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 SEPTEMBER 30,
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
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
475 17th Street, Suite 1400
Denver, Colorado 80202
--------------------------------------------
(Address of principal (Zip Code)
executive offices)
(303)293-9133
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(Registrant's telephone number, including area code)
Amber Resources Company
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(Former name, former address and former fiscal year,
if changed since last report)
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
November 8, 2004.
INDEX
PART I FINANCIAL INFORMATION PAGE NO.
ITEM 1. Financial Statements
Balance Sheets - September 30, (unaudited) and
June 30, 2004 ............................................ 3
Statements of Operations and Accumulated Deficit
for the Three Months Ended September 30, 2004
and 2003 (unaudited) ..................................... 4
Statements of Cash Flows for the Three Months Ended
September 30, 2004 and 2003 (unaudited) .................. 5
Notes to Financial Statements (unaudited) ................ 6
ITEM 2. Management's Discussion and Analysis of Financial
Conditions and Results of Operation ...................... 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. Unregistered Sales of Equity Securities and
Use of Proceeds ......................................... 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 ................................................. 13
SIGNATURES ........................................................ 14
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
_____________________________________________________________________________
September 30, June 30,
2004 2004
------------- ----------
ASSETS
Current Assets:
Cash $ 469 $ 579
---------- ----------
Total current assets 469 579
---------- ----------
Undeveloped offshore California properties
(Successful efforts method of accounting) 5,006,560 5,006,560
---------- ----------
$5,007,029 $5,007,139
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities $ - $ -
---------- ----------
Total current 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 September 30, 2004 and 4,666,185
at June 30, 2004 291,637 291,637
Additional paid-in capital 5,755,232 5,755,232
Accumulated deficit (906,227) (882,571)
Advance to parent (133,613) (157,159)
---------- ----------
Total stockholders' equity 5,007,029 5,007,139
---------- ----------
$5,007,029 $5,007,139
========== ==========
See accompanying notes to consolidated financial statements.
3
AMBER RESOURCES COMPANY OF COLORADO
STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
(Unaudited)
_____________________________________________________________________________
Three Months Ended
September 30,
2004 2003
---------- ----------
Revenue $ - $ -
Operating expenses:
Exploration (1,504) 1,441
General and administrative, including
$25,000 in 2004 and 2003 to parent 25,159 25,409
---------- ----------
Total operating expenses 23,656 26,850
---------- ----------
Net loss $ (23,656) $ (26,850)
========== ==========
Accumulated deficit at beginning of the year (882,571) (773,264)
Accumulated deficit at end of the period (906,227) (800,114)
Basic loss per common share $ * $ *
========== ==========
Weighted average number of common shares
outstanding 4,666,185 4,666,185
========== ==========
* less than $.01 per common share
See accompanying notes to consolidated financial statements.
4
AMBER RESOURCES COMPANY OF COLORADO
STATEMENTS OF CASH FLOWS
(Unaudited)
_____________________________________________________________________________
Three Months Ended
September 30,
2004 2003
---------- ----------
Cash flows from operating activities -
Net loss $ (23,656) $ (26,850)
---------- ----------
Net cash used in operating activities (23,656) (26,850)
---------- ----------
Net cash used in investing activities - -
---------- ----------
Cash flows from financing activities -
Changes in advances to parent 23,546 26,791
---------- ----------
Net cash provided by financing activities 23,546 26,791
---------- ----------
Net decrease in cash (110) (59)
---------- ----------
Cash at beginning of period 579 867
---------- ----------
Cash at end of period $ 469 $ 808
========== ==========
See accompanying notes to consolidated financial statements.
5
AMBER RESOURCES COMPANY OF COLORADO
(A Subsidiary of Delta Petroleum Corporation)
Notes to Financial Statements Three Months Ended September 30, 2004 and 2003
(Unaudited)
_____________________________________________________________________________
(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, 2004, 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 include oil and gas reserves, oil and
gas properties, contingencies and litigation. Actual results could differ
from these estimates.
(2) Summary of Significant Accounting Policies
Property and Equipment
The Company accounts for its natural gas and crude oil exploration and
development activities under the successful efforts method of accounting.
Under such method, costs of productive exploratory wells, development dry
holes and productive wells and undeveloped leases are capitalized. Oil and
gas lease acquisition costs are also capitalized. Exploration costs,
including personnel costs, certain geological geophysical expenses and delay
rentals for gas and oil leases, are charged to expense as incurred.
Exploratory drilling costs are initially capitalized, but charged to expense
if and when the well is determined not to have found reserves in commercial
quantities. The sale of a partial interest in a proved property is accounted
for as a cost recovery and no gain or loss is recognized as long as this
treatment does not significantly affect the units-of-production amortization
rate. A gain or loss is recognized for all other sales of producing
properties.
6
AMBER RESOURCES COMPANY OF COLORADO
(A Subsidiary of Delta Petroleum Corporation)
Notes to Financial Statements Three Months Ended September 30, 2004 and 2003
(Unaudited)
_____________________________________________________________________________
(2) Summary of Significant Accounting Policies, Continued
Property and Equipment, Continued
Unproved properties with significant acquisition costs are assessed
quarterly on a property-by-property basis and any impairment in value is
charged to expense. If the unproved properties are determined to be
productive, the related costs are transferred to proved gas and oil
properties. Proceeds from sales of partial interests in unproved leases are
accounted for as a recovery of cost without recognizing any gain or loss.
Depreciation and depletion of capitalized acquisition, exploration and
development costs is computed on the units-of-production method by individual
fields as the related proved reserves are produced.
Other property and equipment are recorded at cost or estimated fair value
upon acquisition and depreciated using the straight-line method over their
estimated useful lives.
Impairment of Long-Lived Assets
Statement of Financial Accounting Standards No. 144 "Accounting for the
Impairment or Disposal of Long-Lived Assets" (SFAS No. 144) requires that
long-lived assets be reviewed for impairment when events or changes in
circumstances indicate that the carrying value of such assets may not be
recoverable.
Estimates of expected future cash flows represent management's best
estimate based on reasonable and supportable assumptions and projections. If
the expected future cash flows exceed the carrying value of the asset, no
impairment is recognized. If the carrying value of the asset exceeds the
expected future cash flows, an impairment exists and is measured by the excess
of the carrying value over the estimated fair value of the asset. Any
impairment provisions recognized in accordance with SFAS No. 144 are permanent
and may not be restored in the future.
For undeveloped properties, the need for an impairment reserve is based
on the Company's plans for future development and other activities impacting
the life of the property and the ability of the Company to recover its
investment. When the Company believes the costs of the undeveloped property
are no longer recoverable, an impairment charge is recorded based on the
estimated fair value of the property. As a result of such assessment, the
Company recorded no impairment provision attributable to certain undeveloped
properties for the three months ended September 30, 2004 and 2003.
7
AMBER RESOURCES COMPANY OF COLORADO
(A Subsidiary of Delta Petroleum Corporation)
Notes to Financial Statements Three Months Ended September 30, 2004 and 2003
(Unaudited)
_____________________________________________________________________________
(2) Summary of Significant Accounting Policies, Continued
Taxes
No income tax expense or benefit has been recorded for the three months
ended September 30, 2004 since the deferred income taxes that would have
otherwise been provided were offset by the change in the valuation allowance
for such net deferred tax assets. The Company is consolidated in Delta's
income tax return and accounts for its income tax as if it filed a separate
return. As Delta has a net operating loss carryforward and a valuation
allowance for deferred tax assets, the consolidation for income tax purposes
has no financial statement impact to the Company.
(3) 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 September 30, 2004, the Company had working capital of
$469. This factor, among others, may indicate that without increased cash
flow from 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
our parent, Delta Petroleum Corporation ("Delta"), 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.
(4) 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 September 30, 2004 and June 30, 2004. 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 September 30,
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 our 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 we decide not to appeal or
8
AMBER RESOURCES COMPANY OF COLORADO
(A Subsidiary of Delta Petroleum Corporation)
Notes to Financial Statements Three Months Ended September 30, 2004 and 2003
(Unaudited)
_____________________________________________________________________________
(4) Unproved Undeveloped Offshore California Properties
that we appeal 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 our interests in the leases
to become impaired, and we 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 our 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 Advice 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, contingencies and litigation, and base our estimates on historical
experience and various other assumptions that we believe are 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. On July 1, 2001, we sold all of
our producing properties to our parent in an arm's length transaction. We own
interests in undeveloped oil and gas properties offshore California, near
Santa Barbara. We do not intend to acquire, explore or develop our oil and
gas properties until we resolve our lawsuit with the U.S. Government discussed
in Part II Item 1.
Liquidity and Capital Resources
At September 30, 2004, we had working capital of $469 compared to working
capital of $579 at June 30, 2004.
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 September 30, 2004 and June 30, 2004.
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 $23,656 and $26,850 for the three
months ended September 30, 2004 and 2003.
As we sold all of our producing properties to our parent on July 1, 2001,
there was no revenue during the two three month periods. Also, because of the
sale of the properties, there were no lease operating expenses or depletion.
During the three months ended September 30, 2004, exploration expenses were
$(1,504) and $1,441 in the 2004 period. We received a credit relating to
previous costs incurred on our offshore properties during the quarter ended
September 30, 2004. General and administrative expenses were $25,409 and
$25,134 for the periods ended September 30, 2004 and 2003, respectively. The
majority of the expense in both periods is a management fee of $25,000 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 September 30, 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 September 30, 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, we 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 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. Our claim for
lease bonuses and rentals paid by us and our predecessors is in excess of $152
million. In addition, our claim for exploration costs and related expenses
will also be substantial. In the event, however, that we receive any proceeds
as the result of such litigation, we will be obligated to pay a portion of any
amount received by us 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. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS. 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.
12
ITEM 6. EXHIBITS.
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
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
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: November 15, 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