FORM 10-QSB U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the six month period ended: March 31, 2000
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: 0-253335
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SHANNON INTERNATIONAL RESOURCES, INC.
-----------------------------------------------------
(Exact name of registrant as specified in its charter)
NEVADA 98-0204956
------------------------ --------------------
(State of incorporation) (IRS Employer ID No.)
4020, 7 Street S.W., Calgary Alberta T2G2Y8
---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (403) 543-0970
--------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 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
--- ---
As of May 10, 2000, the Registrant had 10,000,000 shares of Common Stock
outstanding.
Transitional Small Business Disclosure Format (check one); Yes No X
THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN THE GENERAL INSTRUCTIONS AND IS
THEREFORE FILING THIS FORM WITH THE REDUCED DISCLOSURE FORMAT.
<PAGE>
Part I - Financial Information
==============================
SHANNON INTERNATIONAL RESOURCES, INC.
(a Development Stage Company)
Balance Sheet
March 31, 2000
(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 115
Loans receivable affiliate (net of discount of $55) 33,250
------------
Total current assets 33,365
Unevaluated oil and gas properties (using the full cost method) 45,000
------------
TOTAL ASSETS $ 78,365
============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 1,903
------------
STOCKHOLDERS' EQUITY
Common stock - authorized 200,000,000
shares of $.001 par value, issued and
outstanding 10,00,000 shares 10,000
Additional paid-in capital 80,299
Accumulated deficit (13,837)
------------
76,462
------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 78,365
============
See accountants' report and notes to financial statements
2
<PAGE>
<TABLE>
<CAPTION>
SHANNON INTERNATIONAL RESOURCES, INC.
(a Development Stage Company)
Statements of Operations
(Unaudited)
Three Months Inception Nine Months Inception Inception
Ended (February 17, Ended (February 17, (February 17,
March 31, 1999) to March 31, 1999) to 1999) to
2000 March 31, 1999 2000 March 31, 1999 March 31, 2000
------------ -------------- ------------ -------------- ---------------
<S> <C> <C> <C> <C> <C>
Expenses
General and administrative $ (704) $ (1,837) $ (5,387) $ (1,837) $ (13,837)
------------ -------------- ------------ -------------- ---------------
Net (loss) $ (704) $ (1,837) $ (5,387) $ (1,837) $ (13,837)
============ ============== ============ ============== ===============
Net (loss) per common share $ * $ * $ * $ * $ *
============ ============== ============ ============== ===============
Weighted average shares outstanding 10,000,000 10,000,000 10,000,000 10,000,000 8,768,186
============ ============== ============ ============== ===============
</TABLE>
* Less than $(.01) per share.
See accountants' report and notes to financial statements
3
<PAGE>
<TABLE>
<CAPTION>
SHANNON INTERNATIONAL RESOURCES, INC.
(a Development Stage Company)
Statements of Cash Flows
(Unaudited)
Inception Inception
Nine Months (February 17, (February 17,
Ended 1999) to 1999) to
March 31, March 31, March 31,
2000 1999 2000
------------------ ----------------- -----------------
<S> <C> <C> <C>
Operations activities:
Net loss $ (5,387) $ (1,837) $ (13,837)
------------------ ----------------- -----------------
Reconciling adjustments:
Amortization of discount (2,320) - (2,340)
Changes in assets and liabilities:
Accounts payable and advances (1,071) 1,615 4,298
Prepaid expenses - - -
------------------ ----------------- -----------------
Total adjustments (3,391) 1,615 1,958
------------------ ----------------- -----------------
Net cash used for operating activities (8,778) (222) (11,879)
------------------ ----------------- -----------------
Investing activities:
Acquisition of oil and gas properties - - (15,000)
Loans receivable 1,695 - (33,305)
------------------ ----------------- -----------------
Net cash (used by) investing activities 1,695 - (48,305)
------------------ ----------------- -----------------
Financing activities:
Issuance of common stock - 19,600 72,300
Offering costs - (10,000) (12,001)
--------------- ----------------- -----------------
Net cash provided by financing activities - 9,600 60,299
------------------ ----------------- -----------------
Net change in cash and cash equivalents (7,083) 9,378 115
Cash and cash equivalents at beginning of period 7,198 - -
------------------ ----------------- -----------------
Cash and cash equivalents at end of period $ 115 $ 9,378 $ 115
================== ================= =================
Supplemental disclosure of cash flow information
Cash paid during the period for
Interest $ - $ - $ -
Income taxes $ - $ - $ -
Supplemental schedule of noncash investing and
financing activities
Issuance of 770,000 shares of
common stock for services $ - $ - $ 7,700
Issuance of 2,000,000 shares of
common stock for oil and gas properties $ - $ - $ 30,000
</TABLE>
See accountants' report and notes to financial statements
4
<PAGE>
SHANNON INTERNATIONAL RESOURCES, INC.
(a Development Stage Company)
Notes to Financial Statements
March 31, 2000
(Unaudited)
Note 1 - Management's Statement
===============================
In the opinion of management, the accompanying unaudited financial statements
contain all adjustments (all of which are normal and recurring in nature)
necessary to present fairly the financial position of Shannon International
Resources, Inc. as of December 31, 1999, and the results of operations for the
three months and six months ended December 31, 1999, and cash flows for the six
months ended December 31, 1999. The Notes to Financial Statements which are
contained in the Form 10-KSB should be read in conjunction with these financial
statements.
Note 2 - Summary of Significant Accounting Policies
===================================================
Organization
- ------------
The Corporation was incorporated pursuant to the provisions of the corporate
charter of the State of Nevada on February 17, 1999. The Corporation established
June 30th as its year end.
The Corporation's primary business activity is the acquisition, development and
production of coalbed methane properties in the province of Prince Edward
Island, Canada. Currently, the Corporation only has an interest in non-producing
properties. The Corporation is in the development stage as its operations
principally involve oil and gas activities and they have no revenue from oil and
gas activities.
Accounting for Oil and Gas Operations
- -------------------------------------
Presently, the full cost method is inapplicable because the Company has not
commenced its oil and gas activities. The Company intends to follow the full
cost method of accounting for oil and gas properties. Accordingly, all costs
associated with acquisition, exploration, and development of oil and gas
reserves, including directly related overhead costs, are capitalized.
All capitalized costs of oil and gas properties, including the estimated future
costs to develop proved reserves, are amortized on the unit-of-production method
using estimates of proved reserves. Investments in unproved properties and major
development projects are not amortized until proved reserves associated with the
projects can be determined or until impairment occurs. If the results of an
assessment indicate that the properties are impaired, the amount of the
impairment is added to the capitalized costs to be amortized.
5
<PAGE>
SHANNON INTERNATIONAL RESOURCES, INC.
(a Development Stage Company)
Notes to Financial Statements
March 31, 2000
(Unaudited)
Accounting for Oil and Gas Operations, Continued
- ------------------------------------------------
In addition, the capitalized costs are subject to a "ceiling test," which
basically limits such costs to the aggregate of the "estimated present value,"
discounted at a 10-percent interest rate of future net revenues from proved
reserves, based on current economic and operating conditions, plus the lower of
cost or fair market value of unproved properties.
Sales of proved and unproved properties are accounted for as adjustments of
capitalized costs with no gain or loss recognized, unless such adjustments would
significantly alter the relationship between capitalized costs and proved
reserves of oil and gas, in which case the gain or loss is recognized in income.
Abandonments of properties are accounted for as adjustments of capitalized costs
with no loss recognized.
Note 3 - Oil and Gas Properties
===============================
The Corporation has acquired a 25% interest in certain non-producing oil and gas
properties in the province of Prince Edward Island, Canada.
This interest was acquired by the Corporation issuing 2,000,000 common shares at
an agreed value of $0.015 per share ($30,000) for the interest in the property
and fees related to the acquisition of $15,000. The agreement also grants the
Company two options to acquire an additional 25% working interest and the right
to enter into a joint venture agreement with the holder or holders of the
remaining 50% working interest by the expenditure of $3,000,000 cdn., on the
property over the next thirty months.
Note 4 - Basis of Presentation
==============================
The Company has no revenue and limited resources to develop its oil and gas
properties. It is the Company's intent to raise additional capital through
private placements or public offerings of its equity securities and use the
capital for development of its current Working Interest. Thereafter the Company
intends to establish or acquire assets with development and exploitation
potential through industry contacts and opportunities known to the company's
management. Whenever possible, the Company intends to use its common stock as
consideration for such acquisitions. The ultimate objective is to conduct a
balanced exploration and development program and seek to acquire operating
control and majority ownership of interests in order to optimize the efficiency
of operations.
6
<PAGE>
Item 2 - Management's Discussion and Analysis or Plan of Operation
==================================================================
THE FOLLOWING ANALYSIS OF THE RESULTS OF OPERATIONS AND FINANCIAL CONDITION OF
THE COMPANY SHOULD BE READ IN CONJUNCTION WITH THE CONSOLIDATED FINANCIAL
STATEMENTS, INCLUDING THE NOTES THERETO, OF THE COMPANY CONTAINED ELSEWHERE IN
THE FORM 10-QSB
Plan of Operations
- -------------------
As a company in its initial stages of development, the company has no revenues
from operations. The Company intends to focus its efforts entirely on the Prince
Edward Island leases for the foreseeable future. However, the company plans to
formulate a development program for its Prince Edward Island lease, which will
include the implementation of a drilling program in conjunction with C M B
Energy Corp., or a larger oil and gas company who will enter into a joint
venture agreement for exploratory drilling and possible development. The Company
has not yet entered into any discussions with any company regarding the
formation of a joint venture for exploratory drilling. The Company's Plan of
Operations is to wait until the Company is approached by third parties seeking
to explore the entire 650,000 leased acres of Prince Edward Island of which the
Company has its twenty-five percent working interest in 116,279 acres. The
Company believes such a third party is likely to be a large oil and gas company
capable of undertaking an exploratory program for the entire area. As a result
the Company anticipates only having to provide its proportional cost of the
exploration program in order to participate. The Company does not have any
exploration or development equipment and does not intend to purchase any as it
anticipates that the exploration program will be conducted by contracted third
parties.
Though no assurance can be given, this development program is expected to
provide for the drilling of exploration or test wells to determine whether there
is sufficient reserves of oil or gas to then develop a program to establish
production. Management believes that sufficient reserves would be such reserves
that the sale of oil and gas from the area at the current market prices would
repay the cost of exploration and development of the area within a reasonable
time as well as provide profitable production for a period of time consistent
with industry standards. Exploratory data determining the size and pressures of
reserves as well as the necessary drilling depth and other drilling factors
effecting production cost must first be obtained and then analyzed before a
final determination may be made that there are "sufficient" reserves to justify
production. Management believes that the general and administrative expenses,
capital and operating expenditures related to the implementation of the
development program is approximately $3,000,000 Cdn., of which the Company may
be expected to provide up to $750,000 Cdn. The Company intends to raise this
capital through the private placement or public offering of securities.
The Company anticipates spending $750,000 Cdn., in connection with maintaining
its twenty-five percent working interest. In order to do so the Company must be
able to raise capital through the sale of its securities. The Company believes
it will be able sell a sufficient amount of its securities to raise the
estimated $750,000 Cdn., through the oil and gas industry contacts of its
President, Blair Coady and those of its Working Interest Partner, CMB Energy
Corp. The Company cannot predict if it will exercise its first option to acquire
up to an additional twelve and one half percent (12.5%) of the Working Interest
from CMB Energy Corp., for the expenditure of approximately $1,500,000 Cdn., by
October 2000 or its second option to acquire up to an additional twelve and one
half percent (12.5%) of the Working Interest from CMB Energy Corp., for the
expenditure of approximately $1,500,000 Cdn., by October 2001. The Company may
exercise only the first option, exercise both options simultaneously or
sequentially or may not exercise the options at all. Exercise of these options
is dependent upon whether the Company and CMB Energy Corp., receive an offer to
participate in an exploration program, whether a market is established for the
Company's securities and whether the Company can successfully raise such capital
through the sale of its securities. In the event, the Company is unable to pay
its obligations under its existing twenty-five percent working interest, its
working interest can be proportionally reduced in favor of whatever working
interest partner pays the delinquent amount.
7
<PAGE>
The Company believes that no expenditure of funds will be required for at least
the next six months due to the fact that no offers to participate in an
exploration program have been made to date. It is the Company's expectation that
it will receive an offer to participate this year and that an exploration
program would begin several months after accepting such an offer. At such time,
the Company believes its expenditures will be primarily in paying its
proportional share of the cost of a third party contractor which will conduct an
exploration program. The Company anticipates that the expenditure of funds will
be determined by the third party contractor. Consistent with industry practice,
once all or most of the working interests agree to initiate the exploration
program and select the third party contractor or operator, the operator will
draft a proposed exploration program and submit a request to approve the
necessary expenditures to the working interests. Each working interest must then
either approve the expenditures and provide funding or withdraw from the
program. The Company expects that the Approval for Expenditures will set forth
the specific costs for site preparation and drilling for the specific sites for
test wells and that these costs will vary due to different conditions such as
drilling depth and whether drilling is to be through relatively soft sedimentary
layers or dense rock layers.
The Company's business plan is to raise additional capital through private
placements or public offerings of its equity securities and use the capital to
pay its proportional share of the costs of development of its current Working
Interest. Thereafter the Company intends to place its securities with and
through the industry contacts and opportunities known to the company's
management. The Company has not established any limitations on the amount or
type of securities it will sell. Such amount will be determined by the market
price for the Company's securities if the Company is successful in establishing
this market. However, the Company also does not intend sell such securities as
would result in a change in voting control the Company.
Liquidity and Capital Resources
- -------------------------------
The company is not at present producing revenues and its main source of funds
has been the sale of the company's equity securities. The company had $33,365 in
cash and receivables and other current assets as of March 31, 2000. The Company
has a receivable of $33,250, from Calgary Chemical, of Calgary, Alberta, which
the Company's President, Blair Coady is also President. All cash is a present
being used to fund ongoing general and administrative expenses, plus consulting
expenses, with the total of such expenses estimated to be approximately $5,000
per month. As a result the Company has enough present cash to meet its needs for
twelve months. The company will need to raise additional capital to meet its
ongoing overhead obligations and the contemplated development program. Such
funding may be obtained through the sale of additional securities. If the
company is unable to obtain sufficient funds, then the company may seek to find
development partners and increase funds available to the company through the
sale of some portion of its working interest in the Prince Edward Island leases.
The ability of the company to sell a portion of its working interest is not a
certainty and the proceeds derived from such sales will be subject to the
ongoing economic viability of the project.
8
<PAGE>
The capital resources of the company are limited. At present the company is not
producing revenues and is not expected to produce revenues until after November
2001. The main source of funds for working capital at present is the sale of the
company's equity securities. Other possible sources of funding are loans from
financial institutions with the company's leasehold interests as collateral.
However, the collateral value of such leasehold interests is limited.
Result of Operations
- --------------------
During the nine month period ended March 31, 2000, there were no revenues being
realized from sale of assets, production or from any other source. Expenses
incurred as of March 31, 2000 from general and administrative were $704.
Effect of Inflation: The Company believes that inflation does not have a
material affect on its business.
Part II - Other Information
===========================
Item 1 - Legal Proceedings: There are no proceedings to report.
Item 2. - Changes in Securities: There have been no changes in Securities.
Item 3. - Default Upon Senior Securities: There are no defaults to report.
Item 4. - Submission of Matters to a Vote of Security Holders: None
Item 5. - Other Information: None
Item 6. - Exhibits and Reports on Form 8-K: None
9
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
SHANNON INTERNATIONAL RESOURCES, INC.
Dated: May 10, 2000
------------
/s/ BLAIR COADY
- ---------------------------------------------------
Blair Coady, President, Chief Financial Officer
10
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-END> MAR-31-2000
<CASH> 2,817
<SECURITIES> 0
<RECEIVABLES> 33,465
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 36,329
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 81,329
<CURRENT-LIABILITIES> 3,555
<BONDS> 0
0
0
<COMMON> 10,000
<OTHER-SE> 80,299
<TOTAL-LIABILITY-AND-EQUITY> 81,329
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 4,076
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (4,076)
<INCOME-TAX> 0
<INCOME-CONTINUING> (4,076)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,076)
<EPS-BASIC> (.01)
<EPS-DILUTED> (.01)
</TABLE>
