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, 2000
Commission File Number 0-10301
NESS ENERGY INTERNATIONAL, INC.
(Exact Name of Registrant as Specified in its Charter)
Formerly known as Kit Karson Corporation
Washington 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.
X YES NO
------- ------
Indicate the number of shares outstanding of each issuer's classes of common
stock as of the latest practicable date:
As of November 15, 2000 the Registrant had outstanding 55,824,211 shares of its
common stock with no par value.
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<TABLE>
<CAPTION>
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 Ness Energy International Inc.'s SEC Form
10-KSB for the period ended December 31, 1999.
NESS ENERGY INTERNATIONAL, INC.
(A Development Stage Company)
BALANCE SHEETS
9/30/00 12/31/99
----------- -----------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 167,923 $ 414,692
Investments - available for sale 78,150 --
----------- -----------
Total current assets 246,073 414,692
PROPERTY AND EQUIPMENT
Oil and gas properties, unproved 94,111 114,386
Oil and gas properties, proved 55,193 28,300
Less accumulated depreciation and depletion 14,888 10,911
----------- -----------
Total oil and gas properties 134,416 131,775
----------- -----------
OTHER ASSETS
Fixed assets, net of accumulated depreciation of $14,233 and
$5,083 at September 30, 2000 and December 31, 1999,
respectively 48,226 55,917
Deposits on equipment -- 1,229,000
----------- -----------
48,226 1,284,917
----------- -----------
TOTAL ASSETS $ 428,715 $ 1,831,384
=========== ===========
LIABILITIES AND STOKCHOLDERS' EQUITY (DEFICIT)
LIABILITIES
Accounts payable and accrued expenses $ 44,753 $ 123,171
Accounts payable - related party 714,265 729,638
----------- -----------
Total current liabilities 759,018 852,809
NOTE PAYABLE - RELATED PARTY 419,789 --
ACCRUED CONTINGENCY -- 1,229,000
----------- -----------
Total liabilities 1,178,807 2,081,809
STOCKHOLDERS' EQUITY (DEFICIT)
Preferred stock, $0.10 par value
10,000 shares authorized, none issued -- --
Common stock, no par; 200,000,000 shares authorized;
54,634,740 shares issued and outstanding 12/31/99
55,724,211 shares issued and outstandIng 9/30/00 7,185,850 5,790,720
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 (4,332,359) (3,382,162)
Deferred consulting (51,500) (28,750)
Accumulated other comprehensive income (921,850) --
----------- -----------
Total stockholders' equity (deficit) (750,092) (250,425)
----------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY (DEFICIT) $ 428,715 $ 1,831,384
=========== ===========
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<CAPTION>
NESS ENERGY INTERNATIONAL, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
FOR THE THREE AND SIX MONTHS
ENDED September 30, 2000 AND 1999
(Unaudited)
Since
Reentering
Development
Three Months Ended Nine Months Ended Stage
September 30, September 30, January 1,
2000 1999 2000 1999 1998
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
REVENUES
Oil and gas revenues $ 7,293 $ 5,109 $ 17,320 $ 15,309 $ 60,829
EXPENSES
Lease operating expenses 626 1,174 4,343 3,817 18,105
Production taxes 498 391 1,255 1,143 4,433
Compression expenses 468 1,176 1,688 3,206 8,741
Depreciation and depletion 4,376 1,411 13,127 4,215 29,121
Litigation settlement -- -- -- -- 1,392,900
General and administrative 389,239 45,154 942,766 90,191 2,509,470
------------ ------------ ------------ ------------ ------------
Total operating expenses 395,207 49,306 963,179 102,572 4,395,154
------------ ------------ ------------ ------------ ------------
Operating income (loss) (387,914) (44,197) (945,859) (87,263) (4,334,325)
Interest Expense (4,789) -- (5,163) -- 1,141
Other Income 220 2,252 825 4,001 7,129
------------ ------------ ------------ ------------ ------------
Net gain (loss) before income taxes (392,483) (41,945) (950,197) (83,262) (4,326,055)
Income tax benefit -- -- -- -- --
------------ ------------ ------------ ------------ ------------
NET LOSS ($ 392,483) ($ 41,945) ($ 950,197) ($ 83,262) ($ 4,326,055)
Other comprehinsive income, net of tax
Unrealized losses on investments ($ 327,850) $ -- ($ 921,850) $ -- ($ 921,850)
------------ ------------ ------------ ------------ ------------
Comprehensive loss ($ 720,333) ($ 41,945) ($ 1,872,047) ($ 83,262) ($ 5,247,905)
============ ============ ============ ============ ============
Net loss per weighted average share $ (0.01) $ (0.00) $ (0.02) $ (0.00) $ (0.08)
============ ============ ============ ============ ============
Weighted average shares outstanding 55,680,075 54,508,097 55,365,661 53,180,868 57,511,840
============ ============ ============ ============ ============
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<CAPTION>
NESS ENERGY INTERNATIONAL, INC.
(Formerly Kit Karson Corporation)
(a development stage company)
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS SEPTEMBER 30, 2000
(Unaudited)
Accumulated Accumulated
Deficit Deficit
Prior to Since
Reentering Reentering
Development Development Accumulated
Common Stock Stage Stage Other
------------------------- January 1, January 1, Comprehensive Deferred
Shares Amount 1998 1998 Income Consulting
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE,
December 31, 1997 35,809,356 $ 2,630,233 (2,630,233) -- -- --
Issuance of common
stock 18,825,384 3,160,487 -- -- -- (30,000)
Recognition of
services performed
for common stock -- -- -- -- -- 1,250
Net loss -- -- -- (3,382,162) -- --
----------- ----------- ----------- ----------- ----------- -----------
BALANCE,
December 31, 1999 54,634,740 5,790,720 (2,630,233) (3,382,162) -- (28,750)
Issuance of common
Stock for employee
bonuses 40,000 58,124 -- -- -- --
Issuance of common
Stock for future
services 250,000 316,430 -- -- -- (316,430)
Issuance of common
Stock for services 18,983 20,576 -- -- -- --
Issuance of common
Stock for investment 780,488 1,000,000
Recognition of
services performed
for common stock -- -- -- -- -- 293,680
Net depreciation of
securities available
for sale -- -- -- -- (921,850) --
Net loss -- -- -- (950,197) -- --
----------- ----------- ----------- ----------- ----------- -----------
BALANCE,
September 30, 2000 55,724,211 7,185,850 (2,630,233) (4,332,359) (921,850) (51,500)
=========== =========== =========== =========== =========== ===========
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<CAPTION>
NESS ENERGY INTERNATIONAL, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(Unaudited)
Cumulative
Amounts
Since
Reentering
Development
Stage
January 1,
2000 1999 1998
----------- ----------- -----------
<S> <C> <C> <C>
NET CASH USED IN OPERATING ACTIVITIES ($ 660,310) ($ 94,317) $ (417,868)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of other fixed assets (1,459) -- (1,459)
Cash paid for deposits on equipment -- -- (1,229,000)
----------- ----------- -----------
Cash used in investing activities (1,459) -- (1,230,459)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings - related party 415,000 -- 415,000
Proceeds from issuance of common stock -- 434,250 1,401,250
----------- ----------- -----------
Cash provided by financing activities 415,000 434,250 1,816,250
Increase (decrease) in cash for period (246,769) 339,933 167,923
CASH, BEGINNING OF PERIOD 414,692 4,352 --
----------- ----------- -----------
CASH, END OF PERIOD $ 167,923 $ 344,285 $ 167,923
=========== =========== ===========
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See accompanying notes to these condensed financial statements.
<PAGE>
Note 1. Unaudited Information
The balance sheet as of September 30, 2000 and the statements of
operations for the three and nine month periods ended September 30,
1999 and September 30, 2000 were taken from the Company's books and
records without audit. However, in the opinion of management, such
information includes all adjustments (consisting only of normal
recurring accruals) which are necessary to properly reflect the
financial position of the Company as of September 30, 2000 and the
results of operations for the three and nine month periods ended
September 30, 1999 and September 30, 2000.
Note 2. Basis of Presentation
The condensed financial statements of Ness Energy International, Inc.
(the "Company") as of September 30, 1999 and September 30, 2000 have
been prepared by the Company, pursuant to the rules and regulations
of the Securities and Exchange Commission. The Company is a
developmental stage company who's primary focus is the development of
an oil and gas project in Israel.
The information furnished herein reflects all adjustments (consisting
of normal recurring accruals and adjustments), which are, in the
opinion of management, necessary to fairly state the operating
results for the respective periods. However, these operating results
are not necessarily indicative of the results expected for the full
fiscal year. Certain information and footnote disclosures normally
included in annual financial statements prepared in accordance with
generally accepted accounting principals have been omitted pursuant
to such rules and regulations. The notes to the condensed financial
statements should be read in conjunction with the notes to the
financial statements contained in the Form 10-KSB filed on May 19,
2000. Company management believes that the disclosures are sufficient
for interim financial reporting purposes.
Note 3. Earnings (Loss) per share
Basic earnings (loss) per share (EPS) is calculated by dividing the
net income or loss by the weighted average number of common shares
outstanding during the period. Diluted EPS reflects the potential
dilution that could occur if securities or other contracts to issue
common stock were exercised or converted into common stock. Potential
dilution is not assumed to occur when the effect would be
anti-dilutive (e.g., reduced loss per share).
Note 4. Notes Payable
The company has notes payable at September 30, 2000 as follows:
Note 1
Payable to: Hayseed Stephens
Amount: $310,000
Accrued Interest: $ 4,383
Interest Rate: Prime Rate +2%
Due Date: June 6, 2001
Hayseed Stephens sold some of the Ness Energy stock that he owns and
loaned the proceeds to the company to use for operations.
Note 2
Payable to: Hayseed Stephens Oil, Inc. (HSOI)
Amount: $105,000
Accrued Interest $ 406
Interest Rate: Prime Rate +2%
Due Date: September 15, 2001
HSOI sold some of the Ness Energy stock that it owns and loaned the
proceeds to the Company to use for operations.
Note 5. Investments in Securities
Unrealized holding gains and losses on securities available for sale
are reported as a net amount in a separate component of stockholders'
equity until realized.
Gains and losses on the sale of securities available for sale are
determined using the specific identification method.
<PAGE>
The amortized cost and market values of investment securities
available for sale at September 30, 2000 was:
Market value $ 78,150
Amortized cost 1,000,000
----------
Unrealized loss $ 921,850
==========
As of December 31, 1999, the Company did not own any securities. In
addition, the Company did not sell any securities during the nine
months ended September 30, 2000.
The Company had no investment securities classified as trading or
held to maturity at September 30, 2000.
Note 6. NONCASH INVESTING AND FINANCING ACTIVITIES:
In March 1999, the Company issued 15,150 shares of its common stock
as a stock bonus. Compensation was recorded based on the average
stock price during the period of service.
In March 1999, the Company issued 2,602,500 shares of its common
stock as a settlement in a lawsuit. The valuation of the stock was
based on the stock price on the date of settlement.
In May 1999, the Company issued 104,315 shares of its common stock in
exchange for oil and gas leases. Property of $53,785 was recorded
based on the stock price on date of purchase.
In June 1999, the Company issued 99,000 shares of its common stock as
a settlement in a lawsuit. The valuation of the stock was based on
the stock price on the date of settlement.
In June 1999, the Company issued 242,404 shares of its common stock
in exchange for oil and gas leases. Property of $60,601 was recorded
based on the stock price on date of purchase.
In March 2000, the Company exchanged 780,488 shares of its common
stock for 1,000,000 shares of Restaurant Teams International. Each
company's stock was valued at $1,000,000 based on quoted closing
prices on the date of agreement.
In March 2000, the Company issued 200,000 shares of its common stock
for professional services to be rendered over a period of time.
Deferred consulting of $248,430 was recorded based on quoted closing
prices on the date of the agreements.
In March 2000, the Company issued 40,000 shares of its common stock
as a bonus to employees that had been accrued at December 31, 1999.
Compensation was recorded based on quoted closing prices on the date
of the agreements.
In June 2000, the Company issued 11,725 shares for advertising
services. The stock value of $12,950 was based on the daily average
of the high and low prices during the months the services were
performed.
<PAGE>
In September 2000, the Company issued 50,000 shares of its common
stock for professional services to be rendered over a period of time.
Deferred consulting of $68,000 was recorded based on quoted prices on
date of authorization.
In September 2000, the Company issued 3,786 shares for advertising
services. The stock value of $3,700 was based on the daily average of
the high and low prices during the months the services were
performed.
In September 2000, the Company issued 3,472 shares of its common
stock as compensation. The expense Was recorded based on the average
stock price during the period of service.
Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward-Looking Statements
This Quarterly Report on Form 10-QSB includes "forward-looking"
statements within the meaning of Section 27A of the Securities Act of 1933, as
amended (the Securities Act), and Section 21E of the Securities Exchange Act of
1934, as amended (the Exchange Act), which can be identified by the use of
forward-looking terminology such as, "may", "believe", "expect", "intend",
"anticipate", "estimate" or "continue" or the negative thereof or other
variations thereon or comparable terminology. All statements other than
statements of historical fact included in this Form 10-QSB, are forward-looking
statements. Although the Company believes that the expectations reflected in
such forward-looking statements are reasonable; it can give no assurance that
such expectations will prove to have been correct. Important factors with
respect to any such forward-looking statements, including certain risks and
uncertainties that could cause actual results to differ materially from the
Company's expectations ("Cautionary Statements") are disclosed in this Form
10-QSB, including, without limitation, in conjunction with the forward-looking
statements included in this Form 10-QSB, and in the Company's Annual Report on
Form 10-KSB for the year ended December 31, 1999. Important factors that could
cause actual results to differ materially from those in the forward-looking
statements herein include, but are not limited to, the newness of the Company,
the need for additional capital and additional financing, government regulation
and the ability of the Company to meet its stated business goals. 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 the
Cautionary Statements.
The following discussion of the results of operations and financial
condition should be read in conjunction with the Financial Statements and
related Notes thereto included herein.
<PAGE>
Liquidity and Capital Resources
In the year 2000, the Company has utilized funds from common stock sales in 1999
and has borrowed $415,000 to use for operations. During the developmental stage,
the Company is dependent on stock sales, direct investment in the wells and
acquiring loans to fund operations.
Results of Operations
Comparison of the nine-month period ended September 30, 1999 and September 30,
2000.
Revenues. Operating revenues for nine month period ended September 30,
1999 were $15,309 with an operating loss of 87,263.
Operating revenues for nine month period ended September 30, 2000 were $17,320 a
13% increase from 1999, with an operating loss of $945,859. The 13% increase in
revenues over 1999 is attributed to higher prices for natural gas.
Costs and Expenses. Costs and expenses for the nine month period ended
September 30, 2000 increased by $8,032 or 65% to $20,413 as compared to $12,381
for the corresponding period ended September 30, 1999. This was primarily due to
higher equipment depreciation expense. General and Administrative Costs in 2000
increased by 945% to $942,766 as compared to $90,191 for the same nine month
period in 1999 due primarily to costs associated with the Israeli project.
Net Income (Loss). The Company had a net loss for the three month
period ended September 30, 2000 of $392,483 compared to net loss of $41,945 for
the same period in 1999, representing ($.01) and ($.00) per share, respectively.
Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standard No. 133, "Accounting for Derivative Instruments
and Hedging Activities" (SFAS 133). This statement standardized the accounting
for derivative instruments, including certain derivative instruments embedded in
other contracts, requiring that an entity recognize those items as assets or
liabilities in the statement of financial position and measure them at fair
value. The statement generally provides for matching the timing of gain or loss
recognition on the hedging instrument with the recognition of (a) the changes in
fair value of the hedged assets or liabilities that are attributable to the
hedged risk, or (b) the earnings effect of the hedged transaction. The statement
is effective for all fiscal quarters of all fiscal years beginning after June
15, 1999, with earlier application encouraged, and shall be applied
retroactively to financial statements of prior periods. Adoption of SFAS 133 had
no effect on the Company's financial statements.
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings:
------------------
On the sixteenth day of August 2000, the Company received notice that
it had been named as a Defendant in a law suite regarding certain commissions
alleged to be owed by the Company under the terms of a Rig Purchase Agreement
for an H-3000 Ideco Drilling Rig. Management is of the opinion that the lawsuit
was brought improperly because the agreement on which the Plaintiff's reply
requires binding arbitration to resolve disputes. Furthermore, management is of
the opinion that the suit is without merit because it is the seller of the rig
that are responsible for paying the commission, not the Company as the buyer.
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) None
(b) None
<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.
NESS ENERGY INTERNATIONAL, INC.
By: /s/Hayseed Stephens
------------------------------------
Hayseed Stephens
President & Chief Executive Officer
Dated: November 22, 2000
