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
January 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 January 31, 1996, the Registrant had 18,092,200 shares of
Common Stock outstanding.
Transitional Small Business Disclosure Format: Yes ; No X
CASPEN OIL, INC.
AND SUBSIDIARIES
FORM 10-QSB
January 31, 1996
PART I - FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements:
Condensed Consolidated Balance Sheets. . . . . . . . . . .1
Condensed Consolidated Statements of Operations. . . . .2-3
Condensed Consolidated Statement of Shareholders' Equity .4
Condensed Consolidated Statements of Cash Flows. . . . . .5
Notes to Condensed Consolidated Financial Statements . ..6-8
Item 2. Management's Discussion and Analysis or
Plan of Operation. . . . . . . . . . . . . . . . . . . ..9-11
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.12
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . 12
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . 13
CASPEN OIL, INC.
AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Unaudited)
January 31, July 31,
ASSETS 1996 1995
CURRENT ASSETS
Cash and cash equivalents $ 82,175 $ 464,876
Accounts receivable and prepaid expenses, net of
allowance for doubtful accounts 256,007 327,038
Notes receivable 8,346 8,346
346,528 800,260
PROPERTY AND EQUIPMENT, AT COST
Oil and gas prop., full cost method 19,784,977 19,626,347
Other 240,830 240,830
20,025,807 19,867,177
Less accum. depl., deprec. amort. 16,754,369 16,659,765
3,271,438 3,207,412
OTHER
Investments 774,244 833,520
Notes rec., related party noncurrent 66,622 42,223
Notes receivable, noncurrent 48,045 48,045
Other 1,950 1,950
890,861 925,738
TOTAL ASSETS $ 4,508,827 $ 4,933,410
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable 1) $ 1,547,500 $ 1,597,500
Accounts payable 833,013 956,116
Accrued expenses 405,466 523,973
Note payable, other 10,000 10,000
2,795,979 3,087,589
LONG-TERM LIABILITIES
Accrued expenses - 66,667
Note payable, other 20,000 20,000
20,000 86,667
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 (20,595,235) (20,528,929)
1,702,558 1,768,864
Less treasury stock 9,710 9,710
1,692,848 1,759,154
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 4,508,827 $ 4,933,410
See accompanying notes to condensed consolidated financial
statements.
(1) See Note 2.
1
CASPEN OIL, INC.
AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Unaudited)
Three months ended
January 31,
1996 1995
REVENUE
Oil and gas sales $ 272,808 $ 359,446
Overhead income 12,826 12,909
Interest income 6,793 5,519
Other 7,801 36,763
300,228 414,637
COSTS AND EXPENSES
Production and operating 125,078 159,820
Depletion, depreciation, and amortization 45,923 103,144
General and administrative 203,944 279,581
Interest expense 20 30,006
374,965 572,551
NET LOSS (74,737) (157,914)
DIVIDEND REQUIREMENTS ON PREFERRED STOCK 269,775 269,820
LOSS APPLICABLE TO COMMON STOCK $(344,512) (427,734)
LOSS PER COMMON SHARE $ (.02) $ (.02)
See accompanying notes to condensed consolidated financial
statements
2
CASPEN OIL, INC.
AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Unaudited)
Six months ended
January 31,
1996 1995
REVENUE
Oil and gas sales $ 467,272 $ 663,358
Overhead income 24,367 27,577
Interest income 10,779 11,741
Other 46,586 265,106
549,004 967,782
COSTS AND EXPENSES
Production and operating 242,157 323,813
Depletion, depreciation, and amortization 94,604 206,288
General and administrative 278,528 436,464
Interest expense 20 60,128
615,309 1,026,693
NET LOSS (66,305) ( 58,911)
DIVIDEND REQUIREMENTS ON PREFERRED STOCK 539,550 539,775
LOSS APPLICABLE TO COMMON STOCK $(605,855) (598,686)
LOSS PER COMMON SHARE $ (.03) $ (.03)
See accompanying notes to condensed consolidated financial
statements
3
CASPEN OIL, INC.
AND SUBSIDIARIES
Condensed Consolidated Statement of Shareholders' Equity
(Unaudited)
Preferred Stock Common Stock Additional
paid-in
shares Amount Shares Amount capital
Balances at July 31, 1995
Series A 600,000 $600,000 18,092,222 $180,922 $21,091,871
Series B 300,000 300,000
Series E 125,000 125,000
Total
Accumulated Treasury shareholders'
deficit stock equity
$(20,528,929) $( 9,710) $1,759,154
Net Income for the three months ended
October 31, 1995
8,431 8,431
Balances at October 31, 1995
Series A 600,000 $600,000 18,092,222 $180,922 $21,091,871
Series C 300,000 $300,000
Series E 125,000 $125,000
$(20,520,498) $( 9,710) $1,767,585
Net Loss for the three months
ended January 31, 1996
( 74,737) ( 74,737)
Balance at January 31, 1996
Series A 600,000 $600,000 18,092,222 $180,922 $21,091,871
Series C 300,000 $300,000
Series E 125,000 $125,000
$(20,595,235) $( 9,710) $1,692,848
4
CASPEN OIL, INC.
AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Six months ended
January 31,
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $( 66,305) $ (58,911)
Adjustments to reconcile net income
to net cash provided by (used in) operating activities:
Depletion, deprec., and amort. 94,604 206,288
Changes in operating assets and liabilities:
Decrease in accounts receivable
and prepaid expenses 71,031 112,113
(Increase) decrease in other assets 34,877 ( 42,223)
Increase (decrease) in notes/accounts payable and
accrued expenses (358,278) (312,967)
NET CASH USED IN
OPERATING ACTIVITIES (224,071) ( 95,700)
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds disposition of prop. and equip. 2,806 2,716
Purchase of property and equipment, net of property
sales and well credits (161,436) ( 61,367)
NET CASH USED IN INVESTING ACTIVITIES (158,630) ( 58,651)
CASH FLOWS FROM FINANCING ACTIVITIES
Sale of treasury stock for working capital - 207,694
Purchase of treasury stock - ( 423)
NET CASH PROVIDED BY FINANCING ACTIVITIES - 207,271
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (382,701) 52,920
CASH AND CASH EQUIVALENTS BEGINNING OF PERIOD 464,876 628,955
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 82,175 $ 681,875
See accompanying notes to condensed consolidated financial
statements.
5
CASPEN OIL, INC.
AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
Six Months Ended January 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 January 31, 1996, and the results of operations for the six
month periods ended January 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
In December 1990, 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 (30)
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.
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.
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.
As of January 31, 1996, the Company has voluntarily reduced the
outstanding principal balance to $1,547,500.
6
The Company has attempted to resolve the loan dispute. The
Company expects one of two developments between the Company and
Daiwa in fiscal year 1996: (a) the Company and Daiwa reach an
agreement to reduce to zero the outstanding loan balance
inclusive of interest (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 secure the debt.); or (b) litigation results in which the
Company asserts lender liability claims for refusal to renew the
credit as represented, 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
years 1996-1997.
7
CASPEN OIL, INC.
AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Continued)
Six Months Ended January 31, 1996
(2) Daiwa Bank, Ltd. Loan (Continued)
The Company received correspondence in late January 1996 from
The Daiwa Bank, Ltd. notifying Caspen Oil that it (Daiwa) had
decided to "re-book" its account with the Company and effectively
assign the account to another Japanese bank, The Sumitomo Bank,
Limited, whereby, The Sumitomo Bank would now be the servicer of
the account. In the correspondence, Daiwa Bank further stated
that unless told so in writing, they would assume that the
Company would have no objections to the "re-booking" of the
account.
Upon receipt of the letter from Daiwa Bank, the Company
immediately objected telephonically and followed with written
objection dated January 31, 1996, whereby, the Company directly
objected to the "re-booking" of the account by Daiwa Bank and
further clarified that the Company's account, related to our
respective agreements, should not be "re-booked", nor should the
account be serviced by anyone other than Daiwa Bank. The Company
further stated in the objection that Daiwa Bank's present account
relative to the Company's respective agreements should a) reflect
a receivable remaining due from the Company of $50,000, b) show
total amounts paid by the Company on account to date of
$14,885,114, c) reflect a contingent liability to the Company of
$10,355,000, and d) reflect a contingent liability to Torch
Operating Company of $192,733.
Simultaneous to the formal written objection described above,
the Company has forwarded a copy of the same written objection to
Daiwa Bank's legal counsel.
Even though the Company's management feels strongly that it
will not pay Daiwa Bank any amount greater than $50,000 in total
settlement (inclusive of principal and interest), because of
Generally Accepted Accounting Principals (GAAP), it is obliged to
retain the total alleged indebtedness on its books.
This in no way should be interpreted that the Company will pay
or owes the alleged indebtedness.
8
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, 1995.
Liquidity and Capital Resources
During the six months ended January 31, 1996, the working capital
deficit increased from July 31, 1995, by approximately $162,122.
This increase is due largely to the reduction of severance tax
liability, due to settlement with Torch Operating Company. (The
Consent Judgment for dismissal of the litigation with Torch was
filed with the Louisiana federal district court and approved on
January 5, 1996.) And to the pay down of certain outstanding
trade payables, as well as principal loan reduction to the Daiwa
Bank debt of $50,000.
The Company's current liabilities exceed current assets by
$2,449,451 at January 31, 1996. The working capital deficit at
January 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 $850,000.
The Company anticipates that given its current cash position and
assuming a satisfactory resolution of the Daiwa matter, it will
have sufficient working capital to meet its obligations during
the ensuing fiscal year.
9
CASPEN OIL, INC.
AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis or Plan of
Operation, Continued
Results of Operations
Oil and gas revenues were substantially lower in the six months
ended January 31, 1996, as compared to the six months ended
January 31, 1995. This was primarily attributable to lower unit
production at both the Vermilion Bay and the Werner Sawmill
leases in fiscal year 1996 as compared to fiscal year 1995, and
to a workover on a non-operated Texas well, the Hill - 1T.
The Company experienced slightly higher gas prices in the six
months ended January 31, 1996, compared with those received in
the same period last year, whereas relatively stable oil prices
were experienced in the first six months of fiscal year 1996 when
compared with the same period last year. Average oil and gas
prices received in the six months ended January 31, 1996, were
approximately $15.90 per barrel of oil and $1.45 per MCF gas as
compared to approximately $15.60 per barrel of oil and $1.40 per
MCF gas for the six months ended January 31, 1995.
The Company reported a net loss of $(66,305) for the six months
ended January 31, 1996, compared to a net loss of $(58,911) for
the six months ended January 31,1995. This is primarily due to
higher oil and gas revenues and comparatively lower production
and operating expenses for the six months ended January 31, 1995
as compared with the six months ended January 31, 1996. Oil and
gas revenues approximated $467,000 for the six months ended
January 31, 1996, while revenues for the same period in 1995
approximated $663,000. Production and operating expenses for the
period ended January 31, 1996, were approximately $242,000, as
compared to the period ended January 31, 1995, which were
approximately $324,000. The increase in lease operating expenses
to 52 percent of oil and gas sales from 49 percent generally
reflects the activities detailed above with respect to the
decrease in oil and gas revenues for the six months ended January
31, 1996.
General and administrative expenses for the six months ended
January 31, 1996, decreased by approximately $158,000 from the
corresponding six months ended January 31, 1995. This decrease
primarily related to lower costs of merger and acquisition
activities, including legal and accounting costs.
Series A Preferred Stock Cumulative Dividends In Arrears
10
The terms of the Series A Shares provide that no dividends may be
paid on theCommon 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 January 31, 1996, dividends on the Company's Series
A Shares are in arrears $16.19 per share for a total of
$9,705,527.
11
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:
A report dated February 13, 1996, was filed reporting
information under Item
4 - Changes in Registrant's Certifying Accountant.
12
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.
March 15, 1996 By:
Gary N. Davis,
Treasurer
13
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.
March 15, 1996 By:/s/ Gary N. Davis
Gary N. Davis,
Treasurer
13<PAGE>
