SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
For Quarter Ended Commission File Number
October 31, 1996 1-7965
CASPEN OIL, INC.
(Exact name of registrant as specified in its charter)
Nevada 75-1325831
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
777 S. Wadsworth Boulevard
Irongate 3, Suite 201
Lakewood, CO 80226
(Address or principal executive offices)
(303) 987-0925
(Registrant's telephone number, including area code)
(Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities and Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such
filing requirement for the past 90 days.
Yes X No
As of October 31, 1996, the Registrant had 18,092,200 shares of
Common Stock outstanding.
Transitional Small Business Disclosure Format: Yes ; No X
<PAGE>
CASPEN OIL, INC.
AND SUBSIDIARIES
FORM 10-QSB
October 31, 1996
PART I - FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements:
Condensed Consolidated Balance Sheets. . . . . . . . . . . 1-2
Condensed Consolidated Statements of Operations. . . . . . . 3
Condensed Consolidated Statement of Shareholders' Equity . . 4
Condensed Consolidated Statements of Cash Flows. . . . . . . 5
Notes to Condensed Consolidated Financial Statements . . . 6-7
Item 2. Management's Discussion and Analysis or Plan of
Operation. . . . . . . . . . . . . . . . . . . . . . . . . 8-9
PART II - OTHER INFORMATION
Item 4.Submission of Matters to a Vote of Security Holders . 10
Item 6.Exhibits and Reports on Form 8- K . . . . . . . . . . 10
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . 11
<PAGE>
CASPEN OIL, INC.
AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Unaudited)
October 31, July 31,
ASSETS 1996 1996
CURRENT ASSETS
Cash and cash equivalents $ 66,727 $ 94,131
Accounts rec., prepaid exp.
net of allowance for doubtful accounts 133,324 130,985
Other 1,603 1,603
----------- -----------
201,654 226,719
----------- -----------
PROPERTY AND EQUIPMENT, AT COST
Oil and gas properties, full cost
method of accounting 19,869,745 19,873,617
Other 302,061 302,061
----------- -----------
20,171,806 20,175,678
Less accum. depl., deprec., and amort. 17,058,667 17,006,425
------------ -----------
3,113,139 3,169,253
------------ -----------
OTHER
Investments 833,520 833,520
Notes receivable, related party 66,622 66,622
Other 8,382 8,832
------------ -----------
908,524 908,974
------------ -----------
TOTAL ASSETS $ 4,223,317 $ 4,304,946
============ ===========
1<PAGE>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable $ 1,547,500 $ 1,547,500
Accounts payable 710,485 747,918
Accrued expenses 609,768 616,167
Note payable, related party 26,521 50,000
Note payable, other 10,000 10,000
------------ -----------
TOTAL CURRENT LIABILITIES 2,904,274 2,971,585
LONG-TERM LIABILITIES
Note payable 10,000 10,000
Other 59,400 59,400
------------ -----------
TOTAL LIABILITIES 2,973,674 3,040,985
------------ -----------
SHAREHOLDERS' EQUITY
Convertible preferred stock:
Series A 600,000 600,000
Series C 300,000 300,000
Series E 125,000 125,000
Common stock 180,922 180,922
Additional paid-in capital 21,091,871 21,091,871
Accumulated deficit (21,038,440)(21,024,122)
----------- -----------
1,259,353 1,273,671
Less treasury stock 9,710 9,710
---------- -----------
TOTAL SHAREHOLDERS' EQUITY 1,249,643 1,263,961
---------- -----------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 4,223,317 $ 4,304,946
============ ===========
See accompanying notes to condensed consolidated financial
statements.
2
<PAGE>
CASPEN OIL, INC.
AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Unaudited)
Three months ended
October 31,
------------------
1996 1995
REVENUE
Oil and gas sales $ 226,517 $ 194,464
Overhead income 13,356 11,541
Interest income 637 3,986
Other 123 38,785
--------- ---------
240,633 248,776
--------- ---------
COSTS AND EXPENSES
Production and operating 55,925 117,080
Depl., deprec., and amort. 52,242 48,681
General and administrative 145,731 74,584
Interest expense 1,053 -
--------- ---------
254,951 240,345
--------- ---------
NET INCOME (LOSS) (14,318) 8,431
DIVIDEND REQUIREMENTS ON PREFERRED STOCK 269,775 269,775
--------- ---------
LOSS APPLICABLE TO COMMON STOCK $(284,093) $(261,344)
========= =========
LOSS PER COMMON SHARE $ (.02) $ (.01)
========= =========
See accompanying notes to condensed consolidated financial
statements.
3
<PAGE>
<TABLE>
CASPEN OIL, INC.
AND SUBSIDIARIES
Condensed Consolidated Statement of Shareholders' Equity
(Unaudited)
Preferred Stock Common Stock Additional Accumu- Total
paid-in lated Treasury shareholders'
Series Shares Amount Shares Amount capital deficit stock equity
------ ------- -------- ---------- ---------- ----------- ------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at July 31, 1996 A 600,000 $600,000 18,092,222 $ 180,922 $21,091,871 $(21,024,122) $( 9,710) $1,263,961
C 300,000 300,000
E 125,000 125,000
Net loss for the three months ended
October 31, 1996 (14,318) (14,318)
Balance at October 31, 1996
Series A 600,000 $600,000 18,092,222 $ 180,922 $21,091,871 $(21,038,440) $( 9,710) $1,249,643
Series C 300,000 $300,000 ---------- ----------- ------------- ------------ ----------
Series E 125,000 $125,000
--------
</TABLE>
4
<PAGE>
CASPEN OIL, INC.
AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Three months ended
October 31,
------------------
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $(14,318) $ 8,431
Adjustments to reconcile net income
to net cash used in operating activities:
Depletion, depreciation, and amortization 52,242 48,681
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable
and prepaid expenses (2,339) 137,807
(Increase) decrease in other assets 450 (24,399)
Decrease in notes/accts. pay./accrued exp. ( 67,311) (350,242)
---------- ---------
NET CASH USED IN
OPERATING ACTIVITIES ( 31,276) (179,722)
---------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from disposition of property and
equipment 8,356 914
Purchase of property and equipment, net of
property sales and well credits ( 4,484) (142,919)
---------- ---------
NET CASH PROVIDED BY (USED IN) INVESTING
ACTIVITIES 3,872 (142,005)
--------- ----------
DECREASE IN CASH
AND CASH EQUIVALENTS ( 27,404) (321,727)
CASH AND CASH EQUIVALENTS, BEG. 94,131 464,876
--------- ---------
CASH AND CASH EQUIVALENTS, END $ 66,727 $ 143,149
========= =========
See accompanying notes to condensed consolidated financial
statements.
5
<PAGE>
CASPEN OIL, INC.
AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
Three Months Ended October 31, 1996
(1) Basis of Presentation
The condensed interim consolidated financial statements
included herein are unaudited but in the opinion of management
reflect all adjustments (consisting of normal recurring accruals)
necessary for a fair presentation of the financial position of
the Company at October 31, 1996, and the results of operations
for the three month periods ended October 31, 1996, and 1995.
Interim results are not necessarily indicative of expected annual
results because of the impact of prices obtained for oil and gas
and other factors. These condensed consolidated financial
statements should be read in conjunction with the consolidated
financial statements of the Company, and related notes thereto,
included in its annual report on Form 10-KSB.
(2) Daiwa Bank, Ltd. Loan
On December 14, 1990, the Company entered into an amended and
restated loan agreement with its principal lender, Daiwa Bank,
Ltd. ("Daiwa"), formerly Lloyd's Bank plc, and satisfied all
technical deficiencies as they existed prior to the
renegotiation. At the request of Daiwa, the Company sold
property, which was mortgaged to Daiwa, for approximately
$5,200,000. From the proceeds of the sale, Daiwa received the
total $5,200,000. Daiwa applied $4,700,000 to the reduction of
principal. Simultaneously, the Company executed a 30-month
extension note in the amount of $2,000,000, with the guarantee by
Daiwa that, upon payment of $500,000 in June 1993, the note would
be renewed or restructured. Daiwa recognized that the Company
would be unable to make the $500,000 principal payment in June
1993 and therefore returned $500,000 from the December 1990 sale
of property to the Company.
In June 1993, after the Company paid interest for thirty months
of approximately $425,000, Daiwa refused to accept the $500,000
principal reduction payment offered by the Company and refused to
renew or restructure the note claiming no legal obligation to do
so and citing its decision to divest itself of oil and gas loans.
6
<PAGE>
CASPEN OIL, INC.
AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Continued)
Three Months Ended October 31, 1996
(2) Daiwa Bank, Ltd. Loan (Continued)
On July 9, 1993, the Company received a demand notice from Daiwa
for $1,997,500 in payment of the loan balance remaining on the
$15,000,000 Credit Revolver established by Daiwa in late 1988.
The interest rate on the revolving line of credit was prime plus
one percent. On February 17, 1994, the Company sold certain oil
and gas properties for $300,000 the proceeds of which were used
to reduce the bank debt principal to $1,697,500.
For years ended July 31, 1996 and 1995, the Company made payments
of $50,000 and $100,000 to reduce the bank debt principal to
$1,547,500 at July 31, 1996.
The Company has attempted to resolve the loan dispute. The
Company expects one of two developments between the Company and
Daiwa in fiscal year 1997; (a) the Company and Daiwa reach an
agreement to reduce to $50,000 the outstanding loan balance
inclusive of interest, which, based on Generally Accepted
Accounting Principles, would result in the Company recording the
forgiveness of the debt. (However, there can be no assurance
that Daiwa will agree to do so, nor can there be any assurance
that Daiwa will not proceed to foreclose on the oil and gas
properties which collateralize the debt); or (b) litigation
results in which the Company will seek damages in excess of
$10,000,000, and Daiwa asserts claims for default interest and
attorneys' fees. Under the second alternative, the Company
estimates legal fees in the range of $150,000 in fiscal year
1997.
Generally accepted accounting principles require the Company to
carry on its financial statements outstanding debt to Daiwa of
$1,547,500 as of October 31, 1996, plus interest accrued to July
31, 1996, using prime plus one percent (9.25% at July 31, 1996),
of $454,103, which is included in accrued expenses. However, the
Company believes that Daiwa will reduce the $2,001,603 balance to
$50,000, requiring the Company to record the forgiveness of the
debt. This action on Daiwa's part will partially compensate the
Company for damages created by Daiwa's breach of contract.
7<PAGE>
CASPEN OIL, INC.
AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis or Plan of
Operation
The following discussion of the Company's financial condition and
results of operations should be read in conjunction with the
condensed consolidated financial statements included in this
report and the consolidated financial statements and notes
contained in the Company's annual report on Form 10-KSB for the
fiscal year ended July 31, 1996.
Liquidity and Capital Resources
During the three months ended October 31, 1996, the working
capital deficit decreased from July 31, 1996, by approximately
$(42,000). This decrease is due largely to the pay down of
certain outstanding trade payables from July 31, 1996.
The Company's current liabilities exceed current assets by
$2,702,620 at October 31, 1996. The working capital deficit at
October 31, 1996, is due primarily to the $1,547,500 of the
Company's debt due to Daiwa Bank which matured in June 1993 (See
Note 2) and to outstanding trade and note payables of an
approximate $750,000, as well as accrued expenses approximating
$150,000, including $75,000 in accrued salary, approximately
$48,000 in accrued service and operations fees and other accrued
expenses.
The Company anticipates that given its current cash position and
assuming a satisfactory resolution of the Daiwa matter, and
further, and assuming no unexpected interruption of current cash
flows or unanticipated expenditures, it will have sufficient
working capital to meet its obligations throughout the remaining
fiscal year.
Results of Operations
Oil and gas revenues were higher in the three months ended
October 31, 1996, as compared to the three months ended October
31, 1995. This was primarily attributable to higher oil and gas
prices in 1996.
The Company experienced higher gas prices in the three months
ended October 31, 1996, compared with those received in the same
period last year, and slightly higher oil prices were experienced
in the first three months of fiscal year 1996 when compared with
the same period last year. Average oil and gas prices received
in the three months ended October 31, 1996, were approximately
$19.85 per barrel of oil and $1.85 per MCF gas as compared to
approximately $16.00 per barrel of oil and $1.35 per MCF gas for
the three months ended October 31, 1995.
8<PAGE>
CASPEN OIL, INC.
AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis or Plan of
Operation, Continued
Results of Operations (Continued)
The Company reported a net loss of $(14,318) for the three months
ended October 31, 1996, compared to a net income of $8,431 for
the three months ended October 31, 1995. This is primarily due
to lower oil and gas revenues and comparatively higher production
and operating expenses for the three months ended October 31,
1995, as compared with the three months ended October 31, 1996,
combined with a beginning of fiscal year 1996 reversing entry of
trade accounts payable that did not occur in the beginning of
fiscal 1997, the effect of which caused general and
administrative costs to be significantly lower than normal for
the three months ended October 31, 1995. Oil and gas revenues
approximated $227,000 for the three months ended October 31,
1996, while revenues for the same period in 1995 approximated
$194,000. Production and operating expenses for the quarter
ended October 31, 1996, were approximately $56,000, as compared
to the quarter ended October 31, 1995, which were approximately
$117,000. The decrease in lease operating expenses to 25 percent
of oil and gas sales from 60 percent generally reflects the
activities detailed above with respect to the increase in oil and
gas revenues for the three months ended October 31, 1996.
General and administrative expenses for the three months ended
October 31, 1996, increased by approximately $71,000 from the
corresponding three months ended October 31, 1995, due to an
adjustment made at the beginning of fiscal year 1996 as explained
above.
Series A Preferred Stock Cumulative Dividends In Arrears
The terms of the Series A Shares provide that no dividends may be
paid on the Common Shares or Series C or E Preferred Shares while
dividends on the Series A Shares are in arrears. The Company has
not paid any dividends on the Series A Shares since June 30,
1988. As of October 31, 1996, dividends on the Company's Series
A Shares are in arrears $17.54 per share for a total of
$10,514,852.
9 <PAGE>
CASPEN OIL, INC.
AND SUBSIDIARIES
Part II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits - none
(b) Reports on Form 8-K - none
10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
CASPEN OIL, INC.
December 9, 1996 By:/s/ Gary N. Davis
Gary N. Davis,
Treasurer
11
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000095254
<NAME> CASPEN OIL INC
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-START> AUG-01-1996
<PERIOD-END> OCT-31-1996
<CASH> 66,727
<SECURITIES> 0
<RECEIVABLES> 134,927
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 201,654
<PP&E> 20,171,806
<DEPRECIATION> 17,058,667
<TOTAL-ASSETS> 4,223,317
<CURRENT-LIABILITIES> 2,904,274
<BONDS> 0
600,000
425,000
<COMMON> 180,922
<OTHER-SE> 43,721
<TOTAL-LIABILITY-AND-EQUITY> 4,223,317
<SALES> 226,517
<TOTAL-REVENUES> 240,633
<CGS> 55,925
<TOTAL-COSTS> 254,951
<OTHER-EXPENSES> 269,775
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (284,093)
<EPS-PRIMARY> (.02)
<EPS-DILUTED> 0
</TABLE>
