<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999
Commission File Number 0-10301
NESS ENERGY INTERNATIONAL, INC.
(Exact Name of Registrant as Specified in its Charter)
FORMERLY KNOWN AS KIT KARSON CORPORATION
NEVADA 91-1067265
(State or other jurisdiction of (I.R.S. Employer I.D. No.)
incorporation or organization)
Registrant's telephone number, including area code: (817) 341-1477
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 required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
YES [ ] NO [X]
Indicate the number of shares outstanding of each issuer's classes of common
stock as of the latest practicable date:
As of November 9, 1999 the Registrant had outstanding 55,179,802 shares of its
common stock with no par value.
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PART 1
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The financial statements included herein have been prepared by Ness Energy
International, Inc., formerly known as Kit Karson Corporation, without audit,
pursuant to the rules and regulations of the Securities and Exchange Commission.
Certain information and footnote disclosure normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. However, in the opinion of management, all
adjustments (which include only normal recurring accruals) necessary to present
fairly the financial position and results of operations for the periods
presented have been made. The financial statements should be read in conjunction
with the notes thereto included in Kit Karson's SEC Form 10-KSB for the period
ended December 31, 1998.
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NESS ENERGY INTERNATIONAL, INC.
(A Development Stage Company)
BALANCE SHEET
(Unaudited)
<TABLE>
<CAPTION>
12/31/98 9/30/99
----------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 4,352 $ 344,285
Accounts receivable -- --
----------- -----------
Total current assets 4,352 344,285
PROPERTY AND EQUIPMENT
Oil and gas properties, proved 28,300 28,300
Less accumulated depreciation and depletion 5,608 9,823
----------- -----------
22,692 18,477
----------- -----------
TOTAL ASSETS $ 27,044 $ 362,762
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
LIABILITIES
Accrued expenses $ 1,392,900 $ 2,000
Accounts payable - related party 102,564 85,294
----------- -----------
Total current liabilities 1,495,464 87,294
STOCKHOLDERS' EQUITY (DEFICIT)
Preferred stock, $0.10 par value
10,000 shares authorized, none issued -- --
Common stock, no par; 200,000,000 shares authorized;
49,959,356 shares issued and outstanding 12/31/99
55,121,392 shares issued and outstanding 9/30/99 2,658,533 4,485,683
Retained deficit prior to reentering
development stage - January 1, 1998 (2,630,233) (2,630,233)
Deficit accumulated since reentering
development stage - January 1, 1998 (1,496,720) (1,579,982)
----------- -----------
Total stockholders' equity (deficit) (1,468,420) 275,468
----------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY (DEFICIT) $ 27,044 $ 362,762
=========== ===========
</TABLE>
3
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NESS ENERGY INTERNATIONAL, INC.
(A Development Stage Company)
STATEMENT OF OPERATIONS
FOR THE THREE MONTHS AND SIX MONTHS
ENDED SEPTEMBER 30, 1998 AND 1999
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
REVENUES
Oil and gas revenues $ 5,109 $ 4,009 $ 15,309 $ 15,592
EXPENSES
Lease operating expenses 1,174 1,236 3,817 4,662
Production taxes 391 280 1,143 1,090
Compression expenses 1,176 749 3,206 2,290
Depreciation and depletion 1,411 1,402 4,215 4,206
General and administrative 45,154 20,930 90,191 84,350
------------ ------------ ------------ ------------
Total operating expenses 49,306 24,597 102,572 96,598
------------ ------------ ------------ ------------
Operating income (loss) (44,197) (20,588) (87,263) (81,006)
Interest income 2,252 -- 4,001 --
------------ ------------ ------------ ------------
Net gain (loss) before income taxes (41,945) (20,588) (83,262) (81,006)
Income tax benefit -- -- -- --
------------ ------------ ------------ ------------
NET GAIN (LOSS) $ (41,945) $ (20,588) $ (83,262) $ (81,006)
============ ============ ============ ============
Net loss per weighted average share $ 0.00 $ 0.00 $ 0.00 $ 0.00
============ ============ ============ ============
Weighted average shares outstanding 54,508,097 49,959,356 53,180,868 49,959,356
============ ============ ============ ============
</TABLE>
4
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NESS ENERGY INTERNATIONAL, INC.
(A Development Stage Company)
Statement of Operations
For the Nine Months Ended September 30, 1998 and 1999
(Unaudited)
<TABLE>
<CAPTION>
1999 1998
--------- ----
<S> <C> <C>
NET CASH USED IN OPERATING ACTIVITIES $ (94,317) $ --
CASH FLOWS FROM INVESTING ACTIVITIES -- --
CASH FLOWS FROM FINANCING ACTIVITIES -- --
Proceeds from issuance of common stock 434,250 --
--------- ----
Increase in cash for period 339,933 --
CASH, BEGINNING OF PERIOD 4,352 --
--------- ----
CASH, END OF PERIOD $ 344,285 $ --
========= ====
</TABLE>
5
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MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
Liquidity and Capital Resources:
The quarter ended September 30, 1999 was another eventful quarter for the
Company in building its cash balance. Cash on hand increased from $4,352 on
December 31, 1998 to $218,296 on June 30, 1999 and continued to increase to
$344,286 on September 30, 1999. Total shares subscribed and paid during the
quarter totaled 282,225 restricted shares of its common stock for $138,000.
Approximately ninety five percent (95%) of the Company's assets on September 30,
1999 was cash compared to approximately 25% on December 31, 1998. This
improvement in liquidity is attributable to the sale of shares through a limited
number of private placements mentioned above. Additional funding is planned
during the fourth quarter for the Company's involvement in the Israel Project.
During this quarter the Company changed its name from Kit Karson Corporation to
Ness Energy International, Inc. The effective date of the name change was made
on July 6, 1999 and the symbol of the stock also changed on this same day from
"KTKC" to "NESS".
Revenues:
The revenues from gas sales have been fairly constant during the past year. The
only exception was the third quarter of 1998 which had a decline in total sales
that was offset by the first two quarters of higher gas sales generating a total
of $15,592 for the first nine months of 1998 compared to $15,309 for the same
period in 1999. Gas revenues for the three months ended September 30, 1999 were
$5,109 compared to $5,076 for the previous quarter ended June 30, 1999 and
$4,009 for the three months ended September 30, 1998. The revenues come from the
Company's interest in a group of wells known as the Greenwood Gas Field located
in Parker County, Texas in which the Company holds a 25% working interest. The
decline in the comparison of the six-month figures is negligible, being less
than two percent (2%) decline.
The Company, in conjunction with the other working interest holders, began a
stimulation and re-working program on two of the wells in the Greenwood Field.
The results of these work programs at the time of this report are not known, as
the wells were re-worked during the later part of the third quarter and the
results from this work was not available.
The price of gas and also oil improved during the quarter ended September 30,
1999. The projections for gas prices for the coming winter are significantly
higher which will dramatically effect the Company's revenues. The work programs
on the existing wells were designed to increase and maximize production during
the winter months when the gas prices are projected to be optimum.
6
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Expenses:
General and administrative expenditures increased significantly comparing the
current quarter to the quarter ended September 30, 1998 with an increase of
$24,224. This increase is due to the increase in the Company's operations
coupled with printing its annual report on SEC Form 10-KSB. Accounting and other
professional expenditures were incurred during this quarter.
In addition to the general and administrative expenses mentioned above, the
balance of the expenses incurred by the Company is attributable to the cost of
lease operations on the Greenwood Gas Field. These costs generally do not
fluctuate unless additional work is required or repairs are made. The reworking
of the wells during the later part of the current quarter being reported will be
recognized during the next quarter as the invoices for the work have not been
received prior to the end of the quarter. Compression charges are based on the
amount of gas produced where production taxes and lease operating expenses are
fairly flat.
Total operating expenses for the three months ended September 30, 1999 were
$49,306 compared to $26,958 for the previous quarter ended June 30, 1999 and
compared to operating expenses of $24,597 for the three months ended September
30, 1998. The Company's shareholder base has grown from approximately 800 to
approximately 6,000 shareholders. The cost of servicing these shareholders with
annual financial information has obviously increased substantially.
The six months total operating expenses were up approximately $6,000 comparing
1999 to 1998. The costs incurred in reviving the Company during the first three
quarters of 1998 were mostly one-time expenses that will not be incurred again,
however, the cost associated with being a public company keeps compliance costs
related to other operations of the Company relatively high.
Results of Operations:
Operating losses incurred for the quarter ended September 30, 1999 was $44,197
compared to $21,882 for the quarter ended June 30, 1999 and had a operating loss
of $20,588 for the quarter ended September 30, 1998. The operating loss for the
nine months ended September 30, 1999 was $87,263 compared to $81,006 for the
same period in 1998.
The interest income shown for the three months and the nine months of 1999 was
earned on the funds raised from private placements made during the year. The
Company did not have any interest income in 1998, as the Company did not raised
any working capital from private placements of its common stock in 1998.
The Company reported a net loss of $41,945 for the quarter ended September 30,
1999 compared to a loss of $20,588 for the previous year and reported a loss of
$20,133 for the quarter ended June 30, 1999. The net loss numbers for the nine
months ended September 30, 1999 were $83,262 compared to $81,006 for the nine
months ended September 30, 1998.
7
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No share data was reported, as the number of shares divided into the nominal net
loss was less than one cent per share.
Disclosure Regarding Forward-Looking Statements
This document includes "forward-looking" statements within the meaning of
Section 27A of the Securities Act and the Company desires to take advantage of
the "safe harbor" provisions thereof. Therefore, the Company is including this
statement for the express purpose of availing itself of the protections of such
safe harbor provisions with respect to all of such forward-looking statements.
The forward-looking statements in this document reflect the Company's current
views with respect to future events and financial performance. These
forward-looking statements are subject to certain risks and uncertainties that
could cause actual results to differ from those anticipated. In this document,
the words "anticipates," "believes," "expects." "intends," "future," and similar
expressions identify forward-looking statements. The Company undertakes no
obligation to publicly revise these forward-looking statements to reflect events
or circumstances that may arise after the date hereof. All subsequent written
and oral forward-looking statements attributable to the Company or persons
acting on its behalf are expressly qualified in their entirety by this section.
Year 2000
The Company has conducted a comprehensive review of its computer systems to
identify the systems that could be affected by the "Year 2000" issue. The "Year
2000" problem is the result of computer programs being written using two digits
rather than four to define the applicable year. Any programs that have
time-sensitive software may recognize a date using "00" as the year 1900 rather
than the year 2000. This could result in a major system failure or
miscalculations. The Company believes that all of its software and equipment are
"Year 2000" compliant and that this problem will have no affect on the Company's
internal operations
8
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings:
Not Applicable
Item 2. Changes in Securities:
Not Applicable
Item 3. Defaults upon Senior Securities:
Not Applicable
Item 4. Submission of Matters to a Vote of Securities Holders:
Not Applicable
Item 5. Other Information:
Not Applicable
Item 6. Exhibits and Reports on Form 8K:
(a) 27 Financial Data Schedule
(b) None
9
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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.
NESS ENERGY INTERNATIONAL, INC.
By: /s/ IVAN WEBB
---------------------------------------
Ivan Webb, Principal Accounting
Officer & Principal Financial Officer
Date: November 11, 1999
10
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Exhibit Index
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
27. Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 344,285
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 344,285
<PP&E> 28,300
<DEPRECIATION> 9,823
<TOTAL-ASSETS> 362,762
<CURRENT-LIABILITIES> 87,294
<BONDS> 0
0
0
<COMMON> 4,485,663
<OTHER-SE> (4,210,215)
<TOTAL-LIABILITY-AND-EQUITY> 362,762
<SALES> 15,309
<TOTAL-REVENUES> 19,310
<CGS> 102,572
<TOTAL-COSTS> 102,572
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (83,262)
<INCOME-TAX> 0
<INCOME-CONTINUING> (83,262)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (83,262)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
