-----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, RMqEEGnYPvNS44RhZQMB0xoxAqnitNkd4N77VwE26+jVPPKp1/0Dl/fj4U4Fvi9r GDvoEi2pTkWYPRKikONmlw== 0000948830-00-000171.txt : 20000421 0000948830-00-000171.hdr.sgml : 20000421 ACCESSION NUMBER: 0000948830-00-000171 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000229 FILED AS OF DATE: 20000420 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CAPCO ENERGY INC CENTRAL INDEX KEY: 0000354767 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 840846529 STATE OF INCORPORATION: CO FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-10157 FILM NUMBER: 605248 BUSINESS ADDRESS: STREET 1: 2922 EAST CHAPMAN AVENUE STREET 2: SUITE 202 CITY: ORANGE STATE: CA ZIP: 92869 BUSINESS PHONE: 7142888230 MAIL ADDRESS: STREET 1: 216 16TH ST STE 730 CITY: DENVER STATE: CO ZIP: 80202 FORMER COMPANY: FORMER CONFORMED NAME: ALFA RESOURCES INC DATE OF NAME CHANGE: 19920703 10QSB 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the quarterly period ended February 29, 2000. OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the transition period from _______, 19___ to _______, 19___. Commission File Number: 0-10157 CAPCO ENERGY, INC. --------------------------------------------------------------- (Exact Name of Small Business Issuer as Specified in its Charter) COLORADO 84-0846529 - ------------------------------- ----------------------- (State or Other Jurisdiction of (IRS Employer Identi- Incorporation or Organization) fication Number) 2922 E. CHAPMAN, SUITE 202 ORANGE CALIFORNIA 92869 -------------------------------------- Address of Principal Executive Offices (714) 288-8230 -------------------------------------------------- (Registrant's Telephone Number, Including Area Code) N/A -------------------------------------------------- (Former Name, Former Address and Former Fiscal Year, If Changed Since Last Report) Check whether the Issuer (1) has 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 Issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. X Yes No There were 21,303,838 shares of the Registrant's $.001 par value common stock outstanding as of February 29, 2000. CAPCO ENERGY, INC. CONSOLIDATED BALANCE SHEET ASSETS FEBRUARY 29, MAY 31, 2000 1999 CURRENT ASSETS: Cash & Cash Equivalents $ 1,714,743 $ 20,860 Accounts Receivables, net 777,250 700 Accounts Receivables, related parties 2,276,823 - Inventory 952,599 - Deferred Tax Asset 146,755 - Other Current Assets 6,799 - Total Current Assets 5,874,969 21,560 Property, Plant and Equipment 6,979,060 1,430,126 Accumulated Depreciation (840,322) (1,430,126) Total Property 6,138,738 - OTHER ASSETS Investments 15,427,358 - Intangibles 363,359 - Amortization of Intangibles (118,016) - Other Assets 31,012 843,000 Total Other Assets 15,703,713 843,000 TOTAL ASSETS $27,717,420 $ 864,560 The accompanying notes are an integral part of the financial statements. 2 CAPCO ENERGY, INC. CONSOLIDATED BALANCE SHEET LIABILITIES AND STOCKHOLDERS' EQUITY FEBRUARY 29, MAY 31, 1999 1999 CURRENT LIABILITIES Accounts Payable, Trade $ 1,900,576 $ 23,941 Book Overdraft 2,492,749 - Current Portion, Long-term Debt 2,347,202 - Accrued Expenses 100,016 - Taxes Payable (26,844) - Dividend Payable 26,673 26,673 Total Current Liabilities 6,840,372 50,614 Long Term Debt 3,546,772 - Deferred Tax Liability 608,247 - Minority Interest in Subsidiaries 765,798 - Commitments and Contingencies Total Liabilities 11,761,189 50,614 Stockholders' Equity Preferred Stock, $1.00 par value; Authorized 10,000,000 shares, 292,947 Shares issued and outstanding 292,947 292,947 Common Stock, $.001 par value; Authorized 150,000 shares; 21,303,838 Shares issued and outstanding 21,304 99,000 Paid-In Capital 17,841,739 2,422,976 Retained Earnings (2,199,759) (2,000,977) Total 15,956,231 813,946 TOTAL LIABILITIES AND EQUITY $27,717,420 $ 864,560 The accompanying notes are an integral part of the financial statements. 3 CAPCO ENERGY, INC. CONSOLIDATED STATEMENT OF OPERATIONS For the Three Months Ended February 29, 2000 and February 28, 1999 2000 1999 REVENUES Sales $ 3,448,627 $ 809,131 Cost of Sales 2,634,830 - Gross Profit 813,797 809,131 EXPENSES Selling, General and Administrative 1,013,416 5,427 Amortization 3,755 - Depreciation/Depletion (798) 1,800 Total Expenses 1,016,373 7,227 Income from Operations (202,576) 801,904 OTHER INCOME AND (EXPENSES) Interest Income (468) 57 Interest Expense (78,555) - Other 12,723 - Gain on Sale of Assets 70 - Total Other Income (66,230) 57 Income (loss) before Taxes (268,806) 801,961 Provision for Income Taxes (136,255) - Income before Minority (132,551) 801,961 Minority Interest (17,956) - Net Income (loss) $ (114,595) $ 801,961 Net Income (loss) per Share Basic $ (0.01) $ 0.81 Diluted $ (0.01) $ 0.81 Average Share Outstanding Basic 14,535,892 990,000 Diluted 14,535,892 990,000 The accompanying notes are an integral part of the financial statements. 4 CAPCO ENERGY, INC. CONSOLIDATED STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED FEBRUARY 29, 2000 AND FEBRUARY 28, 1999 2000 1999 REVENUES Sales $ 3,459,648 $ 816,768 Cost of Sales 2,634,830 - Gross Profit 824,818 816,768 EXPENSES Selling, General and Administrative 1,104,092 30,498 Amortization 3,755 - Depreciation/Depletion 2,931 5,400 Total Expenses 1,110,778 35,898 Income from Operations (285,960) 780,870 OTHER INCOME AND (EXPENSES) Interest Income (398) 204 Interest Expense (83,483) - Other 12,723 - Gain on Sale of Assets 4,125 - Total Other Income (67,033) 204 Income (loss) before Taxes (352,993) 781,074 Provision for Income Taxes (136,255) - Income before Minority (216,738) 781,074 Minority Interest (17,956) - Net Income (loss) $ (198,782) $ 781,074 Net Income (loss) per Share Basic $ (0.04) $ 1.23 Diluted $ (0.04) $ 1.23 Average Share Outstanding Basic 5,506,408 634,807 Diluted 5,506,408 634,807 The accompanying notes are an integral part of the financial statements. 5 CAPCO ENERGY, INC CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE NINE MONTHS ENDED FEBRUARY 29, 2000 AND FEBRUARY 28, 2000 2000 1999 Cash Flow from Operating Activities: Net Income (Loss) $ (198,782) $ 781,074 Adjustments to reconcile net income to net cash provided by operating activities Depreciation and amortization 6,685 5,400 (Gain) loss on disposal of property and equipment (4,125) - Deferred Income Taxes (138,504) - Minority Interest (17,956) - Decrease (Increase) in: Accounts Receivable, (net) (646,539) (804,644) Inventories 97,835 - Other Current Assets (5,729) - Increase(Decrease) in Accounts Payable 774,601 5,469 Increase(Decrease) in Accrued Liabilities (20,744) (336) Increase (Decrease) in Taxes Payable (55,156) - Decrease (Increase) Other Assets 2,429 2,900 Net Cash Used by Operating Activities (205,985) (10,137) Cash Flows from Investing Activities: Acquisition Net of Cash (2,089,499) - Cash Proceeds from Sale of Property 4,125 - Purchases of Property and Equipment (929,978) (35,000) Non-compete Agreement 266 - Investment in Closely Held Business (698,528) - Net cash used by investing activities (3,713,614) (35,000) Continued on Next Page 6 CAPCO ENERGY, INC CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE NINE MONTHS ENDED FEBRUARY 29, 2000 AND FEBRUARY 28, 2000 (Continued) 2000 1999 Cash Flow from Financing Activities: Increase(Decrease) in Book Overdraft $ 2,492,749 $ - Borrowings on Long-Term Debt 2,324,858 - Sale of Stock 795,875 55,135 Net Cash Provided by Financing Activities 5,613,482 55,135 Net Increase in Cash 1,693,883 9,998 Cash, Beginning of Period 20,860 10,830 Cash, End of Period $ 1,714,743 $ 20,828 Non Cash Transactions Stock Issued for Acquisitions $14,545,192 $ - The accompanying notes are an integral part of the financial statements. 7 CAPCO ENERGY, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FEBRUARY 28, 1999 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ORGANIZATION Capco Energy, Inc. ("CEI") was incorporated as a Colorado corporation on January 6, 1981. Effective in 1999 CEI acquired 100% of Capco Resource Corporation ("CRC"), approximately 80% of Capco Resources, Ltd. ("CRL"), 80% of Zelcom Industries, Inc. ("ZELCOM"), and 100% of Meteor Stores, Inc. ("MSI"). CRL owns 100% of Capco Asset Management, ("CAM"). CRL owns 1,290,000 shares of Greka Energy, Inc. These shares represent approximately 30% of the outstanding Share Capital of Greka. Greka trades under the symbol GRKA. CAM owns 1,216,000 shares of Meteor Industries Inc. these shares represent approximately 35% of the outstanding Share Capital of Meteor Industries, a petroleum marketing business based in Denver. Meteor trades under the symbol METR. CAM made a convertible investment in Chaparral, which may result in CAM owning in excess of 400,000 shares of Chaparral's Common Stock. Chaparral trades under the symbol CHAR. CAM made a convertible investment in Nevada Manhattan, which may result in CAM owning 16,000,000 shares of Nevada's common stock. Nevada trades under the symbol NVMHE. OIL AND GAS ACCOUNTING The Company accounts for oil and gas properties using the "full cost" method. Under this method, all costs associated with property acquisition, exploration and development activities are capitalized, including costs of unsuccessful activities. Oil and gas properties are depleted using the units-of-production method based on the ratio of current period production to estimated proved oil and gas reserve quantities. No gain or loss resulting from the disposition of oil and gas properties is recognized unless the relationship between capitalized costs and reserves in the cost center is significantly changed. In addition to normal depletion, net capitalized costs are subject to a ceiling limitation required by the Securities and Exchange Commission (SEC). Such costs are limited to the present value (discounted at 10%) of the future net revenues from proved oil and gas properties, using year end costs and prices, after considering potential future income tax effects. There were no charges related to the ceiling limitation during the quarter ending February 29, 2000. Revenue from oil and gas production is recognized upon sale to unaffiliated purchasers. CASH EQUIVALENTS Cash equivalents include money-market accounts or other highly liquid debt instruments with an original maturity of three months or less. USE OF ESTIMATES Preparation of financial statements in accordance with generally accepted accounting principles requires the use of estimates. The unaudited oil and gas reserve estimates prepared by management should be considered as reasonably possible to change, which can affect depletion and the net carrying value of oil and gas properties. 8 INCOME (LOSS) PER SHARE Basic earnings per common share are computed by dividing net income by the weighted average number of common shares outstanding. Diluted earnings per share are calculated taking into account all potentially dilutive securities. The company has no dilutive securities. Antidilutive securities are omitted. BASIS OF PRESENTATION These financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information. 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, such interim statements reflect all adjustments (consisting of normal recurring accruals) necessary to present fairly the financial position and the results of operations and cash flows for the interim periods presented. The results of operations for these interim periods are not necessarily indicative of the results to be expected for the full year. These financial statements should be read in conjunction with the audited consolidated financial statements and footnotes for the year ended May 31, 1999, filed with the Company's Form 10-K. CONTINGENCIES The Company is subject to various federal, state and local environmental laws and regulations. Although Company environmental policies and practices are designed to ensure compliance with these laws and regulations, future developments and increasingly stringent regulations could require the Company to make additional unforeseen environmental expenditures. Environmental accruals are routinely reviewed on an interim basis as events and developments warrant. The Company is a party to certain litigation that has arisen in the normal course of its business and that of its subsidiaries. In the opinion of management, none of this litigation is likely to have a material effect on the Company's financial position or results of operation BUSINESS SEGMENTS The Company operates in three business segments: oil production retail convenience stores and Internet operations. Senior management evaluates and makes operating decisions about each of these operating segments based on a number of factors. The following tables reflect the segment information: 9
For the Nine Months Ended For the Nine Months Ended February 29, 2000 February 28, 1999 Oil Conven- Oil Conven- Produc- ience Produc- ience Total tion Stores Internet Total tion Stores Internet ---------- --------- ---------- -------- -------- -------- ------ -------- REVENUES Sales $3,459,648 $ 164,884 $3,294,764 $ - $816,768 $816,768 $ - $ - Cost of Sales 2,634,830 - 2,634,830 - - - - - Gross Profit 824,818 164,884 659,934 - 816,768 816,768 - - EXPENSES Selling, General & Adminin- strative 1,104,092 400,394 689,525 14,173 30,498 30,498 - - Amortiza- tion 3,755 3,755 - - - - - - Depreciation /Depletion 2,931 2,931 - - 5,400 5,400 - - ---------- --------- ---------- -------- -------- -------- ------ -------- Total Expenses 1,110,778 407,080 689,525 14,173 35,898 35,898 - - Income from Operations (285,960) (242,197) (29,590) (14,173) 780,870 780,870 - - Other Income & (Expenses) Interest Income (398) - (398) - 204 204 - - Interest Expense (83,783) (34,690) (48,793) - - - - - Other 12,723 12,723 - - - - - - Gain on Sale of Assets 4,125 4,125 - - - - - - ---------- --------- ---------- -------- -------- -------- ------ -------- Total other Income (67,033) (17,842) (49,191) - 204 204 - - Income (loss) Before Taxes (352,993) (260,039) (78,781) (14,173) 781,074 781,074 - - Provision For income Taxes (136,255) (100,375) (30,410) (5,470) - - - - Income before Minority (216,738) (159,664) (48,371) (8,703) 781,074 781,074 - - Minority Interest (17,956) (12,432) - (5,524) - - - - ---------- --------- ---------- -------- -------- -------- ------ -------- Net Income (Loss) $(198,782) $(147,232) $ (48,371) $ (3,179) $781,074 $781,074 $ - $ - 10 For the Nine Months Ended For the Nine Months Ended February 29, 2000 February 28, 1999 Oil Conven- Oil Conven- Produc- ience Produc- ience Total tion Stores Internet Total tion Stores Internet ---------- --------- ---------- -------- -------- -------- ------ -------- REVENUES Sales $3,448,627 $ 153,863 $3,294,764 $ - $809,131 $809,131 $ - $ - Cost of Sales 2,634,830 - 2,634,830 - - - - - Gross Profit 813,797 153,863 659,934 - 809,131 809,131 - - EXPENSES Selling, General & Adminin- strative 1,013,416 309,719 689,524 14,173 5,427 5,427 - - Amortiza- tion 3,755 3,755 - - - - - - Depreciation /Depletion (798) (798) - - - - - - ---------- --------- ---------- -------- -------- -------- ------ -------- Total Expenses 1,016,373 312,676 689,524 14,173 5,427 5,427 - - Income from Operations (202,576) (158,813) (29,590) (14,173) 801,904 801,904 - - Other Income & (Expenses) Interest Income (468) (70) (398) - 57 57 - - Interest Expense (78,555) (29,762) (48,793) - - - - - Other 12,723 12,723 - - - - - - Gain on Sale of Assets 70 70 - - - - - - ---------- --------- ---------- -------- -------- -------- ------ -------- Total other Income (66,230) (17,039) (49,191) - 57 57 - - Income (loss) Before Taxes (268,806) (175,852) (78,781) (14,173) 801,961 801,961 - - Provision For income Taxes (136,255) (100,375) (30,409) (5,471) - - - - Income before Minority (132,551) (75,477) (48,372) (8,702) 801,961 801,961 - - Minority Interest (17,956) (12,432) - (5,524) - - - - Net Income (Loss) $(114,595) $ (63,045) $ (48,372) $ (3,178) $801,961 $801,961 $ - $ -
11 1. ACQUISITIONS Effective in December 1999 the Company acquired 100% of the outstanding common stock of Capco Resource Corporation ("CRC") in exchange for common stock of the Company. The transaction was accounted for as a purchase. Effective in December 1999 the Company acquired approximately 70% of the outstanding stock of Capco Resources, Ltd. ("CRL") in exchange for common stock of the Company. Effective in December 1999 the Company acquired 80% of the outstanding common stock of Zelcom Industries, Inc. ("ZELCOM") in exchange for common stock of the company. Effective December 31, 1999 the Company acquired 100% of the outstanding stock of Meteor Stores, Inc. for cash and a note. 2. RELATED PARTY TRANSACTIONS Ilyas Chaudhary, President and Director, controls directly or indirectly a majority of the stock of the Company. He also controlled directly or indir- ectly a majority of the stock of CRL and CRC. He also controlled directly or indirectly 34% of the parent company of Meteor Stores, Inc. Mr. Chaudhary's independent son controlled a majority of Zelcom. During the quarter ended the Company advanced funds to and received funds from various entities either controlled by Mr. Chaudhary or entities of which he is an officer or director. At February 28, 2000, the Company had a receivable from these companies of $2,276,823. Of that amount $1,387,742 relates to fuel sales to Meteor Industries Inc., $513,478 relates to transactions with companies that the company has an investment in common stock, and $375,603 are with private companies. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 that include, among others, statements concerning: the benefits expected to result from Capco's acquisition of CRL, CRC and MSI. Including synergies in the form of increased revenues, decreased expenses and avoided expenses and expenditures that are expected to be realized by Capco as a result of the acquisitions, and other statements of: expectations, antici- pations, beliefs, estimations, projections, and other similar matters that are not historical facts, including such matters as: future capital, development and exploration expenditures (including the amount and nature thereof), drilling of wells, reserve estimates (including estimates of future net revenues associated with such reserves and the present value of such future net revenues), future production of oil and gas, repayment of debt, business strategies, and expansion and growth of business operations. These statements are based on certain assumptions and analyses made by the management of Capco in light of: past experience and perception of: His- torical trends, current conditions, expected future developments, and other factors that the management of Capco believes are appropriate under the circumstances. Capco cautions the reader that these forward-looking statements are subject to risks and uncertainties, including those associated with: the financial environment, the regulatory environment, and trend projections, that could cause actual events or results to differ materially from those expressed or implied by the statements. Such risks and uncertainties include those risks and uncertainties identified below. 12 Significant factors that could prevent Capco from achieving its stated goals include: the failure by Capco to integrate the respective operations of Capco and its acquisitions or to achieve the synergies expected from the acquisitions, declines in the market prices for oil and gas, increase in refined product prices, and adverse changes in the regulatory environment affecting Capco. The cautionary statements contained or referred to in this report should be considered in connection with any subsequent written or oral forward-looking statements that may be issued by Capco or persons acting on its or their behalf. Capco undertakes no obligation to release publicly any revisions to any forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. LIQUIDITY AND CAPITAL RESOURCES At February 29, 2000, the company has a deficit working capital of $965,403, compared to a deficit of $29,054 at May 31, 1999. This deficit is principally due to a short-term note related to an acquisition of a producing oil and gas property. The Company through its subsidiaries has investments in various public companies. The majority of these investments are restricted and are not readily saleable. The Company through its subsidiaries is also involved in litigation regarding the investment in Greka Energy Corporation. (See Litigation). Cash flows used in operations for the nine months ended February 29, 2000, and February 28, 1999, were $205,985 and $10,137 respectively. The increase in cash used during this period is principally due to the increased activity of the company. Cash flows used in investing activities for the nine months ended February 29,2000, were $3,713,614 compared to $35,000 in the prior year. This increase is principally due to the acquisition of oil and gas properties and investments in convertible securities. Cash flows provided by financing activities for the nine months ended February 29, 2000, were $5,613,482 compared to $55,135 in the prior year. This increase is principally due to the sale of stock and borrowings. Capco sells most of its oil production to certain major oil companies. However, in the event these purchasers discontinued oil purchases, Capco has made contact with other purchasers who would purchase the oil. The Company is responsible for any contamination of land it owns or leases. However, the Company may have limitations on any potential contamination liabilities due to state reimbursement programs. YEAR 2000 Capco has no proprietary software. The Company did receive updates for its purchased software and the Company did not incur any significant costs related to the Year 2000 problem. 13 RESULTS OF OPERATIONS THREE MONTHS ENDED FEBRUARY 29, 2000 COMPARED TO FEBRUARY 28, 1999 Oil and Gas Production Segment Capco's revenues from its oil and gas segment decreased to $153,863 in 2000 from $809,131 in 1999. This decrease is primarily due to a management fee in 1999, which was not continued. Selling, general and administrative costs increased to $309,720 in 2000 from $5,427 in 1999, as the company geared up for increased activities. Total other income (expense) decreased to $(17,039) in 2000 from $57 in 1999, principally due to increase interest expense on increased debt. Net operating revenues from Capco's oil and gas production are very sensitive to changes in the price of oil; thus it is difficult for management to predict whether or not the Company will be profitable in the future. C-Stores Segment This is a new segment for the company due to an acquisition this quarter. There are no comparative numbers for the prior year. Revenues were $3,294,764 and cost of sales were $2,634,830, reflecting a gross profit percentage of 20%. Selling, general and administrative costs were $689,524, due principally to operating this division. Total other income (expense) is $(49,191) due principally to interest expense. Internet Segment This is a new segment for the company due to an acquisition this quarter. There are no comparative numbers for the prior year. There have been no revenues and costs are $14,173 due principally getting started in this division. NINE MONTHS ENDED FEBRUARY 29, 2000 COMPARED TO FEBRUARY 28, 1999 Oil and Gas Production Segment Capco's revenues from its oil and gas segment decreased to $164,884 in 2000 from $816,768 in 1999. This decrease is primarily due to a management fee in 1999, which was not continued. Selling, general and administrative costs increased to $400,394 in 2000 from $30,498 in 1999, as the company geared up for increased activities. Total other income (expense) decreased to $(17,842) in 2000 from $204 in 1999, principally due to increase interest expense due to borrowings. Net operating revenues from Capco's oil and gas production are very sensitive to changes in the price of oil; thus it is difficult for management to predict whether or not the Company will be profitable in the future. C-Stores Segment This is a new segment for the company due to an acquisition this quarter. There are no comparative numbers for the prior year. Revenues were $3,294,764 and cost of sales were $2,634,830, reflecting a gross profit percentage of 20%. Selling, general and administrative costs were $689,525, due principally to operating this division. Total other income (expense) is $(49,191) due principally to interest expense. 14 Internet Segment This is a new segment for the company due to an acquisition this quarter. There are no comparative numbers for the prior year. There have been no revenues and costs are $14,173 due principally getting started in this division. EFFECT OF CHANGES IN PRICES Changes in prices during the past few years have been a significant factor in the oil and gas industry. The price received for the oil and gas produced by Capco has fluctuated significantly during the last year. Changes in the price that Capco receives for its oil and gas is set by market forces beyond Capco's control. That uncertainty in oil and gas prices makes it more difficult for a company like Capco to increase its oil and gas asset bases and become a significant participant in the oil and gas industry. PART II - OTHER INFORMATION Item 1. Legal Proceedings. Capco Resources, Ltd. v. GREKA Energy Corporation and Randeep S. Grewal (Case No. 99-8521-R, U.S. District Court, Central District of California). In August 1999, Capco Resources, Ltd. ("CRL") filed an action against GREKA and Randeep S. Grewal, the President of GREKA, alleging that GREKA breached, and GREKA and Mr. Grewal made misrepresentations in connection with, a Stock Exchange Agreement entered into between Greka, CRL and CRL's affiliates (the "Exchange"). CRL claims that it is entitled to $12.25 million in damages, plus interest and costs, and requests that the court require GREKA to file a registration statement for the resale of 1.29 million shares of GREKA common stock that CRL received pursuant to the Exchange. GREKA filed the case of GREKA vs. CRL and Service Asset Management Company d/b/a Penson Financial Services, Inc. d/b/a Global Hanna Trading in the Denver Colorado District Court and obtained a temporary restraining order (Case No. 99-CV-6006). Prior to the preliminary injunction hearing CRL removed the case to the U.S. Federal District Court in Denver, Colorado (Civil Action No. 99-K-1814) where the cases were combined. CRL is vigorously pursuing this litigation. Item 2. Changes in Securities. None. Item 3. Defaults Upon Senior Securities. None. Item 4. Submission of Matters to a Vote of Security Holders. None. Item 5. Other Information. None. 15 Item 6. Exhibits and Reports on Form 8-K. Current Report on Form 8-K dated February 15, 2000, which reported events under Item 5, Other Events. Current Report on Form 8-K dated February 15, 2000, which reported events under Item 5, Other Events. SIGNATURES In accordance with the requirements of the Exchange Act, the Issuer caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized. CAPCO ENERGY, INC. Dated: April 17, 2000 By: /s/ Dennis R. Staal Dennis R. Staal, Chief Financial and Accounting Officer 16
EX-27 2
5 This schedule contains summary financial information extracted from the Consolidated balance sheets and consolidated statements of operations found on Page 2, 3 and 4 of the Company's Form 10-QSB for the quarter ended February 29, 2000, and is qualified in its entirety by reference to such financial statements. 9-MOS MAY-31-2000 FEB-29-2000 1,714,743 0 3,054,073 0 952,599 5,874,969 6,979,060 ( 840,322) 27,717,420 6,840,372 0 21,304 0 292,947 15,641,980 27,717,420 3,448,627 3,448,627 2,634,830 2,634,830 12,325 0 78,555 (268,806) (136,255) (114,595) 0 0 0 (114,595) (.02) (.02)
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