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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 JUNE 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 August 15, 2000 the Registrant had outstanding 55,666,953 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 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
(Unaudited)
<TABLE>
<CAPTION>
6/30/00 12/31/99
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 13,493 $ 414,692
Investments - available for sale 406,000 --
----------- -----------
Total current assets 419,493 414,692
PROPERTY AND EQUIPMENT
Oil and gas properties, unproved 114,386 114,386
Oil and gas properties, proved 28,300 28,300
Less accumulated depreciation and depletion 10,911 13,562
----------- -----------
Total oil and gas properties 129,124 131,775
----------- -----------
OTHER ASSETS
Fixed assets, net of accumulated depreciation of $11,183 and
$5,083 at June 30, 2000 and December 31, 1999, respectively 55,917 50,475
Deposits on equipment 1,229,000 1,229,000
----------- -----------
1,279,475 1,284,917
----------- -----------
TOTAL ASSETS $ 1,828,092 $ 1,831,384
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
LIABILITIES
Accounts payable and accrued expenses $ 15,467 $ 123,171
Accounts payable - related party 723,740 729,638
=========== ===========
Total current liabilities 739,207 852,809
NOTE PAYABLE - RELATED PARTY 50,000 --
ACCRUED CONTINGENCY 1,229,000 1,229,000
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
55,666,953 shares issued and outstanding 6/30/00 7,110,224 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 (3,939,876) (3,382,162)
Deferred consulting (136,230) (28,750)
Accumulated other comprehensive income (594,000) --
----------- -----------
Total stockholders' equity (deficit) (190,115) (250,425)
----------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY (DEFICIT) $ 1,828,092 $ 1,831,384
=========== ===========
</TABLE>
See accompanying notes to these condensed financial statements.
2
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NESS ENERGY INTERNATIONAL, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
FOR THE THREE AND SIX MONTHS
ENDED JUNE 30, 2000 AND 1999
(Unaudited)
<TABLE>
<CAPTION>
Cumulative
Amounts
Since
Reentering
Development
Three Months Ended Six Months Ended Stage
June 30, June 30, January 1,
2000 1999 2000 1999 1998
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
REVENUES
Oil and gas revenues $ 5,646 $ 5,076 $ 10,028 $ 10,200 $ 53,537
EXPENSES
Lease operating expenses 2,543 1,159 3,717 2,643 17,479
Production taxes 421 378 757 752 3,935
Compression expenses 578 1,091 1,220 2,030 8,273
Depreciation and depletion 4,376 1,402 8,751 2,804 24,745
Litigation settlement -- -- -- -- 1,392,900
General and administrative 311,394 22,928 553,902 45,037 2,120,606
------------ ------------ ------------ ------------ ------------
Total operating expenses 319,312 26,958 568,347 53,266 4,000,322
------------ ------------ ------------ ------------ ------------
Operating income (loss) (313,666) (21,882) (558,319) (43,066) (3,946,785)
Other Income 488 1,749 605 1,749 6,909
------------ ------------ ------------ ------------ ------------
Net gain (loss) before income (313,178) (20,133) (557,714) (41,317) (3,939,876)
Income tax benefit -- -- -- -- --
------------ ------------ ------------ ------------ ------------
NET LOSS $ (313,178) $ (20,133) $ (557,714) $ (41,317) $ (3,939,876)
Other comprehensive income, net of tax
Unrealized losses on investments $ (469,000) $ -- $ (593,750) $ -- $ (593,750)
------------ ------------ ------------ ------------ ------------
Comprehensive loss $ (782,178) $ (20,133) $ (1,151,464) $ (41,317) $ (4,533,626)
============ ============ ============ ============ ============
Net loss per weighted average share $ (0.01) $ (0.00) $ (0.01) $ (0.00) $ (0.08)
============ ============ ============ ============ ============
Weighted average shares outstanding 55,655,357 52,210,606 55,206,726 53,188,354 52,148,467
============ ============ ============ ============ ============
</TABLE>
See accompanying notes to these condensed financial statements
3
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NESS ENERGY INTERNATIONAL, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999
(Unaudited)
<TABLE>
<CAPTION>
Cumulative
Amounts
Since
Reentering
Development
Stage
January 1,
2000 1999 1998
----------- ----------- ------------
<S> <C> <C> <C>
NET CASH USED IN OPERATING ACTIVITIES $ (450,540) $ (967,306) $ (208,098)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of other fixed assets (659) -- (659)
Cash paid for deposits on equipment -- -- (1,229,000)
----------- ----------- -----------
Cash used in investing activities (659) -- (1,229,659)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings - related party 50,000 -- 50,000
Proceeds from issuance of common stock -- 281,250 1,401,250
Cash provided by financing activities 50,000 281,250 1,451,250
Increase (decrease) in cash for period (401,199) 213,944 13,493
CASH, BEGINNING OF PERIOD 414,692 4,352 --
----------- ----------- -----------
CASH, END OF PERIOD $ 13,493 $ 218,296 $ 13,493
=========== =========== ===========
</TABLE>
See accompanying notes to these condensed financial statements.
NOTE 1. UNAUDITED INFORMATION
The balance sheets as of June 30, 2000 and the statements of
operations for the three month periods ended June 30, 1999 and June
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 June 30, 2000 and the results of
operations for the three months periods ended June 30, 1999 and June
30, 2000.
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NOTE 2. BASIS OF PRESENTATION
The condensed financial statements of Ness Energy International, Inc.
(the "Company") as of June 30, 1999 and June 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 whose 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).
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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, the Company's limited
restaurant base, lack of geographic diversification, the risks associated with
expansion, a lack of marketing experience and activities, risks of franchising,
seasonability, the choice of site locations, development and construction
delays, need for additional personnel, increases in operating and food costs and
availability of supplies, significant industry competition, government
regulation, insurance claims 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.
Liquidity and Capital Resources
Prior to October 1997 several attempts were made to keep the Company active.
These attempts included contacting several companies; 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 of that time entered into an
agreement with Hayseed Stephens where he would take over operations in
conjunction with vending 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 approved by the board
of directors of Kit Karson and Mr. Stephens that Mr. Sykes would receive the
assets described in paragraphs 1 and 2 under Item 2 Description of Property, as
compensation for taking care of the Company during the dormant years and that
Hayseed Stephens would vend in a gas asset for 14,150,000 shares of stock.
Please see Item 2. Properties and "Gas Reserves" for a description of the gas
asset (Greenwood Gas Field) located in Parker County, Texas.
6
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The principle asset on both December 31, 1995 and 1996 was cash being $2,680 and
$1,453 for these respective dates. The Company owned 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. This interest was still in
effect until it was assigned to Art Sykes being a part of the closing for the
change of control that occurred on December 22, 1997.
Three of the Company's assets were investments in stocks of which only one,
Black Giant Oil Company, is still in existence and is currently listed on the
Electronic Bulletin Board. The Company owned 87,400 shares of Black Giant Oil
Company and on December 22, 1997 (date of change of control) with a market value
of $2,622 and was assigned to Art Sykes as a part of the change of control. The
other two securities are considered to be worthless.
Liquidity and Capital Resources
During 1999, the Company made private placements totaling $1,401,250 for the
issuance of 1,427,026 restricted shares of its common stock. Also, the Company
acquired a 4% working interest in two oil and gas leases and 2,081 acres of oil
and gas property through the issuance of 346,719 shares of its common stock. The
Company also settled a lawsuit by issuing 2,701,500 shares of its common stock.
The Company acquired a vehicle, received services during 1999, and will receive
future services 30,500, 154,639, and 15,000 shares of its common stock
respectively.
On June 6, 2000, the Company signed a Note to borrow up to $300,000 from Harold
"Hayseed" Stephens payable with interest at prime rate plus 2% by June 6, 2001.
As of June 30, 2000, $50,000 had been received and at August 15, 2000, a total
of $150,000 had been advanced.
Results of Operations
COMPARISON OF THE THREE MONTH PERIOD ENDED JUNE 30, 1999 AND JUNE 30, 2000.
Revenues. Operating revenues for three month period ended June 30, 1999
were $5,076 with an operating loss of $21,882.
Operating revenues for three month period ended June 30, 2000 were $5,646 a 11%
increase from 1999, with an operating loss of $313,666. The 11% increase in
revenues over 1999 is due to an increase in gas prices, partially offset by
lower gas production.
Costs and Expenses. Costs and expenses for the three month period ended
June 30, 2000 increased by $3888 or 96% to $7,918 as compared to $4,030 for the
corresponding period ended June 30, 1999. This was primarily due to increased
lease operating costs and higher equipment depreciation expense. General and
Administrative Costs in 2000 increased by 1258% to $311,394 as compared to
$22,928 for the same three month period in 1999 due primarily to increased
corporate expenses and to costs associated with the Israel project.
Net Income (Loss). The Company had a net loss for the three month
period ended June 30, 2000 of $313,178 compared to net loss of $20,133 for the
same period in 1999, representing ($.01) and ($.00) per share, respectively.
7
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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.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings:
During 1999, the Company settled two lawsuits filed in 1998 through the
issuance of unrestricted stock. In January 2000, the Company was served with a
lawsuit demanding that the Company pay to the Plaintiff 500,000 shares of the
company's common stock. The suit is filed in the United States District Court
for the District of Kansas, bearing civil action number 00-1018-JTM. The
Plaintiff was not a shareholder at the time present management took control of
Ness Energy International, Inc. (then Kit Karson Corporation) on December 22,
1997, and had not been a stockholder since November of 1985. Management believes
that the Plaintiff has no standing to bring this legal action and that the
demand is totally without merit. On August 9, 2000, the court ordered the suit
he dismissed with prejudice. On the sixteenth day of August 2000, the Company
received notice that it had been named as a Defendant in a law suit 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's 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:
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(a) Exhibit I Note from Harold "Hayseed" Stephens (Lender) to the Company
(Borrower)
(b) Form 8K May 4, 2000 announced the resignation of Ivan Webb as Director
and Chief Financial Officer effective April 28, 2000.
(c) Financial Data Schedule
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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/ Hayseed Stephens
---------------------------
Hayseed Stephens
President & Chief Executive
Officer
Dated: August 21, 2000
9
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EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
-------- -----------
<S> <C>
99.1 Note from Harold "Hayseed" Stephens (Lender) to the Company
(Borrower)
27.1 Financial Data Schedule
</TABLE>
