SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10KSB
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from to
Commission File
No.1-8322
VISA INDUSTRIES OF ARIZONA, INC.
Name of small business issuer in its charter)
STATE OF ARIZONA 86-0510653
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
9201 N. 7th Avenue, Phoenix, AZ, 85021
(Address of principal executive offices)
Issuer's telephone number, including area code:(602) 870-0004
Securities registered under Section 12(b) of the Exchange Act:
NONE
Securities registered under Section 12(g) of the Exchange
Act:
Common stock, $.0001 par value
Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past
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 disclosure of delinquent filers in response to Item
405 of Regulation SB is not contained in this form, 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 10KSB or any
amendment to this Form 10KSB. (X)
Issuer's revenues for its most recent fiscal year: $49,849.35
The aggregate market value of voting stock held by nonaffiliates
of the registrant was approximately $1,109 as of December 31,
1997.
The registrant had 2,219,742 shares outstanding at December 31,
1997.
DOCUMENTS INCORPORATED BY REFERENCE
Part III contains material that will be incorporated by reference
in a definitive proxy statement to be filed in the first 120 days
of 1998, or will be provided in an amendment to this form 10KSB
prior to that date.
VISA INDUSTRIES OF ARIZONA, INC.
PART I
Item 1: DESCRIPTION OF BUSINESS
General
Visa Industries of Arizona was incorporated in the state of
Arizona on November 29, 1984, as a successor to Visa Energy
Corporation under Visa Energy Corporation's Bankruptcy Plan of
Reorganization. Visa Energy Corporation ("Energy") filed for
protection under Chapter 11 of the Bankruptcy Code on December
6, 1983. Pursuant to the Plan of Reorganization under the
Bankruptcy Code, Energy was merged into the Company effective
April 10, 1985.
Visa Industries of Arizona, Inc. is a company with
interests in 20 oil and gas wells, and a stock transfer
agency. The Company is headquartered in Phoenix, Arizona.
Oil and Gas Operations
Principal Products and Markets
Visa engages in oil and gas exploration and production. It
produces crude oil natural gas and condensate. Visa is not
involved in the transportation, refining or marketing of refined
products.
While the Oil and gas business accounts for the bulk of
Visa's assets, revenues from oil and gas operations after Lease
Operating Expense and Severance tax were only $29,609.54 last
year. Because of this limited income,.Visa determined not to
engage engineers to evaluate its petroleum reserves.
Because of Visa's limited resources, Visa has not
voluntarily participated in active exploration or development of
its properties in the last three years. Visa farmed out certain
properties, that is, transferred properties to third parties in
consideration of the third party drilling a well with Visa
retaining a small override and a reversionary interest. Some
wells were drilled on properties held by Visa without Visa's
consent, and Visa will gain an interest in those wells only when
and if the participants in the well recover their costs plus a
penalty.
The principal purchasers of crude oil and condensate
produced by the Company are refiners and other companies which
have gathering facilities near the Company's oil producing
properties. The principal customers for gas production are
companies having pipelines located near the Company's gas
producing properties.
The availability of a ready market for the Company's oil
and gas production is dependent upon numerous factors beyond the
control of the Company, including the extent of domestic
production and importation of oil and gas, the proximity of the
Company's producing properties to pipelines and other gathering
facilities and the capacity of such facilities, the marketing
of other competitive fuels, fluctuations in seasonal demand and
governmental regulation of production, refining,
transportation, pricing and allocation of oil and natural gas
and their substitute fuels.
Distribution of Products
Visa sells its oil production under shortterm contracts at field
prices quoted by purchasers in the area of the producing
property. A portion of the Company's production comes from
"stripper wells" (i.e., wells with low production and relatively
high operating costs). Because this production is low margin,
stripper wells are particularly vulnerable to declines in oil
prices.
The Company's natural gas production is generally sold
pursuant to long term contracts.
Competition
The Company competes with numerous other companies and
individuals in the production and marketing of oil and gas.
The Company's competitors include major and independent oil
companies, all of which have financial resources and facilities
substantially greater than those of the Company.
Dependence on a few major customers
During 1997, there were four customers which individually
accounted for ten percent or more of the Company's revenue from
oil and gas sales. These customers were Brock Oil (16%), Amoco
Production Co. (14%), Panenergy Field Services (12%) and BTA Oil
Producers (11%).
In view of the demand for domestic oil at market prices, the
Company does not believe that the loss of any oil purchasers
would adversely affect its operations. Loss of a gas purchaser,
however could cause the Company significant revenue loss.
Environmental Regulation
The Company is subject to a variety of federal, state and local
environmental laws and regulations relating to site
rehabilitation, spillages, noise, air quality and waste disposal
arising from its operations. To date, the cost of complying with
these environmental laws and regulations has not been material.
Whether such compliance in the future will necessitate material
capital expenditures is not known.
Government Regulation
The Company is subject to extensive federal and state regulations
governing its oil and gas activities. The Company owns leasehold
interests in federal and state acreage that entail numerous
reporting requirements. Federal and state regulations affect well
spacing and drilling permits.
Employees
At December 31, 1997, the Company had no full time employees, and
one part-time employee engaged in oil an gas operations.
Item 2. Description of Properties
Oil and gas Properties
The Company's interests in its properties are in the form of
direct interests in oil and gas leases. The Company believes it
has satisfactory title to its properties based upon generally
accepted industry standards. As is customary in the industry,
only a perfunctory title examination is conducted at the time
property is acquired by the Company. Prior to the commencement
of drilling, however, a thorough examination is conducted and
material defects, if any, are corrected before proceeding with
operations
A portion of the oil and gas properties owned by the Company
are leases requiring annual payment of a delay rental to retain
the Company's interest in the lease. The current annual delay
rental on most of the Company's leases is $1.00 per acre.
Current Drilling Operations
The Company has not conducted any drilling operations since
January 1, 1996.
Oil and Gas Interests in Leasehold Acreage
The areas in which the Company holds oil and gas interests
in acreage as of December 31, 1997 are as follows:
<TABLE>
<CAPTION> Acreage Position
<C> <C>
Location Developed Acreage
Arkansas 54
New Mexico 623.2
Oklahoma 480
Texas 419.44
West Virginia 1088
Total 2664.64
</TABLE>
Oil and Gas Wells
The following table summarizes the Company's gross and net
interests in oil and gas wells as of December 31, 1997. All net
well amounts are based on the working interests currently in
effect and include the Company's net interest in its wells and
partnership wells.
<TABLE>
<CAPTION> Oil and Gas Wells
Oil Gas
<C> <C> <C> <C> <C>
Location Gross Net Gross Net
Arkansas .10000 .07925 .10000 .07925
New Mexico .041268 .03668 .041268 .03668
Oklahoma .5314618 .4201368 .5314618 .4206496
Texas .094575 .102268 .094575 .102268
W.Virginia 0 0 .20000 .175000
Total .7673048 .6383348 .9673048 .8138476
</TABLE>
There was no drilling activityfor the years ended December
31, 1997 or 1996.
Selected Production, Price and Cost Data
The following table sets forth annual net production, and
the average sales price and average production (lifting) costs
per unit of oil and gas produced by the Company for the years
ended December 31, 1997 and 1996. Average production costs are
converted to equivalent units of oil due to the dominance of oil
sales during the periods.
<TABLE>
<CAPTION> Production
Oil (Bbls) Gas (Mcf)
<C> <C> <C> <C> <C> <C>
Lifting Costs
Year Production Price Production Price (per Bbl)
1997 930.95 21.99 6446.64 2.43 20.171
1996 1141.55 26.31 8792.03 2.32 19.258
</TABLE>
Exploration and Development Activity
During the calendar year 1995, the Company drilled one
exploratory well and no development wells. The well was dry. In
1996, the Company transferred one 40 acre tract to another
company for the drilling of a well, retaining a small
royalty convertible to a working interest at payout. The
well was completed, and has paid out, but is still shut in
waiting on a market.
Item 3. Legal Proceedings
The Company is not subject to any leagal proceedings.
Item 4. Submission of Matters to a vote of security Holders
No matter has been was submitted to a vote of security
holders during the past 10 years.
PART II
Item 5. Market for Common Equity and Related Stockholder Matters
The common stock of Visa is traded on the NASD Bulletin
Board under the symbol VIIS.U. Such trading has been sporadic,
and should not be taken to indicate an established trading market
in the Company's Stock. The high and low bid prices for 1997
and 1996 were as follows:
<TABLE>
<CAPTION> STOCK Price
<C> <C> <C>
1997 High Low
1st quarter 0 0
2nd quarter 0 0
3rd quarter 0 0
4th quarter 0 0
1996
1st quarter 0 0
2nd quarter 0 0
3rd quarter 0 0
4th quarter 0 0
</TABLE>
The approximate number of holders of the Company's Common
Stock was 2,730 record holders as of December 31, 1997 The
Company mailed approximately 5,400 proxy statements for its most
recent annual meeting, and believes that this 5,400 number is
more accurate as an estimate of the total number of shareholders,
including those shareholders holding in street name.
The Company has not declared any dividends on its Common
Stock and does not expect to pay dividends in the foreseeable
future.
Item 6. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Given the existing state of its finances, the Company does
not anticipate utilizing any material amount of its limited funds
to conduct drilling activities. The Company will continue efforts
to farmout high risk prospects to other oil and gas companies
thereby avoiding the risk and the potential depletion of cash
from drilling activities.
The Company Makes it's current expenses with little
remaining for capital expenses. While the company is sufficiently
liquid to pay its current obligations, it does not have
sufficient liquidity to make a significant capital investment.
The recent price decreases could have a significant adverse
impact on the finances of the Company should they remain at this
level for a significant period of time.
The company is seeking a merger partner.
Item 7. Financial Statements
The Company does not have sufficient resources to have its
financial statements audited. While the statements are
unaudited, Management believes that the statements accurately
express the financial condition of the Company.
<TABLE>
<CAPTION>
Visa Industries of AZ, Inc.
Unaudited Balance Sheet
As of December 31, 1997 & 1996
<C> <C> <C>
January 1 to January 1 to
December 31, 1997 December 31, 1996
ASSETS
Current Assets
Cash 555.42 997.96
Accounts Receivable 3713.53 12,627.09
Notes Receivable 27,447.20 29,408.33
Bond
Bond Investment 17,932.00 17,932.00
Allowance for Decline (12,114.00 (12,114.00)
Total Bond Investment 5,818.00 5,818.00
Montessori Day Schools 24,721.75 (554.00)
__________ ----------
Total Current Assets 62,255.90 48,277.38
Fixed Assets
Oil & Gas Properties
Proven 337,769.55 337,769.55
Accumulated Depletion (299,479.12) (289,633.11)
Total Oil & Gas Prop. 38,290.43 48,136.44
Furniture and Fixtures 16,288.48 16,288.48
Accumulated Depreciation (15,908.21) (15,528.78)
Total Furniture & Fixtures 380.27 759.70
___________ -----------
Total Fixed Assets 38,670.70 48,896.14
TOTAL ASSETS $100,926.60 97.173.52
LIABILITIES & EQUITY
Liabilities
Current Liabilities
Accounts Payable 14.990.31 12,301.36
Other Current Liabilities 7,290.05 7.219.49
Total Current Liabilities 22,280.36 19,520.85
Total Liabilities 22,280.36 19,520.85
Equity
Common Stock 2,219.92 2,219.92
Treasury Stock (8,499.50) (8,499.50)
Additional Paid In Capital 596,994.08 596,994.08
Net Unrealized Loss
on Investments (26,780.59) 29,780.59)
Retained Earnings (485,996.82) (499,531.59)
Net Income 709.15 13,250.35
____________ ____________
Total Equity 78,646.24 77,652.67
TOTAL LIABILITIES & EQUITY $ 100,926.60 97,173.52
</TABLE>
<TABLE>
<CAPTION>
Visa Industries of AZ, Inc.
Profit and Loss
January 1 through December 31, 1997 & 1996
<C> <C> <C>
January 1 to January1to
December 31 December31
1997 1996
INCOME
Oil and Gas Sales 47,307.72 48,854.29
Stock Transfer Fees 2,541.63 4,732.01
__________ __________
Total Income 49,849.35 53,583.30
Cost of Goods Sold
Severance Tax 2,546.31 3,387.42
Lease Operating Expense 17,693.50 18,596.69
Abandoned Lease Cost 0.00 25,719.15
Total Cost of Goods Sold 20,239.81 47,703.26
_________ _________
Gross Profit 28,971.54 5,883.04
General and Administrative
Expense 19,242.38 20,530.68
Depletion Expense 9,846.01 3,969.29
NET INCOME before Extraordinary Item 521.15 (18,616.93)
Extraordinary Item
Gain on Sale of Asset (188.00) 31,867.28
NET INCOME 709.15 13,250.35
Net income per share of common stock .00032 .00596
Weighted average number
of shares outstanding 2,219,742 2,219,742
</TABLE>
Notes to Financial Statements
December 31, 1997
1. Organization
The Company was incorporated in Arizona on November 29, 1984, for
the purpose of acquiring, throught the issuance of stock, the
remaining assets of Visa Energy Corporation. Visa Energy
Corporation filed for protection from its creditors under Chapter
11 of the Bankruptcy Code on December 6, 1983. The merger of
Visa Energy Corporation into Visa Industries of Arizona, Inc. was
effective April 10, 1985. Under the terms of the bankruptcy, the
stockholders of Visa Energy Corporation received on share of Visa
Industries of Arizona, Inc. common stock for each ten shares of
Visa Energy Corporation common stock.
The assets acquired in the merger consisted of interests in 23
oil and gas wells. The acquired oil and gas wells are located in
the states of Texas, Oklahoma, and New Mexico. Visa Industries
of Arizona, Inc. had no operations prior to the merger.
The merger is accounted for using the pooling of interests
method. Visa Energy Corporation's retained earnings was adjusted
to zero and oil and gas properties adjusted to their fair value
as a result of the reorganization in bankruptcy. This adjustment
was made because substantially all assets of the Company were
sold and because of the decline in the value of the properties.
Visa is primarily an oil and gas operating company, revenues from
its Stock Transfer Business amount to less than 10% of revenues.
2. Summary of significant accounting policies
A. Method of accounting
The Company's policy is to prepare its financial statements
on the accrual basis of accounting in accordance with generally
accepted accounting principles; consequently, revenues and gains
are recognized when earned and losses are recognized when
incurred.
B. Recording of oil and gas revenue
Revenue from oil and gas sales are recognized based upon
production date.
C. Oil and gas properties
Oil and gas properties are recorded at estimated net
realizable value. The estimated net realizable value is based
upon a reserve study done as of January 1, 1986, for ten of 23
wells in which the Company has an interest.
The reserve study done on proved developed/producing
properties represent approximately 90 percent of the value of the
properties of the Company. It was management's decision not to
have reserve studies done on the remaining properties because it
was not economically beneficial.
The Company has not undertaken any exploration or development
efforts in connection with its oil and gas properties At such
time as these activities commence, they will elect either full
cost or successful efforts methods of accounting.
D. Depletion expense
Depletion expense on oil and gas properties is recorded using
the units of production method over the estimated productive life
of all the reserves to recorded basis of the properties.
E. Furniture and equipment
Furniture and equipment are recorded at cost and are
being depreciated using the straight-line method over an
estimated useful life of five years.
F. Net loss per share of common stock
Net loss per share has been computed based on the weighted
average number of common shares outstanding during the year.
5. Income taxes
The Company's tax basis in oil and gas properties is zero.
This is because Visa Energy Corporation offset its entire tax
basis in the properties with debt forgiveness income which it
elected not to recognize.
The Company files its income tax returns on a cash basis in
which revenues earned are not recognized until received and
expenses incurred are not recognized until paid. The Company has
a net operating loss carryforward available to offset future
taxable income of $17,000. The tax net operating loss expires in
the year 2000.
Item 8.
Item 8. is not applicable
Part III.
Part III is not applicable.
SIGNATURES
In accordance with the requirements of the exchange act, the
registrant has caused this report to be signed on its behalf by
the undersigned, hereunto duly authorized.
Date: March 30, 1998
Visa Industries of Arizona, Inc.
(Registrant)
By: /s/ Edgar J. Huffman
Edgar J. Huffman
Vice President, Chief Executive
Officer
Director
By: /s/ Mary Anne Ramirez
Mary Anne Ramirez
Chief Financial Officer,
President, Director
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1996
<PERIOD-END> DEC-31-1997 DEC-31-1996
<CASH> 555 998
<SECURITIES> 5,818 5,818
<RECEIVABLES> 55,882 48,481
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 62,256 48,277
<PP&E> 354,058 354,057
<DEPRECIATION> 315,387 305,162
<TOTAL-ASSETS> 100,927 97,174
<CURRENT-LIABILITIES> 22,280 19,520
<BONDS> 0 0
0 0
0 0
<COMMON> 2,220 2,220
<OTHER-SE> 76,426 75,433
<TOTAL-LIABILITY-AND-EQUITY> 100,927 97,174
<SALES> 49,849 53,583
<TOTAL-REVENUES> 49,849 53,583
<CGS> 20,240 47,703
<TOTAL-COSTS> 20,240 47,703
<OTHER-EXPENSES> 29,088 24,500
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> 521 (18,616)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 521 (18,616)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 188 31,867
<CHANGES> 0 0
<NET-INCOME> 709 13,250
<EPS-PRIMARY> .000 .006
<EPS-DILUTED> .000 .006
</TABLE>
