<PAGE> 1
U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-QSB
X Quarterly report pursuant to Section 13 or 15 (d) of the Securities
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Exchange Act of 1934
For the quarterly period ended September 30, 1998 or
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Transition report under to Section 13 or 15 (d) of the Securities
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Exchange Act of 1934
For the transition period from to .
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Commission File Number 0-5833
OASIS OIL CORPORATION
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(Exact name of small business issuer as specified in its charter)
NEVADA 94-1713830
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1800 ST. JAMES PLACE, SUITE 101. HOUSTON. TEXAS 77056
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(Address of principal executive office & zip code)
(713) 627-8875
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(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 No X
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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
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Common Stock, $0.05 par value 7,150,000
Series B Preferred Stock, $1.00 par value 63,694
Transitional Small Business Disclosure Format (check one) Yes No X
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Page 1 of 12
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OASIS OIL CORPORATION
INDEX
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Page
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PART 1. - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheet at September 30, 1998 3
Consolidated Statement of Operations for the three
months Ended September 30, 1998 and 1997 4
Consolidated Statement of Operations for the nine
months Ended September 30, 1998 and 1997 5
Consolidated Statement of Cash Flows for the nine
months ended September 30, 1998 and 1997 6
Condensed Notes to Interim Consolidated Financial Statements 7 - 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8 - 11
PART II. - OTHER INFORMATION
Item 1. Legal Proceedings 11
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Page 2 of 12
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PART 1 FINANCIAL INFORMATION
Item 1 - Financial Statements
OASIS OIL CORPORATION
CONSOLIDATED BALANCE SHEET
(In thousands of dollars, unaudited)
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September 30,
1998
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ASSETS
CURRENT ASSETS
Cash $ 190
Accounts Receivable - trade 1,658
Inventories 366
Prepaid Expenses 115
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TOTAL CURRENT ASSETS 2,329
Property, equipment, and leasehold improvements, net 1,283
Deposits 5
Goodwill,net 180
Pipeline construction project 2,000
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TOTAL ASSETS $5,797
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LIABILITIES AND EQUITY
CURRENT LIABILITIES
Notes payable - Line of credit $ 350
Accounts payable 1,816
Accrued expenses 66
Current maturities of long-term debt 217
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TOTAL CURRENT LIABILITIES 2,449
Long-term debt, less current maturities 1,108
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TOTAL LIABILITIES 3,557
STOCKHOLDERS' EQUITY
Preferred Stock, $1 par value, 1,000,000 shares authorized 637
Common Stock, $.05 par value, 50,000,000 shares 358
authorized
Additional paid-in capital 2,328
Current Dividends Payable ( 67)
Deficit (1,016)
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TOTAL STOCKHOLDERS' EQUITY 2,240
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TOTAL LIABILITIES AND EQUITY $ 5,797
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OASIS OIL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands of dollars)
(Unaudited)
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THREE MONTHS ENDED
SEPTEMBER 30,
1998 1997
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Sales $ 9,720 $ 3,879
Cost of sales 9,086 3,699
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Gross Margin 634 180
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Operating expenses
Selling 50 37
General and administrative 674 409
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Total operating expenses 724 446
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Net operating income (loss) (90) (266)
Other income (expense)
Interest expense (24) (15)
Other ( 5) ( 1)
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Total other expenses, net (29) (16)
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Net income (loss) $ (119) $ (282)
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Per share - basic and assuming dilution $ (.02) $ (.05)
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Weighted average number of common
shares outstanding 6,476,087 6,000,000
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OASIS OIL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands of dollars)
(Unaudited)
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NINE MONTHS ENDED
SEPTEMBER 30,
1998 1997
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Sales $29,749 $ 9,715
Cost of sales 27,497 8,814
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Gross Margin 2,252 901
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Operating expenses
Selling 191 57
General and administrative 2,028 1,431
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Total operating expenses 2,219 1,488
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Net operating income (loss) 33 (587)
Other income (expense)
Interest expense (59) (39)
Other (12) 4
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Total other expenses, net (71) (35)
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Net income (loss) $ (38) $ (622)
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Per share - basic and assuming dilution $ (.02) $ (.10)
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Weighted average number of common
shares outstanding 6,259,890 6,000,000
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OASIS OIL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of dollars)
(Unaudited)
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NINE MONTHS ENDED
SEPTEMBER 30,
1998 1997
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Net cash (used in) operating activities $(179) $ (247)
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Cash flows used in investing activities:
Purchases of fixed assets (525) (249)
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Cash flows from financing activities:
Net borrowings (repayments) on line of credit 150 243
Borrowings on long-term debt 806 468
Repayments on long-term debt (289) (240)
Current dividends on preferred stock (67) -
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Net cash provided by (used in)
financing activities 600 471
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Net decrease in cash (104) (25)
Cash, beginning of period 294 134
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Cash, end of period $ 190 $ 109
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Cash paid during the periods for:
Interest $ 71,186 $ 40,444
Taxes 0 0
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OASIS OIL CORPORATION
CONDENSED NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. The accompanying condensed consolidated financial statements
are unaudited, but, in the opinion of management, include all
adjustments (consisting of normal recurring accruals) necessary
for a a fair presentation of financial position and results of
operations. Interim results are not necessarily indicative of
results for a full year. The information included in this Form
10-QSB should be read in conjunction with Management's Discussion
and Analysis and Consolidated Financial Statements and notes
thereto included in the Oasis Oil Corporation's 1997 Form 10-KSB.
NOTE 2. Effective for the year ended December 31, 1997, the Company was
required to adopt Statement of Financial Standards No. 128,
"Earnings Per Share" ("SFAS 128"). In accordance with SFAS
128, the Company is required to provide basic and dilutive
earnings per common share information.
The basic net income per common share is computed by dividing the
net income available to common shareholders by the weighted
average number of common shares outstanding.
Diluted net income per common share is computed by dividing the
net income available to common shareholders, adjusted on an as if
converted basis, by the weighted average number of common shares
outstanding plus potential dilutive securities.
Income available to common shareholders was reduced by preferred
stock dividends. There were no potential dilutive securities.
NOTE 3. Effective March 31, 1999, the Company sold 100% of its ownership in
Oasis Transportation and Marketing Corporation ("OTMC"),
representing the discontinuation of all of its existing operations.
The Company received $350,000 in cash and a note receivable for
$1,500,000. The note receivable has no stated interest rate, is due
in monthly installments of $45,000 as defined in the agreement and
the installments are payable starting in May 1999. All amounts that
remain unpaid after 24 months are due April 30, 2001.
NOTE 4. In August 1998, the Company entered into an agreement with an
employee, who is also a shareholder and director of the Company, to
purchase the employee's rights to serve as the general contractor
under a pipeline construction contract. The Company exchanged
1,000,000 shares of the Company's common stock, warrants for
1,500,000 additional shares of the Company's common stock and a
$50,000 promissory note for these exclusive rights. The
promissory note has no stated interest and, as amended, is due
February 28, 2000.
Page 7 of 12
<PAGE> 8
Under the terms of the contract, the contractor will construct a
thirty-six mile natural gas pipeline for a natural gas association
in west Texas for approximately $9,000,000. The construction project
is to begin when instructed by the natural gas association. Under
the terms of the Company's contract with the employee, as amended,
if the construction project has not begun by February 28, 2000,
the promissory note is cancelled and the employee is required to
pay the Company $2,000,000 as consideration for the 1,000,000
shares of common stock issued.
The Company has recorded the estimated $2,000,000 value of the
shares paid to the employee as a receivable from stockholder and
classified the receivable as a component of equity on the
accompanying consolidated balance sheet.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
General
Since February 1996, the Company was principally engaged in the service
of gathering, transporting and marketing of domestic crude oil through its
wholly-owned subsidiary, OTMC. As a first purchaser of crude oil, the Company
offered a complete division order and royalty disbursement service to its
producer accounts. During this period the Company sustained substantial
operating losses and effective March 31, 1999, the Company sold 100% of its
ownership in OTMC, representing the discontinuation of all of its existing
operations. Management believes the proceeds from the sale of OTMC is
sufficient to cover the overhead of the exisiting Company, and the credit
facility due November 6, 1999 will be renewed through the bank or paid through
private financing.
The Company's remaining three employees are currently exploring merger
and acquisition possibilities that will maximize shareholder value. Oasis
will continue to evaluate oil and natural gas ventures as well as pipeline
opportunities. The Company is also exploring areas outside the oil and
natural gas business. The present management believes that internet and high
tech companies may be a positive way to maximize shareholder value, and
management is currently looking into several opportunities.
Results of Operations
Revenue increased $5,841,000 (151%) in the third quarter ending
September 30, 1998 over the third quarter ending September 30, 1997, and
$20,034,000 (206%) for the nine month period ending September 30, 1998 over
the same period ending September 30, 1997. The increase is a result of
increased transporting volume. During the third quarter of 1998, OTMC
transported and marketed approximately 254,000 barrels of crude oil per month,
and 233,000 barrels per month for the nine-month period ending September 30,
1998. Barrels transported and marketed for the comparable three and nine-
month periods ending September 30, 1997 were 70,000 and 57,000, respectively.
Page 8 of 12
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The Company's sales and purchase contracts are based upon the purchase
price of crude oil. These contracts purport to reduce the effect of normal
price fluctuations because crude oil is considered a widely traded commodity.
Most of the Company's expenses are fixed except for crude oil purchases and
field expenses (drivers payroll, fuel, etc.). These variable expenses are
directly related to the number of barrels transported. As a result, gross
margin as a percentage of sales was 6.5% for the third quarter of 1998, and
7.6% for the nine months ending September 30, 1998. Comparable three and nine
months gross margins for the periods ending September 30, 1997 were 4.6% and
9.3%, respectively.
Selling expenses increased during the third quarter and nine month
period ending September 30, 1998 as compared to the third quarter and nine
month period ending September 30, 1997. The increase is primarily due to the
hiring of two new marketing personnel in late 1997 along with increased
commission costs. The increase in general and administrative expenses in 1998
was primarily due to the Company's move to West Texas, increased personnel
required to handle the increased business and the due diligence associated
with potential acquisitions.
Liquidity and Capital Resources
In 1996, a major customer notified the Company that the Company
delivered an improper product into their pipeline that subsequently damaged
their refinery. The customer filed a lawsuit in the 347th Judicial District
Court in Nueces County, Texas asserting damages in the amount of $1,000,000.
The Company is covered by a general liability insurance policy that provides
per occurrence and an aggregate amount of $2,000,000. The policy is subject
to a deductible of $10,000. The Company notified the insurance company of the
event described above and paid the deductible amount. Representatives of the
insurance company took charge of the defense of the case and in April 1999,
the case was settled for $700,000 paid by the insurance company. The
Company's total out-of-pocket cost was the $10,000 deductible.
During the third quarter of 1998, the Company purchased 3 Mack trucks and 3
Polar trailers. The fixed asset purchase was funded through a loan with a
financial institution. The loan bears interest at the rate of 9.5%, is due on
September 1, 2003, and is collateralized by these fixed assets.
During the third quarter 1998, the Company borrowed approximately $375,000
from a financial institution to repay a loan to the Edgar Monroe Estate which
is administered by a director of the Company. The new loan bears interest at
the rate of 10% per annum, is due on March 1, 2002, and is collateralized by
10 trucks and 13 trailers owned by the Company.
At September 30, 1998, 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% (9.75% at September 30, 1998). The line of credit
is collateralized by substantially all the Company's assets. Borrowings under
this agreement at September 30, 1998 were $100,000.
Page 9 of 12
<PAGE> 10
At September 30, 1998, the Company had a revolving line of credit facility
with a bank. The credit agreement bears interest at the rate of 1% above
prime (9.5% at September 30, 1998). The loan is personally guaranteed by five
directors of the Company. Borrowings under this agreement at September 30,
1998 were $250,000.
In September 1998, the Company borrowed $30,000 from five shareholders totaling
$150,000. The notes bear interest at 12% and are due on demand.
In August 1998, the Company entered into an agreement with an employee, who is
also a shareholder and director of the Company, to purchase the employee's
rights to serve as the general contractor under a pipeline construction
contract. The Company exchanged 1,000,000 shares of the Company's common stock,
warrants for 1,500,000 additional shares of the Company's common stock and a
$50,000 promissory note for these exclusive rights. The promissory note has no
stated interest and, as amended, is due February 28, 2000.
Under the terms of the contract, the contractor will construct a thirty-six
mile natural gas pipeline for a natural gas association in west Texas for
approximately $9,000,000. The construction project is to begin when instructed
by the natural gas association. Under the terms of the Company's contract with
the employee, as amended, if the construction project has not begun by February
28, 2000, the promissory note is cancelled and the employee is required to pay
the Company $2,000,000 as consideration for the 1,000,000 shares of common stock
issued.
The Company has recorded the estimated $2,000,000 value of the shares paid to
the employee as a receivable from stockholder and classified the receivable as
a component of equity on the accompanying consolidated balance sheet.
Management believes the proceeds from the sale of OTMC is sufficient to cover
the overhead of the existing Company, and the credit facility due November 6,
1999 will be renewed through the bank or paid through private financing.
Year 2000
The Company's internal business information systems are primarily comprised of
commercial application software products offered by recognized providers.
Because these provider's products are widely distributed, commercially
developed applications, the Company anticipates these applications have been
or will be brought into compliance by the manufacturers. On January 1, 1999,
the Company began using its new accounting and financial reporting software
implemented during 1998. The reasons for such purchase included the assurance
of Year 2000 compliance. Costs incurred specifically related to Year 2000
issues have totaled less than $2,000 as of December 1998.
The Company does not anticipate any Year 2000 compliance issues to arise
related to its primary internal business information systems. The Company is
not aware of any further material operational issues or costs associated with
preparing internal systems for the Year 2000. However, the Company utilizes
other third party network equipment, telecommunications products, and other
third party software products that may or may not be Year 2000 compliant.
Page 10 of 12
<PAGE> 11
Although the Company is currently taking steps to address the impact, if any,
of the Year 2000 issue surrounding such third party products, failure of any
critical technology to operate properly in the Year 2000 may have an adverse
impact on business operations or financial results.
The Company cannot anticipate the impact of Year 2000 compliance on its
clients at this time. The Company is unaware of any client who may be
impacted by the Year 2000 issue. A failure of a client to appropriately
handle issues related to the Year 2000 might have an adverse impact on the
financial results of the Company.
Forward Looking Statements
This quarterly report for the quarter ended September 30, 1998 as well as
other public documents of the Company contains forward-looking statements
which involve known and unknown risks, uncertainties and other factors which
may cause the actual results, performance or achievement of the Company to be
materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. Such statements
include, without limitation, the Company's expectations and estimates as to
future financial performance, cash flows from operations, capital expenditures
and the availability of funds from refinancings of indebtedness. Readers are
urged to consider statements which use the terms "believes," "intends,"
"expects," "plans," "estimates," "anticipated," or "anticipates" to be
uncertain and forward looking. In addition to other factors that may be
discussed in the Company's filings with the Securities and Exchange
Commission, including this report, the following factors, among others, could
cause the Company's actual results to differ materially from those expressed
in any forward-looking statement made by the Company: (i) general economic and
business conditions, acts of God and natural disasters which may effect the
demand for the Company's products and services or the ability of the Company
to manufacture and/or provide such products and services; (ii) the loss,
insolvency or failure to pay its debts by a significant customer or customers;
(iii) increased competition; (iv) changes in customer preferences and the
inability of the Company to develop and introduce new products to accommodate
these changes; and (v) the maturing of debt and the ability of the Company to
raise capital to repay or refinance such debt on favorable terms.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
In 1996, a major customer notified the Company that the Company
delivered an improper product into their pipeline that subsequently damaged
their refinery. The customer filed a lawsuit in the 347th Judicial District
Court in Nueces County, Texas asserting damages in the amount of $1,000,000.
The Company is covered by a general liability insurance policy that provides
for defense and indemnity for damages arising from negligence up to $1,000,000
per occurrence and an aggregate amount of $2,000,000. The policy is subject
to a deductible of $10,000. The Company notified the insurance company of the
event described above and paid the deductible amount. Representatives of the
insurance company took charge of the defense of the case and in April 1999,
the case was settled for $700,000 paid by the insurance company. The
Company's total out-of-pocket cost was the $10,000 deductible.
Page 11 of 12
<PAGE> 12
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
OASIS OIL CORPORATION
Date: September 7, 1999 /s/ C. A. Beane
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C. A. Beane, President
Page 12 of 12
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<PERIOD-END> SEP-30-1998
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0
637
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