UNITED STATES
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended MARCH 31, 2000
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE
EXCHANGE ACT
FOR THE TRANSITION PERIOD FROM __________ TO ___________
0-26321
(Commission File Number)
SAN JOAQUIN RESOURCES INC.
(Exact name of small business issuer as specified in its charter)
NEVADA 98-0204105
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
53 STRATFORD PLACE, S.W. CALGARY, ALBERTA T3H 1H7
- ------------------------------------------- -----------
(Address of principal executive offices) (ZIP Code)
(403) 242-9703
(Issuer's telephone number)
N/A
(Former name, former address and former fiscal year,
if changed since last report)
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
------- ------
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
As of May 5, 2000 the Registrant had 11,769,000 shares of common
stock, $0.0001 par value.
Transitional Small Business Disclosure Format (check one):
Yes No X
------ -------
<PAGE>
SAN JOAQUIN RESOURCES INC.
FORM 10-QSB
FOR THE QUARTER ENDED MARCH 31, 2000
INDEX
Part I. Financial Information:
Item 1. - Consolidated Balance Sheets -
March 31, 2000 and December 31, 1999........................3
- Condensed Consolidated Statement of Operations -
Three Months Ended March 31, 2000 and Period from Inception
(September 14,1999) to March 31, 2000.......................4
- Consolidated Statement of Cash Flow -
Three Months Ended March 31, 2000 and Period from Inception
(September 14,1999) to March 31, 2000.......................5
- Consolidated Statements of Shareholders' Equity -
March 31, 2000 and December 31, 1999........................6
- Notes to Consolidated Financial Statements..................7
Item 2. - Management's Discussion and Analysis or
Plan of Operations..........................................8
Part II. Other Information:
Item 1. - Legal Proceedings..........................................10
Item 2. - Changes ofin Securities....................................10
Item 3. - Defaults Upon Senior Securities............................10
Item 4. - Submission of Matters to a Vote of Security Holders........10
Item 5. - Other Information..........................................10
Item 6. - Exhibits and Reports on Form 8-K...........................10
Signature.....................................................................11
2
<PAGE>
SAN JOAQUIN RESOURCES INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
(UNAUDITED)
$ $
<S> <C> <C>
A S S E T S
CURRENT ASSETS
Cash 197,721 387,160
Accounts receivable and prepaids 9,651 1,038
Advance - 10,000
---------- -----------
Total current assets 207,372 398,198
INVESTMENT IN OIL AND GAS VENTURE 399,398 391,670
OIL & GAS PROPERTIES 205,635 122,590
---------- -----------
812,405 912,458
=========== ===========
L I A B I L I T I E S & S T O C K H O L D E R S' E Q U I T Y
CURRENT LIABILITIES
Accounts payable and accrued liabilities 11,741 74,163
----------- -----------
Total current liabilities 11,741 74,163
----------- -----------
STOCKHOLDERS' EQUITY
Common stock, $0.0001 par value
Authorized - 1,000,000,000 shares
Issued and outstanding - 11,769,000 shares 1,177 1,177
Additional paid-in capital 984,722 984,722
(Deficit) accumulated during the development stage (185,235) (147,604)
----------- -----------
800,664 838,295
----------- -----------
812,405 912,458
=========== ===========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
CONSOLIDATED FINANCIAL STATEMENTS.
3
<PAGE>
SAN JOAQUIN RESOURCES INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
INCEPTION THREE MONTHS
TO ENDED
MARCH 31, MARCH 31,
2000 2000
$ $
<S> <C> <C>
REVENUE
Interest 9,475 3,691
----------- ------------
OPERATING EXPENSES
Administration and accounting 7,861 5,520
Audit and legal 31,992 10,844
Office and miscellaneous 5,143 2,431
Professional fees 114,269 18,907
Transfer agent 649 366
Travel 36,466 3,254
----------- ------------
196,380 41,322
----------- ------------
(LOSS) FROM OPERATIONS (186,905) (37,631)
EQUITY IN INCOME OF AFFILIATE 1,670 -
----------- ------------
NET (LOSS) FOR THE PERIOD (185,235) (37,631)
=========== ============
NET (LOSS) PER COMMON SHARE - BASIC
AND DILUTED (0.020) (0.003)
=========== ============
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING - BASIC AND DILUTED 9,311,250 11,769,000
=========== ============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
CONSOLIDATED FINANCIAL STATEMENTS.
4
<PAGE>
SAN JOAQUIN RESOURCES INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
INCEPTION THREE MONTHS
TO ENDED
MARCH 31, MARCH 31,
2000 2000
$ $
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) for the period (185,235) (37,631)
Adjustments to reconcile net (loss) to net cash (used)
by operating activities
Equity in income of affiliate (1,670) -
Changes in assets and liabilities
Increase in amounts receivable and prepaids (9,651) (8,613)
Decrease (increase) in accounts payable
and accrued liabilities 11,741 (62,422)
----------- -----------
Net cash (used) by operating activities (184,815) (108,666)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in oil and gas venture (397,728) (7,728)
Additions to oil and gas properties (283,635) (81,045)
Proceeds from sale of participation agreement 78,000 8,000
----------- -----------
Net cash (used) by investing activities (603,363) (80,773)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from sale of preferred stock 30,745 -
Proceeds from sale of common stock 960,000 -
Cash paid for offering costs (4,846) -
----------- -----------
Net cash provided by financing activities 985,899 -
----------- -----------
NET INCREASE (DECREASE) IN CASH 197,721 (189,439)
CASH - BEGINNING OF PERIOD - 387,160
----------- -----------
CASH - END OF PERIOD 197,721 197,721
=========== ===========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
CONSOLIDATED FINANCIAL STATEMENTS.
5
<PAGE>
SAN JOAQUIN RESOURCES INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK (DEFICIT)
--------------------------- ---------------------------- ADDITIONAL DURING THE
PAID-IN DEVELOPMENTAL
SHARES AMOUNT SHARES AMOUNT CAPITAL STAGE
---------- ------------ ------------ ----------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Inception, September 14, 1999 - $ - - $ - $ - $ -
Sale of Series A Preferred
Shares at $0.50 per share 61,490 615 - - 30,130 -
Conversion of Series A
Preferred Shares into (61,490) (615) 6,149,000 6,149 (5,534) -
common stock
Sale of common stock at
$0.50 per share - - 1,920,000 1,920 958,080 -
Costs of offerings - - - - (4,846) -
Issuance of common stock for
acquisition of San Joaquin - - - (7,262) 7,262 -
Recapitalization of shares
issued by LEK prior to merger - - 3,700,000 370 (370) -
Net (loss) for the period - - - - - (147,604)
---------- ------------ ------------ ----------- ------------ -------------
Balance, December 31, 1999 - - 11,769,000 1,177 984,722 (147,604)
Net (loss) for the period - - - - - (37,631)
---------- ------------ ------------ ----------- ------------ -------------
Balance, March 31, 2000 - $ - 11,769,000 $ 1,177 $ 984,722 $ (185,235)
========== ============ ============ =========== ============ =============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
CONSOLIDATED FINANCIAL STATEMENTS.
6
<PAGE>
SAN JOAQUIN RESOURCES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2000
(UNAUDITED)
The accompanying interim consolidated financial statements of San Joaquin
Resources Inc. (the "Company") are unaudited. In the opinion of management, the
interim data includes all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of the results for the interim
period.
The consolidated financial statements included herein have been prepared
pursuant to the rules and regulations of the Securities and Exchange Commission.
Certain information and footnote disclosure normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations.
Management believes the disclosures made are adequate to make the information
not misleading and recommends that these condensed financial statements be read
in conjunction with the financial statements and notes included in the Company's
Form 10-KSB as of December 31, 1999.
ORGANIZATION AND BUSINESS COMBINATION
LEK International, Inc. ("LEK") was incorporated under the laws of the State of
Nevada on April 21, 1997, for the purpose of evaluating, structuring and
completion of a merger with, or acquiring a privately owned corporation. LEK is
a public company which had no operations. On December 31, 1999, LEK completed an
agreement (the "Agreement and Plan of Reorganization") whereby it issued
8,069,000 shares of its common stock to acquire all of the shares of San Joaquin
Oil & Gas Ltd. ("San Joaquin"), a private corporation incorporated on September
14, 1999, under the laws of the State of Nevada. San Joaquin is an independent
energy company engaged in the exploration, development and acquisition of crude
oil and natural gas reserves in the western United States and is considered a
development stage company as defined by Statement of Financial Accounting
Standards (SFAS) No. 7. San Joaquin is an exploration stage oil and gas company
and as of March 31, 2000, has not earned any production revenue, nor found
proved resources on any of its properties. San Joaquin's principal activities
have been raising capital through the sale of its securities, identifying and
evaluating potential oil and gas property acquisitions, and acquiring an
interest in a limited liability company.
As a result of this transaction, San Joaquin became a wholly-owned subsidiary of
LEK, and effective January 17, 2000, LEK changed its name to San Joaquin
Resources Inc. Since this transaction resulted in the former shareholders of San
Joaquin acquiring control of LEK, for financial reporting purposes the business
combination was accounted for as an additional capitalization of LEK (a reverse
acquisition with San Joaquin as the accounting acquirer). The operations of San
Joaquin will be the only continuing operations of the Company. In accounting for
this transaction:
i) San Joaquin was deemed to be the purchaser and parent company for financial
reporting purposes. Accordingly, its net assets were included in the
consolidated balance sheet at their historical book value; and
ii) control of the net assets and business of LEK was acquired effective
December 31, 1999, for no consideration.
The Company's fiscal year end is December 31. As San Joaquin was incorporated on
September 14, 1999, no comparative figures are presented.
7
<PAGE>
SAN JOAQUIN RESOURCES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2000
(UNAUDITED)
INVESTMENT IN OIL AND GAS VENTURE
On April 4, 2000, the Company notified Hilton Petroleum Ltd. ("Hilton") and
Hilton Petroleum Greater San Joaquin Basin LLC ("Hilton LLC") that it would no
longer fund any further capital contributions. Accordingly, the Company will
receive common shares of Hilton, based on the trading value price of Hilton
common stock, in an amount equal to its capital contributions. Hilton is a
Canadian public company listed on the Canadian Venture Exchange and is engaged
in the business of acquiring leasehold interests in oil and gas properties and
the exploration for, and development, production and sale of oil and gas,
predominantly in the United States through its wholly owned subsidiaries.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND& ANALYSIS OR PLAN OF OPERATION
The Company, through its subsidiary, San Joaquin, is engaged in the business of
acquiring and exploring for petroleum and natural gas prospects. The Company
intends to participate in selected exploration projects as a non-operating,
working interest owner or gross overriding royalty owner, sharing both risk and
rewards with its joint interest partners. As of May 10, 2000, the Company did
not have any joint interest partners.
THREE MONTHS ENDED MARCH 31, 2000
San Joaquin was incorporated on September 14, 1999. Accordingly, no comparative
figures are presented. During the three month period ended March 31, 2000, the
Company recorded a net loss of $37,631, a loss of $0.003 per share. During the
period the Company earned interest revenue of $3,691 on deposits held from funds
received from the Company's equity financings conducted in 1999.
During the period the Company incurred total expenses of $41,322. Included in
this amount was $18,000 relating to the salary of the President of the Company.
The Company capitalized $81,045 towards oil and gas properties. Of this amount
$40,500 was attributed to professional fees paid to Davis & Namson for
geological studies. The Company also received an $8,000 payment from
Consolidated Earth Stewards Inc. under an option agreement granted by the
Company.
During the period the Company contributed an additional $7,728 towards its
investment in Hilton LLC. On April 4, 2000, the Company notified Hilton and
Hilton LLC that it will cease funding any further capital contributions and
elected to receive common shares of Hilton.
LIQUIDITY AND PLAN OF OPERATIONS
In management's view, given the nature of the Company's operations, which
consist of the acquisition, exploration and evaluation of petroleum and natural
gas properties, the most meaningful information relates to current liquidity and
solvency. The Company's financial success will be dependent upon the extent to
which it can discover sufficient economic reserves and successfully develop the
properties containing those reserves. Such development may take years to
complete and the amount of resulting income, if any, is difficult to determine
with any certainty. The sales value of any petroleum or natural gas discovered
by the Company is largely dependent upon other factors beyond the Company's
control.
To date, the Company's capital needs have been met by equity financings.
Management believes the Company has sufficient cash, without giving effect to
the sale of the shares of Hilton which the Company anticipates receiving as a
result of its election to discontinue its funding of Hilton LLC, to fund the
Company's operations until the second quarter of 2001. As at March 31, 2000, the
Company had $197,721 in cash which management has allocated to:
i) acquire approximately 650 acres of petroleum and natural gas leases in the
Willow Springs project; and
ii) continue to fund the retainer fees to Davis & Namson through September
2000. Davis & Namson has additioanl prospects in the San Joaquin Basin on
which they need to carry out additional geological studies to determined if
the prospects satisfy the Company criteria to justify acquiring petroleum
and natural gas leases covering said prospects.
In order to reduce its outlay of capital the Company has decided to convert its
interest in theHilton LLC into common shares of Hilton. By making this election
the Company is no longer subject to cash calls for wells drilled in the San
Joaquin Joint Venture. Pursuant to the terms of the operating agreement of
Hilton LLC, the Company will receive shares in Hilton, based on the trading
value price of Hilton common stock, in an amount equal to the Company's its
capital contributions. The number of shares to be issued cannot be determined at
this time. The operating agreement provides that no shares can be issued until
twelve months after the date of the investment in the Hilton LLC, which in the
case of the Company is
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION & ANALYSIS OR PLAN OF OPERATION (continued)
September 30, 2000. In additional, the price of the shares of Hilton will be
determined at this future date. The objective of the agreement is to reimburse
the Company for its investment in Hilton LLC with common shares of Hilton.
It is anticipated these shares in Hilton will be sold in an orderly manner on
the Canadian Venture Exchange in the fourth quarter year 2000 and the first half
of the year 2001. The money received from the sale of these shares will be used
to fund the further activity of the Company. There are no assurances that the
Company will be able to sell the shares of Hilton which the Company receives or
that the Company will realize an amount upon any such sales sufficient to
reimburse the Company for its expenditures.
Management believes the Company will need to raise additional funds within the
next 12 to 18 months. It is the intention of the Company to raise additional
capital in the following ways to fund the acquisition of additional prospects
and to drill exploration wells on the Willow Springs and Crocker Canyon
prospects:
a. Farmout both Willow Springs and Crocker Canyon prospects whereby the
Company will be carried through the cost to drill, complete, equip or
abandon an exploration well on each prospect and retain a negotiated
interest in each prospect. Alternatively, the Company may elect to sell
all or portions of Willow Springs and/or Crocker Canyon prospects. The
funds derived from the sale could be used to pay the Company's portion
of the cost to drill, complete, equip or abandon an exploration well on
each prospect.
b. By raising additional capital through a private placement (or
placements) of common stock of the Company.
During the next 12 months the operational plans for the Company entail
conducting the following:
a. Complete acquisition of petroleum and natural gas leases in the Willow
Springs Project.
b. Continue the services of Davis & Namson in generating prospects in the
San Joaquin Basin which will be accepted or rejected by the Company. In
prospects the Company accepts, acquire available petroleum and natural
gas leases covering said prospects.
c. Either sell all or a portion of its interest in the Willow Springs and
Crocker Canyon prospects or, alternatively, farmout its interest in
said prospects. This action is necessary to facilitate the drilling of
an exploration well on each prospect in year 2000 or early year 2001.
The Company's ability to continue as a going concern is dependent upon its
ability to generate sufficient cash flow to meet its obligations on a timely
basis, to obtain additional financing (through the sale of its equity intersts
or interests in its properties) or refinancing as may be required, and
ultimately to attain profitability. There are no assurances that the Company
will be able to obtain any such financing or, if the Company is able to obtain
additional financing, that such financing will be on terms favourable to the
Company. The inability to obtain additional financing when needed will have a
material adverse effect on the Company's operating results.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
10
<PAGE>
ITEM 2. CHANGES OF SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
By written consent dated December 15, 1999, shareholders of the Company
holding 608,000 of the 1,000,000 outstanding shares (60.8%) of the
Company's common stock approved and adopted the amendments contained in
the Amended and Restated Articles of Incorporation and the Company's
1999 Stock Option Plan, with the adoption of the Stock Option Plan to
be effective no earlier than January 10, 2000.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
<TABLE>
<CAPTION>
REGULATION CONSECUTIVE
S-B NUMBER EXHIBIT PAGE NUMBER
<S> <C> <C>
2.1 Agreement and Plan of Reorganization (1) N/A
3.1 Amended and Restated Articles of Incorporation (1) N/A
3.2 Bylaws (2) N/A
4.1 1999 Stock Option Plan (3) N/A
10.1 Operating Agreement of Hilton Petroleum Greater San Joaquin Basin Joint
Venture LLC (3) N/A
10.2 Consulting and Overriding Royalty Agreement with Davis & Namson (3) N/A
10.3 Agreement with Canyon Oil (3) N/A
10.4 Agreement with Consolidated Stewards Inc., as amended (3) N/A
11 Statement re: Computation of Per Share Earnings See
Financial
Statements
27 Financial Data Schedule 13
</TABLE>
(1) Incorporated by reference to the exhibits filed with the Company's Form 8-K
dated December 31, 1999.
(2) Incorporated by reference to the exhibits filed with the Company's Form
10-SB dated July 23, 1999.
(3) Incorporated by reference to the exhibits filed with the Company's Form
10-KSB dated December 31, 1999.
(b) Reports on Form 8-K: None.
11
<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.
SAN JOAQUIN RESOURCES INC.
Date: May 15, 2000 By: /s/Nick DeMare
-----------------------------------------
Nick DeMare, Secretary, Treasurer,
Director and Principal Financial and
Accounting Officer
12
<PAGE>
EXHIBIT 27
FINANCIAL DATA SCHEDULE
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S
CONSOLIDATED BALANCE SHEETS, CONSOLIDATED STATEMENT OF OPERATIONS, CONSOLIDATED
STATEMENT OF CASH FLOWS, CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY, AND THE
NOTES THERETO FOUND ON PAGES 3 THROUGH 8 OF THE COMPANY'S FORM 10-QSB FOR THE
PERIOD ENDED MARCH 31, 2000.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<EXCHANGE-RATE> 1
<CASH> 197,721
<SECURITIES> 0
<RECEIVABLES> 9,651
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 207,372
<PP&E> 205,635
<DEPRECIATION> 0
<TOTAL-ASSETS> 812,405
<CURRENT-LIABILITIES> 11,741
<BONDS> 0
0
0
<COMMON> 1,177
<OTHER-SE> (799,487)
<TOTAL-LIABILITY-AND-EQUITY> 812,405
<SALES> 0
<TOTAL-REVENUES> 3,691
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 41,322
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (37,631)
<INCOME-TAX> 0
<INCOME-CONTINUING> (37,631)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (37,631)
<EPS-BASIC> (0.003)
<EPS-DILUTED> (0.003)
</TABLE>
