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 SEPTEMBER 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 B Preferred Stock, $1.00 par value 63,294
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 September 30, 1997.................4
Consolidated Statement of Operations for the three
months ended September 30, 1997 and 1996......................5
Consolidated Statement of Operations for the nine
months ended September 30, 1997 and 1996......................6
Consolidated Statement of Cash Flows for the
nine months ended September 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........................9-11
PART II. - OTHER INFORMATION
Item 1. Legal Proceedings...............................................12
Item 2. Changes in Securities...........................................12
Item 3. Defaults Upon Senior Securities.................................12
Item 4. Submission of Matters to a Vote of Security Holders.............12
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
SEPTEMBER 30, 1997
------------------
ASSETS (Unaudited)
CURRENT ASSETS
Cash .......................................................... $ 109
Accounts Receivable - trade ................................... 1684
Inventories ................................................... 10
Prepaid Expenses .............................................. 36
-----
TOTAL CURRENT ASSETS ............................... 1839
PROPERTY AND EQUIPMENT
Property, equipment, and leasehold improvements, net .......... 731
-----
TOTAL PROPERTY AND EQUIPMENT ....................... 731
OTHER ASSETS
Deposits ...................................................... 6
Goodwill, net ................................................. 195
-----
TOTAL OTHER ASSETS ................................. 201
-----
TOTAL ASSETS .................................................. $2771
=====
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Notes payable ................................................... $ 564
Accounts payable ................................................ 1894
Accrued expenses ................................................ 43
Current maturities of long-term debt ............................ 138
-----
TOTAL CURRENT LIABILITIES ............................ 2639
Long-term debt, less current maturities ......................... 37
-----
TOTAL LIABILITIES .................................... 2676
STOCKHOLDERS' EQUITY
Preferred Stock, $1 par value, 1,000,000 shares authorized ...... 633
Common Stock, $0.05 par value, 50,000,000 shares ................ 300
authorized
Additional paid-in capital ...................................... 85
Deficit ......................................................... (923)
-----
TOTAL STOCKHOLDERS' EQUITY ........................... 95
-----
TOTAL LIABILITIES AND EQUITY .................................... $2771
=====
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OASIS OIL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands of dollars)
(Unaudited)
THREE MONTHS ENDED
SEPTEMBER 30,
---------------------
1997 1996
------- -------
Sales .............................................. $ 3879 $ 3349
Cost of Sales ...................................... 3699 2838
------- -------
Gross Margin ............................ 180 511
------- -------
Operating expenses
Selling ......................................... 37 17
General and administrative ...................... 409 426
------- -------
Total operating expenses ................ 446 443
------- -------
Net operating income (loss) ............. (266) 68
------- -------
Other income (expense)
Interest income ................................. -- --
Interest expense ................................ (15) (20)
Loss on sale of fixed assets .................... (1) --
Other ........................................... -- --
------- -------
Total other expenses, net ............... (16) (20)
------- -------
Net income (loss) .................................. $(282) $ 48
======= =======
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OASIS OIL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands of dollars)
(Unaudited)
NINE MONTHS ENDED
SEPTEMBER 30,
---------------------
1997 1996
-------- -------
Sales ............................................... $ 9715 $ 10141
Cost of Sales ....................................... 8814 8882
-------- -------
Gross Margin ............................. 901 1259
-------- -------
Operating expenses
Selling .......................................... 57 57
General and administrative ....................... 1431 1134
-------- -------
Total operating expenses ................. 1488 1191
-------- -------
Net operating income (loss) .............. (587) 68
-------- -------
Other income (expense)
Interest income .................................. -- 4
Interest expense ................................. (39) (56)
Loss on sale of fixed assets ..................... -- (12)
Other ............................................ 4 15
-------- -------
Total other expenses, net ................ (35) (49)
-------- -------
Net income (loss) ................................... $ (622) $ 19
======== =======
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OASIS OIL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of dollars)
(Unaudited)
Increase (decrease) in cash
NINE MONTHS ENDED
SEPTEMBER 30,
--------------
1997 1996
----- -----
Cash flows from operating activities:
Net income (loss) ......................................... $(622) $ 19
Adjustments to reconcile net income (loss)
to net cash provided by (used in)
operating activities: ................................... 104 144
Depreciation and amortization
Changes in assets and liabilities
Accounts receivable ............................ (162) 235
Inventories .................................... 23 3
Prepaid expenses ............................... 23 85
Other assets ................................... (6) (5)
Accounts payable and accrued expenses .......... 393 1106
----- -----
Net cash provided by (used in) operating activities (247) 1587
----- -----
Cash flows from investing activities:
Purchases of fixed assets ................................. (249) (151)
Purchase of Oasis Oil Ltd. Co. ............................ -- (2024)
----- -----
Net cash used in investing activities ............. (249) (2175)
----- -----
Cash flows from financing activities:
Net borrowings on line of credit .......................... 243 421
Issuance of common stock .................................. -- 259
Issuance of preferred stock ............................... 228 9
----- -----
Net cash provided by financing activities ......... 471 689
----- -----
Net increase (decrease) in cash .............................. (25) 101
Cash, beginning of year ...................................... 134 2
----- -----
Cash, end of period .......................................... $ 109 $ 103
===== =====
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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,
transporting 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. As a transporter of crude oil, the Company
offers transport services to its customers including major oil companies.
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
goodwill has not been impaired.
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NOTE 3 - SUPPLEMENTAL CASH FLOW INFORMATION
During the third quarter of 1997, OTMC focused on its expansion in West
Texas. At this time OTMC fully set up its truck terminal, built new sales
stations and moved most of its assets from South Texas. OTMC had equipment
moving expenses in the third quarter in the amount of $9,423. Additional
equipment moving expenses will be incurred during the fourth quarter of 1997 as
the rest of the equipment is being transferred. These expenses are considered
non-reoccurring expenses on the books of OTMC.
The Company has looked into several asset acquisitions during 1997 to
increase its marketing capabilities and sales opportunities, but so far nothing
has fully met the criteria the Company is looking for. During the third quarter
of 1997, in conjunction with the due diligence involved in considering any asset
acquisition, the Company incurred $2,395 in professional fees. These expenses
are considered non-reoccurring expenses on the books of the Company.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
General Discussion
During the second and third quarters of 1997, the Company moved its
operations from South Texas to West Texas. As a temporary result, expenses
increased and revenues decreased resulting in losses.
During the third quarter of 1997, OTMC was operating in West Texas
exclusively. Barrels of crude oil purchased by OTMC in South Texas were handled
through a contract between OTMC and another crude oil transporter. Marketing
efforts in West Texas were focused on acquiring customers and expanding the
business. Toward the end of the third quarter, OTMC entered into several new
contracts, most of which became effective at the beginning of the fourth quarter
of 1997. For the quarter ending September 30, 1997, OTMC incurred a net loss of
$281,580 compared to a net profit of $47,519 for the same period of the prior
year. The loss in the third quarter was slightly less than the loss in the
second quarter of 1997. During the quarter ending September 30, 1997, OTMC
purchased and/or transported 155,000 barrels of crude oil, almost the same as in
the third quarter of the prior year. Management believes that, although the move
to West Texas has resulted in losses, in the long-term, operations in West Texas
will grow more rapidly and be more profitable than operations in South Texas.
The gross profit margin for West Texas crude oil is smaller than for South
Texas crude oil, but more crude oil is available for the business of the
Company. Trucking expenses decreased by 18% compared to the same period of 1996,
while general and administrative expenses increased by about the same
percentage. The increase in general and administrative costs has been necessary
due to the buildup of business for the fourth quarter of 1997. General and
administrative costs are expected to remain essentially constant through the end
of 1997 and trucking expenses are expected to increase in proportion to the
increase in crude oil transported.
9
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From time to time in recent years, the price of crude oil has fluctuated.
There is therefore uncertainty regarding the future market price for crude oil.
However, demand for crude oil has been generally in balance with available
supplies, and OTMC believes the long-term prospects for the crude oil industry
continue to be good.
Liquidity and Capital Resources
OTMC's sales and purchase contracts are based upon the posted price of
crude oil which reduces the effect of normal price fluctuations. Most of OTMC'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 of crude oil transported and the distance traveled.
At September 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 accounts receivables and is due on demand. The credit
agreement bears interest at the prime rate plus 1.25% (9.5% at September 30,
1997). The line of credit is collateralized by certain accounts receivables.
Borrowings under this agreement at September 30, 1997, were $200,000.
During the third quarter of 1997, to finance its expansion and provide
working capital, the Company entered into a loan by a private lender,
collateralized by the assets of the Company, and sold and issued Series B
Preferred Stock.
In July 1997, the Board of Directors approved the sale of Series B
Preferred Stock. This sale generated an additional $232,000 in working capital.
All Series A Preferred Stock, was converted to Series B Preferred Stock. Series
B Preferred Stock accumulates dividends at the simple rate of 14% per annum, has
a preference on liquidation, is convertable into common stock, and has voting
rights.
On August 18, 1997, the Board of Directors approved a loan by a private
lender in the amount of $500,000. The interest rate is 10.75% simple interest
with repayment over forty-two (42) months. The loan is collateralized by the
Company's assets. The first $200,000 of the loan was used to pay off leases on
ten (10) trucks, and the cost of those trucks was then capitalized.
OTMC anticipates that its future capital will be provided from operations,
and from time to time the company may seek to borrow funds for actual or
anticipated working capital.
Plan of Operation
The main objective of the Company is to transport and market as many
barrels of crude oil as possible. In the past, the Company operated in South
Texas. However, there is more opportunity for the Company's business in West
Texas than in South Texas. Accordingly, in order to maximize its long-term
potential, the Company conceived and executed a plan to move its operations to
West Texas. During the second quarter of 1997, the Company moved its operations
from South Texas to West Texas. During the third quarter of 1997, the Company
10
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completed the move, including the movement of most of its equipment. OTMC hired
an experienced oil marketer and purchaser to acquire new customers and
opportunities in West Texas. The crude oil that OTMC was transporting in South
Texas was contracted to another transport company, effective June 1, 1997. OTMC
is being paid a small commission for that South Texas crude oil and is not
liable for hauling, marketing, or sale thereof. As a temporary result of the
move from South Texas to West Texas, monthly expenses increased and monthly
revenues declined, resulting in losses. OTMC entered into new contracts in West
Texas during the third quarter of 1997 and has signed additional new contracts
effective the fourth quarter. As a result, the Company expects revenues to
increase in the fourth quarter of 1997.
11
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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 and has filed a lawsuit against the Company seeking an unspecified
amount of damages. 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
notified the insurance company of the event described above and representatives
of the insurance company have responded to the lawsuit. As a result of the
insurance coverage, management does not anticipate that this lawsuit will result
in a material loss to the Company.
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 third
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.
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:_____________________ By: /S/ C. A. BEANE
C. A. Beane, President
13
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM FINANCIAL STATEMENTS AT INTERIM PERIOD ENDED SEPTEMBER 30, 1997. AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
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