FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended June 30, 1998 Commission File # 0-9129
LOCH EXPLORATION, INC.
(Exact Name of Registrant as Specified in its Charter)
TEXAS 75-1657943
(State or other jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
414 E. Elm, Gainesville, Texas 76240
(Address of principal executive offices) (Zip Code)
(940) 668-1271
(Registrant's telephone number, including area code)
(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 of 15 (d) of the Securities Exchange Act of 1934
during the preceding twelve 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 ninety (90) days.
YES X NO
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock - $.01 par value 1,295,286
(Title of Class) (Number of shares Outstanding
on June 30, 1998)
1
<PAGE>
Hess & Rohmer, P.C.
316 W. Broadway
Gainesville, Texas 76240
(940)665-0738
ACCOUNTANTS' COMPILATION REPORT
Loch Exploration, Inc.
Gainesville, Texas
We have compiled the accompanying balance sheet of Loch Exploration, Inc. as of
June 30, 1998 and December 31, 1997, and the related statements of operations
and cash flows for the six months ended June 30, 1998 and 1997, and the related
statements of operations for the three months ended June 30, 1998 and June 30,
1997, in accordance with Statements on Standards for Accounting and Review
Services issued by the American Institute of Certified Public Accountants.
A compilation is limited to presenting in the form of financial statements
information that is the representation of management. We have not audited or
reviewed the accompanying financial statements and, accordingly, do not express
an opinion or any other form of assurance on them.
Management has elected to omit substantially all of the disclosures and
statement of changes in shareholders' equity required by generally accepted
accounting principles. If the omitted disclosures and statement of changes in
shareholders' equity were included in the financial statements, they might
influence the user's conclusions about the company's financial position, results
of operations and cash flows. Accordingly, these financial statements are not
designed for those who are not informed about such matters.
Hess & Rohmer, P.C.
A Professional Corporation
Certified Public Accountants
August 7, 1998
2
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LOCH EXPLORATION, INC.
Balance Sheets
As of June 30, 1998 and December 31, 1997
<TABLE>
<CAPTION>
1998 1997
--------- ---------
ASSETS
Current assets
<S> <C> <C>
Cash $ 81,287 $ 80,457
Trade accounts receivable 8,605 12,067
Accounts receivable, related parties 7,750 33,449
Other accounts receivable - 45,000
Other current assets - 501
--------- ---------
Total current assets 97,642 171,474
Property and equipment - at cost
Oil and gas properties (full cost method) 122,262 125,777
Equipment 78,891 78,891
Accumulated depreciation and depletion (89,314) (84,306)
---------- ----------
Total property and equipment 111,839 120,362
Other assets
Organizational costs 620 -
---------- ----------
Total assets $ 210,101 $ 291,836
========== ===========
</TABLE>
Unaudited - see accountants' compilation report
3
<PAGE>
LOCH EXPLORATION, INC.
Balance Sheets
As of June 30, 1998 and December 31, 1997
<TABLE>
<CAPTION>
1998 1997
--------- --------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
<S> <C> <C>
Accounts payable and accrued liabilities $ 2,392 $ 11,322
Accounts payable, related parties 5,459 19,912
Debentures payable 23,745 22,172
--------- ---------
Total current liabilities 31,596 53,406
Long term debt, less current portion - 10,153
--------- ---------
Total liabilities 31,596 63,559
Shareholders' equity
Common stock,$.01 par value;50,000,000
shares authorized; 1,295,286 and
1,295,286 shares issued and outstanding
at June 30, 1998 and December 31, 1997 12,896 12,896
Additional paid in capital 326,538 326,538
Retained earnings (160,929) (111,157)
----------- ----------
Total shareholders' equity 178,505 228,277
----------- ----------
Total liabilities and shareholders' equity $ 210,101 $ 291,836
=========== ==========
</TABLE>
Unaudited - see accountants' compilation report
4
<PAGE>
LOCH EXPLORATION, INC.
Statements of Operations
For the six months ended June 30, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
---------- ----------
Revenues
<S> <C> <C>
Oil and gas revenue $ 21,691 $ 78,325
Equipment rental 1,336 14,364
Revenue from lease operations 4,590 3,424
Reimbursements - 1,156
Gain on sale of oil property 1,370 -
Dividend income 2,198 2,434
---------- ----------
31,185 99,703
---------- ----------
Expenses
Lease operations 20,536 50,495
Depreciation and depletion 6,378 11,550
General and administrative 49,651 53,708
Interest expense 4,392 4,666
---------- ----------
80,957 120,419
---------- ----------
Net earnings (loss) before taxes (49,772) (20,716)
Income taxes - -
---------- ----------
Net earnings (loss) $ (49,772) $ (20,716)
========== ==========
Net earnings (loss) per share of common stock $ (0.04) $ (0.02)
========== ==========
Weighted average shares outstanding 1,295,286 1,289,286
========== ==========
</TABLE>
Unaudited - see accountants' compilation report
5
<PAGE>
LOCH EXPLORATION, INC.
Statements of Operations
For the three months ended June 30, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
---------- ----------
Revenues
<S> <C> <C>
Oil and gas revenue $ 10,545 $ 30,930
Equipment rental 494 5,640
Revenue from lease operations 2,518 1,957
Gain on sale of oil property 1,370 -
Dividend income 997 1,207
---------- ----------
15,924 39,734
---------- ----------
Expenses
Lease operations 7,925 25,082
Depreciation and depletion 3,189 5,775
General and administrative 23,705 28,367
Interest expense 2,222 2,277
---------- ----------
37,041 61,501
---------- ----------
Net earnings (loss) before taxes (21,117) (21,767)
Income taxes - -
---------- ----------
Net earnings (loss) $ (21,117) $ (21,767)
========== ==========
Net earnings (loss) per share of common stock $ (0.02) $ (0.02)
========== ==========
Weighted average shares outstanding 1,295,286 1,289,286
========== ==========
</TABLE>
Unaudited - see accountants' compilation report
6
<PAGE>
LOCH EXPLORATION, INC.
Statements of Cash Flows
For the six months ended June 30, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
---------- ----------
Cash flows from operating activities
<S> <C> <C>
Net earnings (loss) $ (49,772) $ (20,716)
Reconciliation of net earnings (loss) to net cash
provided (used) by operating activities:
Depreciation and depletion 6,378 11,550
Gain on sale of oil property (1,370) -
(Increase) decrease in accounts receivable 74,662 19,805
Increase (decrease) in accounts payable (23,383) (6,612)
---------- ----------
Net cash provided (used) by operating activities 6,515 4,027
---------- ----------
Cash flows from investing activities
Sale of oil property 3,515 -
Organizational costs (620) -
---------- ---------
Net cash provided (used) by investing activities 2,895 -
---------- ---------
Cash flows from financing activities
Repayment of debt (8,580) (16,877)
---------- ---------
Net cash provided (used) by financing activities (8,580) (16,877)
---------- ---------
Increase (decrease) in cash 830 (12,850)
Cash at beginning of period 80,457 119,721
---------- ---------
Cash at end of period $ 81,287 $ 106,871
========== =========
Supplemental cash flow information:
Income tax paid $ - $ -
Interest paid 4,409 4,745
======== =========
</TABLE>
Unaudited - see accountants' compilation report
7
<PAGE>
Management's Discussion and Analysis of Financial Conditions and
Results of Operations:
At the end of the second quarter of 1998, the assets of the Company amounted to
$210,101 showing a decrease of $140,440 from the second quarter 1997 assets. The
decrease in assets is mainly due to the sale of the New York properties at
12/31/97 and a decrease in accounts receivable.
Revenues and Operating Expenses:
Total revenue for the second quarter of 1998 was $15,924 compared to $39,734 for
the second quarter of 1997. This decrease in revenue is primarily due to a
decrease in oil and gas prices, a decrease in equipment rental and to the sale
of the New York properties on 12/31/97.
Lease operating expenses in the second quarter 1998 decreased $17,157 from the
second quarter 1997 lease operating expenses because of the sale of the New York
properties on 12/31/97.
8
<PAGE>
Part 11 - Other Information
Item 6 Exhibits and Reports on Form 8-K:
---------------------------------
(A) Exhibits
27 Financial Data Schedule
(B) Reports on Form 8-K - none
9
<PAGE>
Signatures
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Loch Exploration, Inc.
Date: August 7, 1998 Glenn L. Loch, President
--------------------------
s/ Glenn L. Loch, President
10
<PAGE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> Dec-31-1998
<PERIOD-START> Jan-1-1998
<PERIOD-END> Jun-30-1998
<EXCHANGE-RATE> 1
<CASH> 81,287
<SECURITIES> 0
<RECEIVABLES> 16,355
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 97,642
<PP&E> 201,153
<DEPRECIATION> 89,314
<TOTAL-ASSETS> 210,101
<CURRENT-LIABILITIES> 31,596
<BONDS> 0
0
0
<COMMON> 12,896
<OTHER-SE> 165,609
<TOTAL-LIABILITY-AND-EQUITY> 210,101
<SALES> 21,691
<TOTAL-REVENUES> 31,185
<CGS> 0
<TOTAL-COSTS> 20,536
<OTHER-EXPENSES> 56,029
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,392
<INCOME-PRETAX> (49,772)
<INCOME-TAX> 0
<INCOME-CONTINUING> (49,772)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (49,772)
<EPS-PRIMARY> (0.04)
<EPS-DILUTED> 0
</TABLE>
