FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period of ____________ to ____________
Commission file number 0-10089
UNIOIL
(Exact name of registrant as specified in its charter)
Nevada 93-0782780
(State or other jurisdiction (I.R.S. Employer identification number)
of incorporation or organization)
3817 Carson Avenue, P.O. Box 310
Evans, Colorado . 80620 .
(Address of principal executive offices) (ZipCode)
Registrant's phone number, including area code (970) 330-6300
Check whether the issuer (1) has filed all reports
required to be filed by Section 13 or 15(d) of the
Securities Exchange Act during the preceding 12 months (or
for a shorter period that the registrant was required to
file such reports),
Yes X No ___
and (2) has been subject to such filing requirements
for the past 90 days.
Yes X No ___
State the number of shares outstanding of each of the
issuer's classes of common equity, as of the latest
practicable date.
Class Outstanding at September 30, 1998
(Common stock, $.01 par value) 9,441,657
<PAGE>
UNIOIL
INDEX
Page No.
Part I Financial Information
Condensed balance sheets- 1
September 30, 1998 and December 31, 1997
Condensed statements of operations- 2
nine months ended September 30, 1998 and 1997
Condensed statements of cash flows- 3
nine months ended September 30, 1998 and 1997
Notes to condensed financial statements 4
Management's Discussion and Analysis of Financial 5
Condition and Results of Operations
Part II Other Information
Item 1 Legal Proceedings 6
Item 2 Changes in Securities 6
Item 3 Defaults upon Senior Securities 6
Item 4 Submission of Matters to a Vote of 7
Security Holders
Item 5 Other Information 7
Item 6 Exhibits and Reports on Form 8-K 7
<PAGE>
PART I - FINANCIAL INFORMATION
UNIOIL
CONDENSED BALANCE SHEETS
(Unaudited)
ASSETS
September 30, December 31,
1998 1997
(Unaudited) *
____________ ____________
Current Assets
Cash $ 143,990 $ 130,829
Joint Interest and Trade Acct. Rec. 142,879 160,573
Prepaid Expenses 1,100 4,058
____________ ____________
Total current assets 287,969 295,460
____________ ____________
Property and Equipment 49,556 49,556
Less accumulated depreciation 46,039 45,313
____________ ____________
3,517 4,243
Investment in Oil and Gas Properties 11,324,476 11,324,476
Less accumulated depletion, depreciation
and amortization 6,281,892 6,098,217
____________ ____________
5,042,584 5,226,259
Other Assets 2,152 2,152
____________ ____________
Total Assets $ 5,336,222 $ 5,528,114
____________ ____________
LIABILITIES
Current Liabilities
Accounts Payable & Other Liabilities $ 432,396 $ 371,773
Accrued Interest 9,109,660 8,675,337
Notes Payable 7,086,751 7,442,185
____________ ____________
Total Current Liabilities 16,628,807 16,489,295
Stockholders' Deficit
Common Stock 94,417 94,417
Capital in Excess of Par 4,062,520 4,062,520
Retained Earnings (Deficit) (15,449,523) (15,118,118)
____________ ____________
Total Stockholders' Deficit (11,292,586) (10,961,181)
____________ ____________
Total Liabilities and
Stockholders' Deficit $ 5,336,221 $ 5,528,114
____________ ____________
* Condensed from audited financial statements.
The accompanying notes are an integral part of these
condensed financial statements.
-1-
<PAGE>
UNIOIL
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
Nine months ended Three months ended
September 30 September 30
1998 1997 1998 1997
________ ________ ________ _______
Revenue
Oil & Gas Sales $647,209 $614,171 $200,531 $383,663
Interest Income 4,708 1,604 2,363 135
Income from serving as operator 21,446 25,128 7,337 8,153
Miscellaneous Income 282 7,567 (218) 5,260
________ ________ ________ _______
Total Revenue 673,645 648,470 210,013 397,211
________ ________ ________ _______
Costs & Expenses
Production Costs and
Related Taxes 145,957 196,775 64,770 80,857
General and Administrative
Expenses 143,664 152,820 39,047 47,426
Depletion, Depreciation
& Amortization 184,401 98,424 35,438 31,189
Interest Expense 531,028 502,273 178,969 197,004
________ ________ ________ _______
Total Costs & Expenses 1,005,050 950,292 318,224 356,476
________ ________ ________ _______
Loss before income taxes (331,405) (301,822) (108,211) 40,735
Income Taxes --- --- --- ---
________ ________ ________ _______
Net Profit/Loss $(331,405) $(301,822) $(108,211) $ 40,735
________ ________ ________ _______
Net Profit/Loss per share $ (.035) $ (.03) $ (.011) $ .004
________ ________ ________ _______
The accompanying notes are an integral part of these
condensed financial statements.
-2-
<PAGE>
UNIOIL
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine months ended
September 30, September 30,
1998 1997
___________ ____________
Cash Flows From (To) Operating Activities
Net Loss $ (331,405) $ (301,822)
___________ ____________
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation, Depletion & Amortization 184,401 93,191
Changes in Assets and Liabilities
Joint Interest & Trade Receivables 17,694 (6,031)
Other Assets 2,958 2,463
Accounts Payable and Taxes Payable 60,623 34,459
Accrued Interest Payable 434,322 434,322
___________ ____________
699,998 558,404
___________ ____________
Net Cash Provided (Used) by Operations 368,593 256,582
___________ ____________
Cash Flows From (To) Investing Activities
Disposition of Property & Equipment -0- 3,158
Acquisition of Oil & Gas Properties -0- (1,874,502)
___________ ____________
Net Cash Provided (Used) by
Investing Activities -0- (1,871,344)
___________ ____________
Cash Flows From (To) Financing Activities
Proceeds from Notes Payable (355,433) 1,539,487
___________ ____________
Net Cash Used by Financing Activities (355,433) 1,539,487
___________ ____________
Net Increase (Decrease) in Cash 13,160 (75,275)
Cash at Beginning of Period 130,829 118,886
___________ ____________
Cash at End of Period $ 143,989 $ 43,611
___________ ____________
Supplemental Schedule of Noncash Investing and Financing
Activities:
None
The accompanying notes are an integral part of these
condensed financial statements.
-3-
<PAGE>
UNIOIL
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1: BASIS OF PRESENTATION
The financial information included herein is unaudited;
however, such information reflects all adjustments
(consisting solely of normal recurring adjustments) which
are, in the opinion of management, necessary for a fair
presentation of financial position, results of operation and
cash flows for the interim periods.
The results of operations for the nine month period ending
September 30, 1998 are not necessarily indicative of the
results to be expected for the full year.
NOTE 2: INCOME TAXES
No provision for income taxes has been recorded due to net
operating losses. The Company has net operating loss
carryforwards of approximately $17,616,189 which may be
applied against future taxable income expiring in various
years beginning in 1999 through 2012.
NOTE 3: RELATED PARTY TRANSACTIONS
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. The
loan is secured by basically all of the assets of the
Company, including interests in oil and gas wells. 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 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, all moneys received from oil and gas purchasers
were then deposited into a checking account controlled by JA
and transferred as needed to accounts owned by the Company
to cover operating expenditures. During 1990 the rights of
Joseph Associates, Inc. were acquired by Joseph Associates
of Greeley, Inc. and the same procedure is still in effect
during 1998. 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.
At September 30, 1998, the unpaid note balance was
$5,791,000.00 and the related Accrued Interest balance was
$9,109,660.00.
During the nine months ending September 30, 1998, interest
in the amount of $434,322.00 was accrued on the note and
charged to expense. Additionally, the Company has a non-
interest bearing payable to Joseph Associates of Greeley,
Inc. in the amount of $156,266.00.
NOTE 4: LITIGATION
On September 28, 1988, the United States Securities and
Exchange Commission filed a complaint against the Company
and its former president for allegedly manipulating its
common stock price and for misleading promotions with regard
to the "Soberz" pill. 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 not granted. Management believes
that the judgment will ultimately be dismissed as they
demonstrate their ability to file currently required SEC
filing (see Legal Proceedings No. 1).
-4-
<PAGE>
UNIOIL
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following is management's discussion and
analysis of certain significant factors which have affected
the Company's financial position and operating results
during the periods included in the accompanying condensed
financial statements.
LIQUIDITY and CAPITAL RESOURCES
At September 30, 1998, 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 a 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, 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.
There are three major areas of indebtedness of the
Company. The principal one is the secured debt owed to
JAGI. With the interest that has been accrued each year,
this debt is in excess of 14 million dollars. Management of
the Company and JAGI intend to work out some restructuring
of this debt; however, at September 30, 1998 and as of the
date hereof, the debt has not been restructured and remains
on the books. The second secured debt is a $344,000 loan
from a local bank and is collateralized by a first lien on
the Company's Colorado oil and gas properties. The Company
used approximately $287,500 of these proceeds to settle
outstanding judgment liabilities. The third secured debt is
to Duke Energy Financial Services, Inc. which was used to
finance the drilling and completion of eight new wells in
1997.
RESULTS OF OPERATIONS
Due to its bankruptcy and adverse financial
condition the Issuer did not engage in drilling any new
wells or acquiring any additional properties from 1985
through 1996. Operations of the Issuer were limited to
continued operation of wells previously drilled on
properties already acquired.
However, during 1996 the Company did enter into
two agreements to resume drilling activity in 1997 with
respect to the leasehold interests of the Company and
provide financing for such drilling. One of these
agreements has thus far resulted in the drilling of 21 new
wells and the recompletion of 4 wells. The other program
began in May, 1997, and has now been completed. This
program resulted in the drilling and completion of 8 new oil
and gas wells.
The Issuer has continued to incur net losses due
primarily to interest expenses. After netting interest
income and expense, which includes a nine month accrual of
$434,322 of interest expense on the secured debt owed to
JAGI, the Company's net loss was $(331,405) for the nine
months ended September 30, 1998 compared to $(301,822) for
the nine months ended September 30, 1997.
The Company's actual results from operations
(before interest income, interest expense and income taxes)
was near the same during the last current year compared to
the preceding year. The Company had operating income of
$194,915 during the nine months ended September 30, 1998
compared to an operating income of $198,847 during the nine
months ended September 30, 1997. The total revenues were
$668,937 during the nine months ended September 30, 1998
compared to total revenues of $646,866 for the same period
in 1997. Had crude oil prices not been the lowest they have
been in the last 12 years a significant gain would have been
seen in third quarter 1998 revenues and operating income.
At this time there is no indication that crude oil
prices will improve anytime soon as the analysts are
continuing to say we have an oversupply of crude on hand and
no huge efforts to cut world wide production significantly.
As a result the Company does not see the fourth quarter
improving.
-5-
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The issuer had been involved in numerous legal
proceedings. Those legal proceedings have been resolved by
the registrant. The following discussion outlines the
current status, to the best knowledge of present management.
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 sometime in the future after it has complied
with the filing requirements over a reasonable period of
time. Current 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 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
therefore decided to treat such stock as cancelable 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.
Item 2. Changes in Securities
No changes in securities occurred in the third
quarter of 1998 covered by this report.
Item 3. Defaults upon Senior Securities
All of the issuer's liabilities are classified as
current because they mature currently or are already past
due. The issuer is in default with respect to its principal
outstanding liability. This liability is the secured
indebtedness to Joseph Associates of Greeley, Inc. This
item, including accrued interest, comprise approximately 95%
of the issuer's total liabilities. In its present financial
condition, the issuer is not able to pay off this liability
or even pay interest which accrues thereon. Management is
therefore attempting to negotiate some restructuring of the
secured indebtedness as a means of curing such default.
There is no assurance management will be able to do this.
-6-
<PAGE>
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 third quarter of 1998 covered by this report.
The last meeting of stockholders of Unioil was held in July,
1983.
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits. None
(b) Reports on Form 8-K. No reports on Form 8-K
have been filed during the third quarter of the year 1998.
-7-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities
Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned
thereunto duly authorized.
October 23, 1998 /s/ Charles E. Ayers, Jr.
Date ____________________ ____________________________________
Charles E. Ayers, Jr., Chairman,
Chief Executive Officer and Director
October 22, 1998 /s/ Fred C. Jones
Date ____________________ ____________________________________
Fred C. Jones
Vice President, Secretary and Director
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