U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X} Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended June 30, 1997 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 0-5833
OASIS OIL CORPORATION
(Exact name of small business issuer as specified in its charter)
NEVADA 94-1713830
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1800 ST. JAMES PLACE, SUITE 101, HOUSTON, TEXAS 77056
(Address of principal executive office & zip code)
(713) 627-8875
(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
Check whether the registrant filed all documents and reports required to
be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution
of securities under a plan confirmed by court.
Yes [ ] No [ ]
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APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date:
CLASS OF EQUITY OUTSTANDING
Common Stock, $0.05 par value 6,000,000
Series A Preferred Stock, $1.00 par value 40,494
Transitional Small Business Disclosure Format (check one) Yes [ ] No [ ]
2
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OASIS OIL CORPORATION
INDEX
Page
PART I. - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheet at June 30, 1997......................4
Consolidated Statement of Operations for the three
months ended June 30, 1997 and 1996...........................5
Consolidated Statement of Operations for the six
months ended June 30, 1997 and 1996...........................6
Consolidated Statement of Cash Flows for the
Six months ended June 30, 1997 and 1996.......................7
Condensed Notes of Consolidated Financial Statements...........8-9
Item 2. Management's Discussion and Analysis of Financial
condition and Results of Operations........................9-10
PART II. - OTHER INFORMATION
Item 1. Legal Proceedings...............................................11
Item 2. Changes in Securities...........................................11
Item 3. Defaults Upon Senior Securities.................................11
Item 4. Submission of Matters to a Vote of Security Holders.............11
Item 5. Other Information...............................................12
Item 6. Exhibits and Reports on Form 8-K................................12
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OASIS OIL CORPORATION
CONSOLIDATED BALANCE SHEET
(In thousands of dollars)
At
June 30, 1997
-------------
ASSETS (Unaudited)
CURRENT ASSETS
Cash ............................................................ $ 64
Accounts Receivable - trade ..................................... 501
Inventories ..................................................... 9
Prepaid Expenses ................................................ 33
------
TOTAL CURRENT ASSETS ...................................... 607
PROPERTY AND EQUIPMENT
Property, equipment, and leasehold improvements, net ............ 528
------
TOTAL PROPERTY AND EQUIPMENT .............................. 528
OTHER ASSETS
Deposits ........................................................ 7
Goodwill, net ................................................... 198
------
TOTAL OTHER ASSETS ........................................ 205
------
TOTAL ASSETS .................................................... $ 1340
======
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Notes payable ................................................... $ 445
Accounts payable ................................................ 699
Accrued expenses ................................................ 11
Current maturities of long-term debt ............................ 21
------
TOTAL CURRENT LIABILITIES ................................. 1176
Long-term debt, less current maturities ......................... 14
------
TOTAL LIABILITIES ......................................... 1190
STOCKHOLDERS' EQUITY
Preferred Stock, $1 par value, 1,000,000 shares authorized ...... 405
Common Stock, $0.05 par value, 50,000,000 shares ................ 300
authorized
Additional paid-in capital ...................................... 85
Deficit ......................................................... (640)
------
TOTAL STOCKHOLDERS' EQUITY ................................ 150
------
TOTAL LIABILITIES AND EQUITY .................................... $ 1340
======
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OASIS OIL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands of dollars)
(Unaudited)
THREE MONTHS ENDED
JUNE 30,
--------------------
1997 1996
----- -----
Sales ............................................ $ 2284 $ 3089
Cost of Sales .................................... 1947 2642
----- -----
Gross Margin ............................... 337 447
----- -----
Operating expenses
Selling ....................................... 15 17
General and administrative .................... 601 373
----- -----
Total operating expenses ................... 616 390
----- -----
Net operating loss ......................... (279) 57
----- -----
Other income (expense)
Interest income ............................... -- --
Interest expense .............................. (11) (20)
Loss on sale of fixed assets .................. -- --
Other ......................................... -- --
----- -----
Total other expenses, net .................. (11) (17)
----- -----
Net Loss ......................................... $(290) $ 40
===== =====
5
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OASIS OIL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands of dollars)
(Unaudited)
SIX MONTHS ENDED
JUNE 30,
--------------------
1997 1996
----- -----
Sales ............................................ $ 5836 $ 6792
Cost of Sales .................................... 5114 6044
----- -----
Gross Margin ............................... 722 748
----- -----
Operating expenses
Selling ....................................... 20 40
General and administrative .................... 1020 713
----- -----
Total operating expenses ................... 1040 753
----- -----
Net operating loss ......................... (318) (5)
----- -----
Other income (expense)
Interest income ............................... -- 4
Interest expense .............................. (25) (31)
Loss on sale of fixed assets .................. -- (12)
Other ......................................... 3 15
----- -----
Total other expenses, net .................. (22) (24)
----- -----
Net Loss ......................................... $(340) $ (29)
===== =====
6
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OASIS OIL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of dollars)
(Unaudited)
Increase (decrease) in cash
SIX MONTHS ENDED
JUNE 30,
--------------
1997 1996
----- -----
Cash flows from operating activities:
Net loss .................................................. $(340) $ (29)
Adjustments to reconcile net loss
to net cash provided by (used in)
operating activities: ................................... 66 109
Depreciation and amortization
Changes in assets and liabilities
Accounts receivable ................................. 1022 (54)
Inventories ......................................... 24 (1)
Prepaid expenses .................................... 26 127
Other assets ........................................ (7) (5)
Accounts payable and accrued expenses ............... (833) 1448
----- -----
Net cash provided by (used in) operating activities .... (42) 1595
----- -----
Cash flows from investing activities:
Purchases of fixed assets ................................. (11) (117)
Purchase of Oasis Oil Ltd. Co. ............................ -- (2024)
----- -----
Net cash used in investing activities .................. (11) (2141)
----- -----
Cash flows from financing activities:
Net borrowings on line of credit .......................... (17) 419
Issuance of common stock .................................. -- 259
Payments of long-term debt ................................ -- --
----- -----
Net cash provided by (used in) financing activities .... (17) 678
----- -----
Net decrease in cash ......................................... (70) 132
Cash, beginning of fiscal quarter ............................ 134 2
----- -----
Cash, end of fiscal quarter .................................. $ 64 $ 134
===== =====
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OASIS OIL CORPORATION
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION AND BUSINESS
Business
Oasis Oil Corporation (the "Company") is a Nevada corporation organized in
1955. The Company is principally engaged in the service of gathering,
transportation and marketing of domestic crude oil. As a first purchaser of
crude oil, the company offers a complete division order and royalty disbursement
service to its producer accounts.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiary, Oasis Transportation and Marketing Corporation
(OTMC). All significant intercompany accounts and transactions have been
eliminated.
Inventories
Inventories consist of crude oil and are valued at the current market
price. Market price is determined based on an average monthly quoted price
established by oil and gas traders who take into consideration such factors as
the supply and demand of oil and gas. Actual cost is not materially different
from market.
Property, Equipment and Leasehold Improvements
Property, equipment and leasehold improvements are stated at cost.
Depreciation and amortization on equipment is provided using the straight-line
method over the estimated useful lives of the assets ranging from 3 to 15 years.
For income tax purposes, depreciation is calculated using accelerated methods.
Revenue Recognition
Sales are recorded in the periods that crude oil is delivered.
Goodwill
Goodwill is amortized on the straight-line method over fifteen years. On a
periodic basis, the Company estimates the future undiscounted cash flows of the
business to which goodwill relates in order to ensure that the carrying value of
good will has not been impaired.
8
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NOTE 3 - SUPPLEMENTAL CASH FLOW INFORMATION
During the first half of 1997 the Company considered an asset acquisition
to increase its marketing capabilities. After the Company completed its due
diligence, including an audit of the prospective acquisition, the decision was
made by the Board of Directors not to make the asset purchase. In conjunction
with the due diligence and negotiations the following non-reoccurring expenses
were incurred, and have been included in the general and administrative costs
for the second quarter 1997:
Legal expense .......... $ 75,000
Auditing expense ....... $ 30,000
Travel expense ......... $ 8,524
--------
$113,524
On May 1, 1997 the Company entered into a contract to haul 700 barrels of
crude oil per day in West Texas, effective immediately. As a result, during the
second quarter the Company was involved in expanding and moving its equipment to
West Texas. The Company incurred the following non-reoccurring expenses which
have been included in the general and administrative costs.
Moving expenses ........ $ 6,000
There will be additional non-reoccurring expenses during the third quarter as
the move to West Texas is completed.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
General Discussion
During the second quarter of 1997 OTMC continued to operate in South Texas
and began operations in West Texas. For the quarter ending June 30, 1997, OTMC
incurred a net loss of $290,000 compared to a net profit of $40,000 for the same
period of the prior year. The Company retained its gross profit margin of 15%
for the second quarter 1997 but had moving and non-reoccurring expenses and
operating expenses, that resulted in a substantial loss.
In March 1997 OTMC was notified that it had delivered approximately 300
barrels of improper product into a purchaser's pipeline. Once OTMC received this
notification it was not possible for OTMC to use its local sales facilities
which are owned by the purchaser. OTMC had to long haul most all of its crude
oil purchases which increased overall trucking expenses by 11% compared to the
same period of 1996. General field expenses, which include supervisors and
support personnel, increased by 38% over the same period of 1996, due mainly to
additional supervisory needs during the long haul of crude oil and the expansion
taking place in West Texas. The non-reoccurring expenses associated with the
expansion and potential acquisition are directly related to 41% of the loss
incurred during the second quarter of 1997.
9
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Liquidity and Capital Resources
The Company's sales and purchase contracts are all based upon the posted
price of crude oil which reduces the effect of normal price fluctuations because
it is considered a widely traded commodity. The Company transports and markets
approximately 60,000 barrels of crude oil per month. Most of the Company's
expenses are fixed except for crude oil purchases and field expenses (drivers
payroll and fuel). These variable expenses are directly related to the number of
barrels transported and distance traveled.
At June 30, 1997, the Company had a revolving line of credit facility with
a foreign bank. The credit agreement provides for a maximum borrowing base of
70% of eligible receivables and is due on demand. The credit agreement bears
interest at prime plus 1.25% (9.5% at June 30, 1997). The line of credit is
collateralized by substantially all the Company's assets. Borrowings under this
agreement at June 30, 1997 were $445,000.
The Company anticipates that its future operating needs will be satisfied
from operations which are expected to generate positive cash flows, and from
time to time the company may seek to borrow funds for actual or anticipated
funding needs,
From time to time in recent years, there has been an oversupply of crude
oil in the marketplace. This in turn has led to a reduced level of prices for
crude oil. There is a high degree of uncertainty regarding the future market
price for crude oil. Historically, however, demand for crude oil has been in
balance with readily available supplies, and OTMC believes the long-term
prospects for the oil industry continue to be good.
To finance its expansion, the Company plans to raise a minimum of $250,000
in additional capital during the third quarter of 1997. The Company is also
evaluating various financing alternatives and is negotiating with several
potential sources of financing.
Plan of Operation
The main objective of the Company is to transport and market as many
barrels of crude oil as possible. During the second quarter of 1997 the Company
expanded into the West Texas market. Its initial contract was to haul 700
barrels per day. The Company has hired an experienced oil marketer and purchaser
to acquire new customers and opportunities. The Company will enter into new
contracts in West Texas during the third quarter of 1997 which will increase its
sales. Before the end of the third quarter the Company expects to be
transporting approximately 3,000 barrels per day.
The crude oil that the Company was transporting in South Texas has been
turned over to another transport company, effective June 1, 1997. The Company
will be paid a small commission for that South Texas crude oil and is not liable
for the hauling, marketing, or sales of the barrels.
10
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OASIS OIL CORPORATION
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
At the end of February 1997, OTMC was notified by a major customer that
OTMC had delivered approximately 300 barrels of improper product into the
purchaser's pipeline. The customer has asserted that the product may have
damaged it. OTMC is covered by a general liability insurance policy which
provides for defense and indemnity for damages arising from negligence up to the
aggregate amount of $2,000,000, subject to a deductible of $10,000. OTMC has
notified the insurance company of the event described above and representatives
of the insurance company have taken charge of the investigation. In June 1997
the customer made a formal settlement demand to the insurance company.
Currently, the investigation is on-going and in the hands of the insurance
company. As a result of the insurance coverage, management does not anticipate
that this event will result in a material loss to the Company.
It is the belief of management that the general liability policy of OTMC
is adequate. OTMC has stringent policies with regard to product quality control
and operating procedures. When a problem does occur, OTMC attempts to discover,
isolate, and correct it quickly thus to minimize any adverse effects.
Item 2. Changes in Securities.
No securities of the registrant have been materially modified.
No securities of the registrant have been materially limited.
Item 3. Defaults Upon Senior Securities.
The registrant has no outstanding senior debt securities.
Item 4. Submission of Matters to a Vote of Security Holders.
The registrant held no meeting of its security holders during the second
quarter of 1997. During this period, the stock of the registrant has not
traded.
No directors have been elected by a vote of the registrant's securities
holders.
No matter has been voted upon by the registrant's securities holders.
11
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Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
Exhibits. None.
Reports on Form 8-K. None.
12
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
cause this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
OASIS OIL CORPORATION
(Registrant)
Date: August 19, 1997 By: /s/ C. A. BEANE
C. A. Beane, President
13
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
FINANCIAL STATEMENTS AT INTERIM PERIOD ENDED JUNE 30, 1997.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-30-1997
<PERIOD-END> JUN-30-1997
<CASH> 64,337
<SECURITIES> 0
<RECEIVABLES> 500,723
<ALLOWANCES> 0
<INVENTORY> 8809
<CURRENT-ASSETS> 606,983
<PP&E> 695,333
<DEPRECIATION> 167,248
<TOTAL-ASSETS> 1,339,965
<CURRENT-LIABILITIES> 1,177,495
<BONDS> 0
0
404,940
<COMMON> 300,000
<OTHER-SE> 83,500
<TOTAL-LIABILITY-AND-EQUITY> 1,339,965
<SALES> 5,836,532
<TOTAL-REVENUES> 5,836,532
<CGS> 5,114,297
<TOTAL-COSTS> 1,040,323
<OTHER-EXPENSES> (2645)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 24,712
<INCOME-PRETAX> (340,156)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (340,156)
<EPS-PRIMARY> (.06)
<EPS-DILUTED> 0
</TABLE>
