SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
Check One
/X/ Quarterly report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the quarterly period ended March 31, 1999
or
/ / Transition report under Section 13 or 15(d) of the Securities Exchange
Act of 1934
Commission file number 0-12500
ISRAMCO INC.
(Exact Name of Small Business Issuer as Specified in its Charter)
Delaware 13-3145265
(State or other Jurisdiction of I.R.S. Employer Number
Incorporation or Organization)
1770 St. James Place, Suite 607 Houston, TX 77056
(Address of Principal Executive Offices)
713-621-3882
(Issuer's Telephone Number, Including Area Code)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days. Yes [X] No [ ]
The number of shares outstanding of the registrant's Common Stock as of May
14, 1999 was 2,639,809.
Transitional Small Business Disclosure Format: Yes [ ] No [X]
<PAGE>
PART I - FINANCIAL INFORMATION:
Item 1. Financial Statements
Consolidated Balance Sheets at March 31, 1999 and December 31, 1998
Consolidated Statements of Operations for the three months ended March
31, 1999 and 1998
Consolidated Statements of Cash Flows for the three months ended March
31, 1999 and 1998
Notes to Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults upon senior securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
Exhibit 27 - Financial Data Schedule
Signatures
2
<PAGE>
ISRAMCO INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
March 31, December 31,
ASSETS 1999 1998
----------- ------------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 14,430 $ 14,240
Marketable securities, at market 2,203 3,846
Accounts receivable 530 268
Prepaid expenses and other current assets 313 207
-------- --------
Total current assets 17,476 18,561
Property and equipment (successful efforts 5,319 5,450
method for oil and gas properties), net
Marketable securities, at market 1,084 --
Investment in affiliate 419 285
Covenants not to compete, net 90 122
Other 65 68
-------- --------
Total assets $ 24,453 $ 24,486
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 374 $ 374
Accounts payable and accrued expenses 525 644
-------- --------
Total current liabilities 899 1,018
Long-term debt 1,311 1,404
-------- --------
Total liabilities 2,210 2,422
Commitments, contingencies and other matters
Shareholders' equity:
Common stock $.0l par value; authorized 75,000,000
shares; issued 2,669,120 27 27
Additional paid-in-capital 26,168 26,168
Accumulated other comprehensive loss (125) --
Accumulated deficit (3,663) (3,967)
Treasury stock, 29,267 shares (164) (164)
-------- --------
Total shareholders' equity 22,243 22,064
-------- --------
Total liabilities and shareholders' equity $ 24,453 $ 24,486
======== ========
</TABLE>
See notes to the consolidated financial statements
3
<PAGE>
ISRAMCO INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except for share information)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
-----------------------------------
1999 1998
----------- -----------
<S> <C> <C>
Revenues:
Oil and gas sales $ 328 $ 407
Operator fees from related party 108 190
Interest income 328 156
Gain on marketable securities 39 --
Office services to affiliates and other 137 120
Reimbursement of exploration costs 48 43
Equity earnings of Jay Management -- 15
----------- -----------
Total revenues 988 931
----------- -----------
Expenses:
Interest expense 39 76
Depreciation, depletion and amortization 190 176
Lease operating expenses and severance taxes 86 276
Operator expense 104 120
General and administrative 220 442
Loss on marketable securities -- 384
----------- -----------
Total expenses 639 1,474
----------- -----------
Income (loss) before taxes and minority interest 349 (543)
Income taxes 45 --
Minority interest -- 17
----------- -----------
NET INCOME (LOSS) $ 304 $ (526)
=========== ===========
Income (loss) per share (basic and diluted) $ 0.12 $ (0.20)
=========== ===========
Weighted average number of shares outstanding 2,639,853 2,639,853
=========== ===========
</TABLE>
See notes to the consolidated financial statements
4
<PAGE>
ISRAMCO INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
------------------------------
1999 1998
-------- --------
<S> <C> <C>
Cash flow from operating activities:
Net income (loss) $ 304 $ (526)
Adjustment to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation, depletion and amortization 190 176
Minority interest -- (17)
(Gain) loss on marketable securities (39) 384
Gain on sale of property and equipment -- (3)
Changes in assets and liabilities
Accounts receivable (262) 154
Prepaid expenses and other current assets (106) (10)
Other 3 (48)
Accounts payable and accrued expenses (26) 9
-------- --------
Net cash provided by operating activities 64 119
-------- --------
Cash flows from investing activities:
Addition to property and equipment (60) --
Investment in affiliate (149) --
Purchase of remaining interests of
Jay Management, LLC (60) --
Purchase of marketable securities (194) (1,460)
Proceeds from sale of marketable securities 682 269
-------- --------
Net cash provided by (used in) investing activities 219 (1,191)
-------- --------
Cash flows from financing activities
Principal payments on long-term debt (93) (175)
-------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 190 (1,247)
Cash and cash equivalents - beginning of year 14,240 9,741
-------- --------
Cash and cash equivalents - end of period $ 14,430 $ 8,494
======== ========
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 39 $ 76
======== ========
</TABLE>
See notes to the consolidated financial statements.
5
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1
As used in these financial statements, the term "company" refers to Isramco,
Inc. and subsidiaries.
NOTE 2
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB. Accordingly,
they do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the opinion
of Management, all adjustments (consisting of only normal recurring adjustments)
considered necessary for a fair presentation have been included. Results for the
three month period ended March 31, 1999, are not necessarily indicative of the
results that may be expected for the year ended December 31, 1999. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the Company's Annual Report on Form 10-KSB for the fiscal
year ended December 31, 1998.
NOTE 3 - Consolidation
The consolidated financial statements include the accounts of the Company, its
direct and indirect wholly-owned subsidiaries Isramco Oil and Gas Ltd. (Oil and
Gas) and Isramco Resources Inc., a British Virgin Islands company, its wholly
owned subsidiary, Jay Petroleum, L.L.C., (Jay) and an immaterial wholly-owned
foreign subsidiary. Intercompany balances and transactions have been eliminated
in consolidation. Another wholly-owned subsidiary of the Company, Isramco
Management (1988) Ltd., an Israeli Company, is not included in the consolidation
because the Company has no voting rights. This entity serves as the nominee for
a Limited Partnership and has no significant assets or operations.
NOTE 4 - Acquisition of Oil and Gas Properties
Although the Company continues to seek to acquire oil and gas properties, no
such purchases were made in the first three months of 1999.
NOTE 5 - Long-term Debt
At March 31, 1999, Jay has outstanding indebtedness of $1,685,000 under a bank
loan facility of $10 million. The loan bears interest at the base rate of the
bank plus 1.5% with monthly payments of $31,208 plus interest and matures in
February 2000. The loan is collateralized by oil and gas properties and cannot
exceed the "Borrowing Base", as defined, which is subject to annual
determination. The Borrowing Base at March 31, 1999 was $3,235,000. Isramco,
Inc. is not a borrower or guarantor under this bank financing.
Under the terms of the financing agreement with the bank, Jay must meet certain
covenant requirements. The most restrictive covenants include maintenance of a
positive working capital ratio, exclusive of current maturities of amounts
outstanding under the bank loan facility. Jay was not in violation of its debt
covenants as of March 31, 1999.
NOTE 6 - New Pronouncements
SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, was
issued by the FASB in June 1998. SFAS No. 133 standardizes the accounting for
derivatives instruments, including certain derivative instruments embedded in
other contracts. SFAS No. 133 is effective for periods beginning after June 15,
1999. The Company believes that adoption of this financial accounting standard
will not have material effect on its financial condition or results of
operations.
6
<PAGE>
NOTE 7 - Geographical Segment Information
The Company's operations involve a single industry segment--the exploration,
development, production and transportation of oil and natural gas. Its current
oil and gas activities are concentrated in the United States, Israel, and the
Republic of Congo, Africa. Operating in foreign countries subjects the Company
to inherent risks such as a loss of revenues, property and equipment from such
hazards as exploration, nationalization, war and other political risks, risks of
increases of taxes and governmental royalties, renegotiation of contracts with
government entities and changes in laws and policies governing operations of
foreign-based companies.
The Company's oil and gas business is subject to operating risks associated with
the exploration, and production of oil and gas, including blowouts, pollution
and acts of nature that could result in damage to oil and gas wells, production
facilities or formations. In addition, oil and gas prices have fluctuated
substantially in recent years as a result of events, which were outside of the
Company's control. Financial information, summarized by geographic area, is as
follows (in thousands):
<TABLE>
<CAPTION>
Geographic Segment
---------------------------------------------------------
United Consolidated
States Israel Africa Total
-------- -------- -------- ------------
<S> <C> <C> <C> <C>
Identifiable assets at March 31, 1999 $ 2,560 $ 59 $ 2,700 $ 5,319
Cash and corporate assets $ 19,134
--------
Total Assets at March 31, 1999 $ 24,453
========
Identifiable assets at December 31, 1998 $ 2,686 $ 64 $ 2,700 $ 5,450
Cash and corporate assets 19,036
--------
Total assets at December 31, 1998 $ 24,486
========
Three Months Ended March 31, 1999
Sales and other operating revenue $ 345 $ 276 $ -- $ 621
Costs and operating expenses $ (274) $ (106) $ -- $ (380)
-------- -------- -------- --------
Operating profit $ 71 $ 170 $ -- $ 241
======== ======== ======== ========
Interest Income $ 328
General corporate expenses $ (220)
Interest expense, gain on marketable securities and other $ --
Income taxes $ (45)
--------
Net Income $ 304
========
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended March 31, 1998
United Consolidated
States Israel Africa Total
-------- -------- -------- ------------
<S> <C> <C> <C> <C>
Sales and other operating revenue $ 422 $ 353 $ -- $ 775
Costs and operating expenses $ (452) $ (120) $ -- $ (572)
-------- -------- -------- --------
Operating profit $ (30) $ 233 $ -- $ 203
======== ======== ======== ========
Interest Income and other corporate revenue $ 156
General corporate expenses $ (442)
Interest expense, loss on marketable securities and other $ (460)
Minority interest $ 17
--------
Net Loss $ (526)
========
</TABLE>
NOTE 8 - Marketable securities
SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities,
requires the Company to classify its debt and equity securities in one of three
categories: trading, available-for-sale and held-to-maturity. Trading securities
are bought and held principally for the purpose of selling them in the near
term. Held-to-maturity securities are those securities in which the Company has
both the ability and intent to hold the security until maturity. All other
securities not included in trading or held-to-maturity are classified as
available-for sale.
At December 31, 1998, the Company considered all of its marketable securities to
be held for trading purposes. During the first quarter of 1999, the Company
transferred certain investments in marketable securities, with a historical cost
of $2,750,000, to available-for-sale at fair market value. The Company holds no
held-to-maturity securities. Trading and available-for-sale are recorded at fair
market value. Unrealized holding gains and losses on trading securities are
included in earnings. Unrealized holding gains and losses, net of the related
tax effects, on available-for sale securities are excluded from earnings and are
reported as a separate component of stockholders' equity until realized.
At March 31, 1999 and December 31, 1998, the Company had net unrealized losses
on marketable securities of $296,000 and $1,756,000, respectively. The change in
the net unrealized holding gains or losses included in earnings is a gain of
$39,000 for the three months ended March 31, 1999.
Trading securities, which are primarily traded on the Tel-Aviv Stock Exchange,
consists of the following:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
March 31, 1999 December 31, 1998
- ---------------------------------------------------------------------------------------------------
Cost Market Value Cost Market Value
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Debentures $2,309,000 $2,136,000 $2,959,000 $2,728,000
- ---------------------------------------------------------------------------------------------------
Equity securities 65,000 67,000 2,643,000 1,118,000
- ---------------------------------------------------------------------------------------------------
$2,374,000 $2,203,000 $5,602,000 $3,846,000
- ---------------------------------------------------------------------------------------------------
</TABLE>
Available-for-sale securities, which are primarily traded on the Tel-Aviv Stock
Exchange, consist of equity securities, including investment in affiliates, with
amortized cost of $1,378,000, gross unrealized holding losses of $125,000 and a
fair market value of $1,503,000 at March 31, 1999. The Company held no
available-for-sale securities at December 31, 1998.
Sales of marketable securities resulted in realized losses of $86,000 for the
three months ended March 31, 1999.
8
<PAGE>
NOTE 9
The Company's comprehensive income for the three months ended March 31, 1999 and
1998 was as follows:
Three months ended March 31,
---------------------------
1999 1998
-------- --------
Net Income (loss) 304,000 (526,000)
Other comprehensive loss
- available-for-sale securities (125) --
-------- --------
Comprehensive income (loss) 179,000 (526,000)
======== ========
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Statements in this "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and elsewhere in this document as well as
statements made in press releases and oral statements that may be made by the
Company or by officers, directors or employees of the Company acting on the
Company's behalf that are not statements of historical or current fact
constitute "forward looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Such forward-looking statements
involve known and unknown factors that could cause the actual results of the
Company to be materially different from the historical results or from any
future results expressed or implied by such forward looking statements.
Liquidity and Capital Resources
The slight increase in the Company's consolidated cash and cash equivalents
of $190,000 from $14,240,000 at December 31, 1998 to $14,430,000 at March 31,
1999 is primarily the result of proceeds from the sale of marketable securities.
In the three month period ended March 31, 1999, the Company had net cash
inflow from purchases and sales of marketable securities of $488,000 as compared
to a net cash outflow from purchases and sales of marketable securities of
$1,191,000 in the three months ended March 31, 1998. As of March 31, 1999 the
Company owned 5.5% of the issued shares of J.O.E.L. -Jerusalem Oil Exploration
Ltd. ("JOEL"), the controlling shareholder of Naphtha Israel Petroleum Company
Ltd. ("Naphtha"). Naphtha through a wholly owned subsidiary holds approximately
50.1% of the Company's outstanding common stock. Shares of JOEL and Naphtha are
traded on the Tel Aviv Stock Market.
As of March 31, 1999, Jay had outstanding indebtedness of $1,685,000 under
a bank loan facility of $10 million. The loan bears interest at the base rate of
the bank plus 1.5% with monthly payments of $31,208 plus interest and matures in
February 2000. The loan is secured by oil and gas properties and cannot exceed
the "Borrowing Base" (as defined in the loan documents), which is subject to
annual re-determination. The Borrowing Base at March 31, 1999 was $3,235,000.
Isramco, Inc. is not a borrower or guarantor under the Comerica Loan Facility.
Under the terms of the financing agreement with the bank, Jay must meet certain
covenant requirements. The most restrictive covenants include maintenance of a
positive working capital ratio, exclusive of current maturities of amounts
outstanding under the bank loan facility. Jay was not in violation of its debt
covenants as of March 31, 1999.
The Company believes that existing cash balances and cash flows from
activities will be sufficient to meet its financing needs. The Company intends
to finance its ongoing oil and gas exploration activities from working capital
and the loan facility.
Results of Operations
United States
Oil and Gas Revenues (in thousands)
Three Months ended March 31
---------------------------
1999 1998
---------- ----------
Oil Volume Sold (Barrels)
Total 6 9
Gas Volume Sold (MCF)
Total 139 140
Oil Sales ($)
Total 68 141
Gas Sales ($)
Total 260 266
Average Unit Price
Oil ($/Bbl) * $11.33 $15.67
Gas ($/MCF) ** $1.87 $1.89
* Bbl - Stock Market Barrel Equivalent to 42 U.S. Gallons
** MCF - 1,000 Cubic Feet
9
<PAGE>
Israel
The Negev Med Licenses Venture
During the three month period ended March 31, 1999, the Negev Med Venture
expended $88,000. The Company's share is 1.0043% or $880.
Yam Ashdod Carveout Venture (within the Med Ashdod License)
During the three month period ended March 31, 1999, the Yam Ashdod Carveout
Venture expended $36,000. The Company's share is 1.0043% or $360.
On May 7, 1999, the Company, as operator of the offshore licenses in
Israel, presented to its participants in the licenses the following proposals
for its oil exploration work plans in the license areas:
(i) Offshore drilling of the Yam West 2 well in the Med Yavne license
area to a depth of 3,500 meters (approximately 11,483 feet) and a water
depth of 750 meters (approximately 2,461 feet). The amount budgeted for the
drilling is approximately $21 million, of which the Companys' share is
1.0043% or approximately $211.00.
(ii) Deepening of the Yam 2 well by approximately an additional 300
meters (approximately 984 feet), to a depth of 5,700 meters (approximately
18,702 feet). The amount budgeted for the drilling is approximately $21
million, of which the Companys' share is 1.0043% or approximately $211.00.
Deepening of the Yam 2 well is subject to the conclusion of an agreement
with the Israeli Ministry of Defense, the availability of drilling equipment
appropriate for elevated water pressure and temperatures, as well as additional
examination of the well head and its condition.
On May 6, 1999, the Company signed a drilling contract with an
international drilling contractor to drill the Yam West 2 and an additional
optional well. The estimated commencement date of drilling is August, 1999.
Congo
The Operator, Naphtha Congo, has submitted to the Congolese Ministry of
Petroleum a work program for the development of the Tilapia and Marine 3
concessions. A Management Committee meeting between Naphtha Congo and the
Congolese Ministry of Petroleum scheduled for July 1998 was postponed. On August
26, 1998 the Minister of Petroleum of Congo informed the Company that according
to the Decree submitted to the Company and signed by the President, Prime
Minister, Minister of Petroleum and Minister of Finance, the permits will become
effective from the date of publishing the production sharing contracts as a law,
and that the Management Committee meeting can only be held after the completion
the formality of these process. Therefore, until the publishing of the law, the
Company cannot go forward with the work program.
10
<PAGE>
The two permits are included in oil and gas properties in the balance sheet
at $2.7 million. Management believes that the permits are not impaired at March
31, 1999. However, the Company's recovery of its investment in the Congo is
dependent upon successful outcome of the permitting and production sharing
contracts which cannot be assessed.
Operator Fees
In the three month period ended March 31, 1999 and 1998, the Company earned
$108,000 and $190,000, respectively, which were based on the minimum monthly
compensation for each period.
Oil and Gas Revenues
In the three month period ended March 31, 1999 and 1998, the Company had
oil and gas revenues of $328,000 and $407,000, respectively. The decrease is due
primarily to the decline in oil and gas prices between the periods.
Lease Operating Expenses and Severance Taxes
In the three month period ended March 31, 1999 and 1998, lease operating
expenses were primarily in connection with oil and gas fields in the United
States. Oil and gas lease operating expenses and severance taxes in the three
month periods ended March 31, 1999 and 1998 were $86,000 and $276,000,
respectively. The decrease in lease operating expenses and severance taxes is
primarily due to the decline in oil and gas prices and slightly lower production
in 1999.
Interest Income
Interest income increased in the three month period ended March 31, 1999
compared to interest income in the three month period ended March 31, 1998
primarily due to the strengthening of the Israeli currency against the U.S
dollar.
Marketable Securities
In the three-month period ended March 31, 1999 the Company recognized net
realized and unrealized gains of $39,000 compared to net realized and unrealized
losses of $384,000 in the same period in 1998.
Increases or decreases in the gains and losses from marketable securities
are dependent on the market prices in general and the composition of the
portfolio of the Company.
Operator Costs
Operator costs decreased in the three-month period ended March 31, 1999 as
compared to the three-month period ended March 31, 1998, primarily as a result
of lower manpower costs and reduced rent payments for the Company's offices in
Israel.
General and Administrative Expenses
The decrease in general and administrative expenses during the three-month
period ended March 31, 1999 compared to the same period in 1998 was mainly due
to a decrease in consulting fees and salaries.
11
<PAGE>
Impact of the Year 2000 Issue
The Year 2000 Issue ("Y2K") is a general term used to describe the various
problems that may arise as a result of computer programs being written using two
digits rather than four to define the applicable year. Any of the Company's
computer programs that have date-sensitive software may recognize a date using
"00" as the year 1900 rather than the year 2000. This could result in a system
failure or miscalculations causing disruptions of operations, including, among
other things, a temporary inability to process transactions, send invoices, or
engage in similar normal business activities. The Y2K software compliance issues
affect the Company and most companies in the world.
The Company is conducting a review of its operations to identify those
systems that could be affected by the Y2K issue. The review covers information
systems, mainframe and personal computers and the Company's delivery systems.
The Company's information systems include administrative and financial
applications, such as for order processing and collection. In the event one of
these systems were to fail, the Company's ability to capture, schedule and
fulfill customer demands would be impaired. Similarly, if a collection
processing system were to fail, the Company would not be able to properly apply
payment to customer balances or correctly determine cash balances. However, the
Company would consider various alternatives, including performing manually
certain functions that it had performed manually before the applicable computer
system was in use. Management also intends to review its external relationships
to address potential Y2K issues arising from relationships with significant
suppliers, service providers and customers.
Management presently believes that the Company has substantially completed
its Y2K planning of its internal systems and facilities utilizing both internal
and external resources. The Company has been advised that its accounting system
software systems will properly utilize dates beyond December 31, 1999. The
Company plans to complete its Y2K project not later than November 30, 1999.
Management anticipates that the total cost of the Y2K project should not exceed
$25,000 and will be funded through operating cash flows.
The Company has not initiated formal communications with all of its
significant suppliers and large customers to determine the extent to which the
Company is vulnerable to those third parties' failure to remediate their own
Year 2000 Issue. The costs of the project and the date on which the Company
plans to complete the Y2K modifications are based on management's best
estimates, which were derived utilizing numerous assumptions of future events
including the continued availability of certain resources, third party
modification plans and other factors. However, there can be no assurance that
these estimates will be achieved and actual results could differ materially from
those plans. Specific factors that might cause such material differences
include, but are not limited to, the availability and cost of personnel trained
in this area, the ability to locate and correct all relevant computer codes, and
similar uncertainties.
Contingency plans will be considered by the Company and to the extent
practicable will be put in place, as required, in the event that the Company
determines that it is at significant risk in regard to suppliers, customers or
its own internal hardware and software. Contingency plans may include
consideration of alternative sources of supply, customer communication plans and
plant and business response plans.
In general, the Company's plans are intended to provide a means of managing
risk, but cannot eliminate the potential for disruption due to third party
failure. The Company believes that due to the widespread nature of the potential
Y2K issues, its contingency planning is an ongoing process which will require
further consideration as the Company obtains additional information. The Company
will define strategy based on the importance of a particular relationship. The
Company's efforts with respect to specific problems identified will depend in
part upon its assessment of the risk that such problem may have an adverse
impact on its operations.
The failure to correct a material Y2K problem could, of course, result in
an interruption in, or failure of, certain normal business activities or
operations, including curtailment of production and failure to bill and collect
revenues. Such failures could materially and adversely affect the Company. More
specifically, the Company would be materially adversely affected if third
parties with which it does business or that provide essential products or
services are not Year 2000 ready. Due to the general uncertainty inherent in the
Year 2000 problem, resulting in part from the uncertainty of the Year 2000
readiness of the Company's suppliers, other third party providers and customers,
the Company is unable to determine at this time whether the consequences of any
Year 2000 failures will have a material impact on the Company. The Company
believes that with the implementation of the new accounting systems and the
completion of its other measures, the possibility of significant interruptions
of normal operations should be mitigated.
12
<PAGE>
PART II
Item 1. Legal Proceedings
Not Applicable
Item 2. Change in Securities & Use of Proceeds
Not Applicable
Item 3. Default Upon Senior Securities
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders
Not Applicable
Item 5. Other Information
Not Applicable
Item 6. Exhibits and Reports on 8-K
a) Reports on From 8-K
Form 8-K for the month of March 1999.
b) Exhibit 27 - - Financial Data Schedule
13
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ISRAMCO INC.
Registrant
Date: May 14, 1999 By /s/ Haim Tsuff
Chairman of the Board,
Chief Executive Officer
And Chief Financial Officer
14
