SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
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For the Quarter Ended March 31, 1997
Commission File Number: 0-10701
TATONKA ENERGY, INC.
(Exact name of registrant as specified in its charter)
Oklahoma, U.S.A. 73-1457920
(State or other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
10850 Switzer Rd., Suite 111, Dallas, Texas 75238
(Address of principal executive offices including zip code)
(214) 340-9341
(Registrant's telephone number including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter periods 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
---- ----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, at the close of the period covered by this report.
5,515,556 shares of common stock, $.001 par value.
Transitional Small Business Disclosure Format (Check one): Yes No X
---- ----
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INDEX
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PART I - FINANCIAL INFORMATION Page
Item 1. Financial Statements
Balance Sheets at March 31, 1997 (unaudited) and 1
December 31, 1996
Statements of Operations for the three months ended 2
March 31, 1997 and 1996 (unaudited)
Statements of Cash Flows for the three months ended March 31,1997 3
and 1996 (unaudited)
Notes to Financial Statements 4
Item 2. Management's Discussion and Analysis of Financial Condition and 5
Results of Operations
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 7
Item 2. Changes in Securities 7
Item 3. Defaults Upon Senior Securities 7
Item 4. Submission of Matters to a Vote of Security Holders 7
Item 5. Other Information 8
Item 6. Exhibits and Reports on Form 8-K 8
Signatures 9
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
TATONKA ENERGY, INC.
BALANCE SHEETS
(excluding subsidiaries)
ASSETS
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<CAPTION>
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March 31, 1997 December 31, 1996
(Unaudited)
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Current Assets
Cash and cash equivalents 6,405 17,814
Accounts/Notes Receivable 37,448 -
----------- -----------
Total Current Assets $ 43,853 $ 17,814
Fixed Assets
Property and Equipment, At Cost, Net 1,414 1,515
----------- -----------
$ 1,414 $ 1,515
Other Assets
Investment in Subsidiary $ 1,000 $ 1,000
Assets Held for Sale $ - $ 30,000
----------- -----------
Total Other Assets $ 1,000 $ 31,000
Total Assets $ 46,247 $ 50,329
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable $ $ 733
----------- -----------
Stockholders' Equity
Series A non-voting preferred stock authorized, 5,000,000 shares of $1 par
value, issued and outstanding, 135,139 shares at 3/31/97 and
12/31/96 135,139 135,139
Common stock, authorized 50,000,000 shares
of $.001 par value, issued 5,540,556 at
3/31/97 and 12/31/96 5,540 5,540
Paid-in Capital 5,282,635 5,282,635
Accumulated deficit (5,374,377) (5,371,008)
Treasury stock, at cost - 25,000 common shares (2,710) (2,710)
---------- -----------
Total Stockholders' Equity 46,267 49,596
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Total Liabilities and Stockholders' Equity $ 46,267 $ 50,329
========== ===========
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The accompanying notes are an integral part of these financial statements.
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TATONKA ENERGY, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
(excluding subsidiaries)
Three Months Ended
March 31
--------
1997 1996
---- ----
Revenue
Gain on Sale of Assets $ 7,448 $ -
Interest Income $ 10 $ 1,082
--------- ----------
Total Revenue 7,458 1,082
Costs and Expenses
Depreciation 101 101
General and administrative 10,686 8,101
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Total Costs and Expenses 10,787 8,202
--------- ----------
Net Loss $ ( 3,329) $ (7,120)
========= ==========
Net Loss Per Common Share $ - $ -
========= ==========
Weighted Average Number of
Shares Outstanding 5,540,556 5,540,556
========== ==========
The accompanying notes are an integral part of these financial statements.
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TATONKA ENERGY, INC.
STATEMENTS OF CASH FLOW
(Unaudited)
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Three Months Ended March 31
1997 1996
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Cash flows from operating activities:
Net loss $ (3,329) $ (7,120)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation 101 101
Changes in operating assets and liabilities:
Decrease in accounts receivable - -
Decrease in trade accounts payable (733) (4,328)
Gain on Sale of Fixed Assets (7,448) Cash flow from investing activities:
Fixed asset additions - -
-------- --------
Net cash used in operating activities (11,409) (11,347)
Cash and cash equivalents at beginning of year 17,814 111,329
-------- --------
Cash and cash equivalents at end of year $ 6,405 $ 99,982
======== ========
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The accompanying notes are an integral part of these financial statements.
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TATONKA ENERGY, INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Consolidated Financial Statements
The balance sheet of Tatonka Energy, Inc. (the "Company") as of March 31,
1997 and December 31, 1996, the statements of operation for the first quarter,
the three months ending March 31, 1997 and 1996, and the statements of cash
flows for the periods then ended have been prepared by the Company without
audit. In the opinion of Management, all adjustments (which include only normal
recurring adjustments) necessary to present fairly the financial position,
results of operations and cash flows for all periods presented have been made.
The balance sheet at December 31, 1996 has been taken from the audited
financial statements at that date and condensed. Certain other information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted. It is suggested that these condensed financial statements be read in
conjunction with the Company's audited financial statements and notes thereto
included in its December 31, 1996 10-KSB filed with the Securities Exchange
Commission. The results of operations for the period ended March 31, 1997 are
not necessarily indicative of the operating results for the full year.
The Company has chosen to omit all financial information regarding its
wholly-owned subsidiary, Crescent Contractors, Inc. This is a material change in
accounting method from the method used in the audited financial statements
included in the 1996 10-KSB filed by the Company on March 31, 1997.
The Company sold certain items of restaurant equipment to Food Franchises,
Inc., for a contract price of $37,448. The carrying value on the books of the
Company for such equipment was $30,000, resulting in a profit of $7,448. The
terms of the contact for sale included a $5,000 down payment, due on March 18,
1997, with the balance due on or before May 15, 1997.
For purposes of the statements of cash flows, only cash is used as the
Company does not have any items meeting the definitions of cash equivalents
contained in Statement of Financial Accounting Standards No. 95.
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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
(a) Plan of Operation.
As disclosed in the 1996 Annual 10-KSB filed by the Company with the
Securities and Exchange Commission (SEC) on March 31, 1997 (incorporated herein
by reference), the present Management of the Company is of the opinion that
participation in the oil and gas industry is no longer a viable option for the
Company. Management has formed a wholly-owned subsidiary, Crescent Contractors,
Inc., ( Crescent") a Texas corporation, and has begun a commercial construction
venture in association with Rustown Homes, Inc., ( Rustown") a privately-held
Texas corporation owned and operated by Gaylord Hall, III (see 10-KSB filed on
March 31, 1997). Mr. Hall has been active in the construction industry for 29
years and is currently serving as President of Crescent, and as one of the three
Directors of Crescent, together with Richard A. Green and Jackie Jones. The
purpose of forming Crescent was to provide an appropriate vehicle for conducting
operations in the commercial construction field without exposing the Company to
excessive legal liability. Management's financial intent is to pass profits from
Crescent to the Company in the form of dividends, thereby allowing the Company
to continue its existence despite the lack of operating income for more than two
years.
Crescent, with the participation of Rustown, was able to secure a contract
with AmeriTel, Inc. for the construction of a motel in Gainesville, Texas.
Crescent agreed to act as a Sub-general contractor" and to construct the motel
for a total price of $228,510. As of March 31, 1997, Management is unable to say
with certainty whether or not the cost of the motel construction will meet or
exceed that amount, or if any profit will be realized by Crescent.
In addition to the Gainesville, Texas motel project, Crescent has made a
bid to AmeriTel, Inc. to build another motel in Oklahoma. As of the date of this
report, no construction has begun on that project. AmeriTel, Inc. has given the
Company an indication that a possibility exists for an opportunity to bid on a
number of motel projects in the Texas- Oklahoma area. However, there is a
possibility that present or future motel construction projects may not come to
fruition, or that they may not result in profit to Crescent or the Company. Any
projections of future income to Crescent or the Company would depend upon a
number of factors, many of which are unpredictable, out of the control of the
Company, or subject to change. There can be no assurance that any future
contracts for commercial construction for AmeriTel, Inc. will be secured by
Crescent.
Furthermore, though Management of the Company intends to pursue commercial
construction opportunities through its subsidiary, Crescent, at this time
Management is unable to make any positive assertions as to any future earnings
or losses from Crescent's participation in any commercial construction projects,
including the current Gainesville project.
Risks of Commercial Construction.
As stated, the Company itself has no current operations. Crescent's
operations are currently the only activity of the Company. The Board of
Directors of Crescent has instructed its officers and agents to seek out
business opportunities in commercial construction and contracting. The ability
to operate profitably in these areas depends on numerous factors, including the
ability to identify and successfully bid for construction contracts, the ability
to accurately estimate the future costs of materials and labor, the ability to
obtain competent sub-contractors to perform various tasks, the ability to locate
and obtain materials and labor at competitive prices, and the ability to
successfully manage an on-going construction project. The market price for
various construction materials depends upon numerous factors, including the
general state of the economy, the rate of overall construction in the country as
a whole, regional economic conditions, environmental legislation by various
states, the U.S. federal government, and foreign governments, as well as any
treaties or other international agreements to which the United States may be or
become a party. In addition, factors such as the weather, the location of a
given construction project, regional and international competition and/or trade
barriers, and other factors which are difficult to predict, could materially
affect the ability of the Company's Subsidiary to obtain materials at a
competitive price.
The ability to locate and obtain competitively priced labor for the completion
of construction projects depends on many factors as well, including the rate of
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unemployment, changes in labor laws, the rise and fall in the ratio of the
number of skilled and unskilled laborers, inflation and the location of a
particular construction project. The expenses associated with commercial
construction projects are thus subject to market forces which are outside of the
control of the Company, and impossible or difficult to predict. Furthermore, the
ability to successfully complete any given construction project, once started,
depends in part upon such uncontrollable factors as the weather and the
existence of undiscovered or unknown physical conditions of the land upon which
a project is to be undertaken. Although these factors may be provided for with
the use of contractual provisions for such contingencies, the risk of an
unsuccessful undertaking in the construction industry remains largely unknown
and can change from time to time.
Competition in Construction Industry. The Company's Subsidiary, Crescent
Contractors, Inc., is a new company with very little history. Its competitors in
the commercial construction industry include entities with long-standing
reputations and pre-existing relationships with customers and suppliers. The
Company's Subsidiary must also compete with some entities which have more
existing capital, or better access to capital, than that currently available to
the Company's Subsidiary. It is possible that the Company's Subsidiary will be
at a competitive disadvantage in bidding for certain commercial contracts due to
its lack of history and lack of access to financing. The Company's Subsidiary
may be able to overcome this disadvantage in some instances by virtue of the
experience of its President, as well as through the use of Joint Venture
agreements with more experienced companies. The Company, as well as the
management of the Subsidiary, are of the opinion that these competitive
disadvantages may be mitigated through the use of Joint Ventures and the
employment of experienced and reputable individuals. However, there remains a
substantial risk that the Company's Subsidiary will not be able to overcome the
above-listed competitive disadvantages in the commercial construction industry.
Major Customers in Construction Industry. As of March 31, 1997, Crescent
Contractors, Inc. has a single contract with a single company, AmeriTel, Inc.,
for the construction of a motel facility in Gainesville, Texas. It is unknown
whether this relationship will continue after the completion of said contract
and there are no other confirmed customers as of March 31, 1997. In addition,
the ability of Crescent to form successful relationships with other customers
may depend in part upon the end-result of the contract with AmeriTel, Inc.
Sources of Raw Materials. Crescent Contractors, Inc. depends on the ability
to obtain raw materials for construction. However, Crescent reports that it is
not dependant upon any particular suppliers or sources of raw materials as of
March 31, 1997. Crescent has reported to the Company that there are numerous
sources for raw materials available in the construction industry, and Crescent
is unaware of reliance upon any particular supplier or source at this time. This
situation is of course subject to change dependant upon the nature and location
of future construction projects.
Licenses and Government Approval. Crescent Contractors, Inc., must obtain
the approval of certain governmental entities in providing the services
associated with commercial construction and contracting. In order to act as a
general contractor in the State of Arkansas, the Company's Subsidiary, Crescent
Contractors, Inc., must first obtain a General Contractors License. To obtain
the license, a principle officer of the Subsidiary must take and pass a written
examination, the Subsidiary must be bonded, and the Subsidiary must submit an
application to the state government. Crescent Contractors, Inc received its
Arkansas General Contractors on February 14, 1997. No contractors license is
needed to act as a general contractor in the states of Texas and Oklahoma.
For Crescent to conduct commercial contracting and construction, it must
comply with other governmental regulations, including local zoning ordinance and
building code compliance, Occupational Safety and Health Act (OSHA) compliance
and approval, as well as local and state fire and safety code, plumbing code,
electrical code, and health code compliance. Projects undertaken by Crescent may
also require prior or on-going approval by other state, local and federal
agencies, depending upon the varying nature of the particular projects
undertaken by Crescent.
The failure to receive approval by any agency or governmental entity with
jurisdiction over the projects conducted by Crescent could materially affect the
ability of Crescent to operate profitably. The loss by Crescent of its General
Contractors License in Arkansas would prohibit Crescent from acting as a general
contractor in that state. Furthermore, should there be a material change in
applicable federal, state, or local building codes, safety codes, health
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codes, OSHA regulations, plumbing and electrical codes, or other rules and
regulations, it is possible that the ability of Crescent to operate profitably
in the commercial construction industry could be compromised.
Due to the relative youth of Crescent, the Company is uncertain as to the
average cost of compliance with government regulation of the construction
industry, including environmental laws.
(b) Analysis of Financial Condition and Results of Operations.
Three Months Ended March 31, 1997 Versus Three Months Ended March 31, 1996:
Results of Operations
---------------------
Interest income decreased by $ 1,072 for the three month period ended March
31, 1997, as compared to the same period for 1996. This is due to a reduction in
cash available for investment.
General and administrative expenses increased by $ 2,585 for the three
month period ended March 31, 1997 as compared to the same period for 1996. This
increase is due to the payment of administrative and professional fees in
connection with the investigation of business opportunities presented to
management.
Liquidity and Capital Resources
-------------------------------
The Company's working capital at March 31, 1997 was $ 43,853 versus $
17,081 at December 31, 1996, for an increase in working capital of $ 26,772.
This is due to the fixed asset sale of $37,448 (see Plan of Operation" above).
Until Crescent is able to pass dividends to the Company, the Company 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. Research and development efforts,
including those associated with Crescent, are expected to require additional
expenditures by the Company, and there is a substantial risk that some or most
of the costs associated with those efforts will not be recoverable by the
Company. Management is attempting to balance the need for new operations and
income against the risk of losses from research and development efforts, but
there is no guarantee that the Company will realize any significant benefits or
income from such efforts.
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 Security Holders
Not applicable.
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Item 5. Other Information
In this report Management has chosen to exclude financial data
regarding its wholly-owned subsidiary, Crescent Contractors, Inc. This is a
substantial change from the reporting and accounting method employed in the
preparation of the audited financial statements in the Company's 1996 10-KSB
filed on March 31, 1997.
Item 6. Exhibits and Reports on Form 8-K
A. Exhibits
See Exhibit 1 ( Exhibit 27"): Financial Data Schedule.
B. Reports on Form 8-K
Not applicable
------------------------------------------------------------------------
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INDEX OF EXHIBITS
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Exhibit No. Description
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1 ( Exhibit 27") 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.
TATONKA ENERGY, INC.
Date: May 15, 1997 By: /s/ Richard A. Green, Sr.
---------------------------------------
Richard A. Green, Sr., President
Date: May 15, 1997 By: /s/ Lynn Jones
----------------------------------------
Lynn Jones, Secretary
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<NAME> TATONKA ENERGY, INC.
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<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
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0
135,139
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