<PAGE>
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 June 30, 1999
[ ] 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
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Petrominerals Corporation
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(Exact name of registrant as specified in its charter)
Delaware No. 95-2573652
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(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
27241 Burbank, Foothill Ranch, California 92610-2500
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(Address of principal executive offices)
(949) 588-2645
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(Registrant's telephone number, including area code)
Check whether the Registrant (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act during the past 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 June 30, 1999
was 1,059,417.
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PETROMINERALS CORPORATION
INDEX
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Page
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PART I - FINANCIAL INFORMATION
Item 1. Unaudited Consolidated Financial Statements
Consolidated Balance Sheets June 30, 1999 and December 31, 1998. . 4
Consolidated Statements of Operations for the three and six months
ended June 30, 1999 and 1998 . . . . . . . . . . . . . . . . . . 6
Consolidated Statements of Cash Flows for the six months ended
June 30, 1999 and 1998 . . . . . . . . . . . . . . . . . . . . . 7
Notes to Consolidated Financial Statements . . . . . . . . . . . . . 8
Item 2. Management's Discussion and Analysis of Financial Condition
Condition and Results of Operations . . . . . . . . . 9
PART II - OTHER INFORMATION .. . . . . . . . . . . . . . . . . . . . 10
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
</TABLE>
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PART I - FINANCIAL INFORMATION
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ITEM 1. UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
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PETROMINERALS CORPORATION
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except par value data)
(Unaudited)
ASSETS
<TABLE>
<CAPTION>
December 31,
June 30, 1999 1998
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<S> <C> <C>
Current Assets
Cash and cash equivalents . . . . . . . . $ 2,686 $ 2,928
Accounts receivable, net. . . . . . . . . 2 8
Prepaid expenses. . . . . . . . . . . . . 32 52
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Total Current Assets. . . . . . . . . . 2,720 2,988
Restricted Cash . . . . . . . . . . . . . . 25 25
Property and Equipment, net (including oil
and gas properties accounted for on the
successful efforts method). . . . . . . . 142 129
Notes Receivable and Other Assets . . . . . 417 417
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Total Assets. . . . . . . . . . . . . . $ 3,304 $ 3,559
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</TABLE>
See accompanying notes to consolidated financial statements.
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PETROMINERALS CORPORATION
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except par value data)
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
December 31,
June 30, 1999 1998
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<S> <C> <C>
Current Liabilities
Accounts payable. . . . . . . . . . . . . . . . $ 80 $ 133
Accrued liabilities . . . . . . . . . . . . . . 5 44
Royalties payable . . . . . . . . . . . . . . . 11 11
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Total Current Liabilities . . . . . . . . . . 96 188
Prepetition liabilities . . . . . . . . . . . . . 448 448
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Total Liabilities . . . . . . . . . . . . . . 544 636
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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;
1,059,417 shares issued and outstanding at
June 30, 1999 and December 31, 1998,
respectively. . . . . . . . . . . . . . . . . 848 848
Capital in Excess of Par Value. . . . . . . . . . 563 563
Retained Earnings . . . . . . . . . . . . . . . . 1,349 1,512
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Total Stockholders' Equity. . . . . . . . . . 2,760 2,923
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Total Liabilities and Stockholders' Equity. . $ 3,304 $ 3,559
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</TABLE>
See accompanying notes to consolidated financial statements.
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PETROMINERALS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
For the Three For the
Months Ended Six Months
June 30, Ended June 30,
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<TABLE>
<CAPTION>
1999 1998 1999 1998
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<S> <C> <C> <C> <C>
REVENUES
Oilfield services . . . . . . . . . . . . $ - $ 30 $ - $ 56
Oil and gas . . . . . . . . . . . . . . . 48 2 78 134
Other income. . . . . . . . . . . . . . . 28 78 56 109
------- ------- ------- -------
Total Revenues. . . . . . . . . . . . . 76 110 134 299
------- ------- ------- -------
COSTS AND EXPENSES
Oilfield services . . . . . . . . . . . . 6 42 15 82
Oil and gas . . . . . . . . . . . . . . . 64 22 104 178
Depreciation, depletion and amortization. 1 2 2 33
General and administrative. . . . . . . . 88 164 168 270
Interest. . . . . . . . . . . . . . . . . - 1 1 2
Other expense . . . . . . . . . . . . . . 1 7 7 19
------- ------- ------- -------
Total Costs and Expenses. . . . . . . . 160 238 297 584
------- ------- ------- -------
Net Loss from Operations. . . . . . . . . . (84) (128) (163) (285)
Gain on sale of fixed assets. . . . . . . . - 2,161 - 2,161
------- ------- ------- -------
Net income (loss) . . . . . . . . . . . . . $ (84) $2,033 $ (163) $1,876
======= ======= ======= =======
Net income (loss) per share . . . . . . . . $ (.08) $ 1.92 $ (.15) $ 1.77
======= ======= ======= =======
Weighted Average Common Shares Outstanding. 1,059 1,059 1,059 1,059
======= ======= ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
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PETROMINERALS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
For the Six Months
Ended June 30,
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<TABLE>
<CAPTION>
1999 1998
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<S> <C> <C>
Cash Flows from Operating Activities
Net income (loss) . . . . . . . . . . . . . . . . . $ (163) $ 1,876
Adjustments to reconcile net income (loss) to
net cash used from operating activities:
Depreciation, depletion and amortization. . . . 2 33
Gain on sale of fixed assets. . . . . . . . . . - (2,161)
Changes in operating working capital:
Accounts receivable . . . . . . . . . . . . . 6 33
Prepaid . . . . . . . . . . . . . . . . . . . 20 (19)
Inventory . . . . . . . . . . . . . . . . . . - 50
Other assets. . . . . . . . . . . . . . . . . - (594)
Accounts payable. . . . . . . . . . . . . . . (53) (22)
Royalties payable . . . . . . . . . . . . . . - (18)
Accrued liabilities . . . . . . . . . . . . . (39) (17)
Prepetition liabilities . . . . . . . . . . . - (58)
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Net Cash Used by Operating Activities . . . . . . . . (227) (897)
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Cash Flows from Investing Activities
Proceeds from sale of assets. . . . . . . . . . . . - 3,680
Capital expenditures. . . . . . . . . . . . . . . . (15) -
Note receivable . . . . . . . . . . . . . . . . . . - 462
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Net Cash Used by Investing Activities . . . . . . . . (15) 4,142
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Cash Flows from Financing Activities
Principal payment of debt . . . . . . . . . . . . . - (11)
Long-term debt borrowed . . . . . . . . . . . . . . - -
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Net Cash Used by Financing Activities . . . . . . . . - (11)
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Net (Decrease) Increase in Cash and Cash Equivalents. (242) 3,234
Cash and Cash Equivalents at beginning of period. . . 2,953 275
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Cash and Cash Equivalents at end of period. . . . . . $2,711 $ 3,509
======= ========
</TABLE>
See accompanying notes to consolidated financial statements.
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PETROMINERALS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED
JUNE 30, 1999 AND 1998
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
-----------------------
The financial information included herein is unaudited; however, such
information reflects all adjustments (consisting solely 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
six month period ended June 30, 1999 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-KSB for the year ended December 31, 1998.
Certain reclassifications have been made to the 1998 financial statements to
conform to the
presentation used in 1999.
NOTE 2 - PER SHARE COMPUTATIONS
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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.
NOTE 3 - BANKRUPTCY
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On June 8, 1999, the Company's wholly-owned subsidiary, Hydro-Test
International, Inc., filed a voluntary petition for Bankruptcy under Chapter 7
of the U.S. Bankruptcy Code with the U.S. Bankruptcy Court in the Southern
District of Texas. The creditor's meeting was held in July 1999. None of
Hydro-Test's creditors attended the meeting. In its Chapter 7 petition,
Hydro-Test indicated that its estimates funds will be available for distribution
to unsecured creditors. On May 16, 1996, Hydro-Test filed for relief under
Chapter 11 of the U.S. Bankruptcy Code. At June 30, 1999, Hydro-Test still owed
approximately $448,000 in prepetition liabilities from this previous Bankruptcy.
In addition the subsidiary owes the Company approximately $888,000 in prior
operating advances and other intercompany loans. The total carrying value of
Hydro-Test's assets at June 30, 1999 was approximately $125,000.
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ITEM 2 - MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
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OF OPERATIONS
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FINANCIAL CONDITION
As discussed in the Company's Annual Report on Form 10-KSB for the year ended
December 31, 1998, the Company has sold substantially all of its oil and gas
properties to an unrelated party. The Company has retained interests in two
small oil and gas properties. As a result of the sale, the Company only has
marginal revenues and expenses from the retained interests in certain oil and
gas properties for the six months ended June 30, 1999. The Company had a
negative cash flow of approximately $242,000 for the six months ended June 30,
1999, compared to a positive cash flow of approximately $3,234,000 for the six
months ended June 30, 1998. The current period negative cash flow is mainly
resulting from normal general and administrative costs for the six months with
marginal production activities. The negative cash flow at June 30, 1999 is the
result of a significant decline in production and sales due to the sale of
substantially all of the Company's oil and gas properties, coupled with
depressed oil prices. However, revenues for the quarter ended June 30, 1999, had
increased due to a rebound in the price of oil. At this moment, it is difficult
to project whether the negative cash flows will continue during the third
quarter of 1999.
Six months ended June 30, 1999 as compared with the six months ended June 30,
- --------------------------------------------------------------------------------
1998
- ----
The Company sold substantially all of its oil and gas properties in the middle
of the second quarter of 1998. Because of this sale, the Company reported an
approximate $2,161,000 gain as compared the quarter ended June 30, 1999. The
Company now has only small holdings in oil and gas production, and the Company's
revenues are not comparable to prior periods.
BUSINESS REVIEW
Oil and Gas Segment
- ----------------------
As noted in the 10-KSB for the year ended December 31, 1998, the Company sold
substantially all of its oil and gas producing properties to an unrelated entity
in May 1998 with an effective date of April 1, 1998. As a part of the amended
sale agreement, the Company agreed to retain a small portion of the field. The
Company continues to earn marginal revenues from the retained interests in
certain oil and gas properties and interest income.
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ITEM 2 - MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
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OF OPERATIONS (Continued)
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BUSINESS REVIEW (Continued)
Oilfield Services Segment
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As noted in the 10-KSB for the year ended December 31, 1998, the Company has
discontinued Hydro-Test's operation since July 1998. On June 8, 1999, the
Company's wholly-owned subsidiary, Hydro-Test International, Inc. filed a
voluntary petition for Bankruptcy under Chapter 7 of the U.S. Bankruptcy Code
with the U.S. Bankruptcy Court in the Southern District of Texas. The
creditor's meeting was held in July, 1999. None of Hydro-Test's creditors
attended the meeting. In its Chapter 7 petition, Hydro-Test indicated that it
estimates funds will be available for distribution to unsecured creditors. On
May 16, 1996 Hydro-Test filed for relief under Chapter 11 of the U.S. Bankruptcy
code. At June 30, 1999, Hydro-Test still owed approximately $448,000 in
prepetition liabilities from this previous Bankruptcy. In addition the
subsidiary owes the Company approximately $888,000 in prior operating advances
and other intercompany loans. The total carrying value of Hydro-Test's assets
at June 30, 1999 were approximately $125,000.
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PART II - OTHER INFORMATION
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ITEM 1. LEGAL PROCEEDINGS
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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-KSB for the year ended December 31, 1998.
ITEM 2. CHANGES IN SECURITIES
-----------------------
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
----------------------------------
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
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None.
ITEM 5. OTHER INFORMATION
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None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
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(a) Exhibits - None.
(b) Reports on Form 8-K - None.
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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
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(Registrant)
/s/ Morris V. Hodges
----------------------
Morris V. Hodges
President, CEO & Chief Financial Officer
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<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1999
<CASH> 2,686
<SECURITIES> 0
<RECEIVABLES> 2
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,720
<PP&E> 588
<DEPRECIATION> 446
<TOTAL-ASSETS> 3,304
<CURRENT-LIABILITIES> 96
<BONDS> 0
0
0
<COMMON> 848
<OTHER-SE> 1,912
<TOTAL-LIABILITY-AND-EQUITY> 3,304
<SALES> 0
<TOTAL-REVENUES> 134
<CGS> 0
<TOTAL-COSTS> 119
<OTHER-EXPENSES> 177
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1
<INCOME-PRETAX> (163)
<INCOME-TAX> (163)
<INCOME-CONTINUING> (163)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (163)
<EPS-BASIC> (.15)
<EPS-DILUTED> 0
</TABLE>
