ASPEN GROUP RESOURCES CORPORATION
AND SUBSIDIARIES
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2005
ASPEN GROUP RESOURCES CORPORATION
AND SUBSIDIARIES
INDEX
Page No.
FINANCIAL INFORMATION
Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheet as of
June 30, 2005 and 2004 (unaudited)
3
Condensed Consolidated Statements of Operations for the
six months ended June 30, 2005 and 2004 (unaudited)
4
Condensed Consolidated Statements of Cash Flows for the
six months ended June 30, 2005 and 2004 (unaudited)
5
NOTES TO CONDENSED CONSOLIDATE FINANCIAL STATEMENTS (unaudited)
Nature of Business and Basis of Preparation and Presentation
Nature of Business
6
Financial Statement Presentation
6
Restricted Cash
6
Discontinued Operations
6
Earnings Per Share
6
Common Stock Issued
6
Operations
7
Related Party Transactions
7
Other Information
Safe Harbor Statement
7
ASPEN GROUP RESOURCES CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
June 30, 2005 (Unaudited)
(Expressed in US Dollars)
June 30, 2005 (Unaudited) | December 31, 2004 (audited) | |||
ASSETS | ||||
Current Assets | ||||
Cash | $ | 1,762,878 | $ | 4,996,185 |
Cash - Restricted | 1,000,000 | - | ||
Accounts receivable net of allowances | ||||
Trade | 1,900,551 | 1,409,092 | ||
Other | 11,290 | 11,631 | ||
Net assets of discontinued operations | - | 1,281,037 | ||
Materials and supplies inventory | 348,725 | 69,577 | ||
Prepaid expenses | 115,602 | 111,113 | ||
Total current assets | $ | 5,139,046 | $ | 7,878,635 |
Proved Oil & Gas Properties (full cost method) | ||||
net of accumulated depletion of $14,237,729 and $13,738,929 | $ | 6,297,052 | $ | 5,085,989 |
Property and Equipment | ||||
net of accumulated depreciation of $2,372,353 and $2,288,387 | 653,666 | 754,279 | ||
Other Assets | ||||
Notes receivable | 43,082 | 49,285 | ||
Deposits and other assets | 49,880 | 8,880 | ||
Total Assets | $ | 12,182,726 | $ | 13,777,068 |
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||
Current Liabilities | ||||
Accounts payable | $ | 1,845,930 | $ | 2,106,081 |
Net liabilities of discontinued operations | 387,947 | 1,059,073 | ||
Accrued expenses | - | 7,485 | ||
Net payable – banks | 453,879 | 747,720 | ||
Current maturities of long-term debt | 106,241 | 119,994 | ||
Total current liabilities | $ | 2,793,997 | $ | 4,040,353 |
Long-Term Debt, less Current Maturities | $ | 162,744 | $ | 215,868 |
Asset Retirement Obligation | 577,568 | 563,236 | ||
Deferred income taxes | - | - | ||
Stockholders’ Equity | ||||
Preferred stock, no par value, authorized-unlimited, issued – none | - | - | ||
Common stock, no par value, authorized-unlimited, | ||||
issued 75,762,807 shares in 2005 and 71,203,307 in 2004 | 64,070,881 | 62,656,769 | ||
Less treasury stock – at cost | (260,198) | (260,198) | ||
Foreigh currency translation adjustment | (886,459) | (886,459) | ||
Accumulated deficit | (54,275,807) | (52,552,501) | ||
Total stockholders’ equity | $ | 8,648,417 | $ | 8,957,611 |
Total Liabilities and Stockholders’ Equity | $ | 12,182,726 | $ | 13,777,068 |
“signed Robert Calentine”
“signed Allan Thorne”
Robert L. Calentine, Director and CEO
Allan C. Thorne, CFO
See accompanying notes to these condensed consolidated financial statements
ASPEN GROUP RESOURCES CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Expressed in US Dollars)
Period from April 1, 2005 to June 30, 2005 (Unaudited) | Period from April 1, 2004 to June 30, 2004 Restated (Unaudited) | Period from January 1, 2005 to June 30, 2005 (Unaudited) | Period from January 1, 2004 to June 30, 2004 Restated (Unaudited) | |||||
REVENUE: | ||||||||
Oil and gas sales (net of royalties) | $ | 600,292 | $ | 674,301 | $ | 1,182,506 | $ | 1,309,222 |
Product and service revenues | 203,648 | 256,121 | 328,106 | 522,192 | ||||
Other income | 9,613 | - | 26,860 | - | ||||
Total revenue | $ | 813,553 | $ | 930,422 | $ | 1,537,472 | $ | 1,831,414 |
EXPENSES: | ||||||||
Oil and gas production | $ | 296,306 | $ | 383,277 | $ | 516,550 | $ | 536,256 |
Operating expenses | 154,068 | 202,529 | 282,308 | 358,649 | ||||
General and administrative | 832,862 | 822,933 | 1,425,079 | 1,359,603 | ||||
Depreciation, depletion and accretion expense | 297,296 | 369,776 | 597,128 | 970,223 | ||||
Stock issued compensation | - | - | 419,309 | - | ||||
Total expenses | $ | 1,580,532 | $ | 1,778,515 | $ | 3,240,374 | $ | 3,224,731 |
EARNINGS (LOSS) FROM OPERATIONS | $ | (766,979) | $ | (848,093) | $ | (1,702,902) | $ | (1,393,317) |
OTHER | ||||||||
Interest and financing expense | (10,845) | (101,698) | (25,667) | (291,666) | ||||
NET (LOSS) FROM CONTINUING OPERATIONS | $ | (777,824) | $ | (949,791) | $ | (1,728,569) | $ | (1,684,983) |
DISCONTINUED OPERATIONS | ||||||||
Revenues from US Oil and Gas Production Activities | - | 784,982 | - | 2,376,545 | ||||
Expenses from US Oil and Gas Production Activities | - | (588,488) | - | (1,676,018) | ||||
Total Discontinued Operations | $ | - | $ | 196,494 | $ | - | $ | 700,527 |
NET EARNINGS (LOSS) | $ | (777,824) | $ | (753,297) | $ | (1,728,569) | $ | (984,456) |
NET EARNINGS (LOSS) PER SHARE | $ | (0.010) | $ | (0.013) | $ | (0.023) | $ | (0.018) |
WEIGHTED AVERAGE SHARES | 75,762,807 | 58,303,134 | 74,213,947 | 53,374,946 | ||||
See accompanying notes to these condensed consolidated financial statements
ASPEN GROUP RESOURCES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Expressed in US Dollars)
Period from April 1, 2005 to June 30, 2005 (Unaudited) | Period from April 1, 2004 to June 30, 2004 (Unaudited) | Period from January 1, 2005 to June 30, 2005 (Unaudited) | Period from January 1, 2004 to June 30, 2004 (Unaudited) | ||||||||
CASH FLOWS FROM OPERATING ACTIVITIES | |||||||||||
Net earnings (loss) | $ | (777,824) | $ | (753,297) | $ | (1,728,569) | $ | (984,456) | |||
Adjustments to reconcile net earnings (loss) to net cash provided by (used in) operating activities: | |||||||||||
Gain on sale of assets | - | - | - | - | |||||||
Stock based compensation | - | - | 419,309 | - | |||||||
Depreciation and depletion | 290,179 | 618,442 | 582,796 | 1,771,955 | |||||||
Accretion expense | 7,117 | 8,375 | 14,332 | 22,491 | |||||||
Cash flow from operations | $ | (480,528) | $ | (126,480) | $ | (712,132) | $ | 809,990 | |||
Change in assets and liabilities net of effects from: | |||||||||||
Accounts receivable | $ | 367,992 | $ | 121,666 | $ | 789,919 | $ | 517,768 | |||
Materials and supplies inventory | (279,148) | - | (279,148) | - | |||||||
Accounts payable and accrued liabilities | (342,721) | (1,188,635) | (933,499) | (2,992,886) | |||||||
Prepaid expenses | 43,011 | (81,161) | (4,489) | (35,608) | |||||||
Other | - | - | - | - | |||||||
Net cash provided by operating activities | $ | (691,394) | $ | (1,274,610) | $ | (1,139,349) | $ | (1,700,736) | |||
CASH FLOWS FROM FINANCING ACTIVITIES | |||||||||||
Costs related to sale of stock and issuance of notes | $ | - | $ | (112,827) | $ | - | $ | (112,827) | |||
Sale of common stock | 44,270 | 1,637,211 | 994,803 | 1,839,241 | |||||||
Repayment of notes payable and long-term debt | (214,105) | (50,367) | (354,515) | (51,441) | |||||||
Net cash provided by (used by) financing activities | $ | (169,835) | $ | 1,474,017 | $ | 640,288 | $ | 1,674,973 | |||
CASH FLOWS FROM INVESTING ACTIVITIES | |||||||||||
Proceeds from sale of equipment | $ | - | $ | - | $ | 16,617 | $ | - | |||
Proceeds from sale of oil and gas properties | - | - | - | - | |||||||
Exploration and development cost capitalized | (293,116) | (390,487) | (1,750,863) | (391,456) | |||||||
Acquisitions of office furniture and equipment | - | (16,030) | - | (16,030) | |||||||
Other assets | - | - | - | - | |||||||
Net cash provided by (used by) investing activities | $ | (293,116) | $ | (406,517) | $ | (1,734,246) | $ | (407,486) | |||
NET INCREASE (DECREASE) | $ | (1,154,345) | $ | (207,110) | $ | (2,233,307) | $ | (433,249) | |||
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD | 3,917,223 | 401,152 | 4,996,185 | 627,291 | |||||||
CASH AND CASH EQUIVALENTS - END OF PERIOD | $ | 2,762,878 | $ | 194,042 | $ | 2,762,878 | $ | 194,042 | |||
SUPPLAMENTAL INFORMATION | |||||||||||
Cash paid for interest | $ | 10,845 | $ | 101,698 | $ | 25,667 | $ | 291,666 | |||
See accompanying notes to these condensed consolidated financial statements
ASPEN GROUP RESOURCES CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Expressed in US Dollars)
NATURE OF BUSINESS AND BASIS OF PREPARATION AND PRESENTATION
Nature of Business
Aspen Resources Corporation’s primary business focus is to build value through the development of its existing producing oil and gas properties by conducting an active exploitation program on these properties and pursuing the acquisition, development, and exploitation of oil and gas properties in both the United States and Canada that offer the potential for increased production while continuing to control cost.
Financial Statement Presentation
The Condensed Consolidated Financial Statements of Aspen Resources Corporation and Subsidiaries (collectively the "Company" or "Aspen") included herein have been prepared by Aspen without audit. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted U. S. accounting principles have been condensed or omitted, since Aspen believes that the disclosures included are adequate to make the information presented not misleading. In the opinion of Management, the Condensed Consolidated Financial Statements include all adjustments consisting of normal recurring adjustments necessary to present fairly the financial position, results of operations and cash flows as of the dates and for the periods presented. These Condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and the notes thereto included for the fiscal year ended December 31, 2004.
Restricted Cash
During the period the Company was required to place a $1.0 million dollar bond along with a court of appeal application to appeal a lawsuit decision. The bond issuer required $1.0 million dollars cash as collateral.
DISCONTINUED OPERATIONS
On October 15, 2004, Aspen and two subsidiaries closed on a transaction to sell all of their United States domiciled oil and gas properties. Operations have been stated as discontinued as of June 30, 2005 with June 30, 2004 restated.
EARNINGS PER SHARE
Diluted earnings per share for the three month period ending June 30, 2005 and 2004 are the same as basic earnings per share because the exercise of potentially dilutive securities would not have an effect.
COMMON STOCK ISSUED
2005 | 2004 | |||||
Number of Shares | Amount | Number of Shares | Amount | |||
Balance, beginning of period | 71,203,307 | $ | 62,656,769 | 51,378,037 | $ | 58,895,708 |
Transactions during the period | ||||||
Private Placement | - | - | 8,000,000 | 1,381,573 | ||
Exercised Purchase Warrants | 3,559,500 | 994,803 | 2,570,833 | 344,841 | ||
Issued for Stock Based Compensation | 1,000,000 | 419,309 | - | - | ||
Balance, end of period | 75,762,807 | $ | 64,070,881 | 61,948,870 | $ | 60,622,122 |
Notes Page
6
ASPEN GROUP RESOURCES CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Expressed in US Dollars)
OPERATIONS
The Company's operations for the six month periods are carried on in the following geographic locations:
US | Canada | Total | ||||
June 30, 2005 | ||||||
Total assets | $ | 5,175,382 | $ | 7,007,344 | $ | 12,182,726 |
Gross revenue | 354,966 | 1,182,506 | 1,537,472 | |||
Net earnings (loss) | (1,774,589) | 46,020 | (1,728,569) | |||
Earnings (loss) per share | (0.023) | 0.00 | (0.023) | |||
June 30, 2004 (restated) | ||||||
Total assets | $ | 37,311,192 | $ | 6,010,233 | $ | 43,321,425 |
Gross revenue | 522,192 | 1,309,222 | 1,831,414 | |||
Net income | (636,820) | (347,636) | (984,456) | |||
Earnings per share | (0.012) | (0.006) | (0.018) |
RELATED PARTY TRANSACTIONS
During the six month period ended June 30, 2005, legal expenses of approximately $41,400 were invoiced from a firm for which one of the directors is a partner.
OTHER INFORMATION
Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995:
Certain statements in this filing, and elsewhere (such as in other filings by Aspen Resources with the Commission, press releases, presentations by Aspen Resources Corporation or its management and oral statements) constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Aspen Resources Corporation to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among other things, (i) significant variability in Aspen’s quarterly revenues and results of operations as a result of variations in the Aspen’s production in a particular quarter while a significant percentage of its operating expenses are fixed in advance, (ii) changes in the prices of oil and gas, (iii) Aspen’s ability to obtain capital and (iv) other risk factors commonly faced by small oil and gas companies.
Notes Page
7