-----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, DCKsnfC8iE4QUROBzqWjfLjkwpVqoEvNbTaJZ4qx44r/uezvchdCz5Yp82SmMOwv fPEsCf4F2TFPf22PIkKVMg== 0001028596-99-000038.txt : 19990426 0001028596-99-000038.hdr.sgml : 19990426 ACCESSION NUMBER: 0001028596-99-000038 CONFORMED SUBMISSION TYPE: 10KSB PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19990423 FILER: COMPANY DATA: COMPANY CONFORMED NAME: APPALACHIAN OIL & GAS CO INC CENTRAL INDEX KEY: 0000732814 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 870382031 STATE OF INCORPORATION: UT FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10KSB SEC ACT: SEC FILE NUMBER: 000-11732 FILM NUMBER: 99599642 BUSINESS ADDRESS: STREET 1: 511 SECOND AVENUE NORTH CITY: NASHVILLE STATE: TN ZIP: 37201 BUSINESS PHONE: 6153554789 MAIL ADDRESS: STREET 1: 511 SECOND AVENUE NORTH CITY: NASHVILLE STATE: TN ZIP: 37201 10KSB 1 U. S. Securities and Exchange Commission Washington D. C. 20549 FORM 10-KSB (X) ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended June 30, 1997 ------------- ( ) TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________________ to __________________ Commission File No. 0-11732 ------- Appalachian Oil & Gas Company, Inc. ----------------------------------- (Name of Small Business Issuer in its Charter) UTAH 87-0382031 ------ ---------- (State of Other Jurisdiction (IRS Employer I.D. No.) of incorporation or organization) 701 Second Avenue North Nashville, TN 37201 --------------------------------------------- (Address of Small Business Issuer in its Charter) Issuer's Telephone Number:(615) 254-4789 -------------- (Former Name or Former Address, if changed since last Report) Securities Registered under Section 12(b) of the Exchange Act. Securities Registered under Section 12(g) of the Exchange Act: Check whether the Issuer(l) 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. (l) Yes X No (2) Yes X No ------ ------ ------ ------ Check if there is no disclosure of delinquent files in response to Item 40S of Regulation S-B is not contained in this form, and no disclosure will be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10KSB. ( ) State Issuer's revenues for its most recent fiscal year: 51,840 . 1 The Exhibit Index commences on page 11 . State the aggregate market value of the voting stock held by non-affiliates computed by reference to the price at which the stock was sold, or the average bid and asked prices of such stock, as of a specified date within the past 60 days. September 8 1998, $.03. There are approximately 8,135,795 shares of common - ------------------------ ---------- voting stock of the Registrant held by non-affiliates. (ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS) Check whether the issuer has filed all documents and reports required to be filed by Section 12, 12 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court. Yes X No ------ ------ (APPLICABLE ONLY TO CORPORATE REGISTRANTS) State the number of shares outstanding of each of the Issuer's classes of common equity, as of the latest practicable date: 8,135,795 Shares as of September 8, 1998. DOCUMENTS INCORPORATED BY REFERENCE ------------------------------------ A description of "Documents Incorporated by Reference" is contained in Item 14 of this Report. Transitional Small Business Issuer Format Yes No X ------ ------ 2 APPALACHIAN OIL & GAS COMPANY, INC.
INDEX Page No. --------- Part I Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . .7 Item 3. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . .8 Item 4. Submission of Matters to a Vote of Securities Holders . . . . . . . . . . . . . . . . . . .9 Part II Item 5. Market for Registrant's Common Equity and Related Matters . . . . . . . . . . . . . . . . . . 10 Item 6. Selected Financial Data. . . . . . . . . . . . . . . . . . . . 10 Item 7. Management's Discussion and Analysis of Financial Conditions and Results of Operations . . . . . . . . . . . . . 11 Item 8. Financial Statements and Supplementary Data. . . . . . . . . . 11 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. . . . . . . . . . . . . . 11 Part III Item 10. Directors and Executive Officers of the Registrant . . . . . . 12 Item 11. Compensation . . . . . . . . . . . . . . . . . . . . . . . . . 13 Item 12. Security Ownership of Certain Beneficial Owners and Management . . . . . . . . . . . . . . . . . . . . . . . . 13 Item 13. Certain Relationships and Related Transactions . . . . . . . . 14 Item 14. Exhibits, Financial Statements, Schedules and Reports on Form 10-K . . . . . . . . . . . . . . . . . . . . . 15 Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . 26
3 PART I Item 1. Business - ---------------- General - ------- In 1981, Dry Creek Exploration, Inc. ("Dry Creek"), the predecessor of Appalachian Oil & Gas Company, Inc. (the "Company") was incorporated under the laws of the State of Utah. Its purpose was to engage in the acquisition, exploration and development of mineral properties. Dry Creek sold 1,165,000 shares of its Common Stock to its promoters for $.00214 per share, a total of $2,500, and 2,500,000 shares of its Common Stock to other residents of the State of Utah at $.01 per share, an aggregate of $25,000. Dry Creek subsequently purchased from a non-affiliate ten (10) placer claims, each consisting of one hundred sixty (160) acres located in Utah, for $20,000. Having substantially depleted the funds obtained by Dry Creek from its public offering in the purchase of the mining claims, and unable thereafter to raise the necessary additional capital for, or to interest third parties in, the exploration of such claims, Dry Creek conducted no substantive business activities until its acquisition of assets from Ratliff Farms, Inc. ("Ratliff") and Universal Energy and Exploration, Inc. ("Universal"). During May 1982, those in control of Dry Creek accepted a proposal from the management of Ratliff and Universal, two (2) Tennessee corporations under the common control of James W. Ratliff, whereby their individually owned shares were acquired by James W. Ratliff and his affiliates and James W. Ratliff and persons affiliated with him were appointed to the Board of Directors of Dry Creek. On June 18, 1982, at a special meeting of Dry Creek's shareholders, and at which, of the three million six hundred sixty-five thousand (3,665,000) shares outstanding, two million forty-seven thousand (2,047,000) shares were represented in person or by proxy, the following actions were approved: (i) the name of the Company was changed to Appalachian Oil & Gas Company, Inc.; (ii) the authorized Common Stock was increased from Fifty million (50,000,000) to one hundred million (100,000,000) shares; (iii) the outstanding three million six hundred sixty-five thousand (3,665,000) shares of Common Stock split on a two for one basis; (iv) individuals who were officers, directors or affiliates of Ratliff and/or Universal were elected to comprise the Company's Board of Directors; and, (v) the Company was thereafter to purchase certain assets of Ratliff and Universal as described in a brochure presented on behalf of the sellers, in exchange for five million (5,000,000) shares of its Common Stock, on a post split basis, subject to satisfying certain conditions relating to the audit of such assets. At the time of purchase, Ratliff was a dormant corporation and Universal was engaged in the acquisition and development of oil and gas properties. The Company has continued some of the oil and gas operations so acquired. From 1982 into late 1985 the Company's activities involved lease acquisitions and the sale of interests in wells to be drilled on such leases. Income was principally derived from the difference between the aggregate purchase price obtained for the interests in a well sold to others and the actual cost to drill and complete the particular well. 4 In December 1985, new directors were elected and they continued to drill wells on developed leases. The Company also sought to increase its sales of natural gas from wells in which it held interests. On August 15, 1989, a group of shareholders filed a complaint for mandamus and other relief pursuant to section 13D of the Securities and Exchange Commission regulations to review the books and records of the company and conduct a shareholders' meeting. This suit was filed in the Chancery Court of Hamilton County, Tennessee. The Court upheld the complaint and allowed the plaintiffs to review the books and conduct a shareholders' meeting. At that time new Directors and Officers were elected by a meeting of the Shareholders. The new management and directors exercised the best efforts to attempt to rectify a situation of field wells that had gone into disrepair, wells that were non-productive and field equipment that needed to be replaced or repaired. For the year 1991 the shareholders elected Raymond Connelly as Chairman of the Board and Director, Russell Ratliff as officer and Director, and Tyler Tait as Secretary and Director. In 1992, the shareholders elected Raymond Connelly as Chairman of the Board of the Corporation, John R. (Jack) Tait as President/CEO and Director and his son, Tyler Tait Secretary and Director. In September 1992, at the annual meeting of the shareholders of the Company, Barry L. Fly was elected as a Director of the corporation. In January 1993, John R. Tait submitted his resignation as President and Director of the Company, Tyler Tait submitted his resignation as Director/Secretary-Treasurer of the Company, and Brent Anderson submitted his resignation as vice-president of the Company. In January 1993, upon the acceptance of the resignations of Messrs. Tait, Tait and Anderson, the Board of Directors of the Company elected Mark S. Moore and Brad L. Fly as Directors of the Corporation. Barry L. Fly was elected Secretary of the corporation and Brad L. Fly was elected as Treasurer of the corporation in January 1993. In April 1993, William Goodwin accepted the position of President with the Company. Mr. Goodwin resigned as President on February 22, 1994. On March 9, 1994, Mark S. Moore was elected President and CEO of the corporation by the Board of Directors. The Company moved its corporate offices on June 1, 1994, to 240 Mayfield Drive, Suite #106, Smyrna, Tennessee 37167. The Company had successfully gained approval of a plan of reorganization under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Southern District of Kentucky. The plan was approved by the Court in March 1992. In January 1993, the Company was able to successfully satisfy all provisions of the confirmed plan by successfully satisfying all unsecured debt according to the plan confirmed by the Untied States Bankruptcy Court for the Southern District of Kentucky. The Corporation also successfully made payments of $25,000 per month to the secured creditor, Valley Bank of Sweetwater, Tennessee on a monthly basis according to the confirmed plan of reorganization by the United States Bankruptcy Court. 5 On February 1, 1996, the Company sold 60.0% of all of its rights, title and interest in machinery and equipment, land, oil and gas well leaseholds to K. Petroleum, Inc., an Ohio Corporation. Further, on February 1, 1996, the Company signed an operating agreement with K. Petroleum, Inc., (KPI), an Ohio Corporation, whereby KPI, would be sole operator of the properties. KPI shall conduct and direct and have full control of all operations and the properties. Under terms of the operating agreement KPI shall operate the properties as an independent contractor on behalf of the parties to the Agreement. Since the sale of 60% of the assets to KPI, the Company has conducted no business other than to pay its creditors with the proceeds of the sale, and collect the royalties from KPI. In December 1995, Mark S. Moore resigned as President and CEO of the Company. In January 1996, the Board of Directors appointed Mr. Raymond Connelly as President and CEO of the Company. In January 1996, Mr. Brad L. Fly resigned as Treasurer and Member of the Board of Directors of Appalachian Oil and Gas Company. In March 1996, Mr. Brad Fly, was re-appointed to its Board of Directors of the Company. In March 1996, the Board of Directors authorized the sale of an undivided 60% of its assets in Clay County, Kentucky for $450,000 to K Petroleum, Inc. In May 1996, Mr. Barry L. Fly, resigned as Secretary and Director and Mr. Brad L. Fly resigned as a director. The Board appointed Mr. Bill Jones, Mr. Turner Snodgrass and Mr. Larry Cortin as Board Members. In 1996, the Company moved its offices from Smyrna, Tennessee to Nashville, Tennessee. In 1997, Mr. David Cooley was appointed to the Board of Directors. For the past two years, the Company sales have been solely from royalties from the production of Natural Gas. Oil production has been negligible. Business Drilling Program - ----------------- During the period after the sale of the 60% interest in its oil and gas wells, royalties from gas sales have declined and ceased in the fourth fiscal quarter of the year ended June 30, 1997. The Company has requested production records from K Petroleum, but has not been able to obtain them as of the date of this report. Competition and Markets - ----------------------- 6 The competitive business conditions which affect the Company's Operating Contractors competitive position in the industry include the price of gas as determined by supply and demand, the availability of gas from the Company and other competitors, weather conditions, and the extremely high cost of the compression and transportation of the gas that is required of the Operating Contractors because of the existing pressure conditions of the Company's sole purchaser, Somerset Gas Services. There are a large number of companies, partnerships and individuals engaged in exploration, development and production of oil and gas properties in the area including, but not limited to, Delta Gas, Wiser Oil Company, Petro Flow, Incorporated, PXT, Incorporated, Southern Gas Company, Incorporated and Midamco, Incorporated. Government Regulation - --------------------- Activities of the Company are regulated by several state and federal agencies and by several state and federal acts. The Company is regulated by the Environmental Protection Agency, the United States Forestry Service, the United States Department of Agriculture, United States Bureau of Land Management, Kentucky Public Service Commission, Kentucky Environmental Protection Agency- Division of Water, and the Kentucky Bureau of Mines and Minerals. Specific acts and statutes which govern the Company include the Federal Environmental Protection Act, the Kentucky Environmental Protection Act and Clean Water and Air Act, the Kentucky Public Service Commission Law Annotated, Kentucky revised statutes Chapter 74, and the Commonwealth of Kentucky, Department of Mines and Minerals permitting drilling operations and the approval of drilled wells for production. Government approval of the Company's Operating Agents operation is mandated pursuant to the Kentucky Public Service Commission Law Annotated, Kentucky revised statutes Chapter 74. While existing and probable governmental regulations on the business are time consuming, the Company believes its Operating Agents to be in compliance with all regulations and that said compliance has not resulted in any significant expense or competitive disadvantage to the Company. Employees - --------- As of June 30, 1997, the Company employed one person, Patsy Fly as Office Manager. Item 2. Properties - ------------------ The following table sets forth the approximate gross and net acres of undeveloped and developed oil and gas properties of the Company at June 30, 1997. The Company has an undivided 40% interest in these wells.
UNDEVELOPED State Gross Acres Net Acres - -------- ------------ ---------- Kentucky 1,100.00 908.00 TOTAL 1,100.00 908.00 7 DEVELOPED State Gross Acres Net Acres - -------- ------------ ---------- Kentucky 2,910 2,206 TOTAL 2,910 2,206
The Company's oil and gas interests are located in Clay County in Kentucky. Oil and Gas Wells - ----------------- The table below shows the number of the Company's gross and net oil and gas wells as of June 30, 1995. Gross wells are the total number of wells in which the Company owns a working interest, and net wells refer to the average of the fractional net revenue interests owned by the Company in gross wells. Dry holes are not included.
Total Total Oil Gas State Gross Net Gross Net Gross Net - -------- ------ ------- ------ ----- ----- ------ Kentucky 30 57.245 0 .0000 30 57.245
The Company has made no attempt to establish a drilling program. Reserves - -------- Richard M. Russell and Associates, consulting engineers of Nashville, Tennessee, rendered an engineering evaluation as of June 30, 1995, of the Company's interest in gas and oil properties. Since the Company is not longer actively engaged as an operator of the wells no subsequent evaluations have been made. Present Activities - ------------------ The Company has no oil and gas activities at this time. Delivery Commitments - -------------------- The Company has no obligations to provide a fixed or returnable quantity of oil or gas under existing contracts or agreements. Item 3. Legal Proceedings - ------------------------- Federal Bankruptcy Court Filing - ------------------------------- On February 1, 1991, the Company filed for relief under Chapter 11 of the Federal bankruptcy laws in the United States Bankruptcy Court for the Eastern District of Kentucky. The Court mandated that the Company management continue operations as debtor-in-possession. On March 25, 1992, a plan of reorganization was approved by the Court and implemented by Company management. 8 The plan required final payment to creditors on or before September 25, 1992. Payment in full was made to all unsecured creditors in January 1993. Monthly payments were made on a timely basis according to the provisions of the confirmed plan to Valley Bank in Sweetwater, Tennessee, the only secured creditor, in the amount of $25,000 per month until March 11, 1993, when the indebtedness to Sweetwater Bank was satisfied in full by the payment of $172,348.49, as a result of the re-financing of the Promissory Note to the bank with private individuals. In 1994 the Company received a court order from the United States Federal Bankruptcy Court in Kentucky fully dismissing the bankruptcy case, in which the company was recognized as having fully completed its obligations under the Chapter 11 Plan of Reorganization and successfully received a full discharge of all obligations pursuant to the bankruptcy. Goldeneye, Inc. and Clyde Fuller vs. Appalachian Oil & Gas Company, Inc. - ------------------------------------------------------------------------ The case was filed on August 17, 1993 seeking payment of royalties due to the Leaseholder. The Operator paid under the terms of the contract and case was dismissed on March 14, 1994 in Clay County Circuit Court, Kentucky. State of Tennessee On the Relation of James E. Ables, et. al. vs. Appalachian Oil & Gas Company, Inc. and Clyde M. Fuller. - ----------------------------------------------------------------- On August 15, 1989 the plaintiffs (Section 13-D Group) filed a complaint for mandamus and other relief to be allowed to review the books and records of the Company and conduct a shareholder meeting, and the defendants (then Company management) moved for an Order to Restrain plaintiffs from conducting an adjourned shareholders meeting on December 20, 1989 in Nashville, Tennessee. The Defendants appealed the interlocutory denial of the request for restraining order. On December 14, 1989 the court ordered then president Clyde M. Fuller, to post a personal bond for $10,000.00 and should Court of Appeals deny defendant's application, the bond shall be liable to pay plaintiffs (13-D Group) their reasonable expenses with solicitation of proxies caused by staying shareholders meeting of December 10, 1989 together with the costs of the appeal. The Chancery Court, Hamilton County, Tennessee denied the appeal and taxed the costs to defendant/Fuller. On March 11, 1994, Clyde M. Fuller renewed his petition for release of his personal bond of $10,000.00. Plaintiffs (then 13-D Group, now present Company Management has simultaneously moved the Court to fix damages caused by defendant in attempting to reverse Order of the Court for the sum of $24,176.47, or alternatively to the extent of Mr. Fuller's bond. On March 22, 1995, the Chancellor of the Chancery Court, Hamilton County Court Tennessee ruled in favor of the petitioner, Clyde M. Fuller, and released the personal bond of $10,000.00 to Mr. Fuller by court opinion. Item 4. Submission of Matters to a Vote of Security Holders - ----------------------------------------------------------- The annual meeting of Shareholders of the Company was held on September 12, 1992. In addition to the election of directors and the approval of auditors, the Shareholders approved an amendment to the Articles of Incorporation to increase the par value of the Common Stock of the Company from one-tenth of a cent to one cent per share, with a resultant stock split of one share of the new one cent par value common voting stock for each ten shares of the old one-tenth of a cent par value common voting stock issued and outstanding. Of the shares present at the annual meeting, 36,108,596 voted for the amendment and 3,670 voted against it; no shares abstained. The Board of Directors set the date for the reverse split as November 20, 1993. 9 On March 29, 1995 the annual meeting of the stockholders of Appalachian Oil & Gas Company, Inc. was held at the company's corporate headquarters, 240 Mayfield Drive, Suite #106, Smyrna, Tennessee 37167. In addition to the election of directors and the approval of auditors, the Shareholders approved changing of the state of incorporation from Utah to the State of Tennessee. 1,401,330 shares presented at the meeting voted in favor of these items and 20 shares voted against. PART II Item 5. Market for Registrant's Common Equity and Related Matters - ----------------------------------------------------------------- Market Price of Common Stock - ---------------------------- The following over-the-counter market quotations reflect inter-dealer prices, without retain markup, markdown or commission, and may not necessarily represent actual transactions. The range of reported high and low bid quotations was derived from a variety of sources, including quotations published by the National Quotation Bureau, Inc. and other over-the-counter broker/dealers.
For the Quarter Ended High Low - ---------------------- ---- ---- September 30, 1996 .18 .03 December 31, 1996 .18 .03 March 31, 1997 .12 .03 June 30, 1997 .12 .03
At June 30, 1997, the Company had approximately 750 shareholders of record. Dividends - --------- There have been no dividends declared since the date of the Company's organization and no dividends are contemplated to be paid in the foreseeable future. It will continue to be the Company's policy to expend any earnings in developing its gas and oil business. Item 6. Selected Financial Data - -------------------------------
06/30/97 06/30/96 06/30/95 06/30/94 06/30/93 Revenues $48,723 $357,273 $539,395 $721,179 $1,069,097 Income (Loss) from Continuing Operation Per Common Share ($82,909) ($73,494) ($197,130) $121,727 ($30,771) Income (Loss) from Continuing Operations (0.03) (0.02) (0.05) 0.04 (0.001) Total Assets $190,875 $287,591 $633,533 $851,628 $790,615 Long-Term Obligations $-0- $-0- $129,490 $166,242 $434,596 Cash Dividends Declare N/A N/A N/A N/A N/A
10 The gain on sale of assets resulted from the sale of 60.0% of the assets to K. Petroleum, Inc., (KPI). The significant decrease in total assets also resulted from that sale. Item 7. Management's Discussion and Analysis of Financial Conditions and - ------------------------------------------------------------------------ Results of Operations - --------------------- The following discussion should be read in conjunction with the Financial Statements and their related notes, which are included elsewhere in this report. Plan of Operation - ----------------- In 1996, the Company faced with re-occurring losses, decided to sell controlling interest in its oil and gas wells and to sign an operations agreement whereby it would receive royalty payments on revenues, if any, for the 40% interest it owns in 30 gas wells it had heretofore operated. The prospect of rising costs and lower gas prices made the decision necessary. In 1997, the Operator reported declining production and in May 1998, reported that production had ceased. The Company currently seeks verification of those reports. Results of Operations - --------------------- The Company has decreased its expenses to a base minimum. It currently has one employee and rents office space and record storage space from its President. At June 30, 1998, the Company was receiving no revenues and was dependent upon its offices for funds to pay its ongoing expenses. Item 8. Financial Statements - ---------------------------- Financial Statements begin on Page 15. Item 9. Changes in and Disagreements with Accountants on Accounting and - ----------------------------------------------------------------------- Financial Disclosure - -------------------- The Company did not re-appoint York, Neel & Company as its Certified Public Accountant. There were no disagreements with York, Neel & Company. The Company appointed Schvaneveldt & Company to perform its certified audit and assist in the other accounting requirements for the Company. 11 PART III Item 10. Directors and Executive Officers of the Registrant - ----------------------------------------------------------- The following list sets forth the names and ages of all Directors and Executive Officers of the Company, indicates the position held by each and their length of service.
Name Position Assumed Office - -------------------- ------------ ------------------- Raymond A. Connelly Director/ April 1990 Age 64 Chairman Turner Snodgrass Director May 1996 Age 44 Bill Jones Director/ May 1996 Age 67 Secretary/Treasurer David Cooley Director 1997 Age 35
The following is a brief resume of the business experience of the Company Directors and Officers. Raymond A. Connelly - ------------------- Mr. Connelly is a self-employed businessman. He has been involved in limited partnerships promoting oil and gas development since 1985. He is President and CEO of First Place Corporation and President of Central Paint and Body Shop in Nashville, Tennessee. He has been a Director and Officer of the Company since 1989. Mr. Connelly, for the last five years, has had business experience in the areas of oil and gas serving as an officer and director of Appalachian Oil & Gas, Inc., in the repair of automobiles and sale of automobile parts. Turner Snodgrass - ---------------- Mr. Snodgrass has been a practicing attorney in Nashville, Tennessee since the year 1980. His practice is concentrated in general business law. Mr. Snodgrass has been an investor in gas and oil for several years. For the past four years he has been involved in the development of a 152-unit apartment complex in Nashville. Bill Jones - ---------- Mr. Jones is a self-employed businessman. He has been involved in the gas and oil business since 1964. He has been involved in numerous other businesses, but basically gas and oil. He started Easter Petroleum Corporation in 1969 and sold his interest in 1991. 12 David Cooley - ------------ Mr. Cooley is currently a partner in the firm McNeely, Pigott and Fox, Public Relations, LLC. Prior to that Mr. Cooley served as Chief of Staff to Nashville Mayor Phil Bredesen. He has also served as Chief Executive to Tennessee Public Service Commissioner Chairman, Frank Cockran. Mr. Cooley spent 15 years as a Political Consultant, mainly in the Southeast. Item 11. Compensation - --------------------- Annual Compensation Paid to Officers and Directors for Fiscal Year - ------------------------------------------------------------------
Other Restricted Securities Name & Annual Stock Underlying LTIP Principal Fiscal Salary Bonus Compen- Awards Options/ Payouts Position Year ($) ($) sation($) ($) SARS (#) ($) - ----------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------- Ray S. Connelly 1997 $-0- $-0- $-0- $-0- $-0- $-0- - ----------------------------------------------------------------------------------- Turner Snodgrass 1997 $-0- $-0- $-0- $-0- $-0- $-0- - ----------------------------------------------------------------------------------- Bill Jones 1997 $-0- $-0- $-0- $-0- $-0- $-0- - -----------------------------------------------------------------------------------
Item 12. Security Ownership of Certain Beneficial Owners and Management - ----------------------------------------------------------------------- The following sets forth, as of June 30, 1997, certain information regarding ownership of the common stock of the Company by (i) all persons known by the Company to be the beneficial owners of as much as five percent (5%) of the outstanding common stock of the company, (ii) each Officer and Director and (iii) all Officers and Directors as a group.
- ----------------------------------------------------------------------- Name & Address of Percent of Title Class Beneficial Owner Amount Class - ----------------------------------------------------------------------- Common Stock Raymond A. Connelly 744,066 17.7 701 2nd Avenue No. Nashville, Tennessee (1) - ----------------------------------------------------------------------- Common Stock Aymkone PTY, LTD 750,000 17.8 Sydney, Australia - ----------------------------------------------------------------------- Common Stock Industrial Resources, Inc. Knoxville, Tennessee 240,000 5.7 - -----------------------------------------------------------------------
The Company's directors and executive officer owned a total of 1,734,066 shares of the Company's common stock. (1) Includes 722,667 (17.1%) owned by First Place Corporation of Nashville, Tennessee. Mr. Connelly is President of First Place Corporation. 13 Changes In Control - ------------------ There are no arrangements contemplated at the present time which may result in the change in control of the small business issuer. Item 13. Certain Relationships and Related Transactions - ------------------------------------------------------- Raymond Connelly, Director and Chairman of the Board of the Company, is an Officer and Shareholder of First Place Corporation. First Place Corporation owns 722,667 shares of Common Stock. There were no material transactions, or series of similar transactions, during the Company's last three calendar years, or any currently proposed transactions, or series of similar transactions, to which the Company or any of its subsidiaries was or is to be a party, in which the amount involved exceeded $60,000, and in which any promoter or founder or any member of the immediate family of any of the foregoing persons, had an interest. There were no reports required by Section 16 (a) that were not filed on a timely basis. 14 Appalachian Oil & Gas Company, Inc. Financial Statements June 30, 1997 & 1996 15 /Letterhead/ Schvaneveldt & Company Certified Public Accountant 275 East South Temple, Suite #300 Salt Lake City, Utah 84111 (801) 521-2392 Darrell T. Schvaneveldt, C.P.A. Independent Auditors Report --------------------------- Board of Directors Appalachian Oil & Gas Company, Inc. I have audited the accompanying balance sheets of Appalachian Oil & Gas Company, Inc., as of June 30, 1997, and the related statements of operations, stockholders' equity, and cash flows for the years ended June 30, 1997 & 1996. These financial statements are the responsibility of the Company's management. My responsibility is to express an opinion on these financial statements based on my audit. I conducted my audit in accordance with generally accepted auditing standards. Those standards require that I plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and the significant estimates made by management, as well as evaluating the overall financial statements presentation. I believe that my audit provides a reasonable basis for my opinion. In my opinion, the aforementioned financial statements present fairly, in all material respects, the financial position of Appalachian Oil & Gas Company, Inc., as of June 30, 1997, and the results of its operations and its cash flows for the years ended June 30, 1997 & 1996, in conformity with generally accepted accounting principles. /S/ Darrell Schvaneveldt Salt Lake City, Utah April 6, 1998 16 Appalachian Oil & Gas Company, Inc. Balance Sheets June 30, 1997 & June 30, 1996
June June 30, 1997 30, 1996 ------------ ------------ Current Assets - -------------- Cash & Cash Equivalents $ 36,954 $ 104,123 Accounts Receivable - Trade 17,855 30,437 ------------ ------------ Total Current Assets 54,809 134,560 Property & Equipment - -------------------- Oil & Gas Properties 140,184 140,184 Other Property & Equipment 326,574 326,574 ------------ ------------ Total Property & Equipment 466,758 466,758 Less Accumulated Depreciation, Depletion & Amortization 330,692 313,727 ------------ ------------ Net Property & Equipment 136,066 153,031 ------------ ------------ Total Assets $ 190,875 $ 287,591 ============ ============
The accompanying notes are an integral part of these financial statements 17 Appalachian Oil & Gas Company, Inc. Balance Sheets -Continued- June 30, 1997 & June 30, 1996
June June 30, 1997 30, 1996 ------------ ------------ Current Liabilities - ------------------- Accounts Payable - Trade $ 338 $ 12,345 Accrued Expenses -0- 2,000 ------------ ------------ Total Current Liabilities 338 14,345 Commitments & Contingencies - --------------------------- Stockholders' Equity Common Stock, Par Value $0.01 Per Share, 100,000,000 Shares Authorized, 3,135,795 Shares Issued & Outstanding 31,358 31,358 Additional Paid In Capital 1,814,342 1,814,342 Retained Deficit ( 1,655,163) ( 1,572,454) ------------ ------------ Total Stockholders' Equity 190,537 273,246 ------------ ------------ Total Liabilities & Stockholders' Equity $ 190,875 $ 287,591 ============ ============
The accompanying notes are an integral part of these financial statements 18 Appalachian Oil & Gas Company, Inc. Statement of Operations For the Years Ended June 30, 1997, 1996 & 1995
1997 1996 1995 ----------- ----------- ----------- Revenues - -------- Oil & Gas Sales $ 48,723 $ 355,225 $ 531,943 Drilling Programs -0- -0- 2,418 Other 3,117 2,048 5,034 ----------- ----------- ----------- Total Revenues 51,840 357,273 539,395 Costs & Expenses - ---------------- Well Abondonments/Impairments -0- -0- 121,853 Other Operating Expenses 35,530 244,232 220,135 Depreciation, Depletion & Amortization 16,965 52,086 83,245 Interest -0- 21,232 24,368 Loss on Sale of Property & Equipment -0- -0- 11,545 General & Administrative 82,054 113,217 275,379 ----------- ----------- ----------- Total Costs & Expenses 134,549 430,767 736,525 Loss from Operations ( 82,709) ( 73,494) ( 197,130) Other Income - ------------ Sale of Oil & Gas Leases -0- 106,834 -0- ----------- ----------- ----------- Net Income (Loss) Before Minority Interest ( 82,709) 33,340 ( 197,130) Minority Interest -0- -0- 2,378 ----------- ----------- ----------- Net Income (Loss) After Minority Interest ( 82,709) 33,340 ( 199,508) ----------- ----------- ----------- Income Taxes - ------------ Current Tax Expenses -0- -0- -0- Benefits of Operating Loss Carryforwards -0- -0- ( 36,700) ----------- ----------- ----------- Total Income Taxes -0- -0- ( 36,700) Income (Loss) Before Extraordinary Items -0- -0- ( 162,808) Extraordinary Item, Net Income taxes Of $36,700 -0- -0- 71,300 ----------- ----------- ----------- Net Income (Loss) ($ 82,709) $ 33,340 ( $91,508) =========== =========== =========== Income (Loss) Per Share Before Extraordinary Item ($ .03) $ .01 ($ 0.05) Extraordinary Item -0- -0- 0.02 Net Income (Loss) ($ .03) $ .01 ($ .03)
The accompanying notes are an integral part of these financial statements 19 Appalachian Oil & Gas Company, Inc. Statement of Stockholders' Equity From July 1, 1993 to June 30, 1997
Additional Common Paid In Accumulated Shares Stock Capital Deficit ---------------------------------------------------- Balance, July 1, 1993 4,202,399 $ 42,024 $ 1,743,676 ($1,636,013) Common Stock Canceled ( 1,026,604) ( 10,266) 10,266 Common Stock Issued 60,000 600 59,400 Net Income for the Year Ended June 30, 1994 121,727 ---------------------------------------------------- Balance, June 30, 1994 3,235,795 32,358 1,813,342 ( 1,514,286) Net Loss for the Year Ended June 30, 1995 ( 91,508) ---------------------------------------------------- Balance, June 30, 1995 3,235,795 32,358 1,813,342 ( 1,605,794) Shares Returned to the Company for Cancellation ( 100,000) ( 1,000) 1,000 Net Income for the Year Ended June 30, 1996 33,340 ---------------------------------------------------- Balance, June 30, 1996 3,135,795 31,358 1,814,342 ( 1,572,454) Net Loss for the Year Ended June 30, 1997 ( 82,709) ---------------------------------------------------- Balance, June 30, 1997 3,135,795 $ 31,358 $ 1,814,342 ($1,655,163) ====================================================
The accompanying notes are an integral part of these financial statements 20 Appalachian Oil & Gas Company, Inc. Statement of Cash Flows For the Years Ended June 30, 1997, 1996 & 1995
1997 1996 1995 ---------- ---------- ---------- Cash Flows from Operating Activities - ------------------------------------ Net Income (Loss) ($ 82,709)$ 33,340 ($ 91,508) Adjustments to Reconcile Net Income (Loss) to Net Cash Provided by Operating Activities Depreciation, Depletion & Amortization 16,965 52,086 83,245 Well Abandonments & Impairments -0- -0- 121,853 Loss on Sale of Property & Equipment -0- -0- 11,545 Gain on Sale of Properties -0- ( 106,834) 2,378 Changes in Operating Assets & Liabilities (Increase) Decrease in Accounts Receivable 12,582 42,211 9,518 Increase (Decrease) in Accounts Payable ( 12,007)( 107,940)( 85,532) Increase (Decrease) in Accrued Expenses ( 2,000)( 3,352)( 303) ---------- ---------- ---------- Net Cash Provided by (Used In) Operating Activities ( 67,169)( 90,489) 51,196 ---------- ---------- ---------- Cash Flows from Investing Activities - ------------------------------------ Purchases of Property & Equipment -0- -0- ( 11,810) Purchase from Sale of Property & Equipment -0- 450,000 -0- Purchases of Oil & Gas Properties -0- -0- ( 11,550) Investment in Joint Venture -0- -0- ( 109,000) ---------- ---------- ---------- Net Cash Provided by (Used In) Investing Activities -0- 450,000 ( 132,360) Cash Flows from Financing Activities - ------------------------------------ Proceeds from Notes Payable -0- -0- 73,500 Principal Payments on Notes Payable -0- ( 138,500) ( 7,500) Principal Payments on Long-Term Debt -0- ( 129,490) ( 36,751) Dividends Paid -0- -0- ( 2,085) ---------- ---------- ---------- Net Cash Provided by (Used In) Financing Activities ( 67,169)( 267,990) 27,164 ---------- ---------- ---------- Increase (Decrease) in Cash & Cash Equivalents ( 67,169) 91,521 ( 54,000) Cash & Cash Equivalents, Beginning of Year 104,123 12,602 66,602 ---------- ---------- ---------- Cash & Cash Equivalents, End of Year $ 36,954 $ 104,123 $ 12,602 ========== ========== ========== Disclosures from Operating Activities - ------------------------------------- Interest $ -0- $ 21,232 $ 24,368 Taxes -0- -0- -0-
The accompanying notes are an integral part of these financial statements 21 Appalachian Oil & Gas Company, Inc. Notes to Financial Statements NOTE #1 - Summary of Significant Accounting Policies - ---------------------------------------------------- Significant accounting policies of the Company are as follows: a. Principles of Consolidation (Applicable to fiscal year 1995 only). The consolidated financial statements include the accounts of Appalachian Oil & Gas Company, Inc. (AOGI) and its subsidiary, TKGC #1 Limited Partnership. All significant intercompany accounts and transactions have been eliminated in consolidation. b. Business Activity and Major Customers AOGI sold the controlling interest in its oil and gas producing properties in February of 1996. AOGI has no activities in extracting oil or gas or in marketing the production of oil and gas. It is AOGI's intention to sell its remaining 40% interest in the oil and gas properties and the related assets and to seek other business opportunities. c. Cash and Cash Equivalents Cash includes amounts on hand and in financial institutions. Cash equivalents include all highly liquid investments with an original maturity of three months or less when purchased. d. Allowance for Losses AOGI uses the specific write-off method to provide for doubtful accounts since experience and management's estimation indicates an adequate allowance for such accounts is immaterial. e. Oil and Gas Properties The Company uses the successful efforts method of accounting for oil and gas producing activities. Costs to acquire mineral interests in oil and gas properties, to drill and equip exploratory wells that find proved reserves, and to drill and equip development wells are capitalized. Costs to drill exploratory wells that do not find proved reserves, geological and geophysical costs, and costs of carrying and retaining unproved properties are expensed. Unproved oil and gas properties that are individually significant are periodically assessed for impairment of value, and a loss is recognized at the time of impairment by providing an impairment allowance. Other unproved properties are amortized based on the Company's experience of successful drilling and average holding period. Capitalized costs of producing oil and gas properties, after considering estimated dismantlement and abandonment costs and estimated salvage values, are depreciated and depleted by the unit-of-production method. Support equipment and other property and equipment are depreciated over their estimated useful lives. 22 Appalachian Oil & Gas Company, Inc. Notes to Consolidated Financial Statements -Continued- NOTE #1- Summary of Significant Accounting Policies -Continued- - --------------------------------------------------------------- e. Oil and Gas Properties -Continued- The costs associated with dismantlement and site restoration are considered immaterial based on past history of AOGI. On the sale or retirement of a complete unit of a proved property, the cost and related accumulated depreciation, depletion, and amortization are eliminated from the property accounts, and the resultant gain or loss is recognized. On the retirement or sale of a partial unit of proved property, the cost is charged to accumulated depreciation, depletion, and amortization with a resulting gain or loss recognized in income. On the sale of an entire interest in an unproved property for cash or cash equivalent, gain or loss on the sale is recognized, taking into consideration the amount of any recorded impairment if the property had been assessed individually. If a partial interest in an unproved property is sold, the amount received is treated as a reduction of the cost of the interest retained. f. Income Taxes Deferred income taxes are provided for significant temporary differences in recognition of revenues and expenses for financial reporting and income tax reporting purposes. For Federal income tax purposes, the Company deducts certain exploration and developmental costs, which are capitalized and amortized for financial reporting purposes. The Company uses statutory depletion for income tax reporting. Investment tax credits are accounted for as a reduction of income tax expense in the year taxes payable are reduced. g. Minority Interest Effective April 15, 1994, AOGI acquired 53.35 percentage interest in the TKGC #1 Partnership for $28,000 in cash and a partial assignment of an oil and gas farm out agreement. The acquisition was accounted for as a purchase. AOGI's 53.35 percentage interest requires that TKGC #1's operations be included in the consolidated financial statements. The remaining interest (46.65%) is shown as "minority interest" in the June 30, 1994 consolidated balance sheet. TKGC #1 did not have any operations as of June 30, 1994. April 1, 1995, the TKGC #1 Partnership was dissolved with each partner receiving their percentage ownership in two oil and gas wells. 23 Appalachian Oil & Gas Company, Inc. Notes to Consolidated Financial Statements -Continued- NOTE #1 - Summary of Significant Accounting Policies -Continued- - ---------------------------------------------------------------- h. Estimates 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 disclosure 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. i. Environmental Costs Environmental expenditures that relate to current operations are expensed or capitalized as appropriate. Liabilities are recorded when environmental assessments are probable and the amounts can be reasonably estimated. NOTE #2 - Property and Equipment - --------------------------------- A summary of property and equipment is as follows:
1997 1996 -------------------- Proved oil and gas properties $ 140,184 $ 140,184 Less accumulated depreciation, depletion and amortization 94,158 88,610 ---------- ---------- 46,026 51,574 ---------- ---------- Land 12,410 12,410 Gas gathering system 196,334 196,334 Machinery and equipment 112,788 112,788 Office furniture and equipment 5,042 5,042 ---------- ---------- Other property and equipment 326,574 326,574 Less accumulated depreciation 236,534 225,117 ---------- ---------- 90,040 101,457 ---------- ---------- Net property and equipment $ 136,066 $ 153,031 ========== ==========
AOGI incurred depreciation expense of; $ 16,965 $52,086, and $67,373, for the years ended June 30, 1997, 1996, and 1995, respectively. 24 Appalachian Oil & Gas Company, Inc. Notes to Consolidated Financial Statements -Continued- NOTE #3 - Income Taxes - ---------------------- At June 30, 1995, the Company had net operating loss and investment tax credit carryforwards for income tax purposes of approximately $1,394,000 and $30,000, respectively, which expire on or before June 30, 2007. For financial reporting purposes, a valuation allowance of $484,160 has been recognized to offset the deferred tax assets related to these items The net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes are reflected in deferred income taxes. Significant components of the Company's deferred tax assets and liabilities as of June 30, 1997 and 1996 are as follows:
1997 1996 ---------- ---------- Deferred tax assets: Net operating loss $ 490,745 $ 462,624 Investment tax credit 10,200 10,200 ---------- ---------- Total deferred tax assets 500,945 472,824 Valuation allowance for deferred tax assets ( 500,945) ( 472,824) ---------- ---------- Deferred tax liabilities -0- -0- ---------- ---------- Net deferred tax asset $ -0- $ -0- ========== ==========
NOTE #4 - Statement of Cash Flows Disclosures - --------------------------------------------- AOGI paid $21,232 and $24,368, in interest during the years ended June 30, 1996, and 1995, respectively. NOTE #5 - Earnings (Loss) Per Share - ----------------------------------- Earnings (loss) per share are based on the weighted average number of shares outstanding of 3,235,795, for the years ended June 30, 1997, 1996, and 1995, respectively. NOTE #6 - Sale of Operating Assets & Well Interest - -------------------------------------------------- Effective March 27, 1996, AOGI sold 60% of their operating assets and 60% of their well interests for $450,000. The company that purchased the assets began operating and managing the majority of AOGI's wells as of February 1, 1996. 25 SIGNATURES In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant caused this report to be signed on its behalf of the undersigned, thereunto duly authorized. Dated: April 21, 1999 Appalachian Oil & Gas Company, Inc. a Utah Corporation By: /S/ Raymond A. Connelly ------------------------ Raymond A. Connelly, President DATE NAME AND TITLE SIGNATURE April 21, 1999 Raymond A. Connelly /S/ Raymond A. Connelly President ----------------------- 26 EX-23 2 /Letterhead/ Schvaneveldt & Company Certified Public Accountant 275 East South Temple, #300 Salt Lake City, Utah 84111 (801) 521-2392 Darrell T. Schvaneveldt, C.P.A. I consent to the use of my report dated April 6, 1998, of Appalachian Oil & Gas Company, Inc., as of June 30, 1997, and to the reference made to me in the Form 10KSB. /S/ Schvaneveldt & Company April 21, 1999 EX-27 3
5 0000732814 APPALACHIAN OIL & GAS COMPANY, INC. 12-MOS JUN-30-1997 JUN-30-1997 36,954 0 17,855 0 0 54,809 466,758 330,692 190,875 338 0 0 0 32,358 158,179 190,537 48,723 51,840 35,530 0 99,019 0 0 (81,709) 0 (82,709) 0 0 0 (82,709) (.03) 0
-----END PRIVACY-ENHANCED MESSAGE-----