ITEM 1. BUSINESS
BACKGROUND
Wilshire Oil Company of Texas (the "Company", "Registrant" or "Wilshire") was incorporated under the laws of the State of Delaware on December 7, 1951. The Company's principal executive offices are located at 921 Bergen Avenue, Jersey City, New Jersey 07306, (201) 420-2796.
The Company is engaged in the exploration and development of oil and gas, both in its own name and through several wholly-owned subsidiaries in the United States and Canada. The Company's real estate division owns investment real estate properties in Arizona, Texas, Florida, Georgia and New Jersey. The Company also holds investments in certain marketable securities.
This Report on Form 10-K for the year ended December 31, 2001 contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected in such forward-looking statements. Certain factors which could materially affect such results and the future performance of the Company are described herein under Item 7., "Management's Discussion and Analysis of Financial Condition and Results of Operations."
FINANCIAL INFORMATION RELATING TO INDUSTRY SEGMENTS
For financial segment information please see Note 9, "Segment Information" of the "Notes to Consolidated Financial Statements", presented elsewhere herein. The Company has no export sales or sales to affiliated customers.
DESCRIPTION OF BUSINESS
OIL AND GAS OPERATIONS
For a glossary of oil and gas terms, see "Properties - Oil and Gas Properties - Glossary."
The Company conducts its oil and gas operations on the North American continent. Oil and gas operations in the United States are located in Arkansas, California, Kansas, Nebraska, New Mexico, Ohio, Oklahoma, Pennsylvania, Texas, Utah, West Virginia and Wyoming. In Canada, the Company conducts oil and gas operations in the Provinces of Alberta, British Columbia and Saskatchewan.
As of March 15, 2002, fifteen people are employed by the Company. Nine employees are directly engaged in the search for new oil and gas properties. In addition, the Company also has consultants.
Prospects for lease acquisitions are developed by staff geologists or acquired from various co-venturers and/or consultants.
Once a property is acquired, the Company subcontracts for surveying and drilling operations. Many of the Company's present producing oil and gas properties are operated by independent contractors or under operating agreements with other companies pursuant to which the Company pays a proportionate share of operating expenses based upon its interests. The Company also acts as operator of various properties, charging joint venture partners for their proportionate share of expenses.
The Company does not engage in the refining of crude oil or the distribution of petroleum products. Crude oil and natural gas productions are sold to oil refineries and natural gas pipeline companies.
The Company participated in the drilling of 15 wells (1.5 net) in 2001 compared to 13 (3.1 net) in 2000. The United States program in 2001 consisted of the drilling of 8 development and 3 exploration wells (.2 net) and (.7 net). Four of the wells (.7 net) were dry. The Canadian drilling program in 2001 consisted of the drilling of 4 development wells (.6 net), with three of these wells successfully completed as gas wells. Overall, the Company's drilling program had a success ratio of 66%.
The Company's crude oil and condensate production is sold at posted field prices, primarily to major crude oil and condensate purchasers. For average posted field prices, for both oil and gas, see "Properties - Oil and Gas Properties - Production." The Company has no one purchaser that purchased in excess of 10% of its 2001 consolidated oil and gas revenues.
The loss of any one customer in the domestic hydrocarbon market is not considered material. The Company is not dependent on any patent, trademark or license.
The Company's oil and gas business is subject to all of the operating risks normally associated with the exploration for and production of oil and gas. In accordance with customary industry practices, the Company maintains insurance coverage limiting financial loss resulting from certain of these operating hazards.
COMPETITION
The oil and gas industry is intensely competitive and competes with other industries in supplying the energy and fuel requirements of industrial, commercial and individual customers.
The principal method of competition in the production of oil and gas is the successful location and acquisition of properties which produce commercially profitable quantities of oil and gas.
The Company competes with many other companies in the search for and acquisition of oil and gas properties and leases for exploration and development. Many of these companies have substantially greater financial, technical and other resources than the Company. Competition among petroleum companies for favorable oil and gas prospects can be expected to continue. The Company is not a significant factor in the oil and gas industry.
The principal raw materials and resources necessary for the exploration for, and the acquisition, development, production and sale of, crude oil and natural gas are leasehold or freehold prospects under which oil and gas reserves may be discovered, drilling rigs and related equipment to explore for and develop such reserves, casing and other capital assets required for the development and production of the reserves and knowledgeable personnel to conduct all phases of oil and gas operations. The Company must compete for such raw materials and resources with both major oil companies and independent operators and also with other industries for certain personnel and materials. Although the Company believes its current inventories of raw materials and resources are adequate to preclude any significant disruption of operations in the immediate future, the continued availability of such materials and resources to the Company cannot be assured.
SEASONALITY
The oil business is generally not seasonal in nature. Gas demand and prices paid for gas have become seasonal, showing a decrease during the summer and fall.
ENVIRONMENTAL MATTERS
The petroleum industry is subject to numerous federal, state and provincial environmental statutes, regulations and other pollution controls in both the United States and Canada. In general, the Company is and will continue to be subject to present and future environmental statutes and regulations.
The Company's expenses relating to preserving the environment during 2001 were not significant in relation to operating costs and the Company expects no material changes in 2002. Environmental regulations have had no materially adverse effect on the Company's petroleum operations to date, but no assurance can be given that environmental regulations will not, in the future, result in a curtailment of production or otherwise have materially adverse effects on the Company's operations or financial condition.
REGULATION - UNITED STATES OPERATIONS
The Company's operations are affected from time to time, in varying degrees, by political developments, laws and regulations. In particular, oil and gas production operations are affected by changes in taxes and other laws relating to the petroleum industry and by constantly changing administrative regulations. The long-term effects of all the federal enactments and programs, whether beneficial or detrimental to the future operations and income of the Company, cannot be predicted at this time.
Rates of production of oil and gas have for many years been subject to conservation laws and regulations. State regulatory agencies set allowable rates of production and limit the number of days a month a well can produce. The petroleum industry has also been subject to tax laws dealing specifically with it, such as the Crude Oil Windfall Profit Tax Act. In addition, oil and gas operations are subject to extensive regulation or termination by government authorities on account of ecological and other considerations. All of the jurisdictions in which the Company operates have statutes and administrative regulations governing the drilling and production of oil and gas.
REGULATION - CANADIAN OPERATIONS
The Company's Canadian subsidiary, Wilshire Oil of Canada, Ltd., operates primarily in the Province of Alberta, with some activity in the Province of British Columbia and Saskatchewan.
The petroleum and natural gas industry operates under federal and provincial legislation and regulations which govern land tenure, royalties, production rates, environmental protection, exports and other matters. Federal legislation monitors the price of oil and gas in export trade and the quantities of such products exportable from Canada. Provincial legislation has been enacted for the purpose of regulating operations in the Provinces.
OIL PRICES
Oil prices actually being paid by purchasers in the United States are publicly announced throughout the country and vary depending on locality and qualitative specifications of the crude oil.
INVESTMENT IN MARKETABLE SECURITIES
The Company holds investments in certain marketable securities. From time to time, the Company buys and sells securities in the open market. The Company over the years has decreased its holdings in marketable securities and focused its resources in the oil & gas and real estate divisions.
Holdings of marketable securities, at market value, amounted to $10,358,000 at December 31, 2001 and $7,166,000 at December 31, 2000. There were no gains from the sale of marketable securities in 2001. In 2001, the Company recorded a one-time charge through its statement of income of $1,684,000 to reflect a decline in the market price of a security it owns, which was determined to be other than temporary.
REAL ESTATE OPERATIONS
The Company's real estate operations are conducted, both in its own name and through several wholly owned subsidiaries, in the states of Arizona, Texas, Florida, Georgia and New Jersey. They are not seasonal in nature.
The Company's Arizona properties include the following:
378 unit garden apartment complex 340 unit garden apartment complex 70 unit midrise apartment building 53,000 sq. ft. multi-tenant two story office building 65,000 sq. ft. retail/medical use complex
The Texas properties includes a 228 and 180 unit apartment complex in San Antonio.
The Company's operations in Florida consists of two office buildings having a combined area of 28,000 square feet and apartment properties having 62 units.
The Georgia property is a 72 unit apartment complex.
The Company's properties in New Jersey consists of apartment properties having 473 units. In addition, the Company holds various commercial/retail properties, including a 75,000 sq. ft. office building and other undeveloped investment properties.
The Company utilizes property management companies to assist in the management of its properties. Expenses incurred in operating the properties include, among other things, administrative costs, utilities, repairs and maintenance and property taxes.
During the twelve months ended December 31, 2001, the Company sold one condominium unit and two undeveloped properties in New Jersey and Arizona for a profit of approximately $1,472,000. In addition, the Company purchased a 180 unit apartment complex in San Antonio, Texas at a cost of $5,250,000. The purchase was funded by a $980,000 cash down payment and an assumable mortgage of $4,270,000. Also, the Company purchased three condominium units in existing properties at a cost of $258,000 and two investment properties in New Jersey for $2,686,000. The condominium units and the smaller investment property were funded entirely from operations in the amount of $344,000 and the larger investment property was acquired by a $1,400,000 cash down payment and purchase money mortgage in the amount of $1,200,000.
The Company will explore other real estate acquisitions as they arise. The timing of any such acquisition will depend on, among other things, economic conditions and the favorable evaluation of specific opportunities presented to the Company. The Company is currently planning further acquisitions of investment properties during the next several months. Accordingly, while the Company anticipates that it will actively explore these and other real estate acquisition opportunities, no assurance can be given that any such acquisition will occur.
The real estate industry is intensely competitive in nature. The Company competes with many other real estate operators and is not a significant factor in the markets it operates in.
The Company's real estate operations are subject to existing federal and state laws regarding environmental quality and pollution control. Environmental regulations had no materially adverse effect on the Company's real estate operations during 2001, but no assurance can be given that environmental regulations will not, in the future, have a materially adverse effect on the Company's operations.
ITEM 1A
ITEM 1A - EXECUTIVE OFFICERS OF THE REGISTRANT
The table below sets forth the names and ages of all executive officers of the Registrant and the position(s) and offices with the Registrant presently held by each and the periods during which each has served in such position(s) and offices. There are no "family relationships" as defined in Item 401 (d) of Regulation S-K between any of these persons and any other executive officer or director of the Company.
All executive officers have been elected or appointed to hold office until their respective successors have been elected or appointed and qualified or until their earlier resignation or removal.
Executive Officers of Registrant
Name Age Position with Registrant - ---- --- ------------------------ S. Wilzig Izak 43 Chairman of the Board, Chief Executive Officer and Chief Financial Officer
ITEM 2.
ITEM 2. PROPERTIES
Offices
The executive and administrative office of the Company consists of approximately 2,000 square feet, located at 921 Bergen Avenue, Jersey City, New Jersey. This office is leased at a monthly rental of $2,683.
The Company maintains its principal office for the United States oil and gas operations in Oklahoma City, Oklahoma, leasing 3,618 square feet, at a monthly cost of $2,345. The Company also owns a storage yard of approximately five acres, situated near Will Rogers Airport in Oklahoma City.
The Company's Canadian subsidiary maintains an exploration office in Calgary, Alberta, Canada. The Company leases 1,583 square feet at a monthly rental of $3,291 Canadian.
OIL AND GAS PROPERTIES
GLOSSARY
The terms defined in this section are used throughout this report.
BBL. One stock tank barrel, or 42 U.S. gallons liquid volume, usually used herein in reference to crude oil or other liquid hydrocarbons.
BOE. Equivalent barrels of oil in reference to natural gas. Natural gas equivalents are determined using the ratio of six Mcf of natural gas to one Bbl of crude oil, condensate or natural gas liquids.
DEVELOPED ACREAGE. The number of acres which are allocated or assignable to producing wells or wells capable of production.
DEVELOPMENT WELL. A well drilled as an additional well to the same reservoir as other producing wells on a lease, or drilled on an offset Lease not more than one location away from a well producing from the same reservoir.
EXPLORATORY WELL. A well drilled in search of a new undiscovered pool of oil or gas, or to extend the known limits of a field under development.
GROSS ACRES OR WELLS. The total acres or wells, as the case may be, in which an entity has an interest, either directly or through an affiliate.
LEASE. Full or partial interests in an oil and gas lease, oil and gas mineral rights, fee rights or other rights, authorizing the owner thereof to drill for, reduce to possession and produce oil and gas upon payment of rentals, bonuses and/or royalties. Oil and gas leases are generally acquired from private landowners and federal, provincial and state governments.
MCF. One thousand cubic feet. Expressed, where gas sales contracts are in effect, in terms of contractual temperature and pressure bases and, where contracts are nonexistent, at 60 degrees Fahrenheit and 14.65 pounds per square inch absolute.
MMCF. One million cubic feet. Expressed, where gas sales contracts are in effect, in terms of contractual temperature and pressure bases and, where contracts are nonexistent, at 60 degrees Fahrenheit and 14.65 pounds per square inch absolute.
NET ACRES OR WELLS. A party's interest in acres or a well calculated by multiplying the number of gross acres or gross wells in which such party has an interest by the fractional interest of such party in such acres or wells.
PRODUCTION COSTS. The expenses of producing oil or gas from a formation, consisting of the costs incurred to operate and maintain wells and related equipment and facilities, including labor costs, repair and maintenance, supplies, insurance, production, severance and other production excise taxes.
PRODUCING PROPERTY. A property (or interest therein) producing oil and gas in commercial quantities or that is shut-in but capable of producing oil and gas in commercial quantities, to which Producing Reserves have been assigned by an independent petroleum engineer. Interests in a property may include working interests, production payments, royalty interests and other nonworking interests.
PRODUCING RESERVES. Proved Developed reserves expected to be produced from existing completion intervals open for production in existing wells.
PROSPECT. An area in which a party owns or intends to acquire one or more oil and gas interests, which is geographically defined on the basis of geological data and which is reasonably anticipated to contain at least one reservoir of oil, gas or other hydrocarbons.
PROVED DEVELOPED RESERVES. Proved Reserves which can be expected to be recovered through existing wells with existing equipment and operating methods.
PROVED RESERVES. The estimated quantities of crude oil, natural gas and other hydrocarbons which, based upon geological and engineering data, are expected to be produced from known oil and gas reservoirs under existing economic and operating conditions, and the estimated present value thereof based upon the prices and costs on the date that the estimate is made and any price changes provided for by existing conditions.
PROVED UNDEVELOPED RESERVES. Proved Reserves which can be expected to be recovered from new wells on undeveloped acreage or from existing wells where a relatively major expenditure is required for recompletion.
UNDEVELOPED ACRES. Oil and gas acreage (including, in applicable instances, rights in one or more horizons which may be penetrated by existing well bores, but which have not been tested) to which proved reserves have not been assigned by independent petroleum engineers.
WORKING INTEREST. The operating interest under a lease which gives the owner the rights to drill, produce and conduct operating activities on the property ;and a share of production, subject to all royalty interests and other burdens and to all costs of exploration, development and operations and all risks in connection therewith.
* * *
Following are certain tables and other statistical data concerning the Company's reserves, production, acreage and other information with regard to the Company's oil and gas properties and operations.
For information regarding costs incurred in 2001, please refer to the "Segment Information" in Note 9 of the Notes to Consolidated Financial Statements, presented elsewhere herein. For information regarding capitalized costs relating to oil and gas producing activities, please refer to Note 9 of the Notes to Consolidated Financial Statements, presented elsewhere herein.
Future revenues, net of development and production expenditures (Net Revenues), from estimated production of proved and proved developed reserves, based on existing economic conditions for each of the next three succeeding years, are estimated as follows:
United States Canada (000's Omitted) (000's Omitted) ----------------------------- ----------------------------- Proved Proved Proved Proved Reserves Developed Reserves Reserves Developed Reserves -------- ------------------ -------- ------------------ 2002 $ 1,450 $1,450 $ 2,835 $ 2,835
2003 $ 1,247 $ 4,018 $ 3,528 $1,247
2004 $ 1,117 $1,117 $ 4,655 $ 3,630
Remainder $15,135 $7,816 $75,047 $57,604
RESERVES
The quantities of natural gas and crude oil Proved and Proved Developed Reserves presented herein include only those amounts which the Company reasonably expects to recover in the future from known oil and gas reservoirs under existing economic and operating conditions. Therefore, Proved and Proved Developed Reserves are limited to those quantities which are recoverable commercially at current prices and costs, under existing technology. Accordingly, any changes in the future oil and gas prices, operating and development costs, regulations, technology and other factors could significantly increase or decrease estimates of Proved and Proved Developed Reserves.
The Company's net Proved and Proved Developed Reserves of oil and gas and the present values thereof at December 31, 1999 and 2000 and 2001 were estimated by the independent professional engineering consultants referred to on page 28. Such estimates were utilized in the preparation of the Company's consolidated financial statements for the applicable fiscal years and for reporting purposes.
Set forth below are estimates of the Company's Proved and Proved Developed Reserves and the present value of estimated future net revenues from such reserves based upon the standardized measure of discounted future net cash flows relating to proved oil and gas reserves in accordance with the provisions of Statement of Financial Accounting Standards No. 69, "Disclosures about Oil and Gas Producing Activities" (SFAS No. 69). The standardized measure of discounted future net cash flows is determined by using estimated quantities of Proved Reserves and the periods in which they are expected to be developed and produced based on period-end economic conditions. The estimated future production is priced at period-end prices, except where fixed and determinable price escalations are provided by contract.
The resulting estimated future cash inflows are reduced further by estimated future costs to develop and produce reserves based on period-end cost levels. No deduction has been made for depletion, depreciation or income taxes or for indirect costs, such as general corporate overhead. Present values were computed by discounting future net revenues by 10 percent per annum.
The following table sets forth-summary information with respect to the estimates of the Company's Proved and Proved Developed Reserves at December 31 of the years indicated:
The determination of oil and gas reserves is a complex and interpretive process, which is subject to continued revisions as additional information becomes available. Reserve estimates prepared by different engineers from the same data can vary widely. Therefore, the reserve data presented herein should not be construed as being exact. Any reserve estimate, especially when based upon volummetric calculations, depends in part on the quality of available data, engineering and geologic interpretation and judgment, and thus, represents only an informed professional judgment. Subsequent reservoir performance may justify upward or downward revision of the estimate.
No Proved or Proved Developed Reserve estimates for oil and gas were filed with or included in reports to any other federal or foreign governmental authority or agency since the beginning of fiscal 2001 other than with the Securities and Exchange Commission.
PRODUCTION WELLS
The following tabulations indicate the number of productive wells (gross and net) as of December 31, 2001:
Gas Oil Developed Acreage ------------- ------------ ------------------- Gross Net Gross Net Gross Net ----- ---- ----- --- ------- -------- United States 551 73.3 293 59.8 48,723 19,228 Canada 326 69.4 26 3.6 168,540 26,909
PRODUCTION
The following table shows the Company's net production in barrels ("Bbls") of crude oil and in thousands of cubic feet ("Mcf") of natural gas (computed after deducting all outstanding interests, including basic royalties and overriding royalties) for the past three years (note - all $ dollar amounts presented are in U.S. dollars).
Oil and Condensate (Bbls) Gas (Mcf) ------------------------------- ----------------------------- United States Canada United States Canada ------------- ------- ------------- --------- 2001 56,000 53,000 1,437,000 750,000 2000 62,000 35,000 957,000 833,000 1999 68,000 46,000 1,048,000 921,000
Average sales price per unit of oil or gas produced:
Oil Gas ----------------------- -------------------------- U.S. Canada U.S. Canada --------- -------- ------- --------- 2001 $ 22.82 $ 19.01 $ 2.26 $ 3.67 2000 $ 25.69 $ 24.66 $ 3.07 $ 3.00 1999 $ 16.61 $ 12.49 $ 1.82 $ 1.70
Production as shown in the table, which is net after royalty interests due others, is determined by multiplying the gross production volume of properties in which the Company has an interest by the percentage of the leasehold or other property interest owned by the Company.
The relative energy content of oil and gas (six Mcf of gas equals one barrel of oil) was used to obtain a conversion factor to convert natural gas production into equivalent barrels of oils.
There are no agreements with foreign governments.
Average Production Cost Per Equivalent Barrel of Oil in the United States and Canada: - ----------------------------------------
2001 2000 1999 ---- ---- ----- United States $6.25 $7.75 $6.31 Canada $3.57 $4.09 $3.20
Unit cost is computed on equivalent barrels of oil equating gas to oil based on BTU content. This method is appropriate for the Registrant since several properties produce both oil and gas and production costs are not segregated.
The components of production costs may vary substantially among wells depending on the methods of recovery employed and other factors, but generally include severance taxes, administrative overhead, maintenance and repair, labor and utilities.
OIL AND GAS LEASES
The following tabulation indicates the undeveloped acreage leased by the Registrant as of December 31 of the years indicated:
2001 2000 ----------------------- ------------------ Undeveloped Acres Undeveloped Acres ----------------------- ------------------ Gross Net Gross Net ------ ----- ------- ----- United States 18,115 4,913 17,930 5,186 Canada 21,768 3,784 21,128 3,592
A "gross" acre is an acre in which the Company owns a working interest. A "net" acre is deemed to exist when the sum of the fractional working interests owned by the Company in gross acres equals one.
DRILLING
The following table sets forth the results of the Registrant's drilling programs for the years covered:
Exploratory Wells Development Wells ------------------------------- ------------------------------------- Net Productive Net Dry Net Productive Net Dry --------------- ------------ ---------------- --------------- U.S. Canada U.S. Canada U.S. Canada U.S. Canada ---- -------- ---- ------ ----- ------ ----- ------- 2001 -- -- .7 -- .2 .3 -- .3 2000 -- -- -- -- 0.5 2.6 -- -- 1999 -- -- 1.5 -- -- 3.9 -- -- 1998 -- -- -- -- 0.6 6.0 1.5 -- 1997 -- -- -- -- 0.4 4.9 -- --
A dry hole is an exploratory or development well which is found to be incapable of producing oil or gas in sufficient quantities to justify completion. A productive well is an exploratory or development well that is capable of commercial production. The number of wells drilled refers to the number of wells completed during the fiscal year, regardless of when drilling was initiated.
REAL ESTATE PROPERTIES
The following table sets forth the location and general character of the principal physical properties owned by the Company as part of its real estate operations. Most of the properties are subject to mortgages. For further information with respect to these properties, see "Business - Real Estate Operations."
Location General Character -------- ------------------ Arizona 378 Unit Apartment Complex Arizona 340 Unit Apartment Complex Arizona 70 Unit Apartment Building Arizona 53,000 Sq. ft. Office Building Arizona 65,000 Sq. ft. Retail/Medical use Complex Texas 228 Unit Apartment Complex Texas 180 Unit Apartment Complex Florida 28,000 Sq. ft. Office Building Florida Apartment Properties (62 units) Georgia 72 Unit Apartment Complex New Jersey Apartment Properties (473 units), including a 132 unit apartment complex New Jersey Commercial/Retail Properties, including a 75,000 sq. ft. office building New Jersey Other undeveloped investment properties
The Company considers all of its properties both owned and leased, together with the related furniture, fixtures and equipment contained therein, to be well maintained, in good operating condition, and adequate for its present and foreseeable future needs.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
At December 31, 2001, the Company was not a party to any actions or proceedings which management believes are reasonably likely to have a material adverse effect upon the Company.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted by the Company to a vote of its security holders during the fourth quarter of the year ended December 31, 2001.
PART II
ITEM 5.
ITEM 5. MARKET PRICE OF THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock is traded on the American Stock Exchange. The following table indicates the high and low sales prices of the Company's common stock for the quarters indicated during the past two years:
(All in ($) Dollars)
As of March 16, 2002 there were 7,821 common shareholders of record.
The Company has not paid any dividends to shareholders in the past two years as it has invested its' profits in oil & gas and real estate properties. The Board of Directors will consider the payment of dividends from time to time in the future based on the Company's results of operations and capital requirements.
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Company is engaged in the exploration and development of oil and gas, both in its own name and through several wholly-owned subsidiaries, on the North American continent. The Company also conducts real estate operations throughout the United States.
OIL AND GAS -
The Company conducts its oil and gas operations in the United States and Canada. Oil and gas operations in the United States are located in Arkansas, California, Kansas, Nebraska, New Mexico, Ohio, Oklahoma, Pennsylvania, Texas, Wyoming, Utah, and West Virgina. In Canada, the Company conducts oil and gas operations in the Provinces of Alberta, British Columbia and Saskatchewan.
REAL ESTATE -
The Company's real estate operations are conducted in the states of Arizona, Texas, Florida, Georgia and New Jersey. The Company's properties consist of apartment complexes as well as commercial and retail properties.
CORPORATE -
The Company holds investments in certain marketable securities. From time to time, the Company buys and sells securities in the open market. Over the years, the Company has decreased its holdings in marketable securities and focused its resources in its oil & gas and real estate divisions.
GENERAL - OIL AND GAS
The Company's oil and gas operating performance is influenced by several factors. The most significant are the prices received for the sale of oil and gas and the sales volume. For 2001, the average price of oil that the Company received was $20.97 compared to $25.32 for 2000, a price decrease of 17%. Average gas prices received by the Company in 2001 were 4% lower than 2000 average gas prices. The average price of gas for 2001 was $2.89 compared to $3.01 for 2000.
The following table reflects the average prices received by the Company for oil and gas, the average production cost per BOE, and the amount of the Company's oil and gas production for the fiscal years presented:
Fiscal Year Ended December 31 ------------------------------------ Crude Oil and Natural Gas Production: 2001 2000 1999 ---------- --------- ---------- Oil (Bbls) ................... 109,000 97,000 114,000 Gas (Mcf) ..................... 2,187,000 1,790.00 1,970,000 Average sales prices: Oil (per Bbl) ................ $ 20.97 $ 25.32 $ 14.95 Gas (per Mfc) ................. $ 2.89 $ 3.01 $ 1.77 Average production costs per BOE: . $ 5.24 $ 6.14 $ 4.90
Sales prices received by the Company for oil and gas have fluctuated significantly from period to period. The fluctuations in oil prices during these periods primarily reflected market uncertainty regarding the inability of the Organization of Petroleum Exporting Countries ("OPEC") to control the production of its member countries, as well as concerns related to global supply and demand for crude oil. Gas prices received by the Company fluctuate generally with changes in the spot market price for gas. It is impossible to predict future price movements with certainty.
The company follows the accounting policy, generally known in the oil and gas industry as "full cost accounting". Under full cost accounting all oil and gas related costs incurred are accumulated in separate cost centers and are amortized to depletion expense using the gross revenue method based on total future estimated recoverable oil and gas reserves. For non oil and gas producing assets, the Company evaluates impairment in accordance with Financial Accounting Standards Board (FASB) No. 121.
The Company periodically reviews available for sale marketable securities for other than temporary impairment in accordance with FASB No. 115, when the cost basis of a security exceeds the market value.
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 2001 ("2001") COMPARED WITH YEAR ENDED DECEMBER 31, 2000("2000")
Net income for the year ended December 31, was $452,000 in 2001 or $0.06 per share, compared to $1,224,000 or $0.15 per share in 2000. Net income in 2001 includes a one-time charge of $1,684,000 ($1,111,000 net of tax impact) for write down of a marketable security due to a decline in market price below cost levels. Excluding the impact of the one time charge, net income for 2001 would have been $1,563,000 or $0.20 per share compared with net income of $1,224,000 in 2000 or $0.15 per share. The market price of the specific security has risen from $2.10 per share at December 31, 2001 (the determination date of the writedown) to $2.50 per share as of March 28, 2002.
Operating income in 2001 was $6,281,000 compared to $6,178,000 in 2000, an increase of $103,000. This increase was due to higher revenue from oil & gas and real estate operations, increased gains from sales of real estate assets mitigated by higher deprecation, amortization and depletion charges.
Oil and gas revenues increased from $7,875,000 in 2000 to $8,534,000 in 2001. This increase was attributable to an increase in the production of crude oil and gas. Average oil prices decreased from $25.32 per BBL in 2000 to $20.97 in 2001. Average gas prices decreased from $3.01 per MCF in 2000 to $2.89 in 2001.
Real estate revenues increased from $12,832,000 in 2000 to $14,095,000 in 2001. This increase was principally due to additional rental income resulting from the purchase of additional properties in 2001.
Oil and gas production expense was higher in 2001 than 2000. Oil and gas production expense amounted to $2,555,000 in 2001 and $2,224,000 in 2000. The increased 2001 expense was primarily a result of cost increases and engineering operations to increase production.
Depreciation, depletion and amortization of oil and gas assets amounted to $2,894,000 in 2001 compared to $1,138,000 in 2000. This increase in depletion, expense resulted from a decrease in value of the Company's reserves due to lower oil and gas prices at December 31, 2001 versus December 31, 2000. Real estate depreciation was $2,263,000 in 2001 compared to $2,126,000 in 2000.
General and administrative expense was comparable in 2001 and 2000. General and administrative expense amounted to $1,690,000 in 2001 compared to $1,689,000 in 2000.
Interest expense increased from $4,419,000 in 2000 to $4,805,000 in 2001. This increase is attributable to an increase in mortgage debt in 2001.
The provision for income taxes includes Federal, State and Canadian taxes. Differences between the effective tax rate and the statutory income tax rates are primarily due to foreign resource tax credits in Canada, and the dividend exclusion in the United States.
YEAR ENDED DECEMBER 31, 2000("2000") COMPARED WITH YEAR ENDED DECEMBER 31, 1999("1999")
Net income for the year ended December 31 was $1,224,000 in 2000 as compared to $614,000 in 1999.
Operating income in 2000 was $6,178,000 compared to $4,461,000 in 1999, an increase of 38%. This increase in operating income is due to higher energy prices in 2000.
Oil and gas revenues increased from $5,238,000 in 1999 to $7,875,000 in 2000. This increase was attributable to a sharp increase in the price of crude oil in 2000. Average oil prices increased from $14.95 per BBL in 1999 to $25.32 in 2000. Average gas prices increased from $1.76 per MCF in 1999 to $3.01 in 2000.
Real estate revenues increased from $12,484,000 in 1999 to $12,832,000 in 2000. This increase was principally due to higher rents.
Oil and gas production expense was higher in 2000 than 1999. Oil and gas production expense amounted to $2,224,000 in 2000 and $2,003,000 in 1999, primarily as a result of cost increases.
Depreciation, depletion and amortization of oil and gas assets amounted to $1,138,000 in 2000 compared to $1,513,000 in 1999. This decrease in depletion expense resulted from an increase in value of the Company's reserves due to higher oil and gas prices. Real estate depreciation was $2,126,000 in 2000 compared to $2,073,000 in 1999.
General and administrative expense was comparable in 2000 and 1999. General and administrative expense amounted to $1,689,000 in 2000 compared to $1,646,000 in 1999.
Interest expense increased from $3,944,000 in 1999 to $4,419,000 in 2000. This increase is attributable to higher interest rates in 2000 and an increase in short term loans.
The provision for income taxes includes Federal, state and Canadian taxes. Differences between the effective tax rate and the statutory income tax rates are primarily due to foreign resource tax credits in Canada, and the dividend exclusion in the United States.
EFFECTS OF INFLATION
The effects of inflation on the Company's financial condition are not considered to be material by management.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 2001 the Company had approximately $8.4 million in marketable securities at cost, with a market value of approximately $10.4 million. The current ratio at December 31, 2001 was 1.4 to 1 on a market basis and the Company's working capital was $5.1 million at December 31, 2001. Management considers these amounts adequate for the Company's current business.
The Company anticipates that cash provided by operating activities and investing activities will be sufficient to meet its capital requirements to acquire oil and gas properties and to drill and evaluate these and other oil and gas properties presently held by the Company. The level of oil and gas capital expenditures will vary in future periods depending on market conditions, including the price of oil and the demand for natural gas, and other related factors. As the Company has no material long-term commitments with respect to its oil and gas capital expenditure plans, the Company has a significant degree of flexibility to adjust the level of its expenditures as circumstances warrant.
The Company plans to actively continue its exploration and production activities as well as search for the acquisition of oil and gas producing properties and of companies with desirable oil and gas producing properties. There can be no assurance that the Company will in fact locate any such acquisitions.
During the year ended December 31, 2001, the Company acquired additional real estate properties. The Company will continue to explore real estate acquisitions as they arise. The timing of any such acquisition will depend on, among other things, economic conditions and the favorable evaluation of specific opportunities presented to the Company. The Company is currently planning further acquisitions of investment properties during the next year. Accordingly, while the Company anticipates that it will actively explore these and other real estate acquisition opportunities, no assurance can be given that any such acquisition will occur.
During the year ended December 31, 2000, the Company refinanced $4,200,000 long-term debt on an apartment complex. No refinancing occurred in 2001. These funds were borrowed on a long-term basis at favorable rates. The proceeds of this loan was used to pay off the original first-mortgage loan and for investment and working capital purposes.
Net cash provided by (used in) operating activities was $6,998,000, $3,620,000 and $5,225,000 in 2001, 2000 and 1999, respectively. The variations in the three years principally relate to changes in accounts receivable and accounts payable and accrued liabilities.
Net cash provided by (used in) investing activities was $(11,182,000), $(10,767,000) and $(2,821,000) in 2001, 2000 and 1999, respectively. The variations principally relate to purchases of real estate properties and transactions in securities. Purchases of real estate properties amounted to $8,194,000 in 2001. Proceeds from sales and redemptions of securities amounted to $602,000 in 1999. Additionally, purchases of marketable securities amounted to $5,000 in 2001, $4,355,000 in 2000 and $1,338,000 in 1999. Proceeds from sales of real estate properties amounted to $1,602,000 in 1999, $691,000 in 2000 and $3,774,000 in 2001. The Company purchased $3,500,000 in mortgages notes in 2000. These mortgage notes were redeemed in 2001 and replaced by a new mortgage note in the amount of $6,790,000 secured by 196 units in two contiguous apartment complexes in Jersey City, New Jersey
Net cash provided by (used in) financing activities was $6,376,000 $8,224,000, and $(5,094,000) in 2001, 2000 and 1999, respectively. The variations principally relate to the issuance, refinance, and repayments of long-term debt. The Company has mortgage notes payable, notes payable and revolving lines of credit with maturity dates ranging from 2002 to 2010.. See Footnote No. (4) to the consolidated financial statements for a schedule of long-term debt.
The Company believes it has adequate capital resources to fund operations for the foreseeable future.
FORWARD-LOOKING STATEMENTS
This Report on Form 10-K for the year ended December 31, 2001 contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements included herein other than statements of historical fact are forward-looking statements. Although the Company believes that the underlying assumptions and expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to be correct. The Company's business and prospects are subject to a number of risks which could cause actual results to differ materially from those reflected in such forward-looking statements, including volatility of oil & gas prices, the need to develop and replace reserves, risks involved in exploration and drilling, uncertainties about estimates of reserves, environmental risks relating to the Company's oil & gas and real estate properties, competition, the substantial capital expenditures required to fund the Company's oil & gas and real estate operations, market and economic changes in areas where the Company holds real estate properties, interest rate fluctuations, government regulation, and the ability of the Company to implement its business strategy.
ITEM 7a
ITEM 7a QUALATATIVE AND QUANTATIVE DISCLOSURE ABOUT MARKET RISK
The Company has investments in domestic equity securities for which the Company has exposure to the risk of market loss. See Note 2 the Financial Statements.
The Company has long term mortgage notes payable which are subject to the risk of market fluxuation in interest rates. See Note 3 to the Financial Statements.
The Company does not believe that it is subject to any other risk from market sensitive instruments.
Financial Accounting Standards Board Statement No. 69 Disclosures
The following disclosures are those required to be made by publicly traded enterprises under Financial Accounting Standards Board Statement No. 69, Disclosures About Oil and Gas Producing Activities.
The SEC defines proved oil and gas reserves as those estimated quantities of crude oil, natural gas and natural gas liquids which geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions. Proved developed oil and gas reserves are those that can be recovered through existing wells with existing equipment and operating methods.
Estimated quantities of proved oil and gas reserves are as follows:
Disclosures of Oil and Gas Producing Activities as Required by Financial Accounting Standards Board Statement No. 69 (000's Omitted)
Standardized Measure of Discounted Future Net Cash Flows Related to Proved Oil and Gas Reserves
For The Years Ended December 31 (000's Omitted)
United States Canada ------------------- ------------------- 2001 2000 2001 2000 -------- -------- -------- -------- Future cash flows $ 35,631 $ 78,112 $102,926 $310,836 -------- -------- -------- -------- Future costs: Production 14,710 23,262 14,675 16,639 Development, dismantlement & abandonment 1,972 1,763 1,696 1,859 -------- -------- -------- -------- Total Future Costs 16,682 25,025 16,371 18,498 -------- -------- -------- -------- Future net inflows-Before income tax 18,949 53,087 86,555 292,338 Future income taxes 4,625 14,066 29,309 97,640 -------- -------- -------- -------- Future net cash flows 14,324 39,021 57,246 194,698 10% Discount factor 6,166 20,852 35,030 117,612 -------- -------- -------- -------- Standardized measure of discounted future net cash flows $ 8,158 $ 18,169 $ 22,216 $ 77,086 -------- -------- -------- --------
Estimated future cash inflows are computed by applying year-end prices of oil and gas to year-end quantities of proved reserves. Future price changes are considered only to the extent provided by contractual arrangements. Estimated future development and production costs are determined by estimating the expenditures to be incurred in developing and producing the proved oil and gas reserves at the end of the year, based on year-end costs and assuming continuation of existing economic conditions. Estimated future income tax expenses are calculated by applying year-end statutory tax rates (adjusted for permanent differences and tax credits) to estimated future pretax net cash flows related to proved oil and gas reserves, less the tax basis of the properties involved.
These estimates are furnished and calculated in accordance with requirements of the Financial Accounting Standards Board and the SEC. Due to unpredictable variances in expenses and capital forecasts, crude oil and natural gas price changes and the fact that the basis for such estimates vary significantly, management believes the usefulness of these projections is limited. Estimates of future net cash flows do not represent management's assessment of future profitability or future cash flow to the Company. Management's investment and operating decisions are based upon reserve estimates that include proved reserves prescribed by the SEC as well as probable reserves, and upon different price and cost assumptions from those used here. It should be recognized that applying current costs and prices at a 10 percent standard discount rate allows for comparability but does not convey absolute value. The discounted amounts arrived at are only one measure of financial quantification of proved reserves.
There were no oil and gas estimates filed with or included in reports to any other federal or foreign governmental authority or agency within the last twelve months.
Reserves in the United States were estimated by Ramsey Engineering Inc. and the Company. Reserves in Canada were estimated by Citidal Engineering, Ltd.
"Total Costs Both Capitalized and Expensed, Incurred in Oil and Gas Producing Activities" (including capitalized interest), "Cost Incurred in Property Acquisition, Exploration and Development Activities" and "Results of Operations from Oil and Gas Producing Activities" during the three years ended December 31, 2001, 2000 and 1999 are included in Note 9 of the Notes to Consolidated Financial Statements, presented elsewhere herein.
The standardized measure of discounted estimated future net cash flows and changes therein related to proved oil and gas reserves is as follows:
Changes in Standardized Measure of
Discounted Future Net Cash Flow from Proved Reserve Quantities
(000's Omitted)
2001 2000 1999 --------- --------- --------- Standardized Measure - $ 95,255 $ 33,509 $ 26,539 Beginning of Year Sales and transfers - Net of Production Costs (6,055) (7,848) (3,018) Extensions and discoveries 700 512 -- Net change in sales price (26,255) 118,760 16,513 Revision of quantity estimates 1,510 (23,308) (1,879) Proceeds from sales of Minerals in Place -0- -0- -0- Accretion of discount 11,716 5,516 3,186 Net change in income taxes 31,894 (26,929) (7,723) Change in production rates- Other (78,391) (4,957) (109) --------- --------- --------- Standardized measure - End of year $ 30,374 $ 95,255 $ 33,509 --------- --------- ---------
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None
PART III
ITEM 10.
ITEM 10. DIRECTORS OF THE REGISTRANT
Information required under this Item with respect to Directors is incorporated by reference from the Company's Definitive Proxy Statement for the 2002 Annual Meeting of Shareholders.
Information regarding executive officers is found in Part I, Item 1 (a)
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
Information required under this Item is incorporated by reference from the Company's Definitive Proxy Statement for the 2002 Annual Meeting of Shareholders.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information required under this Item is incorporated by reference from the Company's Definitive Proxy Statement for the 2002 Annual Meeting of Shareholders.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information required under this Item is incorporated by reference from the Company's Definitive Proxy Statement for the 2002 Annual Meeting of Shareholders.
QUARTERLY FINANCIAL DATA
(Unaudited)
(In thousands $ except per share amounts)
------------------------------------------------ 1st 2nd 3rd 4th Year ------- ------- ------- ------- ------- Oil/Gas Revenues $ 3,418 $ 2,397 $ 1,601 $ 1,118 $ 8,534 Real Estate Revenues $ 3,289 $ 3,539 $ 3,617 $ 3,650 $14,095 ------- ------- ------- ------- ------- Total Revenues $ 6,707 $ 5,936 $ 5,218 $ 4,768 $22,629 ------- ------- ------- ------- ------- Gross Profit (loss) Oil/Gas (a) $ 2,354 $ 1,308 $ 78 $ (655) $ 3,085 Gross Profit Real Estate (b) $ 711 $ 846 $ 914 $ 856 $ 3,327 ------- ------- ------- ------- ------- Total Gross Profit $ 3,065 $ 2,154 $ 992 $ 201 $ 6,412 ------- ------- ------- ------- ------- Net Income (loss) $ 1,037 $ 767 $ 541 $(1,893) $ 452 ------- ------- ------- ------- ------- Net Income (loss) Per Share $ 0.13 $ 0.10 $ 0.07 $ (0.24) $ 0.06 ------- ------- ------- ------- ------- Cash Dividends Per Share $ .00 $ .00 $ .00 $ .00 $ .00 ------- ------- ------- ------- -------
- ---------
(a) - Gross profit relating to oil and gas represents oil and gas revenues less production costs and related depreciation, depletion and amortization.
(b) - Gross profit relating to real estate represents total real estate revenues less real estate operating costs and related depreciation.
WILSHIRE OIL COMPANY OF TEXAS AND SUBSIDIARIES
QUARTERLY FINANCIAL DATA
(Unaudited)
(In thousands $ except per share amounts)
----------------------------------------------- 1st 2nd 3rd 4th Year ------- ------- ------- ------- ------- Oil/Gas Revenues $ 1,345 $ 2,015 $ 2,107 $ 2,408 $ 7,875 Real Estate Revenues $ 3,225 $ 3,159 $ 3,167 $ 3,281 $12,832 ------- ------- ------- ------- ------- Total Revenues $ 4,570 $ 5,174 $ 5,274 $ 5,689 $20,707 ------- ------- ------- ------- ------- Gross Profit Oil/Gas (a) $ 439 $ 901 $ 1,282 $ 1,891 $,4,513 Gross Profit Real Estate (b) $ 919 $ 630 $ 737 $ 763 $ 3,049 ------- ------- ------- ------- ------- Total Gross Profit $ 1,358 $ 1,531 $ 2,019 $ 2,654 $ 7,562 ------- ------- ------- ------- ------- Net Income $ 132 $ 75 $ 543 $ 474 $ 1,224 ------- ------- ------- ------- ------- Net Income Per Share $ 0.02 $ 0.01 $ 0.06 $ 0.06 $ 0.15 ------- ------- ------- ------- ------- Cash Dividends Per Share $ .00 $ .00 $ .00 $ .00 $ .00 ------- ------- ------- ------- -------
- ----------
(a) - Gross profit relating to oil and gas represents oil and gas revenues less production costs and related depreciation, depletion and amortization.
(b) - Gross profit relating to real estate represents total real estate revenues less real estate operating costs and related depreciation.
SELECTED FINANCIAL DATA
(Not covered by Report of Independent Public Accountants)
(In thousands of dollars except per share amounts)
- ------------
a) Gross profit relating to oil and gas represents oil and gas revenues less production costs and related depreciation, depletion and amortization.
b) Gross profit relating to real estate represents total real estate revenues less real estate operating costs and related depreciation.
c) Restated to give effect to stock dividends.
PRO FORMA RESULTS
(Unaudited)
Pro Forma Excluding Security Write Down Actual ----------- -------------------------- December 31 December 31 ----------- -------------------------- 2001 2001 2000 ----------- ----------- ----------- Revenues ............................ $22,629,000 $22,629,000 $20,707,000 Operating Income .................... $ 6,281,000 $ 6,281,000 $ 6,178,000 Net Income .......................... $ 1,563,000 $ 452,000 $ 1,224,000 Earning Per Share ................... $ 0.20 $ 0.06 $ 0.15
Net income for the year ended December 31, was $452,000 in 2001 or $0.06 per share, compared to $1,224,000 or $0.15 per share in 2000. Net income in 2001 includes a one-time charge of $1,684,000 ($1,111,000 net of tax impact) for write down of a marketable security due to a decline in market price below cost levels. Excluding the impact of the one time charge, net income for 2001 would have been $1,563,000 or $0.20 per share compared with net income of $1,224,000 in 2000 or $0.15 per share. The market price of the specific security has risen from $2.10 per share at December 31, 2001 (the determination date of the writedown) to $2.50 per share as of March 28, 2002.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors of Wilshire Oil Company of Texas:
We have audited the accompanying consolidated balance sheets of Wilshire Oil Company of Texas (a Delaware corporation) and subsidiaries as of December 31, 2001 and 2000, and the related consolidated statements of income, shareholders' equity and cash flows for each of the three years in the period ended December 31, 2001. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. 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 significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Wilshire Oil Company of Texas and subsidiaries as of December 31, 2001 and 2000, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2001, in conformity with accounting principles generally accepted in the United States.
ARTHUR ANDERSEN LLP
Roseland, New Jersey March 22, 2002
WILSHIRE OIL COMPANY OF TEXAS AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2001 AND 2000
The accompanying notes to consolidated financial statements are an integral part of these balance sheets.
WILSHIRE OIL COMPANY OF TEXAS AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
The accompanying notes to consolidated financial statements are an integral part of these statements.
WILSHIRE OIL COMPANY OF TEXAS AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY DECEMBER 31, 2001, 2000 AND 1999
The accompanying notes to consolidated financial statements are an integral part of these statements.
WILSHIRE OIL COMPANY OF TEXAS AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS DECEMBER 31, 2001, 2000 AND 1999
WILSHIRE OIL COMPANY OF TEXAS AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued) DECEMBER 31, 2001, 2000 AND 1999
The accompanying notes to consolidated financial statements are an integral part of these statements.
WILSHIRE OIL COMPANY OF TEXAS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS
Wilshire Oil Company of Texas (the Company) is a diversified corporation primarily engaged in oil and gas exploration and production and real estate operations. The Company's oil and gas operations are conducted, both in its own name and through several wholly-owned subsidiaries, in the United States and Canada. Oil and gas operations in the United States are located in Arkansas, California, Kansas, Nebraska, New Mexico, Ohio, Oklahoma, Pennsylvania, Texas, Utah, West Virginia and Wyoming. In Canada, the Company conducts oil and gas operations in the Provinces of Alberta, British Columbia and Saskatchewan. Crude oil and natural gas production is sold to oil refineries and natural gas pipeline companies. The Company's real estate holdings are located in the states of Arizona, Florida, New Jersey, Georgia and Texas. The Company also maintains investments in marketable securities, which are available-for-sale.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Significant accounting policies followed by the Company and its subsidiaries are as follows-
Basis of Presentation
The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. Significant intercompany account balances and transactions among subsidiaries have been eliminated in consolidation.
Use of Estimates
The preparation of these financial statements in conformity with accounting principals generally accepted in the United States 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.
Cash And Cash Equivalents
The Company considers cash and cash equivalents to include deposits with banks having a maturity of three months or less from date of purchase.
Marketable Securities, Available-for-Sale
As of December 31, 2001 and 2000, the marketable securities of the Company consist primarily of equity securities, all of which are classified as available-for-sale. These securities are carried at fair value based upon quoted market prices. Unrealized gains and losses, representing differences between an investment's cost and its fair value, are charged (credited) directly to shareholders' equity, net of related income taxes, as a component of accumulated comprehensive income (loss). The cost of securities sold is determined on a specific identification basis. The Company periodically reviews available-for-sale securities for other than temporary impairment when the cost basis of a security exceeds the market value.
In 2001, the Company wrote down a marketable security held as available-for-sale to fair value by $1,684,000 since the market value decline was determined to be other than temporary.
WILSHIRE OIL COMPANY OF TEXAS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Property And Equipment
Oil And Gas Properties
The Company follows the accounting policy, generally known in the oil and gas industry as "full cost accounting". Under full cost accounting, the Company capitalizes all costs, including interest costs, relating to the exploration for and development of its mineral resources. Under this method, all costs incurred in the United States and Canada are accumulated in separate cost centers and are amortized using the gross revenue method based on total future estimated recoverable oil and gas reserves.
Capitalized costs are subject to a "ceiling" test that limits such costs to the aggregate of the estimated present value, using a discount rate of 10% of the future net revenues of proved reserves and the lower of cost or fair value of unproved properties. Management is of the opinion that, based on reserve reports of petroleum engineers and geologists, the fair value of the estimated recoverable oil and gas reserves exceeds the unamortized cost of oil and gas properties at December 31, 2001 and 2000.
Real Estate And Other Properties
Real estate properties and other property and equipment are stated at cost. Depreciation is provided on the straight-line method using an estimated useful life of 30 to 35 years for real estate buildings and at various rates based upon the estimated useful lives of the other property and equipment.
As of December 31, 2001 and 2000, real estate properties consist of land with an aggregate cost of $16,191,000 and $15,146,000, buildings with an aggregate cost of $44,244,000 and $38,786,000 and furniture and fixtures with an aggregate cost of $8,726,000 and $7,470,000, respectively.
Impairment of Property and Equipment
The Company follows Financial Accounting Standards Board (FASB) Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets" (SFAS 121) for their non oil and gas producing assets. As of December 31, 2001 and 2000, the Company has determined that no impairment has occurred in accordance with the measurement criteria prescribed by SFAS 121.
Revenue Recognition
Revenue from oil and gas properties is recognized at the time these products are delivered to third party purchasers. Revenue from real estate properties is recognized during the period in which the premises are occupied and rent is due from the tenant. Because revenues from both oil and gas and real estate operations are collected in a relatively short period, no allowance is required for uncollectible accounts.
Income Taxes
The Company accounts for income taxes using Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS 109). Under SFAS 109, deferred taxes are provided for the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The primary temporary differences are those related to tax over book depreciation, depletion, and amortization and unrealized gains and losses on marketable securities (see Note 7).
WILSHIRE OIL COMPANY OF TEXAS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Foreign Operations
The assets and liabilities of the Company's Canadian subsidiary have been translated at year-end exchange rates, and the related revenues and expenses have been translated at average annual exchange rates. The aggregate effect of translation losses are reflected as a component of accumulated other comprehensive income (loss) until the sale or liquidation of the underlying foreign investment.
Unremitted earnings of the Canadian subsidiary are intended to be permanently invested in Canada and are subject to foreign taxes substantially equivalent to United States Federal income taxes. The unremitted earnings on which the Company has not been required to provide Federal income taxes amounted to approximately $19,702,000 and $17,613,000 at December 31, 2001 and 2000, respectively.
Accounting for Stock-Based Compensation
The Company has adopted the disclosure-only provisions of Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" (SFAS 123).
Net Income Per Common Share
Basic earnings per share are calculated based on the total weighted average number of shares of common stock outstanding during the period and excludes any dilutive effects of options, warrants and convertible securities. Diluted earnings per share gives effect to all potentially dilutive common shares that were outstanding during the period.
The following table sets forth the computation of basic and diluted earnings per share-
WILSHIRE OIL COMPANY OF TEXAS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Accumulated Other Comprehensive Income (Loss)
Comprehensive income (loss) includes net income, unrealized gains or losses on available-for-sale securities and foreign currency translation adjustments. The Company has chosen to disclose comprehensive income (loss) in the Consolidated Statements of Shareholders' Equity.
Changes in the components of Accumulated Other Comprehensive Income (Loss) for the years 1999, 2000 and 2001 are as follows-
Reclassifications
Certain reclassifications have been made to the prior year's financial information to conform to the current year presentation.
3. LONG-TERM DEBT
Long-term debt as of December 31 consists of the following-
2001 2000 ------------ ------------ Mortgage notes payable (a) ........... $ 26,464,000 $ 22,496,000 Mortgage notes payable (b) ........... 16,868,000 17,062,000 Mortgage notes payable (c) ........... 9,796,000 5,610,000 Mortgage note payable (d) ............ 4,145,000 4,200,000 Note payable (e) ..................... 4,575,000 6,075,000 Revolving line of credit (f) ......... 3,500,000 3,500,000 Revolving line of credit (g) ......... 2,600,000 2,600,000 ------------ ------------ 67,948,000 61,543,000 Less-Current portion ................. 7,287,000 14,842,000 ------------ ------------ $ 60,661,000 $ 46,701,000 ============ ============
(a) At December 31, 2001, the Company had mortgage notes payable to The Trust Company of New Jersey (The Trust Company) totaling $26,464,000 payable in monthly and quarterly installments, bearing interest at a weighted average effective interest rate of 7.53%. These mortgage notes are secured by a first mortgage interest in the Company's real estate properties and mature at various dates through 2010.
WILSHIRE OIL COMPANY OF TEXAS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(b) The Company has two mortgage notes payable to Criimi Mae/Citicorp Real Estate (Criimi Mae). The Criimi Mae notes at December 31, 2001 are payable in monthly installments, bear interest at a rate of 7.48% and mature in November 2007. In February 2002, Criimi Mae transferred servicing of the two mortgage notes payable to GMAC Commercial Mortgage Corporation.
(c) In August 1999, Criimi Mae transferred servicing of two of the mortgage notes payable, to Orix Real Estate Capital Markets, LLC (ORIX). The Orix notes are payable in monthly installments, bearing a weighted average interest rate of 7.05% and mature in July 2008. In March 2001, the Company also obtained a mortgage note payable for $4,270,000 from ORIX. The mortgage note is payable in monthly installments, bearing interest at 7.9%, which matures in June 2009 and is secured by the property.
(d) At December 31, 2001, the Company had a mortgage note payable for $4,145,000 from Columbia Savings Bank. The mortgage note is payable in monthly installments, bearing interest at a rate of 8.00%, which matures in January 2011 and is secured by the property.
(e) In 1999, the Company had an outstanding note payable for $1,975,000 to The Trust Company. In August 2000, the Company renewed the note, which bore interest at the prime lending rate, matured in August 2001 and was secured by certain marketable securities. In August 2001, the Company renewed the note, bearing interest at the prime lending rate (4.75% at December 31, 2001) which matures in January 2003.
In addition, in June 2000, the Company obtained a partially secured note payable to The Trust Company for $2,100,000. This loan bore interest at the prime lending rate and matured in May 2001. The amount was paid in full in 2001.
The Company also obtained a note payable for $2,000,000 in December 2000, to The Trust Company. This loan bore interest at 6.5%, matured in March 2001 and was secured by a certificate of deposit. The amount was paid in full in 2001. The Company obtained a note payable of $2,600,000 in December 2001, to The Trust Company. This loan bore interest at the prime lending rate, matured in March 2002 and was secured by a certificate of deposit. The amount was paid in full in 2002.
(f) In 1999, the Company had an unsecured $2,000,000 revolving line of credit from The Trust Company. In August 2000, the revolving line of credit was renewed. This loan bore interest at the prime lending rate and matured in August 2001. In August 2001, the line of credit was extended and matures in January 2003.
In addition, the Company obtained an unsecured line of credit for $1,500,000 in December 2000, which bore interest at the prime lending rate and matured in March 2001. In March 2001, the line of credit was extended and matures in October 2002. The amount was paid in full in March 2002.
(g) In June 2000, the Company obtained a revolving line of credit from the Provident Savings Bank for $2,600,000 all of which was outstanding at December 31, 2000. This loan bore interest at the prime lending rate and matured in June 2001. In June 2001 the line of credit was extended, bearing interest at the prime lending rate of 4.75% at December 31, 2001 and matures in July 2002.
WILSHIRE OIL COMPANY OF TEXAS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The aggregate maturities of the long-term debt in each of the five years subsequent to 2001 and thereafter are-
2002 ....................................... $ 7,287,000 2003 ....................................... 10,508,000 2004 ....................................... 8,627,000 2005 ....................................... 685,000 2006 ....................................... 735,000 Thereafter ................................. 40,106,000 ----------- $67,948,000 ===========
4. MORTGAGE NOTES RECEIVABLE
During June 2000, the Company acquired mortgage notes receivable secured by underlying property from The Trust Company for a fair value price of $3,500,000. This transaction was financed in part with the $2,100,000 note payable discussed in Note 3 (e) above. In 2001, the Company entered into an agreement whereby they borrowed $3,200,000 from The Trust Company (included in mortgage notes payable discussed in Note 3 (a) above) which was issued to a third party and redeemed the mortgage notes acquired in 2000 in exchange for $6,790,000 of mortgage notes receivable. Under this agreement, the Company has the right to receive proceeds from the sale of the underlying property for which they received $218,000 in 2001.
5. LOAN PAYABLE TO SHAREHOLDER
During 2000, a shareholder loaned the Company $900,000, payable on demand at the prime interest rate (4.75% at December 31, 2001). During 2001, the shareholder loaned the Company an additional $300,000. At December 31, 2001, $700,000 was outstanding under this loan. The Company repaid $200,000 to the shareholder in January 2002.
6. STOCK OPTIONS
Under various stock option plans adopted prior to 1995, stock options to purchase an aggregate of 26,764 shares of common stock were outstanding to officers, key consultants and employees at December 31, 2001. No additional options may be granted under these plans.
In June 1995, the Company adopted two new stock-based compensation plans (1995 Stock Option and Incentive Plan "Incentive Plan"; and 1995 Non-employee Director Stock Option Plan "Director Plan") under which, up to 450,000 and 150,000 shares, respectively, are available for grant. During 1999, the Company granted 5,000 options, to purchase common stock under the Director Plan. No options were granted under either plan during 2000 and 2001. At December 31, 2001, 3,090 and 82,100 options were outstanding under the Incentive Plan and Director Plan, respectively.
The number and terms of the options granted under these plans are determined by the Company's Stock Option Committee (the Committee) based on the fair market value of the Company's common stock on the date of grant. The period during which an option may be exercised varies, but no option may be exercised after ten years from the date of grant.
The Company has adopted the disclosure-only provisions of SFAS 123. As permitted by the statement, the Company has chosen to continue to account for stock-based compensation using the intrinsic value method. Accordingly, no compensation expense has been recognized for its stock-based compensation plans. Had the
WILSHIRE OIL COMPANY OF TEXAS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
fair value method of accounting been applied to the Company's stock option plans, which requires recognition of compensation cost ratably over the vesting period of the underlying equity instruments, net income would have been reduced by $0 with no per share effect in 2001, $6,000 with no per share effect in 2000, and $49,000 with no per share effect in 1999. This pro forma impact only takes into account options granted since January 1, 1995 and is likely to increase in future years as additional options are granted and amortized ratably over the vesting period. The average fair value of options granted during 1999 was $2.09.
The fair value was estimated using the Black-Scholes option-pricing model based on the weighted average market price at grant date of $3.94 per share in 1999 and the following weighted average assumptions; risk-free interest rate of 6.19% for 1999, volatility of 25.94% for 1999, and no dividend yield for 1999.
The following table summarizes stock option activity for 2001 and 2000-
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(a) At December 31, 2001, options outstanding include options ($1.00 to $6.51 per share) granted to certain employees and key consultants whereby the initial option price as determined by the Committee is subject to reduction (to a minimum of $1.00) by an amount equal to the increase in market value from the date of grant. At December 31, 2001, the lowest outstanding option price is $3.94 per share. Included in these options are options with attached stock appreciation rights, pursuant to which the Company may elect to grant cash, stock or a combination of cash and stock in lieu of the stock appreciation value. Additional compensation attributable to these options is charged to income or capitalized as exploration and development costs over calculated periods of employment based on the duties performed by the individuals awarded the options. During 2001, 2000 and 1999, $0, $0 and $69,000, respectively, was charged to operations, and $0, $0 and $48,000, respectively, was charged to oil and gas properties relating to such options.
As of December 31, 2001 and 2000, included in accrued liabilities is $31,000 payable to certain individuals for stock appreciation rights. These amounts are currently payable under certain conditions.
WILSHIRE OIL COMPANY OF TEXAS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. INCOME TAXES
Provision (benefit) for income taxes consist of the following-
2001 2000 1999 ---------- ----------- ---------- Federal- Current ............ $ 72,000 $ (164,000) $ 251,000 Deferred ........... (635,000) 84,000 (350,000) ---------- ----------- ---------- (563,000) (80,000) (99,000) ---------- ----------- ---------- Foreign- Current ............ 933,000 767,000 63,000 Deferred ........... (103,000) (24,000) 254,000 ---------- ----------- ---------- 830,000 743,000 317,000 ---------- ----------- ---------- State ................. (60,000) (10,000) (8,000) ---------- ----------- ---------- Total ....... $ 207,000 $ 653,000 $ 210,000 ========== =========== ==========
A reconciliation of the differences between the effective tax rate and the statutory U.S. income tax rate is as follows-
2001 2000 1999 -------- -------- -------- Federal income tax provision at statutory rate ..................... $224,000 $638,000 $280,000 State income tax benefit, net of Federal impact ..................... (40,000) (7,000) (5,000) Impact of foreign operations ......... 119,000 109,000 (20,000) Dividend exclusion ................... (96,000) (87,000) (45,000) -------- -------- -------- $207,000 $653,000 $210,000 ======== ======== ======== Effective tax rate 31.4% 34.8% 25.5% ======== ======== ========
Significant components of deferred tax liabilities as of December 31, 2001 and 2000 were as follows-
WILSHIRE OIL COMPANY OF TEXAS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. COMMITMENTS AND CONTINGENCIES
The Company's income tax returns for the State of Arizona are currently under review by the local tax authorities for the years 1993 through 1998. The Company believes that final settlement of its state tax liability for those years will not have a material impact on its consolidated financial position or results of operations.
In June 1996 the Company's Board of Directors adopted the Stockholder Protection Rights Plan (the Rights Plan). The Rights Plan provides for issuance of one Right for each share of common stock outstanding as of July 6, 1996. The Rights are separable from and exercisable upon the occurrence of certain triggering events involving the acquisition of at least 15% (or, in the case of certain existing stockholders, 25%) of the Company's common stock by an individual or group, as defined in the Rights Plan (an Acquiring Person) and may be redeemed by the Board of Directors at a redemption price of $0.01 per Right at any time prior to the announcement by the Company that a person or group has become an Acquiring Person.
As of December 31, 2001 and 2000, $7,880,888 and $7,975,988, respectively, of Rights were outstanding. Each Right entitles the holder to purchase, for an exercise price of $25, one one-hundredth of a share of Series A Participating Preferred Stock. Each one one-hundredth share of Series A Participating Preferred Stock is designed to have economic terms similar to those of one share of common stock but will have one one-hundredth of a vote. Because the Rights are only exercisable under certain conditions, none of which were in effect as of December 31, 2001 and 2000, the outstanding Rights are not considered in the computation of basic and diluted earnings per share.
The Company does not have significant lease commitments or post retirement benefits.
9. SEGMENT INFORMATION
The Company is engaged in the exploration and development of oil and gas, both in its own name and through several wholly-owned subsidiaries, on the North American continent. The Company also conducts real estate operations throughout the United States.
Oil and Gas
The Company conducts its oil and gas operations in the United States and Canada. Oil and gas operations in the United States are located in Arkansas, California, Kansas, Nebraska, New Mexico, Ohio, Oklahoma, Pennsylvania, Texas, Utah, West Virginia and Wyoming. In Canada, the Company conducts oil and gas operations in the Provinces of Alberta, British Columbia and Saskatchewan.
Real Estate
The Company's real estate operations are conducted in the states of Arizona, Texas, Florida, Georgia and New Jersey. The Company's properties consist of apartment complexes, as well as commercial and retail properties.
Corporate
The Company holds investments in certain marketable securities. From time to time, the Company buys and sells securities in the open market. Over the years, the Company has focused its resources in the oil and gas and real estate divisions.
WILSHIRE OIL COMPANY OF TEXAS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following segment data is presented based on the Company's internal management reporting system-
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(a) Represents revenues less all operating costs, including depreciation, depletion and amortization.
WILSHIRE OIL COMPANY OF TEXAS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. GEOGRAPHIC INFORMATION
The following is a description by geographic location-
11. OIL AND GAS PRODUCING ACTIVITIES
The following data represents the Company's oil and gas producing activities for 2001 and 2000-
WILSHIRE OIL COMPANY OF TEXAS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following data summarizes the costs incurred in property acquisition, exploration and development activities and the results of operations from oil and gas producing activities-
PART IV
ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT, SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. FINANCIAL STATEMENTS
The Financial statements filed as part of this report are listed on the Index to Consolidated Financial Statements on page.
(a) 2. FINANCIAL STATEMENT SCHEDULES
All schedules are omitted because they are not required, inapplicable or the information is otherwise shown in the financial statements or notes thereto.
(a) 3. EXHIBITS
Exhibit Number Description
3.1 Restated Certificate of Incorporation of Wilshire Oil Company of Texas, as amended. (Incorporated by reference to Exhibit 3.1 of Item 14 of the Registrant's Annual Report on Form 10-K for the year ended December 31, 1992).
3.2 Amended By-Laws, as of June 11, 1998, of Wilshire Oil Company of Texas (Incorporated by reference to Exhibit 3 of the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1998).
4.1 Stockholder Protection Rights Agreement, dated as of June 21, 1996, between Wilshire Oil Company of Texas and Continental Stock Transfer & Trust Company, as Rights Agent (Incorporated by reference to Exhibit 1 to the Company's current report on Form 8-K dated June 21, 1996).
4.2 Multifamily Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing between a subsidiary of Wilshire Oil Company of Texas and Criimi Mae, Inc. dated October 28, 1998. (Incorporated by reference to Item 14 of the Registrant's Annual Report on Form 10-K for the year ended December 31, 1998).
4.3 Multifamily Promissory Note given by a subsidiary of Wilshire Oil Company Of Texas to Criimi Mae, Inc. dated October 28, 1997. (Incorporated by reference to Item 14 of the Registrant's Annual Report on Form 10-K for the year ended December 31, 1998).
4.4 Multifamily Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing between a subsidiary of Wilshire Oil Company of Texas and Criimi Mae, Inc. dated October 28, 1998. (Incorporated by reference to Item 14 of the Registrant's Annual Report on Form 10-K for the year ended December 31, 1998).
4.5 Multifamily Promissory Note given by a subsidiary of Wilshire Oil Company Of Texas to Criimi Mae, Inc. dated October 28, 1997. (Incorporated by reference to Item 14 of the Registrant's Annual Report on Form 10-K for the year ended December 31, 1998).
4.6 The Company agrees to furnish to the Commission upon request any other agreements with respect to long term debt.
10.1 General Assignments and Assignments of Leases dated March 31, 1992 with respect to the purchase of income producing real estate properties (Incorporated by reference to Exhibit 1 and 2 of Form 8 dated December 9, 1992, filed with the Commission).
10.2 General Assignments, Assignments of Leases, and Escrow Agreements and Early Possession Agreements with respect to the purchase of four income producing real estate properties, (Incorporated by reference to Exhibits 1 (a) through 4(c) on the Company's Form 8-K dated December 31, 1992 filed with the Commission).
10.3 Wilshire Oil Company of Texas 1980 Stock Option Plan. (Incorporated by reference to Exhibit 10.4 of Item 14 of the Registrant's Annual Report on Form 10-K for the year ended December 31, 1992).
10.4 Wilshire Oil Company of Texas 1984 Stock Option Plan. (Incorporated by reference to Exhibit 10.5 of Item 14 of the Registrant's Annual Report on Form 10-K for the year ended December 31, 1992).
10.5 Wilshire Oil Company of Texas 1995 Stock Option and Incentive Plan. (Incorporated by reference to Exhibit A of the Registrant's Definitive Proxy Statement for its 1995 Annual Meeting of Stockholders).
10.6 Wilshire Oil Company of Texas 1995 Non-Employee Director Stock Option Plan. ( Incorporated by reference to Exhibit B of the Registrant's Definitive Proxy Statement for its 1995 Annual Meeting of Stockholders).
99.1 Letter to Commission Pursuant to Temporary Note 3T
11. Computation of Earnings Per Share
21. List of significant subsidiaries of the Registrant
23. Consent of Arthur Andersen LLP
14(b) REPORTS ON FORM 8
There were no Form 8-K filings by the Company during the fourth quarter of 2001.
S I G N A T U R E S
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused the report to be signed on its behalf by the undersigned thereunto duly authorized.
WILSHIRE OIL COMPANY OF TEXAS ----------------------------- (Registrant)
Directors:
By: /s/ S. WILZIG IZAK ---------------------------------------- S. Wilzig Izak
By: /s/ WILLIAM SCHWARTZ, M.D. ---------------------------------------- William Schwartz, M.D., Director
By: /s/ MILTON DONNENBERG ---------------------------------------- Milton Donnenberg
By: /s/ ERNEST WACHTEL ---------------------------------------- Ernest Wachtel
Officers:
By: /s/ S. WILZIG IZAK ---------------------------------------- S. Wilzig Izak Chairman of the Board and Chief Executive Officer (Duly Authorized Officer and Chief Financial Officer)
Date: March 30, 2002