SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934.
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1998
OR
__ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934.
FOR THE TRANSITION PERIOD FROM __________TO__________
COMMISSION FILE NUMBER 0-21591
MASON OIL COMPANY, INC.
(Name of small business issuer as specified in its charter)
UTAH 37-1099747
(State of Incorporation) (I.R.S. Employer Identification No.)
6337 RAVENWOOD DRIVE
SARASOTA, FLORIDA 34243
(Address of principal executive offices)
(941) 351-3102
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days. Yes X
-
No __
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS
NOT APPLICABLE
APPLICABLE ONLY TO CORPORATE ISSUERS
INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE REGISTRANT'S CLASSES
OF COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE:
There were 11,757,504 shares of the Issuer's common stock, par value $.001 per
share, outstanding as of May 1, 1998.
<PAGE>
PART I
FINANCIAL INFORMATION
MASON OIL COMPANY, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, 1997 MARCH 31, 1998
------------- --------------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $1,587,627 $ 619,511
Accounts receivable - related party -- 90,000
Prepaid expenses 1,904 100,072
--------- ----------
Total Current Assets 1,589,531 809,583
Property and equipment, at cost
Unproved oil and gas properties,
full cost method 192,893 350,478
Vehicles 33,825 39,960
Oil and Gas Equipment -- 905,000
Other 2,530 7,468
--------- ----------
229,248 1,302,906
Less accumulated depreciation (1,786) (7,774)
--------- ----------
227,462 1,295,132
Other noncurrent assets
Organization costs, net of amortization 1,048 777
Deposits -- 21,672
--------- ----------
Total Other Assets 1,048 22,449
Total 1,842,684 2,127,164
========= ==========
LIABILITIES AND STOCKHOLDERS' (DEFICIT)
Current Liabilities
Accounts Payable $ 19,165 $ 71,998
Notes payable - related party 196,591 175,633
Current portion of notes payable 11,358 16,370
---------- -----------
Total Current Liabilities 227,114 264,001
Notes payable - long term 11,011 3,958
Deferred salary payable 24,000 60,000
Stockholders' equity
Common Stock, $.001 par value,
50,000,000 shares authorized; 11,732,171
shares issued and outstanding at
March 31, 1998 and 10,890,504 issued and
outstanding at June 30,1997 10,890 11,732
Additional paid-in capital 1,881,801 2,489,459
Accumulated deficit (310,554) (688,054)
Foreign currency translation adjustment (1,578) (13,932)
--------- ---------
Total Stockholders' equity 1,580,559 1,799,205
--------- ---------
Total Liabilities and Stockholders'
Equity 1,842,684 2,127,164
========= =========
</TABLE>
See notes to consolidated financial statements
<PAGE>
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS
ENDED MARCH 31, 1998 AND 1997
<TABLE>
<CAPTION>
Nine Months Ended
MARCH, 31
-------------------
1997 1998
---- ----
<S> <C> <C>
Costs and expenses
General and administrative $ 177,030 $ 404,447
-------- ---------
Total operating costs and expenses 177,030 404,447
Other (income) expense
Interest income (5,942) (37,551)
Interest expense 9,706 10,604
------- --------
Net income (loss) $(180,794) $(377,500)
======== =========
Basic net loss per common share $ (.02) $ (.03)
======== =========
Weighted average number of shares outstanding 9,406,010 11,092,463
========= ==========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
MASON OIL COMPANY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS
ENDED MARCH 31, 1998 AND 1997
<TABLE>
<CAPTION>
Three Months Ended
MARCH 31,
---------------------
1997 1998
<S> <C> <C>
Costs and Expenses:
Selling, general and administrative $ 126,323 $ 190,896
-------- ---------
Total operating costs and expenses 126,323 190,896
Other (income) expense:
Interest income (5,843) (10,050)
Interest expense 4,160 3,944
-------- ---------
Net loss $(124,640) (184,790)
========= =========
Basic loss per common share $ (.01) $ (.01)
======== =========
Weighted average number of shares outstanding 9,767,121 11,092,463
========= ==========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
MASON OIL COMPANY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS
ENDED MARCH 31, 1998
<TABLE>
<CAPTION>
Nine Months Ended
MARCH 31,
-----------------
1997 1998
---- ----
<S> <C> <C>
Cash flows used for operating activities
Net (loss) $ (180,794) $ 377,500
----------- -----------
Depreciation and amortization -- 6,402
Stock issued for consulting service 24,797 3,500
Adjustments to reconcile net loss
to net cash used in operating
activities
Accrued interest to related parties 9,706 --
Accounts receivable (4,503) (89,848)
Prepaid expenses and other assets -- (98,520)
Accounts payable and accrued liabilities 48,587 97,990
------------ ------------
Net cash used for operating activities (102,207) (457,976)
------------ ------------
Cash flows used by investing activities
Oil and gas exploration expenses (2,431) (147,275)
Oil and gas acquisition costs -- (34,815)
Drilling Rig -- (300,000)
Purchase of Equipment, furniture and automobile (1,369) (17,198)
------------ -----------
Net cash used for investing activities (3,800) (499,288)
------------ ------------
Cash flows from financing activities
Payments on L-T Debt -- (9,881)
Increase in Notes Payable -- 3,925
Increase in L-T Debt -- 10,921
Advances from stockholders 44,107 -
Proceeds from sale of stock, net 1,848,500 -
------------ -------------
Net cash provided by financing activities 1,892,607 49,653
------------ -------------
Net effect of currency fluctuations on cash
and cash equivalents (752) (15,817)
------------ --------------
Net increase (decrease) in cash and cash
equivalents 1,785,848 (968,115)
Beginning cash and cash equivalents 12,277 1,587,627
------------- ------------
Ending cash and cash equivalents $1,798,125 $ 619,511
============= ============
</TABLE>
During the three months ended December 31, 1997, the Company issued 806,607
shares of common stock valued at $605,000 towards the purchase of a drilling
rig.
During the three months ended December 31, 1997, the Company also issued
35,000 shares of common stock valued at $3,500.
See notes to consolidated financial statements
<PAGE>
------
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF ACCOUNTING POLICIES
- ---------------------------------------------
The summary of Mason Oil Company's, Inc. (the "Company") significant
accounting policies are incorporated by reference to the Company's annual
report on Form 10-KSB dated June 30, 1997.
The accompanying unaudited condensed financial statements reflect all
adjustments which, in the opinion of management, are necessary for a fair
presentation of the results of operations, financial position and cash flows.
The results of the interim period are not necessarily indicative of the
results for the full year.
NOTE 2 - BASIC LOSS PER COMMON SHARE
- -------------------------------------------
The Company adopted the provisions of Statement of Financial Accounting
Standards No. 128, "Earnings Per Share" (FAS 128). FAS 128 established new
definitions for calculating and disclosing basic and diluted earnings per
share. In accordance with FAS 128, all prior periods have been restated to
conform to the new methodology. The restated amounts did not differ
materially from amounts previously reported. Due to the Company's loss from
operations, all dilutive potential common stock is antidilutive and therefore
no diluted earnings per share is presented.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
- -----------------------------------------------------------------------------
Ability of Company to Continue
- ----------------------------------
The Company has not had revenues from operations in either of the last
two fiscal years, but the drilling rig in which it owns a 50% interest has
recently commenced drilling operations, and some revenues are being generated
from such operations. The Company's plan of operation for the next twelve
months is set forth below.
Given its current cash position and resources, the Company anticipates
that it can satisfy its cash requirements, at current operating level, for a
period of one year. The Company will continue to conduct investigations and
evaluations of promising exploration and development opportunities, and will
conduct testing and gather data with respect to such properties, but will
defer any substantial exploration or production activities pending receipt of
additional financing.
The Company plans to seek to raise additional capital to fund future
exploration and development operations, through joint venture type
arrangements or through the issuance of additional equity in either the
private or public markets within the next 12 months. There can be no
assurance that the Company will be able to obtain any such financing within
such time period.
After 12 months of negotiations, Mr. John L. Naylor, COO of Hemley Exploration
and Mr. Yami Lester, representing both the Yankunytjatjari and the Amtakirinja
peoples, signed an access agreement. This agreement allows the Company access
for the purpose of exploration and production to over 11,000 square kilometers
area of the Eastern Officer Basic in north central South Australia designated
as Block B or PEL-63 (Petroleum Exploration License 63). These lands became
subject to Native title claim under recent legislation passed by the
Australian parliament.
This is the second such agreement negotiated and signed by the Company.
Previously the Company negotiated and signed an access agreement with the
Anangu Pitjantjatjari Peoples on Black A (PEL-61), an area of 6,200 square
kilometers immediately to the West of Block B.
Since the passing of the native title legislation there has been much
uncertainty in the petroleum and mining industries in Australia. These
agreement eliminate any future problems regarding the Company's drilling
operations pursuant to its existing license by allowing the native peoples to
share in any benefits which might result from these agreements.
The Company purchased a 50% equity interest in a Cabot 100 drilling rig
as referenced in the Company's Form 8-K filed with the Securities and Exchange
Commission on December 11, 1997. The rig is now completing a contract in
Laos. When released it is expected that the rig will be transported to the
Port of Darwin, Northern Territories, Australia. From Darwin it will be
further transported overland to the Mataranka's block EP-18 in the Beetaloo
Basin. The Company's portion of the revenues from the Laos contract will be
applied to the cost of mobilization of the rig to Australia. The Mataranka
drilling project is still uncertain, and there can be no assurance as to the
amount of revenues to be generated from operation of the rig, or the
profitability of such operations.
The Company has agreed to purchase Mataranka Oil NP of Sydney, Australia
("Mataranka") pursuant to a letter of intent signed by Mataranka. The Company
anticipates that the purchase of Mataranka will be consummated within the next
twelve (12) months by issuing shares of common stock. Once the purchase is
consummated, the Company may begin to realize revenues from exploration
activities on certain parcels of land licensed to Mataranka.
The location within the licensed area has been surveyed and the location
graded to specifications. A water well has been drilled and tested to be
suitable for all water requirements of the drilling operation as well as camp
needs. Providing the requisite additional funding is obtained, the rig will
be used to spud in the what is referred to as an Arnold No. 1 well. If
funding is promptly obtained, the drilling activity could commence by the end
of July 1998.
The Company does not anticipate any significant changes in the number of
employees, pending receipt of additional funding and commencement of
exploration and development activities.
Forward-Looking Statements
- ---------------------------
The foregoing and subsequent discussion contains certain forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as
amended and Section 21E of the Securities Exchange Act of 1934, as amended,
which are intended to be covered by the safe harbors created thereby. These
forward-looking statements include the plans and objectives of management for
future and possible further capitalization of the Company. The
forward-looking statements contained herein are based on current expectations
that involve numerous risks and uncertainties. Assumptions relating to such
current expectations involve judgments with respect to, among other things,
future economic, competitive and market conditions and future business
decisions, all of which are difficult or impossible to predict accurately and
many of which are beyond and control of the Company. Although the Company
believes that the assumptions could be inaccurate and therefore there can be
no assurance that the forward-looking statements included in this Form 10-QSB
will prove to be accurate. In light of the significant uncertainties inherent
in the forward-looking statements included herein, the inclusion of such
information should not be regarded as a representation of the Company or any
other person that the objectives and plans of the Company will be achieved.
Results of Operations
- -----------------------
The Company is currently in the exploration stage. During the quarterly
period ended March 31, 1998, the Company received interest income of $10,050.
Expenses during this period totaled $190,896 and the Company sustained a net
loss during this period of $184,790. During the nine months ended March 31,
1998, the Company received interest income of $37,551. Expenses during this
period totaled $404,447 and the Company sustained a net loss of $377,500
during this period.
PART II
Item 1. Legal Proceedings.
- -------------------------------
Not applicable.
Item 2. Changes in Securities and Use of Proceeds.
- ------------------------------------------------------------
None; not applicable.
Item 3. Defaults Upon Senior Securities.
- -----------------------------------------------
There has been no material default in the payment of principal, interest,
a sinking or purchase fund installment, or any other material default not
cured within 30 days with respect to any indebtedness of the Company exceeding
five percent (5%) of the total assets of the Company.
Item 4. Submission of Matters to a Vote of Security Holders.
- ------------------------------------------------------------------------
No matters were submitted to a vote of the Company's security holders
during the fiscal quarter covered by this report.
Item 5. Other Information.
- -------------------------------
The Company has no other information to report.
Item 6. Exhibits and Reports on Form 8-K.
- --------------------------------------------------
(a) Exhibits
*Exhibit 3.1 Articles of Incorporation of the Registrant (Filed as Exhibit
3.1 to the Registrant's Form 10-SB-A1, Reg. No. 0-28184 filed May 31, 1996).
*Exhibit 3.2 Articles of Amendment to Articles of Incorporation. (Filed as
Exhibit 3.2 to the Registrant's Form 10-SB-A1, Reg. No. 0-28184 filed May 31,
1996).
*Exhibit 3.3 Bylaws of the Registrant. (Filed as Exhibit 3.3 to the
Registrant's Form 10-SB-A1 Reg. No. 0-28184 filed May 31, 1996).
*Exhibit 3.4 Amended Bylaws of the Registrant. (Filed as Exhibit 3.4 to
the Registrant's Form 10-SB-A1, Reg. No. 0-28184 filed May 31, 1996).
*Exhibit 10 Stock Purchase Agreement, dated September 10, 1996, by and
between Craig Carpenter, Mason Oil Company, Inc., Paul B. Ingram and John L.
Naylor. (Filed as Exhibit 2.1 to the Registrant's Form 10-QSB Reg. No.
000-28184 filed November 15, 1996).
*Exhibit 10.1 Stock Purchase and Sale Agreement, dated October 14, 1996,
between the Registrant, Paul Ingram and John L. Naylor. (Filed as Exhibit 2.2
to the Registrant's Form 10-QSB Reg. No. 000-28184 filed November 15, 1996).
*Exhibit 10.2 Access Agreement between Anangu Pitjantjatjara and John
Leonard and Paul Bryan Ingram. (Filed as Exhibit 2.5 to the Registrant's Form
10-QSB, Reg. No. 000-28184 filed February 21, 1997).
*Exhibit 10.3 Petroleum Exploration License (PEL) No. 61and PEL Agreement.
(Filed as Exhibit 2.3 to the Registrant's Form 10-QSB Reg. No. 000-28184 filed
February 21, 1997).
*Exhibit 10.4 Petroleum Exploration License No. 63 and PEL Agreement.
(Filed as Exhibit 2.4 to the Registrant's Form 10-QSB Reg. No. 000-28184 filed
February 21, 1997).
*Exhibit 10.5 Joint Venture Agreement between Hemley Exploration PTY.
LTD., an Australian corporation and PT.PUTRA BAKTI MAHKOTA, an Indonesian
corporation.
*Exhibit 10.6 Subscription Agreement and Investment Representation, dated
February 28, 1997. (Filed as Exhibit 10.1 to the Registrant's Form 10-QSB Reg.
No. 000-28184 filed May 20, 1997).
*Exhibit 10.7 Consulting Fee Agreement dated February 28, 1997. (Filed as
a plan to the Registrant's Registration Statement in Form S-8 Reg. No.
333-24467 filed April 3, 1997).
*Exhibit 10.8 Amendment No. 1 to Consulting Fee Agreement dated May 8,
1997, amending the Consulting Fee Agreement dated February 28, 1997, and
previously filed with the Securities and Exchange Commission on a Form S-8
Registration Statement dated March 25, 1997. (Filed as Exhibit 10.2 to the
Registrant's Form 10-QSB Reg. No. 000-28184 filed May 20, 1997).
Exhibit 24 Power of Attorney (included on page 8 herewith).
Exhibit 27 Financial Data Schedule
*Exhibits incorporated herein by reference.
(b) Forms 8-K filed during the last quarter. None.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
May 15, 1998 MASON OIL COMPANY, INC.
/s/ Paul B. Ingram
Director and President
POWER OF ATTORNEY
KNOW ALL PERSONS by these presents that each person whose signature to
this Quarterly Report appears below hereby constitutes and appoints Paul B.
Ingram and John L. Naylor, and each of them as his true and lawful
attorney-in-fact and agent, with full power of substitution, to sign on his
behalf individually and in the capacity stated below and to perform any acts
necessary to be done in order to file all amendments and post-effective
amendments to this Quarterly Report, and any and all instruments or documents
filed as part of or in connection with this Quarterly Report or the amendments
thereto and each of the undersigned does hereby ratify and confirm all that
said attorney-in-fact and agent, or his substitutes, shall do or cause to be
done by virtue hereof.
In accordance with the requirements of Section 13 or 15(d) of the
Securities and Exchange Act of 1934, the Registrant has duly caused this
report to be signed below by the following persons on behalf of the Registrant
and in the capacities and on the dates indicated.
May 15, 1998 /s/Paul B. Ingram
------------------
Paul B. Ingram, President
(Principal Executive Officer)
and Director.
May 15, 1998 /s/John L. Naylor
-----------------
John L. Naylor, Secretary-Treasurer
(Principal Accounting and Financial
Officer)
May 15, 1998 /s/John Price
-------------
John Price, Director
May 15, 1998 /s/Geoffrey J. Pickles
----------------------
Geoffrey J. Pickles, Director
May 15, 1998 /s/ David A. Munns
------------------
David A. Munns, Director
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> MAR-31-1998
<CASH> 619,511
<SECURITIES> 0
<RECEIVABLES> 90,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 809,583
<PP&E> 1,302,906
<DEPRECIATION> 7,774
<TOTAL-ASSETS> 2,127,164
<CURRENT-LIABILITIES> 264,001
<BONDS> 0
0
0
<COMMON> 11,732
<OTHER-SE> 1,787,473
<TOTAL-LIABILITY-AND-EQUITY> 2,127,164
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 404,447
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,604
<INCOME-PRETAX> (377,500)
<INCOME-TAX> 0
<INCOME-CONTINUING> (377,500)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (377,500)
<EPS-PRIMARY> (.03)
<EPS-DILUTED> 0
</TABLE>
