UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________________
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES ACT OF 1934
For the transition period from to .
Commission File No. 1-6336
Petrominerals Corporation
(Exact name of registrant as specified in its charter)
Delaware No. 95-2573652
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) No.)
915 South Westminster Avenue, Alhambra, California 91803
(Address of principal executive offices)
(818) 284-8842
(Registrant's telephone number, including area code)
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]
No Yes
The number of shares of Registrant's common stock outstanding at
November 8, 1996 was 8,475,336.
<PAGE>
PETROMINERALS CORPORATION
INDEX
Page
PART I - FINANCIAL INFORMATION
Item 1 Unaudited Consolidated Financial Statements
Consolidated Balance Sheets September 30, 1996
and December 31, 1995 . . . . . . . . . . . 3
Consolidated Statements of Operations
for the three and nine months ended
September 30, 1996 and 1995 . . . . . . . . 5
Consolidated Statements of Cash Flows
for the nine months ended September 30,
1996 and 1995 . . . . . . . . . . . . . . . 6
Notes to Consolidated Financial Statements . 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . 8
PART II - OTHER INFORMATION . . . . . . . . . . 10
SIGNATURES. . . . . . . . . . . . . . . . . . . 11
<PAGE>
PART I - FINANCIAL INFORMATION
<PAGE>
Item 1. Unaudited Consolidated Financial Statements
PETROMINERALS CORPORATION
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except par value and share data)
ASSETS
September 30, December 31,
1996 1995
(Unaudited) (Audited)
Current Assets
Cash and cash equivalents $ 240 $ 325
Accounts receivable, net 130 83
Inventories 40 171
Prepaid expense 34 11
Total Current Assets 444 590
Restricted Cash 84 84
Property and Equipment, net (including
oil and gas properties accounted for
on the successful efforts method) 2,082 2,159
Notes Receivable and Other Assets 491 510
Total Assets $ 3,101 $ 3,343
See accompanying notes to consolidated financial statements.
<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY
September 30, December 31,
1996 1995
(Unaudited) (Audited)
Current Liabilities
Accounts payable $ 137 $ 218
Current portion of long-term debt 155 170
Accrued liabilities 21 86
Royalties payable 37 24
Total Current Liabilities 350 498
Long-Term Debt, net of current portion 333 343
Liabilities Subject to Compromise - 555
Total Liabilities 683 1,396
Stockholders' Equity
Preferred stock:
$.10 par value, 5,000,000 shares
authorized; no shares issued
and outstanding - -
Common stock:
$.10 par value, 20,000,000 shares
authorized; 8,475,336 and 8,460,336
shares issued and outstanding at
September 30, 1996 and December 31,
1995, respectively 847 847
Capital in Excess of Par Value 558 558
Retained Earnings 1,013 542
Total Stockholders' Equity 2,418 1,947
Total Liabilities and
Stockholders' Equity $ 3,101 $ 3,343
See accompanying notes to consolidated financial statements.
<PAGE>
PETROMINERALS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
For the three months
ended September 30,
1996 1995
(Restated)
REVENUES
Oilfield services $ 6 $ 23
Oil and gas 288 295
Gain on sale of assets 18 115
Other income 4 3
Total Revenues 316 436
COSTS AND EXPENSES
Oilfield services 37 283
Oil and gas 127 183
Depreciation, depletion and
amortization 32 32
General and administrative 102 132
Interest 1 1
Other 12 9
Total Costs and Expenses 311 640
Net Income (Loss) Before
Reorganization Items 5 (204)
Reorganization Items:
Gain (loss) on debt forgiven - -
Loss on asset sales - (1,192)
Net Gain (Loss) on Reorganization
Items - (1,192)
Net Income (Loss) $ 5 $ (1,396)
Net Income (Loss) Per Share .00 (.17)
Weighted Average Common Shares
Outstanding 8,475 8,415
See accompanying notes to consolidated financial statements.
<PAGE>
PETROMINERALS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
For the three months
ended September 30,
1996 1995
(Restated)
REVENUES
Oilfield services $ 14 $ 762
Oil and gas 839 1,022
Gain on sale of assets 50 313
Other income 7 9
Total Revenues 910 2,106
COSTS AND EXPENSES
Oilfield services 164 1,479
Oil and gas 467 571
Depreciation, depletion and
amortization 91 106
General and administrative 286 422
Interest 3 -
Other 27 96
Total Costs and Expenses 1,038 2,674
Net Income (Loss) Before
Reorganization Items (128) (568)
Reorganization Items:
Gain (loss) on debt forgiven 599 -
Loss on asset sales - (1,192)
Net Gain (Loss) on Reorganization
Items 599 (1,192)
Net Income (Loss) $ 471 $ (1,760)
Net Income (Loss) Per Share .00 (.17)
Weighted Average Common Shares
Outstanding 8,475 8,415
See accompanying notes to consolidated financial statements.
<PAGE>
PETROMINERALS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
For the three months
ended September 30,
1996 1995
Cash Flows from Operating Activities
Net income (loss) $ 471 $ (1,760)
Adjustments to reconcile net income (loss) to
net cash provided from operating activities:
Depreciation, depletion and amortization 91 106
(Gain) loss on sale of assets (50) -
Loss from restructuring - 1,909
Changes in operating working capital:
Accounts receivable (47) 446
Inventory 131 200
Other current assets - (68)
Prepaid
Liabilities subject to compromise (23) -
Accounts payable (555) -
Royalties payable (81) (1,106)
Accrued liabilities 13 (1)
Deferred income taxes (65) (161)
- -
Net Cash Used by Operating Activities
(115) (435)
Cash Flows from Investing Activities
Capital expenditures - (9)
Proceeds from sale of assets 36 330
Collection of note receivable 19 -
Net Cash Provided by Investing 55 321
Activities
Cash Flows from Financing Activities
Principal payment of debt (25) (158)
Long-term debt borrowed - 138
Restructuring of debt due
to Chapter 11 - 609
Repayment of credit line - (285)
Net Cash Provided (Used) by (25) 304
Financing Activities
Net Increase (Decrease) in Cash
and Cash Equivalents (85) 190
Cash and Cash Equivalents at
beginning of period 409 236
Cash and Cash Equivalents at
end of period $ 324 $ 426
See accompanying notes to consolidated financial statements.
<PAGE>
PETROMINERALS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1996 AND 1995
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The financial information included herein is unaudited; however,
such information reflects all adjustments (consisting primarily of
normal recurring adjustments) which are, in the opinion of
management, necessary for a fair statement of results for the
interim periods. The results of operations for the nine month period
ended September 30, 1996, are not necessarily indicative of the
results to be expected for the full year.
The accompanying consolidated financial statements do not include
footnotes and certain financial presentations normally required
under generally accepted accounting principles; and, therefore,
should be read in conjunction with the Company's Annual Report on
Form 10-K for the year ended December 31, 1995.
Certain reclassifications have been made to the 1995 financial
statements to conform to the presentation used in 1996.
NOTE 2 - PER SHARE COMPUTATIONS
Per share computations are based upon the weighted average number of
common shares outstanding during each year. Common stock equivalents
are not included in the computations since their effect would be
anti-dilutive.
<PAGE>
Item 2. Management Discussion and Analysis of Financial Condition
and Results of Operations
Business Review
Oil and Gas Segment
With the recent increases in the price of oil, the Company has found
it feasible to perform deferred remedial work on several of the
wells in their remaining field located near Santa Clarita, in Los
Angeles County, California. This remedial work is expected to have
a significant positive impact on future production; however, the
increased costs have negatively impacted the year to date operating
results. The remedial work consisted primarily of well pulling, a
stimulation project, and the addition of natural gas powered pumping
units. The Company's management feels that the price of oil will
remain at near-current levels during the remainder of 1996, which
should lead to increased profits in future periods. Profits in the
Oil and Gas segment are currently offset by losses in the Oilfield
Services segment.
Oilfield Services Segment
On May 16, 1996, the Company's wholly owned subsidiary, Hydro-Test
International, Inc.'s (HTI) Chapter 11 plan of reorganization was
accepted by the creditors and confirmed by the United States
Bankruptcy Court for the Southern District of Texas, Houston
Division. As such, HTI is no longer in bankruptcy and will satisfy
their remaining pre-petition liabilities with future revenues.
Additionally, the intercompany debt will be converted to equity at
the rate of approximately $100,000 per year. Management has
estimated that approximately $600,000 in total liabilities will be
forgiven, based on elections made by the creditors. This estimate
has been reflected as a reorganization item in the second quarter of
the current year Statement of Operations. HTI will continue to
operate its remaining facility near Waller, Texas, with the existing
equipment. The Company does not currently have any plans to expand
these operations and continues to sell off assets.
Financial Condition
The Company had a negative cash flow of approximately $8,000 during
the three months ended September 30, 1996, which was primarily a
result of the continued losses from HTI. The remedial work performed
on the oil wells was expensed as incurred in the first two quarters
of this year. This work is substantially complete and should not
negatively impact future cash flows.
The Company has entered into negotiations with a developer to build
a golf course on the Company's 140 acres of land adjacent to their
oilfields. The planned agreement is a lease which will begin on June
15, 1997, with an option to purchase the property for approximately
$2,700,000. This agreement, if finalized, will provide the Company
with additional cash flow and ensure a compatible neighbor in the
future. The developer has placed $100,000 in an escrow account as a
good faith deposit.
<PAGE>
Results of Operations
Nine Months Ended September 30, 1996, as Compared with Nine Months
Ended September 30, 1995
The Company had losses from continuing operations of approximately
$128,000 at September 30, 1996, compared to approximately $568,000
at September 30, 1995, however, net income was approximately
$471,000 at September 30, 1996, due to a one time gain on debt
forgiven. The large operating losses in 1995 were primarily due to
the Company's wholly owned subsidiary HTI. The Company has since
significantly downsized HTI's operations and sold off most of its
assets as part of a restructuring plan that included Chapter 11
reorganization. As part of this restructuring, approximately
$600,000 in debt was forgiven by the creditors. This has been
recorded as a reorganization item in the statement of operations at
September 30, 1996, based on an estimate made by management. This
estimate will be adjusted to actual at year end, based on the
results of elections made by the creditors to receive either 25% of
their original claim within 90 days or 50% over a 60 month period.
The results of these elections are currently being calculated,
however, management does not anticipate any material adjustments to
the current estimate.
HTI was recorded as a discontinued operation in 1995, because it was
management's intention to liquidate this segment. The Company
reversed this decision in September 1995, when management sought
protection under Chapter 11 of the United States Bankruptcy Code,
which requires the entity seeking protection to continue operating.
HTI's results are included in continuing operations for both the
period ended September 30, 1996, and the period ended September 30,
1995, as restated.
<PAGE>
PART II - OTHER INFORMATION
<PAGE>
ITEM 1. LEGAL PROCEEDINGS
The Company is not a party to nor is its property the subject of any
material legal proceedings other than ordinary routine litigation
incidental to its business, or which is covered by insurance, except
as previously disclosed in the Company's Annual Report on Form 10-K
for the year ended December 31, 1995; however, an attempt was made
by one of the HTI creditors to seek damages from Petrominerals for
debt that was forgiven in Chapter 11 reorganization. This case was
dismissed on October 4, 1996, and management feels that other
similar actions will end with the same result.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits - None.
(b) Reports on Form 8-K - None.
<PAGE>
SIGNATURES
Pursuant to the requirement 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.
PETROMINERALS CORPORATION
(Registrant)
Paul L. Howard
President, CEO & Chief Financial Officer
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> DEC-31-1996
<CASH> 324,000
<SECURITIES> 0
<RECEIVABLES> 130,000
<ALLOWANCES> 0
<INVENTORY> 40,000
<CURRENT-ASSETS> 444,000
<PP&E> 2,082,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 3,101,000
<CURRENT-LIABILITIES> 350,000
<BONDS> 0
0
0
<COMMON> 847,000
<OTHER-SE> 1,571,000
<TOTAL-LIABILITY-AND-EQUITY> 3,101,000
<SALES> 853,000
<TOTAL-REVENUES> 910,000
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,035,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,000
<INCOME-PRETAX> (128,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (128,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 599,000
<CHANGES> 0
<NET-INCOME> 471,000
<EPS-PRIMARY> .06
<EPS-DILUTED> .06
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