SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2004
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 OR THE TRANSITION PERIOD FROM __________ TO
__________
Commission file number 0-8874
Amber Resources Company of Colorado
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(Exact name of registrant as specified in its charter)
Delaware 84-0750506
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
475 17th Street, Suite 1400
Denver, Colorado 80202
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(Address of principal (Zip Code)
executive offices)
(303) 293-9133
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X] No [ ]
4,666,185 shares of common stock $.0625 par value were outstanding as of
May 10, 2004.
Form 10-Q
3rd Qtr.
FY 2004
INDEX
PART I FINANCIAL INFORMATION PAGE NO.
ITEM 1. Financial Statements
Balance Sheets
March 31, 2004 (unaudited)
and June 30, 2003 ................................... 3
Statements of Operations and
Accumulated Deficit for the Three and Nine
Months Ended March 31, 2004
and 2003 (unaudited) ................................ 4-5
Statements of Cash Flows
for the Nine Months Ended March 31, 2004
and 2003 (unaudited)................................. 6
Notes to Financial Statements (unaudited) ............. 7
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ................... 10
ITEM 3. Quantitative and Qualitative Disclosures About
Market Risk ............................................ 11
ITEM 4. Controls and Procedures ................................ 11
PART II OTHER INFORMATION
ITEM 1. Legal Proceedings ..................................... 12
ITEM 2. Changes in Securities ................................. 12
ITEM 3. Defaults upon Senior Securities ....................... 12
ITEM 4. Submission of Matters to a Vote of
Security Holders .................................... 12
ITEM 5. Other Information ..................................... 12
ITEM 6. Exhibits and Reports on Form 8-K ...................... 12
The terms "Amber," "Company," "we," "our," and "us" refer to Amber Resources
Company of Colorado unless the context suggests otherwise.
2
AMBER RESOURCES COMPANY OF COLORADO
BALANCE SHEETS
- -----------------------------------------------------------------------------
March 31, June 30,
2004 2003
------------- -----------
(Unaudited)
ASSETS
Current Assets:
Cash $ 683 $ 867
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Total current assets 683 867
----------- -----------
Undeveloped offshore California properties 5,006,560 5,006,560
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$ 5,007,243 $ 5,007,427
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities $ - $ -
Stockholders' Equity:
Preferred stock, $.10 par value;
authorized 5,000,000 shares of Class A
convertible preferred stock, none issued - -
Common stock, $.0625 par value;
authorized 25,000,000 shares, issued 4,666,185
shares at March 31, 2004 and June 30, 2003 291,637 291,637
Additional paid-in capital 5,755,232 5,755,232
Accumulated deficit (856,042) (773,263)
Advance to parent (183,584) (266,179)
----------- -----------
Total Stockholders' Equity 5,007,243 5,007,427
----------- -----------
Commitments
$ 5,007,243 $ 5,007,427
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See accompanying notes to financial statements.
3
AMBER RESOURCES COMPANY OF COLORADO
STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
(Unaudited)
- -----------------------------------------------------------------------------
Three Months Ended
March 31, March 31,
2004 2003
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Operating expenses:
General and administrative, including
$25,000 in 2004 and 2003 to parent 30,862 25,400
---------- ----------
Total operating expenses 30,862 25,400
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Net loss (30,862) (25,400)
Accumulated deficit at
beginning of the year (825,180) (694,621)
---------- ----------
Accumulated deficit at
end of the period $ (856,042) $ (720,021)
========== ==========
Basic loss per share $ (0.01) $ (0.01)
========== ==========
Weighted average number of common
shares outstanding 4,666,185 4,666,185
========== ==========
See accompanying notes to financial statements.
4
AMBER RESOURCES COMPANY OF COLORADO
STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
(Unaudited)
- -----------------------------------------------------------------------------
Nine Months Ended
March 31, March 31,
2004 2003
------------ ------------
Operating expenses:
Exploration expenses 1,448 -
General and administrative, including
$75,000 in 2004 and 2003 to parent 81,331 75,692
---------- ----------
Total operating expenses 82,779 75,692
---------- ----------
Net loss (82,779) (75,692)
Accumulated deficit at
beginning of the year (773,263) (644,329)
---------- ----------
Accumulated deficit at
end of the period $ (856,042) $ (720,021)
========== ==========
Basic loss per share $ (0.02) $ (0.02)
========== ==========
Weighted average number of common
shares outstanding 4,666,185 4,666,185
========== ==========
See accompanying notes to financial statements.
5
AMBER RESOURCES COMPANY OF COLORADO
STATEMENTS OF CASH FLOWS
(Unaudited)
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Nine Months Ended
March 31, March 31,
2004 2003
------------ ------------
Cash flows from operating activities:
Net loss $ (82,779) $ (75,692)
Net changes in operating assets and operating
liabilities-
Decrease in trade accounts payable - (2,911)
--------- ---------
Net cash used in operating activities (82,779) (78,603)
--------- ---------
Cash flows from financing activities-
Changes in accounts receivable from and
accounts payable to parent 82,595 78,862
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Net increase (decrease) in cash (184) 259
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Cash at beginning of period 867 681
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Cash at end of period $ 683 $ 940
========= =========
See accompanying notes to financial statements.
6
AMBER RESOURCES COMPANY OF COLORADO
(A Subsidiary of Delta Petroleum Corporation)
Notes to Financial Statements
Three and Nine Months Ended March 31, 2004 and 2003
(Unaudited)
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(1) Basis of Presentation
The accompanying unaudited financial statements have been prepared in
accordance with the instructions to Form 10-Q and, in accordance with those
rules, do not include all the information and notes required by generally
accepted accounting principles for complete financial statements. As a
result, these unaudited financial statements should be read in conjunction
with Amber Resources Company of Colorado's ("the Company") audited financial
statements and notes thereto filed with the Company's most recent annual
report on Form 10-K. In the opinion of management, all adjustments,
consisting only of normal recurring accruals, considered necessary for a fair
presentation of the financial position of the Company and the results of its
operations have been included. Operating results for interim periods are not
necessarily indicative of the results that may be expected for the complete
fiscal year. For a more complete understanding of the Company's operations
and financial position, reference is made to the financial statements of the
Company, and related notes thereto, filed with the Company's annual report on
Form 10-K for the year ended June 30, 2003, previously filed with the
Securities and Exchange Commission.
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. Significant estimates are related to oil and gas reserves,
oil and gas properties, income taxes, derivatives, contingencies and
litigation. Actual results could differ from these estimates.
Liquidity
The Company has incurred losses from operations over the past several
years coupled with significant deficiencies in cash flow from operations for
the same period. As of March 31, 2004, the Company had working capital of
$683. This factor, among others, may indicate that without increased cash
flow from the sale of oil and gas properties or additional financing, the
Company may not be able to meet its obligations in a timely manner. The
Company believes that proceeds from the sale of undeveloped properties,
advances from its parent and other sources of funds will be adequate to fund
its operating expenses and satisfy its other current liabilities over the next
year or longer.
7
AMBER RESOURCES COMPANY OF COLORADO
(A Subsidiary of Delta Petroleum Corporation)
Notes to Financial Statements
Three and Nine Months Ended March 31, 2004 and 2003
(Unaudited)
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(2) Recently Issued or Proposed Accounting Standards and Pronouncements
We have been made aware that an issue has arisen within the industry
regarding the application of provisions of SFAS No. 142 and SFAS No. 141,
"Business Combinations," to companies in the extractive industries, including
oil and gas companies. The issue is whether SFAS No. 142 requires companies to
reclassify costs associated with mineral rights, including both proved and
unproved leasehold acquisition costs, as intangible assets in the balance
sheet, apart from other capitalized oil and gas property costs. Historically,
we and other oil and gas companies have included the cost of these oil and gas
leasehold interests as part of oil and gas properties. Also under
consideration is whether SFAS No. 142 requires registrants to provide the
additional disclosures prescribed by SFAS No. 142 for intangible assets for
costs associated with mineral rights.
If it is ultimately determined that SFAS No. 142 requires us to
reclassify costs associated with mineral rights from property and equipment to
intangible assets, the amounts that would be reclassified are as follows:
March 31, June 30,
2004 2003
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INTANGIBLE ASSETS:
Proved leasehold acquisition costs $ - $ -
Unproved leasehold acquisition costs 5,006,560 5,006,560
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Total leasehold acquisition costs 5,006,560 5,006,560
Less: Accumulated depletion - -
----------- -----------
Net leasehold acquisition costs $ 5,006,560 $ 5,006,560
=========== ===========
The reclassification of these amounts would not affect the method in
which such costs are amortized or the manner in which we assess impairment of
capitalized costs. As a result, net income would not be affected by the
reclassification.
8
AMBER RESOURCES COMPANY OF COLORADO
(A Subsidiary of Delta Petroleum Corporation)
Notes to Financial Statements
Three and Nine Months Ended March 31, 2004 and 2003
(Unaudited)
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(3) Unproved Undeveloped Offshore California Properties
The Company has ownership interests ranging from .87% to 6.97% in three
unproved undeveloped offshore California oil and gas properties with aggregate
carrying values of $5,006,560 on March 31, 2004 and June 30, 2003. These
property interests are located in proximity to existing producing federal
offshore units near Santa Barbara, California and represent the right to
explore for, develop and produce oil and gas from offshore federal lease
units. Preliminary exploration efforts on these properties have occurred and
the existence of substantial quantities of hydrocarbons has been indicated.
The recovery of the Company's investment in these properties will require
extensive exploration and development activities (and costs) that cannot
proceed without certain regulatory approvals that have been delayed and is
subject to other substantial risks and uncertainties.
Based on indications of levels of hydrocarbons present from drilling
operations conducted in the past, the Company believes the fair values of its
property interests are in excess of their carrying values at March 31, 2004
and that no impairment in the carrying values has occurred. Pursuant to a
ruling in California v. Norton, later affirmed by the 9th Circuit Court of
Appeals, the U.S. Government is required to make a consistency determination
relating to the 1999 lease suspension requests under a 1990 amendment to the
Coastal Zone Management Act. In the event that there is some future adverse
ruling under the Coastal Zone Management Act that the Company decides not to
appeal or that the Company appeals without success, it is likely that some or
all of our interests in these leases would become impaired and written off at
that time. It is also possible that other events could occur during the
Coastal Zone Management Act review or appellate process that would cause the
Company's interests in the leases to become impaired, and the Company will
continuously evaluate those factors as they occur. On January 9, 2002, the
Company and several other plaintiffs filed a lawsuit in the United States
Court of Federal Claims in Washington, D.C. alleging that the U.S. Government
has materially breached the terms of forty undeveloped federal leases, some of
which are part of the Company's Offshore California properties. See
disclosure in Item 1 of Part II.
9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Forward Looking Statements
The statements contained in this report which are not historical fact are
"forward looking statements" that involve various important risks,
uncertainties and other factors which could cause the Company's actual results
to differ materially from those expressed in such forward looking statements.
These factors include, without limitation, the risks and factors set forth
below as well as other risks previously disclosed in the Company's annual
report on Form 10-K.
Critical Accounting Policies and Estimates
The discussion and analysis of the Company's financial condition and
results of operations were based upon the financial statements, which have
been prepared in accordance with accounting principles generally accepted in
the United States. The preparation of these financial statements requires us
to make estimates and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses. Our significant accounting policies are
described in Note 1 to our financial statements filed in Form 10-K for our
fiscal year ended June 30, 2003. In response to SEC Release No. 33-8040,
"Cautionary Advise Regarding Disclosure About Critical Accounting Policies,"
we have identified certain of these policies as being of particular importance
to the portrayal of our financial position and results of operations and which
require the application of significant judgment by management. We analyze our
estimates, including those related to oil and gas reserves, oil and gas
properties, income taxes, derivatives, contingencies and litigation, and base
our estimates on historical experience and various other assumptions that we
believe reasonable under the circumstances. Actual results may differ from
these estimates under different assumptions or conditions. We believe that
our critical accounting policies affect our more significant judgments and
estimates used in the preparation of the Company's financial statements.
Background
Amber Resources Company of Colorado ("Amber," the "Company," "we," "us"
and "our") was incorporated in January, 1978, and is principally engaged in
acquiring, exploring and developing oil and gas properties. We own interests
in undeveloped oil and gas properties offshore California, near Santa Barbara.
Liquidity and Capital Resources
At March 31, 2004, we had working capital of $683 compared to working
capital of $867 at June 30, 2003.
We do not currently have a credit facility with any bank and we have not
determined the amount, if any, that we could borrow against our existing
properties.
We believe that proceeds from the sale of properties, the repayment of
advances from our parent, and other sources of funds will be adequate to fund
our operating expenses and satisfy our other current liabilities over the next
year or longer.
10
Unproved Undeveloped Offshore California Properties
We have ownership interests ranging from .87% to 6.97% in three unproved
undeveloped offshore California oil and gas properties with an aggregate
carrying value of $5,006,560 on both March 31, 2004 and June 30, 2003. These
property interests are located in proximity to existing producing federal
offshore units near Santa Barbara, California and represent the right to
explore for, develop and produce oil and gas from offshore federal lease
units. Preliminary exploration efforts on these properties have occurred and
the existence of substantial quantities of hydrocarbons has been indicated.
The recovery of our investment in these properties will require extensive
exploration and development activities (and costs) that cannot proceed without
certain regulatory approvals that have been delayed and is subject to other
substantial risks and uncertainties.
Results of Operations
Net loss. We reported net losses of $30,862 and $25,400 for the three
months ended March 31, 2004 and 2003. For the nine month periods ended March
31, 2004 and 2003, we reported losses of $82,779 and $75,692.
As we sold all of our producing properties to our parent on July 1, 2001,
there was no revenue during the two three and nine month periods. Also,
because of the sale of the properties, there were no lease operating expenses
or depletion. Exploration expenses were $0 and $1,448 for the three and nine
months ended March 31, 2004. General and administrative expenses were $30,862
and $81,331 for the three and nine months ended March 31, 2004 compared to
$25,400 and $75,692 for the three and nine months ended March 31, 2003. The
majority of the expense in both periods is a management fee of $25,000 for the
three month periods and $75,000 for the nine month periods paid to our parent.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk is the potential loss arising from adverse changes in market
rates and prices, such as foreign currency exchange and interest rates and
commodity prices. We do not use financial instruments to any degree to manage
foreign currency exchange and interest rate risks and do not hold or issue
financial instruments to any degree for trading purposes. All of our revenue
and related receivables are payable in U.S. dollars.
ITEM 4. CONTROLS AND PROCEDURES
As of March 31, 2004, under the supervision and with the participation of
the Company's Chief Executive Officer and the Chief Financial Officer,
management has evaluated the effectiveness of the design and operation of the
Company's disclosure controls and procedures. Based on that evaluation, the
Chief Executive Officer and the Chief Financial Officer concluded that the
Company's disclosure controls and procedures were effective as of March 31,
2004. There were no changes in internal control over financial reporting that
occurred during the fiscal quarter covered by this report that have materially
affected, or are reasonably likely to affect, the Company's internal control
over financial reporting.
11
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
On January 9, 2002, Amber and several other plaintiffs filed a lawsuit in
the United States Court of Federal Claims in Washington, D.C. alleging that
the U.S. Government has materially breached the terms of forty undeveloped
federal leases, some of which are part of our Offshore California properties.
The Complaint is based on allegations by the collective plaintiffs that the
United States has materially breached the terms of certain of their Offshore
California leases by attempting to deviate significantly from the procedures
and standards that were in effect when the leases were entered into, and by
failing to carry out its own obligations relating to those leases in a timely
and fair manner. More specifically, the plaintiffs have alleged that the
judicial determination in 2001 in the California v. Norton case that a 1990
amendment to the Coastal Zone Management Act required the Government to make a
consistency determination prior to granting lease suspension requests in 1999
constitutes a material change in the procedures and standards that were in
effect when the leases were issued. The plaintiffs have also alleged that the
United States has failed to afford them the timely and fair review of their
lease suspension requests which has resulted in significant, continuing and
material delays to their exploratory and development operations.
The suit seeks compensation for the lease bonuses and rentals paid to the
Federal Government, exploration costs and related expenses. The total amount
claimed by all lessees for bonuses and rentals exceeds $1.2 billion, with
additional amounts for exploration costs and related expenses. In the event,
however, that Amber receives any proceeds as the result of such litigation,
Amber will be obligated to pay a portion of any amount received by Amber to
landowners and other owners of royalties and similar interests, and to pay
expenses of litigation and to fulfill certain pre-existing contractual
commitments to third parties. Although the computation of the various amounts
that we would be required to pay to landowners and other owners of royalties
and similar interests is dependent upon facts and circumstances that are not
yet known, it is possible that they may be as much as twenty percent of any
proceeds that we might ultimately obtain.
The Federal Government has not yet filed an answer in this proceeding
pending its motion to dismiss the lawsuit, which motion has not yet been heard
by the court.
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.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits are as follows:
31.1 Certification of Chief Executive Officer pursuant to Section
302 of the Sarbanes-Oxley Act of 2002. Filed herewith
electronically
12
31.2 Certification of Chief Financial Officer pursuant to Section
302 of the Sarbanes-Oxley Act of 2002. Filed herewith
electronically
32.1 Certification of Chief Executive Officer pursuant to 18
U.S.C. Section 1350. Filed herewith electronically
32.2 Certification of Chief Financial Officer pursuant to 18
U.S.C. Section 1350. Filed herewith electronically
(b) Reports on Form 8-K: None.
13
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
AMBER RESOURCES COMPANY OF COLORADO
(Registrant)
Date: May 13, 2004 By:/s/ Roger A. Parker
-------------------------------------
Roger A. Parker
President and Chief Executive Officer
By:/s/ Kevin K. Nanke
-------------------------------------
Kevin K. Nanke, Chief Financial
Officer and Treasurer
14