UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934.
FOR THE PERIOD ENDED 9/30/97
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 (IRS Employer identification number)
of incorporation or organization)
P.O. Box 814653, Dallas, TX 75381
(Address of principal executive offices) (Zip Code)
972/650-1612
(Registrant's telephone number, including area code)
NA
(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 lates practicable date. As of December 31, 1997, there
were 936,280 shares of the Registrant's Common Stock outstanding.
<PAGE>
PART I
ITEM 1. FINANCIAL STATEMENTS
SUNRAY MINERALS, INC.
BALANCE SHEETS
(UNAUDITED)
ASSETS
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------ -----------
CURRENT ASSETS:
Cash $ 681 $ 608
Accounts receivable-trade 9,204 3,997
Accounts receivable-related 0 33,948
party
Interest receivable 0 0
--------- ---------
Total Current Assets 9,886 38,553
PROPERTY AND EQUIPMENT:
Oil and gas property 408,048 386,829
Less: Accumulated depreciation,
depletion and amortization (154,125) (122,638)
--------- ---------
Total Property and Equipment 253,923 264,191
OTHER ASSETS:
Investment in Great Western 190,500 190,500
Total Other Assets 190,500 190,500
--------- ---------
TOTAL ASSETS $ 454,309 $ 493,244
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 15,958 $ 3,675
Payroll taxes payable 474 707
--------- ---------
Total Current Liabilities 16,432 4,382
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value;
1,000,000 authorized; no shares
issued
Common stock, $.01 par value;
20,000,000 shares authorized;
936,280 and 886,280 shares
issued and outstanding at March
31, 1997 and December 31, 1996,
respectively 9,363 8,863
Additional paid-in-capital 2,959,053 2,957,553
Accumulated deficit (2,530,538) (2,477,554)
--------- ---------
Total Stockholders' Equity 437,878 488,862
TOTAL LIABILITIES AND STOCKHOLDERS
EQUITY $ 454,309 $ 493,244
========= =========
<PAGE>
SUNRAY MINERALS, INC
STATEMENT OF OPERATIONS
(Unaudited)
THREE MONTHS ENDED SIX MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------------------------------
1997 1996 1997 1996
------- ------- ------- -------
REVENUES:
Sales from oil and gas $14,870 $ 8,774 $47,568 $18,046
Interest 0 1,321 1 9,403
Other income 12,441 0 12,441 1,310
------- ------- -------- -------
Total Revenue 27,311 10,095 60,010 28,759
OPERATING EXPENSE:
Lease operating 1,181 2,188 7,723 0
Lease operating-related
parties 8,215 2,384 17,256 12,637
Depreciation and depletion 8,085 5,000 31,487 11,650
Leased prospects expired 0 66,150 0 141,016
Dry hole costs 0 0 0 0
General and administrative 12,474 33,882 53,154 104,888
General and administrative-
related party 750 2,250 3,375 6,750
------- ------- -------- -------
Total Operating Expenses 30,705 111,854 112,995 276,941
OTHER INCOME AND EXPENSE:
Loss on sale of property 0 0 0 0
Loss on mortgage note
receivable 0 0 0 0
NET INCOME (LOSS) ( 3,395) (101,759) (52,985) (248,182)
Weighted average shares
outstanding 936,280 886,280 925,169 886,280
LOSS PER SHARE:
Loss per share ($.0036) ($.11) ($.06) ($.28)
<PAGE>
SUNRAY MINERALS, INC.
STATEMENT OF CASH FLOWS
(Unaudited)
NINE MONTHS ENDED SEPTEMBER 30,
------------------------------
1997 1996
---------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $( 52,985) $(248,182)
Adjustments to reconcile net loss to
net cash (used) by operating
activities:
Depreciation and depletion 31,487 11,650
Issuance of stock for services 2,000 250
Loss on leased prospects expired 0 141,016
Changes in working capital:
(Increase) decrease in
Accounts receivable (5,207) (3,470)
Accounts receivable-related party 33,948 (29,955)
Interest Receivable 0 114
Increase (decrease) in
Accounts payable 12,283 (2,671)
Payroll taxes payable (233) (543)
NET CASH (USED) BY OPERATING ------- --------
ACTIVITIES 21,293 (131,791)
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of properties (33,661) (252,874)
Sale of properties 12,441 0
NET CASH PROVIDED (USED) BY INVESTING ------- --------
ACTIVITIES (21,220) (252,874)
NET INCREASE (DECREASE) IN CASH: 73 (384,665)
CASH AT BEGINNING OF PERIOD 608 415,809
CASH AT END OF PERIOD 681 31,144
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note 1 - Summary of Significant Accounting Policies
The accompanying unaudited financial statements have been prepared in accordance
with instructions to Form 10-Q and, therefore, do not include all disclosures
required by generally accepted accounting principles. However, in the opinion
of management, these statements include all adjustments, which are of a normal
recurring nature, necessary to present fairly the financial position at
September 30, 1997 and December 31, 1996 and the results of operations and
changes in cash flows for the periods ended September 30, 1997 and 1996. These
financial statements should be read in conjunction with the financial statements
and notes to the financial statements in the 1996 Form 10-K of Sunray Minerals,
Inc. (the "Company") that was filed with the Securities and Exchange Commission.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
Sunray Minerals, Inc., formerly Tarragon Corporation, was organized under the
laws of the state of Nevada in August 1985 for the purpose of searching,
investigating and acquiring business opportunities. Oil and gas operations were
commenced in December 1993. The Company is currently engaged in oil and gas
exploration, development and acquisitions in the State of Oklahoma. All of the
Company's oil and gas properties are located within the State of Oklahoma. The
Company's business strategy has been to increase production, cash flow and
reserves through the acquisition and development of mature properties along with
acquiring oil and gas prospects located in Oklahoma and Texas. These properties
have characteristics that include an established production history, proved
undeveloped reserves and at times multiple prospective reservoirs that provide
significant development opportunities. Prior to acquiring a property, the
Company performs a thorough geological and engineering analysis of the property
to formulate a comprehensive development plan. Development activities seek to
increase cash flow from existing proved reserves and to establish additional
proved reserves. These activities typically involve the drilling of new wells,
workovers and recompletions of existing wells, and the application of other
techniques designed to increase production.
RESULTS OF OPERATIONS
The Company suffered a loss of $3,395 for the quarter ended September 30, 1997
as compared to 1996's third quarter loss of $101,759. Overall production
quantities for the third quarter of 1997 were significantly higher to levels
achieved in the third quarter of 1996, as new production from acquisitions and
successfull development activities offset production declines. For the first
nine months of 1997, a net income loss of $52,985 was incurred, as compared to a
net income loss of $248,182 for the comparable 1996 period.
Total oil and gas revenues for the third quarter of 1997 were $14,870 and were
comprised of $12,715 of oil revenues and $2,155 of gas revenues. This was an
increase from total oil and gas revenues received in the third quarter of 1996
of $8,774. Average oil and gas prices received in the third quarter of 1997
were $19.34 per barrel and $1.04 per Mcf. For the first nine months of 1997,
total oil and gas revenues were $47,568, as compared to $18,046 for the
comparable 1996 period.
On August 1, 1997, the Company sold all of its interest in four of its wells to
JOC Operating, Inc. and acquired the interest of JOC Operating, Inc. in four of
their wells. This transaction was prepared and recorded on an Assignment Of Oil
And Gas Leases And Bill Of Sale. The Company netted a profit of $12,441 through
this transaction which has been recorded under Other Income as sale of assets.
The Company expects no substantive changes in income, expenses or production due
to this sale and acquisition.
Lease operating expenses for the third quarter of 1997 totaled $9,396 compared
to $4,572 for the third quarter of 1996. This increase was due to new
production from acquisition and development activities. Lease operating
expenses per barrel of oil equivalent (BOE) for the third quarter of 1997 was
$8.96. Depletion and depreciation expense totaled $8,085 for the third
quarter of 1997 compared to $5,000 for the third quarter of 1996. This increase
was also the result of new production added during 1996. Lease operating
expenses for the first nine months of 1997 were $24,979, as compared to $12,637
for the comparable 1996 period.
For the third quarter of 1997, general and administrative expenses decreased to
$13,224 from $36,132 in the third quarter of 1996. This was a result of
reductions in general and administrative expenses being implemented during the
first quarter of 1997. For the first nine months of 1997, general and
administrative expenses decreased to $56,529, as compared to $111,638 for the
comparable 1996 period.
Management of the Company plans to continue an acquisition, exploration and
development program. New opportuninies and leads will continue to be
investigated and sought out.
LIQUIDITY AND CAPITAL RESOURCES
During the fourth quarter of 1996, the Company paid $78,500 to Las Colinas Oil
Corp. on a "turnkey" bases for a 50% interest in a well to be drilled and
completed. Mechanical problems occurred during the drilling which caused a
delay in operations. Operations resumed in the third quarter of 1997 in which
mechanical problems occurred again. The Company is currently awaiting a
substitute well to be drilled by Legacy Oil Corp., successor in interest to Las
Colinas Oil Corp.
FORWARD LOOKING STATEMENTS
This document includes "forward looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended (the "Securities Act"),
and Section 21E of the Securities Exchange Act of 1934 ("Exchange Act"). All
statements other than statements of historical facts included in this document,
including without limitation, statements under "Management's Discussion and
Analysis of Financial Condition and Results of Operations" regarding the
Company's financial position, estimated quantities and net present values of
reserves, business strategy, plans and objectives of management of the Company
for future operations and covenant compliance, are forward-looking statements.
Although the Company believes that the assumptions upon which such forward-
looking statements are based are reasonable, it can give no assurances that such
assumptions will prove to have been correct. Important factors that could cause
actual results to differ materially from the Company's expectations ("Cautionary
Statements") are disclosed within this document. All subsequent written and
oral forward-looking statements attributable to the Company or persons acting
on its behalf are expressly qualified by the Cautionary Statements.
SIGNATURE
Pursuant to 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, hereunto duly authorized.
SUNRAY MINERALS, INC.
Date: July 27, 1998 By: /s/ Michael P. O'Brien
President
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
BALANCE SHEET AS OF SEPTEMBER 30, 1997, AND THE RELATED STATEMENT OF
OPERATIONS FOR THE THREE MONTH ENDED SEPTEMBER 30, 1997, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 681
<SECURITIES> 0
<RECEIVABLES> 9,204
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 9,886
<PP&E> 408,048
<DEPRECIATION> 154,125
<TOTAL-ASSETS> 454,309
<CURRENT-LIABILITIES> 16,432
<BONDS> 0
<COMMON> 9,363
0
0
<OTHER-SE> 2,959,053
<TOTAL-LIABILITY-AND-EQUITY> 454,309
<SALES> 47,568
<TOTAL-REVENUES> 60,010
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 112,995
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (52,985)
<INCOME-TAX> 0
<INCOME-CONTINUING> (52,985)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (52,985)
<EPS-PRIMARY> (0.06)
<EPS-DILUTED> (0.06)
</TABLE>
