<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A1
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 12, 1995
LaTex Resources, Inc.
- - --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 0-13399 73-1405081
- - --------------- ------- ----------
(State or other (Commission File No.) (I.R.S. Employer
jurisdiction of Identification No.)
incorporation)
4200 East Skelly Drive, Suite 1000, Tulsa, Oklahoma 74135-3234
- - --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 918-747-7000
------------
Not Applicable
- - --------------------------------------------------------------------------------
(Former name or former address, if changed since last report.)
<PAGE>
This Amendment No. 1 to Current Report on Form 8-K amends the Registrant's
Current Report on Form 8-K filed with the Securities and Exchange Commission on
May 11, 1995, by deleting in its entirety Item 7 as set forth in the Current
Report on Form 8-K as originally filed May 11, 1995 and replacing it with Item
7 as follows:
Item 7. Financial Statements and Exhibits.
----------------------------------
(a) Financial statements of businesses acquired.
--------------------------------------------
Germany Oil Company Audited Financial Statements
Reports of Independent Public Accountants
Consolidated Balance Sheets, Consolidated Statements of Operations,
Consolidated Statements of Stockholders' Equity, and Consolidated
Statements of Stockholder's Equity, and Consolidated Statements of
Cash Flows for the Periods Ended March 31, 1995, December 31, 1994,
1993, and 1992
Notes to Consolidated Financial Statements for the Periods Ended
March 31, 1995, December 31, 1994, 1993, and 1992
(b) Pro forma financial information.
--------------------------------
Germany Oil Company Pro forma Financial Information
Report of Independent Public Accountants on Pro Forma Adjustments
Pro Forma Combined Balance Sheet July 31, 1994
Pro Forma Combined Statement of Operations for the Year Ended
July 31, 1994
Pro Forma Combined Statement of Operations for the Six Months ended
January 31, 1995
Notes to Pro Forma Combined Financial Statements
(c) Exhibits.
--------
SEC
Exhibit
No. Description of Exhibits Page
------- ------------------------------------------ ----
(1) Underwriting Agreement
----------------------
Not Applicable.
(2) Plan of Acquisition, Reorganization,
Arrangement Liquidation or Succession
-------------------------------------
*2.1 Agreement and Plan of Merger
dated March 31, 1995 among Germany Oil
-2-
<PAGE>
SEC
Exhibit
No. Description of Exhibits Page
------- ------------------------------------------ ----
Company, a Texas corporation, LRI
Acquisition Inc., a Delaware corporation,
and LaTex Resources, Inc., a Delaware
corporation.
*2.2 Purchase and Sale Agreement dated
March 30, 1995 between ENRON Reserve
Acquisition Corp., a Delaware corporation,
ENRON Capital & Trade Resources Corp.,
a Delaware corporation, LaTex/GOC Acquisition,
Inc., a Delaware corporation, and LaTex Resources,
Inc., a Delaware corporation.
(4) Instruments Defining the Rights of Security
Holders, Including Indentures
-------------------------------------------
*4.1 Certificate of Designation, Voting Powers
and Rights of Series A Convertible Preferred
Stock of LaTex Resources, Inc.
*4.2 Certificate of Designation, Voting Powers
and Rights of Series B Senior Convertible
Preferred Stock of LaTex Resources, Inc.
(16) Letter re Change in Certifying Accountant
-----------------------------------------
Not Applicable.
(17) Letter re Director Resignation
------------------------------
Not Applicable.
(20) Other Documents or Statements to Security
Holders
-----------------------------------------
Not Applicable.
-3-
<PAGE>
SEC
Exhibit
No. Description of Exhibits Page
------- ------------------------------------------ ----
(23) Consents of Experts and Counsel
-------------------------------
Not Applicable.
(24) Power of Attorney
-----------------
Not Applicable.
(27) Financial Data Schedule
-----------------------
**27.1 Financial Data Schedule of Germany Oil Company, a wholly
owned subsidiary of LaTex Resources, Inc.
(99) Additional Exhibits
-------------------
*28.1 Credit Agreement dated as of March 31, 1995
among Bank of America National Trust and Savings
Association, LaTex Petroleum Corporation, an
Oklahoma Corporation, LaTex/GOC Acquisition, Inc.,
a Delaware corporation, and LRI Acquisition,
Inc., a Delaware corporation.
- - --------------------
* Previously Filed.
** Filed Herewith.
-4-
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed in its behalf by the
undersigned hereunto duly authorized.
LaTex Resources, Inc.
DATED: November 30, 1995 By: /s/ Jeffrey T. Wilson
---------------------------------
Jeffrey T. Wilson, President
-5-
<PAGE>
GERMANY OIL COMPANY
and
SUBSIDIARY
CONSOLIDATED
FINANCIAL STATEMENTS
MARCH 31, 1995, DECEMBER 31, 1994, 1993, and 1992
and
REPORT OF INDEPENDENT
PUBLIC ACCOUNTANTS
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To The Board of Directors and Shareholders
Wanete Petroleum Company and Subsidiary:
We have audited the accompanying consolidated balance sheet of Wanete Petroleum
Company and its Subsidiary (collectively referred to as the "Company" and now
known as Germany Oil Company) as of December 31, 1992, and the related
consolidated statements of operations, stockholders' equity and cash flows for
the year then ended. 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 audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the consolidated financial statements are free of
material misstatement. An audit includes examining, on test basis, evidence
supporting the amounts and disclosures in the consolidated financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall consolidated
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
During 1992 the Company acquired significant assets from a related entity for
cash, assumption of certain debt and obligations and common stock. In addition,
a significant percentage of the Company's proved oil and natural gas reserves at
December 31, 1992, and the related future net revenues is concentrated in a
single area of interest.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Wanete
Petroleum Company and its Subsidiary at December 31, 1992, and the consolidated
results of its operations and its cash flows for the year then ended in
conformity with generally accepted accounting principles.
/s/ JONATHAN COCKS
Jonathan Cocks & Associates
Certified Public Accountants
2929 N. Central Expressway, Suite 250
Richardson, Texas 75080
April 30, 1993
<PAGE>
BRISCOE . ROBINSON CO.
CERTIFIED PUBLIC ACCOUNTANTS
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
----------------------------------------
Board of Directors
Germany Oil Company
Tulsa, Oklahoma
We have audited the accompanying consolidated balance sheets of Germany Oil
Company and Subsidiary (formerly Wanete Petroleum Company) as of March 31, 1995,
December 31, 1994 and 1993 and the related consolidated statements of
operations, stockholders' equity, and cash flows for the three months ended
March 31, 1995 and the years ended December 31, 1994 and 1993. 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, in all material respects, the consolidated financial position of Germany
Oil Company and Subsidiary as of March 31, 1995, December 31, 1994 and 1993 and
the results of their operations and their cash flows for the three months ended
March 31, 1995 and the years ended December 31, 1994 and 1993 in conformity with
generally accepted accounting principles.
/s/ BRISCOE ROBINSON CO.
BRISCOE ROBINSON CO.
Certified Public Accountants
November 6, 1995
Tulsa, Oklahoma
<PAGE>
GERMANY OIL COMPANY
Consolidated Balance Sheets
<TABLE>
<CAPTION>
December 31,
March 31, -------------------------------------
ASSETS 1995 1994 1993 1992
------------- ------------ ----------- ----------
<S> <C> <C> <C> <C>
Current assets:
Cash $ 42,546 $ 66,576 $ 8,150 $ 6,607
Accounts receivable - net 1,055,605 1,290,956 2,242,128 79,730
Accounts receivable - employee 1,620 2,329 - 6,000
Restricted cash 4,470 288,029 114,125 188,568
----------- ----------- ----------- ----------
Total current assets 1,104,241 1,647,890 2,364,403 280,905
----------- ----------- ----------- ----------
Property, plant and equipment at cost
(Notes 1 and 3):
Oil and gas properties (using
successful efforts method) 25,513,206 26,036,495 25,221,061 3,304,774
Other depreciable assets 135,289 135,289 83,677 49,101
Unproved properties 717,404 715,511 478,354 -
----------- ----------- ----------- ----------
26,365,899 26,887,295 25,783,092 3,353,875
Accumulated depreciation, depletion,
and amortization (Note 1) (7,274,033) (6,074,823) (1,250,540) (119,046)
----------- ----------- ----------- ----------
Net property and equipment 19,091,866 20,812,472 24,532,552 3,234,829
----------- ----------- ----------- ----------
Other assets:
Prepaid expenses and other 411,797 36,797 224,630 161,177
----------- ----------- ----------- ----------
TOTAL ASSETS $20,607,904 $22,497,159 $27,121,585 $3,676,911
=========== =========== =========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
-2-
<PAGE>
GERMANY OIL COMPANY
Consolidated Balance Sheets
<TABLE>
<CAPTION>
December 31,
March 31, -------------------------------------
LIABILITIES and STOCKHOLDERS' EQUITY 1995 1994 1993 1992
------------- ------------ ----------- ----------
<S> <C> <C> <C> <C>
Current liabilities:
Accounts payable $ 5,763,574 $ 6,297,289 $ 4,273,944 $ 450,992
Accrued expenses payable 484,220 338,245 342,714 20,660
Current portion, long-term debt
(Note 4) 3,530,414 3,242,315 3,475,750 897,569
Deferred income taxes payable - - - -
----------- ----------- ----------- -----------
Total current liabilities 9,778,208 9,877,849 8,092,408 1,369,221
----------- ----------- ----------- -----------
Long-term liabilities:
Deferred revenue 14,202,996 14,329,931 16,899,926 -
Gas balancing 443,023 443,023 453,084 -
Long-term debt, net of current
portion (Note 4) 2,354,239 3,077,683 2,760,973 1,464,333
----------- ----------- ----------- -----------
Total long-term liabilities 17,000,258 17,850,637 20,113,983 1,464,333
----------- ----------- ----------- -----------
Redeemable preferred stock (Note 6) 1,180,000 1,180,000 1,128,350 665,000
Total obligations 27,958,466 28,908,486 29,334,741 3,498,554
----------- ----------- ----------- -----------
Stockholders' equity:
Common stock (Note 6) 9,886 9,886 9,861 131
Additional paid-in-capital 3,544,768 3,544,768 3,582,342 1,495,217
Retained earnings (deficit) (10,905,216) (9,965,981) (5,805,359) (1,316,991)
----------- ----------- ----------- -----------
Total stockholders' equity
(deficit) (7,350,562) (6,411,327) (2,213,156) 178,357
----------- ----------- ----------- -----------
TOTAL LIABILITIES and STOCKHOLDERS'
EQUITY $20,607,904 $22,497,159 $27,121,585 $ 3,676,911
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
-3-
<PAGE>
GERMANY OIL COMPANY
Consolidated Statements of Operations
<TABLE>
<CAPTION>
Three Months Years Ended December 31,
Ended ----------------------------------------
March 31, 1995 1994 1993 1992
--------------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues:
Oil and gas revenue $2,054,051 $ 8,998,725 $ 2,122,862 $ 374,022
Lease operations and management fees 148,750 845,329 100,495 13,859
---------- ----------- ----------- -----------
Total operating income 2,202,801 9,844,054 2,223,357 387,881
---------- ----------- ----------- -----------
Operating expenses:
Dryhole cost and leasehold abandonment 57,669 575,328 2,829,562 580,334
Lease operating expense 968,433 4,412,343 568,057 107,575
General and administrative 354,264 1,986,948 1,696,156 600,607
Depreciation, depletion, and amortization 1,199,210 4,883,706 1,286,693 111,421
Interest 564,392 2,302,174 561,868 74,242
Bad debts - 19,064 30,000 -
---------- ----------- ----------- -----------
Total operating expense 3,143,968 14,179,563 6,972,336 1,474,179
---------- ----------- ----------- -----------
Net operating income (loss) (941,167) (4,335,509) (4,748,979) (1,086,298)
Other income:
Interest income and other 1,932 23,198 19,402 22,607
Gain on sale of assets and other income - 151,872 241,209 230,673
---------- ----------- ----------- -----------
Net income (loss) before income taxes (939,235) (4,160,439) (4,488,368) (833,018)
Income taxes - current (Note 7) - - - -
Income taxes - deferred (Note 7) - - - -
---------- ----------- ----------- -----------
Net income from continuing operations (939,235) (4,160,439) (4,488,368) (833,018)
Preferred stock dividends (Note 6) - 51,650 463,350 -
---------- ----------- ----------- -----------
Net income (loss) attributable to common stock $ (939,235) $(4,212,089) $(4,951,718) $ (833,018)
========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
-4-
<PAGE>
GERMANY OIL COMPANY
Consolidated Statement of Stockholders' Equity
For the Three Months Ended March 31, 1995
and the Years Ended
December 31, 1994, 1993, and 1992
<TABLE>
<CAPTION>
Common Stock Additional Retained
-------------------- Paid-In Earnings
Shares Par Value Capital (Deficit)
-------- ---------- ----------- ------------
<S> <C> <C> <C> <C>
Balances at January 1, 1992
as originally stated 7,500 $ 75 $ 925 $ (306,852)
Prior period adjustment (620) (6) 7 (177,121)
------- ------ ---------- -----------
Balances at January 1, 1992
as restated 6,880 69 932 (483,973)
------- ------ ---------- -----------
Issuance of common shares
in connection with the
acquisition of assets
from Germany Exploration
Company (a related party) 6,250 62 1,525,034 -
Issuance costs incurred in
connection with the
preferred stock
recapitalization - - (30,749) -
Net loss for the year - - - (833,018)
------- ------ ---------- -----------
Balances at
December 31, 1992 13,130 131 1,495,217 (1,316,991)
Common shares issued for
stock conversion 512,070 5,121 (5,121) -
Common stock issued 24,000 240 119,760 -
Vesting of restricted
stock 75,000 750 374,250 -
Common stock issued in
exchange for oil and
gas properties 75,000 750 369,250 -
Common stock issued in
connection with the
acquisition of assets
from Hunt Oil Company 175,000 1,750 1,133,720 -
Common stock issued in
settlement of accounts
payable 111,900 1,119 558,616 -
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
-5-
<PAGE>
GERMANY OIL COMPANY
Consolidated Statement of Stockholders' Equity
For the Three Months Ended March 31, 1995
and the Years Ended
December 31, 1994, 1993, and 1992
<TABLE>
<CAPTION>
Common Stock Additional Retained
------------------------ Paid-In Earnings
Shares Par Value Capital (Deficit)
------------ ---------- ------------ -------------
<S> <C> <C> <C> <C>
Net loss for the year - $ - $ (463,350) $ (4,488,368)
------------ ---------- ---------- ------------
Balances at
December 31, 1993 986,100 9,861 3,582,342 (5,805,359)
Stock issued 2,500 25 14,076 -
Net loss for the year - - (51,650) (4,160,622)
------------ ---------- ---------- ------------
Balances at
December 31, 1994 988,600 9,886 3,544,768 (9,965,981)
Net loss for the three
months ended
March 31, 1995 - - - (939,235)
------------ ---------- ---------- ------------
Balances at March 31, 1995 988,600 $ 9,886 $3,544,768 $(10,905,216)
============ ========== ========== ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
-6-
<PAGE>
GERMANY OIL COMPANY
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Three Months Years Ended December 31,
Ended ------------------------------------------
March 31, 1995 1994 1993 1992
--------------- ------------- ------------- ------------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Historical net income (loss) $ (939,235) $(4,212,089) $(4,951,718) $ (833,018)
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation, depletion and amortization 1,199,210 4,883,706 1,131,494 111,421
Preferred stock dividends - 51,650 463,350 (230,673)
Gain on sale of oil and gas properties - - - (82,075)
(Increase) Decrease in accounts receivable 236,060 948,660 (2,156,398)
(Increase) Decrease in accounts receivable - employee
and related - - -
(Increase) Decrease in other assets (375,000) 187,833 (63,453) 1,267
(Increase) Decrease in restricted cash 283,559 (173,904) 74,443 -
Increase (Decrease) in accounts payable and accrued expenses (387,740) 2,018,876 4,704,741 (26,058)
Increase (Decrease) in deferred income taxes payable - - (382,000) -
---------- ----------- ------------ -----------
Net cash provided by (used for) operating activities 16,854 3,704,732 (1,179,541) (1,059,136)
---------- ----------- ------------ -----------
Cash flows from investing activities:
Increase in deposits - - - (4,281)
Net purchases of property, plant, and equipment - (1,173,687) (20,470,663) (905,532)
Proceeds from sales of properties 521,396 - - 249,680
---------- ----------- ------------ -----------
Net cash provided by (used for) investing activities $ 521,396 $(1,173,687) $(20,470,663) $(660,133)
========== =========== ============ =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
-7-
<PAGE>
GERMANY OIL COMPANY
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Three Months
Ended Years Ended December 31,
--------------- -----------------------------------------
March 31, 1995 1994 1993 1992
--------------- ------------ ------------- ------------
<S> <C> <C> <C> <C>
Cash flows from financing activities:
Proceeds from notes payable $ - $ 1,767,171 $21,559,747 $1,900,000
Proceeds from common stock - 14,101 495,000 -
Proceeds from redeemable preferred stock - - - 312,000
Debt issuance cost - - - (156,896)
Principal payments (562,280) (4,253,891) (403,000) (145,734)
Cash held in escrow - - - (188,568)
--------- ----------- ----------- ----------
Net cash provided by (used for) financing activities (562,280) (2,472,619) 21,651,747 1,720,802
--------- ----------- ----------- ----------
(24,030) 58,426 1,543
Net increase (decrease) in cash and cash equivalents 1,533
Cash and cash equivalents at beginning of period 66,576 8,150 6,607 5,074
--------- ----------- ----------- ----------
Cash and cash equivalents at end of period $ 42,546 $ 66,576 $ 8,150 $ 6,607
========= =========== =========== ==========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 418,417 $ 2,306,643 $ 239,814 $ 80,332
Income taxes $ - $ - $ - $ 3,085
The following is a summary of all significant non-cash
investing and financing activities:
Common stock issued in exchange for oil and gas properties $ - $ - $ 370,000 $1,525,096
Common stock issued in connection with acquisition of assets $ - $ - $ 1,135,470 $ -
Common stock issued in settlement of accounts payable $ - $ - $ 559,735 $ -
Disclosure of accounting policy:
For purposes of the statement of cash flows,
the Company considers all highly liquid debt
instruments purchased with a maturity of three
months or less to be cash equivalents.
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
-8-
<PAGE>
GERMANY OIL COMPANY
Notes to Consolidated Financial Statements
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Germany Oil Company and subsidiary (the "Company"), a Texas corporation, is
an independent energy company primarily engaged in the exploration for, the
acquisition, development and operation of domestic crude oil and natural
gas properties. The Company's properties are principally located in Texas,
Louisiana, Mississippi, Alabama and Oklahoma.
Principles of Consolidation
---------------------------
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiary, Germany Operating Company (a Delaware
corporation). All significant intercompany accounts and transactions have
been eliminated in consolidation.
Restricted Cash
---------------
Under the Company's reserve-backed note agreements, the Company is required
to deposit certain funds in a cash collateral account at the bank, with the
bank performing as trustee. Amounts deposited in such cash collateral
accounts are available only for principal and interest payments to the note
holders.
Oil and Gas Properties
----------------------
The Company follows the successful efforts method of accounting for its
investments in oil and gas properties. Under this method, expenditures
relating to all development wells and successful exploratory wells are
capitalized and amortized on a unit-of-production basis over the life of
the related proved reserves. Cost centers for amortization purposes are
determined on a field-by-field basis. Proved oil and gas properties are
periodically assessed for impairment in value and a loss is recognized as a
part of depreciation, depletion and amortization expense when impairment
occurs.
Estimated costs of future dismantlement, restoration and abandonment are
amortized as part of depreciation, depletion and amortization expense.
Oil and gas leasehold acquisition costs and costs associated with promoting
the acquisition are capitalized when incurred. The Company periodically
assesses its unproved properties and any impairments in value are charged
to expense.
Exploratory expenses, including geological and geophysical expenses and
delay rentals for oil and gas leases, are charged to expense as incurred.
Exploratory drilling costs are initially capitalized as oil and gas
property but charged to expense if and when the well is determined not to
have proved reserves.
-9-
<PAGE>
GERMANY OIL COMPANY
Notes to Consolidated Financial Statements
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)
Other Property and Equipment
----------------------------
Other property and equipment is depreciated on the straight-line method
based upon the estimated useful lives which range from two to seven years.
Gains and losses from disposition are included in operations in the period
incurred.
Capitalized Interest
--------------------
The Company capitalized carrying costs relating to its undeveloped oil and
gas leases including interest and related financing costs. Interest of
$134,560 and related financing costs of $156,896 were capitalized in 1993.
Financing costs are being amortized using the straight-line method over the
term of the related notes and are included in other assets net of
accumulated amortization in the accompanying consolidated balance sheet.
Deferred Revenue
----------------
In connection with the acquisition of certain oil and gas properties in
December 1993, the Company sold a volumetric production payment and
overriding royalty interest for $15.6 million. The Company is required to
deliver approximately 6.9 Bcf of natural gas and 205 Mbbl of oil from the
acquired properties through August 2000 under the terms of the agreement.
The Company recognizes revenues from the prepayment as deliveries of
production are made. In addition, the Company borrowed $1.2 million which
is required to be repaid out of the net profits of the acquired properties.
Income Taxes
------------
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes". SFAS No. 109
requires an asset and liability approach to accounting for income taxes.
There was no impact on the financial position or results of operations of
the Company as a result of the change in method of accounting for income
taxes.
Natural Gas Futures Contracts
-----------------------------
The natural gas volumes pledged under the production payments have been
hedged at a fixed price of $1.955 per Mcf for the period January 1, 1994
through December 31, 1994. Gains and losses on these contracts are
recognized as the related volumes are sold based on the difference of the
fixed price and a floating price of the average of the last three days
sales price on the NYMEX.
-10-
<PAGE>
GERMANY OIL COMPANY
Notes to Consolidated Financial Statements
2. ACQUISITION OF OIL AND GAS PROPERTIES
On December 1, 1993, the Company completed the acquisition of certain oil
and gas properties from Hunt Oil Company ("Hunt") for an aggregate purchase
price of $23.4 million. The Hunt properties consist of 365 crude oil and
natural gas wells primarily located in Texas, Louisiana, Mississippi,
Alabama and Oklahoma. The acquisition was financed from the proceeds of the
sale of two non-recourse production payments to a major natural gas company
for $17.1 million. Under the terms of the first production payment, valued
at $15.6 million, the Company agreed to deliver to the creditor the
equivalent of approximately 6.9 Bcf of natural gas and 205 Mbbl of oil from
the acquired properties over a seven year period beginning November 16,
1993. The Company is responsible for all production-related costs and
certain development costs. The Company is required to repay the second
production payment, with interest at a rate of 10%, out of net profits from
the acquired properties. The acquisition increased the Company's present
value of future net revenues from proved reserves from approximately $7.3
million at December 31, 1992 to $14.435 million at December 31, 1993.
3. OIL AND GAS PRODUCING ACTIVITIES
The Company has interests in approximately 490 crude oil and natural gas
wells (of which it operates 90 wells) and has proved reserves of 10.6 Bcf
of natural gas and 867 MMbls of oil as of December 31, 1994. Set forth
below is certain information regarding the aggregate capitalized costs and
accumulated depreciation, depletion and amortization relating to oil and
gas producing activities and property acquisitions, all of which are
conducted within the United States at March 31, 1995 and December 31, 1994,
1993, and 1992:
Capitalized Costs (Oil and Gas Properties)
-----------------------------------------
<TABLE>
<CAPTION>
December 31,
March 31, ------------------------------
1995 1994 1993 1992
---------- --------- --------- --------
(In thousands)
<S> <C> <C> <C> <C>
Proved properties $25,513 $26,036 $25,221 $3,304
Unproved properties 717 715 478 -
Accumulated
depreciation,
depletion and
amortization (7,245) (6,052) (1,220) (102)
------- ------- ------- ------
$18,985 $20,699 $24,479 $3,202
======= ======= ======= ======
</TABLE>
-11-
<PAGE>
GERMANY OIL COMPANY
Notes to Consolidated Financial Statements
4. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
December 31,
March 31, --------------------------------------
1995 1994 1993 1992
----------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Reserve-backed
notes $3,432,350 $ 3,836,073 $ 3,048,333 $1,464,333
Notes payable,
bearing interest 2,452,303 2,483,925 2,760,000 515,569
Other obligations - - 428,390 -
---------- ----------- ----------- ----------
5,884,653 6,319,998 6,236,723 1,979,902
Less current
portion (3,530,414) (3,242,315) (3,475,750) (515,569)
----------- ----------- ----------- ----------
$ 2,354,239 $ 3,077,683 $ 2,760,973 $1,464,333
=========== =========== =========== ==========
</TABLE>
Aggregate maturities of long-term debt for the five years ending
December 31 are as follows:
1994 1993 1992
---------- ---------- ----------
1993 $ - $ - $ 382,000
1994 - 3,475,750 382,000
1995 3,242,315 778,750 382,000
1996 1,078,000 1,002,015 382,000
1997 1,044,666 712,083 318,333
1998 620,000 268,125 -
1999 335,017 - -
---------- ---------- ----------
$6,319,998 $6,236,723 $1,846,333
========== ========== ==========
In October 1992, the Company issued $2,000,000 of 12% senior secured notes
to fund the acquisition of certain assets and the assumption of certain
obligations of Germany Exploration Company. The notes are collateralized by
a first mortgage lien on all the oil and gas properties, including
reserves, available as of the placement of the notes, and accrue interest
at a 12% annual rate which commenced November 30, 1992. Principal payments
are paid in equal monthly installments over five years which commenced
November 30, 1992 and mature October 31, 1997. The Company may prepay the
notes, in full or in part, at any time upon the payment of the notes'
remaining face value and a premium which varies from 10% in 1993 to 2% in
1997.
-12-
<PAGE>
GERMANY OIL COMPANY
Notes to Consolidated Financial Statements
4. LONG-TERM DEBT (continued)
The notes have the benefit of an account which will be held in the name of
the Escrow Agent for the benefit of the notes into which all revenue from
the collateral properties flow. Any cash flow in excess of the minimum
balance required is used for the 1993 reserve-backed notes.
In 1993, the Company issued $1,265,000 of 12% secured notes to fund reserve
acquisitions and to pay accounts payable incurred as completion costs for
successful wells drilled in 1993. The 1993 Notes are collateralized by a
first mortgage lien or security interest covering certain oil and gas
properties, prospects and agreements and contracts that the Company is
entitled to receive an assignment of oil and gas wells, and available cash
flow from the properties pledged by the Company to secure the 1992 Notes to
the extent cash flow exceeds debt service and reserve requirements for the
Notes. The 1993 Notes accrue interest at an annual rate of 12%. Interest
payments are required to be paid monthly commencing July 31, 1993. The
Notes will be repaid in forty-eight (48) equal monthly installments
commencing September 30, 1994 and continuing through maturity of August 31,
1998. Germany may prepay the 1993 Notes at any time, in full or in part, or
at any time upon the payment of the Notes' remaining face value and a
premium which varies from 10% in 1993 to 2% in 1997.
In November 1993, the Company obtained $1,560,000 in bridge notes to enable
the Company to close the Hunt Oil property acquisition. The notes mature
December 31, 1994 and monthly interest is paid beginning January 31, 1994
at a 15% annual rate. The remaining notes and obligations accrue interest
at various annual rates, ranging from current prime to 15%, and have
various maturities from January 1994 to November 1998.
5. LEASE COMMITMENTS
The Company leased its previous office facilities in Dallas, Texas. The
term of the original Lease Agreement (the "Lease"), with extensions,
expires in 1999. In connection with the April 1995 closing of the sales
transaction (see Note 10), the Company assigned the Lease to a third party.
The Assignment of Lease, dated June 1, 1995, conveys all of the Company's
rights, title and interest in the Lease to the third party under the terms
and conditions of the Lease. The Company's annual base rental obligations
assigned to the third party for the remaining term of the Lease are as
follows:
1996 $125,100
1997 $127,185
1998 $129,270
1999 $129,270
The Company and the third party are jointly and severally liable to the
landlord under the terms of the Consent to Assignment Agreement with the
landlord.
-13-
<PAGE>
GERMANY OIL COMPANY
Notes to Consolidated Financial Statements
6. STOCKHOLDERS' EQUITY
Preferred Stock
---------------
At March 31, 1995, 11,800 shares of convertible, voting, redeemable, $0.01
par value preferred stock have been authorized, issued and outstanding.
These shares have a liquidation preference of $10.00 per share.
The redeemable preferred shares are entitled to a partially cumulative
dividend of $15 per year on its liquidation value. The Company declared and
issued preferred stock dividends of $463,350 at December 31, 1993 and
$51,650 through March 31, 1995.
Each preferred share is entitled to one vote on all matters submitted to
the Company's shareholders. Any proposal to issue additional preferred or
common stock or to amend the Company's Articles of Incorporation requires a
two-thirds vote of the then outstanding preferred and common stock. In
addition, the Company's common shareholders have agreed to vote in favor of
the Company's liquidation or other disposition of the Company's assets if
at any time between March 31, 1994, and March 31, 1995, a majority of the
preferred shareholders vote during a period in which at least two quarterly
preferred stock dividends have accumulated and remain unpaid, in favor of
the liquidation or other disposition of the Company or its assets.
Subsequent to December 31, 1993, the Company presented a proxy to the
existing preferred and common shareholders and received a two-thirds vote
from both groups to amend the Company's Articles of Incorporation and the
terms of the existing preferred stock. Following is a summary of the
revised terms:
. Removed restriction on issuance of additional securities.
. Removed right to vote to liquidate the Company from March 31, 1994 to
March 31, 1995 if the Company is not current on less than two
quarters of preferred dividends. In a liquidation, preferred holders
would only receive original investment plus accumulated dividends.
. Change original redemption of 1/8th of preferred from March 31, 1994
to May 31, 1994.
. Allow Company to redeem preferred stock regardless of its
consolidated tangible net worth.
. Authorize an increase in the authorized shares by 500,000 common
shares and 1,000,000 preferred shares.
. Added a 50:1 conversion to common stock option.
-14-
<PAGE>
GERMANY OIL COMPANY
Notes to Consolidated Financial Statements
6. STOCKHOLDERS' EQUITY (continued)
Common Stock
------------
In July 1993, the Company's shareholders voted to increase the authorized
shares of common stock from 25,000 to 2,000,000. In return, each existing
shareholder received 40 shares for each share currently owned. The par
value remained $.01 per share. At March 31, 1995, 988,600 such shares were
issued and outstanding.
During 1993 the Company issued 111,900 shares of common stock in settlement
of certain account payables aggregating $559,735. In addition, the Company
issued 75,000 shares in exchange for working interest in various wells
aggregating $370,000. The Company also issued 175,000 shares of common
stock in connection with the acquisition of the Hunt Oil properties,
aggregating $1,135,470. These shares were issued at management's best
estimate of their fair value as the stock of the Company's not publicly
traded. The effects of these noncash transactions are all excluded from the
accompanying consolidated statement of cash flows.
Stock Options and Warrants
--------------------------
In July 1993, the Company's stockholders approved the Long-Term Incentive
Plan (the "Incentive Plan") for the Company's management including
officers, directors and managerial employees. The Incentive Plan authorizes
the granting of non-qualified stock options to purchase common stock of the
Company and the granting of restricted stock to key executives of the
Company. Shares are valued at the most current price at which the Company's
stock has been sold prior to the grant date.
A provision to recognize compensation expense for the restricted stock
grants is made ratably over the vesting period. Compensation expense
recognized for restricted stock grants was $375,000 for the year ended
December 31, 1993.
7. INCOME TAXES
The Company has no current federal income tax liability. Net operating
losses were incurred for financial and income tax reporting purposes for
the years 1992, 1993, 1994 and the three months ended March 31, 1995.
The Company's temporary differences between the financial reporting and tax
basis of its assets and liabilities are offset against unrecorded net
operating loss carryforward tax benefits.
The Company's net operating loss carryforwards expire in varying amounts
from 2004 to 2008.
-15-
<PAGE>
GERMANY OIL COMPANY
Notes to Consolidated Financial Statements
8. RELATED PARTY TRANSACTIONS
In connection with the acquisition of properties from Germany Exploration
("GX") in 1992, the Company agreed to pay an officer of GX a consulting fee
of $5,000 per month through October 1995. This obligation has been recorded
as a liability in the Company's financial statements.
During 1993, two members of the Company's board of directors were retained
as its investment banker. These members, who office with the Company, were
paid approximately $239,000 in fees and commissions during 1993.
9. OIL AND GAS RESERVES INFORMATION (UNAUDITED)
The estimates of proved oil and gas reserves utilized in the preparation of
the financial statements were estimated by independent reserve engineers.
The Company emphasizes that reserve estimates of new discoveries or
undeveloped properties are more imprecise than those of producing oil and
gas properties. Accordingly, these estimates are expected to change as
future information becomes available. All of the Company's reserves are
located onshore the continental United States.
-16-
<PAGE>
GERMANY OIL COMPANY
Notes to Consolidated Financial Statements
9. OIL AND GAS RESERVES INFORMATION (UNAUDITED) (continued)
The following unaudited table sets forth proved oil and gas reserves at
December 31, 1992, 1993 and 1994.
<TABLE>
<CAPTION>
1994 1993 1992
---------------------- ---------------------- --------------------
(Bbls) (Mcf) (Bbls) (Mcf) (Bbls) (Mcf)
--------- ----------- --------- ----------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Proved reserves:
Beginning of year 795,542 16,077,040 468,200 5,728,200 51,993 1,798,881
Revisions of previous estimates 383,060 (1,901,227) (234,439) (2,189,450) - -
Extensions and discoveries - - - - 337,658 2,158,448
Purchases of minerals in place - - 597,787 13,125,222 87,549 1,870,871
Sales of minerals in place - - - - - -
Production (236,750) (2,246,425) (36,006) (586,932) (9,000) (100,000)
-------- ---------- -------- ---------- ------- ---------
End of year (1) 941,852 11,929,388 795,542 16,077,040 468,200 5,728,200
======== ========== ======== ========== ======= =========
Proved developed reserves:
Beginning of year 747,998 14,591,116 132,900 2,401,900 38,744 1,707,996
======== ========== ======== ========== ======= =========
End of year 867,449 10,643,220 747,998 14,591,116 132,900 2,401,900
======== ========== ======== ========== ======= =========
</TABLE>
(1) (Includes 204,544 Bbls of oil and 6,874,180 Mcf of gas and 95,963 Bbls
of oil and 4,564,775 Mcf of gas production scheduled to be delivered
to a major natural gas company under a production payment in 1993 and
1994, respectively.)
Standardized Measure of Discounted Future Net Cash Flows Relating to Proved
---------------------------------------------------------------------------
Reserves:
--------
<TABLE>
<CAPTION>
December 31, December 31, December 31,
1994 1993 1992
------------ ------------ ------------
(In thousands)
<S> <C> <C> <C>
Future cash flows $32,774 $49,435 $20,277
Future production costs
and development 20,284 21,566 3,834
------- ------- -------
Future net cash flows 12,490 27,869 16,443
10% discount factor 2,148 7,538 6,227
Discounted income taxes 2,642 5,896 2,872
------- ------- -------
Standardized measure of
discounted future net cash flows $ 7,700 $14,435 $ 7,344
======= ======= =======
</TABLE>
-17-
<PAGE>
GERMANY OIL COMPANY
Notes to Consolidated Financial Statements
10. CHANGE OF OWNERSHIP
Pursuant to an Agreement and Plan of Merger dated as of March 31, 1995 (the
"Merger Agreement"), LaTex Resources, Inc. ("LaTex"), acquired all of the
issued and outstanding capital stock of Germany Oil Company, ("Old GOC"),
pursuant to a merger (the "Merger") of Old GOC with and into LRI
Acquisition Corp., a newly-formed Delaware corporation (the "Surviving
Subsidiary Corporation") and a wholly-owned subsidiary of LaTex.
Pursuant to the Merger, the Surviving Subsidiary Corporation changed its
name to Germany Oil Company ("New GOC"). The effective date (the "Effective
Date") of the Merger was April 12, 1995. The transaction was accounted for
by LaTex using the purchase method of accounting and utilizing push-down
accounting.
By virtue of the Merger, (i) each share of Old GOC common stock outstanding
was converted into shares of LaTex's Common Stock at the rate of 0.160029
of a share of the LaTex Common Stock for each one share of Old GOC common
stock and (ii) each share of Old GOC Original Issue Preferred Stock was
converted into shares of the LaTex Series A Convertible Preferred Stock
("Series A Preferred Stock") at the rate of 10 shares of Series A Preferred
Stock for each one share of Old GOC Original Issue Preferred Stock. As a
result, a total of 250,000 shares of the LaTex's common stock were issued
to the former common stockholders of Old GOC and a total of 11,800 shares
of the LaTex's Series A Preferred Stock were issued to the former preferred
stockholders of Old GOC. The ratio of the number of shares received by the
former stockholders of Old GOC was determined through arms length
negotiations between the Chairman of the Board and President of LaTex and
the President of Old GOC.
-18-
<PAGE>
LATEX RESOURCES, INC.
ACCOUNTANT'S REPORT
and
GERMANY OIL COMPANY
PRO FORMA COMBINED
FINANCIAL STATEMENTS
July 31, 1994
and
THE SIX MONTHS ENDED
January 31, 1995
<PAGE>
BRISCOE . ROBINSON CO.
CERTIFIED PUBLIC ACCOUNTANTS
Report of Independent Public Accountant's on
--------------------------------------------
Examination of Pro Forma Financial Information
----------------------------------------------
To the Board of Directors and Stockholders
of LaTex Resources, Inc.
We have examined the pro forma adjustments reflecting the transactions described
in Note 1 and the application of those adjustments to the historical amounts in
the accompanying pro forma consolidated balance sheet of LaTex Resources, Inc.
as of July 31, 1994, and the pro forma consolidated statement of operations for
the year then ended and the six months ended January 31, 1995. The July 31,
1994 historical consolidated financial statements are derived from the
historical financial statements of LaTex Resources, Inc., which were audited by
us. The historical statement of operations for the six months ended January 31,
1995 is derived from unaudited financial statements prepared by the Company.
The unaudited financial statements are included in the January 31, 1995 10-Q
filing and are included herein by this reference. Such pro forma adjustments
are based upon management's assumptions described in Notes 1, 2, and 3. Our
examination was made in accordance with standards established by the American
Institute of Certified Public Accountants and, accordingly, included such
procedures as we considered necessary in the circumstances.
The objective of this pro forma financial information is to show what the
significant effects on the historical financial information might have been had
the transactions occurred at August 1, 1993 and July 31, 1994. However, the pro
forma consolidated financial statements are not necessarily indicative of the
results of operations or related effects on financial position that would have
been attained had the above-mentioned transaction actually occurred earlier.
In our opinion, management's assumptions provide a reasonable basis for
presenting the significant effects directly attributable to the above-mentioned
transactions described in the Notes to Pro Forma Combined Financial Statements,
the related pro forma adjustments give appropriate effect to those assumptions,
and the pro forma column reflects the proper application of those adjustments to
the historical financial statement amounts in the pro forma consolidated balance
sheet as of July 31, 1994, and the pro forma consolidated statements of
operations for the year then ended and the six months ended January 31, 1995.
/s/ BRISCOE ROBINSON CO.
BRISCOE ROBINSON CO.
Certified Public Accountants
November 10, 1995
Tulsa, Oklahoma
<PAGE>
LATEX RESOURCES, INC.
Pro Forma Combined Balance Sheet
July 31, 1994
<TABLE>
<CAPTION>
Company Germany Oil New Acquisition Eliminations Company
Historical Company Credit of ENRON Exchange & Push Down Combined
ASSETS Consolidation Acquisitions Facility Override Offer Accounting Pro Forma
------------- ------------ ----------- ------------- ------------- ------------- -----------
Notes 1 and 6 Note 2
<S> <C> <C> <C> <C> <C> <C> <C>
Current assets:
Cash $ 208,399 $ 42,546 $14,176,190 $ (8,900,000) $ (1,742,294) $ - $ 3,784,841
Accounts receivable -
related parties 549,314 1,620 - - - - 550,934
Accounts receivable 1,774,853 1,055,605 - - - - 2,830,458
Accounts receivable -
other 2,108,351 - - - - - 2,108,351
Inventories 221,943 - - - - - 221,943
Other current assets 71,074 - - - - - 71,074
Deferred loan costs -
current 66,757 - - - - - 66,757
Restricted cash - 4,470 - - - - 4,470
----------- ----------- ------------ ------------- ------------- ------------- -----------
Total current assets 5,000,691 1,104,241 14,176,190 (8,900,000) (1,742,294) - 9,638,828
----------- ----------- ------------ ------------- ------------- ------------- -----------
Property, plant, and
equipment, at cost:
Oil and gas properties
(using successful
efforts method) 16,208,494 25,513,206 1,758,810 (1,602,996) (58,101) (10,888,139) 30,931,274
Other 898,905 135,289 - - - - 1,034,194
Unproved properties - 717,404 - - - - 717,404
----------- ----------- ------------ ------------- ------------- ------------- -----------
17,107,399 26,365,899 1,758,810 (1,602,996) (58,101) (10,888,139) 32,682,872
Less accumulated
depreciation
and depletion 4,030,164 7,274,033 - - - 7,274,033 4,030,164
----------- ----------- ------------ ------------- ------------- ------------- -----------
Net property, plant, and
equipment 13,077,235 19,091,866 1,758,810 (1,602,996) (58,101) (3,614,106) 28,652,708
----------- ----------- ------------ ------------- ------------- ------------- -----------
Other assets:
Goodwill 44,753 - - - - 9,929,199 9,973,952
Deposits and other assets 125,287 411,797 - - - - 537,084
Reorganization cost, net 131,133 - - - - - 131,133
Investments - other 2,437,968 - - - - - 2,437,968
Deferred tax asset 308,400 - - - - - 308,400
Deferred loan costs, net
of current portion 133,514 - 450,000 - - - 583,514
----------- ----------- ------------ ------------- ------------- ------------- -----------
Total other assets 3,181,055 411,797 450,000 - - 9,929,199 13,972,051
----------- ----------- ------------ ------------- ------------- ------------- -----------
TOTAL ASSETS $21,258,981 $20,607,904 $ 16,385,000 $(10,502,996) $ (1,800,395) $ 6,315,093 $52,263,587
=========== =========== ============ ============= ============= ============= ===========
</TABLE>
See accountant's report. The accompanying notes are an integral part of these
financial statements.
-2-
<PAGE>
LATEX RESOURCES, INC.
Pro Forma Combined Balance Sheet
July 31, 1994
<TABLE>
<CAPTION>
Company Germany Oil New Acquisition Eliminations Company
LIABILITIES and Historical Company Credit of ENRON Exchange & Push Down Combined
STOCKHOLDERS' EQUITY Consolidation Acquisitions Facility Override Offer Accounting Pro Forma
------------- ------------ ------------- ----------- ------------ ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Current liabilities:
Accounts payable $ 2,323,885 $ 5,763,574 $ - $ - $ - $ - $ 8,087,459
Accounts payable - other 566,522 - - - - - 566,522
Accrued expenses payable 173,130 484,220 - - - - 657,350
Current portion of
long-term debt 2,908,000 3,530,414 692,000 - (3,530,414) - 3,600,000
Notes payable stockholder 140,000 - - - - - 140,000
Notes payable - - - - 87,988 - 87,988
----------- ------------ ------------ ------------ ----------- ------------ -----------
Total current
liabilities 6,111,537 9,778,208 692,000 - (3,442,426) - 13,139,319
----------- ------------ ------------ ------------ ----------- ------------ -----------
Noncurrent liabilities:
Deferred revenue - 14,202,996 - (14,202,996) - - -
Long-term debt, net of
current portion 4,467,000 2,354,239 15,693,000 - (2,354,239) - 20,160,000
Deferred income taxes 400,508 - - - - - 400,508
Gas balancing - 443,023 - - - - 443,023
----------- ------------ ------------ ------------ ----------- ------------ -----------
Total long-term
liabilities 4,867,508 17,000,258 15,693,000 (14,202,996) (2,354,239) - 21,003,531
----------- ------------ ------------ ------------ ----------- ------------ -----------
Total liabilities 10,979,045 26,778,466 16,385,000 (14,202,996) (5,796,665) - 34,142,850
----------- ------------ ------------ ------------ ----------- ------------ -----------
Stockholders' equity
Preferred stock - 1,180,000 - 3,700,000 3,996,270 (1,180,000) 7,696,270
Common stock 184,802 9,886 - - - (7,386) 187,302
Additional paid-in capital 8,692,456 3,544,768 - - - (3,402,737) 8,834,487
Treasury stock (275,000) - - - - - (275,000)
Retained earnings
(deficit) 1,677,678 (10,905,216) - - - 10,905,216 1,677,678
----------- ------------ ------------ ------------ ----------- ------------ -----------
Total stockholders'
equity 10,279,936 (6,170,562) - 3,700,000 3,996,270 6,315,093 18,120,737
----------- ------------ ------------ ------------ ----------- ------------ -----------
TOTAL LIABILITIES and
STOCKHOLDERS' EQUITY $21,258,981 $ 20,607,904 $16,385,000 $(10,502,996) $(1,800,395) $ 6,315,093 $52,263,587
=========== ============ ============ ============ =========== ============ ===========
</TABLE>
See accountant's report. The accompanying notes are an integral part of these
financial statements.
-3-
<PAGE>
LATEX RESOURCES, INC.
Pro Forma Combined Statement of Operations
For the Year Ended July 31, 1994
<TABLE>
<CAPTION>
Company Germany Oil Company
Historical Company Combined
Consolidation Acquisition Pro Forma
-------------- ------------- -------------
Note 2
<S> <C> <C> <C>
Revenues:
Oil and gas revenue $ 8,703,100 $ 7,747,288 $16,450,388
Crude oil and gas marketing 2,780,543 - 2,780,543
Lease operations and management fees 601,723 124,438 726,161
----------- ----------- -----------
Total operating income 12,085,366 7,871,726 19,957,092
----------- ----------- -----------
Operating expenses:
Crude oil and gas sold 4,953,410 - 4,953,410
Lease operating expense 2,216,294 3,348,815 5,565,109
General and administrative 2,571,661 150,000 2,721,661
Depreciation, depletion, and amortization 2,213,823 4,000,000 6,213,823
Interest 598,335 1,745,000 2,343,335
----------- ----------- -----------
Total operating expense 12,553,523 9,243,815 21,797,338
----------- ----------- -----------
Net operating income (loss) (468,157) (1,372,089) (1,840,246)
Other income:
Equity in earnings (losses) of joint ventures
and unconsolidated subsidiary (216,998) - (216,998)
Gain on sale of assets 392,592 - 392,592
Loss on asset write down (222,918) - (222,918)
Interest income 17,046 - 17,046
----------- ----------- -----------
Net income (loss) before income taxes (498,435) (1,372,089) (1,870,524)
Income taxes - current (30,933) - (30,933)
Income taxes - deferred (44,161) - (44,161)
----------- ----------- -----------
Net income (loss) $ (423,341) $(1,372,089) $(1,795,430)
=========== =========== ===========
Earnings (loss) per share $ (.02) $ (5.49) $ (.10)
=========== =========== ===========
Weighted average number of shares outstanding 17,434,159 250,000 17,684,159
=========== =========== ===========
</TABLE>
See accountant's report. The accompanying notes are an integral part of these
financial statements.
-4-
<PAGE>
LaTEX RESOURCES, INC.
Pro Forma Combined Statement of Operations
For the Six Months Ended January 31, 1995
<TABLE>
<CAPTION>
Company Germany Oil Company
Historical Company Combined
Consolidation Acquisition Pro Forma
-------------- ------------ -------------
Note 2
<S> <C> <C> <C>
Revenues:
Oil and gas revenue $ 3,417,772 $3,576,193 $ 6,993,965
Crude oil and gas marketing 765,980 - 765,980
Lease operations and management fees 174,286 870,969 1,045,255
----------- ---------- -----------
Total operating income 4,358,038 4,447,162 8,805,200
----------- ---------- -----------
Operating expenses:
Crude oil and gas sold 493,618 - 493,618
Lease operating expense 2,112,230 1,887,453 3,999,683
General and administrative 1,316,126 75,000 1,391,126
Depreciation, depletion, and amortization 911,318 2,000,000 2,911,318
Interest 405,297 872,500 1,277,797
----------- ---------- -----------
Total operating expense 5,238,589 4,834,953 10,073,542
----------- ---------- -----------
Net operating income (loss) (880,551) (387,791) (1,268,342)
Other income:
Equity in earnings (losses) of joint ventures
and unconsolidated subsidiary (197,026) - (197,026)
Gain on sale of assets 69,200 - 69,200
Interest income 46,938 - 46,938
----------- ---------- -----------
Net income (loss) before income taxes (961,439) (387,791) (1,349,230)
Income taxes - current (247,870) - (247,870)
Income taxes - deferred - - -
----------- ---------- -----------
Net income (loss) $ (713,569) $ (387,791) $(1,101,360)
=========== ========== ===========
Earnings (loss) per share $ (.04) $ (1.55) $ (.06)
=========== ========== ===========
Weighted average number of shares outstanding 17,522,195 250,000 17,773,195
=========== ========== ===========
</TABLE>
See accountant's report. The accompanying notes are an integral part of these
financial statements.
-5-
<PAGE>
LATEX RESOURCES, INC.
Notes to Pro Forma Combined
Financial Statements
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Summary of Pro Forma Transactions - The July 31, 1994 pro forma combined
---------------------------------
balance sheet of the Company has been prepared assuming the Company
consummated the acquisition of Germany Oil Company on July 31, 1994 along
with other related transactions as described in Note 2. The pro forma
combined statements of operations for the year ended July 31, 1994 and the
six months ended January 31, 1995 have been prepared assuming the Company
consummated the transaction on August 1, 1993.
2. ACQUISITION OF GERMANY OIL COMPANY
These adjustments give effect to the acquisition, at the beginning of the
period, of Germany Oil Company, an ENRON override, an exchange offer and
the establishment of a new credit facility;
Acquisition of Germany Oil Company - Pursuant to an Agreement and Plan of
----------------------------------
Merger dated as of March 31, 1995 (the "Merger Agreement"), LaTex
Resources, Inc. (the "Company"), acquired all of the issued and outstanding
capital stock of Germany Oil Company, ("Old GOC"), pursuant to a merger
(the "Merger") of Old GOC with and into LRI Acquisition Corp., a newly-
formed Delaware corporation (the "Surviving Subsidiary Corporation") and a
wholly-owned subsidiary of the Company.
Pursuant to the Merger, the Surviving Subsidiary Corporation changed its
name to Germany Oil Company ("New GOC"). The effective date (the "Effective
Date") of the Merger was April 12, 1995. The transaction will be accounted
for by the Company using the purchase method of accounting.
By virtue of the Merger, (i) each share of Old GOC common stock outstanding
was converted into shares of the Company's Common Stock at the rate of
0.160029 of a share of the Company's Common Stock for each one share of Old
GOC common stock and (ii) each share of Old GOC Original Issue Preferred
Stock was converted into shares of the Company's Series A Convertible
Preferred Stock ("Series A Preferred Stock") at the rate of 10 shares of
Series A Preferred Stock for each one share of Old GOC Original Issue
Preferred Stock. As a result, a total of 250,000 shares of the Company's
common stock were issued to the former common stockholders of Old GOC and a
total of 11,800 shares of the Company's Series A Preferred Stock were
issued to the former preferred stockholders of Old GOC. The ratio of the
number of shares received by the former stockholders of Old GOC was
determined through arms length negotiations between the Chairman of the
Board and President of the Company and the President of Old GOC.
-6-
<PAGE>
LATEX RESOURCES, INC.
Notes to Pro Forma Combined
Financial Statements
2. ACQUISITION OF GERMANY OIL COMPANY (continued)
The purpose of the Merger was to effect the acquisition by the Company of
Old GOC and its assets, which include significant producing oil and gas
properties, pursuant to a forward triangular merger. By virtue of the
Merger, New GOC is now engaged in the business in which Old GOC was engaged
prior to the Merger, which is the exploration for and production of oil and
gas from properties in which it owns an interest.
The preceding statements with respect to the Merger Agreement are a brief
summary thereof. While the summary is accurate, it does not purport to be
complete and reference is made to the Merger Agreement for a complete
statement of the Merger. A copy of the Merger Agreement is filed as an
Exhibit to the Current Report on Form 8-K and is incorporated herein by
this reference.
Acquisition of ENRON Override - On the Effective Date of the Merger and
-----------------------------
pursuant to a Purchase and Sale Agreement dated March 30, 1995 ("ENRON
Purchase Agreement") between the Company and ENRON Reserve Acquisition
Corp. and its Affiliates, the Company acquired a volumetric production
payment and overriding royalty interest and all related contract rights,
mortgages, vendor's liens and security interests (collectively, the "ERAC
Interests") in certain Old GOC oil and gas properties. The purchase price
paid by the Company to ERAC for the ERAC Interests was $8,900,000 in cash
and 370,000 shares of the Company's Series B Senior Convertible Preferred
Stock ("Series B Preferred Stock").
The preceding statements with respect to the ENRON Purchase Agreement are a
brief summary thereof. While the summary is accurate, it does not purport
to be complete and reference is made to the ENRON Purchase Agreement for a
complete statement of LaTex/GOC Acquisition's purchase of the ENRON
Interests. A copy of the ENRON Purchase Agreement is filed as an Exhibit to
the Current Report on Form 8-K and is incorporated herein by this
reference.
Exchange Offer - In connection with the Merger, the Company conducted an
--------------
exchange offer (the "Exchange Offer") pursuant to which the Company offered
to acquire any and all of the outstanding Old GOC indebtedness ("Old GOC
Notes") represented by Old GOC Reserve Backed Notes and certain secured and
unsecured 1993 and 1994 Promissory Notes, in exchange for cash, shares of
the Company's Series A Preferred Stock and, in certain instances,
indebtedness of the Company.
-7-
<PAGE>
LATEX RESOURCES, INC.
Notes to Pro Forma Combined
Financial Statements
2. ACQUISITION OF GERMANY OIL COMPANY (continued)
Pursuant to the Exchange Offer, on the Effective Date of the Merger, the
Company acquired (or paid off) Old GOC Notes in the principal amount of
approximately $5,826,514 in exchange for the payment of a total of
$1,742,294 in cash, 399,627 shares of Series A Preferred Stock and $87,998
in debt.
New Credit Facility - The acquisition of Old GOC, including the cash
-------------------
portion of the purchase price paid by the Company for the ERAC Interests
and the cash portion of the consideration paid by the Company pursuant to
the Exchange Offer, were financed through borrowings under a new credit
facility pursuant to a Credit Agreement dated as of March 31, 1995 (the
"Credit Agreement") between Bank of America, NT and SA ("BANK") and the
Company's wholly-owned subsidiaries, LaTex Petroleum Corporation ("LaTex
Petroleum"), New GOC and LaTex/GOC Acquisition ("Borrowers"). In addition,
under the new credit facility the Company and the Borrowers refinanced the
existing indebtedness to the Company's former principal lender.
Under the Credit Agreement, the Bank agreed to make loans to the Borrowers
(i) in the amount of $23,000,000 (the "Acquisition Loan") for the purposes
of refinancing the Borrower's existing indebtedness, partially funding the
acquisition of Old GOC and the ERAC Interests and for working capital, and
(ii) in the amount of $2,000,000 (the "Development Loan") for additional
approved development drilling, workover or recompletion work on oil and gas
properties.
The preceding statements with respect to the Credit Agreement are a brief
summary thereof. While the summary is accurate, it does not purport to be
complete and reference is made to the Credit Agreement for a complete
statement of the Credit Agreement. A copy of the Credit Agreement is filed
as an Exhibit to the Current Report on Form 8-K and is incorporated herein
by this reference.
The historical results of operations of Germany Oil Company for the year
ended July 31, 1994 and the six months ended January 31, 1995 are derived
from the audited financial statements of Germany Oil Company for the years
ended December 31, 1993 and 1994 and the three months ended March 31, 1995.
-8-
<PAGE>
LATEX RESOURCES, INC.
Notes to Pro Forma Combined
Financial Statements
2. ACQUISITION OF GERMANY OIL COMPANY (continued)
The pro forma depreciation, depletion and amortization expense has been
adjusted by computing the Company's pro forma cost of proved oil and gas
properties subject to amortization and pro forma production and proved
reserves, giving effect to the purchase of the Acquisition Properties, and
comparing such computation with historical amounts. The Company's pro forma
depletion and amortization is calculated on the units of production method
based upon pro forma production and reserve estimates provided by
management. Depreciation is calculated on the straight-line method over the
pro forma estimated useful lives of the respective assets. Interest expense
has been calculated assuming the acquisition funds are advanced under the
new credit facility at a 9.6% rate from August 1, 1993 to the date of
acquisition.
The estimated depreciable life of property and equipment is seven years.
The following tables set forth the pro forma adjustments to the historical
results of operations of the Germany Oil Company Acquisition as if Germany
Oil Company was acquired August 1, 1993. The revenue, expenses, and net
income shown are for the year ended July 31, 1994 and the period August 1,
1994 to January 31, 1995.
-9-
<PAGE>
LATEX RESOURCES, INC.
Notes to Pro Forma Combined
Financial Statements
2. GERMANY OIL COMPANY ACQUISITION (continued)
Germany Oil Company
For the Year Ended July 31, 1994
<TABLE>
<CAPTION>
Germany Oil
Pro Forma Company
Historical Adjustments Acquisition
------------- ------------ ------------
<S> <C> <C> <C>
Revenues:
Oil and gas sales $ 7,747,288 $ - $ 7,747,288
Lease operation and
management fees 124,438 - 124,438
----------- ----------- -----------
Total operating income 7,871,726 - 7,871,726
----------- ----------- -----------
Costs and expenses:
Lease operating 3,348,815 - 3,348,815
Dry hole cost and
lease abandonment 2,662,528 (2,662,528) -
General and administrative 2,137,085 (1,987,085) 150,000
Depreciation, depletion and
amortization 3,899,457 100,543 4,000,000
Interest 1,786,887 (41,887) 1,745,000
Bad debts 30,000 (30,000) -
----------- ----------- -----------
Total costs and
expenses 13,864,772 (4,620,957) 9,243,815
----------- ----------- -----------
Net income from operations (5,993,046) 4,620,957 (1,372,089)
Other income:
Interest 19,402 (19,402) -
Gain on sale of assets 371,209 (371,209) -
----------- ----------- -----------
Net income (loss) before
income taxes (5,602,435) 4,230,346 (1,372,089)
Provision for
income taxes - - -
----------- ----------- -----------
Net income (loss) $(5,602,435) $ 4,230,346 $(1,372,089)
=========== =========== ===========
</TABLE>
-10-
<PAGE>
LATEX RESOURCES, INC.
Notes to Pro Forma Combined
Financial Statements
2. GERMANY OIL COMPANY ACQUISITION (continued)
Germany Oil Company Acquisition Properties
For the Six Months Ended January 31, 1995
<TABLE>
<CAPTION>
Germany Oil
Company
Acquisition
Historical Adjustments Properties
------------ ------------- ------------
<S> <C> <C> <C>
Revenues:
Oil and gas sales $ 3,576,193 $ - $3,576,193
Lease operations and
management fees 870,969 - 870,969
----------- ----------- ----------
Total operating income 4,447,162 - 4,447,162
----------- ----------- ----------
Costs and expenses:
Lease operating 1,887,453 - 1,887,453
Dry hole and lease
abandonment 594,551 (594,551) -
General and administrative 1,162,807 (1,087,807) 75,000
Depreciation, depletion and
amortization 2,429,851 (429,851) 2,000,000
Interest 1,167,860 (295,360) 872,500
Bad debts 19,064 (19,064) -
----------- ----------- ----------
Total costs and expenses 7,261,586 (2,426,633) 4,834,953
----------- ----------- ----------
Net income (loss) from
operations (2,814,424) 2,426,633 (387,791)
Other income:
Interest 23,842 (23,842)
Gain on sale 21,872 (21,872) -
----------- ----------- ----------
Income (loss) before income
taxes (2,768,710) 2,380,919 (387,791)
Provision for deferred income
taxes - - -
----------- ----------- ----------
Net income (loss) $(2,768,710) $ 2,380,919 $ (387,791)
=========== =========== ==========
</TABLE>
-11-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MARCH 31,
1995/DECEMBER 31, 1994 AUDIT AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 3-MOS YEAR
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1994
<PERIOD-START> JAN-01-1995 JAN-01-1994
<PERIOD-END> MAR-31-1995 DEC-31-1994
<CASH> 42,546 66,576
<SECURITIES> 0 0
<RECEIVABLES> 1,055,605 1,290,956
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 1,104,241 1,647,890
<PP&E> 26,365,899 26,887,295
<DEPRECIATION> 7,274,033 6,074,823
<TOTAL-ASSETS> 20,607,904 22,497,159
<CURRENT-LIABILITIES> 9,778,208 9,877,849
<BONDS> 0 0
<COMMON> 9,886 9,886
1,180,000 1,180,000
0 0
<OTHER-SE> (10,905,216) (9,965,981)
<TOTAL-LIABILITY-AND-EQUITY> 20,607,904 22,497,159
<SALES> 2,054,051 8,998,725
<TOTAL-REVENUES> 2,202,801 9,844,054
<CGS> 968,433 4,412,343
<TOTAL-COSTS> 1,026,102 4,987,671
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 19,064
<INTEREST-EXPENSE> 564,392 2,302,174
<INCOME-PRETAX> (939,235) (4,160,439)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (939,235) (4,160,439)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (939,235) (4,160,439)
<EPS-PRIMARY> (95.01) (420.84)
<EPS-DILUTED> (95.01) (420.84)
</TABLE>
