-----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, K9Xn72cx/kocxBAxOYI5VGkjFga1ACkhb2faSsIk6G2c6gz9EcicpKLm4IWtDkMA lXXNLr1zOCx3yRwHCkU8aQ== 0001016275-96-000006.txt : 19960702 0001016275-96-000006.hdr.sgml : 19960702 ACCESSION NUMBER: 0001016275-96-000006 CONFORMED SUBMISSION TYPE: 10-12G/A PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 19960701 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: GEO PETROLEUM INC CENTRAL INDEX KEY: 0001016275 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 330328958 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-12G/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-20915 FILM NUMBER: 96589344 BUSINESS ADDRESS: STREET 1: 25660 CRENSHAW BLVD STREET 2: SUITE 201 CITY: TARRANCE STATE: CA ZIP: 90505 BUSINESS PHONE: 3105398191 MAIL ADDRESS: STREET 1: 25660 CRENSHAW BLVD STREET 2: SUITE 201 CITY: TORRANCE STATE: CA ZIP: 90505 10-12G/A 1 FORM 10-SB/A GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL BUSINESS ISSUERS Under Section 12(b) or (g) of the Securities Exchange Act of 1934 Geo Petroleum, Inc. ------------------- (Name of Small Business Issuer in its charter) California ---------- (State or other jurisdiction of incorporation or organization) 25660 Crenshaw Boulevard, Suite 201 ----------------------------------- Torrance, California -------------------- (Address of principal executive offices) 33-0328958 ---------- (I.R.S. Employer Identification No.) 90505 ----- (Zip Code) Issuer's telephone number (310) 539-8191 -------------- Securities to be registered under Section 12(b) of the Act: Title of each class to be so registered Inapplicable Name of each exchange on which each class is to be registered Inapplicable Securities to be registered under Section 12(g) of the Act: Common shares ------------- (Title of Class) Registrant, Geo Petroleum, Inc. hereby amends the Registration Statement on Form 10SB dated June 18, 1996, by amending the item numbers of such form identified below to read as follows: ITEM 2. MANAGEMENT DISCUSSION The following discussion and analysis for the quarters ended March 31, 1995 and March 31, 1996 should be read in combination with the Unaudited Financial Statements presented elsewhere herein. RESULTS OF OPERATIONS FIRST QUARTER 1996 COMPARED WITH FIRST QUARTER 1995. During the quarter ended March 31, 1996, GEO had a net loss of $52,785 and cash used in operations of $43,783, compared to net income of $39,955 and cash provided by operations of $155,978 for the comparable 1995 quarter. Oil and gas revenues declined to $226,150 for the 1996 period, compared to $437,698 for the first quarter 1995. This was attributable mostly to normal declines and to a reduction of the number of wells on production in the Rosecrans and East Los Angeles Fields as a result of temporary mechanical malfunctions. Average oil prices increased to $17.53 per barrel in the 1996 period, compared to $15.66 per barrel in the comparable 1995 period, while gas prices remained about unchanged at $1.45 per mcf. Lease operating expenses for the first quarter of 1996 declined to $247,174, as compared to $264,119 in the comparable 1995 period, a 7% decrease reflecting the fewer number of wells on production. However, average production costs per barrel of oil and equivalents increased to $13.97 in the 1996 period from $7.01 in the 1995 period, due to increased repair costs and due to allocating fixed operating costs to a smaller quantity of produced barrels. In addition to the normal operating expenses of existing wells, expenses were incurred in repairing and recompleting wells to bring them on production, performing repairs on wells and facilities damaged by a fire caused by contractor negligence, and putting into service automated custody transfer facilities necessary for the delivery of oil into a refiner's pipeline. General and administrative expenses for the 1996 quarter were $52,075, as compared to $112,834 for the 1995 period, a decrease of 54%. The decrease was largely due to a reduction in legal costs and fees after substantially resolving two lawsuits successfully, and due to lower accounting and consulting fees. Interest expense for the 1996 quarter was $56,314, as compared to $105,758 for the comparable 1995 period, a decrease of 47%. This decrease was due primarily to the exchange of short-term loans for the Company's preferred stock. The Company's provision for depletion and depreciation decreased to $49,121 for the first quarter of 1996, as compared to $55,016 for the 1995 period, a decrease of 11%. CAPITAL RESOURCES AND LIQUIDITY FINANCIAL POSITION. At March 31, 1996, the Company had a working capital deficiency of $2,338,410, which deficiency is greater by $35,050 than such deficiency at December 31, 1995. The Company has requested a one year extension of its bank loan of $1,460,000 now due July 15, 1996. Negotiations are continuing and the Company expects its bank to respond to the request by July 15, 1996. Historically, the net cash flow from the properties of the Company has been sufficient to fund its costs of operations but insufficient to fund such costs and its debt servicing requirements. The Company's primary sources of liquidity and capital resources in the near term will consist of working capital derived from its oil and gas production and water disposal operations, augmented by any such funds as may be derived from the sale of equity in the Company and of participating interests in its operations. The Company's net revenues from oil and gas sales in excess of production and operating expenses during the first quarter of 1996 and 1995 were ($21,024) and $173,579, respectively. This decline is primarily attributable to the drop in revenues in the first quarter 1996 which was previously discussed. Cash used in operations for the quarter ended March 31, 1996, was $43,783 compared to cash provided by operations of $155,978 for the period ended March 31, 1995. This decrease in cash provided by operations of $199,761 is primarily a result of decreased oil and gas production and revenues, increased costs per unit of production, and costs of repair of fire damage. GEO is seeking long-term equity financing. The first step in obtaining it was a merger with Drake Investment Corporation, which closed on April 9, 1996. This was for the purpose of increased access to capital sources. The Company plans now to sell additional shares of its common or preferred stock in equity offerings, which, if successfully completed, will permit it to eliminate its working capital deficiency, debt, and interest obligations, to perform improvement and remedial work on its existing properties, to acquire additional properties, and to drill new wells. All of these activities are expected to substantially increase the revenues of the Company and permit it to continue to operate on a positive cash flow basis. SOURCES OF CAPITAL RESOURCES. During 1996, the Company obtained agreements to extend the maturity date of its bank credit facility in the amount of $1,460,000 from April 15, 1996, to June 15, 1996, and a later extension to July 15, 1996. The Company, its bank and the pledgors of the loan collateral have been negotiating to obtain a one-year extension of the loan. These negotiations are expected to continue into July, 1996. This facility is secured by collateral pledged by minority shareholders of the Company and is not secured by any of the assets of the Company. A portion of the proceeds from the planned equity offering will be dedicated to the repayment of such indebtedness. The Company's cash used in investing activities, primarily additions to its oil and gas properties, net of any sales or disposals, was $30,173 in the first quarter of 1996 and $127,032 for the period ending December 31, 1995. PART F/S
GEO PETROLEUM, INC. UNAUDITED CONDENSED BALANCE SHEET MARCH 31 1996 ----------- ASSETS Current assets: Cash and cash equivalents $ 141,802 Accounts receivable: Accrued oil and gas revenues 61,639 Joint interest and other 195,226 Prepaid expenses and other 52,413 ----------- Total current assets 451,080 Property and equipment: Oil and gas properties 4,765,050 Office furniture and equipment 65,948 ----------- 4,830,998 Accumulated depletion and depreciation (1,086,525) ----------- 3,744,473 Total Assets $4,195,553 ===========
GEO PETROLEUM, INC. UNAUDITED CONDENSED BALANCE SHEET MARCH 31 1996 ----------- LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable: Accrued royalties $ 443,614 Trade and other 214,624 Dividends payable 7,126 Accrued expenses 75,657 Current portion of notes payable 2,048,469 ----------- Total current liabilities 2,789,490 Redeemable convertible preferred stock, $1,000 par value; authorized 100,000 shares; issued and outstanding 538.65 shares at March 31, 1996 578,945 Stockholders' equity Common stock, no par value; authorized 50,000,000 shares; issued and outstanding 1,755,700 at March 31, 1996 2,157,702 Accumulated deficit (1,330,584) ----------- Total stockholders' equity 827,118 ----------- Total liabilities and stockholders' equity $4,195,553 ===========
GEO PETROLEUM, INC. UNAUDITED CONDENSED STATEMENTS OF OPERATIONS THREE MONTHS ENDED MARCH 31, 1996 1995 ---------- ---------- Revenues: Oil and gas sales $ 226,150 $ 437,698 Other revenue 124,131 154,712 Interest income 1,618 869 ---------- ---------- 351,899 93,279 Expenses: Lease operating expenses 247,174 264,119 Depletion and depreciation 49,121 55,613 Amortization of deferred loan costs - 15,000 General and administrative 52,075 112,834 Interest expense 56,314 105,758 ---------- ---------- Income (loss) before income taxes (52,785) 39,955 Provision for income taxes - - ---------- ---------- Net income (loss) (52,785) 39,955 Less preferred stock dividends (39,008) - ---------- ---------- Net income (loss) applicable to common stock $ (91,793) $ 39,955 ========== ========== Net income (loss) per share of common stock $ (0.02) $ 0.01 ========== ========== Weighted average number of common shares outstanding 4,477,913 4,288,454 ========== ==========
GEO PETROLEUM, INC. UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS THREE MONTHS ENDED MARCH 31, 1996 1995 ---------- ---------- OPERATING ACTIVITIES Net income (loss) $ (52,785) $ 39,955 Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depletion and depreciation 49,121 55,613 Amortization of deferred loan costs - 30,000 Gain on sale of property and equipment (36,000) - Changes in operating assets and liabilities: Accounts receivable 104,469 57,125 Prepaid expenses and other - (13,053) Accounts payable (56,304) (21,817) Accrued expenses (52,284) 8,155 ---------- ----------- Net cash provided by (used in) operating activities (43,783) 155,978 INVESTING ACTIVITIES Additions to property and equipment (70,173) (127,032) Proceeds on sale of property and equipment 40,000 - ---------- ----------- Net cash used in investing activities (30,173) (127,032)
GEO PETROLEUM, INC. UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS (CONTINUED) THREE MONTHS ENDED MARCH 31, 1996 1995 ---------- ---------- FINANCING ACTIVITIES Proceeds from notes payable 96,693 - Payments on notes payable (5,000) (70,695) Bank overdraft - (26,002) Preferred stock issued 23,500 - ---------- ----------- Net cash provided by financing activities 115,193 (96,697) ---------- ----------- Net increase (decrease) in cash and cash equivalents 41,237 (67,751) Cash and cash equivalents at beginning of period 100,565 139,874 ---------- ----------- Cash and cash equivalents at end of period 141,802 72,123 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for interest 18,299 103,705 Cash paid during the period for income taxes $ - $ - ========== ===========
GEO PETROLEUM, INC. STATEMENTS OF CASH FLOWS MARCH 31, 1996 SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES: During the quarter ended March 31, 1996, the Company issued 10 shares of the Company's redeemable convertible preferred stock in exchange for the retirement of a certain note payable aggregating $10,000, and the Company sold an additional 23.5 shares of the Company's redeemable convertible preferred stock for $23,500. Dividends on the Company's redeemable convertible preferred stock, amounting to $32,354, were declared during the quarter ended March 31, 1996. However, $25,422 of said dividends were automatically reinvested into additional shares of preferred stock. Additionally, $14,872 of dividends payable at December 31, 1995 were automatically reinvested into additional shares of preferred stock during the quarter ended March 31, 1996. GEO PETROLEUM, INC. NOTES TO CONDENSED FINANCIAL STATEMENTS 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ORGANIZATION Geo Petroleum, Inc. (the Company) is a private oil and gas production company that was founded in 1986 in the state of California. The Company engages in the development, production and management of oil and gas properties located in California. On April 9, 1996, a proposed merger with Drake Investment Corp. (Drake) became effective after approval by the Company's Board of Directors and by Shareholders. On June 20, 1996, the Company filed a Form 10-SB General Form for Registration of Securities of Small Business Issuers with the Securities and Exchange Commission, under Section 12 (b) or (g) of the Securities Exchange Act of 1934. BASIS OF PRESENTATION The accompanying unaudited financial statements have been prepared in accordance with Item 310 of Regulation S-B and 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 normal recurring adjustments) considered necessary for a fair presentation have been included. These statements should be read in conjunction with the financial statements and notes thereto included in Form 10-SB filed June 21, 1996, which is available without cost from Geo Petroleum, Inc. upon request. The accompanying unaudited financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As shown in the financial statements, as of March 31, 1996, the Company's accumulated deficit totaled $1,330,584, and current liabilities exceeded current assets by $2,338,410. These factors, among others, may indicate that the Company will be unable to continue as a going concern for a reasonable period of time. The Company's continuation as a going concern is dependent upon its ability to generate sufficient cash flow to meet its current obligations on a timely basis, to obtain additional financing, and ultimately to obtain successful operations. Management is continuing its efforts to obtain additional funds so that the Company can meet its obligations and sustain operations. These potential alternatives include, among other things, a private and public placement of debt or equity, extending or refinancing the bank loan using oil and gas properties as collateral, sale of oil and gas properties, and obtaining an advance on future production from an end user. As a first step in a potential public or private offering, the Company has signed an agreement to merge with Drake. There can be no assurance that any of these potential alternatives will materialize. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. CASH AND CASH EQUIVALENTS Cash equivalents include certificates of deposit with original maturity dates of less than three months. The Company maintains a $100,000 certificate of deposit for state of California authorization purposes to perform additional oil and gas well recompletions. These funds are subject to certain withdrawal restrictions until completion of the work. INVESTMENT IN PARTNERSHIP Included in oil and gas properties is an investment in a general partnership that was created in 1991 to produce oil at a well located on one of the Company's oil and gas properties. The Company is the managing partner in this general partnership, and this investment is accounted for under the pro rata consolidation method. PROPERTY AND EQUIPMENT The Company follows the full cost method of accounting for oil and gas properties. Accordingly, all costs associated with the acquisition, exploration and development of oil and gas reserves are capitalized as incurred. The costs of oil and gas properties are accumulated in a cost center and are subject to a cost center ceiling which such costs do not exceed. All capitalized costs of oil and gas properties, including the estimated future costs to develop proved reserves, are depleted over the estimated useful lives of the properties by application of the unit-of-production method using only proved oil and gas reserves, excluding future estimated costs and related proved undeveloped oil reserves at the Vaca Oil Sands property, which relate to a major development project involving an enhanced recovery process. The evaluations of the oil and gas reserves were prepared by Sherwin D. Yoelin, a petroleum engineer. Substantially all additions to oil and gas properties during the quarter ended March 31, 1996, relate to recompletions of existing producing or previously producing wells. Depreciation of office equipment and furniture is computed using the straight-line method, with depreciation rates based upon their estimated useful lives, which range between five and seven years. REVENUE Revenue is recorded net of royalties and certain other costs that the Company incurs to bring the oil and gas into salable condition. The Company had two significant customers during the quarters ended March 31, 1996 and 1995, which comprised approximately 75% and 52% of gross oil and gas sales, respectively. Included in other revenues during the quarter ended March 31, 1996, is $45,000 received from the settlement of a lawsuit against an adjacent property owner for damages to Company property incurred while trespassing on a Company easement. EARNINGS PER COMMON SHARE Net income (loss) per common share for all periods presented is based upon average outstanding common shares, adjusted for the stock split described in Note 5. Such calculations do not assume any conversion of the redeemable convertible preferred stock into common stock because determination of the conversion price is subject to future events. USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. RECLASSIFICATIONS Certain prior year amounts in the financial statements have been reclassified to conform to current year presentation. 2. NOTES PAYABLE Notes payable consisted of the following:
MARCH 31 1996 ----------- Note payable to bank $1,460,000 Notes payable to investors 588,469 ----------- 2,048,469 Less current portion 2,048,469 ----------- Total long-term debt $ - ===========
The Company has issued notes payable to various investors bearing an interest rate of 10% and a guaranteed oil and gas production payment equal to 20% of the outstanding principal amount per annum. The holders of the notes have extended the maturities of the notes to various dates in 1996, and all of the notes are secured by interests in the Company's oil and gas properties. The note payable to bank bears interest at prime plus 2.0%. At March 31, 1996, the prime rate was 8.25%. Interest payments are due monthly, and the outstanding principal amount and all unpaid interest was due on October 15, 1995. In October 1995, the bank extended the maturity date of the note payable to April 15, 1996. In June 1996, the bank further extended the maturity date of the note payable to July 15, 1996. The bank has indicated that it will not foreclose on the note, so long as negotiations for a further extension continue on a good faith basis. The Company was not in compliance with certain loan covenants at and subsequent to March 31, 1996, including restrictions on incurring additional debt and failure to make certain payments to outside vendors on a timely basis. While the bank has not taken any action regarding such noncompliance, the covenants have not been waived through the extended maturity date. As a result, the note is classified as current at March 31, 1996. The Company is engaged in discussions with the bank to further extend the maturity of the note for up to one year from June 15, 1996. In 1990, the Company issued 107,300 shares of common stock, an option to purchase 70,833 additional shares of common stock at $6 per share and a recorded deed of trust on 20% of the Company's interest in its Vaca Oil Sands property to certain parties in exchange for those parties providing the collateral, 35,000 shares of Union Pacific Corp. common stock, for the Company's note payable to a bank. The consideration issued was valued at $300,000, its estimated fair market value, and was amortized as additional loan costs over five years. The 35,000 shares of Union Pacific Corp. common stock are held in a trust and had an approximate value of $2,401,875 at March 31, 1996. In the event of default on the bank note payable, the parties providing the collateral may take steps to recover from the Company the value of any collateral taken by the bank. The collateral agreements and the stock purchase option expired on September 11, 1995. In connection with the extension of the maturity date of the bank note payable, the collateral agreement was extended to July 15, 1996. However, the parties providing the collateral have indicated that they will not foreclose on the collateral, so long as negotiations continue on a good faith basis. No additional consideration was given for this extension. 3. RELATED PARTY TRANSACTIONS The Company has entered into agreements with another entity to sell gas and offer water disposal services at certain locations. The principal officer/shareholder of the Company is also the principal officer/shareholder of the other entity. Total revenue to the Company from these agreements was $29,683 during the quarter ended March 31, 1996. At March 31, 1996, the Company had a net receivable balance of $139,219 from the other entity. At March 31, 1996, the Company had notes payable to relatives of the principal officer/shareholder totaling $118,469. The principal officer/shareholder of the Company has not taken a salary since inception of the Company. 4. REDEEMABLE CONVERTIBLE PREFERRED STOCK During the quarter ended March 31, 1996, the Company issued 10 shares of the Company's redeemable convertible preferred stock in exchange for the retirement of a certain note payable aggregating $10,000, and sold an additional 23.5 shares of the Company's redeemable convertible preferred stock for $23,500. During the quarter ended March 31, 1996, dividends on the Company's redeemable convertible preferred stock amounting to $32,354 were declared. However, $25,422 of said dividends were automatically reinvested into additional shares of the preferred stock. Therefore, $6,931 in dividends were payable at March 31, 1996. Additionally, $14,872 of dividends payable at December 31, 1995 were automatically reinvested into additional shares of preferred stock during the quarter ended March 31, 1996. The series of preferred stock issued, carrying an annual dividend of 30%, is callable by the Company at par at any time on notice to the holder. If the Company has not called the preferred stock for redemption by January 1, 1997, the holder may require the Company to redeem the preferred stock. The preferred stock is convertible into common stock, at the option of the holder, at a price equal to 80% of the price at which the common stock may be sold in an initial public offering of the common stock of the Company. 5. COMMON STOCK In June 1995, the Company issued 72,730 shares of common stock to a consulting company as payment for services that were performed in 1994 and 1995. The parties agreed that the stock issued had a value of $10,000 and that approximately 80% of the services were performed at December 31, 1994. Accordingly, at December 31, 1994, the Company had a payable balance of $8,000 relating to these services. On November 17, 1995, the Company's Articles of Incorporation were amended to provide for an authorized capital of fifty million shares of common stock. In connection with the merger with Drake (Note 8), the outstanding shares, including those issued in connection with the acquisition, were split at the rate of 2.5505 to 1. 6. INCOME TAXES Deferred income taxes result from temporary differences in the recognition of revenues and expenses for financial accounting and tax reporting purposes. Net deferred income taxes were composed of the following:
MARCH 31 1996 ----------- Deferred income tax asset - operating loss carryforwards $1,470,000 Deferred income tax liability - differences between book and tax basis of property (1,050,000) Valuation allowance (420,000) ----------- Net deferred income taxes $ - ===========
As of March 31, 1996, the Company had net operating loss carryforwards available in future periods to reduce income taxes that may be payable at those dates. For federal income tax purposes, net operating loss carryforwards at March 31, 1996 amounted to approximately $3,800,000, and expire during the years 2001 through 2010. For state income tax purposes, net operating loss carryforwards at March 31, 1996 amounted to approximately $2,000,000, and expire during the years 2004 through 2011. The Company is delinquent in filing its 1994 income tax returns. 7. COMMITMENTS The Company leases office space under a noncancelable operating lease agreement expiring June 30, 1996. The Company also leases equipment under month-to-month leases. 8. EVENTS SUBSEQUENT TO MARCH 31, 1996 Effective April 9, 1996, the Company merged with Drake. The agreement provides that 10% of the Company's outstanding common stock after the merger will be issued to the Drake shareholders in exchange for the net assets of Drake. In accordance with Section 12 of the Securities Exchange Act of 1934, the registrant caused this amendment no. 1 to registration statement to be signed on its behalf of the undersigned, thereunto duly authorized. Geo Petroleum Inc. (Registrant) Date July 1, 1996 By GERALD T. RAYDON --------------------------------------- Gerald T. Raydon, president (signature)
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