<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
Quarterly Report Under Section 13 or 15(d) of the
Securities Exchange Act of 1934
--------------------------------
For the quarter period ended JUNE 30, 1997 Comm. File# 0-12813
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AMERICAN ATLAS RESOURCE CORPORATION
---------------------------------------------------------------------
(Formerly Wepco Energy Co.)
(Exact name of small business registrant as specified in its charter)
DELAWARE 84-0809164
- ------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
240 WEST JESSUP STREET, BRIGHTON, COLORADO 80601
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(Address of principal executive office)
Registrant's telephone number, including area code: (303) 659-8203
Check whether the registrant (1) has filed all reports to be filed by Section
13 or 15(d) of the Securities Exchange Act during the past 12 months (or for
such shorter period that the Registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
The number of shares outstanding of each of the registrant's class of common
stock or common stock equivalents
Class Outstanding at June 30,1997
- --------------------------------------------------------------------------------
COMMON STOCK $.01 PAR VALUE 720,043 SHARES
PREFERRED STOCK 523,903 SHARES *
* CONVERTIBLE INTO 5,239,030 COMMON SHARES
<PAGE> 2
AMERICAN ATLAS RESOURCE CORPORATION
(Formerly Wepco Energy Co.)
Form 10-QSB - For the Quarter Ended June 30, 1997
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE
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<S> <C>
Item 1. Financial Statements
A. Consolidated Balance Sheet - June 30, 1997 3
B. Consolidated Statements of Operations - Six Months
and Three Months ended June 30, 1997 and 1996 4
C. Consolidated Statements of Changes in Cash Flows - Six
Months Ended June 30, 1997 and 1996 5
D. Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 7
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 9
Item 2. Changes in Securities 9
Item 3. Defaults Upon Senior Securities 9
Item 4. Submission of Matters to a Vote of Security Holders 9
Item 5. Other Information 9
Item 6. Exhibits and Reports on Form 8-K 9
</TABLE>
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1 - CONSOLIDATED FINANCIAL STATEMENTS
AMERICAN ATLAS RESOURCE CORPORATION AND SUBSIDIARIES
(Formerly Wepco Energy Co.)
CONSOLIDATED BALANCE SHEET
JUNE 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
<S> <C>
ASSETS
CURRENT ASSETS:
Cash $ 45,100
Accounts Receivable (less $4,700 allowances for doubtful accounts) 149,900
Parts and Equipment Inventory 60,400
Prepayments and Other 14,700
-----------
TOTAL CURRENT ASSETS 270,100
-----------
PROPERTY AND EQUIPMENT:
Oil and Gas Properties, (at cost on the successful
efforts method of accounting)
Proved Properties 1,647,100
Natural Gas Compressors 951,000
Land and Building 141,900
Automobiles, Trucks and Heavy Equipment 149,700
Shop Machinery, Equipment, Furniture and Fixtures 62,900
-----------
2,952,600
Accumulated Depreciation, Depletion and Amortization (1,740,700)
-----------
1,211,900
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OTHER ASSETS: 5,000
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TOTAL ASSETS $ 1,487,000
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts Payable and Accrued Expenses $ 302,400
Oil and Gas Revenue Payable 240,600
Production Taxes Payable 23,100
Current Portion of Long-Term Debt 90,900
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TOTAL CURRENT LIABILITIES 657,000
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LONG-TERM DEBT AND OTHER LIABILITIES:
Long-Term Debt 89,700
Production Taxes Payable 66,400
Advances From Joint Owners and Affiliates 39,700
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195,800
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COMMITMENTS AND CONTINGENT LIABILITIES
STOCKHOLDERS' EQUITY:
Serial Preferred Stock, $.01 par value; 1,000,000 shares authorized:
Series A, 462,890 shares issued and outstanding;
face value $3.82 per share 1,768,200
Series B, 61,013 shares issued and outstanding;
face value $5.00 per share 305,100
Common Stock, $.01 par value; 12,000,000
shares authorized; 720,430 shares issued and outstanding 7,200
Additional Paid-In Capital 5,312,000
Accumulated Deficit (6,758,300)
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TOTAL STOCKHOLDERS' EQUITY 634,200
-----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,487,000
===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE> 4
AMERICAN ATLAS RESOURCE CORPORATION AND SUBSIDIARIES
(Formerly Wepco Energy Co.)
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
------------------------ ------------------------
June 30, June 30,
------------------------ ------------------------
1997 1996 1997 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
REVENUES:
Oil and Gas Sales $ 92,500 $ 130,600 $ 32,400 $ 58,600
Compressor Rental Income and Sales 141,900 121,700 64,200 51,400
Sale of Oil and Gas Properties and Compressors (Net) 54,000 50,900 51,000 40,200
Sales and Services of Oil and Gas Field Equipment 252,500 36,800 85,200 22,400
Management and Operator Fees 26,100 25,100 5,000 4,400
Other Income 1,100 100 700 --
---------- ---------- ---------- ----------
568,100 365,200 238,500 177,000
---------- ---------- ---------- ----------
COSTS AND EXPENSES:
Oil and Gas Production Costs 39,900 48,800 20,100 16,700
Compressor Operating Costs 152,600 105,700 78,100 59,000
Costs of Oil and Gas Field Equipment and Services 227,300 33,000 70,300 27,100
Depreciation, Depletion and Amortization 91,000 93,400 45,900 46,200
General and Administrative 88,300 94,900 38,900 44,700
Interest Expense 10,000 12,100 5,200 5,900
---------- ---------- ---------- ----------
609,100 387,900 258,500 199,600
---------- ---------- ---------- ----------
LOSS BEFORE INCOME TAXES (40,900) (22,700) (20,000) (22,600)
PROVISION FOR INCOME TAXES:
Income Tax Benefit (Expense) -- -- -- --
---------- ---------- ---------- ----------
NET LOSS (40,800) (22,700) (20,000) (22,600)
LESS PREFERRED DIVIDENDS (10,600) (10,600) (5,300) (5,300)
---------- ---------- ---------- ----------
NET LOSS TO COMMON STOCKHOLDERS $ (51,400) $ (33,300) $ (25,300) $ (27,900)
========== ========== ========== ==========
NET LOSS PER COMMON AND
COMMON EQUIVALENT SHARE $ (0.01) $ (0.01) $ (0.01) $ (0.01)
========== ========== ========== ==========
WEIGHTED AVERAGE COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING 5,349,300 5,349,300 5,349,300 5,349,300
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE> 5
AMERICAN ATLAS RESOURCE CORPORATION AND SUBSIDIARIES
(Formerly Wepco Energy Co.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended June 30,
-------------------------
1997 1996
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (Loss) Income $ (40,900) $ (22,700)
Adjustments to Reconcile Net (Loss) Income to
Net Cash Provided by Operating Activities:
Depreciation, Depletion and Amortization 91,000 93,400
Gain on Sale of Oil and Gas Properties and Compressors (52,000) (50,900)
Bonus Interest 600 2,100
--------- ---------
(1,300) 21,900
Changes in Operating Assets/Liabilities:
Decrease (Increase) in Accounts Receivable (27,700) (21,700)
Decrease (Increase) in Parts and Equipment Inventory 16,400 (22,900)
Decrease (Increase) in Prepayments and Other (13,000) (10,900)
Decrease (Increase) in Other Assets -- --
(Decrease)Increase in Accounts Payable
and Accrued Expenses (37,900) (41,800)
(Decrease) Increase in Undistributed Revenue 300 (10,600)
(Decrease) Increase in Production Taxes Payable (4,300) (30,300)
(Decrease) Increase in Advances from Joint Owners -- --
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NET CASH (USED) PROVIDED BY OPERATING ACTIVITIES (67,500) (116,300)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from Sale of Oil and Gas Properties and Compressors 89,400 62,000
Proceeds from Sale of Equipment -- 23,400
Additions to Oil and Gas Properties (Net) -- (3,000)
Additions to Compressors and Other Equipment (400) (400)
--------- ---------
NET CASH PROVIDED (USED) IN INVESTING ACTIVITIES 89,000 82,000
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CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings from Notes 23,000 19,300
Payments on Notes (53,300) (90,900)
Payment of Preferred Stock Dividends -- --
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NET CASH PROVIDED BY (USED) FINANCING ACTIVITIES (30,300) (71,600)
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NET (DECREASE) INCREASE IN CASH (8,800) (105,900)
CASH, Beginning of Year 53,900 152,900
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CASH, End of Quarter $ 45,100 $ 47,000
========= =========
SUPPLEMENTAL INFORMATION:
Cash Paid During the Period For Interest $ 10,000 $ 10,000
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
5
<PAGE> 6
AMERICAN ATLAS RESOURCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The consolidated balance sheet as of June 30, 1997 and the related consolidated
statements of operations for the six months and three months ended June 30,
1997 and 1996, and the consolidated statements of changes in cash flows for the
periods then ended have been prepared by the Company, without audit. In the
opinion of management, the accompanying financial statements contain all
adjustments necessary to present fairly the financial position of the Company
as of June 30, 1997 and results of operation for the periods then ended except
for normal recurring year-end adjustments.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. Therefore, it is suggested that these financial
statements be read in conjunction with the financial statements and notes
included in the Company's 1996 Form 10-KSB. The accounting policies utilized in
the preparation of the financial statements herein presented are the same as
set forth in the Company's annual financial statements except as modified for
appropriate interim accounting policies. The operating results of the six
months ended June 30, 1997 are not necessarily indicative of those which the
Company may experience for fiscal 1997.
Consolidation:
The financial statements include the accounts of the Company and its
wholly-owned subsidiaries, States Exploration Co. ("States"), Schreider &
Company, Inc. ("Schreider"), and American Gas Compression Services, Inc.
("AGCSI"). All significant intercompany transactions have been eliminated.
Certain reclassification's have been made to the June 30, 1996 statement of
operations to conform with the current period's presentation.
Net Loss Per Common and Common Equivalent Share:
Net loss per common share is computed on the basis of the weighted average
number of common shares outstanding during the period. Common Stock equivalents
are not included in the weighted average shares or net loss per share
calculation for the six months and three months ended June 30, 1997 and 1996,
due to their effect being antidilutive.
6
<PAGE> 7
ITEM 2 - MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Liquidity and Capital Resources:
The Company's liquidity continues to improve in spite of fluctuating oil and
gas prices experienced over the last nine months. During the second quarter and
the first half of the third quarter of 1997, substantially all of its residual
inventory of oil and gas field equipment was sold plus three of its
compressors. Net proceeds from these sales should provide sufficient funds to
liquidate the bonus interest of $27,000 that was past due at June 30, 1997.
Fifteen compressors were rented at June 30, 1997, and twenty-five are available
for rental or sale. Current rental rates for the available compressor packages
exceed $25,000 per month. One compressor was extensively damaged by fire and
the residual value after insurance proceeds of $16,000 is carried in inventory
at $3,000.
In conclusion, the Company's management and employees have managed to maintain
good relationships with customers, suppliers, creditors and shareholders. Both
liquidity and capital resources remain a major concern to all involved with the
Company and all actions are subjected to the restraints of inadequate liquidity
and capital resources.
Results of Operations:
For the six months and the quarter ended June 30, 1997, the Company experienced
losses of $51,400 and $25,300 as compared to $33,300 and $27,900 for the
comparable 1996 periods. All amounts include the 7% preferred stock dividends
$5,300 per quarter.
Oil and gas prices were down dramatically from the first quarter of 1997 and
the decline between the 1997 periods and 1996 amounts are reflective of the
sale of non operated properties in June of 1996 at auction and exchange of
other properties for indebtedness.
7
<PAGE> 8
The following table shows the results of these transactions and the effect of
price changes for the periods:
<TABLE>
<CAPTION>
June 30,
-----------------
1997 1996
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<S> <C> <C>
Production:
Oil-bbl 2,200 2,900
Gas-MCF 24,300 33,600
Sale:
Oil $41,700 $62,500
Gas $50,800 $68,100
Average Price:
Oil $ 19.33 $ 21.25
Gas $ 2.09 $ 2.03
Production Costs: $39,900 $48,800
Depletion Expense: $50,000 $50,000
Equivalent Barrels: 6,250 8,500
Sales $ 14.80 $ 15.36
Cost of Sales $ 6.38 $ 5.74
Margin $ 8.42 $ 9.62
Depletion $ 8.00 $ 5.88
</TABLE>
The revenue declines are a combination of lower prices and production problems.
Oil and gas revenues in the second quarter were down 46% from the first quarter
of 1997 or $27,700 while production costs remained comparable.
The gas production declines caused by the H2S situation in the State 1-17
continues to be addressed and production has been resumed at approximately 40
MCFD as compared to 200 MCFD prior to the problem. (The Company has a 33%
working interest and a 25% net revenue interest in this well).
Oil and gas production costs have declined with the sale of the non-operated
properties. Depletion expense for the six months ended June 30, 1997 and 1996,
was $50,000.
The Company's gas compression rental and sales revenues for the six months
ended June 30, 1997 have increased by 14 percent and related costs have
increased by 30 percent. On a segment basis, the Company's compressor rental
and sales operation lost $18,600 for the six months ended June 30, 1997,
compared to $59,300 for the same period in 1996.
Continuing low gas prices in the Company's market area have caused customers to
return rental units. Of the Company's forty units, fifteen were under contract
at June 30, 1997.
Sales and service of oil and gas field equipment has increased and includes the
sale of part of the 6 5/8 inch gas pipeline. The balance of which was sold in
the third quarter of 1997.
All other revenues and costs are comparable between periods.
8
<PAGE> 9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
None
Item 2. Changes in Securities.
None
Item 3. Defaults upon Senior Securities.
None
Item 4. Submission of Matters to a Vote of Security Holders.
None
Item 5. Other Information.
None
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
27 Financial Data Schedule
(b) Reports on Form 8-K
None
9
<PAGE> 10
SIGNATURES
In accordance with the requirements 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.
AMERICAN ATLAS RESOURCE CORPORATION
/s/ Rudy C. Schreider, Jr. August 7, 1997
- -------------------------- --------------
Rudy C. Schreider, Jr. Chief Executive Officer Date
Director
The Company is actively looking for qualified replacements for its two
directors and will fill the vacancies as soon as practical.
10
<PAGE> 11
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION PAGE
- ------ ------------------- ----
<S> <C> <C>
27 FINANCIAL DATA SCHEDULE
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 45,100
<SECURITIES> 0
<RECEIVABLES> 186,600
<ALLOWANCES> 4,700
<INVENTORY> 60,400
<CURRENT-ASSETS> 270,100
<PP&E> 2,952,600
<DEPRECIATION> 1,740,700
<TOTAL-ASSETS> 1,487,000
<CURRENT-LIABILITIES> 657,000
<BONDS> 195,800
0
2,073,300
<COMMON> 7,200
<OTHER-SE> (1,446,300)
<TOTAL-LIABILITY-AND-EQUITY> 1,487,000
<SALES> 540,900
<TOTAL-REVENUES> 568,100
<CGS> 419,800
<TOTAL-COSTS> 609,100
<OTHER-EXPENSES> 179,300
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,000
<INCOME-PRETAX> (40,900)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (40,900)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> (.01)
</TABLE>
