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, 1998
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.18322
VISA INDUSTRIES OF ARIZONA, INC.
(Name of small business issuer in its charter)
STATE OF ARIZONA 860510653
(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) 8700004
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
10KSBor any amendment to this Form 10KSB. (X)
Issuer's revenues for its most recent fiscal year: $28,452.52
The aggregate market value of voting stock held by nonaffiliates of the
registrant was approximately $1,109 as of December 31, 1998.
The registrant had 2,799,742 shares outstanding at December 31, 1998.
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 1999, 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 $15,729.60 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 short-term 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 1998, there were three customers which individually accounted for
ten percent or more of the Company's revenue from oil and gas sales. These
customers were Duke Energy (32%), BTA Oil Producers (12%), and Brock Oil
(12%). 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, 1998, 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,
1995.
Oil and Gas Interests in Leasehold Acreage
The areas in which the Company holds oil and gas interests in acreage as
of December 31, 1998 are as follows:
Acreage Position
Location Developed Acreage
Arkansas 54
New Mexico 623.2
Oklahoma 480
Texas 419.44
West Virginia 1088
Total 2664.64
Oil and Gas Wells
The following table summarizes the Company's gross and net interests in
oil and gas wells as of December 31, 1998. 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.
Oil and Gas Wells
Oil GAS
Location Gross Net Gross Net
Arkansas 1.0000 .07925 .1000 .7925
New Mexico .041268 .03668 .41268 .3668
Oklahoma .5314618 .4201368 .5314618 .4206496
Texas .094575 .102268 .094575 .102268
West Virginia 0 0 .20000 .175000
Totals 1.7673048 .6383348 .9673048 .8138476
There was no drilling activity for the year ended December 31, 1998 and
one (1) salt water disposal well was drilled in 1995.
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, 1998 and 1997.
Average production costs are converted to equivalent units of oil due to
the dominance of oil sales during the periods.
Production
Oil (Bbl) Gas (Mcf)
Lifting Costs
Year Production Price Production Price (per Bbl)
[C] [C] [C] [C] [C] [C]
1998 1044.40 9.02 7506.00 1.78 14.775
1997 930.95 21.99 6446.64 2.43 20.171
1996 1141.55 26.31 8792.03 2.32 19.258
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 legal 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 1998 and 1997 were as follows:
STOCK Price
[C] [C] [C]
1998 High Low
1st quarter 0 0
2nd quarter 0 0
3rd quarter 0 0
4th quarter 0 0
1997
1st quarter 0 0
2nd quarter 0 0
3rd quarter 0 0
4th quarter 0 0
The approximate number of holders of the Company's Common Stock was
2,730 record holders as of December 31, 1998 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 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.
Visa Industries of AZ, Inc.
Unaudited Balance Sheet
As of December 31, 1998 & 1997
January 1 to January 1 to
December 31, 1998 December 31, 1997
ASSETS
Current Assets
Cash 202.15 505.42
Accounts Receivable 6176.67 5719.30
Notes Receivable 27061.30 27363.16
Bond
Bond Investment 17932.00 17932.00
Allowance for Decline (12114.00) (12114.00)
Total Bond Investment 5818.00 5818.00
Montessori Day Schools 34151.43 26718.29
__________ __________
Total Current Assets 73409.55 66124.17
Fixed Assets
Oil & Gas Properties
Proven 337769.55 337769.55
Accumulated Depletion (309479.12) (299479.12)
Total Oil & Gas Properties 28444.43 38670.70
Furniture and Fixtures 16288.48 16288.48
Accumulated Depreciation (16287.61) (15908.21)
Total Furniture & Fixtures .87 380.27
____________ ___________
Total Fixed Assets 28445.30 38670.70
TOTAL ASSETS $101854.85 $104794.87
LIABILITIES & EQUITY
Liabilities
Current Liabilities
Accounts Payable 14366.89 15113.71
Other Current Liabilities 7415.40 7290.05
Total Current Liabilities 21782.29 22403.76
Total Liabilities 21782.29 22403.76
Equity
Common Stock 2799.74 2219.92
Treasury Stock (8499.50) (8499.50)
Additional Paid In Capital 596414.26 596994.08
Net Unrealized Loss on Invest. (26780.59) (29780.59)
Retained Earnings (481492.80) (485948.22)
Net Income (1946.58) 4455.42
____________ ___________
Total Equity 80072.56 82391.11
TOTAL LIABILITIES & EQUITY $101854.85 104794.87
Visa Industries of AZ, Inc.
Profit and Loss
January 1 through December 31, 1998 & 1997
Jan Dec '98 Jan-Dec '97
INCOME
Oil and Gas Sales 25880.52 52086.68
Stock Transfer Fees 2572.00 2541.63
__________ ___________
Total Income 28452.52 54628.31
Cost of Goods Sold
Severance Tax 1406.61 2742.24
Lease Operating ense 8744.31 18390.93
Total Cost of Goods Sold 10150.92 21272.50
_________ __________
Gross Profit 18301.60 33355.81
General and Administrative Expense 10602.10 19242.38
Depletion Expense 9,846.00 9846.01
NET INCOME before Extraordinary Item (2146.50) 4267.42
Extraordinary Item Gain on Sale of (199.92) (188.00)
NET INCOME (1946.58) 4455.42
Net income per share of common stock (.00069) .0020
Weighted average number of shares
outstanding 2,799,742 2,219,742
Notes to Financial Statements
December 31, 1998
1. Organization
The Company was incorporated in Arizona on November 29, 1984, for the purpose
of acquiring, through 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 carry
forward 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, thereunto
duly authorized.
Date: June 10, 1999
Visa Industries of Arizona, Inc.
(Registrant)
By: /s/ Edgar J. Huffman
Edgar J. Huffman
Vice President, Chief Executive Officer
Director
By: Mary Anne Ramirez
Mary Anne Ramirez
Chief Financial Officer,
President, Director
