SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For Quarter Ended September 30, 1997
OR
[ ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File No. 0-10301
KIT KARSON CORPORATION
(Exact Name of Registrant as Specified in its Charter)
State of Washington 91-1067265
(State of Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification #)
4201 East Interstate 20
Willow Park, TX 76087
(Address of Principal Executive Offices)
817-341-1477
Registrant's Telephone Number Including Area Code
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that
the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. [ ] Yes [X] No
35,809,356 Shares, Common Stock, No Par Value
Number of shares outstanding of each of the issuer's classes
of common stock, as of September 30, 1997
Transitional Small Business Disclosure Format
(Check One): [ ]Yes [X] No
<PAGE>
REPORT ON REVIEW BY INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Kit Karson Corporation
Willow Park, Texas
We have reviewed the accompanying balance sheet of Kit Karson Corporation
as of September 30, 1997, and the related statements of operations for
three and nine months and cash flows for nine months ended September 30,
1997 and 1996. These financial statements are the responsibility of the
Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical review
procedures to financial data and making inquiries of persons responsible
for financial and accounting matters. It is substantially less in scope
than an audit conducted in accordance with generally accepted auditing
standards, the objective of which is the expression of an opinion
regarding the financial statements taken as a whole. Accordingly, we do
not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the accompanying financial statements for them to be in
conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the balance sheet as of December 31, 1996, and the related
statements of operations, retained earnings and cash flows for the year
then ended (not presented herein); and in our report dated December 24,
1997, we expressed an unqualified opinion on those financial statements.
In our opinion, the information set forth in the accompanying condensed
consolidated balance sheet as of December 31, 1996 is fairly stated in all
material respects in relation to the consolidated balance sheet from which
it has been derived.
/s/ROBERT EARLY & COMPANY, P.C.
Robert Early & Company, P.C.
Abilene, Texas
January 10, 1998
<PAGE>
KIT KARSON CORPORATION
Balance Sheets
September 30 December 31
1997 1996
(Unaudited)
------------ -----------
Assets
Cash $ 2,757 $ 1,453
Accounts receivable 130 151
------------ -----------
Total current assets 2,887 1,604
------------ -----------
TOTAL ASSETS $ 2,887 $ 1,604
============ ===========
`
Liabilities & Stockholders' Equity
Liabilities
Accrued expenses $ 42 $ 55
Income taxes payable - -
Stockholders' Equity
Common stock, no par (50,000,000 shares
authorized, 35,809,356 outstanding) 2,630,233 2,630,233
Retained (deficit) (2,627,388) (2,628,684)
------------ -----------
Total Stockholders'
Equity/(Deficiency) 2,845 1,549
------------ -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 2,887 $ 1,604
============ ===========
See accompanying selected information and accountant's report.
<PAGE>
KIT KARSON CORPORATION
Statement of Operations
For Three and Nine Months Ended September 30, 1997 and 1996
(Unaudited)
Three Months Nine Months
1997 1996 1997 1996
---------- ---------- ---------- ----------
Oil & gas revenues $ 411 $ 474 $ 1,569 $ 1,309
Miscellaneous income - - 1,357 -
---------- ---------- ---------- ----------
Total revenues 411 474 2,926 1,309
---------- ---------- ---------- ----------
Production taxes 29 40 112 62
Lease operating expenses 103 135 446 445
Taxes - - 59 110
General and
administrative expenses 1,015 95 1,065 452
---------- ---------- ---------- ----------
Total operating expenses 1,147 270 1,682 1,069
---------- ---------- ---------- ----------
Operating Income (736) 204 1,244 240
Interest income 18 18 52 53
---------- ---------- --------- ---------
Net income/(loss)
before income taxes (718) 222 1,296 293
Income tax benefit - 9 - 27
---------- ---------- ---------- ----------
NET INCOME/(LOSS) $ (718) $ 231 $ 1,296 $ 320
========== ========== ========== ==========
Net loss per weighted
average share $ (0.00) $ 0.00 $ 0.00 $ 0.00
========== ========== ========== ==========
Weighted average
shares outstanding 35,809,356 35,809,356 35,809,356 35,809,356
========== ========== ========== ==========
See accompanying selected information and accountant's report.
<PAGE>
KIT KARSON CORPORATION
Statements of Cash Flows
For Nine Months Ended September 30, 1997 and 1996
1997 1996
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income /(loss) $ 1,296 $ 320
Adjustments to reconcile net income/(loss) to
net cash provided by operations:
(Increase)/decrease in Accounts receivable 21 (19)
Increase/(decrease) in accrued expenses (13) (4)
Increase/(decrease) in income taxes payable - (27)
--------- ---------
NET CASH PROVIDED/(USED) BY OPERATING ACTIVITIES 1,304 270
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
None
CASH FLOWS FROM FINANCING ACTIVITIES:
None
Increase/(decrease) in cash for period 1,304 270
Cash, Beginning of period 1,453 2,680
--------- ---------
Cash, End of period $ 2,757 $ 2,950
========= =========
Supplemental Disclosures:
Cash payments for:
Interest $ - $ -
Income taxes - -
See accompanying selected information and accountant's report.
<PAGE>
KIT KARSON CORPORATION
SELECTED INFORMATION FOR CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1997
(Unaudited)
NOTE 1: BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim
financial information and with the instructions of Regulation SB. They do
not include all information and footnotes required by generally accepted
accounting principles for complete financial statements. However, except
as disclosed herein, there has been no material change in the information
included in the Company's Annual Report on Form 10-KSB for the year ended
December 31, 1996. In the opinion of Management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. The report of Robert Early & Company,
P.C. commenting on their review accompanies the condensed financial
statements included in Item 1 of Part 1. Operating results for the nine
month period ended September 30, 1997, are not necessarily indicative of
the results that may be expected for the year ending December 31, 1997.
NOTE 2: SUBSEQUENT EVENTS
During the last quarter of 1997, an agreement was reached between the
Company and Hayseed Stephens transferring operating control of the Company
to him. This agreement was consummated in December 1997. Under this
agreement, Stephens caused a Company he owned to transfer its interest in
an oil and gas lease to the Company in exchange for 14,150,000 shares of
the Company's unissued common stock. The Company's president agreed to
provide assistance to Stephens in contacting current stockholders in an
effort for Stephens to acquire as many as 15,000,000 previously
outstanding shares. Additionally, the Company's president resigned his
position as president and as a director. The board of directors elected
Stephens as the Company's new president and appointed him as a director to
fill the place of the resigning president. The board also agreed to
appoint individuals selected by Stephens to the board.
A portion of the agreement between Stephens, the Company, and the
Company's president calls for the Company to transfer the single oil and
gas lease and the worthless stock in the various inactive entities to the
outgoing president in recognition of his efforts in keeping the Company in
existence over the years.
Stephens has agreed to cause the Company to regain full reporting status
with the Securities and Exchange Commission through current filings and to
seek market makers and trading on the Electronic Bulletin Board.
Stephens' future plans are for the Company to raise funds to be used in
oil and gas drilling and development ventures.
NOTE 3: GOING CONCERN
The Company has been relatively inactive during the past ten years due to
a shortage of operating assets and working capital. These factors raise
questions about the Company's ability to continue as a going concern.
However, there is no indication the Company could not continue to operate
at its current minimal level. The agreement with Hayseed Stephens alters
the status quo which the Company has experienced over the last several
years because of the transfer of the single existing revenue source to the
previous president. Stephens' transfer of another producing property would
imply that a minimal operating level can be maintained. However, the
Company's ability to continue after 1997 depends on the effects of the
plans and efforts of Stephens.
<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operation.
General Discussion
The company was not able to raise working capital after December 31, 1984
in any significant manner to keep the Company in an active status. Several
attempts were made to keep the Company active subsequent to December 31,
1984. The time period also put the Company at a disadvantage as it was
near the end of the oil boom, plus in 1986 the oil bust began which made
it even more difficult for the Company to attract funds to sustain the
Company. When oil prices plunged below $10 per barrel, that made any hope
of raising funds almost impossible for several years following the oil
market crash. Management then began to focus on alternate ideas to regain
interest in the Company by looking for private companies as merger
candidates. Many attempts were and several companies made various offers
of which none were ever completed due to either financing problems or lack
of working capital to make the merger successful.
On October 8, 1997, the management of the Company entered into an
agreement with Hayseed Stephens where he would take over operations in
conjunction with vending in certain oil and gas leases. Included in the
agreement, Mr. Stephens agreed to cause the accounting and filings to
become current with the Securities and Exchange Commission and other
regulatory authorities.
Change of control of the Company from Art Sykes to Hayseed Stephens was on
December 22, 1997. At the time of change of control it was mutually agreed
between these two parties that Art Sykes would receive the oil and gas
asset and the stocks owned by the Company, as compensation for taking care
of the Company during the dormant years. These assets do not show any
value on the books of the Company, however, a value of $4,622 was given to
them by management of the Company. Hayseed Stephens would vend in an oil
and gas asset for 14,150,000 shares of stock as his part of the change of
control. This asset is a 25% working interest in the Greenwood Gas Field
located in Parker County, Texas.
Assets
The principle asset on September 30, 1997 was cash being $2,757 and was
$1,453 on December 31, 1996. The Company's investments in oil and gas did
not make it through the declining oil market during the late 1980's. The
Company had interests in two Kansas and two Oklahoma leases which
generated $98,136 in oil and gas sales during 1984. The Company does hold
one oil and gas interest in a gas well in Beaver County, Oklahoma, which
was acquired by the Company without any cost in an agreement where after
the investors recaptured their investment, a 4.6125% working interest
would become effective. On September 30, 1997 this interest was still in
effect.
Income and Expenses
The Company's 4.6125% working interest in Benjegerdes #1 produced revenues
of $1,569 for the first nine months of 1997 compared to $1,309 for the
same period during 1996. The three months revenues ended September 30,
1997 and 1996 are $411 and $474 respectively. During the first quarter of
1997 the Company reported revenues of $1,300 in miscellaneous revenues.
Reflected in the nine month figures, this was the sale of a truck that was
fully depreciated.
Total revenues are $2,926 and $1,309 for the nine months ending September,
1997 and 1996 respectively.
Subsequent to the end of the quarter as previously mentioned, the Company
will own a 25% working interest in a gas field located in Parker County,
Texas. Revenues for the Company in 1998 are estimated to range from
$50,000 to $125,0000 depending on the success of certain well completions
and workovers.
The operating expenses are primarily related to the working interest in
the gas well for all periods reported, except for administrative expenses
of $1,000 during the third quarter of 1997 paid to Art Sykes.
The Company's operating income was $204 for the three months ended
September 30, 1996 compared to a loss of $736 for the same three month
period in 1997. The reason for the loss in the third quarter was due to
the $1,000 administrative fee, previously disclosed. The nine months
operating income went from $240 in 1996 to $1,244 in 1997 with the
increase being attributed to the sale of the truck.
Net Income
The Company reported a net income of $1,296 for the nine months ended
September 30, 1997 compared to $320 in net income for the same period in
1996. The Company had a net loss of $718 for the three months ended
September 30, 1997 compared to $231 in net income for the same period in
the previous year.
Both the retiring management and the new management are excited about the
prospects of the Company to rebuild the asset and revenue base of the
Company during 1998.
Exhibits and Reports on Form 8-K
The Company did not file a Form 8-K during the reporting period; however,
the Company did file subsequent to September 30, 1997, an 8-K reporting
the change of control, resignation of directors and change of auditors.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Date: January 12, 1998
/s/ IVAN WEBB
Ivan Webb
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements of Kit Karson Corporation for the period
ended SEPTEMBER 30, 1997, and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<CIK> 0000353634
<NAME> Kit Karson Corporation
<S> <C> <C> <C> <C>
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