SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the fiscal year ended December 31, 1995
Commission file number 0-10701
TATONKA ENERGY, INC.
(Exact name of registrant as specified in its charter)
Oklahoma, U.S.A.
(State or other jurisdiction of incorporation or
organization)
73-1457920
(I.R.S. Employer Identification No.)
9320 East Central
Wichita, Kansas
(address of principal executive offices)
67206
(Zip Code)
Registrant's telephone number, including area code
(316)
636-2667.
Securities registered pursuant to Section 12(b) of the
Act:
None
Securities registered pursuant to Section 12(g) of the
Act:
Common Stock, Par Value of $.001 per Share
(Title of Class)
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 __
Check if there is no disclosure of delinquent
filers in response to Item 405 or Regulation S-B
contained herein, and no disclosure will be contained,
to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by
reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. X
Issuer's revenues for its most recent fiscal year:
$5,140
Transitional Small Business Disclosure format:
Yes __ No X
As of February 8, 1996, the aggregate market value
of the voting stock held by non-affiliates of the
registrant was $166,217 (U.S. dollars) and the number
of shares of Common Stock outstanding was 5,540,556.
PART I
Item 1. Business
Sooner Energy Corp. (Sooner) was organized under the
laws of British Columbia, Canada, on March 12, 1980.
On June 1, 1994, at the extraordinary general meeting
of members of Sooner, a special resolution was passed
for the continuance of the Company as a Wyoming
corporation in the United States. After the
continuation, a "foreign merger" with a wholly-owned
subsidiary company incorporated in Oklahoma, Tatonka
Energy, Inc. (Tatonka), occurred with Tatonka being the
surviving entity and Sooner being dissolved.
Subsequent to December 31, 1994, the Company was
"delisted" on the Vancouver Stock Exchange and began
trading on the OTC Exchange.
Effective May 1, 1994, the stock of Sooner Acquisition
Corp., a wholly-owned subsidiary, was sold with the
Company incurring a loss of $27,076 on the sale.
Gallatin Resources, Inc., a wholly-owned subsidiary was
dissolved in December, 1994 with the remaining assets
and liabilities being distributed to the Company.
Accordingly, at December 31, 1994, there are no longer
any subsidiaries as the Company's other wholly-owned
subsidiary, Arum Petroleum Corp., was dissolved in 1993
with its remaining assets and liabilities also
distributed to its parent corporation.
The Company's registered office in Oklahoma is Twelfth
Floor, One Leadership Square, 211 N. Robinson, Oklahoma
City, Oklahoma 73102, and its telephone number is
(405) 235-4100.
Oil and Gas Production
The Company primarily explores for and develops oil
and gas reserves in the Mid-Continent region of the
United States. The majority of the Company's proved
developed reserves were located in Caddo, Custer, Ellis
and Kingfisher Counties in Northwestern Oklahoma.
The Company's exploration and production is conducted
for its own account. In 1995, the Company participated
in no new wells.
Major Customer
None
Markets
The availability of a ready market for any oil and
gas which may be discovered by the Company and the
price obtained therefore depend upon numerous factors,
including the proximity to adequate transmission
facilities and government regulations on the
production, transportation and sale of oil and gas.
See "Regulations" below.
During the past several years demand, with certain
exceptions, in the United States for crude oil and
natural gas has generally been weak, and prices for
these products have generally declined. Prices of oil
and gas have historically been and will continue to be
subject to supply and demand factors. Over the long
term, prices for both oil and gas will depend on
demand, product availability, sources of alternative
fuels, governmental regulation and other factors beyond
the control of the Company.
Regulations
Federal Regulation of Liquid Hydrocarbons. Liquid
hydrocarbons (including crude oil and natural gas
liquids) were subject to federal price and allocation
controls until January, 1981 when they were effectively
eliminated by executive order of the President. As a
result, the Company sells oil produced from its
properties at unregulated market prices. Although it
appears unlikely under present circumstances that
controls will be reimposed upon liquid hydrocarbons, it
is possible Congress may enact such legislation at a
future date. The impact of such legislation on the
Company cannot be predicted.
Natural Gas Regulation. Sale of natural gas by the
Company is subject to regulation of production,
transportation and pricing by governmental regulatory
agencies. Generally, the regulatory agency in the
state where a producing gas well is located supervises
production activities and, in addition, the
transportation of gas sold intrastate. The Federal
Energy Regulatory Commission ("FERC") regulates the
price of intrastate, as well as interstate, gas under
the Natural Gas Policy Act of 1978 ("NGPA"). The NGPA
is a complicated and lengthy piece of legislation. It
provides for wellhead price controls for specified time
periods; decontrol of certain prices, depending on
location, depth or time of production; emergency
allocation authority; curtailment of deliveries to
certain consumers coupled with preferential delivery
status to other customers; incremental pricing to large
industrial customers (on a limited basis); refunding
with interest in the event of sales at prices in excess
of the ceiling prices; and substantial penalties (both
civil and criminal) for violations of the NGPA.
Price controls for certain categories of natural gas
production have been deregulated under the NGPA,
including "new gas", gas produced from below 15,000
feet and certain other "high cost" gas, and gas
produced from "new onshore production wells". Such
deregulated gas production may be sold at market prices
that are determined by supply, BTU content, pressure,
location of the wells, and other factors.
The FERC has adopted major changes in certain of its
regulations that will significantly affect future
transportation and marketing of natural gas.
The Company is uncertain how the recent or proposed
regulations will affect the marketing of its gas
because it is unable to predict how all interstate
pipelines that receive its gas will respond to such
rule making.
Federal Leases. Any Company operations conducted on
federal oil and gas leases must be conducted in
accordance with permits issued by the Bureau of Land
Management and are subject to a number of other
regulatory restrictions. Moreover, on certain federal
leases, prior approval of drillsite locations must be
obtained from the Environmental Protection Agency.
State Regulation. State regulatory authorities have
established rules and regulations requiring permits for
drilling operations, drilling bonds and reports
concerning operations. The states in which the Company
operates also have statutes and regulations governing a
number of environmental and conservation matters,
including the unitization or pooling of oil and gas
properties and establishment of maximum rates of
production from oil and gas wells. In addition, many
states restrict production of oil and gas wells. Many
states also restrict production of oil and gas to the
market demand for such commodities. Such statutes and
regulations may limit the rate at which oil and gas
could otherwise be produced from the Company's
properties.
Environmental and Safety Regulations. The Company
believes that it complied, in all material respects,
with all legislation and regulations affecting its
operations in the drilling of oil and gas wells and the
discharge of wastes. To date, compliance with such
provisions and regulations has not had a material
effect upon the Company's expenditures for capital
equipment, its earnings or its competitive position.
The cost of such compliance is not anticipated to be
material in the future.
The Company is also subject to federal, state and
local laws pertaining to safety standards, including
the federal Occupational Safety and Health Act.
Pending Legislation. A number of legislative
proposals regarding the oil and gas industry have been
introduced in Congress and in various state
legislatures, which, if enacted, could significantly
affect all segments of the industry. At the present
time, it is impossible to predict the effect of any of
these proposals or others that may be enacted by
Congress or the various state legislatures.
Canadian Regulation
The Company does not believe that it is subject to
the provisions of Investment Canada Act ("ICA") because
as of December 31, 1995, it did not have any employees
in Canada and did not maintain a business establishment
in Canada which would cause it to be considered a
Canadian business enterprise subject to ICA. The
Company does not plan to alter its contacts with Canada
and, therefore, believes that ICA will continue not to
be applicable to the common stock of the Company and
the acquisition thereof by a non-resident or non-
citizen of Canada. However, in the event that
management of the Company should, for whatever reason,
decide that it is in the best interests of the Company
to hire employees in Canada, lease office space in
Canada, or acquire oil and gas properties in Canada,
the Company would probably be deemed to be a Canadian
business enterprise and ICA would be applicable.
Competition
The oil and gas industry is intensely competitive.
The Company competes with a substantial number of
corporations that have greater resources and that not
only can explore for and produce oil and gas, but also
carry on refining operations and market petroleum and
other products on a world-wide basis.
Most aspects of the Company's business require
skilled and experienced personnel. The ability to
retain and attract additional people with experience
and ability will be a critical aspect of the Company's
success.
In raising capital for its exploration and
development activities, the Company competes with other
oil and gas concerns as well as other investment
opportunities, whether or not related to the petroleum
industry. The Company's ability to compete
successfully for such capital is largely dependent on
the success of its oil and gas exploration activities,
its arrangements for participation by outside parties,
and the continued availability of tax incentives for
exploration and development activities.
General Risks
Exploration for oil and gas is extremely hazardous by
its nature and involves a high degree of risk of loss.
The industry ratio of productive oil and gas wells has
been low when compared with the total number of wells
drilled, and there can be no assurance that oil and gas
production will be obtained in sufficient quantities to
enable the Company to recover the expenditures made in
its oil and gas exploration activities.
The Company's operations are subject to all the risks
inherent in the exploration for and production of oil
and gas which could result in damage to or destruction
of oil and gas wells and formations. The Company does
not generally serve as operator of the wells in which
it owns an interest, and therefore certain of such
risks are not as severe to the Company's operations.
The Company generally carries insurance against certain
risks, but will not be fully insured, particularly
against various risks involved in drilling wells,
because insurance is either not available or the
Company elects not to insure because the premium costs
are prohibitive. The occurrence of an event not fully
insured against could cause the Company to incur
substantial costs.
As of December 31, 1995, the Company had no full-time
employees. All administrative services are provided by
Bison Energy Corporation, a Kansas Corporation which is
affiliated with Heritage Resources, Inc., a controlling
interest owner of the Company.
Item 2. Properties
General
The Company's principal properties consisted of oil
and gas logs related to properties located in the State
of Oklahoma.
Item 3. Legal Proceedings
Manning Investments, Inc. (the "Plaintiff" v. Sooner
Acquisition Corp., et al.,) District Court of Oklahoma,
Tulsa County, No. CJ-93-0783 filed February 18, 1993.
In 1993, the Company was co-defendant in a lawsuit
involving an alleged breach of contract, accounting
and conversion based on the failure to remit to
plaintiff revenues from an oil and gas interest on
which the plaintiff purportedly held a lien. A
settlement was reached, whereas the plaintiff
dismissed all charges in exchange for assignment of
the Company's interest in all oil and gas properties
except for two leases. The effective date of the
settlement was January 1, 1994. The Company's net
book value in the leases assigned was $34,240 and as
such, this amount was recorded as lawsuit settlement
expense.
Item 4. Submission of Matters to a Vote of Security
Holders
On June 1, 1994, at the Extraordinary General Meeting
of members, a special resolution was passed for the
continuance of the Company as a Wyoming corporation in
the United States. After the continuation, a "foreign
merger" with a wholly-owned subsidiary company,
incorporated under the laws of the State of Oklahoma,
occurred. The principal purpose of the continuation
and subsequent merger was to effect a change of situs
of the Company and cause it to cease to be a resident
of Canada for tax purposes. As of September 30, 1994,
Sooner Energy Corp. was merged with its wholly-owned
subsidiary, Tatonka Energy, Inc., with Tatonka Energy,
Inc. being the surviving entity.
PART II
Item 5. Market for the Company's Common Stock
and Related Stockholder Matters
The Company's common stock is traded on the NASDAQ
Bulletin Board under the symbol "TTKA". As of December
31, 1995, the number of stockholders was 396 (supplied
by the Company Registrar and Transfer Agent). The
tables below list the high and low bid prices in U.S.
dollars as provided by Paragon Capital, Corp.
<TABLE>
<CAPTION>
Bid Quotations
High Low
<S> <C> <C> <C>
1995 (U.S. Dollars):
First Quarter .02 .02 (3)
Second Quarter .02 .02 (3)
Third Quarter .02 .02 (3)
Fourth Quarter .03 .02 (3)
1994 (Canadian Dollars):
First Quarter .15 .09 (1)
Second Quarter .15 .09 (1)
Third Quarter .17 .13 (1)
Fourth Quarter .20 .06 (2)
</TABLE>
(1)These bids were reported for Sooner Energy Corp.,
Vancouver Stock Exchange, trading symbol SGY, which
merged with Tatonka Energy, Inc. effective September
26, 1994.
(2)These bids were reported for Tatonka Energy, Inc.,
Vancouver Stock Exchange, trading symbol TNK.
(3)These bids were reported for Tatonka Energy, Inc.,
NASDAQ Bulletin Board, trading symbol TTKA.
The Company is not aware of any limitations on the
rights of foreigners to hold or vote its securities,
save and except the potential application of the
Foreign Investment Review Act of Canada.
The Company does not believe that it is subject to
the provisions of ICA because as of December 31, 1994,
it did not have any employees in Canada and did not
maintain a business establishment in Canada which would
cause it to be considered a Canadian business
enterprise subject to ICA. The Company does not plan
to alter its contacts with Canada and, therefore,
believes that ICA will continue not to be applicable to
the common stock of the Company and the acquisition
thereof by a non-resident or non-citizen of Canada.
However, in the event that management of the Company
should, for whatever reason, decide that it is in the
best interests of the Company to hire employees in
Canada, lease office space in Canada, or acquire oil
and gas properties in Canada, the Company would
probably be deemed to be a Canadian business enterprise
and ICA would be applicable.
The Company has not paid any dividends on its common
stock and anticipates that future earnings, if any,
will be retained to finance future growth.
Certain Tax Matters
Following is a brief summary of the United States and
Canadian income tax provisions under the presently
existing treaty which the Company believes are material
to an understanding of the income tax matters related
to the ownership of the Company's common stock. It is
the responsibility of each shareholder of the Company
to consult with his tax advisors with respect to these
and other provisions which may affect his individual
tax position.
Canadian Taxes
In general, for a dividend paid by the Company, a
Canadian individual resident shareholder will, for
federal income tax purposes, include in his income 15%
of the amount of the cash dividend paid and will be
entitled to a tax credit of 37.5% of the cash dividend.
An additional amount will be payable with respect to
the dividend as a provincial income tax, which tax will
vary depending upon the taxpayer's province of
residence.
Except in the case of shares beneficially owned by a
person who is or is deemed to be a resident of Canada
or has or is deemed to have a "permanent establishment"
in Canada, no Canadian income tax consequences will
arise upon a disposition of the Company's common stock
by a resident of the United States. The Canadian
income tax consequences arising for a resident of
Canada upon a disposition of the Company's common stock
will depend upon whether such shareholder holds the
shares as a trader or dealer in securities or has
acquired the shares as an adventure or concern in the
nature of trade. If the former, the entire gain upon
disposition is included in income subject to Canadian
income tax; if the latter, and the shareholder holds
the shares as capital property, only one-half of the
gain is included in income as a taxable capital gain.
Tax Treaties
The presently existing tax treaty between the United
States and Canada essentially calls for taxation of
shareholders by the shareholders' country of residence.
In those instances in which a tax may be assessed by
the other country, a corresponding credit against the
tax owed in the country of residence is normally
available. Shareholders of the Company should consult
with their own advisors, however, for full details.
Item 6. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Year Ended December 31, 1995 vs. Year Ended December
31, 1994
Results of Operations
Other income decreased by $1,541 for 1995, as
compared to 1994. This is due to changes in interest
income.
Depreciation, depletion and amortization increased
by $11,848 for 1995, as compared to 1994. This
decrease is due to the write down of cost in oil and
gas logs.
General and administrative expenses decreased by
$71,861 for 1995, as compared to 1994. This decrease
is mainly due to professional services involved in the
lawsuit settlement, selling of the stock of Sooner
Acquisition Corporation, a wholly-owned subsidiary (see
notes on sale of subsidiary below), and fees involved
in moving the Company situs from Canada to the United
States (see Item 4) in 1994.
Effective May 1, 1994, the stock of Sooner
Acquisition Corp., a wholly-owned subsidiary, was sold
with the Company incurring a loss of $27,076 on the
sale.
The Company was co-defendant in a lawsuit involving
an alleged breach of contract, accounting conversion
and a declaratory judgment based on the Company's
alleged failure to remit to plaintiff revenues from oil
and gas interests on which plaintiff purportedly held a
lien. A settlement was reached, whereas the plaintiff
dismissed all charges in exchange for assignment of the
Company's interest in all oil and gas properties except
the Tippens and Alma Neece leases. The effective date
of the settlement was January 1, 1994. The Company's
net book value in the assigned properties at January 1,
1994 was $34,240, as such this amount was recorded as
lawsuit settlement expense.
Liquidity and Capital Resources
The Company's working capital at December 31, 1995
was $104,805 versus $148,692 at December 31, 1994, for
a decrease in working capital of $43,887. This is due
to a reduction in 1995 as compared to 1994 of
administrative fees such as audit and management fees.
Management is of the opinion that the Company is
dependent upon obtaining additional working capital to
continue operations. The Company's immediate needs for
working capital include development or purchase of oil
and gas properties. The Company is currently looking
to acquire larger working interest in a small number of
properties with increased upside potential. In the
future, the Company's efforts to obtain additional
capital include continuing efforts to conduct a public
or private offering of the Company's equity securities,
and proposed acquisitions of additional oil and gas
properties in exchange for common stock of the Company.
During 1994 and 1995, management met with several
investment bankers and broker-dealers in an effort to
generate interest in conducting a public offering of
the Company's securities. However, as of December 31,
1995 such discussions had not resulted in an agreement
for such offering. Nonetheless, the Company will
continue to investigate opportunities which are
presented through the contacts of management.
The Company does not have a formal plan for capital
expenditures in 1996 and will continue to depend on
internally generated funds as its major source of
liquidity, as it has no unused line of credit or any
formal arrangements with any lending institution to
borrow any funds.
Inflation and Changes in Prices
The rate of inflation during 1995 did not have a
negative impact on the Company's operating costs. To
the extent some of such costs leveled off, increased,
or decreased, the Company suffered no setback.
Item 7. Financial Statements
The financial statements are attached hereto.
Item 8. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure
None
PART III
Item 9. Directors, Executive Officers, Promoters and
Control Persons; Compliance with Section 16(a) of the
Exchange Act
Directors
The term of the present directors will expire
concurrently with the election of directors at the
next General Meeting of Shareholders. Members of the
Board of Directors of the Company have served in
that capacity continuously since elected. The
following information concerning each director is
presented as of December 31, 1995.
C. J. Lett, III C. J. Lett, III was
appointed President of the Company in June, 1991.
He holds a BSBA from the University of Colorado and
a JD from the Oklahoma City University School of
Law. Mr. Lett is also President of Bison Energy
Corporation, established in 1981, which is engaged
in the exploration, acquisition and operation of oil
and gas properties in the Mid-Continent region.
Joe R. Love Mr. Love has been a director since
June, 1989. In addition to being co-founder and
Chairman of Sinclair Capital Group, Inc., is
currently Chairman of the Board and President of
Partridge Capital Corporation, a venture capital
firm headquartered in Oklahoma City, Oklahoma, a
position he has held since 1983. Partridge Capital
has made a number of investments over the last nine
years, including Skolniks, Inc., a thirty-six unit
restaurant chain for which Mr. Love has served as
Co-Chairman of the Board since 1986 and First Cash,
Inc., a public company which operates a chain of
pawn shops, for which Mr. Love has served as a Board
Member since 1991. He has been instrumental in
arranging public offerings totaling approximately
$27 million for a number of his portfolio companies.
Over the last ten years, Mr. Love has been involved
in several other public companies as well as being
active in real estate and restaurant ventures. His
real estate activities include acting as general
partner of a $94 million joint venture with
Metropolitan Life Insurance Company. He has also
been involved as a partner in several Hilton Hotels.
Mr. Love is a graduate of the University of
Oklahoma with a BBA in Finance.
Gerald L. Jardine Mr. Jardine has been a director
since June, 1989. He has experience in the fields
of finance, marketing and engineering. During 1978
to 1985 he founded and was President of Advance
Method Jewelry Manufacturing, Ltd. During 1984 to
the present, Mr. Jardine has served as President and
Director of International Powertech Industries,
Inc., a company established to research and develop
a new patented combustor, and is listed on the
Vancouver Stock Exchange. Mr. Jardine is also
President, Chief Executive Officer, and a director
of Pacific Summa Environmental Corp.
Executive Officers
C. J. Lett, III was appointed President in June,
1991. See discussion of Directors above.
D. Keith McFall was appointed Vice President in
October, 1994 as a result of the merger of Sooner
Energy Corp. and Tatonka Energy, Inc. He holds a BBA
and JD from the University of Oklahoma. Mr. McFall
has been practicing corporate law for over ten years
and is currently President and Managing Partner of
Phillips, McFall, McCaffrey, McVay and Murrah, P.C., a
legal firm established in 1986.
Dean Pattisson was appointed Secretary in June,
1991. He holds a BS in Geology from the University of
Colorado. Mr. Pattisson has worked as a geological
consultant for over ten years, and is currently
President of Xploration Services, Inc., a consulting
firm he established in 1989, and Vice President of
Exploration for Bison Energy Corporation.
Item 10. Executive Compensation
Executive Officers
The Company has one executive officer. For the
Company's most recently completed financial year, no
cash compensation was paid to such executive officer.
Stock options were granted to the following
employees in the amount set opposite their name at an
exercise price of $0.15 (Cdn) per share for a period of
five years commencing July 14, 1994:
<TABLE>
<S> <C>
C. J. Lett, III 275,000 shares
D. Keith McFall 137,500 shares
Dean Pattisson 137,500 shares
</TABLE>
There are no further plans in effect pursuant to which
cash or non-cash compensation is proposed to be paid or
distributed in a subsequent year.
Directors
As compensation for service as a director, each
Director of the Company receives $500 per board Meeting
attended, plus expenses incurred in attending such
Meetings.
Item 11. Security Ownership of Certain Beneficial
Owners and Management
The following table sets forth, as of December 31,
1995, certain information with respect to all persons
known to the Company to be the beneficial owners of
record, directly or indirectly, of more than ten
percent (10%) of the outstanding Common Shares of the
Company on the record date of the Meeting.
<TABLE>
<CAPTION>
Name and Address Amount and Nature of Percent
of Beneficial Owner Beneficial Ownership of Class
<S> <C> <C>
Heritage Resources 1,270,591 22.9%
Twelfth Floor
One Leadership Square
211 N. Robinson
Oklahoma City, OK 73102
</TABLE>
Also, as of December 31, 1995, Howe & Co., a
clearing house for the Vancouver Stock Exchange, holds
of record 1,137,516 Common Shares registered in the
name of Howe & Co. or other intermediary registrars,
but for which they are not the beneficial owner. The
Company has no knowledge regarding the beneficial
owners of such shares.
The above information was supplied by the Company's
Registrar and Transfer Agent, by the Company, or by the
Members themselves.
Item 12. Certain Relationships and Related
Transactions
Management of the Company has been performed by Bison
Energy Corporation (affiliated with Heritage
Resources, which is a controlling interest owner in the
Company) since August, 1991 under a monthly fee
arrangement. Total fees charged were $24,000 and
$29,000 for the years ended December 31, 1995 and 1994,
respectively.
Item 13. Exhibits and Reports on Form 8-K
There were no filings of Form 8-K for the year ended
December 31, 1995.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
TATONKA ENERGY, INC.
Date: March 31, 1996 By: C. J. Lett, III
C. J. Lett, III
President
Date: March 31, 1996 By: Joe R. Love
Joe R. Love
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Tatonka Energy, Inc.
We have audited the accompanying balance sheets of
Tatonka Energy, Inc. as of December 31,1995 and 1994,
and the related statements of operations, stockholders'
equity and cash flows for the years then ended. These
financial statements are the responsibility of the
Company's management. Our responsibility is to express
an opinion on these financial statements based on our
audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require
that we plan and perform the audits to obtain
reasonable assurance about whether the financial
statements are free of material misstatement. An audit
includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the
accounting principles used and significant estimates
made by management, as well as evaluating the overall
financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to
above present fairly, in all material respects, the
financial position of Tatonka Energy, Inc. as of
December 31, 1995 and 1994, and the results of its
operations and its cash flows for the years then ended
in conformity with generally accepted accounting
principles.
GRANT THORNTON LLP
Wichita, Kansas
February 28, 1996
<PAGE>
<TABLE>
<CAPTION>
TATONKA ENERGY, INC.
BALANCE SHEETS
December 31, December 31,
1995 1994
--------- ---------
ASSETS
<S> <C> <C>
CURRENT ASSETS
Cash and cash
equivalents 111,329 146,488
Accounts receivable
from affiliates -- 10,594
--------- ---------
Total current
assets 111,329 157,082
PROPERTY AND EQUIPMENT,
AT COST, less
accumulated depreciation
of $19,439 and $4,555
in 1995 and 1994,
respectively 1,818 16,702
--------- ---------
Total Assets 113,147 173,784
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable
includes $2,000 and
$7,294 to affiliate
at December 31,
1995 and 1994,
respectively) 6,524 8,390
========= =========
STOCKHOLDERS' EQUITY
Series "A" non-voting 135,139 139,251
preferred stock
authorized, 5,000,000
shares of $1 par
value, issued and
outstanding, 135,139
and 139,251 shares
in 1995 and 1994,
respectively
Common stock, 5,540 5,513
authorized 50,000,000
shares of $.001 par
value, issued
5,540,556 and
5,513,143 in 1994
and 1995,respectively
Paid-in capital 5,282,635 5,278,550
Accumulated deficit (5,313,981) (5,255,210)
Treasury stock
at cost - 25,000
common shares (2,710) (2,710)
--------- ---------
Total Stockholders'
Equity 106,623 165,394
------- -------
Total Liabilities and
Stockholders'
Equity 113,147 173,784
========= =========
<FN>
The accompanying notes are an integral part of these
financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TATONKA ENERGY, INC.
STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31,
1995 1994
-------- --------
<S> <C> <C>
INTEREST INCOME 5,140 6,681
COSTS AND EXPENSES
Depreciation 14,884 3,036
General and
administrative
(includes amounts
incurred with affiliate
of $24,000 and $29,000
in 1995 and 1994,
respectively) 49,027 120,888
Loss on sale of
subsidiary -- 27,076
Lawsuit
settlement -- 34,240
-------- --------
Total costs
and
expenses 63,911 185,240
-------- --------
LOSS BEFORE
INCOME TAXES (58,771) (178,559)
Income Taxes -- --
-------- --------
NET LOSS (58,771) (178,559)
======== ========
NET LOSS PER
COMMON SHARE (.01) (0.03)
======== ========
<FN>
The accompanying notes are an integral part of these
financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TATONKA ENERGY, INC.
STATEMENTS OF CASH FLOW
Increase (Decrease) in Cash and Cash Equivalents
YEAR ENDED DEC 31,
1995 1994
--------- ---------
<S> <C> <C>
Cash flows from
operating activities
Net loss (58,771) (178,559)
Adjustments to
reconcile net
loss to net cash
used in operating
activities
Depreciation,
depletion and
amortization 14,884 3,036
Lawsuit settlement -- 34,240
Loss on sale of
subsidiary -- 27,076
Change in operating
assets and liabilities
Increase (decrease) in
accounts
receivable 10,594 (10,594)
Decrease in
oil and gas
distributions
payable -- (5,271)
Increase (decrease)
in accounts
payable (1,866) 8,390
--------- ---------
Net cash used in
operating
activities (35,159) (121,682)
Cash flows from
investing activities
Acquisition and
development of oil
and gas properties -- (15,700)
Cash transferred to buyer
on sale of subsidiary -- (11,376)
--------- ---------
Net cash used in
investing
activities -- (27,076)
Cash flows from
financing activities
Purchase of treasury
stock -- (2,710)
--------- ---------
Net decrease in cash (35,159) (151,468)
and cash equivalents
Cash and cash
equivalents at
beginning of year 146,488 297,956
--------- ---------
Cash and cash
equivalents at end
of year 111,329 146,488
========= =========
<FN>
Noncash investing and
financing activities
During the year ended December 31, 1995 the Company
cancelled 4,112 shares of preferred stock upon their
conversion into 27,413 shares of common stock.
The accompanying notes are an integral part of these
financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TATONKA ENERGY, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1995 AND 1994
Preferred Stock Common Stock Paid-in
Shares Amount Shares Amount Capital
<S> <C> <C> <C> <C> <C>
Balance
at
January
1,1994 139,251 107,108 5,513,143 5,316,206 --
Recapi-
taliza-
tion
upon
merger
with
Tatonka
Energy,
Inc. -- 32,143 -- (5,310,693) 5,278,550
Net loss
for the
year -- -- -- -- --
Purchase
of
common
stock for
treasury -- -- -- -- --
--------- --------- ---------- ---------- ----------
Balance at
December
31, 1994 139,251 139,251 5,513,143 5,513 5,278,550
Conversion
of preferred
stock to
common
stock (4,112) (4,112) 27,413 27 4,085
Net
loss
for the
year -- -- -- -- --
--------- --------- ---------- ---------- ----------
Balance at
December
31, 1995 135,139 135,139 5,540,556 5,540 5,282,635
========= ========= ========= ========= =========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TATONKA ENERGY, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1995 AND 1994 (CONTINUED)
Accumulated Treasury Stock
Deficit Shares Amount Total
<S> <C> <C> <C> <C>
Balance
at
January
1,1994 (5,076,651) -- -- 346,663
Recapi-
taliza-
tion
upon
merger
with
Tatonka
Energy,
Inc. -- -- -- --
Net loss
for the
year (178,559) -- -- (178,559)
Purchase
of
common
stock for
treasury -- 25,000 (2,710) (2,710)
--------- --------- ---------- ----------
Balance at
December
31, 1994 (5,255,210) 25,000 (2,710) 165,394
Conversion
of preferred
stock to
common
stock -- -- -- --
Net
loss
for the
year (58,771) -- -- (58,771)
--------- --------- ---------- ----------
Balance at
December
31, 1995 (5,313,981) 25,000 (2,710) 106,623
========= ========= ========= =========
<FN>
The accompanying notes are an integral part of these
statements.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
December 31, 1995 and 1994
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
1. Presentation
Sooner Energy Corp. (Sooner) was organized under the
laws of British Columbia, Canada, on March 12, 1980.
On June 1, 1994, at a meeting of the stockholders of
Sooner, a special resolution was passed for the
continuance of the Company as a U.S. Corporation.
There upon the Company merged with its wholly-owned
U.S. subsidiary, Tatonka Energy, Inc. and adopted its
name. Subsequent to December 31, 1994, the Company was
"delisted" on the Vancouver Stock Exchange and began
trading over the counter in the United States.
Effective May 1, 1994, the stock of Sooner Acquisition
Corp. (SAC), a wholly-owned subsidiary, was sold with
the Company incurring a loss of $27,076 on the sale.
Gallatin Resources, Inc., a wholly-owned subsidiary was
dissolved in December 1994 with the remaining assets
and liabilities being distributed to the Company.
Accordingly, at December 31, 1994, there no longer are
any subsidiaries as the Company's other wholly-owned
subsidiary, Arum Petroleum Corp., was dissolved in 1993
with its remaining assets and liabilities also
distributed to its parent corporation.
2. Nature of Operations
The Company conducted oil and gas operations in the
Mid-Continent region of the United States until 1994
when it disposed of its oil and gas properties. The
Company intends to continue to operate in the oil and
gas industry through the purchase of oil and gas
properties. Future purchases will be dependent upon
obtaining equity or debt financing.
3. Income Taxes
Deferred tax assets and liabilities are determined
based on the differences between the financial
accounting and tax basis of assets and liabilities.
Deferred tax assets or liabilities at the end of each
period are determined using the currently enacted tax
rate expected to apply to taxable income in the periods
in which the deferred tax asset or liability is
expected to be settled or realized.
4. Loss per common share
Loss per common share are based upon the weighted
average number of shares outstanding during the year
after consideration of the dilutive effect of
convertible preferred stock (see Note E).
5. Cash equivalents
The Company considers all highly liquid investments
purchased with a maturity of three months or less to be
cash equivalents.
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- Continued
6. Use of estimates
In preparing the Company's financial statements,
management is required to make estimates and
assumptions that affect the reported amounts of assets
and liabilities, the disclosure of contingent assets
and liabilities at the date of the financial
statements, and the reported amounts of revenues and
expenses during the reporting period. Actual results
could differ from those estimates.
NOTE B - INCOME TAXES
The deferred income tax asset arose from the following
temporary difference at December 31:
<TABLE>
CAPTION
1995 1994
<S> <C> <C>
Net operating loss
carryforwards 61,056 37,541
Less valuation allowance 61,056 37,541
-------- --------
Net deferred tax asset -- --
======== ========
</TABLE>
The Company has net operating loss carryforwards of
approximately $140,800 which will expire in 2009.
A reconciliation of income taxes computed at the
federal statutory rate to income tax expense is as
follows:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Income tax benefit at
statutory rate (19,982) (60,710)
Net operating loss not
providing a
tax benefit (19,982) (60,710)
-------- --------
Net deferred tax asset -- --
======== ========
</TABLE>
NOTE C - STOCK TRANSACTIONS
The Company's convertible preferred stock is nonvoting
and has a par value of $1. It has a 5% per annum
noncumulative dividend which is only payable if
declared by the Board of Directors. A preferred share
is convertible into 6.6667 common shares. The
remaining 135,139 preferred shares at December 31, 1995
are convertible into 900,931 shares of common stock.
NOTE D - RELATED PARTY TRANSACTIONS
During the year ended December 31, 1991 a controlling
interest in the Company's common stock was purchased by
an individual and entities controlled by him. One of
these controlled entities provides office space and
managerial, geological, legal, accounting and clerical
services to the Company. The Company incurred fees for
such services totaling $24,000 and $29,000 for the
years ended December 31, 1995 and 1994, respectively.
NOTE E - LOSS PER COMMON SHARE DATA
The weighted average common shares of stock outstanding
used to compute loss per common share is 5,531,769 and
5,502,253 for 1995 and 1994, respectively.
Series A nonvoting preferred stock and common stock
options for the years ended in 1995 and 1994 are not
included in the per share computations as to do so
would be antidilutive. Primary and fully diluted loss
per common share are considered equal in all years.
NOTE F - STOCK OPTIONS
The Company granted stock options on July 14, 1994 to
certain directors and employees to purchase 550,000
shares of the Company's common stock at $.15 (Canadian)
per share. The options are exercisable on or before
July 13, 1999, subject to termination clauses in the
event employment or directorship ceases. No options
have been exercised at December 31, 1995.
The option price was not less than the quoted market
price for the stock at the date of the option grant
and, therefore, no compensation expense was recognized.
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<CAPTION>
BALANCE SHEET
<S> <C>
<PERIOD-TYPE> 12-MOS
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<FISCAL-YEAR-END> DEC-31-1995
<CASH> 111329
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 111329
<PP&E> 1818
<DEPRECIATION> 0
<TOTAL-ASSETS> 113147
<CURRENT-LIABILITIES> 6524<F1>
<BONDS> 0
0
135139
<COMMON> 5540
<OTHER-SE> (34056)
<TOTAL-LIABILITY-AND-EQUITY> 113147
<CAPTION>
INCOME STATEMENT
<S> <C>
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<PERIOD-TYPE> 12-MOS
<SALES> 0
<TOTAL-REVENUES> 5140
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 63911
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (58771)
<INCOME-TAX> 0
<INCOME-CONTINUING> (58771)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (58771)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1> INCLUDES $24,000 TO AFFILIATE AT 12/31/95.
</TABLE>
