limited dated
September 22, 1989
10.7 Agreement for Study and Exhibit 10.8 on Form SB-2
Petroleum Evaluation of the filed October 6, 1995,
South East Area of Bolivia, File # 33-63277
dated May 11, 1992
10.8 Management Agreement with Page 63 of the Report
Cordillera Corporation dated on Form 10-KSB for the
January 1, 1990 year ended March 31, 1995
10.9 Management Agreement with Page 67 of the Report
San Miguel Valley Corporation on Form 10-KSB for the
dated January 1, 1990 year ended March 31, 1995
10.10 Office Building Lease with Page 71 of the Report
Sorrento West Properties, Inc. on Form 10-KSB for the
dated March 1, 1991 year ended March 31, 1995
10.11 Addendum to Office Building Page 129 of the Report
Lease dated March 1, 1994 on Form 10-KSB for the
year ended March 31, 1995
10.12 Promissory Note with NWO Page 131 of the Report
Resources, Inc. dated on Form 10-KSB for the
June 15, 1994 year ended March 31, 1995
10.13 Promissory Note with NWO Page 132 of the Report
Resources, Inc. dated on Form 10-KSB for the
July 18, 1994 year ended March 31, 1995
10.14 Security Agreement in favor Page 133 of the Report
of NWO Resources, Inc. on Form 10-KSB for the
dated July 27, 1994 year ended March 31, 1995
</TABLE>
38
<PAGE> 39
<TABLE>
<CAPTION>
Exhibit Number Name of Exhibit Location
- -------------- --------------- --------
<S> <C> <C>
10.15 Promissory Note with NWO Page 149 of the Report
Resources, Inc. dated on Form 10-KSB for the
September 22, 1994 year ended March 31, 1995
10.16 Promissory Note with NWO Page 150 of the Report
Resources, Inc. dated on Form 10-KSB for the
December 15, 1994 year ended March 31, 1995
10.17 Promissory Note with NWO Page 151 of the Report
Resources, Inc. dated on Form 10-KSB for the
January 1, 1995 year ended March 31, 1995
10.18 Promissory Note with NWO Page 152 of the Report
Resources, Inc. dated on Form 10-KSB for the
February 15, 1995 year ended March 31, 1995
10.19 Modification Agreement Exhibit 10.20 on Form SB-2
with NWO Resources, Inc. filed October 6, 1995,
dated September 19, 1995 File # 33-63277
10.20 First Amendment to Exhibit 10.21 on Form SB-2
Security Agreement with filed October 6, 1995,
NWO Resources, Inc. File # 33-63277
dated September 19, 1995
10.21 Letter dated August 22, 1995 Exhibit 10.22 on Form SB-2
from International Hydrocarbons filed October 6, 1995,
regarding purchase of unsubscribed File # 33-63277
stock in Rights Offering
10.22 Extension Agreement Exhibit 10.23 on Form SB-2,
with NWO Resources, Inc. Amendment 2, filed
dated December 27, 1995 January 3, 1996,
File # 33-63277
10.23 Extension Agreement Page 16 of the Report
with NWO Resources, Inc. on Form 10-QSB for the
dated December 11, 1996 quarterly period
ended December 31, 1996
</TABLE>
39
<PAGE> 40
<TABLE>
<CAPTION>
Exhibit Number Name of Exhibit Location
- -------------- --------------- --------
<S> <C> <C>
10.24 Second Addendum to Page 42 of the Report
Office Building Lease on Form 10-KSB for the
dated March 1, 1997 year ended March 31, 1997
10.25 Extension Agreement Page 44 of the Report
with NWO Resources, Inc. on Form 10-KSB for the
dated March 10, 1996 year ended March 31, 1997
10.26 Extension Agreement Page 42 of the Report
with NWO Resources, Inc. on Form 10-KSB for the
dated February 13, 1998 year ended March 31, 1998
10.27 Management Agreement Page 14 of the Report
with San Miguel Valley on Form 10-QSB for the
Corporation dated quarterly period ended
May 1, 1998 June 30, 1998
10.28 Extension Agreement Page 40 of the Report
with International on Form 10-KSB for the
Hydrocarbons dated year ended March 31, 1999
April 5, 1999
10.29 Promissory Note with Page 13 of the Report
NWO Resources, Inc. dated on Form 10-QSB for the
June 30, 1999 quarterly period ended
June 30, 1999
10.30 Security Agreement in Page 14 of the Report
favor of NWO Resources, Inc. on Form 10-QSB for the
dated June 30, 1999 quarterly period ended
June 30, 1999
27 Financial Data Schedule
</TABLE>
(b) No reports on Form 8-K were filed during the last quarter during the period
covered by this Report.
40
<PAGE> 41
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized.
OCEANIC EXPLORATION COMPANY
(REGISTRANT)
By /s/ Charles N. Haas
------------------------------------
Charles N. Haas, President
Dated March 27, 2000
--------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been signed below by the following persons on behalf of the Registrant and
in the capacity and on the date indicated, namely:
1. By its principal executive officer.
<TABLE>
<S> <C>
Date: March 27, 2000 By /s/ Charles N. Haas
-------------------------------------------- ---------------------------------------
Charles N. Haas, President
2. And by its principal financial officer.
Date: March 27, 2000 By /s/ Lori A. Brundage
-------------------------------------------- ---------------------------------------
Lori A. Brundage, Treasurer
3. And by a majority of its board of directors.
Date: March 27, 2000 By /s/ James N. Blue
-------------------------------------------- ---------------------------------------
James N. Blue, Director
Date: March 27, 2000 By /s/ Charles N. Haas
-------------------------------------------- ---------------------------------------
Charles N. Haas, Director
Date: March 27, 2000 By /s/ John L. Redmond
-------------------------------------------- ---------------------------------------
John L. Redmond, Director
</TABLE>
<PAGE> 42
2. 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.
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit Number Name of Exhibit Location
- -------------- --------------- --------
<S> <C> <C>
3.1 Articles of Incorporation Page 58 of Report on
(including all amendments) Form 10-K for year
ended September 30, 1980
3.2 Bylaws (including all Page 15 of Form 8
amendments) (Amendment No. 1 to
10-K Report) dated
June 1, 1982
10.1 Memorandum of Agreement dated Report on Form 10-K for
June 30, 1976 between Oceanic year ended September 30, 1976
Exploration Company and Denison
Mines Limited
10.2 Letter Agreement dated July 28, Report on Form 10-K for
1976 amending Agreement of year ended September 30, 1976
June 30, 1976
10.3 Amendment dated August 27, 1976 Report on Form 10-K for
to Agreement of June 30, 1976 year ended September 30, 1976
10.4 Farm-out Agreement with Page 38 of the Report
Enterprise Oil Exploration on Form 10-KSB for the
Limited and NMX Resources year ended March 31, 1995
(Overseas) Limited dated
September 22, 1989
10.5 Letter Agreement with Page 54 of the Report
Enterprise Oil Exploration on Form 10-KSB for the
Limited and NMX Resources year ended March 31, 1995
(Overseas) Limited dated
September 22, 1989
</TABLE>
<PAGE> 43
<TABLE>
<CAPTION>
Exhibit Number Name of Exhibit Location
- -------------- --------------- --------
<S> <C> <C>
10.6 Letter of Indemnification with Page 62 of the Report
Enterprise Oil Exploration on Form 10-KSB for the
Limited and NMX Resources year ended March 31, 1995
(Overseas) Limited dated
September 22, 1989
10.7 Agreement for Study and Exhibit 10.8 on Form SB-2
Petroleum Evaluation of the filed October 6, 1995,
South East Area of Bolivia, File # 33-63277
dated May 11, 1992
10.8 Management Agreement with Page 63 of the Report
Cordillera Corporation dated on Form 10-KSB for the
January 1, 1990 year ended March 31, 1995
10.9 Management Agreement with Page 67 of the Report
San Miguel Valley Corporation on Form 10-KSB for the
dated January 1, 1990 year ended March 31, 1995
10.10 Office Building Lease with Page 71 of the Report
Sorrento West Properties, Inc. on Form 10-KSB for the
dated March 1, 1991 year ended March 31, 1995
10.11 Addendum to Office Building Page 129 of the Report
Lease dated March 1, 1994 on Form 10-KSB for the
year ended March 31, 1995
10.12 Promissory Note with NWO Page 131 of the Report
Resources, Inc. dated on Form 10-KSB for the
June 15, 1994 year ended March 31, 1995
10.13 Promissory Note with NWO Page 132 of the Report
Resources, Inc. dated on Form 10-KSB for the
July 18, 1994 year ended March 31, 1995
10.14 Security Agreement in favor Page 133 of the Report
of NWO Resources, Inc. on Form 10-KSB for the
dated July 27, 1994 year ended March 31, 1995
</TABLE>
<PAGE> 44
<TABLE>
<CAPTION>
Exhibit Number Name of Exhibit Location
- -------------- --------------- --------
<S> <C> <C>
10.15 Promissory Note with NWO Page 149 of the Report
Resources, Inc. dated on Form 10-KSB for the
September 22, 1994 year ended March 31, 1995
10.16 Promissory Note with NWO Page 150 of the Report
Resources, Inc. dated on Form 10-KSB for the
December 15, 1994 year ended March 31, 1995
10.17 Promissory Note with NWO Page 151 of the Report
Resources, Inc. dated on Form 10-KSB for the
January 1, 1995 year ended March 31, 1995
10.18 Promissory Note with NWO Page 152 of the Report
Resources, Inc. dated on Form 10-KSB for the
February 15, 1995 year ended March 31, 1995
10.19 Modification Agreement Exhibit 10.20 on Form SB-2
with NWO Resources, Inc. filed October 6, 1995,
dated September 19, 1995 File # 33-63277
10.20 First Amendment to Exhibit 10.21 on Form SB-2
Security Agreement with filed October 6, 1995,
NWO Resources, Inc. File # 33-63277
dated September 19, 1995
10.21 Letter dated August 22, 1995 Exhibit 10.22 on Form SB-2
from International Hydrocarbons filed October 6, 1995,
regarding purchase of unsubscribed File # 33-63277
stock in Rights Offering
10.22 Extension Agreement Exhibit 10.23 on Form SB-2,
with NWO Resources, Inc. Amendment 2, filed
dated December 27, 1995 January 3, 1996,
File # 33-63277
10.23 Extension Agreement Page 16 of the Report
with NWO Resources, Inc. on Form 10-QSB for the
dated December 11, 1996 quarterly period
ended December 31, 1996
</TABLE>
<PAGE> 45
<TABLE>
<CAPTION>
Exhibit Number Name of Exhibit Location
- -------------- --------------- --------
<S> <C> <C>
10.24 Second Addendum to Page 42 of the Report
Office Building Lease on Form 10-KSB for the
dated March 1, 1997 year ended March 31, 1997
10.25 Extension Agreement Page 44 of the Report
with NWO Resources, Inc. on Form 10-KSB for the
dated March 10, 1996 year ended March 31, 1997
10.26 Extension Agreement Page 42 of the Report
with NWO Resources, Inc. on Form 10-KSB for the
dated February 13, 1998 year ended March 31, 1998
10.27 Management Agreement Page 14 of the Report
with San Miguel Valley on Form 10-QSB for the
Corporation dated quarterly period ended
May 1, 1998 June 30, 1998
10.28 Extension Agreement Page 40 of the Report
with International on Form 10-KSB for the
Hydrocarbons dated year ended March 31, 1999
April 5, 1999
10.29 Promissory Note with Page 13 of the Report
NWO Resources, Inc. dated on Form 10-QSB for the
June 30, 1999 quarterly period ended
June 30, 1999
10.30 Security Agreement in Page 14 of the Report
favor of NWO Resources, Inc. on Form 10-QSB for the
dated June 30, 1999 quarterly period ended
June 30, 1999
27 Financial Data Schedule
</TABLE>
(b) No reports on Form 8-K were filed during the last quarter during the period
covered by this Report.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> APR-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 66,462
<SECURITIES> 0
<RECEIVABLES> 10,442
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 79,109
<PP&E> 39,000,000
<DEPRECIATION> 39,000,000
<TOTAL-ASSETS> 80,549
<CURRENT-LIABILITIES> 2,386,435
<BONDS> 0
0
0
<COMMON> 619,759
<OTHER-SE> 155,696
<TOTAL-LIABILITY-AND-EQUITY> 80,549
<SALES> 0
<TOTAL-REVENUES> 420,551
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 674,021
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 93,876
<INCOME-PRETAX> (347,346)
<INCOME-TAX> (9,489)
<INCOME-CONTINUING> (337,857)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (337,857)
<EPS-BASIC> (0.03)
<EPS-DILUTED> (0.03)
</TABLE>
