SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the fiscal year ended December 31, 1995
Commission File No. 0-10089
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to .
UNIOIL
(Name of small business Issuer in its charter)
Nevada 93-0782780
State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
3817 Carson Avenue, P.O. Box 310 Evans, Colorado 80620
(Address of principal executive offices)
Issuer's telephone number, including area code: (970) 330-6300
Securities registered pursuant to Section 12(b) of the Act: None.
Securities registered pursuant to section 12(g) of the Act:
Common Stock $.01 Par Value) 9,441,657
Title of Class Shares outstanding as of March 31, 1996
Check whether the Issuer (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 Issuer was required
to file such reports) and (2) has been subject to such filing requirements
for the past 90 days. Yes X No
Check if no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is contained in this form, and no disclosure will be
contained, to the best of the Issuer's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-KSB or any amendment to this Form 10-KSB. [ ]
The Issuer's revenues for its most recent fiscal year: $ 345,311
The aggregate market value of the voting stock held by non-affiliates of the
registrant is not determinable because of the lack of market quotations.
(See Item 5 herein).
Check whether the registrant has filed all documents and reports required to
be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934
subsequent to the distribution of securities under a plan confirmed by a
court. Yes X No
None of the following documents is incorporated by reference into this
report: (1) Any annual report to security holders; (2) Any proxy or
information statement; (3) Any prospectus filed pursuant to Rule 424(b) or
(c) under the Securities Act of 1933.
<PAGE>
PART I
Item 1. Description of Business
(a) Business Development.
Unioil (the "Issuer" or "Company") was incorporated under the laws of
the State of Nevada on January 16, 1981. The Issuer was organized to
engage in the acquisition of undeveloped oil and gas leases for purposes of
resale, farmout or trading, and to participate with others in the
development of drilling prospects. The Issuer made an initial public
offering of its common stock during 1981. This offering was made pursuant
to a registration statement under the Securities Act of 1933 filed with the
Securities and Exchange Commission in Washington, D.C.
On August 17, 1984, the Issuer filed a Voluntary Petition for
Reorganization pursuant to Chapter 11 of the United States Bankruptcy Code
with the United States Bankruptcy Court for the District of Colorado (the
"Bankruptcy Court"). The Issuer continued in the reorganization process
until March 23, 1989 when the Bankruptcy Court issued a Final Decree
discharging the Issuer. Even though the Issuer's Plan of Reorganization had
been approved and confirmed by the Bankruptcy Court in 1985, the issuer was
not discharged from bankruptcy until 1989 due to continuing legal
proceedings involving the Issuer over which the Bankruptcy Court needed to
retain jurisdiction pending resolution (see "Legal Proceedings").
The Plan of Reorganization approved by the Bankruptcy Court had been
funded by a secured loan from Joseph Associates, Inc. ("JAI"). All of the
Issuer's assets, including its cash and accounts receivable, were pledged to
JAI to secure the indebtedness owed to it. Because of the Issuer's
inability to repay this indebtedness on schedule, during 1990 JAI, as the
mortgagee under the Mortgage, Security Agreement, Assignment and financing
statements securing these loans, notified the first purchasers of oil and
gas produced from properties in which the Issuer had an interest to direct
all payments of proceeds attributable to the Issuer's interests directly to
JAI because the Issuer had failed to make payments on the loan as required.
JAI subsequently assigned its position as a secured party with respect
to the Issuer's loan to Joseph Associates of Greeley, Inc. ("JAGI"), an
entity controlled by the persons to whom JAI was indebted. JAGI is now the
direct recipient of all production payments attributable to the Issuer's
interests in oil and gas properties.
(b) Business of Issuer.
Beginning in January, 1982, the Issuer engaged in various aspects of
the oil and gas business primarily involving the acquisition of interests
in oil and gas leases and arrangements to provide for or participate in the
development and operation of such interests. Prior to its bankruptcy, the
Company participated with other firms and investors in the drilling of
numerous oil and gas wells. The Company sometimes acted as the operator of
the wells in which it participated but all drilling and related work was
done through separate contractors.
-1-
<PAGE>
The Company's current holdings are located in Colorado and Wyoming.
Soon after filing for bankruptcy protection in August, 1984, all acquisition
and drilling activity of the Issuer ceased. The Issuer participated in the
drilling of only one well in 1985, and has not participated in the drilling
of any wells since that time. Financing of any future drilling activities
is dependent upon improvement in the Issuer's general financial condition.
During the pendency of the bankruptcy and since its discharge, the
Issuer's business activity has been limited to continued operation of
existing wells drilled on properties it acquired. In some instances, the
Company has re-worked existing wells to increase production.
As an operator of and interest holder in a number of producing oil and
gas wells, the Issuer's products consist of unrefined petroleum products
such as crude oil, natural gas and condensates therefrom. The Issuer is a
relatively small producer and its position in the industry is insignificant.
The oil and gas industry is very competitive and is dominated by a number of
large producers, refiners and retailers. Such companies have substantially
greater resources and expertise and significant competitive advantages over
the Issuer. The Issuer's ability to market its products, and the prices at
which it can market them, are subject to numerous factors and conditions
existing in the industry over which the Issuer has no control. Crude oil
prices are determined on worldwide markets and are constantly fluctuating
based on a number of political and economic factors. The Issuer can only
sell its oil to large refineries, oil companies and other users at whatever
the prevailing price in such markets is at the time. Also, natural gas is
generally sold to a gas processing company that has pipelines and other
distribution facilities sufficiently nearby to connect to the wells. If no
such facilities exist, a well may be shut-in even though capable of
production. However, none of the gas producing wells in which the Issuer
has an interest is presently shut-in.
Presently the Issuer does have gas and oil contracts in place for all
the output from the wells in which the Issuer has an interest.
Item 2. Properties
(a) The Company's principal business offices are located at 3817
Carson Avenue, P.O. Box 310, Evans, Colorado 80620. The Company currently
leases these offices on a year to year basis, with monthly payments of
$ 900. The building contains about 6,300 square feet of improved space of
which about 2,500 square feet is presently utilized by the Company for its
offices.
The Company's other property and equipment (other than oil and gas
properties) is comprised principally of equipment used in the field in
connection with oil and gas exploration and production activities.
Reserves and Other Information
Information regarding oil and gas reserves and the present value of
-2-
<PAGE>
estimated future net revenues is set forth as supplemental information in
the financial statements attached hereto.
Quantities of estimated net reserves of crude oil and natural gas for
the Company's properties and for its interest in those properties as of
January 1, 1996, are presented in summary form below:
Crude Oil Natural Gas
Proved Developed/Prod. Reserves 45,002 23,323
Proved Developed/Nonprod. Reserves 119,666 1,127,581
Proved Undeveloped Reserves 2,052,330 27,314,980
Total Reserves 2,216,998 28,465,884
Proved undeveloped reserves will only be recognized through
substantial drilling in future years. No assurance is given that any such
development will take place.
Natural gas volumes are expressed at standard conditions of
temperature and pressure applicable in the area where the reserves are
located. Condensate reserves estimated are those obtained from normal
separator recovery. Crude oil and natural gas liquids are stated as
standard barrels of 42 U.S. gallons per barrel.
Value of net proved reserves is expressed in terms of estimated future
net revenue and present value of future net revenue. Future net revenue is
calculated by deducting estimated operating expenses, future development
costs, and severance, ad valorem, and windfall profit taxes from the future
gross revenue. Present value of future net revenue is calculated by
discounting the future net revenue at the arbitrary rate of 10 percent per
year compounded monthly over the expected period of realization. Present
value, as expressed herein, should not be construed as fair market value
since no consideration has been given to many factors which influence the
prices at which petroleum properties are traded, such as taxes on operating
profits, allowance for return on the investment, and normal risks incident
to the oil business.
Prices for crude oil, natural gas liquids, and natural gas effective
in December, 1995 reflect the posted prices in the Rocky Mountain Region on
December 31, 1995. Current average operating costs are used in estimating
future costs required to operate the properties.
Estimated future net revenue and net present value of the Company's
revenues from estimated production of proved reserves, are as follows:
-3-
<PAGE>
10% Disc.
Future Net Future net
Revenue Revenue
Proved Developed/Prod. Reserves $ 370,606 $ 232,979
Proved Developed/Nonprod. Reserves 871,033 527,985
Proved Undeveloped Reserves 24,718,460 8,271,249
Total Reserves $25,960,099 $ 9,032,213
Reserves Reported to Other Agencies
The Issuer has filed its reserve report with the Department of Energy
for their annual oil and gas survey and has not filed or reported reserve
information to any other federal authority or agency since the beginning of
the last fiscal year.
Drilling Activity
The Company has not participated in any drilling activity since 1985.
Productive Wells and Acreage
The total gross and net wells, expressed separately for oil and gas,
and the total gross and net developed acres as of January 1, 1996 are as
follows:
Geographic Area Productive Wells Developed Acres
Gross Net Gross Net
Oil Gas Oil Gas Oil Gas Oil Gas
Colorado 42 0 31.0 0 1,680 0 1,210 0
Wyoming 6 0 3.0 0 240 0 121 0
Wells that produce both oil and gas are treated as oil wells herein.
Of the 42 gross wells in Colorado, 34 are producing oil and gas and eight
are oil wells only.
Undeveloped Acreage
At December 31, 1995, the Company held interests in 8,870 gross
(7,469.5 net) undeveloped acres in the United States, as summarized below:
Geographic Area Gross Acres Net Acres
Colorado 8,030 6,786
Wyoming 840 683.5
-4-
<PAGE>
All the acreage shown is held by production from the Issuer's
presently producing wells.
Production
The following table sets forth, by geographic area, for the fiscal
years 1995, 1994, and 1993: 1) the Issuer's portion of the net quantities of
oil in barrels, and gas in thousand cubic feet (MCF), produced from
properties in which the Issuer had an interest; 2) the average sales price
per barrel of oil and MCF of gas shown separately; and 3 ) the average
lifting cost per unit of production of oil and gas shown together on an
equivalent basis. The unit of production for purposes of averaging costs is
barrels. MCF of gas is converted to barrels at the rate of 6 to 1.
1995 1994 1993
1) Net Quantities Oil Gas Oil Gas Oil Gas
Wyoming 6,991 0 9,789 0 12,550 0
Colorado 9,358 55,071 12,133 55,071 11,203 53,298
2) Average Sales
Price:
Wyoming $15.05 $ 0 $11.97 $ 0 $12.38 $ 0
Colorado $16.73 $1.35 $14.81 $1.62 $15.92 $1.83
3) Average Lifting 1995 1994 1993
Cost: Barrels Barrels Barrels
Wyoming $12.49 $ 6.89 $ 9.69
Colorado $24.00 $16.35 $16.95
Present Activities
The Company has no wells in the process of being drilled.
(b) Investment Policies.
The Issuer does not have any policy with respect to investments in
real estate or interests in real estate, real estate mortgages, securities
of or interests in persons primarily engaged in real estate activities,
except for its investments in oil and gas producing properties and
undeveloped acreage which is a necessary incident to its oil and gas
producing business. With respect to such properties, the Issuer's general
policy is to hold the properties for present production as well as possible
future exploration, development and production.
c) Description of Real Estate Operating Data.
The Issuer's real property interests consist of oil and gas leasehold
interests in a number of producing oil and gas wells and adjacent acreage.
-5-
<PAGE>
Detailed operating data regarding such properties, which account for all of
the Issuer's operations, is contained in the preceding section of this
report as well as in the financial statements and the supplemental
information regarding oil and gas producing activities included with such
statements.
Item 3. Legal Proceedings.
The following discussion outlines the current status of the legal
proceedings involving the Issuer which are still pending or were pending at
any time during the fiscal year covered by this report.
1. On September 28, 1988 the United States Securities and Exchange
Commission ("SEC") filed a complaint in United States District Court for the
District of Columbia (Civil Action No. 88-2803) naming the Issuer and its
former President as defendants. The complaint charged securities laws
violations arising from an alleged attempt to manipulate the price of the
Company's stock by conducting an allegedly false and misleading publicity
campaign during 1986 about a purported company product known as the "Soberz"
pill. The pill allegedly lowered a person's blood-alcohol level rendering a
drunk person sober. The complaint also charged the defendants with
violating securities laws by failing to file timely and accurate periodic
reports as required. On October 19, 1989 the SEC obtained by default final
judgments of permanent injunction enjoining the defendants from violating
the securities laws by failing to file such reports, or violating the anti-
fraud provisions of the securities laws.
In October, 1990, after filing the Annual Report on Form 10-K for the
fiscal year ended December 31, 1989 (which report included financial and
other information covering the intervening period since reports had last
been filed), the Issuer made a motion to have the injunction against itself
set aside. By order dated January 8, 1991 the U.S. District Court of the
District of Columbia denied the Issuer's motion without prejudice "pending
demonstration of Unioil's ability and willingness to comply with filing
requirements in the future over a reasonable period of time." The Issuer
intends to renew its motion to set aside the judgment in 1996 after it has
completed adequate filing requirements. Management believes that such
motion will be granted at that time.
The legal proceedings regarding the "Soberz" pill were filed against
the Issuer and its former President by the SEC in response to certain
meetings held with stockbrokers and others to promote such pill, two press
releases which made certain claims regarding the pill, and a statement
concerning the pill which was included in the Issuer's Annual Report on
Form 10-K for the year ended December 31, 1985, which was filed on or about
August 6, 1986. In addition to making the claims about such pill which
resulted in the SEC action, the statement in the Form 10-K report indicated
that the Issuer had agreed to acquire Guardian Laboratories, Inc., the
company which supposedly had rights to the pill in the form of a patent
pending. The statement further indicated that the Issuer agreed to issue
500,000 shares of its stock in consideration thereof. Successor management
of the Issuer has determined from the transfer records that such stock was
in fact issued, but can find no evidence that the Issuer ever received
anything in consideration of such issuance. The Board of Directors has
-6-
<PAGE>
therefore decided to treat such stock as cancellable for lack of
consideration and has placed stop transfer orders with the transfer agent to
prevent any attempted transfer of such stock. The Issuer also notified the
recipient of the action taken and instructed him to return the certificate
for cancellation. The Issuer received a response which disputed the
Issuer's position, but no further action has been taken by either party in
regard to the matter.
2. As part of the Corporation's First Amended Plan of Reorganization
approved by the U.S. Bankruptcy Court for the District of Colorado in
September, 1985, Joseph Associates, Inc. ("JAI") was granted a first
mortgage and lien against all of the assets of the Corporation except
properties in Yuma County, Colorado, to secure loans which eventually
totalled more than $5 million. By letter dated May 15, 1990, JAI as the
mortgagee under the Mortgage, Security Agreement, Assignment and financing
statements securing those loans, notified the first purchasers of oil and
gas from the Corporation that they were to direct all payments of proceeds
attributable to the Corporation's interests to JAI because the Corporation
had failed to make payments on those loans. Thereafter, such proceeds were
paid to the order of JAI.
By assignment dated July 1, 1990, JAI transferred all of its right,
title and interest in and to the Mortgage, Security Agreement, Assignment
and Financing Statement and the collateral securing that Mortgage and the
Promissory Note to Joseph Associates of Greeley, Inc. ("JAGI"). All
payments of oil and gas proceeds which were previously sent to JAI have been
and are being sent to JAGI.
During 1993, JAGI commenced a foreclosure action against the assets of
the Company in Laramie County, Wyoming. This action was commenced by JAGI
in part to demonstrate its willingness and ability to foreclose upon all the
Issuer's assets and thereby extinquish the claims of other creditors, as a
means of inducing such creditors to settle their claims on a reasonable
basis or have them extinquished. Management believes that such action
directly resulted in settlement during 1994 of all the remaining judgments
against the Issuer. During the fiscal year for which this report is filed,
the action was formally dismissed without prejudice on February 10, 1995,
as a result of a settlement between the Company and the taxing authorities
of Laramie County, Wyoming resolving outstanding tax liens and accrued
interest in excess of $500,000.
JAGI has, as of the date hereof, taken no further action to foreclose
on its Mortgage or to assert any rights under that Mortgage. What has JAGI
done as far as debt restructuring goes?
Item 4. Submission of Matters to a Vote of Security Holders.
No matter was submitted to a vote of security holders through the
solicitation of proxies or otherwise during the fourth quarter of the fiscal
year covered by this report. The last meeting of stockholders of the
Company was held in July, 1983.
-7-
<PAGE>
PART II
Item 5. Market for Common Equity and Related Stockholder Matters.
(a) Market information.
At the time of the Issuer's bankruptcy filing in August of 1984, the
Issuer's common stock was traded in the over-the-counter market, was quoted
on NASDAQ and was also listed on the Boston Stock Exchange. Following the
bankruptcy filing, trading activity gradually declined to the point where
quotation or listing of the stock was discontinued. During the past two
years, no systematic quotations of the Issuer's stock have been available,
to the best of present management's knowledge.
(b) Holders.
The approximate number of record holders of the Issuers common stock
as of the latest practicable date (March 31, 1996) is 2,109.
(c) Dividends.
The Issuer has not yet paid any cash dividends to date and does not
anticipate or contemplate paying dividends in the foreseeable future. It is
the present intention of management to utilize all available funds for the
development of the Issuer's business. There are no restrictions that limit
the ability to pay dividends on common equity or that are likely to do so in
the future, other than the restrictions imposed by law. Under Nevada
corporate law, no dividends or other distributions may be made which would
render the Issuer insolvent or reduce assets to less than the sum of its
liabilities plus the amount needed to satisfy outstanding liquidation
preferences.
Item 6. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Liquidity and Capital Resources. At December 31, 1995, the Issuer was
insolvent; liabilities greatly exceed assets, and revenues from operations
were insufficient to discharge liabilities or even pay interest accruing
thereon. In such financial condition, the Issuer cannot raise additional
funds to meet such commitments. The Issuer has been able to continue
operations only because Joseph Associates of Greeley, Inc. ("JAGI"), whose
secured position has priority over all other creditors of the Issuer, has
been foregoing its right to foreclose upon all the Issuer's assets, but is
asserting its right to take direct payment of the proceeds of production
attributable to the Issuer's interest in oil and gas properties.
However, during 1993, JAGI commenced a foreclosure action against the
assets of the Company in Laramie County, Wyoming. This action was commenced
by JAGI in part to demonstrate its willingness and ability to foreclose upon
-8-
<PAGE>
all the Issuer's assets and thereby extinquish the claims of other creditors,
as a means of inducing such creditors to settle their claims on a reasonable
basis or have them extinquished. As a result of this action and the fact
that the Company was able to obtain a line of credit with which to make cash
offers in settlement of its remaining judgment liabilities, during 1994 the
Company was able to reach settlement with all remaining judgment creditors.
As a result of these settlements, including a settlement between the Company
and the taxing authorities of Laramie County, Wyoming resolving outstanding
tax liens and accrued interest in excess of $500,000, the foreclosure action
was formally dismissed without prejudice on February 10, 1995. As of
December 31, 1995, JAGI had taken no further action to foreclose on its
Mortgage or to assert any rights under that Mortgage other than the rights
to take the direct payment of the Company's oil and gas proceeds.
With the elimination of the outstanding judgment liabilities, the
principal remaining indebtedness of the Company (other than the
forementioned line of credit) is the secured debt owed to JAGI. With the
interest that has been accrued each year, this debt is now in excess of
$12 million. Management of the Company and JAGI intend to work out some
restructuring of this debt; however, at December 31, 1995 and as of the date
hereof, the debt has not been restructured and remains on the books. There
is no assurance the Company will be able to work out an affordable
restructuring of this debt.
The Company was able to fund such settlements with a portion of the
proceeds available to the Company from a $350,000 loan plus an additional
$350,000 line of credit it obtained from a local bank. The Company used
approximately $287,500 of these proceeds to make cash payments in settlement
of these outstanding judgment liabilities. Management intends to use the
remaining line of credit to recommence drilling activity and reworking of
wells to increase production. However, there is no assurance management
will be able to achieve these objectives.
Results of Operations. Due to its bankruptcy and adverse financial
condition the Issuer has not engaged in drilling any new wells or acquiring
any additional properties since 1985. Operations of the Issuer have been
limited to continued operation of wells previously drilled on properties
already acquired. The Issuer has continued to incur net losses due
primarily to interest expenses.
Item 7. Financial Statements and Supplemental Data.
See attached Financial Statements and Schedules.
Item 8. Disagreements on Accounting and Financial Disclosure.
There are not and have not been any disagreements between the Issuer
and any of the accountants on any matter of accounting principles or
practices or financial statement disclosure.
-9-
<PAGE>
PART III
Item 9. Directors and Executive Officers of the Issuer.
(a) Identification of Directors.
The current directors of the Issuer, who will serve until the next
annual meeting or until their successors are elected or appointed and
qualified, are set forth in the following table:
Term Served Positions
Name of Director Age As Director With Company
Charles E. Ayers, Jr. 51 July, 1990 Chairman & CEO
Fred C. Jones 58 May, 1991 Vice President/Secretary
& Director
Richard C. Zelnar 48 December, 1993 Director
(b) Identification of Executive Officers.
In addition to the officers who are also directors, Jamie R. Hood,
age 33, was appointed to the office of Treasurer in January, 1995.
(c) Significant Employees.
None other than the persons previously identified.
(d) Family Relationships.
None.
(e) Business Experience.
(1) Background.
Charles E. Ayers, Jr. was admitted to the bar in 1974. He attended
Virginia Polytechnic Institute and State University and Virginia
Commonwealth University where he received a B.S. in accounting in 1971.
Mr. Ayers received his Juris Doctorate from the University of Richmond in
1974. He was counsel to the Senate Finance and Rules Committees, 1974
Session, of the Virginia Legislature, member of the Richmond and American
Bar Associations; Virginia State Bar and Federal Bar; Virginia Trial Lawyers
Association; and was an officer in the United States Army from 1966 to 1969
serving one tour of duty in Vietnam. In 1982 he founded the law firm which
is now known as Ayers & Stolte, P.C.
Fred C. Jones is a graduate of Kemper College and has attended both
-10-
<PAGE>
the University of Washington and Western Kentucky University in courses
related to business and management. Since joining the company in January,
1985, he has been Administrative Land Manager and since 1986, Operations
Manager. Since the election of the company's new Board of Directors in
July, 1990, he has been Vice President and Director of Operations and in
May, 1991, he was elected to serve as Secretary and on the Board of
Directors. From 1979 to 1984 he was an independent landman and consultant
for major and independent oil and gas, mining and geothermal companies.
From 1964 to 1978 he served in management capacities for several wholesale,
retail and marketing companies, including four years as President and
General Manager. From 1959 to 1964 he was District Manager of Husky Oil
Company for marketing and land management.
Richard C. Zelnar graduated with a B.A. Degree in 1973 from Florida
International University where he also completed one and one half years of
graduate work in Business Administration. He is presently President and
Chief Executive Officer of Consolidated Aviation Services, Inc. and
Consolidated Capital Planning, Inc. From 1968 to 1976, he worked for
Knight Ridder Newspapers, Inc. in various staff management positions in
marketing and economic analysis. Mr. Zelnar has invested several million
dollar in oil and gas exploration and development drilling operations in the
Anadarko and Appalachian basins.
(2) Directorships.
None of the Issuer's directors nor any person nominated or chosen to
become a director holds any directorships in any other company with a class
of securities registered pursuant to Section 12 of the Exchange Act or
subject to the requirements of Section 15(d) of such Act or any company
registered as an investment company under the Investment Company Act of
1940.
(f) Involvement in Certain Legal Proceedings.
As of the date of filing this report, no present officer or director
of the Issuer; 1) has had any petition filed, within the past five years,
in Federal Bankruptcy or state insolvency proceedings on such person's
behalf or on behalf of any entity of which such person was an officer or
general partner within two years of filing; or 2) has been convicted in a
criminal proceeding within the past five years or is currently a named
subject of a pending criminal proceeding; or 3) has been the subject, within
the past five years, of any order, judgment, decree or finding (not
subsequently reversed, suspended or vacated) of any court or regulatory
authority involving violation of securities or commodities laws, or barring,
suspending, enjoining or limiting any activity relating to securities,
commodities or other business practice.
Compliance with Section 16(a) of the Exchange Act
The Issuer is not aware of any transactions in its outstanding
securities by or on behalf of any director, executive officer or ten percent
holder, which would require the filing of any report pursuant to Section
16(a) during the fiscal year ended December 31, 1995, that was not filed
with the Issuer.
-11-
<PAGE>
Item 10. Executive Compensation.
(a) Cash Compensation.
The Issuer's Chief Executive Officer is Charles E. Ayers, Jr.
Mr. Ayers has not been compensated for management or director services to
the Company to date. Mr. Ayers is an attorney in the law firm of Ayers &
Stolte, P.C., and this firm acts as general counsel to the Issuer and bills
for such services at the firm's usual billing rates. The following table sets
forth the aggregate cash compensation paid as legal fees and costs to such
law firm for services rendered by Mr. Ayers firm during the fiscal years
ended December 31, 1995, 1994 and 1993. (See "Certain Relationships and
Related Transactions").
Year Total Cash Compensation
1995 $ 12,500
1994 $ 332
1993 $ 35,000
Of the Issuer's other officers or directors, only Fred Jones and Jamie
Hood were employed by the Issuer and received any salary or wage for
services rendered during 1995, 1994 and 1993. None of these persons
individually received annual compensation in excess of $100,000 in any of
these years.
There are presently no on-going plans or arrangements, such as pension
plans or deferred compensation plans, pursuant to which compensation is paid
or proposed to be paid in the future, to any of the officers and directors
of the Issuer, other than standard, non discriminatory medical expense
reimbursement plans for employees.
Item 11. Security Ownership of Certain Beneficial Owners and Management.
(a) Security Ownership of Certain Beneficial Owners.
The following table sets forth the names, addresses and security
ownership of all persons known to the Issuer to be the beneficial owner of
more than 5% of the Issuer's voting stock.
-12-
<PAGE>
Name of Positions Amount and Nature Percent
Owner With Company of Ownership Owned
Alvin Jarrett Estate Stockholder 666,667 shares 7.0%
4704 Ocean Front
Virginia Beach, VA 23451
B. Roland Freasier, Jr. Stockholder 671,666 shares 7.1%
1081 Camino Del Rio So.
San Diego, CA 92108
Charles E. Ayers, Jr. Director & 1,666,667 shares 17.7%
710 N. Hamilton St. Stockholder
Richmond, VA 23230
The foregoing amounts reflect all shares each person would be deemed
a beneficial owner of, regardless of the form of ownership. 666,667 of the
shares shown for Mr. Ayers are owned of record by immediate family members.
(b) Security Ownership of Management.
The following table indicates the stock ownership of the Issuer's
present directors as well as all present officers and directors as a group:
Title of Amount and Nature of Percent
Name Class Beneficial Ownership of Class
Charles E. Ayers, Jr. Common 1,666,667 shares 17.7%
Fred C. Jones Common -0- shares 0%
Richard C. Zelnar Common -0- shares 0%
Jamie R. Hood Common -0- shares 0%
All officers and directors as 1,666,667 shares 17.7%
a group (4 people)
Item 12. Certain Relationships and Related Transactions.
Except as disclosed in this item, in notes to the financial statements
or elsewhere in this report, the Issuer is not aware of any indebtedness or
other transaction in which the amount involved exceeds $60,000 between the
Issuer and any officer, director, nominee for director, or 5% or greater
-13-
<PAGE>
beneficial owner of the Issuer or an immediate family member of such person;
nor is the Issuer aware of any relationship in which a director or nominee
for director of the Issuer was also an officer, director, nominee for
director, greater than 10% equity owner, partner, or member of any firm or
other entity which received from or paid the Issuer, for property or
services, amounts exceeding 5% of the gross annual revenues or total assets
of the Issuer or such other firm or entity.
As previously mentioned, the Issuer's plan of reorganization in
bankruptcy was funded by a secured loan from Joseph Associates, Inc. The
secured interest has been assigned to Joseph Associates of Greeley, Inc.
These entities are affiliated with the Issuer through common controlling
ownership. During 1995, $579,096 of interest was accrued on this debt,
bringing the total accrued interest at December 31, 1995 to $7,517,146.
It is presently contemplated that this debt will be restructured, but the
terms of such restructuring have not been determined or agreed to as of the
date hereof.
Also as previously mentioned, the Issuer was able to settle the
remaining outstanding judgments against it during 1994 by obtaining $700,000
in loans and lines of credit, and using the cash available to it from such
loans and lines of credit to make settlement offers that included
substantial payments of cash, which the remaining judgment creditors
accepted. The Issuer obtained a $350,000 loan by pledging its Colorado
properties to secure such obligation. As part of that arrangement, JAGI
agreed to subordinate its secured interest in such properties. In order to
obtain the other $350,000 line of credit, the bank required $350,000 in
Certificates of Deposit as collateral, as well as the personal guarantee of
Charles E. Ayers, Jr. the current Chief Executive Officer and Chairman of
the Board of Directors of the Issuer. These Certificates of Deposit funds
were provided by an affiliate, JAGI Capital Group, Inc. (the "Capital
Group"), an entity of which a member of management, Richard C. Zelnar, is an
owner. As part of these transactions, the Capital Group entered into an
agreement with the Company pursuant to which the Company paid $35,000 to the
Capital Group at closing, and will pay interest in an amount equal to the
difference between the yield on the Certificates of Deposit and an 11% rate
of return the first year, and 14% the second year (if the line of credit is
extended for a second year). Also, the Company agreed to give the Capital
Group a one quarter of one percent overriding royalty interest in all wells
it drills on undeveloped acreage, and increase the interest to one half of
one percent if the loan is extended for a second year. In addition, the
Company agreed to pledge its Wyoming properties to secure this obligation.
In the event the Company is in default under this agreement, the Capital
Group will have the right to receive the income from the Wyoming properties
until the Certificates of Deposit are released by the bank.
Mr. Ayers is a member of the law firm of Ayers & Stolte, P.C. which
now acts as general counsel for the Issuer. Mr. Ayers' law firm has
performed a variety of legal services on behalf of and with respect to the
Issuer. This firm has also advanced substantial costs with respect to these
legal matters and has billed the Issuer at its regular rates for such fees
and costs. The Issuer paid this law firm legal fees during 1995 for such
services in the amount of $12,500.
-14-
<PAGE>
PART IV
Item 13. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a) The following documents are filed as part of this report:
1. Financial Statements examined and reported upon by Pritchett,
Siler & Hardy, Independent Certified Public Accountants, containing a
Balance Sheet at December 31, 1995 and Statements of Operations,
Shareholders' Equity (Deficit) and Cash flows for the two fiscal years
ended December 31, 1995.
2. Financial Statement Schedules
(See index to Financial Statements)
3. Exhibits. None
(b) No reports on Form 8-K have been filed during the last quarter of
the fiscal year ended December 31, 1995.
-15-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange
Act of 1934, the Issuer has duly caused this registration statement to be
signed on its behalf by the undersigned, thereunto duly authorized.
UNIOIL
Date: June 3, 1996 /s/ Charles E. Ayers, Jr.
Charles E. Ayers, Jr., Chairman
(Chief Executive Officer)
Date: June 3, 1996 /s/ Fred C. Jones
Fred C. Jones, Vice President/Secretary
(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
Issuer and in the capacities and on the dates indicated.
Date: June 3, 1996 /s/ Charles E. Ayers, Jr.
Charles E. Ayers, Jr., Director
Date: June 3, 1996 /s/ Fred C. Jones
Fred C. Jones, Director
<PAGE>
UNIOIL
FINANCIAL STATEMENTS
DECEMBER 31, 1995
PRITCHETT, SILER & HARDY, P.C.
CERTIFIED PUBLIC ACCOUNTANTS
<PAGE>
UNIOIL
CONTENTS
PAGE
- Independent Auditors' Report 1
- Balance Sheet, December 31, 1995 2 - 3
- Statements of Operations, for the years ended
December 31, 1995 and 1994 4
- Statement of Stockholders' Deficit, from
December 31, 1993 through December 31,
1995 5
- Statements of Cash Flows, for the years ended
December 31, 1995 and 1994 6 - 7
- Notes to Financial Statements 8 - 16
- Supplemental Information - Unaudited 17 - 22
<PAGE>
PRITCHETT, SILER & HARDY, P.C.
CERTIFIED PUBLIC ACCOUNTANTS
430 EAST 400 SOUTH
SALT LAKE CITY, UTAH 84111
(801) 328-2727
INDEPENDENT AUDITORS' REPORT
Board of Directors
UNIOIL
Evans, Colorado
We have audited the accompanying balance sheet of Unioil at December 31, 1995
and the related statements of operations, stockholders' deficit and cash
flows for the years ended December 31, 1995 and 1994. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements audited by us present fairly, in
all material respects, the financial position of Unioil as of December 31,1995
and the results of its operations and its cash flows for the years ended
December 31, 1995 and 1994, in conformity with generally accepted accounting
principles.
The accompanying financial statements have been prepared assuming the
Company will continue as a going concern. As discussed in Note 9 to the
financial statements, the Company has suffered losses from operations, has
a net capital deficiency, has unresolved contingencies and has uncertainties
related to the realization of assets, raising substantial doubt about its
ability to continue as a going concern. Management's plans in regard to
these matters are also described in Note 9. The financial statements do not
include any adjustments that might result from the outcome of these
uncertainties.
/S/ Pritchett, Siler & Hardy, P.C.
Pritchett, Siler & Hardy, P.C.
March 26, 1996
-1-
<PAGE>
UNIOIL
BALANCE SHEET
ASSETS
December 31,
1995
____________
CURRENT ASSETS:
Cash $ 61,635
Joint interest and trade accounts receivable,
net of allowance for doubtful accounts of
$214,825 at 1995 90,388
Deferred loan costs, net 49,550
Other current assets 4,627
____________
Total Current Assets 206,200
PROPERTY AND EQUIPMENT, net 543
INVESTMENT IN OIL AND GAS PRODUCING
PROPERTIES, full cost method, net of depletion 3,859,238
OTHER ASSETS 2,152
____________
TOTAL ASSETS $ 4,068,133
____________
The accompanying notes are an integral part of this financial statement.
-2-
<PAGE>
UNIOIL
BALANCE SHEET
LIABILITIES AND STOCKHOLDERS' DEFICIT
December 31,
1995
____________
CURRENT LIABILITIES:
Accounts payable $ 110,062
Joint interest accounts payable 14,311
Notes payable 573,300
Notes payable - related party 5,791,000
Interest payable - related parties 7,519,596
Other current liabilities 196,307
____________
Total Current Liabilities 14,204,576
CONTINGENCIES [See Notes 7 and 8]
____________
Total Liabilities 14,204,576
____________
STOCKHOLDERS' DEFICIT:
Common stock, $.01 par value,
100,000,000 shares authorized,
9,441,657 shares issued and
outstanding at 1995 94,417
Capital in excess of par value 4,062,519
Retained deficit (14,293,379)
____________
Total Stockholders' Deficit (10,136,443)
____________
TOTAL LIABILITIES AND STOCK-
HOLDERS' DEFICIT $ 4,068,133
____________
The accompanying notes are an integral part of this financial statement.
-3-
<PAGE>
UNIOIL
STATEMENTS OF OPERATIONS
For The Years Ended
December 31
__________________________
1995 1994
___________ __________
REVENUE:
Oil and gas sales $ 311,197 $ 404,948
Income from serving as operator 53,591 59,254
___________ __________
Total Revenue 364,788 464,202
____________ __________
EXPENSES:
Production costs and related taxes 203,392 192,203
General and administrative 280,273 211,659
Depreciation, depletion and amortization 149,896 148,635
____________ __________
Total Expenses 633,561 552,497
____________ __________
OPERATING (LOSS) (268,773) (88,295)
____________ __________
OTHER INCOME (EXPENSE):
Interest income and other 3,036 7,622
Interest expense - related party (607,480) (579,100)
Interest expense - other (37,491) (43,995)
Loss on disposal of asset - (250)
____________ __________
(641,935) (615,723)
____________ __________
LOSS FROM OPERATIONS BEFORE INCOME
TAXES AND EXTRAORDINARY ITEMS (910,708) (704,018)
CURRENT TAX EXPENSE - -
DEFERRED TAX EXPENSE - -
____________ __________
LOSS FROM OPERATIONS BEFORE
EXTRAORDINARY ITEMS: (910,708) (704,018)
EXTRAORDINARY ITEMS:
Gain on discharge of debt obligations
(No tax effect) - 1,186,758
____________ __________
NET INCOME (LOSS) $(910,708) $ 482,740
____________ __________
INCOME (LOSS) PER SHARE:
Loss before extraordinary item $ (.10) $ (.08)
Extraordinary items - .13
____________ __________
Net Income (Loss) $ (.10) $ .05
____________ __________
The accompanying notes are an integral part of these financial statements.
-4-
<PAGE>
UNIOIL
STATEMENT OF STOCKHOLDERS' DEFICIT
FROM DECEMBER 31, 1993 THROUGH
DECEMBER 31, 1995
Common Stock Capital in
_________________ Excess of Retained
Shares Amount Par Value Deficit Total
_________ ______ ________ ___________ ___________
BALANCE, December
31, 1993 9,441,657 94,417 4,062,519 (13,865,411) (9,708,475)
Net income for
the year ended
December 31, 1994 - - - 482,740 482,740
_________ ______ _________ __________ ___________
BALANCE, December
31, 1994 9,441,657 94,417 4,062,519 (13,382,671) (9,225,735)
Net loss for
the year ended
December 31, 1995 - - - (910,708) (910,708)
_________ ______ __________ ____________ ____________
BALANCE, December
31,1995 9,441,657 $94,417 $4,062,519 $(14,293,379) $(10,136,443)
_________ _______ __________ ____________ ____________
The accompanying notes are an integral part of these financial statements.
-5-
<PAGE>
UNIOIL
STATEMENTS OF CASH FLOWS
Net Increase (Decrease) in Cash
For The Years Ended
December 31
__________________________
1995 1994
____________ __________
Cash Flows From Operating Activities:
Net income (loss) $ (910,708) $ 482,740
___________ __________
Adjustments to reconcile net income (loss) to net
cash used in operating activities:
Gain on discharge of debt - (1,186,758)
Depreciation, depletion and amortization 100,346 139,626
Deferred loan costs amortization 49,550 9,009
Bad debt expense 14,067 -
Changes in assets and liabilities:
(Increase) decrease in joint interest and trade
receivables 6,546 (6,745)
(Increase) decrease in other current assets 755 (4,282)
Increase (decrease) in accounts payable (3,393) (29,723)
Increase (decrease) in joint interest accounts
payable (12,910) (10,199)
Increase in interest payable 581,546 452,246
Increase (decrease) in other current liabilities (6,129) (52,708)
Increase (decrease) in judgments payable - (67,500)
___________ ___________
Total Adjustments 730,378 (757,034)
___________ ___________
Net Cash (Used) by Operating Activities (180,330) (274,294)
___________ ___________
Cash Flows From Investing Activities:
Proceeds from sale of property and equipment - 250
Additions to oil and gas full cost pool - (9,790)
Dispositions of oil and gas property - -
___________ ___________
Net Cash Provided by Investing Activities - (9,540)
___________ ___________
Cash Flows From Financing Activities:
Proceeds from line of credit 169,337 53,963
Payments for deferred loan costs - (108,109)
Proceeds from notes payable - 350,000
___________ ___________
Net Cash Provided by Financing
Activities 169,337 295,854
___________ ___________
[Continued]
-6-
<PAGE>
UNIOIL
STATEMENTS OF CASH FLOWS [Continued]
Net Increase (Decrease) in Cash
For The Year Ended
December 31
__________________________
1995 1994
____________ __________
Net Increase (Decrease) in Cash (10,993) 12,020
Cash at Beginning of Year 72,628 60,608
____________ __________
Cash at End of Year $ 61,635 $ 72,628
____________ __________
Supplemental Disclosures of Cash Flow
Information:
Cash paid during the period:
Interest $ 61,494 $ 170,849
____________ __________
Income taxes $ - $ -
____________ __________
Supplemental Schedule of Noncash Investing and Financing Activities:
For the Year Ended December 31, 1995:
The Company increased its investment in oil and gas property in the
amount of 59,915 in exchange for payment of joint interest receivables
in the same amount.
For the Year Ended December 31, 1994:
The Company settled accrued liabilities in the amount of $476,378 for a
cash payment of $50,000. [See Note 11]
The Company settled a judgment payable of 93,756 for a cash payment of
$67,500. [See Note 11]
The Company settled a judgment payable recorded in the following accounts:
accrued interest of $206,717, notes payable $250,000 and judgment payable
of $350,657 for a cash payment of $170,000. [See Note 11]
The accompanying notes are an integral part of these financial statements.
-7-
<PAGE>
UNIOIL
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization - The Company is engaged in oil and gas exploration,
development and production activities on its own behalf and as an operator
for others. The Company is incorporated under the laws of the State of
Nevada. The Company completed a sale of its common stock to the public in
December, 1981. During 1984, the Company filed a petition for
reorganization under Chapter 11 of the Bankruptcy Code. In connection with
the reorganization process, control of the Company changed hands and new
management was installed during 1985. The Company emerged from the
reorganization during 1989. During 1990, control of the Company and
management changed again.
Property and Equipment - Property and equipment are recorded at cost which
is depreciated over the estimated useful lives of the related assets.
Depreciation is computed using the straight-line method for financial
reporting purposes and with accelerated methods for income tax purposes.
The useful lives of property and equipment for purposes of financial
reporting range from four to ten years.
Oil and Gas Properties - Oil and gas properties are accounted for on the
full cost method, whereby all costs associated with acquisition,
exploration and development of oil and gas properties are capitalized on a
country-by-country, cost center basis. All oil and gas revenues are
derived from reserves located in northern Colorado and southern Wyoming.
Amortization of such costs is determined by the ratio of current period
production to estimated proved reserves. Estimated proved reserves are
based upon reports of petroleum engineers.
The net carrying value of oil and gas properties is limited to the lower
of amortized costs or the cost center ceiling defined as the sum of the
present value [10% discount rate] of estimated, unescalated future net
cash flows from proved reserves, plus the lower of cost or estimated fair
value of unproved properties, giving effect to income taxes. Depletion,
as a percentage of gross oil and gas revenues, was 31.78% and 31.56% for
the years ended December 31, 1995 and 1994, respectively.
Income (Loss) Per Share - The computation of income (loss)per share of
common stock is based on the weighted average number of shares outstanding
during the period presented.
Cash Flow Statement - For purposes of the statements of cash flows, the
Company considers all highly liquid debt investments purchased with a
maturity of three months or less to be cash equivalents.
Income Taxes - The Company accounts for income taxes in accordance with
Statement of Financial Accounting Standards No. 109 "Accounting for Income
Taxes" which requires the liability approach for the effect of income
taxes.
Deferred Loan Costs - Expenses in the amount of $108,109 associated with
obtaining a line of credit and a note payable were incurred during 1994.
These costs have been deferred and are being amortized using the straight-
line method over the life of the loans.
-8-
<PAGE>
UNIOIL
NOTES TO FINANCIAL STATEMENTS
NOTE 2 - PROPERTY AND EQUIPMENT
The following is a summary of property and equipment - at cost, less
accumulated depreciation as of December 31:
1995
___________
Shop tools and equipment $ 21,112
Furniture and fixtures 20,059
Transportation equipment 11,503
Leasehold improvements 5,165
___________
57,839
Less: accumulated depreciation (57,296)
___________
Total $ 543
___________
All property and equipment of the Company is collateral for the related
party note payable to Joseph Associates of Greeley, Inc. [See Note 7].
Depreciation expense for the years ended December 31, 1995 and 1994
amounted to $1,461 and $1,476, respectively.
NOTE 3 - LINE OF CREDIT
During November of 1994, the Company obtained a $350,000 line of credit
from a bank. As of December 31, 1995 the Company had total borrowings of
$223,300 against the line of credit, which is currently bearing interest
at 9.75%, maturing in November of 1996 and is colateralized by a first
lien on the Company's Colorado oil and gas properties.
NOTE 4 - NOTES PAYABLE - RELATED PARTY
The following is a summary of notes payable as of December 31 to related
parties:
1995
____________
Note payable to related corporation, currently
in default, interest accruing at 19% per annum
through December, 1991, 10% thereafter, secured
by substantially all the Company's assets,
including interests in oil and gas wells
[See Note 7]. $5,791,000
____________
-9-
<PAGE>
UNIOIL
NOTES TO FINANCIAL STATEMENTS
NOTE 5 - NOTES PAYABLE
The following is a summary of notes payable as of December 31 to unrelated
parties:
1995
__________
Note payable to a bank, due in November, 1996,
currently accruing interest to the bank at 7.25%
per annum, collateralized by a CD in the amount
of $350,000 held in the name of JAGI Capital
Group, Inc., a related party, the personal guarantee
of an officer, director and shareholder of the Company
and by a second lien on all of the Company's Colorado
oil and gas properties and a first lien on the Wyoming
oil and gas properties. Interest is also being paid to
the JAGI Capital Group at 8.13%, the difference
between 14% and the current yield on the CD's. $350,000
__________
$350,000
__________
Amortization expense for the deferred loan costs was $49,550 and $9,009 in
1995 and 1994, respectively.
NOTE 6 - INCOME TAXES
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109 Accounting for Income Taxes
[FASB 109]. FASB 109 requires the Company to provide a net deferred tax
asset or liability equal to the expected future tax benefit or expense of
temporary reporting differences between book and tax accounting and any
available operating loss or tax credit carryforwards. At December 31,
1995 and 1994, the total of all deferred tax assets was $5,991,002 and
$5,279,124 and the total of the deferred tax liabilities was $1,356,299
and $1,391,283. The amount of and ultimate realization of the benefits
from the deferred tax assets for income tax purposes is dependent, in part,
upon the tax laws in effect, the Company's future earnings, and other
future events, the effects of which cannot be determined. Because of the
uncertainty surrounding the realization of the deferred tax assets, the
Company has established a valuation allowance of $4,634,703 and $3,887,841
as of December 31, 1995 and 1994, which has been offset against the
deferred tax assets. The net change in the valuation allowance during the
year ended December 31, 1995, was $746,862.
-10-
<PAGE>
UNIOIL
NOTES TO FINANCIAL STATEMENTS
NOTE 6 - INCOME TAXES [Continued]
The Company has available at December 31, 1995, unused tax operating loss
carryforwards of approximately $15,800,000, which may be applied against
future taxable income and expire in various years beginning in 1999
through 2010.
The components of income tax expense from continuing operations for the
years ended December 31, 1995 and 1994 consist of the following:
Year Ended December 31,
_________________________
1995 1994
__________ __________
Current income tax expense:
Federal $ - $ -
State - -
__________ __________
Net current tax expense - -
__________ __________
Deferred tax expense (benefit) arising from:
Excess of tax over financial accounting
depreciation $ (7,397) $ (2,845)
Excess of tax over financial accounting
depletion (27,587) (43,457)
Contribution carryover (188) -
Reserve for bad debts (80,259) -
Net operating loss carryforwards (631,711) 226,841
Valuation allowance 747,142 (180,539)
___________ _________
Net deferred tax expense $ - $ -
___________ _________
Deferred income tax expense results primarily from the reversal of
temporary timing differences between tax and financial statement income.
There is no portion of current or deferred tax expense that is required to
be allocated to the extraordinary item.
A reconciliation of income tax expense at the federal statutory rate to
income tax expense at the Company's effective rate is as follows:
Year Ended December 31,
_________________________
1995 1994
__________ __________
Computed tax at the expected federal
statutory rate 34.00% 34.00%
Excess of tax over financial accounting
depreciation (.37) .59
Excess of tax over financial accounting
depletion (1.38) 8.99
Contribution carryover (.01) -
Reserve for bad debt (4.01) -
State income taxes, net of federal income
tax benefits 3.36 3.36
Net operation loss carry forward (31.59) (46.94)
___________ _________
Effective income tax rates 0.00% 0.00%
___________ _________
-11-
<PAGE>
UNIOIL
NOTES TO FINANCIAL STATEMENTS
NOTE 6 - INCOME TAXES [Continued]
The temporary differences gave rise to the following deferred tax asset
(liability) at December 31, 1995 and 1994:
Year Ended December 31,
_____________________________
1995 1994
_____________ ___________
Excess of tax over book accounting
depreciation (198,113) (205,509)
Excess of tax over book accounting depletion (1,158,186) (1,185,774)
Contribution carryforward 200 12
Reserve for bad debt 80,259 -
NOL carryforwards 5,910,543 5,279,112
The deferred taxes are reflected in the consolidated balance sheet as
follows:
Year Ended December 31,
_____________________________
1995 1994
_____________ ___________
Short term asset (liability) $ - $ (47,495)
Long term asset (liability) $ - $ 47,495
NOTE 7 - RELATED PARTY TRANSACTIONS
The Company has agreed to indemnify its officers and directors against
liability to the extent permissible by law.
The Company serves as operator for various wells and, in that capacity,
receives the sales proceeds from oil and gas purchasers, and pays the
underlying production expenses on behalf of all well interest owners. The
Company has also served as operator on occasional drilling projects
wherein it advanced or collected monies for the drilling of wells.
Pursuant to these receiving and paying activities, at any one time the
Company may owe money to, or have receivables from, the various joint
interest owners. In the past, joint interest owners have included
partnerships and private companies that were affiliated by virtue of their
common control through a former officer of the Company.
An officer and director of the Company is affiliated with a law firm which
provides legal representation, consultation and other services to the
Company. During 1995, $12,500 in fees and $0 in out of pocket costs were
incurred by the Company to this law firm. During 1994, $0 in fees and
$332 in out of pocket costs were incurred by the Company to this law firm.
-12-
<PAGE>
UNIOIL
NOTES TO FINANCIAL STATEMENTS
NOTE 7 - RELATED PARTY TRANSACTIONS [Continued]
During 1985, the Company borrowed approximately $6,000,000 from Joseph
Associates, Inc. [JA] in order to fund the reorganization plan approved by
the bankruptcy court. Under the loan agreement, initial interest of
$156,889 and an origination fee of $150,000 were paid to JA. The loan is
secured by basically all of the assets of the Company, including interests
in oil and gas wells. The loan bears interest at the greater of (1) 19%
per annum or (2) 6% over the prime rate of 90-day commercial loans as
published by Irving Trust Company of New York (subject to the maximum rate
of interest allowed by law). The original term of the loan was for 60
months with the principal and interest payments due the first day of each
month beginning October 1, 1985. Almost from the beginning, the Company
has been in default with respect to payments due on this loan. In May,
1989, JA exercised its right under the loan agreement to receive directly
from purchasers all proceeds derived from the sale of oil and gas by the
Company. Accordingly, since December 31, 1989, all monies received from
oil and gas purchasers is deposited into a checking account controlled by
JA and transferred as needed to accounts owned by the Company to cover
operating expenditures. The same procedure is still in effect at
December 31, 1995 except that the rights of JA have transferred from a
former officer of the Company to interests held by certain current
officers, directors and shareholders. Also, interest is being accrued by
the Company at the rate(s) specified above through December, 1991 and at
10% per annum thereafter. Accrued interest payable on the loan amounts to
$7,517,146 at December 31, 1995. Interest expense on the loan was
$579,096 and $579,100 for each of the years ended December 31, 1995 and
1994. No Interest was paid to JA for the years ended December 31, 1995
and 1994. Interest continues to be accrued on the note, but note holders
have indicated that they will not pursue collection of the note in the
near future and may be willing to consider some restructuring of the
debt in an attempt to improve the financial condition of the Company
[See Note 8].
During the periods from 1986 through 1989, JA paid certain expenses on
behalf of the Company, and the Company paid certain expenses on behalf of
JA. These expenditures have been recorded by the Company in a non-
interest bearing, related-party, account payable account, except for a few
payments which were treated as a reduction of accrued interest. The
account payable to JA amounted to $156,266 at December 31, 1995 and is
included in other current liabilities. The amounts are non-interest
bearing.
NOTE 8 - CONTINGENCIES AND LITIGATION
SEC Complaint - On September 28, 1988, the United States Securities and
Exchange Commission [SEC] filed a complaint against the Company and its
former president for allegedly manipulating its common stock price and for
misleading promotions with regards to a proposed product. The Company
was also charged with failure to file required SEC reports. Final
judgments and a permanent injunction were entered against the Company on
October 19, 1989. The Company filed a motion to set aside the judgment
which was denied with permission to renew the motion upon substantial
compliance. Management believes that the judgment will ultimately be
dismissed as they demonstrate their ability to file currently required SEC
filings.
-13-
<PAGE>
UNIOIL
NOTES TO FINANCIAL STATEMENTS
NOTE 8 - CONTINGENCIES AND LITIGATION [Continued]
Partnership Interest - At December 31, 1985, the Company had recorded
receivables from joint interest owners in the amount of $2,454,800
(representing costs to develop certain wells), net of a collectibility
reserve of $500,000. During 1986, the bankruptcy court ruled the joint
interest ownership of these certain wells (36) belonged solely to the
Company, rather than to various limited partnerships and private companies
as had been contended in litigation. Subsequent to the court's decision,
the $2,454,800 in development costs were reclassified from receivables to
the full cost pool. The limited partnerships filed an appeal with regard
to the bankruptcy court decision giving ownership of certain well
interests to the Company. The US Tenth Circuit Court of Appeals ruled
that the partnership's appeal was defective as to all but one partnership.
The Court remanded to the Bankruptcy Court for further proceedings with
respect to this one partnership. No further appeal was taken by any of
the parties from the Tenth Circuit decision. In November, 1992 a
settlement agreement was reached and executed by the parties and filed
with the U.S. Bankruptcy Court and District Court. Consequently, the
wells continue to be included in the investment in oil and gas properties.
Class Action Lawsuit - During 1984, the Company was a named defendant in
four separate class action lawsuits which were consolidated into one case
and subsequently certified as class actions. The suits also named the
Company's former directors and other parties. The complaints allege the
Company disseminated inaccurate information regarding its business
operations and that management's forecast of increased earnings and other
matters was prepared in a reckless manner. The actions allege these
matters were intended to inflate the price of the Company's stock. Due to
failure to abide by a May 15, 1985 settlement, the court awarded a default
judgment in the amount of $2,400,000. Current management has been
negotiating with the judgment holder and reached an understanding wherein
the Company issued 225,416 shares of common stock during 1990,
representing a total ownership of 21/2% of the Company, after issue, and
also agreed to give the plaintiffs a 5% after-payout working interest in
the next 5 wells drilled. Subsequently, disputes between management and
plaintiffs' counsel over calculation of the number of shares and handling
of various litigation costs, resulted in further negotiations which
eventually culminated in a final settlement. As part of that settlement,
the Company paid an additional $5,000 cash, issued an additional 100,000
shares of common stock in 1991 for legal fees of $40,971 to the attorney
representing plaintiffs and issued an additional 300,000 shares of common
stock in 1993 which were distributed among the class of plaintiffs. The
original $2,400,000 judgment amount was not recorded on the Company's
books but $13,194 had been recorded in 1989 as a preliminary renegotiated
judgment amount, based on 263,878 estimated shares of common stock being
issued at $.05 per share. The 225,416 shares issued during December, 1990
were recorded at the same $13,194 which represents approximately $.06 per
share. The additional 300,000 shares issued during March of 1993 were
recorded at par value (an adjustment to the original number of shares
issued) and bring the effective price per share to approximately $.025.
-14-
<PAGE>
UNIOIL
NOTES TO FINANCIAL STATEMENTS
NOTE 8 - CONTINGENCIES AND LITIGATION [Continued]
Joint Interest Owners - During 1990 a judgment was entered against the
Company, Joseph Associates and a former officer of the Company by the
United States District Court for the Central District of California in the
amount of $897,406. This judgment encompassed compensatory damages as
well as punitive damages, legal costs and interest. Management attempted
to have this judgment set aside because it was entered in a different
jurisdiction by default without any notice being given to current officers
or directors. The court ruled in December, 1991 to remove punitive
damages of $200,000 but let stand the remainder of the judgment of
$697,406. At December 31, 1993, the judgment has been recorded in the
following accounts on the balance sheet $250,000 note payable, $350,657
judgment payable and $96,749 interest payable. During November, 1994, the
judgment with its related accrued interest of $206,717 was settled for
$170,000 [See Note 10].
Stock Cancellation - In June of 1988 the Company was named the defendant
in a suit filed by a shareholder that alleged the Company had wrongfully
canceled 25,000 shares of the shareholder's stock. The case was tried
before a jury which rendered a verdict in 1989 that the Company pay the
shareholder damages of $93,756. The verdict was upheld on appeal. During
November 1994 the Company settled with the shareholder for $67,500
[See Note 10].
NOTE 9 - GOING CONCERN
The Company has incurred significant losses during the past several years,
has current liabilities in excess of current assets of $14,045,871 at
December 31, 1995, and has a net stockholders' deficit of $10,136,443 at
December 31, 1995. These items raise substantial doubt about the ability
of the Company to continue as a going concern.
Management's plans in regards to these matters are as follows:
Management is currently negotiating the possible conversion of
all or part of $5,791,000 of notes payable and related accrued
interest of approximately $7,517,146 to stockholders equity in
exchange for the issuance of common stock.
Management has been making plans for and hopes to attract new
venture capital through outside investors and/or a supplemental
stock offering, to start an oil and gas drilling program in the
near future.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The financial statements do not
include any adjustments relating to the recoverability and classification
of recorded asset amounts or the amounts and classification of liabilities
that might be necessary should the Company be unable to obtain additional
financing, establish profitable operations or realize its plans.
-15-
<PAGE>
UNIOIL
NOTES TO FINANCIAL STATEMENTS
NOTE 10 - EXTRAORDINARY INCOME
During November, 1994, the Company negotiated the settlement of a $697,406
judgment related to a note payable in the amount of $250,000 and the
related accrued interest of $206,717, for cash of $170,000 and recognized
extraordinary income of $734,123 [See Note 8].
A judgment of $93,756 related to a stock cancellation dispute was settled
during November, 1994 for a cash payment of $67,500 resulting in
extraordinary income of $26,256 [See Note 8].
The Company was also successful in negotiating the settlement of certain
past due production tax payables to the state of Wyoming in the amount of
$476,378. A cash payment of $50,000 was paid during November, 1994, and
extraordinary income of $426,378 was recorded by the Company.
-16-
<PAGE>
UNIOIL
SUPPLEMENTAL INFORMATION
[Unaudited]
OIL AND GAS PRODUCING ACTIVITIES
Oil and Gas Reserves - Users of this information should be aware that the
process of estimating oil and gas reserves is very complex, requiring
significant subjective decisions in the evaluation of available geological,
engineering, and economic data for each reservoir. The data for a given
reservoir may change substantially over time as a result of, among other
things, additional development activity, production history and viability
of production under varying economic conditions; consequently, material
revisions to existing reserve estimates may occur in the future. Although
every reasonable effort is made to ensure that the reserve estimates
reported represent the most accurate assessment possible, the significance
of the subjective decisions required, and variances in available data for
various reservoirs make these estimates generally less precise than other
estimates presented in connection with financial statement disclosure.
Proved reserves are estimated quantities of natural gas, crude oil and
condensate, and natural gas liquids which geological and engineering data
demonstrate, with reasonable certainty, to be recoverable in future years
from known reservoirs under existing economic and operating conditions.
Proved developed reserves are proved reserves that can be expected to be
recovered through existing wells with existing equipment and operating
methods.
The following tables set forth the Company's net reserves and the changes in
the net proved reserves, all of which are located within the United States,
as estimated by management and independent petroleum engineers, Resource
Services International, Inc. The Company does not have proved reserves
applicable to long-term supply agreements with foreign governments.
-17-
<PAGE>
UNIOIL
SUPPLEMENTAL INFORMATION
[Unaudited]
OIL AND GAS PRODUCING ACTIVITIES [Continued]
Changes in Net Proved Reserves
1995 1994
_______________ ________________
Oil Gas Oil Gas
(MBBLS) (MMCF) (MBBLS) (MMCF)
_______ ______ ________ _______
Estimated quantity at beginning
of period 2,227 28,542 2,195 28,459
Revisions of previous estimates 6 (40) 54 138
Discoveries and extensions - - - -
Purchase of reserves in place - - - -
Production (16) (36) (22) (55)
Sale/disposal of reserves in place - - - -
_______ _______ _______ _______
Estimated quantity at end of
period 2,217 28,466 2,227 28,542
_______ _______ _______ _______
Proved developed reserves:
Beginning of period 211 1,338 180 1,255
End of period 90 483 211 1,338
_______ _______ _______ _______
Company's proportional interest
in reserves of investees accounted
for by the equity method - end
of year - - - -
_______ ________ ______ _______
-18-
<PAGE>
UNIOIL
SUPPLEMENTAL INFORMATION
[Unaudited]
OIL AND GAS PRODUCING ACTIVITIES [Continued]
Costs Incurred in Oil and Gas Property Acquisition,
Exploration and Development Activities
December 31,
_____________________
1995 1994
_________ ________
[In Thousands of Dollars]
Acquisition of properties:
Undevelopment leases $ 46 $ -
Proved producing leases 12 -
Exploration costs - -
Development costs - 10
________ ________
Total Additions to Oil and Gas
Properties $ 58 $ 10
________ ________
Company's share of equity method
investees' costs of property
acquisition, exploration and
development costs $ - $ -
________ ________
Capitalized Costs Relating to Oil and Gas Producing Activities
Capitalized costs as of the end of the
period: [In thousands of dollars]
Proved properties $ 9,152 $ 9,138
Unproved properties 294 248
________ ________
Total Capitalized Costs 9,446 9,386
Less accumulated depreciation and
depletion (5,587) (5,488)
________ ________
Net Capitalized Costs $ 3,859 $ 3,898
________ ________
Company's share of equity method
investees' net capitalized costs $ - $ -
________ ________
-19-
<PAGE>
UNIOIL
SUPPLEMENTAL INFORMATION
[Unaudited]
OIL AND GAS PRODUCING ACTIVITIES [Continued]
Results of Operations for Producing Activities
December 31,
____________________
1995 1994
________ ________
[In Thousands of Dollars]
Oil and gas sales $ 311 $ 405
Production costs (203) (192)
Exploration costs - -
Depreciation and depletion (99) (138)
________ ________
Income (loss) from operations 9 75
Income tax benefit (expense) (3) (26)
________ ________
Results of Operations from Producing
Activities [Excluding Corporate Overhead
and Interest Costs] 6 49
________ ________
Company's share of equity method investees'
results of operations for producing activities - -
________ ________
Standard Measure of Discounted Future Net Cash Flows
Relating to Proved Oil and Gas Reserves
The information that follows has been developed pursuant to procedures
prescribed by SFAS No. 69, and utilizes reserve and production data
estimated by management and independent petroleum engineers. The
information may be useful for certain comparison purposes, but should not be
solely relied upon in evaluating the Company or its performance. Moreover,
the projections should not be construed as realistic estimates of future
cash flows, nor should the standardized measure be viewed as representing
current value.
The future cash flows are based on sales, prices, costs, and statutory
income tax rates in existence at the dates of the projections. Material
revisions to reserve estimates may occur in the future, development and
production of the oil and gas reserves may not occur in the periods assumed,
and actual prices realized and actual costs incurred are expected to vary
significantly from those used. Management does not rely upon the
information that follows in making investment and operating decisions;
rather, those decisions are based upon a wide range of factors, including
estimates of probable reserves as well as proved reserves, and different
price and cost assumptions than those reflected herein.
-20-
<PAGE>
UNIOIL
SUPPLEMENTAL INFORMATION
[Unaudited]
OIL AND GAS PRODUCING ACTIVITIES [Continued]
Standard Measure of Discounted Future Net Cash Flows
Relating to Proved Oil and Gas Reserves
The following tables set forth the standardized measure of discounted future
net cash flows from projected production of the Company's proved oil and gas
reserves:
December 31,
_____________________
1995 1994
_________ ________
[In Thousands of Dollars]
Future reserves $84,564 $85,446
Future production and development
costs (58,604) (58,895)
Future income tax expenses (8,762) (8,781)
________ ________
Future net cash flows 17,198 17,770
Discount to present value at 10 percent (11,132) (10,737)
________ ________
Standardized measure of discounted
future net cash flows $ 6,066 $ 7,033
________ ________
Company's share of equity method
investees' standardized measure of
discounted future net cash flows $ - $ -
________ ________
-21-
<PAGE>
UNIOIL
SUPPLEMENTAL INFORMATION
[Unaudited]
OIL AND GAS PRODUCING ACTIVITIES [Continued]
Standard Measure of Discounted Future Net Cash Flows
Relating to Proved Oil and Gas Reserves
The following table sets forth the changes in standardized measure of
discounted future net cash flows:
December 31,
_____________________
1995 1994
_________ ________
[In Thousands of Dollars]
Balance at beginning of period $ 7,033 $ 6,294
Sales of oil and gas net of production
costs (108) (213)
Revisions to reserves proved in prior
years:
Changes in prices and costs (8,501) 968
Changes in quantity estimates and
timing of production 7,661 304
Additions to proved reserves:
Acquisition of reserves in place - -
Current year discoveries, extensions
and improved recoveries - -
Estimated future development and
production costs related to current
year acquisitions, discoveries,
extensions and improved recoveries - -
Net change in income taxes (19) (320)
Sales of reserves in place - -
Accretion of discount - -
Other - change in ten percent
discount - -
________ ________
Balance at End of Period $ 6,066 $ 7,033
________ ________
-22-
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary information extracted from the financial
statements as of December 31, 1995 and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 62
<SECURITIES> 0
<RECEIVABLES> 215
<ALLOWANCES> 125
<INVENTORY> 0
<CURRENT-ASSETS> 206
<PP&E> 58
<DEPRECIATION> 57
<TOTAL-ASSETS> 4,068
<CURRENT-LIABILITIES> 14,205
<BONDS> 0
0
0
<COMMON> 94
<OTHER-SE> (10,230)
<TOTAL-LIABILITY-AND-EQUITY> 4,068
<SALES> 311
<TOTAL-REVENUES> 365
<CGS> 353
<TOTAL-COSTS> 353
<OTHER-EXPENSES> 280
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 644
<INCOME-PRETAX> (911)
<INCOME-TAX> 0
<INCOME-CONTINUING> (911)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (911)
<EPS-PRIMARY> (.10)
<EPS-DILUTED> 0
</TABLE>
