UNITED STATES
SECURITIES & EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
(X) ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1998
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the transition period from to
Commission File Number 0-8847
DOL RESOURCES, INC.
(Exact Name of Registrant as Specified in Charter)
83-0219465
Wyoming I.R.S.
Employer
State of Other Jurisdiction of Identification No.
Incorporation or Organization
13636 Neutron Road, Dallas,Texas 75244-4410
(Address of Principal Executive Office) (Zip code)
Registrant's Telephone Number:(214) 661 5869
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT
Title of each class Name of each exchange on which
registered
None None
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
Common Stock, $0.01 Par Value
(Title of Class)
Indicate by check mark whether Registrant has (I) filed all
reports required by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the proceeding twelve months, and
(ii) been subject to such filings requirements for the past
ninety (90) days.
Yes. X No.
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulations S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. ( )
At March 1, 1999 the aggregate market value of the shares of
Common Stock held by non-affiliates of the registrant was
approximately $103,665 At such date there were 20,783,529 shares
of the registrant's Common Stock outstanding.
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PART 1
Item 1. Business
DOL Resources, Inc. ("Registrant" or "the company") was
incorporated November 6,1973 under the laws of the State of
Wyoming.
The Company buys, leases and sells oil and gas properties.
It also explores and develops these properties usually with
others through joint ventures or farmouts.
The economic success of Registrant depends on its ability to
locate and purchase or lease valuable oil and gas prospects or
mineral deposits. It must further sell or lease these deposits
or prospects to others at a profit or develop the properties
itself in conjunction with others.
To accomplish these goals, Registrant will encounter
competition from major oil companies and independent operators
attempting to acquire prospective oil and gas leases and other
mineral interests.
These sources of competition maybe both large and small
energy oriented companies operating in states in which Registrant
does business. Some of these competitors are major oil and gas
companies with substantial reserves and earnings records. Others
are small independents with varying degrees of stability. Some
not only produce oil and gas but refine and market petroleum
products. Registrant may be in a position of competitive
disadvantage with many of these companies in that they have a
greater source of capital, technical and management talent,
research facilities and sources of information.
Registrant has sold certain coal properties to others
retaining an overriding royalty interest. Although Registrant
had no additional expense in developing these properties in which
a royalty is retained, it also has no control over when-if ever-
these properties are developed.
If coal is discovered under lease in which Registrant owns
an economic interest, the availability of a ready-market for coal
will depend upon numerous factors beyond Registrant's control
including the expense of domestic production and imports of coal,
proximity of transportation and the effect of state and federal
regulations on production of coal.
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Compliance with statutory requirements respecting
environmental quality may necessitate significant capital outlays
which may materially affect the earning power of the Company, or
may cause material changes in its proposed business. In 1998
Registrant did not expend any funds to comply with environmental
regulations. It does not contemplate spending funds incidental
to its operation in 1999 to comply with environmental
regulations.
Registrant did not participate in the drilling of any wells
in 1998. Registrant had no paid employees.
The business of the Company is seasonal only to the extent
that weather conditions, particularly snow and cold in the
winter, impede the ability of it or others who may be developing
properties in which it has an interest to conduct exploratory
activities or drilling or mining operations.
Registrant is engaged in two lines of business (1) the
exploration for the sales of oil and gas, and (2) investments in
natural resource properties.
The operations pertaining to the exploration of and sales of
oil and gas involve actively participating in drilling for oil
and gas and sale of subsequent production. The investment in
natural resource properties involves buying and selling the right
to explore for or produce the resources from the land owners
property.
The following details Registrant's operations in the
described lines of business:
Year Ended December 31,
1998 1997 1996
Sales to Unaffiliated
Customer
Sales of Oil and Gas 30,316 74,615 64,449
Investment in natural
resource properties -0- -0- -0-
Operating profit or
(loss)
Sales of oil & gas (8,068) 20,477 10,393
Investment in natural
resource properties: -0- -0- -0-
Identifiable assets:
Sale of oil & gas 487,407 508,563 532,549
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Investment in
natural resource
properties: 10,156 10,156 10,156
General corporate assets 433,777 483,233 345,495
Item 2 Oil and Gas Properties:
For the following discussion, gross well or acre is a well
or acre in which an interest is owned. The number of gross wells
is the total number of wells in which a working interest is
owned.
A net well or acre is deemed to exist when the sum of
fractional ownership working interests in gross wells to acres
equals one. the number of net wells or acres is the sum of the
fractional working interests owned in gross wells or acres as
expressed as whole numbers and fractions thereof.
A summary of Registrant's oil and gas properties as of
December 31, 1998 is as follows:
Gross Acres Net Acres Costs
Undeveloped acres:
Leasehold Interest:
Oil and Gas:
Wyoming 792 792 -0-
North Dakota 280 8 -0-
1,072 800 -0-
Developed Acres:
Leasehold Interest:
Oil and Gas:
Wyoming 7,768.4 363 984,083
Louisiana 640 13 17,106
New Mexico 1,240 30 107,584
North Dakota 40 1 47,146
Texas 80 1 7,576
New York 522 1.3 -0-
10,289.4 409.3 1,163,495
Oil and Gas Production: As of December 31, 1998 the
Company owns the following productive wells:
Oil and Gas
Oil Gas (Dual Producers)
Gross Wells 13 5 13
Net Wells 1.32215 .54217 .8236
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From the drilling efforts and from production purchased from
others, Registrant's yearly production of crude oil and gas has
been as follows:
Year Crude Oil in Barrels Gas in MCF
1996 1,566 12,578
1997 2,444 11,687
1998 1,612 7,420
The average sales price (including transfers) per unit of
oil and gas produced is as follows:
1998 1997 1996
Oil - Barrels 11.11 19.30 23.04
Gas - MCF 1.65 2.35 2.26
The average production (lifting) cost per unit of production is
as follows:
1998 1997 1996
Oil - Barrels 11.07 7.47 15.10
Gas - MCF .94 .98 .65
Exploratory Wells
Producers Dry Holes Total Wells
Year Drilled Gross Net Gross Net Gross Net
1998 0 0 0 0 0 0
1997 0 0 0 0 0 0
1996 0 0 0 0 0 0
Developed Wells
Producers Dry Wells Total Wells
Year Drilled Gross Net Gross Net Gross Net
1998 0 0 0 0 0 0
1997 0 0 0 0 0 0
5
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1996 0 0 0 0 0 0
Reserves: The following are reserve estimates as of December
31,
Proved Oil and Gas Reserves: Oil (bbls) (Gas (MCF)
1998 31,753 49,590
1997 30,263 53,468
1996 31,526 62,924
Proved Developed Oil and Gas Reserves:
1998 7,783 49,590
1997 6,283 53,468
1996 7,556 62,924
The following are estimated net revenues from production of oil
and gas reserves as of December 31, 1998.
Proved
Proved Developed
1999 (34,478) 19,692
2000 72,662 17,182
2001 57,444 14,884
Remainder 146,845 47,835
242,473 99,593
As of December 31, 1997.
Proved
Proved Developed
Reserves
1998 (31,527) 22,643
1999 75,172 19,692
2000 59,742 17,182
Remainder 161,729 62,719
265,116 122,236
Present value of estimated future net reserves, computed using a
discount factor of 10% as of December 31, 1997.
1998 128,117 38,397
1997 140,305 50,585
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The reserve estimates for all properties were completed by
management. No reserve figures have been filed with or reported
to any other regulatory authorities or agencies. All of the
reserves of Registrant are located entirely in the United States.
Registrant has annual rental obligation from $.24 to $1.00
per acre on all of it's leasehold oil, gas and coal properties on
which there is no production. If these payments are not made
when due, the leases terminate. Additionally, the leases
terminate at the end of this term unless production is obtained
in which case the lease continues as long as production
continues.
Coal Properties: In 1975, Registrant acquired certain coal
properties. These properties were located primarily in the
Powder River Basin portion of the State of Wyoming.
Subsequently, some of these leases were sold and an overriding
royalty retained. No coal leases have been sold since 1977.
Royalty interest as of December 31, 1998 are:
Gross acres - - 2,901
Net acres - - 58
Cost - - 10,156
None of the coal properties described above are producing and
Registrant is attempting to find others to purchase these
properties.
Registrant follows the policy of capitalizing all property
acquisition costs. Such costs are charged to operations through
depletion when production is obtained. At the time of the sale
of a lease where no interest is retained in the property, the
costs of the property is charged to operations at that time. If
at the time of the sale Registrant retains a nonoperating
interest, the carrying value of the property is written down in
an amount representing its estimated realizable value computed on
the basis of geological estimates of proven primary reserves. If
no geological estimates of proven primary reserves are available
on the nonoperating interest retained, the entire cost associated
with the property is charged to operations at the time of the
sale. If Registrant determines that a property is not capable
of profitable development, all nonrecoverable costs applicable to
the property are charged against operations at the time such
determination is made.
Gold Properties: In 1980, Registrant acquired placer gold mining
claims in the Mesquite Mining District of Imperial County,
California by canceling a promissory note from non-affiliated
entities in the sum of $125,247, principal and accrued interest.
These claims cover approximately 20,800 acres. In 1983, the
Company sold this property for $20,000. DOL retained a royalty
7
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interest valued at $10,000. In 1985 the claims were abandoned
and expended.
Item 3. Legal Proceedings:
On November 20, 1979, Phillips Petroleum Company (Phillips)
filed a complaint (Docket No. C1-80-70-000) with Federal Energy
Regulatory Commission (FERC) against Registrant and other
producers alleging certain producer respondents had abandoned the
sale of natural gas from the Miller Jacobs #1 (the well) to
Phillips without having obtained necessary Commission
authorization under Section 7 (b) of the Natural Gas Act. The
commission ruled in favor of Phillips on April 16, 1985.
Effective December 1, 1985 Registrant's share of the settlement
to be paid from future production from the Well is $160,000
payable out of 30% of gas revenues accruing to its interest for
the period December 1, 1985 through November 30, 1989 and 50% of
gas revenues accruing to its interest in production on and after
December 1, 1989. This situation arose prior to present
management's ownership in Registrant and management has since
entered into an agreement with former management whereby
Registrant is to recover 100% of the amount withheld by Phillips.
There are no other pending legal proceedings to which
Registrant is a party or of which any of its property is subject.
Item 4. Submission of Matters to a Vote of Security Holders.
Not applicable.
PART 11
Item 5. Market for Registrant's Common Equity and Related
Stockholders Matters.
The company's shares are traded over-the-counter. The range
of quoted bid prices are as follows:
1st quarter 2nd quarter 3rd quarter 4th
quarter
High Low High Low High Low High Low
1998 .01 .01 .01 .01 .01 .01 .01 .01
1997 .01 .01 .01 .01 .01 .01 .01 .01
The source for the prices quoted is as reported by the
National Association of Securities Dealers and does not include
retail markups, mark-downs, commissions or other adjustments, and
does not represent actual transactions.
There were approximately 2,478 holders of record of Company's
of the common stock as of March 1, 1999.
8
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No dividends have been declared in the Company's history.
Wyoming law generally provides that dividends may be declared and
paid only out of the unreserved and unrestricted earned surplus
of the corporation except when the Articles of Incorporation of a
corporation engaged in the business of exploiting natural
resources so provide, dividends may be declared and paid out of
the depletion reserves.
Registrant presently has no unreserved and unrestricted earned
surplus and its Articles of Incorporation do not provide that
dividends may be paid from deletion reserves.
9
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Item 6. Selected Financial Data:
1998 1997 1996 1995 1994
Operating revenues $38,109 $83,599 $73,267 $56,608 $68,299
Income (loss from
continuing opers.(67,970) 8,981 (224,760) 4,122 (13,554)
Income (losses) from
continuing operations
per share (.0033) .0004 (.0109) .0003 (.0009)
Total Assets 931,340 1,001,852 888,200 927,142
827,895
Long-term oblig. 330,472 335,599 294,800 77,669
84,122
Cash dividends paid for
common share -0- -0- -0- -0- -0-
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Liquidity
Registrant's recurring monthly average cash flow from the
sale of oil and gas was approximately $5,300.00 per month in
1998. This was down $2,300.00 from year 1997. The average cash
in 1997 was down $900.00 from 1996 at $7,600.00. Working capital
decreased $53,282 primarily in the area of prepaid expenses.
Net cash provided in operating activities for 1998 was a
negative $3,831. A positive cash flow from investing activities
of $8,628 and a negative cash flow from financing activities of
$5,127 offset most of operating leaving a net decrease in cash of
$330 over 1997. There are no plans to seek long-term credit or
equity capital for any project.
If Registrant should experience a major oil or salt water
spill, compliance with statutory requirements respecting
environmental quality could necessitate significant capital
outlays which would materially decrease its liquidity and
profitability.
No funds were expended in 1998 for clean-up compliance and none
is expected in 1999.
Registrant has made no commitments for capital expenditures as
of the end of the fiscal year. However, Registrant intends to
continue to pursue its drilling activities with both joint
ventures and partnerships, and for its own account providing
financing is made available in a sufficient amount to justify
same. Interest in oil and gas drilling activities is presently
at a low level, however, if prices continue their upward trend
10
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this could change in the future.
Cash requirements for the fiscal year 1998 averaged
approximately $5,600 per month. This is expected to be about
the same in 1998 provided there are no major repairs or work
overs.
Results of Operations
Losses in revenues over the past three (3) years are
attributable primarily to price declines, normal decline in
production and shutting in of non-economic wells. Management
continues to update existing production of re-working the wells
and continues to reduce recurring expenses when practicable.
1998 vs 1997
Total revenues in 1998 were down approximately $45,500.00
from 1997 due primarily to decreases in the price of oil and
gas.Lease operating expenses decreased approximately $5,000.00.
General administrative expense increased substantially, due to
the write-off of $37,500.00 in prepaid expenses. Profitability
(before depletion and depreciation) decreased approximately
$82,800 in 1998 from 1997.
1997 vs 1996
Total revenues in 1997 were up approximately $11,300.00 over
1996 due primarily to an increase in the oil production. Lease
operating expenses decreased significantly as did total expense
due to the elimination of management fees. Consequently there
was an increase in profitability (before managements fees and
depletion) in 1997 and 1996 of approximately $21,974.
Management expects a slow upward trend in oil and gas prices to
continue toward $20.00 per Bbl. This would not only increase
revenues and cash flow but would enhance our ability to raise
much needed funds for drilling additional wells. It is the
opinion of management that a minimum of $25.00 per Bbl. oil is
need in order to expand operations and replace depleted reserves.
Meanwhile a continuing effort is being made to increase the
production, and consequently revenues by seeking out and
negotiating joint-venture recompletion projects where positive
reserve information exists.
At the year-end there was nothing specific to indicate a
material change in income and expenses over the next twelve (12)
months.
During 1994, an $100,000 payable to an affiliate was
converted to equity by the issuance of 5,000,000 shares of common
stock. Relative to the restructuring of long-term debt, a
collateral fee of $37,500 was paid to an affiliate by the
issuance of 750,000 shares of common stock. Restructuring of
debt was finalized in 1995. The collateral fee was expenses in
1998.
11
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Item 8 Financial Statement and Supplementary Data.
Enclosed
Item 9. Disagreements on Accounting and Financial Disclosure.
None
Item 10. Directors and Executive Officers of the Registrant
S. Mort Zimmermann, age 71, has been a director and
president of the company since April 16, 1984.
Fred M. Updegraff, age 64, has been a director vice-
president and treasurer since April 16, 1984.
Stephen G. Wesstrom, age 49, has been a director of the
company since April 16, 1984.
There is no family relationship between any of the
officers and directors of the company.
Item 11. Executive Compensation
The following is information regarding remuneration
received by management of the Company in the calendar year 1996.
Name Capacities Cash and cash-equivalent Aggregate
Individual in which Forms and remuneration contingent
or person served Salaries, Fees, Securities forms
in group director's fees, or property remuneration
Commissions Insurance
bonuses benefits or
reimbursement,
personal benefit.
Name None -0- -0- -0-
All officers Directors -0- -0- -0-
and directors president,
as a group vice president and
secretary treasurer
Joe B. Abbey, Attorney at Law, represents the Company as
general counsel. The Company contracts for necessary legal
services with the law firm on an as needed basis. In 1998 the
Company was not billed for any attorney's fees by the firm.
12
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The Company adopted a stock plan for key employees and a
restricted plan bonus in 1981. Neither of these programs has
been implemented.
Item 12. Security Ownership of Certain Beneficial Owners and
Management.
The following tabulations shows the name of each person who
as of December 31, 1997 was known by the Company to own
beneficially more than 5% of the Company's outstanding Common
Stock.
Amount and Nature of Per cent
Name Beneficial Ownership Of Class
Glauber Management Co. 5,672,630 27.4%
Owned directly
Interfederal Capital, Inc. 5,750,000 27.8%
Owned directly
Management does not own any voting common stock of the Company
as of December 31, 1998.
Item 13. Certain Relationships and Related Transactions
As reported in the Registrant's 10-Q for the quarter ended June
30, 1984 Featherstone Development Corporation owned 3,245,099
shares, Featherstone, Ltd. owned 609,058 shares, and Olen F.
Featherstone II owned 654,0978 of DOL Resources, Inc. common
stock from January
1, 1982 to April, 1984. On April 16, 1984 all of their
restricted shares of DOL Resources, were exchanged for restricted
shares in Petro Imperial Corporation, Dallas, Texas, a Utah
Corporation controlled by Commercial Technology, Inc.
Item 14. Exhibits, Financial Statements Schedules, and Reports
on Form 8-K.
(1) The following financial statements are included in Item
Page
Balance Sheet 15-16
Statement of Income 17
Statements of Stockholders' Equity 18
Statements of Cash Flow 19
Notes to Financial Statements 20-28
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(2) Exhibits No Exhibits are filed as part of this.
There are no reports on Form 8-K filed in the last quarter of the
period covered by this report.
The financial statements included herein have been prepared by
internal accountants of the Registrant, without audit, due to the
inability of the Registrant to pay for a certified audit.
Financial statements have been prepared in accordance with
generally accepted accounting principles and in the opinion of
management presents fairly the financial position of the Company
at December 31, 1998.
SIGNATURE
Pursuant to the requirement of Section 13 or 15(d) 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.
DOL RESOURCES, INC.
By: /s/ Fred M. Updegraff
Fred M. Updegraff
Treasurer and Chief
Financial Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the Registrant and in the capacities and on the date
indicated.
/s/ S. Mort Zimmerman
S. Mort Zimmerman
Chairman of the Board and President Dated: March 24, 1999
/s/ Fred M. Updegraff
Fred M. Updegraff
Director, Vice President and Treasurer Dated: March 24, 1999
14
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DOL RESOURCES, INC.
BALANCE SHEET
(Unaudited)
ASSETS
December
1998 1997
CURRENT ASSETS
Cash $ 870 $1,201
Marketable Securities, at
lower of aggregate cost
or market, cost $24,175
in 1998 and 1997 - Note 2 1,924 1,924
Trade accounts receivable,
less allowance for doubtful
accounts of $1,711, ($1,711 in
1997 Note 1) 22,927 25,685
Due from related parties - Note 4 426,115 436,222
Prepaid expenses -0- 37,500
Total Current Assets 451,836 502,532
PROPERTIES - Using full costing -
Note 1. 100,000 100,000
Production payment
Exploration, acquisition &
development cost, net of
allowance for reduction of
oil & gas assets of $137,083
in 1985 1,649,985 1,653,485
Total cost 1,749,985 1,753,485
Less accumulated depletion 1,338,297 1,327,756
Net Properties 411,688 425,729
FURNITURE & FIXTURES
At cost - Note 1
Furniture and fixtures 6,476 6,476
Less accumulated depreciation 5,828 5,181
Net Furniture and Fixtures 648 1,295
OTHER ASSETS
Undeveloped coal royalties-Note 9 10,156 10,156
Other accounts receivable-Note 12 57,012 62,140
Total Other Assets 67,168 72,296
TOTAL ASSETS 931,340 1,001,852
15
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DOL RESOURCES, INC.
BALANCE SHEET
December 31,
CURRENT LIABILITIES 1998 1997
Notes payable - Note 3 408,000 408,000
Accounts payable 30,737 28,151
Accrued expenses -0- -0-
Total current liabilities 438,737 436,151
LONG-TERM LIABILITIES
` Notes payable -0- -0-
Other accounts payable - Notes 4 & 12 330,472 335.599
Total Long Term Liabilities 330,472 335,599
STOCKHOLDERS' EQUITY
Capital Stock, common,
$.01 par value
Authorized 25,000,000 shares;
issued and outstanding
20,671,254 shares at 12-31-97
and 20.783,529 at 12-31-98 207,835 206,712
Capital in excess of
par value 1,501,618 1,502,741
Accumulated deficit 1,546,947) (1,478,977)
Stock ( 375) ( 375)
Total Equity 162.131 230,102
TOTAL LIABILITIES AND STOCKHOLDERS
EQUITY 931,340 1,001,852
The accompanying notes are an integral part of this statement.
16
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DOL RESOURCES, INC.
STATEMENT OF INCOME
(Unaudited)
Years Ended December 31,
1998 1997 1996
REVENUE:
Oil and gas sales 30,316 74,615 64,449
Investment and other income 7,792 8,984 8,818
38,108 83,599 72,267
EXPENSES:
General and Administrative 38,684 9,461 238,458
Depletion, depreciation and
amortization 11,188 17,062 14,338
Lease operating expense 24,857 29,707 33,422
Interest 27,138 10,112 4,865
Production and windfall
profit taxes 3,704 8,015 6,944
Salaries -0- -0- -0-
Lease rentals 507 261 -0-
106,078 74,618 298,027
Net profit (loss)
before income taxes ( 67,970) 8,981 (224,760)
Provision for income taxes -
Note 6 -0- -0- -0-
Net Profit (loss) ( 67,970) 8,981 (224,760)
Weighted average number of
common shares outstanding 20,783,529 20,671,254 20,671,254
Earnings per common share $(.0033) $.0004 $(.0109)
The accompanying notes are an integral part of this statement.
17
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DOL RESOURCES, INC.
STATEMENTS OF STOCKHOLDERS EQUITY
(Unaudited)
Year ended December 31, 1998, 1997, and 1996
Capital Stock Capital in
Number of Excess of Accumulated Treasury
Shares Amount Par Value Deficit Stock
Balance at
12-31-95 20,671,254 206,713 1,502,741 (1,263,198) (375)
Net Loss ( 224,760)
Balance at
12-31-96 20,671,254 206,713 1,502,741 (1,487,958) (375)
Net Income 8,981
Balance at
12-31-97 20,671.254 206,713 1,502,741 (1,478,977) (375)
( 67,970)
Net Income
Error Correction
by Transfer Agent 112,275 1,123 (1,123)
Balance at
12-31-98 20,783,529 207,835 1,501,618 (1,546,947) (375)
The accompanying notes are an integral part of this statement.
18
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DOL RESOURCES, INC.
STATEMENTS OF CASH FLOWS
Years Ended December 31,
1998 1997 1996
INCREASE (DECREASE) in Cash:
CASH FLOWS FROM OPERATING
ACTIVITIES;
Net Income (Loss) (67,970) 8,981 (224,760)
Adjustments to Reconcile
Net Earnings to net cash
provided by operating
activities:
Depreciation and depletion 11,198 17,062 14,338
Changes in Assets and
Liabilities:
Accounts Receivable-Trade 2,758 404 ( 7,742)
Accounts Receivable-Affil. 10,107 (154,982) ( 8,497)
Prepaid Expense 37,500 -0- -0-
Accounts Payable - Trade 2,586 ( 6,819) 6,378
Accrued Expenses -0- -0- -0-
Net Cash Provided by operating
Activities (3,831) (135,354) (220,283)
Cash Flows from Investing Activities:
Proceeds from sale of property
and equipment 3,500 961 ( 156)
Decrease in other assets 5,128 6,507 8,018
Net Cash provided by investing
Activities 8,628 8,979 7,713
Cash Flow from Financing Activities:
Decrease in Note Payable (5,127) 111,489 179,441
Increase in Capital Stock -0- -0- -0-
Increase in paid-in capital -0- -0- -0-
Net Cash provided by financing
Activities (5,127) 111,489 179,441
Net Increase (Decrease) in
Cash ( 330) (14,890) ( 33,129)
Cash at beginning of year 1,201 16,086 49,215
Cash at end of the year 871 1,196 49,215
Supplemental Disclosures of Cash Flow Information:
Cash paid during the year for:
Interest 27,138 10,112 4,865
Income taxes -0- -0- -0-
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DOL RESOURCES, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1. Summary of Significant Accounting Policies
Organization and Operations
The Company was organized on November 1, 1983 under the
laws of the State of Wyoming. Its primary activities
have been the acquisition of interests in various oil
and gas properties, coal properties (Note 9) and
exploration for oil and gas.
Allowance for bad debts
Accounts receivable from participants in oil and gas
exploration are estimated to be at least 93%
collectible, consequently a 7% allowance for bad debts
has been established against those receivables.
Receivables from the sale of oil and gas are fully
collectible, since accruals are based primarily on
collection of oil and gas sales subsequent to year-end.
Properties
The Company uses the full cost method of accounting for
oil and gas acquisition, exploration and development
costs. The Company has operations only within the
continental United States and consequently has only one
cost center.
All costs associated with property acquisition,
exploration and development activities are capitalized
within the cost center. No costs related to production,
general corporate overhead or similar activities are
capitalized.
Capitalized costs within the cost center are amortized
on the units-of-production basis using proved oil and
gas reserves. The carrying value of capitalized cost
is limited to the sum of (A) the present value of
future net revenues from estimated production of proved
oil and gas reserves, plus (B) the cost of properties
note being amortized, plus (C) the lower of cost or
estimated fair value of unproved properties included in
the costs being amortized less (D) income tax effects
related to differences between book and tax basis of the
properties involved. For the year ended December 31,
1985, total capitalized costs exceeded the cost
center ceiling by $137,083. The excess was expensed in
1985 operations.
20
<PAGE>
DOL RESOURCES, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1. Properties: (Con't).
Sales and abandonments of oil and gas properties are
accounted for as adjustments of capitalized costs,
with no gain or loss recognized.
Drilling in progress is included in the cost center
with depletion being calculated on all costs within the
cost center.
Furniture and Fixtures
Deprecation is computed by the straight-in line method
on the cost of the automobiles and furniture and
fixtures at rates based on their estimated service
lives.
Estimated lives in use are as follows:
Furniture and
Fixtures 5 - 12 years
During the year ended 12-31-87, all furniture and
fixtures were sold. Additional furniture and fixtures
were acquired from an affiliate during 1988 as payment
on accounts receivable.
Earnings per common share
Earnings per common share were computed by dividing the
net loss by the weighted average number of common
shares outstanding during the year.
NOTE 2. Marketable Securities
Marketable securities are valued at the lower of cost
of value.
1998 1997
Aggregate cost 24,172 24,172
Aggregate market cost 1,924 1,924
Unrealized loss: 22,251 22,251
*The unrealized loss on marketable securities is
charged to operations.
21
<PAGE>
DOL Resources, Inc.
NOTES TO FINANCIAL STATEMENTS (Continued)
NOTE 3. Notes Payable
Notes payable consist of the following:
Monthly Interest Due Within Due After
Installment Rate One Year One Year
1997
Note 1 Due 3-14-98 6.64% 408,,000 $ -0-
1998
Note 1 Due 7-14-99 6.64% 408,000 $ -0-
Further information concerning borrowing:
1998 1997
Maximum unpaid balance 408,000 408,000
Weighted average borrowing 408,000 391,500
Weighted average interest
rate 6.64% 6.64%
A settlement of existng debt was negotiated with the
R.T.C. (Resolution Trust Corporation) in January, 1995.
This resulted in a consolidated refinancing with a
local financial institution. The new note includes
accrued interest and approximately $100,000. of debt
assumed from the parent corporation thus increasing the
inter-company receivable by approximately $100,000.00.
22
<PAGE>
DOL Resources, Inc.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 4. Related Party Transactions
As reported in our registrant's 10-Q for the quarter
ended 30, 1984, Featherstone Development Corporation
owned 3,245,099 shares, Featherstone Farms, Ltd., owned
609,058 shares, and Olen F. Featherstone II owned
654,097 shares of DOL Resources, Inc. common stock
from January 1, 1982 to April 16, 1984. The
Featherstone group had a total of 4,508,254 shares of
common stock representing approximately 31.9% of the total
outstanding common stock of DOL Resources, Inc. at
December 31, 1983. On April 16, 1984 all of their
restricted shares in DOL Resources, Inc. were exchanged
for restricted shares in Petro Imperial Corporation of
Dallas, Texas, a Utah Corporation controlled by
Commercial Technology, Inc. Petro Imperial Corporation
purchased an additional 500,000 shares of DOL
Resources, Inc. common stock also on that date.
The Company acquired by assignment from Petro Imperial
Corp. in 1987 accounts receivable of $100,000 from
Comtec Superior Management Co. and $139,719 from
Comtec Glauber Management Co. as contributed capital.
Both are affiliated companies. This was reversed in
1991. The Company also had accounts receivable from
RCT Petro, Ltd. of $7,414 in 1990. This was written
off as uncollectible in 1991. The Company ended 1998
with an account receivable from Glauber Management Co.
(The parent corporation) of $344,615.
A long-term payable if $100,148 was created to an
affiliate during 1989 when a bank that was holding, as
collateral, a Certificate of Deposit belonging
to the Affiliate applied the proceeds of the C.D.
to accrued interest and a principal payment on one
of the company's matured notes.
In 1994 5,000,000 shares of stock were issued to the
affiliate in payment of the $100,148. ($.02 per
share).
NOTE 5. Commitments:
The Company had the following lease obligations:
Coal Oil & Gas
Leases Leases
1997 -0- -0-
1998 -0- -0-
After 1998 -0- -0-
23
<PAGE>
DOL Resources
NOTES TO FINANCIAL STATEMENTS
NOTE 6. Income Taxes
The Company as of December 31, 1998 has a net operating
loss carryover for income tax purposes of approximately
$740,000. The carryover is available to offset
taxable income of future years and expires as follows:
1998 241,000
1999 14,000
2000 109,000
2001 40,000
2002 48,000
2003 3,000
2004 34,000
2007 14,000
2008 19,000
2009 1,000
2011 217,000
740,000
The Company also had approximately $1,300 of investment
tax credits available for carryover against future
federal income tax liabilities.
For financial reporting purposes, the net operating
loss has been used to offset prior deferred income
taxes. To the extent that the net operating loss
carryovers are utilized for income tax purposes in
future years, the deferred income taxes eliminated
to give recognition to the carryovers as well as
credits related to timing difference of the current
year not recorded will be reinstated.
Because of timing differences related principally
to intangible drilling costs, cumulative losses for]
income tax reporting purposes exceed those reported
by approximately $554,000. Because of the uncertainty
as to realization, no future tax benefits are
recognized at December 31, 1998.
24
<PAGE>
DOL Resources
NOTES TO FINANCIAL STATEMENTS
NOTE 7. Operations in Difference Industries:
The company operates principally in two industries
(1) the exploration for and sale of oil and gas, and
(2) investment in natural resource properties. The
operations pertaining to the exploration for and
sale of oil and gas involve actively participating
in drilling for oil and gas and sale of subsequent
production. The investment in natural resource
properties as of December 31, 1998 includes investments
in coal royalties of $10,156. Certain financial
information concerning the company's operations in
the described industries is as follows:
Exploration Investment
for and in Natural General
Sale of Oil Resource Corporate
and Gas Properties Assets
Year ended December
31, 1996
Assets applicable
to industry segment 534,261 10,156 343,783
Year ended December
31,1997
Assets applicable
to industry segment 508,463 10,156 483,233
Year ended December
31, 1998 487,407 10,156 433,777
Exploration Investment
for and in Natural General
Sale of Oil Resources Corporate
and Gas Properties Assets
Year ended December
31, 1996
Income (loss) $ 10,393 $ -0- $(235,153)
Applicable to
Industry Segment
Year ended December
31, 1997
Income (loss) $ 27,623 $ -0- $( 18,642)
Year ended December
31, 1998 $(9,293) $ -0- $( 58,677)
25
<PAGE>
DOL Resources, Inc.
NOTES TO FINANCIAL STATEMENTS
NOTE 8. Major Customers:
The company had sales of oil and gas to two primary
customers (purchasers of over 10% of product) in
1998. These sales were in the amount of $7,565 and
$11,275 respectively.
During the year ended December 31, 1997, the company
had sales of oil and gas of $26,971 and $24,531 to
three major purchasers, and for the year ended
December 31, 1996 $16,636 and $27,433 to three
major purchasers.
NOTE 9. Undeveloped Coal Royalties:
The undeveloped coal royalties were received in
exchange of stock in the company from Discovery Oil,
Ltd. (at the time the parent company of DOL Resources,
Inc. ) in related party transaction in prior years.
These coal royalties cover approximately 2,901 gross
acres and 58 net acres at the end of 1998 and 1997.
There were no coal lease expiration in 1998 and 1997.
Development is not under control of the company.
NOTE 10. Undeveloped Gold Properties
The undeveloped gold properties, which were obtained
on March 1, 1980 through foreclosure of a note by a
placer gold mining claim in California, were sold
for $20,000 during 1983 and $10,000 overriding
royalty interest was retained by DOL Resources, Inc.
In 1985, the pacer gold mining claim project was
abandoned. The remaining cost was expensed during
1985.
NOTE 11. Supplementary information as to Oil and Gas Producing
Activities (Unaudited)
Supplementary disclosures for oil and gas producing
activities in accordance with Financial Accounting
Standard No. 69 set forth below.
The following table represents the Company's estimate
of its proved oil and gas reserves at December 31,
1998. The company emphasized that reserve estimates
are inherently imprecise. Accordingly, the estimates
are expected to change as future information becomes
available. These estimates, as they relate to
December 31, 1998 information, have been prepared by
Company personnel.
26
<PAGE>
DOL Resources, Inc.
NOTES TO FINANCIAL STATEMENTS
NOTE 11. Supplementary Information to Oil and Gas Producing
Activities (Unaudited) (continued)
Proved developed reserves at December 31, 1998 were
16,048 barrels. Proved undeveloped reserves of
23,970 bbls. are estimated at December 31, 1998.
Gas reserves are included in the estimated barrels at
6 MCF per barrel.
Disclosure of the standardized measure of discount
future net cash flows for the year ending 12-31-98,
12-31-97, and 12-31-96 have not been included in
this note due to the following:
(1) Future gas flows are based on year and prices
with changes in pricing considered only to the
extend of contractual arrangements existing at
year-end. Due to the significant fluxuation in
oil and gas prices during 1998 future cash
inflows based on year-end prices would be
inaccurate and would result in a material
misstatement.
(2) Future development costs and production costs
based on year-end cost and assuming continuation
of continuing economic conditions would also
result in a misstatement due to the price decline.
(3) Future income tax expense, if any, would be
difficult to determine due to large net operating
losses incurred for both financial reporting and
tax purposes.
Proved Developed Proved Undeveloped
Reserves
(In Barrels) (In Barrels
Reserves:
Beginning of 1998 15,194 23,970
Discoveries -0- -0-
Revisions of prior
year's estimates 3,703 -0-
Production ( 2,849) -0-
12-31-98 16,048 23,970
27
<PAGE>
DOL Resources, Inc.
NOTES TO FINANCIAL STATEMENTS
NOTE 12. Legal Proceedings:
On November 20, 1979, Phillips Petroleum Company
filed a complaint with the Federal Energy Regulatory
Commission (Docket No. C180-70--00) against DOL
Resources, Inc. and other producers alleging that
certain producer respondents abandoned the sales of
natural gas to Phillips without first obtaining
necessary Commission authorization under Section 7(b)
of the Natural Gas Act. The Commission ruled in favor
of Phillips on April 16, 1985. Effective December 1,
1985, DOL's share of the settlement to be paid from
future production from the Miller-Jacobs #1 well is as
follows:
$160,000 payable out of 30% of gas reserves accruing
to its interest in production for the period
December 1, 1985 through November 30, 1989, and
payable out of 50% of gas revenues accruing to its
interest in production on or after December 1, 1989.
The situation arose prior to present management's
association with DOL Resources, Inc. DOL has since
entered into an agreement with past management and will
recover the entire amount on the basis of the amounts'
of production withheld by Phillips.
28
<PAGE>
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 870
<SECURITIES> 1,924
<RECEIVABLES> 24,638
<ALLOWANCES> 1,711
<INVENTORY> 0
<CURRENT-ASSETS> 451,836
<PP&E> 1,756,461
<DEPRECIATION> 1,344,125
<TOTAL-ASSETS> 931,340
<CURRENT-LIABILITIES> 438,737
<BONDS> 0
0
0
<COMMON> 207,835
<OTHER-SE> (45,704)
<TOTAL-LIABILITY-AND-EQUITY> 931,340
<SALES> 30,316
<TOTAL-REVENUES> 38,108
<CGS> 0
<TOTAL-COSTS> 106,078
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 27,138
<INCOME-PRETAX> (67,970)
<INCOME-TAX> 0
<INCOME-CONTINUING> (67,970)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (67,970)
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