FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
(x) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
For Quarter Ended June 30, 1996 Commission file no. 0-20760
PETRO UNION, INC.
(Exact name of registrant as specified in its charter)
COLORADO 84-1091986
(State or other jurisdiction (I.R.S. Employer No.)
of incorporation of organization)
224 W. Main Street
Boonville, Indiana 47601
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code (812)897-2666
Not Applicable
(Former name, former address and former fiscal year, if changed
since 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. Yes (X) No ( )
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
dates.
Title of Each Class Outstanding at June 30, 1996
Common 17,537,945
PART I
ITEM 1 - FINANCIAL STATEMENTS
TABLE OF CONTENTS
PAGE
Consolidated Balance Sheets as of June 30, 1996
(Unaudited) and December 31, 1995 (Audited) 3
Consolidated Statements of Operations for the Three
Months Ended June 30, 1996 and 1995 (Unaudited) 4
Consolidated Statements of Stockholders' Equity for
the year ended December 31, 1995 (Audited) and the
Six Months Ended June 30, 1996 (Unaudited) 5
Consolidated Statements of Cash Flows for the Six
Months Ended June 30, 1996 and 1995 (Unaudited) 6
Notes to Consolidated Financial Statements (Unaudited) 7-9
PETRO UNION INC. AND SUBSIDIAIRIES
CONSOLIDATED BALANCE SHEET
ASSETS
JUNE 30 DECEMBER 31
1996 1995
(unaudited) (audited)
CURRENT ASSETS
CASH 4,728 518
RESTRICTED CASH 36,909 36,842
ACCOUNTS RECEIVABLE 17,858 0
TOTAL CURRENT ASSETS 59,495 37,360
PROPERTIES AND EQUIPMENT 4,503,204 4,560,925
TOTAL ASSETS 4,562,699 4,598,285
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
ACCOUNTS PAYABLE 272,456 517,091
DUE RELATED PARTIES 56,588 16,375
NOTES PAYABLE 15,049 18,071
ACCRUED LIABILITIES 242,000 217,538
ADVANCE ON JOINT
VENTURE 230,000 250,000
TOTAL CURRENT
LIABILITIES 816,093 1,019,075
LONG TERM NOTE PAYABLE 22,661 27,577
STOCKHOLDER'S EQUITY
COMMON STOCK $0.125
PAR VALUE. 50,000,000
SHARES AUTHORIZED.
17,537,945 SHARES
ISSUED AND
OUTSTANDING 2,192,242 1,990,930
ADDITIONAL
PAID IN CAPITAL 14,104,562 14,019,562
RETAINED EARNINGS
(DEFICIT) (12,577,859) (12,423,859)
LESS STOCK
SUBSCRIPTION
AGREEMENT (35,000)
TOTAL
STOCKHOLDER'S
EQUITY 3,738,945 3,551,633
TOTAL LIABILITIES
AND STOCKHOLDERS'
EQUITY 4,562,699 4,598,285
PETRO UNION, INC. AND SUBSIDIAIRIES
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(UNAUDITED)
Six months Three months
ended June 30 ended June 30
1996 1995 1996 1995
REVENUES 92,849 34,826 75,740 22,269
COST OF
REVENUES 95,417 69,208 35,442 19,260
GROSS PROFIT
(LOSS) (2568) (34,382) 40,298 3,009
GENERAL AND
ADMINISTRATIVE 132,041 205,129 65,823 98,232
LOSS FROM OPERATIONS (134,609) (239,511) (25,525) (95,223)
OTHER INCOME
(EXPENSES)
INTEREST EXPENSE (466) (936) (231) (289)
INTEREST INCOME 1075 1912 738 1,201
OTHER 0 0 0 0
TOTAL OTHER INCOME
(EXPENSE) 609 976 507 912
NET (LOSS) FROM
OPERATIONS BFIT (134,000) (238,535) (25,018) (94,311)
FEDERAL INCOME TAX 0 0 0 0
NET INCOME (LOSS) (134,000) (238,535) (25,018) (94,311)
PER SHARE -0.008 -0.02 -0.001 -0.01
WEIGHTED AVERAGE
NUMBER OF SHARES
USED TO COMPUTE
PER SHARE AVERAGE 17,537,945 14,454,260 17,537,945 14,454,260
PETRO UNION, INC. AND SUBSIDIAIRIES
CONSOLIDATED STATEMENTS OF STOCKOHOLDERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1994 AND 1995 (AUDITED)
AND FOR THE SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED)
ADDITIONAL
PAID IN RETAINED
SHARES AMOUNT CAPITAL EARNINGS TOTAL
BALANCE DECEMBER 31, 1993
10,540,100 1,317,513 13,765,229 (7,450,833) 7,131,909
SALE OF COMMON STOCK
2,056,660 257,082 716,793 - 973,875
STOCK ISSUED FOR SERVICES
400,000 50,000 - - 50,000
ISSUANCE OF COMMON STOCK IN CONNECTION WITH BANKRUPTCY OF GREEN
COAL COMPANY, INC.
500,000 62,500 (62,500) - -
NET (LOSS)
- - - (4,520,081) (4,520,081)
BALANCE DECEMBER 31, 1994
13,946,760 1,687,095 13,919,522 (11,970,914) 3,635,703
STOCK ISSUED FOR SERVICES
2,430,685 303,835 100,040 - 403,875
NET (LOSS)
- - - (452,945) (452,945)
BALANCE DECEMBER 31, 1995
15,927,445 1,990,930 14,019,562 (12,423,859) 3,586,633
STOCK ISSUED FOR SERVICES
1,610,500 201,312 85,000 - 286,312
NET (LOSS)
- - - (108,982) (108,982)
BALANCE MARCH 31, 1996
17,537,945 2,192,247 14,104,562 (12,532,841) 3,763,963
NET (LOSS)
- - - (25,018) (25,018)
BALANCE JUNE 30, 1996
- - - - 3,738,945
PETRO UNION, INC. AND SUBSIDIAIRIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995 (UNAUDITED)
1996 1995
CASH FLOWS FROM OPERATIONS
CASH RECEIVED FROM CUSTOMERS 77,849 35,785
CASH PAID TO SUPPLIERS 96,915 (67,600)
INTEREST INCOME 1,075 1,912
INTEREST EXPENSE (466) 647
NET CASH PROVIDED (USED) (18,457) (30,550)
CASH FLOW FROM INVESTING ACTIVITIES
PURCHASE OF PROPERTY AND EQUIPMENT (741) (93,089)
(INCREASE) DECREASE IN INVESTMENTS 250,000
AND OTHER ASSETS 0 25,000
NET CASH PROVIDED (USED) BY INVESTING (741) 181,911
CASH FLOW FROM FINANCING ACTIVITIES
SALE OF COMMON STOCK 286,312 0
NET PAYMENT ON NOTES PAYABLE
AND DEBT 272,000 (1,500)
NET CASH PROVIDED (USED) FROM
FINANCING ACTIVITIES 14,312 (1,500)
NET INCREASE (DECREASE) IN CASH (4,886) 149,861
CASH AT BEGINNING OF PERIOD 27 51,650
CASH AT END OF PERIOD (5,359) 201,511
RECONCILIATION OF NET INCOME TO
NET CASH PROVIDED BY OPERATIONS
NET (LOSS) (134,000) (238,535)
DEPRECIATION AND AMORTIZATION 61,655 33,000
DECREASE (INCREASE)
ACCOUNTS RECEIVABLE (12,172) 13,543
INCREASE (DECREASE)
ACCOUNTS PAYABLE 29,639 240,451
INCREASE (DECREASE)
ACCRUED LIABILITIES 65,538 (129,009)
NET CASH PROVIDED (USED)
BY OPERATIONS (18,457) (30,550)
PETRO UNION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996
(UNAUDITED)
NOTE 1. BASIS OF PRESENTATION
The accompanying unaudited financial statements have been
prepared in accordance with the instructions to Form 10-QSB and,
therefore, do not include all information and footnotes necessary
for a fair presentation of financial position, results of
operations and cash flows in conformity with generally accepted
accounting principles.
Except as disclosed herein, there has been no material change in
the information disclosed in the notes to consolidated financial
statements included in the Company's Annual Report on Form 10-KSB
for the year ended December 31, 1995. In the opinion of
Management, all adjustments considered necessary for a fair
presentation have been included. All significant intercompany
accounts and transactions have been eliminated. Operating
results for the six month period ended June 30, 1996 are not
necessarily indicative of the results that may be expected for
the year ending December 31, 1996.
NOTE 2. OIL AND LIMESTONE OPERATIONS
The Company acquired its limestone reserves in July, 1992 through
the acquisition of Calox Corporation. The Company has not com-
menced production and developement activities on these acquired
reserves. The following summarizes activity related to these
acquired reserves:
LIMESTONE OIL
Capitalized costs: RESERVES RESERVES
Acquisition costs 3,500,000 87,269
Production and Developement Costs - (3,069)
Amortization/Depletion - -
Balance at March 31, 1996 3,500,000 84,230
LIMESTONE OIL
RESERVES RESERVES
(TONS) (BBLS)
Initial Proven Reserves at
Acquisition 73,458,000 1,827,000
Production - -
Change in Estimates - -
Estimated Reserves at
June 30, 1996 73,458,000 1,827,000
The accompanying table reflects the standardized measure of
discounted future net cash flows relating to Petro Union, Inc.'s
interest in proved reserves as of June 30, 1996:
LIMESTONE OIL
Future cash inflows $367,290,000 $ 37,453,500
Futere Costs:
Developement (18,000,000) (3,000,000)
Production (202,000,000) (21,809,145)
Future income tax expense (44,074,800) (3,793.307)
Future net cash flows 102,841,200 8,851,049
10% discount to reflect
timing of cash flows (77,698,967) (3,412,463)
Standarized measure of
discounted future net
cash flows 25,142,233 5,438,586
Discounted future net cash
flows before income tax 35,917,475 7,769,409
Future cash inflows are computed by applying year-end prices of
limestone and oil relating to the year-end quantities of those
reserves. Future developement and production cost are computed
by independent consultants by estimating the expenditures to be
incurred in developing and producing limestone and oil reserves
at the end of the year, based on year-end cost and assuming
continuation of existing economic conditions.
Future income tax expenses are computed by applying the
appropriate statutory tax rates to the future pretax net cash
flows relating to proved reserves, exclusive of the tax basis of
the properties involved. The future income tax expenses give
effect to permanent differences and tax credits, but do not
reflect the impact of continuing operations. Future income tax
expenses have been reduced by the estimated future
nonconventional fuel source income tax credits to be utilized.
The 10% annual discount is applied to refect the timing of the
future net cash flows. The standarized measure of discounted
cash flows is the future net cash flows less the computed
discounts.
The Company is obligated under various working interest leases
for oil extraction. The Company's working interest in these
leases varies from 3 to 100%. Working interest reserves are
included calculations of reserves and net future revenues.
The Company has elected to use the successful efforts method of
accounting for its oil and gas operations.
NOTE 3. DISCONTINUED OPERATIONS
On April 10, 1993, the Company entered into an agreement to pur-
chase 100% of the issued and outstanding common stock of Green
Coal Company, Inc., a Kentucky corporation for $3,052,000 cash
with $100,000 payable on April 10, 1993 and $2,952,000 due August
15, 1993, 1,000,000 restricted common shares and a 1% overriding
royalty on controlled reserves in place upon the signing of the
contract. A $1,052,000 note due from the former stockholder to
be forgiven by the Company as a non-compete agreement for five
years.
In April, 1995, the Company discontinued the operations of its
coal mining segment. This decision resulted from the following
events:
1. Involuntary conversion of the Company's investment in Green
Coal Company by a Bankruptcy Judge on August 8, 1994; and
2. Loss of the Company's leasehold interest in the Central City
coal reserves in Muhlenberg County, Kentucky, due to the
Company's inability to pay lease royalties due April 1994,
and April, 1995.
The discontinuance of the Company's coal operations was effective
as of August 8, 1994. Accordingly, the revenues and expenses ap-
plicable to the discontinued segment have been removed from the
appropiate accounts and presented as a seperate line item in the
statement of operations.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
COMPARISON OF THREE MONTHS ENDED June 30, 1996
TO THE THREE MONTHS ENDED June 30, 1995
Revenues for the three months ended June 30, 1996 increased
$53,471 over the same period in 1995 due to horizontal drilling
service work performed in this quarter.
Cost of Revenue and General and Administrative Expenses decreased
$16,227 over the same period in 1995, due to a reduction of legal
and consulting charges.
LIQUIDITY AND CAPITAL RESOURCES
Negative working capital of $1,023,603 at June 30, 1996 increased
$18,457 from the negative working capital of $1,005,146 for the
period ended March 31, 1996.
The Company has been unable to meet its obligations and on May
13, 1996 filed for Chapter 11 Reorganization in the U.S.
Bankruptcy Court. The management is devoting the majority of its
time seeking funding for the Company, particularily from those
parties that demonstrated interest in the Company but were
reluctant due to the liabilities and contingent liabilities
associated with the Company.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Location: United States Bankruptcy Court
Southern District of Indiana
Case: 96-70559-BHL-11
Description: Chapter 11 Reorganization
Date: May 13, 1996
On May 13, 1996 the Company voluntarily filed a petition for
"Reorganization" persuant to Chapter 11 in the United States
Bankruptcy Court for the Southern District of Indiana. The
filing was due to the liabilities and contingent liabilities
resulting from the acquisition and subsequent disposition of
Green Coal Comapny, Inc.
The Company has been unable to attract the needed financings to
develop its properties and pursue its business opportunities as a
result of these liabilities. It is management's belief that
filing for reorganization is in the best interest to protect the
company's assets and to attract investors that can be protected
through the Bankruptcy Court on a priority basis.
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
On August 16, 1996, the Company received the signed order dated
August 15, 1996 from the United States Bankruptcy Court for the
Southern District of Indiana approving a loan transaction with
Pembrooke Holding Corporation for a post-petition financing to
meet the Companys present working capital needs. The Company has
entered into an agreement with Pembrooke Holding Corporation
whereby $150,000 will be loaned to the Company for a period of
180 days without interest, secured by a pledge of 50% of the
stock of Calox Corporation ( a wholly owned subsidiary of the
company).
Upon the Court's confirmation of the plan of reorganization
Pembrooke shall receive, in satisfaction of its $150,000 loan, a
debenture in the amount of $150,000 which shall be convertible to
stock at a price of 12.5 cents per share. The Company shall also
issue warrants for its stock to Pembrooke as a part of a plan of
reorganization for a total of 2,333,3334 warrants exercisable at
58% of the market price at the time of exercise. The company
will also receive $130,000 from Pembrooke to acquire a 60%
working interest in each well developed in a certain oil and gas
property.
At such time that Pembrooke receives oil and gas production
payments equal to its investments in each well, Pembrooke's
working interest shall be reduced to 50%.
On April 11, 1996, the Company received a Letter of Intent from
Tiger Industrial Transportation Systems, Inc. to enter a contract
to mine and market lime and limestone products from the Company's
limestone reserve located in Monroe County, Indiana. The
transaction is subject to a market survey that is being conducted
at this time. Pembrooke Holding Corporation is financing an
independent market study and is soliciting customers for the
limestone products.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) Exhibits
None
(B) Reports of Form 8-K
None
SIGNATURE
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
thereunto duly authorized.
PETRO UNION, INC.
DATE: August 16, 1996 /s/ Richard D. Wedel
Richard D. Wedel, President
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000840402
<NAME> PETRO UNION, INC.
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> MAR-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 41637
<SECURITIES> 0
<RECEIVABLES> 17858
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 59495
<PP&E> 4503204
<DEPRECIATION> 45355
<TOTAL-ASSETS> 4562699
<CURRENT-LIABILITIES> 816093
<BONDS> 0
0
0
<COMMON> 2192242
<OTHER-SE> 14104562
<TOTAL-LIABILITY-AND-EQUITY> 4562699
<SALES> 75740
<TOTAL-REVENUES> 76478
<CGS> 35442
<TOTAL-COSTS> 101265
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 231
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> (25018)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (25018)
<EPS-PRIMARY> (0.001)
<EPS-DILUTED> 0
</TABLE>
