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, 1999
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 10,890,504 shares of the Issuer's common stock, par value $.001 per
share, outstanding as of May 17, 1999.
<PAGE>
MASON OIL COMPANY, INC.
Consolidated Balance Sheets
PART I
FINANCIAL INFORMATION
<TABLE>
<CAPTION>
June 30, March 31,
1998 1999
------- --------
(Unaudited)
<S> <C> <C>
Assets
Current Assets
Cash and cash equivalents $ 473,652 $ 154,988
Note receivable (Note 2) - 207,843
Prepaid expenses and other - 3,107
--------- ---------
Total current assets 473,652 365,938
Property and equipment, at cost
Unproved oil and gas properties, full cost method 274,994 329,641
Portable rig camp (Note 2) - 120,029
Vehicles 37,185 38,048
Other 7,684 9,065
--------- ---------
319,863 496,783
Less accumulated depreciation (11,980) (18,728)
--------- ---------
307,883 478,055
Other noncurrent assets
Deposits 19,682 19,482
Investment in joint venture (Note 2) 528,894 -
--------- --------
Total Other Assets 548,576 19,482
--------- ---------
Total $1,330,111 $ 863,475
========== =========
Liabilities and Stockholders' (Deficit)
Current Liabilities
Accounts Payable $ 32,673 $ 36,144
Notes payable - related party 197,599 195,400
Current portion of notes payable 13,588 3,760
--------- ---------
Total Current Liabilities 243,860 235,304
Notes payable - long term 1,695 -
Deferred salary payable 72,000 108,000
Stockholders' equity
Common Stock, $.001 par value, 200,000,000 shares
authorized; 10,890,504 shares issued and outstanding at
March 31, 1999 and 11,697,171 at June 30,1998 (Note 2) 11,697 10,890
Additional paid-in capital 2,485,994 2,365,801
Accumulated deficit (1,498,738) (1,919,299)
Foreign currency translation adjustment 13,603 62,779
--------- ---------
Total Stockholders' equity 1,012,556 520,171
--------- ---------
Total Liabilities and Stockholders' Equity $1,330,111 $ 863,475
========== =========
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</TABLE>
<PAGE>
MASON OIL COMPANY, INC.
Condensed Consolidated Statements of Operations
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
March 31, March 31,
----------------------- ----------------------
1998 1999 1998 1999
---------- ----------- --------- ---------
(unaudited) (unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C>
Costs and expenses
General and administrative $ 404,447 $ 402,812 $ 190,896 $ 130,269
---------- ---------- ---------- ----------
Total operating costs and
expenses 404,447 402,812 190,896 130,269
Other (income) expense
Interest income (37,551) (20,857) (10,050) (2,296)
Interest expense 10,604 38,606 3,944 4,486
---------- ---------- ---------- ----------
Net loss $ (377,500) $ (420,561) $ (184,790) $ (132,439)
========== ========== ========== ==========
Basic net loss per common share $ (.03) $ (.04) $ (.02) $ (.01)
========== ========== ========== ==========
Weighted average number of
shares outstanding 11,092,463 10,890,504 11,092,463 10,890,504
========== ========== ========== ==========
</TABLE>
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<PAGE>
MASON OIL COMPANY, INC.
Consolidated Statements of Comprehensive Income
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
March 31, March 31,
----------------------- -----------------------
1998 1999 1998 1999
---------- ---------- ---------- ----------
(unaudited) (unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C>
Net loss $ (377,500) $ (420,561) $ (184,790) $ (132,439)
---------- ---------- ---------- ----------
Other comprehensive income, net
of tax
Foreign currency translation
adjustments (12,354) 59,176 76,781 39,789
---------- ---------- ---------- ----------
Total other comprehensive
income (loss) (12,354) 59,176 76,781 39,789
---------- ---------- ---------- ----------
Comprehensive loss $ (389,854) $ (361,388) $ (108,009) $ (92,650)
========== ========== ========== ==========
</TABLE>
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<PAGE>
MASON OIL COMPANY, INC.
Condensed Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Nine Months Ended
March 31,
--------------------------
1998 1999
---------- ----------
(unaudited) (unaudited)
<S> <C> <C>
Cash flows from operating activities
Net loss $ (377,500) $ (420,561)
Depreciation and amortization 6,402 6,435
Stock issued for consulting 3,500 -
Adjustments to reconcile net loss to net cash used
in operating activities
Accounts receivable (89,848) 9,060
Prepaid expenses and other assets (98,520) (3,107)
Accounts payable and accrued liabilities 97,990 55,706
---------- ----------
Net cash used by operating activities (457,976) (352,467)
---------- ----------
Cash flows used by investing activities
Oil and gas exploration expenses (147,275) (48,267)
Oil and gas acquisition costs (34,815) -
Purchase of equipment and furniture (17,198) (1,190)
Purchase of drilling rig (300,000) -
Payments on note receivable - 99,045
---------- ----------
Net cash (used in) provided by investing
activities (499,288) 49,588
---------- ----------
Cash flows from financing activities
Borrowings on notes payable 14,846 18,525
Payments on notes payable (9,881) (11,877)
---------- ----------
Net cash used by financing activities 4,965 6,648
---------- ----------
Net effect of currency fluctuations on cash and cash (15,817) (22,433)
equivalents
Net decrease in cash and cash equivalents (968,116) (318,664)
Beginning cash and cash equivalents 1,587,627 473,652
---------- ----------
Ending cash and cash equivalents $ 619,511 $ 154,988
========== ==========
</TABLE>
Supplemental non-cash flow disclosures:
During the nine months ended March 31, 1999 and 1998, the Company paid
approximately $33,000 and $0, respectively, for interest expense.
During the nine months ended March 31, 1998 the Company purchased a 50%
interest in a drilling rig for $300,000 cash and 806,667 shares of common
stock of common stock valued at $605,000.
During the nine months ended March 31, 1999, the Company sold its 50%
investment in the drilling rig back to the original seller for a note
receivable payable in U.S. dollars of $300,000, the return of 806,667
shares of the Company's common stock valued at $121,000, and the transfer
of title to a portable drilling rig camp valued at $121,626.
-5-
<PAGE>
MASON OIL COMPANY, INC.
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, 1998.
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 - Investment in Joint Venture
The Company's sale of its investment in a drilling rig joint venture has been
recorded at its estimated net realizable value, which consists of a $300,000
note receivable, 806,667 shares of the Company's common stock valued at $121,000
and the title to a portable rig camp valued at $121,626. The note receivable has
the following terms: $50,000 payable on the closing date of the agreement and
$50,000 payable in quarterly installments on the following dates; January 1,
1999, March 30, 1999, June 30, 1999, September 30, 1999 and January 1, 1999. The
note also provides for interest payments of 8% and is secured by the Company's
interest in the drilling rig. The Company has received $100,000 to date on the
note.
Note 3 - New Accounting Standards
Recently Issued Accounting Pronouncements
In June 1997, the FASB issued Statement of Financial Accounting Standards No.
130, "Reporting Comprehensive Income" (SFAS 130), which establishes standards
for reporting and display of comprehensive income, its components and
accumulated balances. Comprehensive income is defined to include all changes in
equity except those resulting from investments by owners and distributions to
owners. Among other disclosures, SFAS 130 requires that all items that are
required to be recognized under current accounting standards as components of
comprehensive income, be reported in a financial statement that is displayed
with the same prominence as other financial statements.
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<PAGE>
MASON OIL COMPANY, INC.
Note 3 - New Accounting Standards (continued)
Recently Issued Accounting Pronouncements (continued)
Also, in June 1997, the FASB issued Statement of Financial Accounting Standards
No. 131, "Disclosures about Segments of an Enterprise and Related Information"
(SFAS 131), which supersedes Statement of Financial Accounting Standards No. 14,
"Financial Reporting for Segments of a Business Enterprise." SFAS 131
establishes standards for the way that public companies report information about
operating segments in annual financial statements and requires reporting of
selected information about operating segments in interim financial statements
issued to the public. It also establishes standards for disclosures regarding
products and services, geographic areas and major customers. SFAS 131 defines
operating segments as components of a company about which separate financial
information is available that is evaluated regularly by the chief operating
decision maker in deciding how to allocate resources and in assessing
performance. Currently, the Company only has a single business segment.
SFAS No.'s 130 and 131 are effective for financial statements for periods
beginning after December 15, 1997, and require comparative information for
earlier periods to be restated.
In February of 1998, the FASB issued Statement of Financial Accounting Standards
No. 132, "Employers' Disclosures about Pensions and Other Postretirement
Benefits" (SFAS No. 132), which supercedes SFAS No.'s 87, 88, and 106. SFAS No.
132 addresses disclosure only and is effective for fiscal years beginning after
December 15, 1997. Restatement of disclosures for prior periods is required. The
adoption of SFAS No. 132 will have no current impact on the Company's financial
statements, as no prior disclosures under SFAS No. 87, 88, or 106 were
applicable.
In June of 1998, the FASB issued Statement of Financial Accounting Standards No.
133, "Accounting for Derivative Instruments and Hedging Activities"(SFAS No.
133). SFAS No. 133 addresses the accounting for derivative instruments,
including certain derivative instruments embedded in other contracts, and
hedging activities. SFAS No. 133 is effective for all fiscal quarters of all
fiscal years beginning after June 15,1999. Initial application of SFAS No. 133
shall be as of the beginning of an entity's fiscal quarter, on that date,
hedging relationships shall be designated anew and documented under the
provisions of this statement. The adoption of SFAS No. 133 shall not be
retroactively applied. This statement currently has no impact on the financial
statements of the Company, as the Company does not hold any derivative
instruments or participate in any hedging activities.
-7-
<PAGE>
MASON OIL COMPANY, INC.
Item 2. Management's Discussion and Analysis or Plan of Operation
Plan of Operation
The Company has not had revenues from operations in either of its last two
fiscal years, or during the portion of the current fiscal year for which
financial statements are furnished in this report. 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 levels, for a period of
approximately one year. Pending receipt of additional financing, the Company
will continue to maintain current relationships and contacts, conduct
preliminary investigations and evaluations of promising exploration and
development opportunities, gather preliminary data with respect to such
properties, and pursue financing alternatives, but will defer any exploration,
development or production activities.
The Company will have to raise additional funds before commencing any
exploration or development activities, and in any event by July 31, 1999. The
Company is currently pursuing financing alternatives, and has engaged a
financing consultant on a non-exclusive, best efforts basis. The Company
anticipates that financing, if obtained, may be in the form of a joint venture
type arrangement or an issuance of equity securities of the Company. There can
be no assurance that the Company will be able to obtain any such financing
within time period it will be needed or at all, or that the terms of any
financing which may be available will be acceptable to the Company or will
permit it to achieve its business and financial objectives. The Company's
ability to commence exploration or production activities, including activities
required to maintain its rights under existing licenses, will depend on its
ability to promptly obtain needed funding.
The Company does not anticipate any significant changes in the number of
employees, pending receipt of additional funding and commencement of exploration
and developing activities.
The Company believes that its inability to obtain funding for current projects
has been tied to the recent slippage of world oil prices to a 12 year low.
Recent upward pricing trends are expected to open new financing opportunities.
Delayed financing has rendered the Company unable to meet the performance
obligations applicable to its Indonesian projects, but the Company has received
positive communications with responsible parties in Indonesia and believes that
variances will be granted, due to the general down-turn in oil prices and
project financing, provided that financing becomes available in the near future.
Assuming that needed financing is received and any requisite variances are
obtained, the company plans to proceed with the testing phase of the the
projects located in the Mogoi and Wasian fields of the Bintuni Basin of Irian
Jaya (Western New Guinea), Indonesia, and the development of the Officer Basin
project in south Australia (where two to three stratigraphic wells are planned
for 1999. Should these initial Officer Basin wells prove to be of acceptable
volume, the Company would undertake to complete them as production wells by
reaming the holes and setting production casing.
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MASON OIL COMPANY, INC.
Contracts are being prepared with service and work-over companies in the various
areas in anticipation of commencing operations this summer, if adequate
financing is received. If funding is received and the Indonesian project
proceeds, the Company's Jakarta office will be minimized and the Indonesian
operations office will be located at Sarong, resulting in significant savings to
the Company. Also, the drilling camp that has been in storage in the Philippines
would be moved for use in the Indonesian project.
On time payments are being received from the sell-back of the drilling rig
previously reported.
Year 2000
The Year 2000 ("Y2K") problem is the result of two potential malfunctions that
could have an impact on systems and equipment. The first problem arises due to
computers being programmed to use two rather than four digits to define the
applicable year. The second problem arises in embedded chips, where microchips
and microcontrollers have been designed using two rather than four digits to
define the applicable year. If uncorrected, the problem could result in computer
system and program failures or equipment malfunctions that could result in a
disruption of business operations.
To date, the Company has not completed an internal review of its minimal number
of systems to determine major areas of exposure to Y2K issues. The Company does
not, however, operate a significant number of computer systems and does not rely
on computers to regulate any critical corporate functions. Accordingly, the
Company believes that even without any corrective measures being taken, the
Company will not suffer material adverse effects from the Y2K problems. However,
there can be no assurance that the Company will not experience loss of data and
loss of capacity to continue pursuing its operations if Y2K issues are not
addressed and remedied.
In addition, third parties with whom the Company interacts, need to be surveyed
to assess Y2K compliance, or if contingency plans will become necessary. If such
third party systems are not addressed, any failure of such systems could have an
adverse effect on the Company's development and exploration activities. Inasmuch
as the Company intends to rely heavily on third parties for its exploration
activities, if such third parties' systems fail, it could have a material
adverse effect on the Company.
-9-
<PAGE>
MASON OIL COMPANY, INC.
Item 2. Management's Discussion and Analysis or Plan of Operation (continued)
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.
-10-
<PAGE>
MASON OIL COMPANY, INC.
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).
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<PAGE>
MASON OIL COMPANY, INC.
*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 Fe bruary 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 (Filed with the Registrants September 30, 1997,
form 10-QSB dated November 13, 1997).
Exhibit 27 Financial Data Schedule
*Exhibits incorporated herein by reference.
(b) Forms 8-K filed during the last quarter. None.
-12-
<PAGE>
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 19, 1999 MASON OIL COMPANY, INC.
/s/ Paul B. Ingram
Director and President
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-END> MAR-31-1999
<CASH> 154,988
<SECURITIES> 0
<RECEIVABLES> 207,843
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 365,938
<PP&E> 496,783
<DEPRECIATION> 18,728
<TOTAL-ASSETS> 478,055
<CURRENT-LIABILITIES> 235,304
<BONDS> 0
108,000
0
<COMMON> 10,890
<OTHER-SE> 509,281
<TOTAL-LIABILITY-AND-EQUITY> 863,475
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 402,812
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 38,606
<INCOME-PRETAX> (420,561)
<INCOME-TAX> 0
<INCOME-CONTINUING> (420,561)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (420,561)
<EPS-PRIMARY> (.04)
<EPS-DILUTED> (.04)
</TABLE>
