-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, EBuw+Quq0X2/aJN90vlCUNtqjkYYYYIIoK/kFA0j8EHVGsAZP8Ki2MdedjUoO6+U VTHrPVtccetwHud8JNdFBw== 0000889812-98-001170.txt : 19980513 0000889812-98-001170.hdr.sgml : 19980513 ACCESSION NUMBER: 0000889812-98-001170 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980512 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: TENGASCO INC CENTRAL INDEX KEY: 0001001614 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 870267438 STATE OF INCORPORATION: TN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-29386 FILM NUMBER: 98616426 BUSINESS ADDRESS: STREET 1: 603 MAIN AVE STREET 2: SUITE 500 CITY: KNOXVILLE STATE: TN ZIP: 37902 BUSINESS PHONE: 4235231124 MAIL ADDRESS: STREET 1: 630 MAIN AVENUE STREET 2: SUITE 500 CITY: KNOXVILLE STATE: TN ZIP: 37902 10QSB 1 QUARTERLY REPORT U. S. Securities and Exchange Commission Washington, D. C. 20549 Form 10-QSB QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly period ended March 31, 1998 -------------- Commission File No. 0-20975 Tengasco, Inc. ------------- (Exact name of small business issuer as specified in its charter) Tennessee 87-0267438 - ------------------------------- --------------------------------- (State or other jurisdiction of (IRS Employer Identification No.) incorporation or organization) 603 Main Avenue, Suite 500, Knoxville, TN 37902 ----------------------------------------------- (Address of principal executive offices) (423) 523-1124 (Issuer's telephone number, including area code) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: 7,284,801 common shares at -------------------------- March 31, 1998. - --------------- Transitional Small Business Disclosure Format (check one): Yes No X --- --- TENGASCO, INC. TABLE OF CONTENTS
PAGE PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS o Consolidated Balance Sheets as of March 31, 1998 and December 31, 1997...................................................... 3 o Consolidated Statements of Loss for the three months ended March 31, 1998 and 1997.......................................... 5 o Consolidated Statements of Cash Flows for the three months ended March 31, 1998 and 1997.......................................... 6 o Notes to Consolidated Financial Statements............................. 7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS................................................. 8 PART II. OTHER INFORMATION o Signatures............................................................. 10
2 TENGASCO, INC. CONSOLIDATED BALANCE SHEETS ASSETS
March 31, 1998 December 31, 1997 (Unaudited) (Audited) -------------- ----------------- Current Assets: Cash and cash equivalents (Note 3) $462,441 $4,451,274 Accounts Receivable 226,870 - Other current assets 350,732 411,192 -------------- ----------------- Total current assets 1,040,043 4,862,466 Oil and gas properties, net (on the basis of full cost 6,856,228 6,872,571 accounting) Pipeline facilities, at cost 3,420,269 2,596,967 Property and equipment, net 319,828 302,146 Other 10,272 10,661 -------------- ----------------- $11,646,640 $14,644,811 ============== =================
See accompanying notes to consolidated financial statements 3 TENGASCO, INC. CONSOLIDATED BALANCE SHEETS LIABILITIES AND STOCKHOLDERS' EQUITY
March 31, 1998 December 31, 1997 (Unaudited) (Audited) ----------------- ------------------ Current liabilities Notes payable $1,500,000 $2,007,486 Loans payable to affiliates 252,398 252,398 Due to AFG Energy, Inc. (Note 3) 763,375 3,552,005 Current maturities of long-term debt 45,748 41,161 Accounts payable - trade 525,510 527,398 Accrued liabilities 296,149 256,589 ----------------- ------------------ Total current liabilities 3,383,180 6,637,037 Due to AFG Energy, Inc.(Note 3) 1,667,125 1,865,078 Long term debt, less current maturities 159,825 141,215 ----------------- ------------------ Total liabilities 5,210,130 8,643,330 ----------------- ------------------ Stockholders' equity Common stock , $.001 par value, 50,000,000 shares authorized 7,159 7,029 Additional paid-in capital 14,043,612 13,276,752 Unamortized stock award (46,047) (63,540) Accumulated Deficit (7,568,214) (7,218,760) ----------------- ------------------ Total stockholders' equity 6,436,510 6,001,481 $11,646,640 $14,644,811 ================= ==================
See accompanying notes to consolidated financial statements 4 TENGASCO, INC. CONSOLIDATED STATEMENTS OF LOSS (Unaudited)
For the Three For the Three Months Ended Months Ended March 31, 1998 March 31, 1997 (Unaudited) (Unaudited) ----------------- ------------------ Oil and gas revenues $ 610,509 $ - Costs and other deductions Production Costs and Taxes 265,487 21,544 Depletion, depreciation and amortization 122,714 16,099 Interest expense 72,716 313,070 General and administrative costs 484,218 310,277 Realized loss on sale of investments 14,828 0 ----------------- ------------------ Total costs and other deductions 959,963 660,990 ----------------- ------------------ Net loss $ (349,454) $ (660,990) ----------------- ------------------ Basic and diluted loss per common share $ (0.05) $ (0.12) ================= ==================
See accompanying notes to consolidated financial statements 5 TENGASCO, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Three Months Ended March 31 1998 1997 ----------------- ------------------ Operating activities Net loss $ (349,454) $ (660,990) Adjustments to reconcile net loss to net cash used in operating activities: Depletion, depreciation and amortization 122,714 16,099 Amortization of deferred loan costs 113,750 Amortization of imputed value of stock warrants issued 165,000 Compensation paid in stock options 45,921 64,169 Changes in assets and liabilities: Accounts receivable (226,870) 2,097 Other current assets 60,410 (4,709) Accounts payable (1,888) (71,156) Accrued liabilities 39,560 (4,918) Stockholder advances payable - 302,000 ----------------- ------------------ Net cash used in operating activities (309,607) (78,658) ----------------- ------------------ Investing activities Additions to property and equipment (40,819) (39,156) Additions to oil and gas properties (397,795) (45,789) Additions to pipeline facilities (823,302) (37,626) ----------------- ------------------ Net cash used in investing activities (1,261,916) (122,571) ----------------- ------------------ Financing activities Proceeds from borrowings 35,485 36,668 Repayment of amount due AFG Energy, Inc. (2,990,253) Repayments of borrowings (516,104) (7,004) Proceeds from issuance of common stock 973,562 28,852 Proceeds from sale of oil and gas properties 80,000 ----------------- ------------------ Net cash (used in) provided by financing activities (2,417,310) 58,516 ----------------- ------------------ Net decrease in cash and cash equivalents (3,988,833) (142,713) Cash and cash equivalents, beginning of period 4,451,274 146,554 ----------------- ------------------ Cash and cash equivalents, end of period $ 462,441 $ 3,841 ================= ==================
See accompanying notes to consolidated financial statements 6 TENGASCO, INC. Notes to Consolidated Financial Statements 1. The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-QSB and Item 310 (b) of Regulation S-B. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of only normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 1998 are not necessary indicative of the results that may be expected for the year ended December 31, 1998. For further information, refer to the Company's consolidated financial statements and footnotes thereto for the year ended December 31, 1997, included in Form 10- KSB, which are incorporated by reference herein. 2. During the first quarter of 1998, the Company issued 25% working interests in three wells in the Swan Creek Field to a Director which were partially paid for by crediting the Director for $235,000 in placement fees for common stock private placements which occurred during the fourth quarter of 1997 and the first quarter of 1998. 3. On December 18, 1997, the Company entered into an asset purchase agreement in which certain producing oil and gas properties located in the state of Kansas were acquired from AFG Energy, Inc.("AFG"). The agreement, which was effective as of December 31, 1997, closed on March 5, 1998. The Company paid $2,990,253 in cash and entered into a note payable agreement with AFG in the amount of $2,500,000. The note will accrue interest at 9% per annum and is due in 23 monthly installments of principal and interest of $79,500 with a balloon payment of $983,773 due in February, 2000. The total note balance due at March 31, 1998 is $2,430,500 with a current portion payable of $763,375 and a long term amount of $1,667,125. 4. In accordance with ("SFAS") No. 128, "Earnings Per Share", basic and diluted loss per share are based on 7,071,506 weighted average shares outstanding for the quarter ended March 31, 1998 and 5,712,287 weighted average shares outstanding for the quarter ended March 31, 1997. There were 517,502 and 948,670 potential weighted common shares outstanding at March 31, 1998 and March 31, 1997 respectively related to common stock options and warrants. These shares were not included in the computation of the diluted share amount because the Company was in a net loss position and, thus, any potential common shares were anti-dilutive. 7 Tengasco, Inc. Management's Discussion and Analysis Of Financial Condition and Results of Operations The Company is in the business of exploring for and producing oil and gas in the states of Tennessee and Kansas and marketing gas for others in the state of Tennessee. The Company has 208 producing oil and gas wells in Kansas and has nine natural gas and one oil well in Tennessee which are expected to commence production in the second quarter of 1998. Liquidity and Capital Resources The Company's primary cash requirements are for capital expenditures and operating expenses. The primary source of cash prior to the first quarter of 1998 has been private placements of common stock, loans from individuals, loans from a majority stockholder and participation agreements with investors who provided funds for drilling wells. Investing activities included additions of $397,795 to oil and gas properties and $823,802 to complete the Company's pipeline in Tennessee which has been under construction since 1996. The additions to oil and gas properties were primarily costs for drilling two wells in the Swan Creek Field in Northeastern Tennessee. Cash and cash equivalents at March 31, 1998 decreased $3,988,833 from the December 31, 1997 balance of $4,451,274 due primarily to the following: o During the first quarter of 1998 the Company closed the purchase of 208 producing oil and gas wells in Kansas from AFG Energy, Inc.(AFG) effective December 31, 1997. The Company paid $2,990,253 in cash and entered into a note payable agreement with AFG for $2,500,000. o The Company paid $507,486 cash to reduce a note payable to an individual. o Net cash used in Operating Activities was $309,307 shown in detail on the Statement of Cash Flows. Proceeds from private placements of 129,833 shares of common stock totaled $973,562 during the first quarter of 1998. Placement fees for private placements occurring during the fourth quarter of 1997 and first quarter of 1998 totaling $235,000 were credited to a Director as part of his payment to the Company for participation agreements giving him a 25% working interest in three of the Company's wells in the Swan Creek Field. The Company's plan of operations for the next twelve months calls for drilling two wells per month in the Swan Creek Field at a cost of $250,000 per well. The Company plans to extend its 8 recently completed pipeline in Tennessee 10 miles at a cost of $2,500,000 to connect with the main gas transmission line of East Tennessee Natural Gas. This will allow the Company to sell natural gas throughout the southeastern and northeastern United States. At the present time, the Company does not have sufficient funds available to complete the well drilling program and pipeline extension. The Company is currently seeking additional equity funding or debt financing in order to complete the additional wells and pipeline extension as described above. Results of Operations The Company recognized $610,500 in revenues from the Kansas oil and gas field purchased from AFG as noted above. These are the first significant revenues the Company has recognized since its inception. Production Costs and Taxes increased $243,943 from the first quarter of 1997 due to the inclusion of operating costs for the Kansas wells. The $101,170 increase in Depletion, Depreciation and Amortization for 1998 was mostly due to a $99,000 charge for depletion of Oil and Gas Properties computed on the units of production basis using first quarter 1998 Kansas production. Interest Expense for the first quarter of 1998 decreased $240,354 from the first quarter of 1997. The 1997 expense included a $165,000 charge for the imputed value of common stock warrants issued and $113,750 for amortization of deferred loan costs. The 1998 expense does not include a charge for either of these items as they were fully amortized during 1997. Interest Expense for Notes Payable in the first quarter 1998 increased $38,000 over the first quarter of 1997. General and Administrative Expenses increased $173,491 for the first quarter of 1998 as compared to the first quarter of 1997. A majority of this increase was attributable to three areas: o Personnel costs increased $37,000 due to higher staffing levels at the corporate office. o Legal and Accounting expenses increased $45,000. o Public Relations costs increased $71,000. The Company expects to earn a profit in 1998 as a result of the acquisition of the Kansas properties and the commencement of sales of natural gas and oil from the Swan Creek field in Northeastern Tennessee which is anticipated to begin during the second quarter of 1998. The Company's pipeline was recently completed and connected to a natural gas utility. Gas sales will begin upon completion of a gathering system from the Company's nine wells to the pipeline during May, 1998. The Company's expectations of earning a profit in 1998 is a forward looking statement and is subject to many variables over which the Company has no control, such as the price of oil and gas, competition, inflation, natural disasters, etc. Therefore, there can be no assurances that the Company will earn a profit in 1998. 9 PART II-OTHER INFORMATION None. 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 hereto duly authorized. Dated: May 8, 1998 TENGASCO, INC. By: /s/ Robert M. Carter ---------------------------------- Robert M. Carter, President By: /s/ William F. Stenken ---------------------------------- William F. Stenken, Chief Accounting Officer 10 EX-27 2 FINANCIAL DATA SCHEDULE
5 1 3-MOS DEC-31-1997 JAN-01-1998 MAR-31-1998 462,441 0 226,870 0 140,253 1,040,043 10,997,505 487,779 11,646,640 3,383,180 0 0 0 7,159 6,429,351 11,646,640 610,509 610,509 265,487 959,963 0 0 72,716 (349,454) 0 (349,454) 0 0 0 (349,454) (.05) (.05)
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