SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")
For the Fiscal Year Ended June 30, 1996 Commission file number 33-15097-D
BASIC NATURAL RESOURCES, INC.
(Exact name of Registrant as specified in its charter)
Colorado 84-1045715
(State of other jurisdiction (IRS Employer I.D. No.)
of incorporation or organization)
2450 South Shore Boulevard, Suite 210
League City, Texas 77573
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (281) 334-0708
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
None
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, and (2) has been subject to such filing
requirements for the past 90 days. Yes No X
Indicate by check mark if there is no disclosure of delinquent filers in
response to Item 405 of Regulation S-K contained in this form, and no disclosure
will be contained, to the best of Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. Yes No X
The Registrant's revenues for its most recent fiscal year were $ -0- .
The Registrant had 2,376,287 shares of $.00005 par value Common Stock and
174,865 shares of $1.00 par value Series A Voting Preferred Stock issued and
outstanding at December 16, 1996. The aggregate market value of the voting stock
held by non-affiliates of the Registrant on that date, computed by reference to
the average of the bid and asked prices of the Common Stock and the par value of
the Preferred Stock, was approximately $0. Total Page Including cover Exhibit
Index Page
1
<PAGE>
PART I
ITEM 1. Description of Business
Overview
History of the Company. Basic Natural Resources, Inc. (the "Registrant" or
the "Company") was incorporated in the State of Colorado in December 1986, under
the name Euram Capital Corporation and became a public company in August 1987,
at which time it completed an offering of "Units", consisting of one share of
Common Stock and one Class A Warrant to Purchase the Common Stock of Euram
Capital Corporation, pursuant to a Registration Statement on Form S-18 that was
filed with the Securities and Exchange Commission on August 6, 1987.
The Registrant was originally organized for the purpose of acquiring
business opportunities and, if successful in that regard, in developing and
operating the entities acquired. Prior to December 1991, the business of the
Company consisted primarily of evaluating companies for acquisition and
participation in two joint ventures related to the development, marketing, sale,
and licensing of proprietary computer software and consulting services.
In November 1988, the Registrant entered into a joint venture agreement
(the "Euram Joint Venture") with Logistical Systems Techniques, Inc., a Delaware
corporation doing business as Cosmos Imaging Systems ("Cosmos"), for the
development and marketing of four software imaging programs. This agreement was
rescinded in March 1990. On August 1, 1990, the Registrant entered into a new
joint venture agreement to market, distribute, sell, and license certain of
Cosmos' line of proprietary computer imaging software and consulting services
(the "Euram/Cosmos Joint Venture"), which resulted in the Registrant investing
approximately $377,000 in Cosmos, in the form of capital contributions and
loans, to complete development and refinement of Cosmos' software programs, and
to begin a national marketing program. Effective October 20, 1990, the
Registrant entered into a joint venture agreement with SC Special Computer
Corporation GmbH ("SC Joint Venture") to complete the final development and to
initiate the commercial marketing of software programs developed by SC Special
Computer Corporation GmbH.
Upon approval of the shareholders of record at the Company's annual meeting
on December 27, 1990, the name of the Company was changed from Euram Capital
Corporation to Basic Natural Resources, Inc.
On February 28, 1991, the Registrant, along with Cosmos, entered into an
Agreement with Dynatech Computer Systems ("Dynatech"), a Massachusetts
corporation. Pursuant to such agreement, Dynatech acquired all of the
Registrant's rights, title, and interest in and to the Euram/Cosmos Joint
Venture.
2
<PAGE>
On December 27, 1991, the Registrant substantially altered the nature and
extent of its business by completing the purchase of 93% of the issued and
outstanding common stock of Diversified Land & Exploration Co., a Utah
corporation, and its subsidiaries (collectively "Diversified") in exchange for
approximately 292,000,000 shares of the Registrant's Common Stock; and at the
same time, the Registrant abandoned the Euram/Cosmos Joint Venture and the SC
Joint Venture. Following the purchase and exchange of shares, Diversified became
a subsidiary of the Registrant.
As a result of the Company's acquisition of Diversified in December 1991,
and of subsequent acquisitions, the Registrant became a natural resources
oriented corporation, with natural gas processing and transportation operations
or interests in eight states. The Registrant's business activities included
natural gas gathering, processing, transportation and marketing services, and
the ownership, development and production of oil, natural gas and natural gas
liquids for its own account. The Registrant also invested in other mineral
properties such as gold, silver and gypsum.
In March 1992, the Company's management elected to change the Company's
accounting period to coincide with the fiscal year end date of June 30, the date
utilized by Diversified, the Company's predominate operating business.
During the year ended June 30, 1995, the Company entered into a settlement
agreement with a shareholder group to return 659,547 shares of the common stock
of the Company owned by entities of certain individual officers and directors
and removed Diversified as a subsidiary of the Company. Following the
disposition of Diversfied, the Company ceased operations related to the oil and
gas segment. The Company continues to seek acquisitions and mergers in the area
of computer related technologies. Management believes that an acquisition of
this nature will provide an opportunity to enhance shareholder value.
Financial Information about Industry Segments
The Registrant, prior to its disposition of Diversified, was conducting
operations and pursuing acquisitions in three industry segments: oil, natural
gas and natural gas liquids development and production; contract oil industry
services; and mineral resource acquisition and development.
Information related to the Registrant's operations in these different
industry segments is as follows:
3
<PAGE>
<TABLE>
<CAPTION>
6/30/96 6/30/95 6/30/94
Revenues
<S> <C> <C> <C>
Oil and gas production $ - $ - $ -
Contract service and management revenues $ - $ - $ 19,695
Operating profit (Loss)
Oil and gas production $ - $ - $ -
Contract service and management revenues $ - $(68,869) $(451,449)
Identifiable assets
Oil and gas properties $ - $ - $ -
Gas and processing and transportation $ - $ - $ -
Capital expenditures
Oil and gas properties $ - $ - $ -
Gas processing and transportation equipment $ - $ - $ -
Depreciation, depletion and amortization
Oil and gas properties $ - $ - $ -
Gas processing and transportation equipment $ - $ - $ 158,215
</TABLE>
Revenues by industry segment represent revenues as reported in the
consolidated statements of operations. Operating profit (loss) represents total
revenues net of total operating expenses, including oil and gas production
costs, depreciation, depletion, and amortization.
Narrative Description of Business.
Following the disposition of Diversfied in June 1995, the Company has not
engaged in any active operations of any type. The Company continues to seek
acquisitions or mergers that will provide an opportunity to enter the computer
technology and software industries.
Employees.
As of June 30, 1996, the Registrant did not employ any full-time employees.
4
<PAGE>
ITEM 2. PROPERTIES
General
The Registrant's corporate offices at June 30, 1996, consist of
approximately 1,000 square feet of space which is leased on a month-to-month
term at a monthly rental of less than $1,000.
ITEM 3. LEGAL PROCEEDINGS
Other than routine litigation incidental to the business of the Registrant,
the only pending legal proceedings of which management is aware to which the
Registrant or any of its directors or officers is a party, or which any
Registrant's property is the subject, are as follows:
1. During the year ended June 30, 1994, a shareholder group brought an
action against two individuals who were officers and directors of the
Company. As part of the settlement, the shareholders agreed to drop
all claims if the two individuals resigned as directors and officers
of the Company, returned a total of 659,457 shares of the common stock
of the Company held by entities which were owned and operated by the
two officers and directors, and removed three subsidiaries of the
Company, Diversified Land & Exploration Company, Wilson Development
Corp. and Diversified Production Services Inc. The 659,457 shares of
common stock were returned to the Company and canceled during the year
ended June 30, 1995.
2. The Company is involved in a lawsuit in the State of Texas which
relates to an enviromental matter. The Company has been advised that
it will cost approximately $80,000 to perform a study to determine the
extent of damage. The estimated cost related to clean-up could be in
excess of $500,000. The Company currently has no means to pay any
costs associated with this lawsuit. Management is negotiating a
settlement agreement with the parties to resolve this matter. The
proposed settlement provides for a payment of $10,000 and the issuance
of 3,000,000 shares of the Company's common stock.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of the Company's fiscal year, no matter was
submitted to a vote of security holders through the solicitation of proxies or
otherwise.
5
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Market Information
The Registrant's Units, consisting of one share of Common Stock and one
Class A Warrant to Purchase the Common Stock of the Company commenced trading in
the NASDAQ over-the- counter market in October 1987. In December 1988, the
Registrant effected a 2:1 split increasing the number of Units from 9,000,000 to
18,000,000. In December 1991, the Registrant effected a 1:50 split of its Units.
Each Unit consists of one share of common stock, $.00005 par value ("Common
Stock") and one A Warrant. The Class A and Class B Warrants expired on August
31, 1996. The Unit components are detachable and separately tradable; however,
no market presently exists except for the Common Stock.
The following table sets forth, for each full quarterly period during the
Company's three most recent fiscal years, the high and low closing bid prices
for the Registrant's Common Stock as reported by the National Quotation Bureau
Inc., and Greenway Capital Corp., a member of the National Association of
Securities Dealers, Inc. Such quotations are inter-dealer quotations without
retail mark-ups, mark-downs, or commissions, and may not represent actual
transactions.
<TABLE>
<CAPTION>
High Low
1996
<S> <C> <C>
June 30, 1996 - -
March 31, 1996 - -
December 31, 1995 - -
September 30, 1995 - -
1995
June 30, 1995 - -
March 31, 1995 - -
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
High Low
1995 (continued)
<S> <C> <C>
December 31, 1994 - -
September 30, 1994 - -
1994
June 30, 1994 - -
March 31, 1994 - -
December 31, 1993 1-1/2 1-1/2
September 30, 1993 1-1/2 1-1/2
</TABLE>
On June 30, 1996, the last reported sales price of the Company's common
stock as reported by the National Quotation Bureau Inc. was $0.00.
Shareholders of Record
The approximate number of shareholders of record of each class of equity
securities of the Registrant as of June 30, 1996, are as follows:
Number of
Title of Class Record Holders
Common Stock, $.00005 Par Value .................................. 96
$1.00 Par Value Series A Voting Preferred Shares.................. 8
Dividends
The Registrant has never declared or paid a cash dividend on its Common
Stock. The Registrant does not intend to pay a cash dividend in the foreseeable
future.
7
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Years Ended June 30,
1996 1995 1994 1993 1992
---------------- ---------------- ---------------- ------------------ ----------
Summary of Operations
<S> <C> <C> <C> <C> <C>
Revenues $ - $ - $ 19,695 $ 1,133,426 $ 1,676,823
Contract costs - - (25,444) 1,212,011 498,546
General and administrative costs 69,403 68,644 332,873 269,416 527,803
Interest expense 81 225 5,500 - 490,266
Depreciation and amortization - - 158,215 106,000 131,948
---------------- ---------------- ---------------- ------------------ ---------------
Net income (loss) from
continuing operations (69,484) (68,869) (451,449) (454,001) 28,260
Other income (loss) 3 71,969 (1,496,264) 299,665 279,588
Provision for income taxes 3,299 - (900) (900) (900)
Income (loss) from
discontinued operations - - 290,685 - -
---------------- ---------------- -------------- ------------------ ---------------
Net income (loss) $ (66,182) $ 3,10 $ (1,657,928) $ (155,236) $ 306,948
Net income (loss) per common share (.03) (.00) (.58) (.05) .12
Summary of Balance Sheet Data
Working capital (Deficit) (41,209) (15,027) (142,295) (277,832) (548,610)
Total Assets $ - $ 644 $ 642 $ 1,932,297 $ 3,013,650
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
Significant Developments During the Year. During the fiscal year ended June
30, 1996, the Company had no active operations, $0 in cash, a working capital
deficit of $41,209, and accumulated losses of $4,826,922.
Mr. Samuel M. Skipper was elected as the sole director, and appointed to
the position of Chairman of the Board, President and Chief Executive Officer on
August 17, 1995. Mr. Skipper continues to hold the positions of Sole Director,
Chairman of the Board, President and Chief Executive Officer of the Company. The
Company is considering entering into the business of computer technology, and is
also considering a change in management.
8
<PAGE>
Current Strategy. The Company continues to seek acquisitions and mergers in
the area of computer related technologies. Management believes that an
acquisition of this nature will provide an opportunity to enhance shareholder
value.
Liquidity and Capital Resources.
At June 30, 1996, the Company maintained a negative liquidity position. The
Company has no major capital commitments at the present time; however,
management continues to pursue acquisitions which offer to improve the Company's
current ratio and liquidity, and provide cash flow necessary for future capital
expenditures and acquisitions.
The selected consolidated financial data presented below has been derived
from the Consolidated Financial Statements of the Registrant including the notes
to the Consolidated Financial Statements, appearing elsewhere herein, and should
be read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations".
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<TABLE>
<CAPTION>
Page
<S> <C>
Report of Independent Auditors...................................................................................10
Consolidated Balance Sheets at June 30, 1996 and 1995............................................................11
Consolidated Statements of Operations for the years ended June 30, 1996, 1995, and 1994 .........................12
Consolidated Statements of Changes of Stockholders' Equity (Deficit) for the years ended
June 30, 1996, 1995, and 1994...........................................................................13
Consolidated Statements of Cash Flows for the years ended June 30, 1996, 1995, and 1994..........................14
Notes to Consolidated Financial Statements .................................................................15 - 20
</TABLE>
9
<PAGE>
SMITH & COMPANY
CERTIFIED PUBLIC ACCOUNTANTS
MEMBERS OF: CRANDALL BUILDING SUITE 700
AMERICAN INSTITUTE OF 10 WEST 100 SOUTH
CERTIFIED PUBLIC ACCOUNTANTS SALT LAKE CITY, UTAH 84101
UTAH ASSOCIATION OF TELEPHONE: (801) 575-8297
CERTIFIED PUBLIC ACCOUNTANTS FACSIMILE: (801) 575-8306
- --------------------------------------------------------------------------------
INDEPENDENT AUDITOR'S REPORT
The Stockholders and
The Board of Directors
Basic Natural Resources, Inc.
We have audited the accompanying consolidated balance sheets of Basic Natural
Resources, Inc. and Subsidiaries as of June 30, 1996 and 1995, and the related
consolidated statements of operations, changes in stockholders' equity (deficit)
and cash flows for the years ended June 30, 1996, 1995, and 1994. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Basic Natural
Resources, Inc. and Subsidiaries as of June 30, 1996 and 1995 and the results of
their operations and their cash flows for the years ended June 30, 1996, 1995,
and 1994 in conformity with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
the Company will continue as a going concern. As shown in the financial
statements, the Company has a working capital deficiency of $41,209 as of June
30, 1996, and has incurred accumulated losses of $4,826,922 at that date. As
discussed in Note 8, the Company's ability to generate sufficient cash flows to
meet its obligations and sustain its operations cannot be determined at this
time. These uncertainties raise substantial doubt about the Company's ability to
continue as a going concern. Management's plans in regard to these matters are
also described in Note 8. The financial statements do not include any
adjustments that might result from the outcome of these uncertainties.
/s/ Smith & Company
Certified Public Accountants
Salt Lake City, Utah
December 11, 1996
10
<PAGE>
BASIC NATURAL RESOURCES, INC.
CONSOLIDATED BALANCE SHEETS
June 30, 1996 and 1995
<TABLE>
<CAPTION>
ASSETS
1996 1995
------------------ -----------
CURRENT ASSETS
<S> <C> <C>
Cash and equivalents $ 0 $ 644
------------------ ----------------
TOTAL CURRENT ASSETS 0 644
------------------ ----------------
TOTAL ASSETS $ 0 $ 644
================== ================
LIABILITIES AND STOCKHOLDERS' (DEFICIT)
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 28,009 $ 12,372
Loan payable (Note 9) 13,200 0
Income taxes payable 0 3,299
------------------ ----------------
TOTAL CURRENT LIABILITIES 41,209 15,671
Contingent liability (Note 10) 0 0
------------------ ----------------
TOTAL LIABILITIES 41,209 15,671
STOCKHOLDERS' (DEFICIT) (Note 7)
Preferred stock - $1 par value 10,000,000 shares authorized;
174,865 shares of Series A Voting Preferred Stock outstanding at
June 30, 1996 and 1995, and 0 shares of Series A Convertible
Preferred Stock outstanding at June 30, 1996, and June 30, 1995. 174,865 174,865
Common stock - $.00005 par value 536,000,000 shares authorized;
2,376,287 shares issued and outstanding at June 30, 1996 and
2,176,289 shares issued and outstanding at June 30, 1995. 119 109
Additional paid-in capital 4,610,729 4,570,739
Retained (deficit) (4,826,922) (4,760,740)
------------------ -----------------
TOTAL STOCKHOLDERS' (DEFICIT) (41,209) (15,027)
------------------ ----------------
$ 0 $ 644
================== ================
</TABLE>
See accompanying notes to these financial statements.
11
<PAGE>
BASIC NATURAL RESOURCES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Years ended June 30, 1996, 1995, and 1994
<TABLE>
<CAPTION>
1996 1995 1994
-------------------- ------------------- -------------
<S> <C> <C> <C>
Revenues $ 0 $ 0 $ 19,695
Costs and Expenses
Contract Costs 0 0 (25,444)
Depreciation and amortization 0 0 158,215
General and administrative expenses 69,403 68,644 332,873
Interest 81 225 5,500
-------------------- ------------------- ------------------
Total Costs and Expenses 69,484 68,869 471,144
-------------------- ------------------- ------------------
Income (loss) from
Continuing Operations: (69,484) (68,869) (451,449)
Other Income (Expense):
Bad debts 0 0 (86,596)
Decline in value of property 0 0 (1,468,348)
Debt forgiveness (Note 3) 0 71,952 52,321
Investment income (loss) 3 17 359
Gain (loss) on sale of assets 0 0 6,000
-------------------- ------------------- ------------------
Net other income (expense) 3 71,969 (1,496,264)
-------------------- ------------------- ------------------
Income (Loss)
Before Income Taxes (69,481) 3,100 (1,947,713)
Income tax expense (benefit) (3,299) 0 900
-------------------- ------------------- ------------------
Income (Loss) Before
Discontinued Operations (66,182) 3,100 (1,948,613)
Discontinued Operations:
Gain on disposal of subsidiary 0 0 290,685
-------------------- ------------------- ------------------
Net Income (Loss) $ (66,182) $ 3,100 $ (1,657,928)
==================== =================== ==================
Income (Loss) Per Share
(Continuing Operations) $ (.03) $ .00 $ (.68)
Income (Loss) per share
(Discontinued operations) .00 .00 .10
-------------------- ------------------- ------------------
Income (Loss) Per Share $ (.03) $ .00 $ (.58)
==================== =================== ==================
</TABLE>
See accompanying notes to these financial statements.
12
<PAGE>
BASIC NATURAL RESOURCES, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
Years ended June 30, 1996, 1995, and 1994
<TABLE>
<CAPTION>
Additional Retained Total
Common Preferred Paid-In Earnings Stockholders'
Shares Amount Shares Amount Capital (Deficit) Equity (Deficit)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCES AT JUNE 30, 1993 2,861,230 $ 143 404,865 $ 404,865 $ 5,180,932 $(2,962,265) $ 1,547,315
Common stock canceled (124,000) (6) (6)
Common stock issued to pay
liabilities 48,500 2 193,384 193,386
Rounding related to stock reverse 16
Preferred stock canceled (230,000) (230,000) (920,000) (1,150,000)
Adjust unrealized decline in value
of property and equipment 1,076,360
Disposition of subsidiary (7,775) (143,647) (151,422)
Net loss (1,657,928) (1,657,928)
---------- ----------- ---------- ---------- ----------- ----------- ----------
BALANCES AT JUNE 30, 1994 2,785,746 139 174,865 174,865 4,446,541 (4,763,840) (142,295)
Common stock issued to
pay liabilities 50,000 3 124,165 124,168
Common stock canceled (659,457) (33) 33
Net income 3,100 3,100
---------- ----------- ---------- ---------- ----------- ----------- ----------
BALANCES AT JUNE 30, 1995 2,176,289 109 174,865 174,865 4,570,739 (4,760,740) (15,027)
Common stock sold for cash 200,000 10 39,990 40,000
Rounding related to stock reverse (2)
Net loss (66,182) (66,182)
---------- ----------- ---------- ---------- ----------- ----------- ----------
BALANCES AT JUNE 30, 1996 2,376,287 $ 119 174,865 $ 174,865 $ 4,610,729 $(4,826,922) $ (41,209)
========== =========== ========== ========== =========== =========== ==========
</TABLE>
See accompanying notes to these financial statements.
13
<PAGE>
BASIC NATURAL RESOURCES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended June 30, 1996,1995, and 1994
<TABLE>
<CAPTION>
1996 1995 1994
------------- ------------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net income (loss) $ (66,182) $ 3,100 $ (1,657,928)
Adjustments to reconcile net income (loss) to net cash
provided (used) in operating activities:
Depreciation and amortization 0 0 158,215
Stock issued (canceled) for non-cash items 0 0 (31)
Bad debts 0 0 86,596
Disposition of assets 0 0 1,316,963
Changes in assets and liabilities:
Trade receivables 0 0 4,676
Other receivables 0 0 77,646
Deposits 0 0 2,866
Income taxes payable (3,299) 0 (1,211)
Accounts payable and accrued liabilities 15,637 (3,098) (47,448)
------------- ------------- ------------
Net Cash Provided (Used) in Operating Activities (53,844) 2 (59,656)
CASH FLOWS FROM INVESTING ACTIVITIES:
Cost of securities traded 0 0 38,756
Increase (decrease) in restricted certificate of deposit 0 0 5,664
------------- ------------- ------------
Net Cash Provided by Investing Activities 0 0 44,420
CASH FLOWS FROM FINANCING ACTIVITIES:
Loan proceeds 13,200 0 0
Sale of common stock 40,000 0 0
------------- ------------- ------------
Net Cash Provided by Financing Activities 53,200 0 0
------------- ------------- ------------
Net Increase (Decrease) in Cash (644) 2 (15,236)
CASH AT BEGINNING OF YEAR 644 642 15,878
------------- ------------- ------------
CASH AT END OF YEAR $ 0 $ 644 $ 642
============= ============= ============
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ 81 $ 225 $ 5,500
Income taxes paid 0 0 0
------------- ------------- ------------
$ 81 $ 225 $ 5,500
============= ============= ============
</TABLE>
See accompanying notes to these financial statements.
14
<PAGE>
BASIC NATURAL RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1996
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company was originally incorporated in Colorado on December 31,
1986 as Euram Capital Corporation ("Euram"), and became a public
company in August 1987. The Company was originally organized for the
purpose of acquiring business opportunities. In 1990, the Company
changed its name to Basic Natural Resources, Inc. ("BNR") and acquired
95% of the outstanding stock of Diversified Land & Exploration
("DL&E") and subsidiaries ("Diversified"), a provider of engineering,
accounting, and operating services to the oil and gas industry.
The Company and its subsidiaries (see below) were previously engaged
in the business of acquiring, exploring, and developing real estate,
minerals, oil, and gas. The Company was concentrating its efforts in
Oklahoma, Texas, Kansas, Illinois, Indiana, Colorado, Wyoming, and
Louisiana.
The Company is currently looking for new business opportunities.
Basis of Presentation
The financial statements for 1995 and 1996 are for the Company only,
as the Company's subsidiaries, BNR Minerals, Inc. and BNR Realty, Inc.
are inactive.
The consolidated financial statements for 1994 included the accounts
of BNR and its subsidiaries: DL&E ( a 95% owned subsidiary), BNR
Minerals, Inc. (a wholly owned subsidiary), and BNR Realty, Inc. (a
wholly owned subsidiary). The financial statements also include the
accounts of Diversified Production Services, Inc. ("DPS") (owned 100%
by DL&E) and Wilson Development Corp ("Wilson") (owned 56% by DL&E).
All significant intercompany transactions and balances have been
eliminated. Effective June 30, 1994 the Company no longer owned DL&E.
Separate sales and net income of BNR and DL&E are as follows:
<TABLE>
<CAPTION>
Year Ended June 30,
-----------------------------------------
1996 1995 1994
----------------- ----------------- -----------
Operating Revenues
<S> <C> <C> <C>
BNR $ 0 $ 0 $ 19,695
DL&E 0 0 0
Net Income (loss)
BNR $ (66,182) $ 3,100 $ (1,606,722)
DL&E 0 0 (51,206)
</TABLE>
Property and Equipment
Property and equipment are stated at cost. Depreciation is provided
using the straight-line method over the estimated useful lives of the
assets, principally three to five years.
Oil and Gas Exploration and Production Operations
The successful efforts method of accounting is followed for costs
incurred in oil and gas exploration and production operations.
Capitalization Policy - Acquisition costs for proved and unproved
properties are capitalized when incurred. Costs of unproved properties
are transferred to proved properties when proved reserves are found.
Exploration costs, including geological and geophysical costs and
costs of carrying and retaining unproved properties will be charged
against income as incurred. Exploratory drilling costs will be
capitalized initially; however, if an exploratory well is plugged and
abandoned, such capitalized costs will be charged to expense, as dry
hole costs, at that time.
Development costs will be capitalized. Costs incurred to operate and
maintain wells and equipment and to lift oil and gas to the surface
are generally expensed.
Leasehold Impairment and Depreciation, Depletion, and Amortization
Unproved properties whose costs are individually significant are
evaluated for impairment by management. Impairment of unproved
properties whose acquisition costs are not individually significant
will be provided for through amortization of the portion of such
properties not expected to become producing over their projected
holding periods; costs of such properties surrendered or abandoned
will be charged to accumulated amortization.
15
<PAGE>
BASIC NATURAL RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
June 30, 1996
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
The acquisition costs of proved properties are depleted by the unit of
production method based on proved reserves. Capitalized exploratory
drilling costs which result in the discovery of proved reserves and
development costs will be amortized/depreciated by the unit of
production method based on proved developed reserves. The unit
determination will be by field.
Mining Operations
Capitalization Policy - Property acquisition costs will be
capitalized. Exploration costs and costs of carrying and retaining
undeveloped properties will be charged against income as incurred.
Mine development costs incurred prior to the operating stage or to
increase the capacity or productivity of operating mines will be
capitalized. Mine development costs incurred to maintain current
production will be generally expensed. Expenditures for plant and mine
equipment for significant additions and replacements will be
capitalized. Other plant and mining equipment costs will be generally
charged against income as incurred. Mobile equipment acquisitions are
capitalized.
Depreciation and Depletion - Property acquisition costs and
capitalized development costs will be depleted by the unit of
production method based on proven reserves. Capitalized plant and
equipment will be generally depreciated over the lesser of their
useful lives or the life of the proven reserves. Depreciation over the
life of reserves will be on a unit of production basis, while
depreciation over useful lives will be principally on a straight-line
basis.
Taxes
Deferred income taxes will be provided for those items of revenue and
expense which will be recognized in different periods for financial
reporting than for income tax purposes.
Net Income Per Share Amounts
Net income per common share amounts are computed based on the weighted
average number of common shares outstanding as follows:
1996 1995 1994
Weighted average common
shares outstanding 2,276,289 2,785,746 2,861,230
Revenue and Cost Recognition
Revenues from fixed price (turnkey) drilling contracts are accounted
for on the percentage-of- completion method of accounting under which
revenues are recorded for costs incurred plus a portion of the profit
expected to be realized. Profits expected to be realized on the
contracts are based on the Company's estimate of total revenues and
costs at completion. These estimates are reviewed and revised
periodically through the lives of the contracts, and adjustments to
profits resulting from such revisions are recorded in the accounting
period in which the revisions are made. Losses on contracts are
recorded in full as they are identified.
Contract costs include all direct material and labor costs (including
drilling and completion costs and geological surveys) and those
indirect costs related to contract performance. General and
administrative costs are charged to expense as incurred.
Costs and estimated profit in excess of billings on contracts comprise
revenues recognized on contracts for which billings have not been
presented to the contract owners at the balance sheet date (Note 3).
Such revenues are expected to be billed and collected generally within
one month and are included in trade receivables in the accompanying
balance sheets.
Billings in excess of costs plus estimated profit on uncompleted
contracts represent amounts billed to contract owners in excess of
revenues recognized.
Additionally, the Company provides administrative and accounting
services to certain oil and gas partnerships for which it receives
management fees and performs various consulting services for which it
receives consulting fees. Consulting fees are recorded as revenue upon
completion of the related services.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect certain reported amounts and disclosures.
Accordingly, actual results could differ from those estimates.
16
<PAGE>
BASIC NATURAL RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
June 30, 1996
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Cash and Equivalents
For purposes of reporting cash flows, the Company considers all cash
accounts which are not subject to withdrawal restrictions or
penalties, and certificates of deposit with original maturitities of
90 days or less to be cash or cash equivalents.
NOTE 2: ACQUISITIONS / DISPOSITIONS
Effective December 31, 1990, the Company issued 1,168,000 shares of
its common stock in exchange for 29,852,896 shares of DL&E's common
stock (representing 93% of all the outstanding common stock of DL&E as
of December 31, 1990). This transaction was accounted for as a
pooling-of-interest. Effective June 30, 1994 the Company no longer
owed DL&E.
In March 1991, the Company acquired four (4) natural gas processing
plants in Illinois and Indiana (collectively, the "Illinois Plants")
valued at $1,000,000 for 80,000 shares of the Company's common stock
and a non-recourse note payable in the amount of $2,202,752. The note
has an interest rate of 10%. The shares of the Company's common stock
were pledged to a bank to secure a $2,000,000 loan to the sellers of
the Illinois Plants. The loan was subsequently paid and the Company's
shares were distributed to the sellers.
In April 1991, the Company entered into an agreement with seven
unrelated limited partnerships to acquire the assets of such limited
partnerships (the "Limited Partnerships") in exchange for shares of
the Company's Series A Convertible Preferred Stock and non-recourse
notes totaling $4,600,000. The transactions closed effective June 30,
1991. Also in April 1991, the Company agreed to exchange certain
shares of its common stock for shares of common stock of three
unrelated public companies: Members Service Corporation, Halo Holdings
Group, Inc. and Associated Trades, Inc. ("Associated"). The shares of
stock of Associated were subsequently converted into shares of stock
of Logos International, Inc. ("Logos") as a result of a merger between
Associated and Logos.
On June 22, 1991, the Company entered into an agreement with the
shareholders of Industrial Gas Services, Inc., a Colorado corporation
("IGS"), pursuant to which the Company acquired for 44,000 shares of
its common stock all of the issued and outstanding common stock of
IGS. The agreement with IGS was effective July 1, 1991, making IGS a
wholly-owned subsidiary of the Company. The Company subsequently
agreed to sell IGS back to its shareholders in December, 1991.
On June 26, 1991, the Company entered into an agreement to purchase a
26-mile pipeline located in the Raton Basin area of Huerfano County,
Colorado (the "Raton Pipeline") from an unrelated joint venture. The
acquisition was effective June 30, 1991 and resulted in the Company
issuing 56,000 additional shares of its common stock and a
non-recourse, non-interest-bearing note in the principal amount of
$1,120,000 to the sellers. Additionally, the Company granted the
holders of said note the option to convert the note into additional
shares of common stock of the Company on the second anniversary date
of the transaction.
Effective June 30, 1994 the Company canceled 230,000 shares of its
preferred stock and $4,600,000 of non-recourse notes, and returned
assets to seven limited partnerships. The Company considered the
partnerships to be in default on various terms of the original
agreement.
Effective June 30, 1994, the Company had abandoned all operations.
NOTE 3: RELATED PARTY TRANSACTIONS
At June 30, 1995, the Company owed $-0- to related parties for
accounts payable and accrued expenses. During the year ended June 30,
1994 the Company removed $52,321 from the books previously recorded as
due to the Company's former President for consulting fees for prior
years. The obligation was removed from the books and recorded as debt
forgiveness because the former President has been unable to provide
evidence that a consulting contract exists. It is possible that the
former President could make a claim for these fees. If a claim is
made, it will be considered at that time. During the year ended June
30, 1995, the Company recorded $70,452 of debt forgiveness income from
related parties. The amount represents actual funds given to the
Company or other amounts paid on behalf of the Company.
During the year ended June 30, 1996, the Company's President was paid
$43,348 in consulting fees.
17
<PAGE>
BASIC NATURAL RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
June 30, 1996
NOTE 4: INCOME TAXES
The provision for income taxes for the year ended June 30, 1994
consisted solely of state income taxes (state franchise taxes)
currently payable. During the years ended June 30, 1996 and 1995, the
Company did not operate in states where a minimum tax is imposed, or
the tax is immaterial to the financial statements and has not been
recorded.
As of June 30, 1996, the Company has available for Federal income tax
purposes net operating loss carryforwards of approximately $3,058,000
expiring through 2,010. The Company may not be able to utilize such
carryover due to change of ownership and the requirement for the
continuation of the same type of business activities.
NOTE 5: MAJOR CUSTOMERS
One customer accounted for approximately 76% of the Company's revenues
during the year ended June 30, 1994.
NOTE 6: COMMITMENTS AND CONTINGENCIES
Leases
The Company leases its corporate and branch offices, and certain
office equipment and furniture under several operating lease
agreements. The Company is obligated to pay certain repairs,
maintenance and insurance in connection with certain leases. Rental
expense was $250, $0 and $13,906 for the years ended June 30, 1996,
1995, and 1994 respectively.
Litigation
The Company is involved in lawsuits in the normal course of business
as both plaintiff and defendant. Management believes, based on the
advice of counsel, that these lawsuits will not have a material
adverse effect on the consolidated financial statements of the
Company.
During the year ended June 30, 1994, a shareholder group brought an
action against two individuals who were Officers and Directors of the
Company. As part of the settlement, the Investors agreed to drop all
claims if the individuals left the Company, returned the Company's
stock owned by entities of the individuals, and took Diversified Land
and Exploration and subsidiaries out of the Company. 659,457 shares of
the Company's common stock were canceled during the year ended June
30, 1995 as part of the settlement agreement.
NOTE 7: STOCKHOLDERS' EQUITY
In fiscal 1989, the Company effected a two-for-one split of its Common
Stock and reduced the par value per share from $.0001 to $.00005. In
fiscal 1991, the Company effected a one-for-fifty reverse split of its
Common Stock. In fiscal 1995 the Company effected a one-for-five
reverse split of its Common Stock. All share and per share amounts in
the accompanying financial statements and notes have been adjusted to
reflect the stock splits.
Preferred Stock
The Company has 10,000,000 shares of $1.00 par value Preferred Stock
authorized for issuance. Such preferred stock can be divided into
classes or series at the discretion of the Board of Directors. At the
present time the Company has designated two (2) classes: Series A
Preferred Stock: $1.00 par value Voting Preferred Stock, consisting of
174,135 shares (the "Voting Preferred Shares"); and $1.00 par value
Series A Convertible Preferred Stock (the "Convertible Preferred
Shares"), consisting of 2,000,000 shares.
The Voting Preferred Shares are callable and redeemable at the option
of the Company. In addition to the cash redemption price of $1.00 per
share, holders of the Voting Preferred Shares are entitled to two
shares of Common Stock for each of the Voting Preferred Shares
redeemed. Holders of the Voting Preferred Shares are entitled to vote
on all matters to be voted upon by the shareholders, have a
liquidation preference of $1.00 per share before any winding-up of the
Company, and are entitled to such dividends as may be declared by the
Board of Directors. The Voting Preferred Shares have no preemptive
rights or sinking fund provisions.
The Convertible Preferred Shares carry the same preferences and rights
as the Voting Preferred Shares except that the Convertible Preferred
Shares have no voting rights, are callable and redeemable, at the
option of the Company, at a redemption price of $10.00 per share in
cash or in shares of Common Stock of the Company, and are convertible
by the holders into two(2) shares of the Company's Common Stock
commencing as of the date of issuance and continuing thereafter for a
period ending on the second anniversary of such issue date.
18
<PAGE>
BASIC NATURAL RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
June 30, 1996
NOTE 7: STOCKHOLDERS' EQUITY (continued)
Warrants
The Company has 360,008 Class A Warrants to purchase Common Stock
("Class A Warrants") issued and outstanding in connection with the
initial public offering in 1987 (Note 1).
A Class A Warrant entitles its holder to purchase one share of the
Company's Common stock and one Class B Warrant to purchase Common
Stock ( the "Class B Warrant") at a price of $2.50. The Class B
Warrant entitles its holder to purchase one share of the Company's
Common Stock at $5.00. The Company has the right to redeem the
warrants upon 30 days written notice to the warrant holders at a price
of $1.00 per warrant.
No warrants have been issued since the public offering and, as of June
30, 1995, all warrants are exercisable and remain outstanding. The
warrants expired August 31, 1995.
Common Stock
During the year ended June 30, 1994, the Company issued 48,500 shares
of Common Stock to settle $193,386 of accounts payable or debt.
During the year ended June 30, 1995, the Company issued 50,000 shares
of Common Stock to settle $124,168 of accounts payable.
During the year ended June 30, 1996, the Company sold 200,000 shares
of common stock for $40,000 cash.
Valuation Allowance
During fiscal 1991 and 1992, the Company acquired oil and gas assets,
a mineral property, and services in exchange for the Company's common
stock and preferred stock. The value of these assets and services was
determined by the Company's board of directors in arm's length
negotiations with the sellers of the assets and providers of services,
who in each case were unrelated to the Company. Among the factors
considered by the board in determining the value of such assets were
the results of prior operations of the assets, the future potential of
the assets and, to a lesser extent, the salvage value of the assets.
The values assigned to these assets were considered to be amounts
which could be realized in the normal course of business or in a
subsequent resale of such assets as "going concerns." The assets and
services acquired by the Company in exchange for its common stock and
preferred stock were available due largely to the fact that the
domestic oil and gas industry is in the middle of a severe depression:
this, coupled with the general U.S. economic recession, has also made
professional services such as financial and accounting consulting
services, available for consideration other than cash.
While the domestic oil and gas industry is attempting to recover,
shortly after the Company's acquisition of the natural gas related
assets, the bottom dropped out of domestic natural gas and natural gas
liquids' prices. As a result of the deteriorating condition of the
domestic oil and gas industry, particularly with respect to the
natural gas and natural gas liquids markets, many of the owners of the
oil/gas wells, shortly after the close of fiscal 1991, elected to
"shut-in" their wells pending an upturn in oil/gas prices: this
resulted in the Company's "shutting in" all but 5 of its oil and
natural gas related properties. The decision to "shut-in" certain
properties was strictly a function of economics brought on by the
continuing fall in the prices paid for domestic natural gas and
natural gas liquids; in February, 1992 prices for natural gas and
natural gas liquids reached the lowest price for any month since
reporting of spot natural gas sales began in 1985.
As a result of the Company's decision to shut-in the majority of its
oil and natural gas related properties, there is no assurance that
these assets could be disposed of by the Company at a price equal to
their acquisition cost. Inasmuch as the value of gas gathering, gas
processing and gas transportation equipment is largely predicated on
the value of such assets as a "going concern", or otherwise on salvage
value, and as certain of the company's assets were not operating at
the end of fiscal 1992 and as far as its ultimate development and sale
of minerals from its mineral properties have not commenced, the
Company has elected to establish a "Valuation Allowance" in the amount
of $1,076,360 by way of a charge to Stockholders' Equity. This charge
represents a reduction in the carrying amount of the assets not
currently income-producing that would likely result if the Company
were forced to liquidate these assets for salvage value. At such time
that the presently non-producing assets are transferred to a producing
status, or sold, the Valuation Allowance will be adjusted accordingly.
During the year ended June 30, 1994 the Company determined that it
will most likely not recover its cost and charged the cost of all
property, plant, and equipment to expense.
19
<PAGE>
BASIC NATURAL RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
June 30, 1996
NOTE 8: GOING CONCERN CONSIDERATION
The financial statements have been prepared in accordance with
generally accepted accounting principles which contemplate
continuation of the Company as a going concern. However, the Company
has a working capital deficiency of $41,209 and presently has a
retained deficit of $4,826,922. In addition, the Company has used,
rather than provided, cash in operations with a corresponding adverse
effect upon liquidity.
The financial statements do not include any adjustments relating to
the recoverability and classification of recorded asset amounts or
amounts and classification of liabilities that might be necessary
should the Company be unable to continue in existence.
The Company's continued existence as a going concern is dependent upon
the success of future operations and its ability to generate cash flow
to meet its obligations on a timely basis. Although it cannot be
assumed that the Company will be able to continue as a going concern
in view of its weakened financial condition, management believes that
sources of working capital will be found that will allow the Company
to continue as a going concern.
NOTE 9: LOAN PAYABLE
At June 30, 1996, the Company owes $13,200 to an entity for funds
advanced to the Company. The loan has no stated interest rate and is
due on demand.
NOTE 10: CONTINGENT LIABILITY
The Company is involved in a lawsuit in Texas related to environmental
problems. It is expected that it will cost $80,000 for a study to
determine the extent of damage and that costs to clean-up the damage
could be in excess of $500,000. The Company is a defendant along with
other entities, each of which have joint and several liability under
Texas law. The Company currently has no means to pay any costs
associated with the lawsuit. The Company's counsel is negotiating to
settle the matter for $10,000 cash and 3,000,000 shares of the
Company's restricted common stock.
NOTE 11: SUBSEQUENT EVENTS
Subsequent to June 30, 1996, the Company's President is investigating
possibilities of acquiring new business opportunities for the Company.
If he is successful, he will most likely appoint new officers and
directors and then resign.
20
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information called for in ITEM 10 is incorporated by reference from
information under the captions "Election of Directors" and "Executive Officers"
in the Company's definitive proxy statement, which involves the election of
directors to be filed pursuant to Regulation 14A no later than 120 days after
the close of its fiscal year.
ITEM 11. EXECUTIVE COMPENSATION
The information called for in ITEM 11 is incorporated by reference under
the caption "Executive Compensation" in the Company's definitive proxy
statement, which involves the election of directors to be filed pursuant to
Regulation 14A no later than 120 days after the close of its fiscal year.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information called for in ITEM 12 is incorporated by reference from
information under the captions "Principal Shareholders" and "Security Ownership
of Management: in the Company's definitive proxy statement which involves the
election of directors to be filed pursuant to Regulation 14A no later than 120
days after the close of its fiscal year.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information called for in ITEM 13 is incorporated by reference from
information under the caption "Certain Relationships and Related Transactions"
in the Company's definitive proxy statement which involves the election of
directors to be filed pursuant to Regulation 14A no later than 120 days after
the close of its fiscal year.
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K.
A. List of Documents
<TABLE>
<S> <C>
Report of Independent Auditors.....................................................................10
Consolidated Balance Sheets at June 30, 1996 and 1995..............................................11
Consolidated Statements of Operations for the years ended June 30, 1996,
1995, and 1994.................................................................................12
Consolidated Statements of Changes of Shareholders' Equity (Deficit) for the
years ended June 30, 1996, 1995, and 1994......................................................13
Consolidated Statements of Changes of Cash Flows for the years ended
June 30, 1996, 1995, and 1994..................................................................14
Notes to Consolidated Financial Statements....................................................15 - 20
</TABLE>
2. Financial Statement Schedules
All of the Schedules have been omitted, since the required information is
not present or is not present in amounts sufficient to require submission of the
Schedule, or because the information required is included in the financial
statements and notes to the consolidated financial statements thereto.
21
<PAGE>
3. Reports on Form 8-K.
The Company did not file any reports on Form 8-K during the period March
31, 1996 through the period ending December 18, 1996.
4. Exhibits
Exhibit
Number Description
3(a) Amendment to Articles of Incorporation (1)
3(b) Bylaws (1)
4(a) Statement of Series Shares(1)
4(b) Form of Warrant Agent Agreement and Form of Warrant Certificate(2)
4(c) Form of Class A and Class B Common Stock Purchase Warrants(3)
(1) Incorporated herein by reference to Exhibit of same number in
Registrant's Report on Form 8-K , dated December 27, 1991.
(2) Incorporated herein by reference to Exhibit of same number in
Registrant's Registration Statement on Form S-18 (No. 33-
15097-D) filed with the Securities and Exchange Commission,
dated August 7, 1987.
(3) Incorporated herein by reference to Exhibit 10.1 of Registrant's
Annual Report on Form 10-K for the year ended March 31, 1988.
22
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
BASIC NATURAL RESOURCES, INC.
(Registrant)
By: /s/ Samuel M. Skipper
Samuel M. Skipper, President
and Chief Executive Officer
Dated: December 20, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in their capacities indicated and on the dates indicated.
Name Title Date
/s/ SAMUEL M. SKIPPER President, Chief Executive December 20, 1996
Samuel M. Skipper Officer, Chief Financial Officer,
Secretary and Director
23
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
Basic Natural Resources, Inc. fiscal year ended June 30, 1996
financial statements and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<CIK> 0000817125
<NAME> *esin7he
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> JUN-30-1996
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 0
<CURRENT-LIABILITIES> 41,209
<BONDS> 0
0
174,865
<COMMON> 119
<OTHER-SE> (216,193)
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 69,403
<OTHER-EXPENSES> (3)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 81
<INCOME-PRETAX> (69,481)
<INCOME-TAX> (3,299)
<INCOME-CONTINUING> (66,182)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (66,182)
<EPS-PRIMARY> (.03)
<EPS-DILUTED> (.03)
</TABLE>
