UNITED STATES SECURITIES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D C 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE PERIOD ENDED 3/31/96.
Commission File Number : 33 - 509 - D
SUNRAY MINERALS, INC.
(Exact name of registrant as specified in its charter)
Nevada 88 - 0210772
(State or other jurisdiction of (IRS Employer
incorporation or organization) identification number)
P.O. Box 814653, Dallas, Texas 75381
(Address of principal executive offices) (Zip Code)
972/650-1612
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed
from last report)
Indicate by check-mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. [X] yes [ ] No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practical date. As of
September 30, 1995, there were 886,280 shares of common stock
issued and outstanding.
<PAGE>
PART I
ITEM 1, FINANCIAL STATEMENTS
Sunray Minerals, Inc. (the Registrant) files herewith the
unaudited financial statements for March 31, 1996 and the three
months then ended presented with the audited financial statements
for December 31, 1995 and the year then ended. In the opinion of
management of the Registrant, the financial statements with the
accompanying notes reflect adjustments necessary to present
fairly the financial condition of the Registrant for the periods
stated.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The Company suffered a loss of $54,917 during the quarter ended
March 31, 1996. The loss includes the write off of $26,303 in
leased properties that the Company did not renew. The Company has
not attained a revenue stream sufficient to cover the general and
administrative expenses necessary to maintain operations.
Management of the Company is exploring various plans designed to
increase revenue and/or reduce overhead costs.
A pipeline to a gas well, which was drilled in late 1995 and in
which the Company has a 23.12% interest, was completed in
February 1996. A gas sales contract has been signed, and the
Company began receiving revenue from this well commencing in
March 1996. The well produced approximately 78,000 cubic feet of
gas per day in March.
The Company purchased a working interest in two re-entry projects
during the quarter. These prospects were acquired on a turnkey
basis from Las Colinas Oil Company, an affiliated company. One
of the prospects, a gas well, was completed in March 1996 and
tested at 204,000 cubic feet of production per day. The Company
has a 25% working interest in this well. A gas sales contract
has been negotiated, however, a pipeline to the well, the
obligation of the purchaser, is not expected to be completed
until June 1996. If the pipeline is completed as scheduled, the
Company will begin to receive revenue from this well in August
1996. Work on the second re-entry project in which the Company
has a 37.5% working interest is in progress, therefore, the level
of success cannot be determined at this time.
Management of the Company plans to continue an exploration
drilling program. To the extent possible, the Company will
continue to acquire fractional interests in many wells drilled to
a relatively shallow depth in order to maximize the chances for
success while minimizing the relative cost.
PART II
ITEM 1. LEGAL PROCEEDINGS
There are no material legal proceedings involving the Company,
nor any of the officers and directors in their capacity with the
Company.
ITEM 2. CHANGES IN SECURITIES
The Company issued 25,000 shares of common stock to Paul B.
McCully, former Vice President and Director. After issuance of
these shares, the Company has 886,280 shares of common stock
outstanding.
ITEM 3. DEFAULTS ON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF THE SECURITIES
HOLDERS
None
ITEM 5. OTHER INFORMATION
Paul B. McCully, Director and Vice President resigned his
position with the Company effective January 3, 1996. Mr.
McCully's resignation was not the result of any conflicts with
the Company, nor management. The Board of Directors authorized
the issuance of 25,000 shares of common stock of the Company as
payment for prior services rendered.
Management of the Company is seeking a suitable replacement for
the vacated position.
ITEM 6. EXHIBITS INCLUDED IN THIS FILING
FINANCIAL STATEMENTS FOR MARCH 31, 1996
(UNAUDITED) AND DECEMBER 31, 1995
EX-27 FINANCIAL DATA SCHEDULE, MARCH 30,1996
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act
of 1934, as amended, the Registrant has duly caused this report
to be signed on its behalf by the undersigned thereunto duly
authorized.
Date: March 12, 1997 SUNRAY MINERALS, INC.
By /s/ Michael P. O'Brien,
President/Director
SUNRAY MINERALS, INC.
BALANCE SHEET
MARCH 31, 1996 (UNAUDITED) AND DECEMBER 31, 1995
THREE
MONTHS YEAR ENDED
ENDED DECEMBER
MARCH 31, 1, 1995
1996
(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash $ 274,790 $ 415,809
Accounts receivable 874 2,125
Account receivable - Related 2,044 10,144
party
Interest receivable 114
Total Current Assets 277,708 428,192
PROPERTY AND EQUIPMENT:
Oil & gas properties 580,456 486,000
Less: Accumulated
depreciation, depletion and (93,280) (91,030)
amortization
Total Property & Equipment 487,176 394,970
OTHER ASSETS:
Restricted common stock 510,000 510,000
TOTAL ASSETS $1,274,884 $ 1,333,162
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 215 $ 2,810
Payroll taxes payable 474 1,490
Total Current Liabilities 689 4,300
STOCKHOLDERS' EQUITY:
Preferred stock, $0.01 par
value10,000,000 shares
authorized, no shares issued
Common stock, $0.01 par
value, 20,000,000 shares
authorized; 886,280 shares
issued and outstanding at
March 31, 1996 and 861,280 8,863 8,613
shares issued and
outstanding at December 31,
1995
Additional paid-in capital 2,956,803 2,956,803
Accumulated deficit (1,691,471) (1,636,554)
Total Stockholders' Equity 1,274,195 1,328,862
TOTAL LIABILITIES &
STOCKHOLDERS' EQUITY $1,274,884 $ 1,333,162
SUNRAY MINERALS, INC.
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND
THE YEAR ENDED DECEMBER 31, 1995
THREE
MONTHS YEAR ENDED
ENDED DECEMBER
MARCH 31, 1, 1995
1996
(UNAUDITED)
: REVENUE:
Sales from oil and gas $ 5,292 $ 103,541
Interest 5,332 28,624
Miscellaneous income 1,072 191
Total Revenue 11,696 132,356
OPERATING EXPENSE: 73
Lease Operating
Lease operating-Related party 3,984 59,375
Depreciation and depletion 2,250 35,792
Leased Prospects Expired 26,303
Dry hole costs 135,132
General and administrative 31,826 139,083
General and administrative - 2,250 20,631
Related party
Total Operating Expense 66,613 390,086
OTHER INCOME AND EXPENSE:
Loss on sale of property 238,989
Loss on mortgage note 31,975
receivable
Total Other Income and 270,964
Expense
NET INCOME (LOSS) $ (54,917) $ (528,694)
WEIGHTED AVERAGE SHARES 886,280 861,280
OUTSTANDING
EARNING (LOSS) PER SHARE:
Earning (loss) Per share $ (0.06) $ (0.61)
SUNRAY MINERALS, INC.
STATEMENT OF CASH FLOW
FOR THE THREE MONTHS ENDED MARCH 31, 1996 (UNAUDITED) AND
THE YEAR ENDED DECEMBER 31, 1995
THREE
MONTHS YEAR ENDED
ENDED DECEMBER
MARCH 31, 1, 1995
1996
(UNAUDITED)
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net loss $ (54,917) $ (528,694)
Adjustments to reconcile net
loss to net cash (used) by
operating activities:
Depreciation and depletion 2,250 35,791
Issuance of stock for 250
services
Loss on Leased Prospects 26,303
Expired
Loss on sale of properties 220,091
Loss on sale of mortgage note 23,297
principal
Changes in working capital:
(Increase) decrease in
accounts receivable
Accounts receivable 1,251 15,026
Accounts receivable - Related 8,100 23
party
Interest receivable 114 10,991
Increase (decrease) in (2,595) (13,410)
accounts payable
Payroll taxes payable (1,016) 1,016
NET CASH PROVIDED (USED)
BY OPERATING ACTIVITIES: (20,260) (235,869)
CASH FLOWS FROM INVESTING
ACTIVITIES:
Acquisition of properties (120,759) 0
Sale of properties 225,000
Collection of note receivable 422,675
NET CASH PROVIDED (USED) BY
INVESTING ACTIVITIES: (120,759) 647,675
NET INCREASE (DECREASE) IN (141,019) 411,806
CASH:
CASH AT BEGINNING OF PERIOD 415,809
STATED
CASH AT END OF PERIOD STATED $ 274,790 $ 415,809
SUNRAY MINERALS, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
MARCH 31, 1996 (UNAUDITED) AND DECEMBER 31, 1995
THREE MONTHS ENDED
MARCH 31, 1996 YEAR ENDED
(UNAUDITED) DECEMBER 1, 1995
SHARES AMOUNT SHARES AMOUNT
PREFERRED STOCK:
Balance at beginning of 0 0 0 0
period
Balance at end of period 0 0 0 0
COMMON STOCK:
Balance at beginning of 861,280 $ 8,613 861,280 $ 8,613
period
Issuance of stock 25,000 250
Balance at end of period 886,280 $ 8,863 861,280 $ 8,613
ADDITIONAL PAID IN CAPITAL:
Balance at beginning of
period $ 2,956,803 $ 2,956,803
Issuance of stock
Balance at end of period $ 2,956,803 $ 2,956,803
ACCUMULATED (DEFICIT):
Balance at beginning of
period $(1,636,554) $(1,107,860)
Net loss (54,917) (528,694
Balance at end of period (1,691,471) (1,636,554
NET STOCKHOLDERS' EQUITY $ 1,274,195 $ 1,328,862
SUNRAY MINERALS, INC.
NOTES TO FINANCIAL STATEMENTS
March 31, 1996 (Unaudited) and December 31, 1995
NOTE A - NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES:
Income Tax:
The Company is subject to the greater of federal income taxes
computed under the regular system or the alternative minimum tax
(AMT) system. No provision for income taxes has been made due to
the Company having an accumulated net operating loss.
The Company adopted Statement of Financial Accounting Standards
("SFAS") No. 109, "Accounting for Income Taxes," effective
January 1, 1993.
NOTE B - PROPERTY AND EQUIPMENT:
Property and Equipment at cost, are summarized as follows:
March 31, December 31,
1996 1995
Oil and gas properties,
successful efforts method:
Producing leasehold costs $74,2290 $74,229
Nonproducing leasehold costs 404,384 315,722
Intangible development costs 90,839 84,965
Lease and well equipment 11,004 11,084
580,456 486,000
Less accumulated depreciation
and depletion (93,280) (91,030)
$487,176 $394,970
Costs incurred in oil and gas property acquisition, exploration,
and development activities
March 31, December 31,
1996 1995
----------- -----------
Acquisition Costs $ 112,500 $ 101,820
Exploration Costs 2,135 10,001
Development Costs 5,873 21,358
SUNRAY MINERALS, INC.
NOTES TO FINANCIAL STATEMENTS
March 31, 1996 (Unaudited) and December 31, 1995
NOTE A - NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES:
History:
The Company was organized August 22, 1985, as a Nevada
corporation under the name Tarragon Corporation for the purpose
of seeking, investigating, and, if such investigation warranted,
acquiring an interest in potential business opportunities. The
Company's name was changed to Sunray Minerals, Inc. on December
31, 1991. The Company has not paid a dividend to its investors.
The Company reverse split its issued and outstanding common stock
on the basis of 1:100 for shareholders of record November 30,
1993. This action reduced the outstanding common shares from
4,111,319 to 41,113.
The Company entered into an agreement with Waste Oil Recycling
Corporation to merge their assets into the Company in return for
the Company's common stock. The merger was completed November
30, 1993.
The Company entered into an agreement with Benitex, A.G. to
acquire working interests in producing and nonproducing oil and
gas wells plus undeveloped oil & gas leases located in Oklahoma.
The Company exchanged its stock for the properties. This
exchange was completed on December 1, 1993.
The Company commenced oil and gas operations in December 1993.
During 1995 the Company sold most of its producing properties.
Basis of Accounting:
It is the Company's policy to prepare its financial statements on
the accrual basis of accounting in accordance with generally
accepted accounting principles. Receipts are recorded as income
in the period in which they are earned and expenses are
recognized in the period in which the related liability is
incurred.
Cash and Cash Equivalents:
For purposes of the statement of cash flows, the Company
considers all highly liquid debt instruments with a maturity of
three months or less to be cash equivalents.
Concentrations of Credit Risks:
The Company places its cash investments in high credit quality
instruments and, by policy, limits the amount of credit exposure
to any one financial institution.
Earnings (Loss) per Common Share:
Earnings (loss) applicable to common stock is based on the
weighted average number of shares of common stock and common
stock equivalents outstanding.
Property and Equipment:
The Company follows the successful efforts method of accounting
for exploration, development and production of oil and gas
reserves, whereby all productive costs are capitalized and
unproductive costs are expensed in the year incurred. Geological
and geophysical costs and costs of carrying and retaining
undeveloped properties are charged to expense as incurred. Costs
of drilling exploratory wells and other test wells that do not
find proved reserves are charged to expense. Costs of
development wells or other successful wells are capitalized and
depleted using the units of production method based on total
proved reserves applicable to each property. Costs of unproved
properties are assessed periodically, and loss recognized if the
properties are impaired. Estimates of oil and gas reserves were
prepared by a related party engineer. Net capitalized costs of
oil and gas properties are subject to a ceiling test. For
ceiling test purposes, the Company compares its undiscounted
standardized measure of future net cash flows from estimated
production to net oil and gas properties. There were charges to
depletion in the amounts of $179,244, relating to ceiling test
limitations in 1994. The Company has working interests in
developed and undeveloped leases located in Texas and Oklahoma.
Most of these leases are operated by an affiliate.
Upon sale or retirement of depreciable or depletable property,
the cost and related accumulated depreciation, depletion and
amortization are removed and gain or loss is recognized.
Renewals and replacements that improve or extend the useful life
of existing properties are capitalized.
Depletion and Depreciation:
The Company will deplete its cost in the leases and related
equipment on a lease by lease basis using the units of production
method based upon the amount of production in relation to its
estimated reserves as determined by current engineering studies.
Oil and Gas Revenues:
Sales from oil and gas are accrued in the month of actual
production
NOTE C - INVESTMENT IN RESTRICTED COMMON STOCK:
The Company has recorded as an Other Asset an investment in
85,000 shares of Great Western Asset Group, Inc. This investment
was one of the assets acquired as a result of the merger with
Waste Oil Recycling Corp. Great Western Asset Group, Inc.,
located in Mesa, Arizona, owns, manages and invests in property
and unimproved real estate in the southwestern United States.
These shares are held as restricted shares and cannot currently
be sold or otherwise transferred. These shares are accounted for
using the cost method.
NOTE D - MORTGAGE NOTE RECEIVABLE:
The Company recorded as an Other Asset a mortgage note receivable
in the amount of $445,972 in 1994. The mortgage provided for
interest at a rate of 7% annually whereby only interest payments
were made on an annual basis. The company held a subordinated
position collateralized by a deed of trust and assignment of
rents for an office building located in Mesa, Arizona. Interest
income in the amount of $11,105 was accrued as of December 31,
1994. The building was sold in 1995 and the Company accepted
$422,675 as payment in full of this obligation. The Company
recorded a loss in the amount of $31,975 as a result of this
transaction.
NOTE E - COMMON STOCK:
The Company on November 10, 1993 effected a 1 for 100 reverse
stock split for shareholders of record on November 30, 1993. The
Company issued 175,000 shares for cash and 645,167 shares for
assets in 1994 and 1993 respectively. In January, 1996, the
Company issued 25,000 shares of common stock to a former
officer/director for services.
NOTE F - INCOME TAXES:
The Company has net operating loss carryforwards totaling
$651,334 that is available to offset its future income tax
liability.
No deferred tax asset has been recognized for the operating loss
carryforward as it is more likely than not that all or a portion
of the net operating loss will not be realized and any valuation
allowance would reduce the benefit to zero.
NOTE G - RELATED PARTY TRANSACTIONS:
The Company's officers and directors are officers, directors and
employees of Las Colinas Oil Corp. (Las Colinas). The Company
occupies office space within the offices leased by Las Colinas
and utilizes their personnel, supplies and office equipment. Las
Colinas agreed to supply these services for a fixed monthly fee.
During 1995, 1994 and 1993 the Company recorded $19,000, $30,000
and $4,793 respectively as an expense under this agreement.
Las Colinas is the Operator for certain oil & gas properties in
which the Company owns a working interest. As the operator, Las
Colinas charges a fee for services and pays the expenses
incidental to the leases. These expenses including the service
fees are billed to the Company on a monthly basis. Las Colinas
also collects and disburses oil & gas revenues for certain
properties of the Company. The balance owed to the Company for
oil & gas revenues was $10,144 and $10,167 at December 31, 1995
and 1994 respectively. Las Colinas may also own a working
interest in the same properties as the Company.
In 1994 the Company issued 175,000 shares of common stock to
Benitex, A.G. for cash $525,000. These funds were used primarily
to purchase non producing properties from Las Colinas. The value
of these properties was determined by actual costs to Las Colinas
or independent third party appraisals.
During 1995 the Company sold to an affiliate the majority of its
existing producing properties for $225,000 cash. The sales price
was calculated using a discounted net present value based upon an
independent reserve appraisal. The sale of these properties
resulted in a net loss to the Company in the amount of $238,989.
The Company purchased working interests in two wells from Las
Colinas Oil Corp. during the quarter ended March 31, 1996 at a
cost of $112,500. The wells are to be drilled and completed by
June, 1996.
NOTE H - SUBSEQUENT EVENTS (UNAUDITED):
During the first quarter of 1996 a director of the Company
resigned and the Company agreed to issue 25,000 shares of its
common stock as compensation for prior service.
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
OF MARCH 31, 1996, AND FOR THE PERIOD THEN ENDED, AND IS QUALIFIED IN IT
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<PERIOD-START> JAN-01-1996
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<S> <C>
<CASH> 274,790
<SECURITIES> 0
<RECEIVABLES> 2,918
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 277,708
<PP&E> 580,456
<DEPRECIATION> 93,280
<TOTAL-ASSETS> 1,274,884
<CURRENT-LIABILITIES> 689
<BONDS> 0
<COMMON> 8,863
0
0
<OTHER-SE> 2,956,803
<TOTAL-LIABILITY-AND-EQUITY> 1,274,884
<SALES> 5,292
<TOTAL-REVENUE> 11,696
<CGS> 0
<TOTAL-COSTS> 66,613
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (54,917)
<EPS-PRIMARY> (0.06)
<EPS-DILUTED> (0.06)
</TABLE>
