U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB/A1
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO .
------ ------
Commission File No. 0-21472
AMERICAN RESOURCES OF DELAWARE, INC.
(Name of small business issuer in its charter)
DELAWARE 86-0713506
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
160 MORGAN STREET, P. O. BOX 87
VERSAILLES, KENTUCKY 40383
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: 606-873-5455
Check whether the issuer: (1) filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 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 xx NO
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APPLICABLE ONLY TO ISSUERS INVOLVED IN
BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS
Check whether the issuer has filed all documents and reports
required to be filed by Section 12, 13 or 15(d) of the Exchange
Act after the distribution of securities under a plan confirmed
by a court.
YES xx NO
------ ------
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the
Issuer's classes of common equity, as of the last practicable
date:
On June 30, 1996, 6,335,818 shares of the Registrant's
Common Stock, par value $.00001 per share, were issued and
outstanding, and 268,851 shares of the Registrant's Series 1993
8% Convertible Preferred Stock were issued and outstanding.
Transitional Small Business Disclosure Format (check one):
Yes ; No xx .
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<PAGE>
AMERICAN RESOURCES OF DELAWARE, INC.
FORM 10-QSB/A1
FOR THE QUARTER ENDED JUNE 30, 1996
INDEX
Page
Number
------
PART I - FINANCIAL INFORMATION 1
Item 1 - Financial Statements
Introduction to the Financial Statements 1
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations 1
PART II - OTHER INFORMATION
Item 3 - Exhibits and Reports on Form 8-K 8
Signature 9
ii
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
NOT AMENDED.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Item 2 is amended to read as follows:
RECENT DEVELOPMENTS
On October 1, 1994, the Company acquired a gas pipeline and
certain related assets from Petroleum Exploration and
Transmission, Inc. (the "PXT Pipeline"), a pipeline system
located in Laurel and Clay Counties, Kentucky. The PXT Pipeline
consists of approximately fifty (50) miles of gathering and
transmission pipeline, related equipment, and interconnects with
four intrastate and interstate pipelines. It also consists of
production ownership, leases, thirty (30) existing residential
home customer retail markets and one wholesale market. The PXT
Pipeline provided the Company with additional direct access to
Delta Natural Gas Co.'s pipeline, Columbia Gas Transmission's KA-
1 pipeline, and new interconnects with Somerset Gas and Tranex.
These new interconnects provided the Company with access to new
markets for retail and wholesale gas sale.
Initially, the Company had intended to connect its Gausdale
and Wofford fields to the PXT Pipeline in order to eliminate
problems delivering gas to Columbia Gas Transmission ("TCo"),
such problems having previously occurred primarily during the
winter months. In addition, the Company estimated that there
would be a significant savings in transportation expenses.
However, a significant capital expenditure was also required to
connect the system. Management determined that there were other
alternatives which might prove to be more cost beneficial and,
therefore, effectuated an alternative transportation route to TCo
through Wiser Oil & Gas Company ("Wiser"). By connecting the
Wofford and Gausdale fields and installing two interconnects from
the Gausdale field to Wiser's facilities, the Company was able to
alleviate the majority of the winter delivery problems it had
previously experienced for a substantially reduced capital
expenditure while also effectuating a 22% savings in
transportation costs for the gas being delivered via the Wiser
facilities.
On February 26, 1996, the Company acquired assets from AKS
Energy Corporation ("AKS") consisting of more than 100 miles of
gathering and transmission pipeline and related equipment,
approximately 50,000 acres of developed and undeveloped leases,
and net revenue interest ownership in approximately 155 producing
wells containing natural gas reserves of approximately 7.7
billion cubic feet ("BCF") net to the Company. The assets are
located in the Appalachian region in Whitley, McCreary and Clay
Counties, Kentucky, and in the State of Tennessee. The AKS
pipelines provide the Company with additional direct
interconnects with Delta Natural Gas, Columbia Gas Transmission's
KA-1 pipeline and Somerset Gas as well as a new interconnection
with Citizens Gas Utility. The Company also entered into an
agreement to participate with AKS in the joint development of
leases in Southeastern Kentucky gas fields wherein the Company
will have the right to earn 50% of AKS's remaining 40,000
undeveloped acres.
In April, 1996, the Company entered into agreements with two
individuals, one of whom is a director of the Company. Under the
agreements, the individuals each paid to the Company $250,000 in
exchange for the right to participate on a pro-rata basis in a
$6,500,000 promissory note (which bears interest at 22%), as
amended, due from Century (the "Century Note"). The agreement
allowed the individuals to receive a combined payment of $500,000
plus interest at 22% from the Century Note repayment. The
agreements assigned the payments from the portion of the Century
Note which was not pledged to the Company's primary lender. The
proceeds received by the Company under the agreements, which
reduced the carrying value of the Century Note, were used to fund
1
<PAGE>
additional development activities in the Gulf Coast region. In
July, 1996, the Century Note was cancelled as part of the
consideration paid by the Company to Century for the purchase of
certain oil and gas properties (see Note 8 of the Notes to
Financial Statements included in Item 1 of this Report on Form
10-QSB). The Company and the individuals simultaneously agreed
to terminate the individuals' participation in the Century Note
in exchange for the Company repaying $500,000 to the individuals
plus interest thereon at the rate of 22% per annum.
On May 9, 1996, the Company and Century Offshore Management
Corporation ("Century") announced that the two companies have
entered into preliminary discussions to explore the possibility
of a merger. As a result of the commencement of these
discussions, Jonathan B. Rudney, who was President and Chief
Executive Officer of the Company and was also affiliated with
Century, tendered his resignation in order to avoid any potential
conflicts. Rick G. Avare, who had previously been serving the
Company as Chief Operating Officer, assumed the position of
President and Chief Executive Officer.
On May 22, 1996, the Company conveyed an approximate 2.2 BCF
volumetric production payment in the wells purchased from AKS
through a facility sponsored by Williams Energy Services Company,
a subsidiary of The Williams Companies, Inc., and structured by
NationsBank. The Company received $4.3 million for the
production payment which has an anticipated six-year term. Of
the funds received, $2.5 million were used to reduce the
Company's credit facility with its primary lender; and the
remainder of the funds were used for working capital and further
acquisition and development activities in the Gulf Coast region.
On June 27, 1996, the Company completed a private placement
of $1 million ($900,000 net of offering costs). The private
placement consisted of 100 Units, each Unit consisting of 3,300
shares of common stock and one Class A Common Stock Purchase
Warrant ("Class A Warrant"). Each Class A Warrant entitles the
holder to purchase 1,650 shares of the Company's common stock at
an exercise price of $4.00 per share.
As a result of the merger discussions with Century, on July
3, 1996, the Company entered into Agreements with Century wherein
it: (i) acquired a portion of the working interest of Century in
ten oil and gas wells together with the exploration rights on
property known as South Timbalier 148, located in the Louisiana
offshore region of the Gulf of Mexico; (ii) purchased one-third
of Century's contract rights to participate in the exploration
and development in three separate onshore Salt Dome properties
also located in the Gulf Coast region of Louisiana with combined
acreage in excess of 100 square miles; and (iii) received a
merger option from Century whereby the Company, at its sole
option, has the right to require a merger between the Company and
Century, such option being exercisable until June 30, 1997. The
consideration for the properties was approximately $25.4 million,
payable in cash and/or stock and relinquishment of the Century
Note. These acquisitions are expected to add approximately 17
billion cubic feet ("BCF") equivalent of proven reserves to the
Company's reserve base and enhance cash flow as well as create
significant exploration opportunities for the Company in the Gulf
Coast region. See Note 8 of the Notes to Financial Statements
included in Item 1 of this Report on Form 10-QSB.
In July, 1995, in order to fulfill the loan commitment to
Century, an aggregate of $400,000 was funded by the directors of
the Company. These monies were paid to the Company in exchange
for a $400,000 participation in the Century Note. Due to the
fact that the Century Note was relinquished as a part of the
Company's acquisition of the South Timbalier 148 properties as
set out above, the Company and the Directors simultaneously
agreed to terminate the Directors' participation in the Century
Note; and the Company remains liable to the Directors for
$400,000 plus interest thereon at the rate of 22% per annum.
RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30,
1996, AS COMPARED WITH THE SIX MONTHS ENDED JUNE 30, 1995:
Total revenues for the six months ended June 30, 1996,
increased 107% to $16,101,952 from $7,741,793 for the comparable
period in 1995. Corresponding operating expenses increased 126%
to $14,075,398 in 1996 from $6,239,379 in 1995. Components of
the increases are as follows:
2
<PAGE>
- - -- MARKETING: The Company's marketing volumes have increased to
---------
3.48 billion cubic feet ("BCF") for the six months ended
June 30, 1996, as compared to 2.12 BCF in 1995. The volume
increase is primarily due to expansion of the Company's
activities in this area and continued focus to function as
an integrated oil and gas company. After strong prices
during the first quarter of 1996, the second quarter of 1996
saw a decrease in prices and strong price competition. As a
result, the Company realized a profit of just .5% on
marketing revenues for the six months ended June 30, 1996,
as compared to 8% in 1995.
- - -- PRODUCTION: The Company's production revenues increased 162%
----------
for the six months ended June 30, 1996, to $2,847,827 from
$1,085,549 for the comparable period in 1995. Increased
revenues result from production from the Ship Shoal B-3 and
B-4 wells located in the Gulf Coast region which were
drilled and completed in mid and late 1995, respectively.
Production of oil and gas from these wells on an MCF
equivalent basis for the first six months of 1996 was
approximately 416,000 MCF as compared to approximately
107,500 MCF for 1995. Also in 1996, production from the
Company's Kentucky wells has increased to approximately
614,000 MCF as compared to approximately 339,000 MCF for
1995. The increase in Kentucky production results primarily
from the Company's acquisition of various producing gas
fields from AKS Energy Corporation in February, 1996.
Also contributing to the increase are stronger gas and/or
oil prices during the six months ended June 30, 1996, versus
1995. The average price per MCF equivalent on oil and gas
production in 1996 was $2.70 versus $2.29 in 1995.
Production expenses also increased to $605,137 for the six
months ended June 30, 1996, from $290,505 for the comparable
period in 1995. The increase results from the production of
the Ship Shoal property and additional operating costs
relating to the property which was acquired from AKS. The
average production cost per MCF equivalent in 1996 was $.57
versus $.61 for the comparable period in 1995.
- - -- DEPRECIATION, DEPLETION AND AMORTIZATION: Depreciation,
----------------------------------------
depletion and amortization increased to $1,044,479 for the
six months ended June 30, 1996, as compared to $561,190 for
the same period in 1995. The increase results primarily
from approximately $230,000 of depreciation, depletion and
amortization on the Ship Shoal wells and additional
depreciation on approximately $2,760,000 of property and
equipment acquired since June 30, 1995.
- - -- GENERAL AND ADMINISTRATIVE ("G&A"): G&A decreased 26% to
----------------------------------
$927,618 for the six months ended June 30, 1996, as compared
to $1,259,133 for the same period in 1995. The decrease
reflects the cost savings achieved through the closing of
the Scottsdale, Arizona, office; the results of an emphasis
on cost control by management and the termination in the
fourth quarter of 1995 of a consulting contract.
Significant components of G&A for the six months ended June
30, 1996, include payroll of $401,800, professional fees of
$125,517, consulting fees of $52,500, insurance of $84,428
and travel of $52,900. Significant savings of G&A which
have been achieved for the six months ended June 30, 1996,
as compared to the same period for 1995 include reductions
in consulting fees of $117,640, payroll of $28,000,
professional fees of $81,062 and bad debt expense of
$50,000.
- - -- OTHER INCOME (EXPENSE): Other income (expense) items
----------------------
consisted of the following:
INTEREST INCOME: Interest income results primarily from
---------------
interest earned on notes receivable issued to Century. The
notes earn interest at 22% per annum and are secured by
offshore properties. During the six months ended June 30,
1996, interest was earned on an average outstanding balance
of $6.5 million as compared to an average outstanding
balance of approximately $2.3 million for the same period in
1995.
3
<PAGE>
INTEREST EXPENSE: Interest expense increased to $989,457 for
----------------
the six months ended June 30, 1996, as compared to $444,130
for the same period in 1995. This results primarily from
increased borrowings under the Company's primary credit
facility. Outstanding borrowings under the facility were
$16,193,000 at June 30, 1996, as compared to $7.8 million at
June 30, 1995. The additional borrowings have been used to
assist in expanding the Company's exploration, development
and acquisition activities.
GAIN ON SALE OF CLAIMS: During the six months ended June 30,
----------------------
1995, the Company recognized a gain of $2,189,616
attributable to the sale of various secured and unsecured
claims previously acquired from creditors of Century.
- - -- NET INCOME: Net income for the six months ended June 30,
----------
1996, was $521,178 as compared to $1,451,682 for the same
period in 1995; however, net income for the six months
ending June 30, 1995, included a gain of $2,189,616
($1,357,000 net of tax) on the sale of claims. Operating
income for the six months ended June 30, 1996 increased to
$1,098,936 versus $243,281 for the same period in 1995. The
increase resulted primarily from higher net production
levels and lower general and administrative expenses.
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30,
1996, AS COMPARED WITH THE THREE MONTHS ENDED JUNE 30, 1995:
Total revenues for the three months ended June 30, 1996,
increased 51% to $6,178,705 from $4,090,182 for the comparable
period in 1995. Corresponding operating expenses increased 82%
to $5,557,873 in 1996, from $3,181,278 in 1995. Components of
the increases are as follows:
- - -- MARKETING: After a strong first quarter, the second quarter
---------
of 1996 saw gas prices decrease at a steady rate. Although
the Company's marketing volumes increased to 1.5 bcf for the
three months ended June 30, 1996, as compared to 1.08 bcf in
1995, the increase was adversely affected by price
competition. Thus, the Company realized a 4.5% loss on
marketing sales versus a 6.1% profit for the comparable
period in 1995.
- - -- PRODUCTION: Production revenues were $1,405,094 for the
----------
three months ended June 30, 1996, as compared to $701,802
for the same period in 1995. The additional revenues are
primarily due to production from the Ship Shoal B-3 and B-4
wells which were successfully drilled and completed in mid
and late 1995, respectively. Production from these wells
contributed approximately $673,000 in production revenues
for the three months ended June 30, 1996. Additional
revenue was also earned as a result of the purchase of
various producing gas fields in the Appalachian area from
AKS Energy Corporation which was consummated on February 26,
1996.
Gas prices on Kentucky properties for the second quarter of
1996 averaged $2.31 per thousand cubic feet ("MCF"), down
from the $2.60 per MCF average of the first quarter of 1996
but above the $2.16 per MCF average for the second quarter
of 1995.
Production of oil and gas on an MCF equivalent basis for the
second quarter of 1996 was approximately 540,000 MCF versus
285,000 MCF for the same period in 1995. Production from
the Ship Shoal properties located in the Gulf Coast region
recovered during the second quarter of 1996, with oil
production increasing approximately 17.5% from the first
quarter of 1996. The operator has been able to increase
production flow through its production platform; however,
full production capabilities are still not being realized on
the two wells.
As can be expected, production costs also increased to
$287,020 for the three months ended June 30, 1996, from
$173,244 for the same period in 1995. This was due to the
production costs associated with the Gulf Coast wells of
approximately $88,000 and the costs associated with the
properties acquired from AKS Energy Corporation.
4
<PAGE>
- - -- DEPRECIATION, DEPLETION AND AMORTIZATION: Depreciation,
----------------------------------------
depletion and amortization increased to $570,136 for the
three months ended June 30, 1996, as compared to $286,521
for the same period in 1995. The increase results primarily
from approximately $140,000 of depreciation, depletion and
amortization on the Ship Shoal wells and additional
depreciation on approximately $2,760,000 of property and
equipment acquired since June 30, 1995.
- - -- GENERAL AND ADMINISTRATIVE ("G&A"): G&A decreased 18% to
--------------------------
$475,156 for the three months ended June 30, 1996, as
compared to $579,914 for the same period in 1995. The
decrease reflects the cost savings achieved through the
closing of the Scottsdale, Arizona, office; the results of
an emphasis on cost control by management and the
termination in the fourth quarter of 1995 of a consulting
contract.
Significant components of G&A for the three months ended
June 30, 1996, include payroll of $207,228, professional
fees of $71,595, consulting fees of $26,250, insurance of
$46,435 and travel of $22,345. Significant savings of G&A
which have been achieved for the three months ended June 30,
1996, as compared to the same period for 1995 include
reductions in consulting fees of $54,865, payroll of $15,529
and rent of $4,543.
- - -- OTHER INCOME (EXPENSE): Other income (expense) items
----------------------
consisted of the following:
* INTEREST INCOME: Interest income results primarily
---------------
from interest earned on notes receivable issued to
Century. The notes earn interest at 22% per annum and
are secured by offshore properties. During the three
months ended June 30, 1996, interest was earned on an
average outstanding balance of $6.5 million, as
compared to an average outstanding balance of
approximately $4.6 million for the same period in 1995.
* INTEREST EXPENSE: Interest expense increased to
----------------
$508,143 for the three months ended June 30, 1996, as
compared to $253,397 for the same period in 1995. This
results primarily from increased borrowings under the
Company's primary credit facilities.
* GAIN ON SALE OF CLAIMS: During the three months ended
----------------------
June 30, 1995, the Company recognized a gain of
$399,201 attributable to the sale of various mechanic
and materialmen's lien claims previously acquired from
creditors of Century.
- - -- NET INCOME: Net income for the three months ended June 30,
----------
1996 was $25,137 as compared to $422,765 for the same period
in 1995. The decrease in 1996 is primarily due to the
inclusion in 1995 of $339,201 of gain on the sale of claims
and losses on marketing of approximately $196,000 in 1996
versus a gain of approximately $172,300 in 1995.
Depreciation, depletion and amortization also increased by
approximately $284,000 due to higher depletion and
depreciation associated with the Gulf Coast region
properties. These items were partially offset in 1996 by
increased production revenues and lower general and
administrative expenses.
LIQUIDITY AND CAPITAL RESOURCES:
Cash and cash equivalents for the six months ended June 30,
1996, totalled $628,422 as compared to $826,393 at December 31,
1995. During 1994 and 1993, the Company funded its oil and gas
exploration and development activities and a portion of its
operations with bank borrowings and equity capital from private
placements. In 1995, $353,271 of cash from operations was
contributed towards the Company's exploration and development
activities and debt service requirements, with that amount
increasing to $2,105,231 for the six months ended June 30, 1996.
At June 30, 1996, the Company had available a $20,000,000 line of
5
<PAGE>
credit through Den norske, with a borrowing base of $20,000,000,
of which the Company had drawn $16,193,000. The base was
increased to $20,000,000 subsequent to December 31, 1995, to
assist in funding the purchase of proved producing properties and
related pipelines and equipment from AKS.
Under the credit agreement with Den norske Bank, S.A. ("Den
norske"), the Company is required to maintain certain ratios
relating to debt coverage ratio, current ratio, tangible net
worth, general and administrative expenses and quarterly interest
ratio. Under the covenants, the financial amounts used to
compute the requirements are specifically defined in the
agreement. At June 30, 1996, the Company was in compliance with
all of the required financial ratios except a covenant pertaining
to its quarterly interest ratio. Under the credit facility, the
Company must maintain a quarterly ratio of earnings, as defined
in the credit facility, to interest expense of not less than 3.0
to 1.0. At June 30, 1996, the Company's ratio was 2.24 to 1.0,
but the Company has obtained a waiver of this covenant from Den
norske.
On February 26, 1996, the Company acquired oil and gas
properties, equipment and pipelines from AKS. As consideration
for the assets, the Company paid $2,909,010 in cash (which
includes commissions paid to an unrelated third party), assumed
$125,000 of AKS's severance tax obligations, issued 225,000
shares of the Company's common stock at a value of $3.594 per
share (which was the closing market price on the day of Closing)
and issued warrants with an estimated value of $348,525 to
purchase an additional 225,000 shares of the Company's common
stock with an exercise price of $5.00 per share and an expiration
date of December 31, 1998. The cash included in the purchase
price was made available from borrowings under the Company's
credit facility with Den norske. The Company also entered into
an agreement to participate with AKS in the joint development of
leases in Southeastern Kentucky gas fields wherein the Company
will have the right to earn 50% of the remaining undeveloped
acreage.
On January 2, 1996, the Company entered into a stock
purchase agreement, as amended, with the holders of the
outstanding Series B Preferred Stock. Under the agreement, the
Company, or its assignee, has the obligation to purchase the
remaining outstanding Series B Preferred Stock at $13.70 per
share. Payment terms under the agreement are as follows:
<TABLE>
Due Number
Date Of Shares Amount
---- --------- ------
<S> <C> <C>
January 02, 1996 18,248 $250,000
January 15, 1996 18,248 250,000
February 10, 1996 3,650 50,000
February 29, 1996 54,409 745,400
March 31, 1996 47,445 650,000
</TABLE>
The share commitments through January 15, 1996, were
purchased by individuals who are not associated or affiliated
with the Company or any of the Company's directors or executive
officers; and the February 10 and 29, 1996, share commitments
were purchased by the Company, primarily with funds obtained
under its Credit Facility with Den norske. Upon purchase, the
Board of Directors retired the 58,059 shares of Series B
Preferred Stock.
6
<PAGE>
The share commitment due March 31, 1996, was amended to
allow the holders of the Series B Preferred Stock to convert
25,769 shares of the Series B Preferred Stock into 100,000 shares
of common stock. The remaining share commitment of 21,676 shares
of Series B Preferred Stock for $296,932 was extended by mutual
consent to April 30, 1996. The Company subsequently allowed the
holders of the Series B Preferred Stock to convert the remaining
21,676 shares of Series B Preferred Stock into 75,410 shares of
common stock.
In April, 1996, the Company entered into agreements with two
individuals, one of whom is a Director of the Company. Under the
agreements, the individuals each paid to the Company $250,000 in
exchange for the right to participate on a pro rata basis in the
$6,500,000 Century Note. The agreement allowed the individuals
to receive a combined payment of $500,000 plus interest at 22%
from the Century Note repayment. The agreements assigned the
payments from the portion of the Century Note which was not
pledged to the Company's primary lender. The proceeds received
by the Company under the agreements, which reduced the carrying
value of the Century Note, were used to fund additional
development activities in the Gulf Coast region. In July, 1996,
the Century Note was cancelled as part of the consideration paid
by the Company to Century for the purchase of certain oil and gas
properties (see Note 8 of the Notes to Financial Statements
included in Item 1 of this Report on Form 10-QSB). The Company
and the individuals simultaneously agreed to terminate the
individuals' participation in the Century Note in exchange for
the Company repaying $500,000 to the individuals plus interest
thereon at the rate of 22% per annum.
On May 22, 1996, the Company conveyed an approximate 2.2 BCF
volumetric production payment in Appalachian wells recently
purchased from AKS through a facility sponsored by Williams
Energy Services Company, a subsidiary of the Williams Companies,
Inc., and structured by NationsBank. The Company received $4.3
million ($4,147,300 after related costs) for the production
payment which has an anticipated six year term. Of the funds
received $2.5 million was used to reduce the Company's credit
facility with its primary lender. The Company used the remainder
of the funds for working capital and further acquisition and
development activities in the Gulf Coast region.
On July 3, 1996, the Company acquired proved developed and
undeveloped oil and gas properties, equipment and pipelines
located offshore Louisiana from Century. As consideration for
the assets, the Company paid $4 million in cash, issued a
subordinated debenture ("Debenture") in the amount of $4 million
with a due date, as amended, of August 31, 1996 (the Debenture
provides for payment at the Company's option of cash or the
issuance of restricted common stock of the Company at $3.00 per
share), the extinguishment of an existing note from Century to
the Company in the amount of $6.5 million and the assumption of
existing liens against the assets in the approximate amount of
$1,051,000. The foregoing transaction was effected pursuant to
an Asset Purchase Agreement entered into on July 3, 1996.
Additionally, the Company acquired certain rights and
interests in undeveloped properties located onshore Louisiana
from Century. As consideration for these interests, the Company
has paid $3,884,000 in cash and issued 1.5 million shares of
restricted common stock in the Company at a deemed price of $4.00
per share. The foregoing transaction was effected pursuant to an
Asset Purchase Agreement entered into on July 3, 1996.
7
<PAGE>
The following is a summary of the Company's expected cash
flow estimates for the remainder of 1996:
<TABLE>
<S> <C> <C>
Cash requirements:
Capital costs $15,494,000
Debt service payments 4,730,000
Total cash requirements $20,224,000
Cash Sources:
Cash from operations $ 5,758,000
Equity raise-ups 10,870,000
Bank borrowings 6,300,000
Sale of property 500,000
Total cash sources 23,428,000
-----------
Excess $ 3,204,000
===========
</TABLE>
As can be seen above, the Company intends to meet its cash
requirements for the remainder of 1996 with cash flow from
operations, equity raise-ups and additional bank borrowings. The
equity raise-ups are to be achieved by a series of private
placements. If the funds are not raised within the expected
timetable, capital projects will be adjusted accordingly. In
August, 1996, Den norske Bank increased the Company's credit
facility to $30,000,000, with a current borrowing base of
$22,500,000.
The continued expansion of the Company's development and
acquisition activities are expected to be financed with
internally generated cash flow and new financings, if available.
The completion or success of any new opportunities is subject to
a number of factors, including the price of oil and gas, and the
ability of the Company to raise additional capital or obtain debt
financing on terms acceptable to the Company. Many of these
factors are outside of the Company's control. There can be no
assurance that the Company will be able to undertake any of these
opportunities or that, if undertaken, they will prove successful.
PART II - OTHER INFORMATION
ITEM 3. EXHIBITS AND REPORTS ON FORM 8-K
NOT AMENDED.
8
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities and
Exchange Act of 1934, the Registrant has caused this report to be
signed on its behalf by the undersigned, thereunto duly
authorized.
AMERICAN RESOURCES OF DELAWARE, INC.
Date: September 3, 1996 By: /S/ Jeffrey J. Hausman
Jeffrey J. Hausman
Chief Financial Officer
(Principal Accounting and
Financial Officer)
9
