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Previous: ENTERTAINMENT INTERNET INC, 10QSB, EX-27, 2000-11-14 |
Next: GLOBESPAN INC/DE, S-8, 2000-11-14 |
(Mark One)
[X] Quarterly report pursuant section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended September 30, 2000 [ ] Transition report pursuant section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from ____________ to _____________
NATION ENERGY, INC.
(Exact name of small business issuer as
specified in its charter)
Commission file number:
0-30193
|
DELAWARE
(State or other jurisdiction of incorporation or organization) |
59-2887569
(IRS Employer Identification No.) |
Suite 1100 - 609 West Hastings Street
Vancouver BC Canada V6B 4W4
(Address of principal executive offices)
(800) 400 - 3969
(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 [ ]
Securities registered under Section 12(b) of the Exchange Act:
None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, $0.001 par value
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS:
Not applicable
APPLICABLE ONLY TO CORPORATE REGISTRANTS:
State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: As of September 30, 2000, the Registrant had 7,170,000 shares of Common Stock outstanding.
TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT (check one): Yes [ ] No [X]
NATION ENERGY, INC.
FORM 10-QSB
FOR THE QUARTER ENDED SEPTEMBER 30, 2000
| Index | Page Number | |
| PART I FINANCIAL INFORMATION | ||
| Item 1. | Balance Sheet | 4 |
| Statement of Operations | 5 | |
| Statements of Cash Flows | 6 | |
| Notes to Financial Statements | 7 | |
| Item 2. | Management's Discussion and Analysis of Financial Conditions and Results of Operations | 8 |
| PART II OTHER INFORMATION | ||
| Item 1. | Legal Proceedings | 13 |
| Item 2. | Changes in Securities | 13 |
| Item 3. | Defaults Upon Senior Securities | 13 |
| Item 4. | Submission of Matters to a Vote of Security Holders | 13 |
| Item 5. | Other Information | 13 |
| Item 6. | Exhibits and Reports on Form 8-K | 13 |
| SIGNATURES | ||
Attached hereto and made a part of this filing is the unaudited consolidated balance sheet at September 30, 2000, consolidated statement of operations for the six months ended September 30, 1999 and 2000, consolidated statement of cash flows for the six months ended September 30, 1999 and 2000, and notes to the consolidated financial statement.
ASSETS
Current assets:
Cash $ 2,554,236
-------------
Oil and gas properties - full cost method 1,570,771
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Total assets $ 4,125,007
=============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 86,479
-------------
Stockholders' equity:
Common stock, $.001 par value; 50,000,000
shares authorized; 7,170,000 shares issued
and outstanding 7,170
Additional paid-in capital 742,230
Common stock subscriptions 3,385,000
Deficit accumulated during the
development stage (95,872)
-------------
Total stockholders' equity 4,038,528
-------------
Total liabilities and stockholders' equity $ 4,125,007
=============
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For the Period
For the Three For the Three For the Six For the Six April 19, 1988
Months Ended Months Ended Months Ended Months Ended (inception) to
September 30, 1999 September 30, 2000 September 30, 1999 September 30, 2000 September 30, 2000
-------------------- ------------------- -------------------- ------------------- -------------------
Revenue: $ - $ - $ - $ - $ -
-------------------- ------------------- -------------------- ------------------- -------------------
Costs and expenses:
General, selling and administrative 4,585 14,214 6,762 23,128 95,872
-------------------- ------------------- -------------------- ------------------- -------------------
Total costs and expenses 4,585 14,214 6,762 23,128 95,872
-------------------- ------------------- -------------------- ------------------- -------------------
Net (loss) $ (4,585) $ (14,214) $ (6,762) $ (23,128) $ (95,872
==================== =================== ==================== =================== ===================
Per share information:
Weighted average number of common
shares outstanding - basic and diluted 7,170,000 7,170,000 7,145,824 7,170,000 968,942
==================== =================== ==================== =================== ===================
Net (loss) per common share - basic and diluted $ (0.00) $ (0.00) $ (0.00) $ (0.00) $ (0.10
==================== =================== ==================== =================== ===================
For the Period
For the Six For the Six April 19, 1988
Months Ended Months Ended (inception) to
September 30, 1999 September 30, 2000 September 30, 2000
------------------ ------------------ -----------------
Cash flows from operating activities:
Net (loss) $ (6,762) $ (23,128) $ (95,872)
Adjustments to reconcile net (loss) to net cash
provided by operating activities:
Common stock issued for services 20,000 - 20,000
(Increase) decrease in prepaid expenses (7,517) 100,632 -
Increase (decrease) in accounts payable (20,741) 77,276 86,479
------------------ ------------------ -----------------
Net cash provided by operating activities (15,020) 154,780 10,607
------------------ ------------------ -----------------
Cash flows from investing activities:
Purchase of oil and gas properties - (1,379,893) (1,570,771)
------------------ ------------------ -----------------
Net cash (used in) investing activities - (1,379,893) (1,570,771)
Cash flows from financing activities:
Payments for withdrawn subscriptions - (500,000) (500,000)
Proceeds from common stock issued and subscribed - 385,000 4,614,400
------------------ ------------------ -----------------
Net cash provided by (used in) financing activities - (115,000) 4,114,400
------------------ ------------------ -----------------
Net increase (decrease) in cash (15,020) (1,340,113) 2,554,236
Beginning cash 728,205 3,894,349 -
------------------ ------------------ -----------------
Ending cash $ 713,185 $ 2,554,236 $ 2,554,236
================== ================== =================
Supplemental cash flow information:
Cash paid for interest $ - $ - $ -
Cash paid for income taxes $ - $ - $ -
The accompanying unaudited condensed financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information. They do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments, consisting only of normal recurring adjustments, considered necessary for a fair presentation, have been included in the accompanying unaudited financial statements. Operating results for the periods presented are not necessarily indicative of the results that may be expected for the full year. For further information, refer to the financial statements and notes therto, included in the Company's Form 10-KSB for the year ended March 31, 2000.
Statements contained herein that are not based on historical fact, including without limitation statements containing the words "believes," "may," "will," "estimate," "continue," "anticipates," "intends," "expects" and words of similar import, constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, events or developments to be materially different from any future results, events or developments expressed or implied by such forward-looking statements. Such factors include, among others, the following: general economic and business conditions, both nationally and in the regions in which the Company operates; technology changes; competition; changes in business strategy or development plans; the ability to attract and retain qualified personnel; liability and other claims asserted against the Company; and other factors referenced in the Company's filings with the Securities and Exchange Commission. Given these uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. The Company disclaims any obligation to update any such factors or to publicly announce the result of any revisions to any of the forward-looking statements contained herein to reflect future results, events or developments.
The Company believes that at least ten wells will need to be drilled and tested for gas production before the Greater Trona Project can be properly evaluated. On June 2, 2000 the Company and it's partner in the Greater Trona Project, Saurus Resources, Inc., commenced drilling the first well of a scheduled ten well drilling program in the Trona Project. The Company has drilled and reviewed the results of all ten wells in the initial ten-well program and has elected to proceed with a completion and testing program to test the long-term producibility of these wells. For strategic reasons and in order to maintain its full working interest in the Trona project, the Company has elected to participate in the drilling of additional wells in the area as proposed by the joint venture partner. As of September 30, 2000 an additional 3 wells had been drilled and were being tested.
The Company has reviewed its potential participation in several oil and gas projects in the Rocky Mountain region and has entered into one agreement as of this date with Saurus Resources Inc., described below in "--Initial Focus," for the exploration of properties and has purchased various leases totaling 11,404 acres in the Greater Trona Area, Wyoming, under this agreement. During the next twelve months the Company plans to focus its resources on exploring this region and evaluating additional opportunities for developing oil and gas projects.
During the next twelve months the Company's proposed plans call for it analyze additional regions for acquisition of oil and gas leases based on several factors. The Company considers those regions in which it's industry contacts have the most experience in order to benefit from such experience. The Company will determine which leases it is interested in exploring based upon the analysis of technical and production data, financial analysis based on such production analysis, on site verification of well equipment and production capability, and verification of ownership of leasehold rights.
The principal activity for the Company in the next twelve months and beyond will be the securing of oil and gas exploration contracts and joint ventures in the Greater Trona Area, Wyoming. On August 11, 1999, the Company signed a letter of intent with Saurus Resources Inc., giving the Company the option to enter into a joint venture with Saurus under which the Company may acquire up to 50% of the profits resulting from oil and gas development by the venture in the Greater Trona Area prospect, located in southwest Wyoming. Saurus currently has an interest in approximately 50,000 acres in the Greater Trona Area prospect. Under the terms of the letter, the Company paid for a study reporting on the economic and geologic merits of the Trona venture and had until September 15, 1999, to enter into a joint venture with Saurus. On October 1, 1999, the Company elected to proceed with the joint venture, and has advanced the initial payment of $202,131 U.S.
Under the arrangement with Saurus, Saurus and the Company will each pay 50% of the costs of obtaining the necessary rights and drilling exploratory wells in the Greater Trona prospect. The Company has spent $525,000 US on drilling and completing wells in the Trona area and has earned its 50% interest in the Greater Trona Area joint venture
If additional lands become available for purchase and the Company is successful in leasing such additional lands, Saurus shall have the option to defer its 50% share of the cost of the first 100,000 acres of such additional land that the Company may purchase. Saurus will have this optionuntil February 1, 2001. At this time the Company has purchased leases covering a total of 11,404 acres in which Saurus may elect to participate.
To date, the Company has purchased various leases totaling 11,404 acres. The leases have terms of between five and ten years and have royalties of between one eighth and one sixth.
The Company does not foresee hiring any additional employees in the next twelve months but may employ consultants as necessary.
Capital acquisitions over the next twelve months are expected to total $200,000. These capital acquisitions will consist of wellhead, tie-in and compression equipment needed to produce gas in the event the Company's exploration wells are successful. The Company has enough cash to meet its obligations in the Greater Trona joint venture.
The Company may, within the next twelve months or thereafter, employ detailed geological interpretation combined with advanced seismic exploration techniques to identify potential ventures. Geological interpretation is based upon data recovered from existing oil and gas wells in an area and other sources. Such information is either purchased from the company that drilled the wells or becomes public knowledge through state agencies after a period of years. Through analysis of rock types, fossils and the electrical and chemical characteristics of rocks from existing wells, the Company can construct a picture of rock layers in the area. Further, the Company will have access to the logs from the existing operating wells which will allow the Company to extrapolate a decline curve and make an estimation of the number of recoverable barrels of oil or cubic feet of gas existing beneath a particular lease. The Company has not purchased, leased, or entered into any agreements to purchase or lease any of the equipment necessary to conduct the geological or geophysical testing referred to herein and will only to do so should the Board of Directors find that the information otherwise available to the Company is insufficient to identify potentially profitable oil and gas properties.
Management is of the opinion that one of the ways to enhance the Company's position in the development of oil and gas may be the purchase and operation of drilling rigs. Though no assurances can be given that the Company will purchase drilling rigs and enter into the drilling business nor that the Company will be successful in such an enterprise, the Company is currently investigating the purchase of used drilling rigs and could possibly apply the proceeds of this Offering to obtain one or more drilling rigs.
The Company would have the option to enter into different types of drilling contracts with operators, each with varying degrees of risk and reward. There are three basic types of contract used in the oil and gas industry: daywork, footage, and turnkey. Pursuant to a daywork contract the rig and necessary personnel are contracted out at a fixed day rate. Most risks and delays to drilling are born by the entity hiring the rig. In footage contracts wells are drilled on a dollars per foot basis to a designated depth. These contracts are more expensive because part of the burdens for delays and the risk of drilling are born by the drilling contractor and part by the entity hiring the rig. A turnkey contract is a well drilled by the contractor for a fixed price. This type of contract bears the greatest risk for the drilling contractor, but this risk is usually reflected in the contract with a substantial increase in service costs or through a substantial participation by the drilling contractor in the well if it is successful. If and when the Company purchases drilling rigs, Management will decide on a deal by deal basis after evaluation of the particular risks and circumstances which type of drilling contract, in its sole discretion, will best serve the interests of the Company.
The Company has no operating history. The Company does not expect to generate sufficient revenues within the foreseeable future to support the expenses of its development and marketing activities and therefore will need to rely upon significant additional funding to implement its development plans. It is anticipated that this funding will be accomplished through the sale of the Company's equity securities or through borrowing. Prior to September, 2000, the Company has sold 7,170,000 shares of its Common Stock for approximately $728,400 prior to deduction of offering expenses. The Company intends to raise future requisite funds by subsequent offerings of its Common Stock and will not be able to institute its full plan of operation without significant additional funding. The Company has had pending a private placement of its Common Stock the gross proceeds of which, should it proceed and all of the shares offered are sold, will amount to $4,500,000 assuming that all of the shares offered for sale are sold. See "--Private Placement," below. As of its unaudited financial statements of September 30, 2000 the Company had assets of $4,125,007. The foregoing funds will be and have been mainly used by the company to develop, exploit and market oil and gas projects. $3,385,000 of such funds are cash advanced for subscriptions for common stock in the private placement that have not yet closed. If the private placement does not close, such funds will be returned to the subscribers. The Company currently anticipates that, assuming that all of the shares offered for sale are sold, this private placement will satisfy the cash requirements of the Company for the next twelve months. If the Company does not proceed with this private placement, the Company will need to obtain alternative financing to pursue its plan of operations.
The Company has pending a private offering of up to 4,500,000 shares of its Common Stock at an offering price of $1.00 per share. This offering has been pending for several months and it is unclear whether or not it will ultimately close. Net proceeds from this offering, should it proceed (after deducting expenses of the offering estimated to be $10,000) is expected to be $4,490,000 if all of the Shares are sold. The Company intends to use al1 of the foregoing amounts for working capital. Funds will be used as general working capital including but not limited to, obtaining oil and/or gas leases, hiring executive and support personnel, and obtaining facilities to conduct operations, and inventory equipment. At present the Company is negotiating regarding several projects and has entered into a joint operating agreement with Saurus Resources, Inc. for an option on a 50% interest in a project in the Greater Trona Prospect, located in southwest Wyoming. The Company has also purchased two oil and gas leases totaling 560 acres. No assurance can be given that the Company will be able to obtain such additional arrangements as will be necessary to develop and implement its plan in a timely manner or if implemented that said enterprise will be profitable. No assurance can be given that significant revenues will be derived from the development and operation of it's the Company's development plans. Until required for specific purposes, the net proceeds of the offering may be invested temporarily in short-term obligations such as short-term government obligations.
The Company has received advances for subscriptions totaling $3,385,000. These subscriptions have not yet been accepted by the Company and are being held subject to such acceptance and the final closing of the private placement. Of the 3,385,000 shares currently subscribed for, 3,000,000 have been subscribed for by Cubix Investments, Inc., a British Columbia, Canada, corporation whose Common Stock is traded on the Canadian Venture Exchange. John R. Hislop, the Company's chairman of the Board, Secretary and Vice President and Chief Financial Officer, is the President and a director of Cubix Investments, Inc. See "CERTAIN RELATIONSHIPS AND RELATED TRANSACTION."
The Company can only estimate the future use of proceeds based on the current status of the Company's operations, its current plans and current economic condition. Due to the uncertainties of fund raising and negotiations, the Company is unable to predict precisely what amount will be used for any particular purpose. The Company will apply the proceeds of this offering in such manner as it deems appropriate under the then existing circumstances. The Company reserves the right to amend the use of proceeds by vote of a majority of the Board of Directors.
Should the offering not proceed under its current terms, the Company will be required to pursue alternative sources of capital. Without additional capital, the Company's ability to pursue its plan of operations will be severely curtailed.
The Company currently has no employees other than its Officers and Directors. Management of the Company expects to hire additional employees as needed. Management currently estimates that the Company will not hire any employees in the next twelve months.
THIS REPORT CONTAINS FORWARD-LOOKING STATEMENTS. ACTUAL EVENTS OR RESULTS COULD DIFFER MATERIALLY FROM THOSE DISCUSSED IN THE FORWARD-LOOKING STATEMENTS AS A RESULT OF VARIOUS FACTORS INCLUDING, WITHOUT LIMITATION, THE RISK FACTORS SET FORTH BELOW AND ELSEWHERE IN THIS REPORT. AN INVESTMENT IN THE SECURITIES OF THE COMPANY INVOLVES A HIGH DEGREE OF RISK. THE FOLLOWING DOES NOT PURPORT TO BE A COMPREHENSIVE SUMMARY OF ALL THE RISKS ASSOCIATED WITH AN INVESTMENT IN THE COMPANY. RATHER, THE FOLLOWING ARE ONLY CERTAIN PARTICULAR RISKS TO WHICH THE COMPANY IS SUBJECT THAT THE COMPANY WISHES TO ENCOURAGE PROSPECTIVE INVESTORS TO DISCUSS IN DETAIL WITH THEIR PROFESSIONAL ADVISORS. PROSPECTIVE INVESTORS, PRIOR TO MAKING AN INVESTMENT IN THE COMPANY, SHOULD CAREFULLY CONSIDER, AMONG OTHERS, THE FOLLOWING RISK FACTORS.
AN INVESTMENT IN OUR COMMON STOCK INVOLVES SUBSTANTIAL RISKS AND UNCERTAINTIES AND PEOPLE CONSIDERING SUCH AN INVESTMENT SHOULD NOT COMMIT MORE THAN THEY CAN AFFORD TO LOSE. PLEASE REFER TO OUR ANNUAL REPORT ON FORM 10- KSB AS FILED WITH THE SEC ON July 14, 2000 FOR A LIST OF ADDITIONAL RISK FACTORS AND INVESTMENT CONSIDERATIONS.FOR ALL OF THE AFORESAID REASONS AND OTHERS SET FORTH HEREIN, AS WELL AS OTHER FACTORS NOT SET FORTH HEREIN, THE PURCHASE OF THE SHARES OF THE COMPANY INVOLVES A HIGH DEGREE OF RISK. ANY PERSON CONSIDERING AN INVESTMENT IN THE SHARES OF THE COMPANY SHOULD BE AWARE OF THESE AND OTHER FACTORS SET FORTH IN THIS REPORT AND OUR OTHER SEC FILINGS. THE SHARES OF COMMON STOCK SHOULD BE PURCHASED ONLY BY PERSONS WHO CAN AFFORD TO ABSORB A TOTAL LOSS OF THEIR INVESTMENT IN THE COMPANY AND HAVE NO NEED FOR A RETURN ON THEIR INVESTMENT.
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities and Use of Proceeds
None.
Item 3. Defaults upon Senior Securities
None.
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
(a) Exhibits:
The following exhibits are attached to this report and are incorporated herein by reference:
| Exhibit No. | Exhibit Name |
| 3.1 | Certificate of Incorporation of Company, filed December 16, 1999* |
| 3.2 | Certificate of Amendment of Certificate of Incorporation of Company, filed February 15, 2000* |
| 3.3 | Bylaws of the Company* |
| 10.1 | Joint Operating Agreement with Saurus Resources, Inc. dated December 1, 1999* |
| 27.1 | Financial Data Schedule |
| 99.1 | 1999 Stock Option and Incentive Plan* |
* Incorporated by reference from the Company's Form 10-SB filed with the Securities and Exchange Commission March 31, 2000
(b) Reports on Form 8-K
None.
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.
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NATION ENERGY, INC.
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| Dated: November 14, 2000 |
By: /S/ "Donald A. Sharpe" Donald A. Sharpe,
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