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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-KSB
Annual Report Under Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the fiscal year ended September 30, 1999
Commission file number: 2-42114
SIGNATURE MOTORCARS, INC.
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(Name of Small Business Issuer in Its Charter)
(Formerly International Royalty & Oil Co.)
State of Nevada 75-1310613
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(State or Other Jurisdiction of (I.R.S. Employer Identification No)
Incorporation or Organization)
7738 Forest Lane #102
Dallas, Texas 75230
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(Address of Principal Executive Offices)
Issuer's Telephone Number including Area Code: (972) 386-7700
Securities registered pursuant to Section 12 (g) of the Act:
Common stock, par value $0.0167
The issuer (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, and (2)
has been subject to such filing requirements for the past 90 days.
Yes No X
--- ---
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B 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 10-KSB or any
amendment to this Form 10-KSB. [X]
State issuer's revenues for its most recent fiscal year.......................$0
The aggregate market value of the voting stock (1,282,018 shares) held by
non-affiliates of the registrant on September 30, 1999, was approximately zero
since the stock is not currently trading. The number of shares outstanding of
the registrant's common stock on September 30, 1998, was 6,398,835 shares. On
September 30, 1999, the Company had 7,449,835 shares outstanding.
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PART I
Item 1. Description of Business
Definitions
"Gravity" is a measure of the density of an oil. As defined in the petroleum
industry, a higher gravity corresponds to a lower density. Gravities of crude
oils range from about 12 degrees (heavy oil) to 60 degrees (distillate or
gasoline-like oil). Lower gravity oils are generally worth less, and they may
require unconventional technology to produce.
"Gross production" as used herein is defined as the total production of oil,
gas, or natural gas liquids from a property or group of properties for any
specified period of time.
The term "overriding royalty" as used herein is defined as an interest carved
out of the lessee's leasehold or working interest. The amounts payable from
overriding royalties referred to in this Form 10-KSB are payments calculated as
a percentage of either gross production or gross revenue from a concession or
lease, free and clear of all costs, except taxes.
The term "royalty" is generally defined as a share of the production reserved by
the grantor of an oil or gas lease or concession. Customarily, the royalty
interest is free of cost or expense incident to exploration, development, or
production, except for production or gathering taxes. The royalty is a part of
the consideration for the grant of the lease.
The term "working interest" ("WI") as used herein means all or a fractional part
of the ownership rights granted by a concession or lease. The owner(s) of a WI
or a part thereof, pays the costs of operations and is entitled to the gross
production, less royalties retained by the grantor or lessor and less other
royalties or non-operating interests created and assigned from the working
interest and less applicable taxes. The owner of WI may incur operating expenses
in excess of income.
Abbreviations
BOPD - barrels of oil per day BOPM - barrels of oil per month
MCFGPD - thousand cubic feet gas per day MMCFGPD-million cubic feet gas per day
NP - non-producing ORR - overriding royalty
D&A - dry and abandoned WI - working interest
(a) Business Development
Signature Motorcars, Inc. (the Company) was organized on February 19, 1969, as a
corporation under the laws of the State of Nevada, under the name of
International Royalty & Finance Co. for the general purpose of engaging in
exploration for oil and gas, and on December 23, 1971, the name of the Company
was changed to International Royalty & Oil Co. (IROC). Again on July 10, 1996,
the Company changed its name to Signature Motorcars, Inc., in anticipation of
entry into the car rental business; however, the anticipated merger and purchase
failed to be consummated. More recently, the Company shifted its activities back
to its former direction of acquiring working interests, royalties, and
overriding royalties in oil and gas properties within the United States and in
foreign countries. However, with the decline of oil and gas prices in 1998, the
Company has also evaluated opportunities in other industries and continues to do
so.
During its fiscal year ended September 30, 1999, the Company was not involved in
any bankruptcy, receivership, or similar proceeding and underwent no material
reclassification, merger, or consolidation. The Company does not anticipate
involvement or participation in any of the above proceedings, excepting a
possible merger or consolidation.
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During the period from October 1, 1995, to September 30, 1999, the Company
conducted minimal business, received nominal income and had minimal assets or
liabilities. The Company had limited activity during this period of time.
In August 1997, a group of stockholders met and decided to bring the Company
into regulatory compliance and initiated a funding campaign. On August 25, 1997,
William R. Miertschin entered into an Option Agreement with the Company to
acquire 1,665,660 common shares of Black Giant Oil Company for $25,000, or
approximately $0.015 per share. At the time, Black Giant stock had no trades
with 0 Bid and 3 cents Ask. The Option Agreement also granted Miertschin an
option to purchase up to 2,000,000 of the common stock of Signature for $20,000,
or 1 cent per share, provided he first bought all of the Company's Black Giant
stock. Miertschin purchased the Black Giant stock from the Company on December
15, 1997, for $25,000, and 500,000 shares of the Company's stock for $5,000 on
December 30, 1997, with the remainder of the option being exercised in July
1998. On September 6, 1997, Miertschin purchased 165,000 shares of the Company
from Manoj K. Patel and 1,100,000 shares from MKP Investments, Inc. Patel
resigned all of his capacities in the Company effective September 6, 1997. With
Patel's resignation, Ivan Webb assumed corporate responsibilities on an interim
basis as Operations Manager, with Elizabeth Webb functioning as Corporate
Secretary. Later at the request of the Board, Miertschin agreed to assume the
office of President and Chairman of the Board of Directors effective November 1,
1997. As of December 15, 1999, those three remain in those capacities.
(b) Business of Issuer
Prior to September 30, 1992, the Company was primarily engaged in enhanced oil
production through the use of its patented process. Although the Company's
patented Enhanced Oil Recovery (EOR) process is not economically viable due to
current oil prices, the Company's patent rights and equipment still have value
and could have more substantial value in the future. Since the Company's EOR
operations have been limited since 1992, for the past seven fiscal years the
Company has been downsizing and evaluating other business opportunities.
Principal Products and Services
When International Royalty & Finance Co. (hereinafter referred to as "IROC") was
organized in 1969, it was incorporated for the general purpose of engaging in
exploration for oil and gas. During the late 1980's and early 1990's, IROC
focused to a lesser degree on the oil and gas royalty business and more on the
research, development and testing of an Enhanced Oil Recovery (EOR) process that
was being patented by the Company. The technology of the IROC EOR Process is
predicated upon electromagnetic stimulation of an oil bearing formation and/or
the well's production tubing. Its three major effects are to increase
production, lower operating costs, and reduce downtime. The IROC EOR process
patent was issued in April of 1992. The Company tested the process on a number
of wells as to its economic viability. In most cases the process was found to be
mechanically viable but economically unsatisfactory primarily because of lower
oil prices during the late 1980's and early 1990's.
During the fiscal year ending September 30, 1992, IROC focused on its first
commercial success with its EOR process. The Turner #2 oil well in northwest
Kansas generated positive cash flow and profit throughout 1989 and 1990. The
Turner Case History demonstrated both the mechanical and economic efficacy of
the IROC EOR process. This case showed that the process was able to sustain
profitable production of highly paraffinic oil, where other EOR methods had
failed. Following the successful demonstration of this technology, the Company
pursued industry partners with production problems relating to heavy or
paraffinic oil characteristics during the three fiscal years prior to September
30, 1995.
The premise of IROC's EOR business was that, through the IROC process, the
Company could acquire at low cost - and produce profitably - known heavy crude
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and paraffinic oil reserves which others had considered unrecoverable on an
economical basis. However, as oil prices have continued to fluctuate throughout
1990's at levels too low to make the process economically viable on a long term
basis, the Company planned and plans to focus on the acquisition, enhancement
and production of oil and gas properties without regard to heavy crude and
paraffinic oil reserves. Therefore, it is possible that the Company will not
utilize the IROC technology in the foreseeable future.
Oil & Gas and Other Operations
During 1995 and 1996 the Company was involved in an attempted acquisition and
expansion of existing high-end car rental businesses; however, those
acquisitions were not made. At this time, the Company has no involvement and no
intention of any involvement in the car rental industry.
During the year ended September 30, 1998, Signature was exclusively focusing on
oil and gas related opportunities. Its oil and gas revenue is currently derived
from Canadian royalties. Oil and gas properties were evaluated in Texas,
Oklahoma and Kansas for acquisition. Prior to September 30, 1998, the Company
acquired interests in two (2) leases in Texas and an interest in an Australian
concession. With the 1998 decline of oil prices the Company broadened its focus
and continues to evaluate other opportunities both within and outside the oil
and gas industry. As of September 30, 1999, the company was engaged in
evaluating merger/acquisition opportunities.
Competition and Markets
The oil and gas industry is highly competitive in all its phases. The Company
will be in competition with larger oil companies and others with far greater
financial resources, experience and technical staffs. It is to be expected that
frequent and vigorous competition will be encountered in efforts to acquire
producing oil and gas properties. The Company is not a significant factor in the
oil and gas industry.
The competition for oil and gas funding is also intense, and the competition for
viable and financially sound merger or consolidation partners is equally as
competitive. In the search for funding, consolidation and merger/acquisition
partners, the Company is in competition with investment bankers, venture
capitalists, brokerage firms and others with far greater financial and technical
resources than the Company.
Countries, states and other jurisdictions in which the Company operates regulate
the exploration, development, production and prices on the sale of oil and gas.
Markets for, and value of, oil and gas discovered are dependent on such factors
as regulation, including well spacing and production allowables, import quotas,
competitive fuels, proximity of pipelines and price-fixing by governments, and
international markets, all of which are beyond control of the Company. During
September, 1997, 40 degree oil (good gravity crude) was selling for
approximately $18.00 per barrel; in September, 1998, the price was approximately
$12.00 per barrel and in September, 1999 the price was approximately $22.00 per
barrel. Prices vary according to gravity, quality, region and purchaser.
The IROC proprietary enhanced recovery process, although proven technologically,
is subject to market acceptance. While the Company believes that it has no
significant competition in its segment of the EOR business, there are other
practitioners of electromagnetics - largely on a "service company" basis. To the
extent that these companies are successful, however, all would benefit from the
increasing legitimacy of electromagnetic EOR implicit in broader marketplace
exposure.
Foreign Currency
Due to the nature of the Company's activities in Canada portions of the
Company's funds may be held at times in various foreign currencies. At this time
the Company does not maintain any foreign bank accounts. However, the
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Company does have receivables from Canadian oil production. Revenues generated
under a foreign currency subjects the Company to a limited risk of currency
fluctuation and changes in rates of conversion for different currencies. The
Company does not engage or expect to engage in any hedging or other transactions
that are intended to manage risks relating to foreign currency fluctuations.
Additionally, revenues generated in foreign countries in which the Company has
or may acquire interests may be subject to governmental regulations which
restrict the free convertibility of such funds, and all remittances of funds out
of these countries might require the approval of the applicable government's
exchange control agency. Presently, the Company experiences no difficulties with
the free convertibility of funds from Canada. In the Company's opinion, the
foreign exchange control laws currently in effect in Canada do not unreasonably
delay the remittance of funds generated in those countries to the United Sates.
Foreign Taxes and United States Tax Credits
The Company prior to September 30, 1998 did not have any operations outside of
the United States, except for one small producing overriding royalty interest in
Canada subject to the Canadian non-resident tax. In the event that revenues
abroad, are established, then the Company will be subject to the imposition of
taxes by foreign governments upon the Company's income derived from the
respective foreign jurisdictions. Such taxes are of various types, with
differing tax rates, and are subject to changes. Generally, the Company's income
from a foreign jurisdiction will be taxed in the same manner as that for other
companies operating in the jurisdiction, but discriminatory taxation by a
particular jurisdiction may occur.
The Company's income is also subject to taxation under the United States
Internal Revenue Code of 1986, as amended (the "Code"). The Code provides that a
taxpayer may obtain a tax credit for certain taxes paid to a foreign country or
may take a deduction for such taxes. A tax credit is generally more favorable
than a deduction. The tax credit applicable to particular foreign income
generally arises when such income is included in the Company's taxable income
under the provisions of the Code. There are, however, substantial restrictions
and limitations on the amount of the tax credit that can actually be claimed.
Governmental and Other Regulations
Oil and gas operations are and will be subject to federal, state and local laws
and regulations governing waste, environmental quality, pollution control,
conservation and other measures regarding environmental and ecological matters.
Failure to comply with applicable regulations could result in interruption or
termination of the operations. It is impossible to predict the impact of
environmental legislation and regulations on the Company's operations and
earnings in the future. However, compliance could require the Company to make
capital expenditures and could adversely affect earnings of the Company.
The domestic production and sale of oil and gas are subject to federal
regulation by the Department of Energy (DOE) and the Federal Energy Regulatory
Commission (FERC). Rates of production of oil and gas have for many years been
subject to federal and state conservation laws and regulations. In addition, oil
and gas operations are subject to extensive federal and state regulations
concerning exploration, development, production, transportation and pricing, and
to interruption or termination by governmental authorities.
In foreign countries, the Company may be subject to governmental restrictions on
production, pricing and export controls. Furthermore, regulations existing or
imposed upon the Company at the time of its acquisition of properties may change
to an unpredictable extent. The Company will have little or no control over the
change of regulations or imposition of new regulations and restrictions by
foreign governments, ex-appropriation or nationalization by foreign governments,
or the imposition of additional foreign taxes and partial foreign ownership
requirements. Management believes that these actions are unlikely to be
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undertaken by the government of Canada where the properties from which Company
receives or may receive income are located.
Personnel
The business of the Company was carried on for the two years prior to September
1997 primarily by Manoj Patel, who resigned as an officer and director on
September 6, 1997. William R. Miertschin, President, Chief Executive Officer and
Chairman of the Board of Directors, with Ivan Webb as Operations Manager and
Director, and Elizabeth Webb as Secretary, have been administering and funding
the Company since October 1997. The Company has no full-time employees as of
September 30, 1999. The Company has no pension or profit-sharing plans, and it
is not a party to a collective bargaining agreement.
Item 2. Description of Property
Domestic Properties
Prior to September 30, 1992, the Company sold the Turner lease in Graham County,
Kansas, discussed in Part I, (c) Narrative Description of Business, Principle
Products and Services, and by September 30, 1997, the Company had sold all of
its other domestic oil interests to fund operational expenses while downsizing
the Company. Therefore as of that date the Company had no domestic oil and gas
properties. The following is a description of each of the properties acquired by
the Company subsequent to September 30, 1997, and as of year end September 30,
1998, the Company decided to discontinue these oil and gas operations due to a
decrease in oil prices during that fiscal year (see Notes 1 and 6 of the
Financial Statements for additional information):
Troell Leases - On October 16, 1997, the Company entered into two agreements to
acquire 50% working interest in the C.T. Troell lease(s) located in Atascosa
County, Texas. One agreement provided for the acquisition of 31.25% working
interest from Benjamin Botello, Trustee, for $30,000 and 85,000 shares of the
Company's common stock. The Company signed a note for $30,000, bearing 12%
interest payable monthly ($300.00), and this debt was extended. The second
agreement was entered into with Blain-Willis, Inc., to acquire the balance of
the 50% working interest (18.75%) in the C.T. Troell lease. The terms of
acquiring this working interest were that the Company was to deliver to
Blain-Willis $18,000 and 51,000 shares of the Company's common stock. On
February 18, 1998, the Company paid Blain-Willis $18,000 for the 18.75% working
interest, and later the 51,000 shares were issued to Blain-Willis.
The C.T. Troell lease contains 8 oil wells completed in formations ranging from
1,600 to 1,950 feet. This 120 acre lease is expected to average 15 BOPD when 6
wells are put into production. This lease was expected to be put into production
during the second or third quarter of 1998; however, the decline of oil prices
during this period caused operational funding to be withdrawn. Subsequent to
September 30, 1999, the Company continues to evaluate both the opportunities for
funding the operations or selling the interests.
Spires Wells - On October 20, 1997, the Company entered into an agreement to
acquire 40% working interest in the two Spires wells located in Nolan County,
Texas, for 250,000 shares of common stock and settle certain account payables
related to the lease. The Spires wells include a single well with an expected
production rate of 18-20 barrels per day and a salt water disposal well. These
wells were expected to be put into production during the second or third quarter
of 1998; however, the decline of oil prices during this period caused
operational funding to be withdrawn.
Subsequent to September 30, 1998, the Company evaluated both the opportunities
for funding the operations or selling the interests. As of September 30, 1999,
the Company intends to distribute these net assets to a newly formed subsidiary
or to dispose of them in some other manner.
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Foreign Properties
Prior to September 30, 1995, the Company sold all of its foreign oil and gas
interests to raise funds, with the exception of one small Canadian producing
overriding royalty interest, which generated $522 and $521 for the fiscal years
ending September 30, 1996 and 1997 respectively. Revenues generated from this
overriding royalty interest for the fiscal year ending September 30, 1998 and
1999 are reported as discontinued operations. See Part II Item 7 - Notes to
Financial Statements - Note 1.
During the fiscal year ended September 30, 1998, an interest in an Australian
concession was acquired. The following is a description of this property.
Australian Concession - On January 26, 1998, the Company entered into a Letter
Agreement with Trebor Resources Co. of Dallas, Texas, for acquisition of 12.5%
working interest in an oil and gas concession located in Queensland, Australia.
The Company agreed to pay $12,500 for the 12.5% working interests and paid an
initial payment of $2,500 on January 26, 1998. The balance will be paid upon
notice that Authority to Prospect (ATP) 638 has officially been issued by the
Queensland government. The concession, known as ATP 638, is located in the
western part of Queensland and covers approximately 130,000 acres. A preliminary
seismic evaluation showed several potential structures on the concession which
need to be further evaluated in order to attempt to develop them into possible
drillable prospects.
Subsequent to September 30, 1998 the Company received a Cash Call notice from
Trebor Resources Co. regarding the Queensland ATP 638P requiring the Company to
pay the balance ($10,000 USD) due Trebor on or before December 31, 1998 per the
terms of the January 26, 1998 Letter Agreement between Signature and Trebor. Due
to low oil prices (approximately $10.00 per barrel or less) and the Company's
financial constraints and expanded focus, the Company was compelled to forfeit
its interest in ATP 638P, however, management was able to obtain an
understanding where Trebor would return the $2,500 to the Company subject to
Trebor obtaining favorable funding for the project.
Item 3. Legal Proceedings
As of December 15, 1999, there were no legal proceedings to which the Company
was a party, and no legal litigation is known to be pending.
Item 4. Submission of Matters to a Vote of Securities Holders
No matters have been submitted to a vote of security holders since May 17, 1996,
at the Company's last Annual Meeting. A shareholder meeting is planned for the
spring of 2000.
PART II
Item 5. Market for Common Equity and Related Stockholder Matters
(a) Market Information
The Company's common stock is currently not traded. However the Company's stock
was trading on the over-the-counter market of the Electronic Bulletin Board in
1996. During the summer of 1999, the Company began the process of taking those
necessary steps to cause it to be relisted and restored to a trading status.
There are no warrants outstanding as of September 30, 1999.
(b) Approximate Number of Holders of Common Stock
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The approximate number of security holders of record of Signature Motorcars,
Inc. (formerly International Royalty & Oil Co.), common stock on December 15,
1999, was 1,393. Additional stockholders hold stock in street name; the number
of holders in street name is not available to the Company.
(c) Dividends
The Company has not declared or paid dividends in the past, and does not
anticipate doing so in the immediate future.
Item 6. Plan of Operations
General Discussion
During the three years ended September 30, 1995, revenues were insignificant and
expenses were kept to a minimum. The 1993 and 1994 fiscal years were focused on
seeking industry partners for development and use of its EOR process. The price
of oil remaining below $20.00 per barrel made the search for partners and joint
ventures difficult. The major shareholder and debt holder of the Company, A.W.
Adkisson Estate, expanded the parameters of the search to include other viable
business opportunities to merge into the corporate public vale of the Company.
On December 4, 1995, the Company entered into a Statement of Intention with
ExotiCar, Inc., a newly formed Oklahoma corporation. As per the Statement of
Intention, the Company was brought into compliance with the Securities and
Exchange Commission's (SEC's) full reporting requirements.
The goal of ExotiCar was to establish a number of high-end car rental locations
with luxury cars and specialty sports cars. On July 10, 1996, the Company
changed its name to Signature Motorcars, Inc., in anticipation of entry into the
car rental business; however, the anticipated merger and purchase failed to be
consummated. Subsequently the Company shifted its activities back to its former
direction of acquiring working interests, royalties, and overriding royalties in
oil and gas properties within the United States and foreign countries.
Prior to September 30, 1997, a group of shareholders met in August to discuss
the Company's future and outline a plan to fund the Company. The plan was to
sell, through a series of private transactions, certain Company assets and
restricted Company common stock to raise operating capital and to pay for the
Company to update its regulatory status. Since the anticipated merger with the
ExotiCar group was not completed, the August 1997 plan called for a change of
control of Company management through the acquisition of large blocks of Company
stock obtained from the former ExotiCar control group.
In accordance with the above plans, on August 25, 1997, the Company granted to
William R. Miertschin an exclusive option to acquire 1,665,660 shares of common
stock of Black Giant Oil Company for $25,000, or approximately $0.015 per share,
which was owned by the Company. At that time, Black Giant was also inactive, and
there was virtually no market for the stock. On December 15, 1997, Miertschin
exercised this option and delivered $25,000 to Signature. Also, in the August
25, 1997, Option Agreement, the Company agreed to sell to Miertschin up to
2,000,000 shares of its common stock in a private placement at an offering price
of $0.01 per share if Miertschin first purchased the Black Giant stock, which he
did as stated above. On December 30, 1997, Miertschin purchased 500,000 shares
for $5,000, and the balance was exercised in July 1998. On September 6, 1997,
Miertschin acquired the control block of Signature stock (1,265,000 shares) from
the ExotiCar group (Manoj Patel, et al).
After the change of control, management proceeded to bring the Company back into
compliance with the various government agencies by bringing current the
corporation fees in Nevada, engaging a tax accountant to prepare the tax returns
for the delinquent years and prepare the financial statements for audit for the
three years ended September 30, 1996, 1997 and 1998.
Since the Company became current in its SEC filings during the summer of 1999,
the Company has been evaluating various opportunities for both funding and/or
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mergers or acquisitions. The competition for viable and financially sound merger
or consolidation partners is competitive. In the search for funding,
consolidation and merger/acquisition partners, the Company is in competition
with investment bankers, venture capitalists, brokerage firms and others with
far greater financial and technical resources than the Company.
Assets & Liabilities
The Company's assets as of September 30, 1996 and 1997, were $78 and $284
respectively. The Company holds the patent (issued April 1992) for the IROC EOR
process, and has equipment necessary for the process. The IROC EOR process shows
this financial asset with no value, having been written off in the year ending
September 30, 1996, but this process could be of significant value in the
future. See Note 1 to the Financial Statements. As of September 30, 1996 and
1997, the Company had no liabilities, as all of the debt had been converted to
equity. Prior to September 30, 1996 the assets of the Company were sold to
reduce or eliminate debt.
During the year ending September 30, 1998 the Company began acquiring oil and
gas properties with the intention of developing the properties as an oil and gas
producer. The drop in oil prices during 1998 caused the Company to discontinue
those operations. Therefore, these operations are reported as net assets of
discontinued operations on the Company's balance sheet. The Company's assets as
of September 30, 1998 were $24,620 and liabilities were $4,800, and on September
30, 1999, the Company's assets were $24,569 and liabilities were $36,992. See
Notes to Financial Statements - Note 1.
Income and Expenses
The Company only had one income producing property on September 30, 1996 and
1997, a small Canadian override which generated $522 for 1996 and $521 for 1997.
No other income was reported during these periods. During the fiscal year ended
September 30, 1998 revenues earned from the Canadian override are reported as
discontinued operations. Also during this fiscal year the Company sold 1,665,660
shares of Black Giant Oil Company common stock for $25,000. The Company had
previously written off this stock as a financial asset. Therefore, the Company
had no basis and reported a gain of $25,000 on this sale. Prior to and at the
time of this sale, Black Giant Oil Company was an inactive stock with virtually
no market value. See Note 2 to the Financial Statements.
The General and Administrative expenses were minimal during the fiscal years
ending September 30, 1996 and 1997 being $2,025 and $566 respectively. These
expenses primarily include postage and bank charges. During the fiscal year
ending September 30, 1996 the Company wrote off $18,000 relating to the IROC EOR
process and other small assets.
The General and Administrative expenses for the fiscal year ending September
30, 1998 were $43,750, and for the fiscal year ending September 30, 1999, they
were $41,934. The Company's expenses for fiscal year ending September 30, 1999,
primarily consisted of salaries, interest, Nevada corporate fees and
administration, and accounting, auditing, professional and other services
related to updating SEC filing status. These expenses may have been or may be
paid by stock being issued for services.
Income Taxes
The Company anticipates that it will not generate taxable income sufficient to
utilize its carried forward tax losses at this time, based on historical
performance. See Note 5 to Financial Statements for additional disclosure.
Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standard No. 133, "Accounting for Derivative Instruments
<PAGE> 10
and Hedging Activities" (SFAS 133). This statement standardized the accounting
for derivative instruments, including certain derivative instruments embedded in
other contracts, requiring that an entity recognize those items as assets or
liabilities in the statement of financial position and measure them at fair
value. The statement generally provides for matching the timing of gain or loss
recognition on the hedging instrument with the recognition of (a) the changes in
fair value of the hedged assets or liabilities that are attributable to the
hedged risk, or (b) the earnings effect of the hedged transaction. The statement
is effective for all fiscal quarters of all fiscal years beginning after June
15, 1999, with earlier application encouraged, and shall be applied
retroactively to financial statements of prior periods. Adoption of SFAS 133 is
expected to have no effect on the Company's financial statements.
Disclosure Regarding Forward-Looking Statements
This Form 10-KSB includes "forward-looking" statements within the meaning of
Section 27A of the Securities Act and the Company desires to take advantage of
the "safe harbor" provisions thereof. Therefore, the Company is including this
statement for the express purpose of availing itself of the protections of such
safe harbor provisions with respect to all of such forward-looking statements.
The forward-looking statements in this Form 10-KSB reflect the Company's current
views with respect to future events and financial performance. These
forward-looking statements are subject to certain risks and uncertainties that
could cause actual results to differ from those anticipated. In the Form 10-KSB,
the words "anticipates," "believes, "expects," "intends," "future" and similar
expressions identify forward-looking statements. The Company undertakes no
obligation to publicly revise these forward-looking statements to reflect events
or circumstances that may arise after the date hereof. All subsequent written
and oral forward-looking statements attributable to the Company or persons
acting on its behalf are expressly qualified in their entirety by this section.
Year 2000 Compliance
The year 2000 poses certain issues for business and consumer computing,
particularly the functionality of software for two-digit storage of dates and
special meanings for certain dates such as 9/9/99. The year 2000 is also a leap
year, which may lead to incorrect calculations, functions or system failure. The
widespread use of computer programs that rely on these two-digit date programs
to perform computations and decision-making functions may cause information
technology systems to malfunction in and around the year 2000. Such malfunctions
may lead to significant business delays in the U.S. and internationally. The
problem exists for many kinds of software, including software for mainframes,
PCs and embedded systems. Many normal business activities will potentially be
impacted because information necessary to monitor and control various operations
is controlled by computers.
The Company has studied and tested its technologies systems impacted by the Year
2000 transition. The Company believes that its systems are Year 2000 compliant.
However, variability of hardware and software combinations may lead to
unforeseen problems. The Company has not experienced any problems with its
computer systems since January 1, 2000.
The Company's vendors are various and diverse and the bulk of the items
purchased by the Company are widely available. There are no problems which are
expected to arise due to vendors' failure to be Year 2000 compliant because
auxiliary channels should be available to the Company to acquire its supplies,
parts and other needs from other vendors should any particular vendor have a
problem due to noncompliance.
Due to the nature of the Company's business and its information and accounting
systems, costs to bring its systems into compliance have been immaterial.
<PAGE> 11
Item 7. Financial Statements
The financial statement information for Signature is set forth immediately
following the signature page of this Form 10KSB. See the Index to Financial
Statements on page F-1.
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
There are no disagreements between the Company and its auditor, Jackson & Rhodes
P.C. of Dallas, Texas regarding accounting and/or financial disclosure.
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons
The following are the officers and directors of the Company as of December 15,
1999:
<TABLE>
<CAPTION>
Name Age Position
---------------------- --- -------------------------
<S> <C> <C>
William R. Miertschin 52 President, CEO & Director
Elizabeth Webb* 51 Secretary
Howard B. Siegel 57 Director
Ivan Webb* 48 Director
</TABLE>
* Ivan Webb and Elizabeth Webb are husband and wife. There are no other
family relationships between the Directors and Officers.
William R. Miertschin, President, Chief Executive Officer, and Chairman of the
Board of Directors, is an oil and gas consultant with offices in Dallas, Texas.
He is a 1972 graduate of the University of Texas at Austin, with a BA in
Mathematics. He completed additional courses in petroleum engineering at the
University of Texas of the Permian Basin in 1978. He began his oil and gas
career in 1975 as an Engineer with the Baroid Division of NL Industries in
Odessa, Texas. From 1977 to 1979, Miertschin was Drilling Supervisor for Gulf
Oil Exploration and Production, being the first trainee to complete Gulf Oil's
drilling and production engineering training program. Thereafter, he was
employed with Mesa Petroleum (1979-1985) as Corporate Supervisor of Regulatory
and Safety in Amarillo, Texas, and as Drilling Supervisor and Senior Drilling
Engineer in Midland and Amarillo, Texas, managing Mesa's corporate drilling and
completion operations for all of the Permian Basin Division, Texas Panhandle and
Kansas. In 1986 he graduated from the Leadership Amarillo Program of the
Amarillo Chamber of Commerce. A member of the Society of Petroleum Engineers,
Miertschin has served as an expert witness before the Kansas Corporation
Commission (KCC) and the New Mexico Oil Conservation Commission (NMOCC) on
regulatory affairs, drilling and completion, and analysis of potential
production purchases. He served on the Oil and Gas Advisory Committee to KCC to
revise statewide rules in Kansas. Miertschin has been active in the oil and gas
industry as an investor and operator, and in private practice as a consultant in
the Dallas-Fort Worth area, for the last twelve (12) years.
<PAGE> 12
Elizabeth Webb, Secretary, of Cisco, Texas, received her Bachelor of Science
Degree in Business Administration from Tarleton State University (a branch of
Texas A&M University) in 1979. She has served as Secretary of the Company since
August 1997. She is also serving as Secretary for Black Giant Oil Company, a
public company, and has held this position for the past 13 years. Over the past
five years she has been active in keeping records for independent oil producers,
including regulatory compliance filings with the Railroad Commission of Texas.
Mrs. Webb is currently employed by the Cisco Independent School District.
Howard Siegel, Director, received his Bachelor of Business Administration Degree
from the University of Oklahoma in 1966. He received a Doctor of Jurisprudence
Degree from St. Mary's University School of Law in 1969. Mr. Siegel was formerly
an attorney for The Superior Oil Company, a major oil and gas concern located in
Houston, Texas. He previously served as Vice President, General Counsel, and a
member of the Board of Directors of Tenneco Inc. Federal Credit Union. From July
1974 to August 1989, Mr. Siegel was employed as an attorney with the law firm of
Bracewell & Patterson in Houston, and from that date until January, 1991, he was
employed with Hurt, Richardson, Garner, Todd & Cadenhead, attorneys in Atlanta,
Georgia. Currently, Mr. Siegel is a practicing attorney in Houston, Texas, and
serves as a Director of Golden Triangle Industries, Inc., a publicly traded
company on the NASDAQ Small Cap Exchange. Mr. Siegel has served in an advisory
capacity to the Board of Directors of the Company since May, 1995.
Ivan Webb, Operations Manager and Director, of Cisco, Texas, received his
Bachelor of Business Degree in Business Administration from Tarleton State
University (Texas A&M Branch) in 1978. He was instrumental in the preparation of
four domestic oil and gas public stock offerings. Mr. Webb has been involved in
negotiations for the acquisition of more than 200 producing oil and gas prop-
erties within the United States during his career. He has international exper-
ience negotiating with governments for oil and gas concessions in Australia and
Argentina, gold and diamond leases in Guyana, and a bauxite project in India. He
is currently Chief Financial Officer of Ness Energy International, Inc., and
president of Black Giant Oil Company both of which are public companies listed
on the Electronic Bulletin Board.
Item 10. Executive Compensation
The following table shows the annual compensation to be paid to the Company's
president. Subject to funding and/or the availability of funds from revenues,
the compensation committee may increase the president's salary.
<TABLE>
<CAPTION>
Name and Principal Position Salary
--------------------------- ------
<S> <C>
William R. Miertschin, President $18,000
</TABLE>
All compensation and other arrangements between the Company and its officers and
directors are to be approved by a Compensation Committee of the Board of
Directors, a majority of whom are to have no affiliation or relationship with
the Company other than as directors. To conserve working capital, the
Compensation Committee may elect to arrange compensation for the Company's
president to be paid in stock in lieu of cash. See Note 3 of the Financial
Statements.
Item 11. Security Ownership of Certain Beneficial Owners and Management
The following is certain information concerning persons or firms who are known
by the Company to own beneficially more than 5% of the Company's common stock
(7,449,835) and voting shares on September 30, 1999.
<PAGE> 13
<TABLE>
<CAPTION>
Name and Address Number of Percent
Title of Class of Beneficial Owner Shares Owned of Class
- -------------- ------------------- ------------ --------
<S> <C> <C> <C>
Common Stock William R. Miertschin 3,911,192 52.50%
$0.0167 Par Value 310 Deer Path
Fairview, Texas 75069
Common Stock Elizabeth Webb 25,000* 0.33%
$0.0167 Par Value 901 W. Sixth Street
Cisco, Texas 76437
Common Stock Ivan Webb 370,000* 4.97%
$0.0167 Par Value 901 W. Sixth Street
Cisco, Texas 76437
Common Stock Howard Siegel 120,000 1.61%
$0.0167 Par Value 14760 Memorial Drive
Houston, Texas 77079
All Directors and Officers as a group (4 persons) 4,426,192 59.41%
Common Stock A.W. Adkisson Estate 595,589 8.00%
$0.0167 Par Value 6300 RidgeLea Place
Suite 611
Fort Worth, Texas 76116
All Beneficial Owners as a group 5,021,781 67.41%
</TABLE>
* The only family relationship between the officers and directors is that Ivan
Webb and Elizabeth Webb are husband and wife.
Changes in Control of Issuer.
In August 1997, a group of stockholders met and decided to bring the Company
into regulatory compliance and initiated a funding campaign. On August 25, 1997,
William R. Miertschin entered into an Option Agreement with the Company to
acquire 1,665,660 common shares of Black Giant Oil Company for $25,000, or
approximately $0.015 per share. At the time, Black Giant stock had no trades
with 0 Bid and 3 cents Ask. The Option Agreement also granted Miertschin an
option to purchase up to 2,000,000 of the common stock of Signature for $20,000,
or 1 cent per share, provided he first bought all of the Company's Black Giant
stock. Miertschin purchased the Black Giant stock from the Company on December
15, 1997, for $25,000, and 500,000 shares of the Company's stock for $5,000 on
December 30, 1997, with the remainder of the option being exercised in July
1998. On September 6, 1997, Miertschin acquired control of the Company from
Manoj K. Patel by purchasing 165,000 shares of the Company from Manoj K. Patel
and 1,100,000 shares from MKP Investments, Inc. which was owned by Patel. This
total purchase of 1,265,000 shares represented 42.55% of the 2,972,385 shares
outstanding; prior to this purchase Miertschin owned 26,192 shares which gave
Miertschin a total of 1,291,192 shares or 43.43% of the Company's outstanding
stock. After Miertschin exercised his above referenced option for two million
(2,000,000) shares and with subsequent stock acquisitions, on the date of this
filing Miertschin owns 3,911,192 shares or 52.50% of 7,449,835 shares of the
Company's stock outstanding. Patel resigned all of his capacities in the Company
effective September 6, 1997. With Patel's resignation, Ivan Webb assumed
corporate responsibilities on an interim basis as Operations Manager, with
Elizabeth Webb functioning as Corporate Secretary. Later, at the request of the
Board, Miertschin agreed to assume the office of President and Chairman of the
Board of Directors effective November 1, 1997. As of December 15, 1999, those
three remain in those capacities.
Item 12. Certain Relationships and Related Transactions
Since William R. Miertschin and Ivan Webb both have interests in the oil and gas
business, their interests could directly or indirectly compete with the
<PAGE> 14
interests of the Company. Although the Company is not aware of any conflict of
interest, such present or future activities on the part of the officers and
directors could cause a conflict of interest. If the Company should enter into
transactions in the future with its officers, directors or other related
parties, the consideration to them as a result of such transactions shall be as
favorable to the Company as those which could be obtained from an unrelated
party in an arm's length transaction. Tango Oil Co., a Texas Corporation, which
is the operator of the C. T. Troell lease in Atascosa County, Texas, is owned
and controlled by Miertschin, and Miertschin formerly owned an interest in the
Troell lease. Prior to Miertschin's becoming a director or officer of the
Company, the Company made the decision to acquire 40% working interest in Spires
lease in Nolan County, Texas; at that time Miertschin owned a minority interest
in that lease, and it is anticipated that Tango may become the operator of the
Spires lease in the future. Miertschin no longer owns an interest in either
lease.
Item 13. Exhibits and Reports on Form 8-K
No reports were filed on Form 8-K during the past year ended September 30, 1999.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, Signature Motorcars, Inc., has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
SIGNATURE MOTORCARS, INC.
Date: January 14, 2000 /s/ William Miertschin
-------------------------------------------
By: William Miertschin, President, Chief
Executive Officer, Principal Accounting
Officer, Principal Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ Elizabeth Webb Secretary January 14, 2000
- -------------------------
Elizabeth Webb
/s/ William R. Miertschin President & Director January 14, 2000
- -------------------------
William R. Miertschin
/s/ Howard Siegel Director January 14, 2000
- -------------------------
Howard Siegel
/s/ Ivan Webb Director January 14, 2000
- -------------------------
Ivan Webb
</TABLE>
<PAGE> 15
SIGNATURE MOTORCARS, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditor's Report.................................................F-2
Balance Sheets at
September 30, 1999 and 1998.........................................F-3
Statements of Operations for the years ended
September 30, 1999 and 1998.........................................F-4
Statements of Changes in Stockholders' Equity (Deficit)
for the years ended September 30, 1999 and 1998.....................F-5
Statements of Cash Flows for the years ended
September 30, 1999 and 1998.........................................F-6
Notes to Financial Statements.............................................F-7-10
</TABLE>
<PAGE> 16
INDEPENDENT AUDITORS' REPORT
Board of Directors
Signature Motorcars, Inc.
We have audited the accompanying balance sheets of Signature Motorcars, Inc. as
of September 30, 1999 and 1998, and the related statements of operations,
changes in stockholders' equity (deficit), 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 audit.
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 Signature Motorcars, Inc. as of
September 30, 1999 and 1998 and the results of its operations and its cash flows
for the years then ended in conformity with generally accepted accounting
principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company's significant operating losses and its working
capital deficit raise substantial doubt about its ability to continue as a going
concern. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
Jackson & Rhodes P.C.
Dallas, Texas
December 15, 1999
F-2
<PAGE> 17
SIGNATURE MOTORCARS, INC.
BALANCE SHEETS
SEPTEMBER 30, 1999 AND 1998
ASSETS
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Current assets:
Cash $ 122 $ 173
----------- -----------
Other assets:
Net assets of discontinued operations 24,447 24,447
----------- -----------
Total other assets 24,447 24,447
----------- -----------
$ 24,569 $ 24,620
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable and accrued liabilities $ 36,992 $ 4,800
----------- -----------
Total liabilities 36,992 4,800
----------- -----------
Commitments and contingencies (Note 5) -- --
Stockholders' equity (deficit):
Preferred stock, $.10 par value, 1,000,000 shares
authorized; none issued and outstanding -- --
Common stock, $.0167 par value, 100,000,000 shares
authorized; 7,449,835, and 6,398,835
shares issued and outstanding 124,867 106,861
Additional paid-in capital 7,367,722 7,442,102
Accumulated deficit (7,505,012) (7,459,883)
----------- -----------
(12,423) 89,080
Less treasury stock (40,272 shares, at cost) 0 (69,260)
----------- -----------
Total stockholders' equity (deficit) (12,423) 19,820
----------- -----------
$ 24,569 $ 24,620
=========== ===========
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE> 18
SIGNATURE MOTORCARS, INC.
STATEMENTS OF OPERATIONS
YEARS ENDED SEPTEMBER 30, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Revenues:
Miscellaneous income $ -- $ --
----------- -----------
Total revenues -- --
----------- -----------
Operating expenses:
General and administrative 41,934 43,750
----------- -----------
41,934 43,750
----------- -----------
Loss from operations (41,934) (43,750)
----------- -----------
Other income (expense):
Interest expense (3,600) (4,800)
Write-off of intangibles -- 25,000
----------- -----------
Total other income (expense) (3,600) 20,200
----------- -----------
Loss from continuing operations (45,534) (23,550)
Discontinued operations 405 (7,428)
----------- -----------
Net loss $ (45,129) $ (30,978)
=========== ===========
Basic loss per common share:
From continuing operations $ (0.01) $ (0.01)
=========== ===========
Net loss $ (0.01) $ (0.01)
=========== ===========
Weighted average common shares outstanding 6,661,585 3,444,752
=========== ===========
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE> 19
SIGNATURE MOTORCARS, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
YEARS ENDED SEPTEMBER 30, 1999 AND 1998
<TABLE>
<CAPTION>
Common Stock
-------------------------- Additional
Paid-in Accumulated Treasury
Shares Amount Capital Deficit Stock Total
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance, September 30, 1997 2,972,835 $ 49,647 $ 7,442,102 $(7,422,205) $ (69,260) $ 284
Shares issued for services 2,040,000 34,068 -- -- -- 34,068
Shares issued for purchase of
oil and lease properties 386,000 6,446 -- -- -- 6,446
Shares issued for cash 1,000,000 16,700 -- (6,700) -- 10,000
Net loss -- -- -- (30,978) -- (30,978)
----------- ----------- ----------- ----------- ----------- -----------
Balance, September 30, 1998 6,398,835 106,861 7,442,102 (7,459,883) (69,260) 19,820
Common stock issued for
accounts payable 750,000 12,525 (5,025) -- -- 7,500
Common stock issued for
services 261,000 4,813 (70,687) -- 69,260 3,386
Common stock issued for cash 40,000 668 1,332 2,000
Net loss (45,129) (45,129)
----------- ----------- ----------- ----------- ----------- -----------
Balance, September 30, 1999 $ 7,449,835 $ 124,867 $ 7,367,722 $(7,505,012) $ -- $ (12,423)
=========== =========== =========== =========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE> 20
SIGNATURE MOTORCARS, INC.
STATEMENTS OF CASH FLOWS
YEARS ENDED SEPTEMBER 30, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(45,129) $(30,978)
Adjustments to reconcile net loss to net cash
used in operating activities:
Shares issued for services 3,386 34,068
Gain on sale -- (25,000)
Changes in operating assets and liabilities:
Accounts payable and accrued liabilities 39,692 4,800
Net assets of discontinued operations -- (18,001)
-------- --------
Net cash used in operating activities (2,051) (35,111)
Cash flows from investing activities:
Proceeds on sale of equity investment -- 25,000
-------- --------
Cash flows from financing activities:
Issuance of common stock 2,000 10,000
-------- --------
Net decrease in cash and cash equivalents (51) (111)
Cash at beginning of year 173 284
-------- --------
Cash at end of year $ 122 $ 173
======== ========
Supplemental disclosure:
Total interest paid $ -- $ 3,000
======== ========
</TABLE>
See accompanying notes to financial statements.
F-6
<PAGE> 21
SIGNATURE MOTORCARS, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999 AND 1998
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business
Signature Motorcars, Inc. was incorporated in Nevada on February 19, 1969,
as International Royalty & Finance Co. Prior to the Company's public
offering in 1972, the Company changed its name to International Royalty &
Oil Co. In April 1996, the Company's controlling interest was acquired by
ExotiCar Rentals, Inc. and the name was changed to Signature Motorcars,
Inc.
During the year ended September 30, 1998, the Company began acquiring oil
and gas properties with the intention of developing the properties and
becoming an oil and gas producer. However, with the drop in oil prices
during the period, the Company has decided to discontinue those operations.
Accordingly, the oil and gas operations are reported as discontinued in the
accompanying statement of operations and the net oil and gas assets are
reported in the accompanying balance sheet as net assets of discontinued
operations (see Note 6). The Company intends to distribute these net assets
to a newly formed subsidiary and spin-off the subsidiary's shares to the
Company's shareholders in the near future. The Company has had nominal
revenues from oil and gas activities.
The Company is currently considered a "public shell" corporation with
nominal business operations and is in the process of searching for an
operating business with which to negotiate a "reverse merger."
Basis of Presentation
The Company's financial statements have been presented on the basis that it
is a going concern, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. The financial
statements do not include any adjustments that might result from the
outcome of this uncertainty.
The Company has suffered continuing net losses from operations and has a
deficit in working capital as of September 30, 1999. As explained above,
without a merger partner, the Company has nominal operations. The Company
is dependant on a merger partner or raising additional funds in order to
provide capital for the Company to continue as a going concern.
F-7
<PAGE> 22
SIGNATURE MOTORCARS, INC.
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Use of Estimates and Assumptions
Preparation of the Company's financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect certain reported amounts and
disclosures. Accordingly, actual results could differ from those estimates.
Net Loss Per Common Share
In March 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, Earnings Per Share ("SFAS 128").
SFAS 128 provides a different method of calculating earnings per share than
was formerly used in APB Opinion 15. SFAS 128 provides for the calculation
of basic and diluted earnings per share. Basic earnings per share includes
no dilution and is computed by dividing income available to common
stockholders by the weighted average number of common shares outstanding
for the period. Dilutive earnings per share reflects the potential dilution
of securities that could share in the earnings of the Company. The Company
was required to adopt this standard in the fourth quarter of calendar 1997.
Because the Company has no potential dilutive securities, the accompanying
presentation is only of basic loss per share.
Statement of Cash Flows
For statement of cash flow purposes, the Company considers short-term
investments with original maturities of three months or less to be cash
equivalents.
Income Taxes
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes"
("SFAS 109"). SFAS 109 utilizes the asset and liability method of computing
deferred income taxes. The objective of the asset and liability method is
to establish deferred tax assets and liabilities for the temporary
differences between the financial reporting basis and the tax basis of the
Company's assets and liabilities at enacted tax rates expected to be in
effect when such amounts are realized or settled. Under SFAS 109, the
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date.
F-8
<PAGE> 23
2. RELATED PARTY TRANSACTIONS
On December 15, 1997, the Company sold 1,665,660 shares of Black Giant Oil
Company for $25,000 to a shareholder of the Company. The Company had no
cost basis in the shares; therefore a gain of $25,000 was recorded.
3. STOCK ISSUED FOR SERVICES
During 1999, 1998 and 1997, the Company issued common stock to certain
related parties, valued at estimated fair market value, for services
performed on behalf of the Company. The shares issued and value of those
shares at September 30 are as follows:
<TABLE>
<CAPTION>
Shares Issued Value
------------- --------
<S> <C> <C>
1999 1,011,000 $ 10,886
1998 2,040,00 34,068
1997 15,000 251
</TABLE>
4. INCOME TAXES
At September 30, 1999, the Company had net operating loss carryforwards
totaling approximately $6,500,000 available to reduce future taxable income
through the year 2011. Due to changes in control of the Company, these
carryforwards are limited on an annual basis.
5. COMMITMENTS AND CONTINGENCIES
Concentration of Credit Risk
The Company invests its cash and certificates of deposit primarily in
deposits with major banks. The Company has not incurred losses related to
its cash.
Fair Value of Financial Instruments
The following disclosure of the estimated fair value of financial
instruments is made in accordance with the requirements of SFAS No. 107,
Disclosures about Fair Value of Financial Instruments. The estimated fair
value amounts have been determined by the Company, using available market
information and appropriate valuation methodologies.
The fair value of financial instruments classified as current assets or
liabilities including cash and cash equivalents and accounts payable
approximate carrying value due to the short-term maturity of the
instruments.
F-9
<PAGE> 24
SIGNATURE MOTORCARS, INC.
NOTES TO FINANCIAL STATEMENTS
6. DISCONTINUED OPERATIONS
As explained in Note 1, the net oil and gas assets of the discontinued
operations are reported in the accompanying balance sheet as net assets of
discontinued operations as of September 30, 1998. Following is a summary of
these net assets:
<TABLE>
<S> <C>
Assets:
Troell lease $ 50,272
Spires wells 4,175
----------
Total assets 54,447
Liabilities:
Note payable to an individual (30,000)
----------
Net assets $ 24,447
==========
</TABLE>
The $30,000 note payable to an individual was due on May 15, 1998 and
accrues interest at 12%.
F-10
<PAGE> 25
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<S> <C>
27 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM AUDITED
FINANCIAL STATEMENTS FILED WITH THE COMPANY'S SEPTEMBER 30, 1999 ANNUAL REPORT
ON FORM 10-KSB AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-END> SEP-30-1999
<CASH> 122
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 122
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 24,569
<CURRENT-LIABILITIES> 36,992
<BONDS> 0
0
0
<COMMON> 124,867
<OTHER-SE> (137,290)
<TOTAL-LIABILITY-AND-EQUITY> 24,569
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 41,934
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,600
<INCOME-PRETAX> (45,534)
<INCOME-TAX> 0
<INCOME-CONTINUING> (45,534)
<DISCONTINUED> 405
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (45,129)
<EPS-BASIC> (.01)
<EPS-DILUTED> (.01)
</TABLE>
