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 6/30/96.
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 June 30, 1996 and the results of operations for
the six months then ended presented with the audited financial statements
for December 31, 1995 and the results of operations for the year then
ended. In the opinion of management of the Registrant, the financial
statements with the accompanying notes reflect adjustments necessary to
fairly present 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 $147,559 for the six months ended June 30,
1996. The loss includes as expense of $74,866 for the write off of leased
prospects whose leases expired during the period and were not renewed. 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.
In the first six months of the current fiscal year, the Company acquired a
working interest in two wells that have been drilled or reworked. The
pipeline on the first well, re-entry, in which the Company has a 25%
interest was completed in June 1996. Sales are expected to begin in August
1996. The second well, re-entry, in which the Company has a 37.5% interest
is still being completed; however, sales of oil for the month of June 1996
were 150 barrels.
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 JUNE 30, 1996 (UNAUDITED) AND
DECEMBER 31, 1995
EX-27 FINANCIAL DATA SCHEDULE FOR JUNE 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
<PAGE>
SUNRAY MINERALS, INC.
BALANCE SHEET
JUNE 30, 1996 (UNAUDITED) AND DECEMBER 31, 1995
THREE
MONTHS
ENDED DECEMBER 1,
JUNE 30, 1995
1996 YEAR ENDED
(UNAUDITED)
ASSETS ----------- ----------
CURRENT ASSETS:
Cash $ 185,550 $ 415,809
Accounts receivable 301 2,125
Account receivable - Related 25,711 10,144
party
Interest receivable 114
Total Current Assets 211,562 428,192
PROPERTY AND EQUIPMENT:
Oil & gas properties 559,309 486,000
Less: Accumulated depreciation,
depletion and amortization (97,680) (91,030)
Total Property & Equipment 461,629 394,970
OTHER ASSETS:
Restricted common stock 510,000 510,000
TOTAL ASSETS $1,183,191 $$1,333,162
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 1,164 $ 2,810
Payroll taxes payable 474 1,4904,300
Total Current Liabilities 1,638
STOCKHOLDERS' EQUITY:
Preferred stock, $0.01 par
value 10,000,000 shares
authorized, no shares issued
Common stock, $0.01 par value,
20,000,000 shares authorized;
886,280 shares issued and
outstanding at June 30, 1996
and 861,280 shares issued and
outstanding at December 31, 1995 8,863 8,613
Additional paid-in capital 2,956,803 2,956,803
Accumulated deficit (1,784,113) (1,636,554)
Total Stockholders' Equity 1,181,553 1,328,862
TOTAL LIABILITIES &
STOCKHOLDERS' EQUITY $1,183,191 $ 1,333,162
SUNRAY MINERALS, INC.
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND
THE YEAR ENDED DECEMBER 31, 1995
THREE
MONTHS YEAR ENDED
ENDED DECEMBER
JUNE 30, 31, 1995
1996
(UNAUDITED)
REVENUE:
Sales from oil and gas $ 9,551 $ 103,541
Interest 7,518 28,624
Miscellaneous income 1,310 191
Total Revenue 18,379 132,356
OPERATING EXPENSE:
Lease Operating 73
Lease operating-Related party 9,167 59,375
Depreciation and depletion 6,650 35,792
Leased Prospects Expired 74,866
Dry hole costs 135,132
General and administrative 70,755 139,083
General and administrative - 4,500 20,631
Related party
Total Operating Expense 165,938 390,086
OTHER INCOME AND EXPENSE:
Loss on sale of property 238,989
Loss on mortgage note 31,975
receivable
Total Other Income and Expense 270,964
NET INCOME (LOSS) $ (147,559) $ (528,694)
WEIGHTED AVERAGE SHARES 886,280 861,280
OUTSTANDING
EARNING (LOSS) PER SHARE:
Earning (loss) Per share $ (0.17) $ (0.61)
SUNRAY MINERALS, INC.
STATEMENT OF CASH FLOW
FOR THE SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED) AND
THE YEAR ENDED DECEMBER 31, 1995
THREE
MONTHS YEAR ENDED
ENDED DECEMBER
JUNE 31, 1, 1995
1996
(UNAUDITED)
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net loss $ (147,559) $ (528,694)
Adjustments to reconcile net loss
to net cash (used) by operating
activities:
Depreciation and depletion 6,650 35,791
Issuance of stock for services 250
Loss on Leased Prospects Expired 74,866
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
- 11
Accounts receivable 1,824 15,026
Accounts receivable - Related (15,567) 23
party
Interest receivable 114 10,991
Increase (decrease) in accounts (1,646) (13,410)
payable
Payroll taxes payable (1,016) 1,016
NET CASH PROVIDED (USED)
BY OPERATING ACTIVITIES: (82,084) (235,869)
CASH FLOWS FROM INVESTING
ACTIVITIES:
Acquisition of properties (148,175) 0
Sale of properties 225,000
Collection of note receivable 422,675
NET CASH PROVIDED (USED) BY
INVESTING ACTIVITIES: (148,175) 647,675
NET INCREASE (DECREASE) IN CASH: (230,259) 411,806
CASH AT BEGINNING OF PERIOD 415,809 4,003
STATED
- 12
CASH AT END OF PERIOD STATED $ 185,550 $ 415,809
SUNRAY MINERALS, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
JUNE 30, 1996 (UNAUDITED) AND DECEMBER 31, 1995
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 30, 1996 YEAR ENDED DECEMBER 31,
(UNAUDITED) 1995
SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <c
PREFERRED STOCK:
Balance at beginning of period 0 0 0 0
Balance at end of period 0 0 0 0
COMMON STOCK:
Balance at beginning of period 861,280 $ 8,613 861,280 $ 8,613
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 (147,559) (528,694)
Balance at end of period (1,784,113) (1,636,554)
NET STOCKHOLDERS' EQUITY $ 1,181,553 $ 1,328,862
</TABLE>
SUNRAY MINERALS, INC.
NOTES TO FINANCIAL STATEMENTS
June 30, 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 warrants, 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
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:
June 31, December 31,
1996 1995
----------- -----------
Oil and gas properties, successful
efforts method:
Producing leasehold costs $ 74,229 $ 74,229
Nonproducing leasehold costs 383,237 315,722
Intangible development costs 90,839 84,965
Lease and well equipment 11,004 11,084
559,309 486,000
----------- ----------
Less accumulated depreciation
and depletion (97,680) (91,030)
$ 461,629 $ 394,970
Costs incurred in oil and gas property acquisition, exploration, and
development activities
June 30, December 31,
1996 1995
----------- -------------
Acquisition Costs $ 139,916 $ 101,820
Exploration Costs 2,135 10,001
Development Costs 5,873 21,358
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, builds single family
dwellings in the Phoenix, Arizona area. 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 a working interest in two wells form Las Colinas Oil
Corp. during the six months ended June 30, 1996 at a cost of $112,500. The
wells have been drill and/or reworked and are in the process of being
completed for production.
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.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AS OF JUNE 30, 1996, AND FOR THE PERIOD THEN ENDED, AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<PERIOD-START> JAN-01-1996
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<S> <C>
<CASH> 185,550
<SECURITIES> 0
<RECEIVABLES> 26,012
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 211,562
<PP&E> 559,309
<DEPRECIATION> 97,680
<TOTAL-ASSETS> 1,183,191
<CURRENT-LIABILITIES> 1,638
<BONDS> 0
<COMMON> 8,863
0
0
<OTHER-SE> 2,956,803
<TOTAL-LIABILITY-AND-EQUITY> 1,183,191
<SALES> 9,551
<TOTAL-REVENUES> 18,379
<CGS> 0
<TOTAL-COSTS> 165,938
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (147,559)
<INCOME-TAX> 0
<INCOME-CONTINUING> (147,559)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (147,559)
<EPS-PRIMARY> (0.17)
<EPS-DILUTED> (0.17)
</TABLE>
