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 March 31, 1997
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 March 31, 1997
Commission file no. 33-24265-LA
PETRO UNION, INC.
(Exact name of registrant as specified in its charter)
COLORADO 84-1091986
(State or other jurisdiction (I.R.S. Employer
of incorporation of organization) Number)
123 Main Street, Suite 300
Evansville, Indiana 47708
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code (812)424-6745
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 March 31, 1997
Common 17,537,945
PART I
ITEM 1 - FINANCIAL STATEMENTS
TABLE OF CONTENTS
PAGE
Consolidated Balance Sheets as of March 31, 1997
(Unaudited) and March 31, 1996 (Unaudited) 3
Consolidated Statements of Operations for the Three
Months Ended March 31, 1997 and 1996 (Unaudited) 4
Consolidated Statements of Stockholders' Equity for
the year ended December 31, 1995 and 1996 (Audited)
and the Three Months Ended March 31, 1997 (Unaudited) 5
Consolidated Statements of Cash Flows for the Three
Months Ended March 31, 1997 and 1996 (Unaudited) 6
Notes to Consolidated Financial Statements (Unaudited) 7-9
Management's Discussion and Analysis 10
Other Information 11-12
<PAGE>
PETRO UNION, INC. AND SUBSIDIARIES
(A DEBTOR IN POSSESSION)
CONSOLIDATED BALANCE SHEET
FOR THREE MONTHS ENDED MARCH 31, 1996
AND MARCH 31, 1997
ASSETS
March March
31, 1997 31, 1996
(Unaudited) (Unaudited)
Current assets:
Cash $ 41,005 $ 1,559
Restricted cash, certi-
ficates of deposit (Note 2) 30,747 36,842
Accounts receivable, trade 120,786 2,843
Total current assets 192,538 41,244
Properties and equipment, net
(Note 3) 4,221,045 4,561,666
Total assets $ 4,413,583 $ 4,602,910
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities not subject to compromise (Note 4):
Current liabilities:
Short term notes payable
and current maturities
of long term note,
pre-petition $ 6,700 $ 16,394
Short term notes payable,
post-petition 150,000
Accounts payable, trade,
post-petition 25,690
Accrued taxes, pre-petition 14,306
Other accrued expenses 99,095
Total current liabilities 295,791 16,394
Long term note payable, net of
portion due within one year,
pre-petition 16,416 22,661
Liabilities subject to compromise:
Accounts payable and
accrues expenses 296,968 514,804
Advances from related parties 52,088 51,088
Advance on joint venture
agreement 230,000 249,000
Amounts arising from guaranties
of discontinued operations 24,022,791
Total liabilities subject
to compromise 24,601,847 814,892
Total liabilities 24,914,054 853,947
Commitments and contingencies (Note 4):
Stockholders' equity:
Common stock, $.125 par value,
50,000,000 shares authorized,
17,537,945 shares issued and
outstanding 2,192,242 2,192,242
Capital in excess of
par value 14,076,088 14,104,562
Accumulated deficit (36,753,802) (12,532,841)
(20,485,472) 3,763,963
Less, Stock subscription
receivable (15,000) (15,000)
Total stockholders' equity (20,500,471) 3,748,963
Total liabilities and
stockholders' equity 4,413,583 4,602,910
PETRO UNION INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1997
(UNAUDITED)
1997 1996
REVENUES $ 123,473 $ 17,109
COST OF REVENUES 50,151 59,975
GROSS PROFIT (LOSS) 73,322 (42,866)
GENERAL AND ADMINISTRATIVE 39,020 66,218)
NET (LOSS) FROM OPERATIONS 34,302 (109,084)
OTHER INCOME (EXPENSES)
INTEREST EXPENSE (3,000) (235)
INTEREST INCOME 0 337
OTHER (37,651) 0
TOTAL OTHER INCOME
(EXPENSES) (40,651) 102
NET (LOSS) FROM OPERATIONS
BFIT (6,349) (108,982)
FEDERAL INCOME TAX 0.0 0.0
NET INCOME (LOSS) (6,349) (108,982)
PER SHARE -0.0004 -0.006
WEIGHTED AVERAGE NUMBER OF
SHARES USED TO COMPUTE PER
SHARE 17,537,945 17,537,945
<PAGE>
PETRO UNION, INC. AND SUBSIDIARIES
(A DEBTOR IN POSSESSION)
CONSOLIDATED STATEMENT OF SHAREHOLDERS EQUITY
FOR THREE MONTHS ENDED MARCH 31, 1996
AND MARCH 31, 1997
Capital in Accumu-
Excess of lated
Shares Amount Par Value Deficit Total
Balance,
December 31,
1994
13,496,760 1,687,095 13,919,522 $(11,970,914) $ 3,635,703
Stock issued
for services
and accrued
liabilities
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
and accrued
liabilities
1,610,500 201,313 56,526 --- 257,839
Net loss
--- --- --- (24,323,592) (24,323,592)
Balance,
December 31,
1996
17,537,945 2,192,243 14,076,088 (36,747,451) (20,479,120)
<PAGE>
Net Loss
--- --- --- (6,351) ---
Balance,
March 31,
1997
17,537,945 2,192,243 14,076,088 (36,153,802) (20,485,472)
<PAGE>
PETRO UNION, INC. AND SUBSIDIARIES
(A DEBTOR IN POSSESSION)
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THREE MONTHS ENDED MARCH 31, 1996
AND MARCH 31, 1997
March March
31, 1997 31, 1996
(Unaudited) (Unaudited)
Cash flows from operating
activities:
Net loss $ (6,349) $ (23,431)
Adjustments to reconcile net
loss to net cash provided
(used) by operations:
Amount attributable to
discontinued operations --- 0
Depreciation, depletion,
and amortization 37,651 16,300
Book value of assets sols 0
Stock issued for services 0
(Increase) decrease in accounts
receivable 11,476 2,843
(Increase) decrease in advance
royalties 0
Decrease in other assets 0
Increase (decrease) in accounts
payable (5,476) 74,987
Increase in accrued liabilities 3,000 20,538
Net cash provided (used) by
operating activities 40,302 91,237
Cash flows from investing
activities:
Increase in properties and
equipment 21,429 (741)
Net cash provided (used) by
investing activities 21,429 (741)
Cash flows from financing
activities:
Increase (decrease) in due to
related parties 0 0
Proceeds from notes payable 0 0
Repayments of notes payable 0 0
Increase in advance on joint
venture agreement 0 0
Decrease (increase) in stock
subscription receivable 0 0
Stock issued in payment of
accrued liabilities 0 0
Net cash provided (used) by
financing activities 0 (14,312)
Net increase (decrease) in cash
and cash equivalents 18,873 (14,312)
Cash and cash equivalents:
Beginning period 22,132 518
End of year 41,005 (9,842)
Non-cash financing and
investing activities:
Stock issued for services 0 0
Stock issued in payment of
accrued liabilities 0 272,000
Equipment acquired by
issuance of note payable 0 0
Supplementary cash flow data:
Interest paid 0 235
Income taxes paid 0 0
<PAGE>
PETRO UNION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997
(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,
1996. 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 three month period ended
March 31, 1997 are not necessarily indicative of the results that
may be expected for the year ending December 31, 1997.
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 development activities on these acquired
reserves. The following summarizes activity related to these
acquired reserves:
LIMESTONE
Capitalized costs: RESERVES
Acquisition costs $ 3,500,000
Production and Development Costs -
Amortization/Depletion -
Balance at March 31, 1996 $ 3,500,000
LIMESTONE
RESERVES
(TONS)
Initial Proven Reserves at
Acquisition 73,458,000
Production -
Change in Estimates -
Estimated Reserves at
March 31, 1996 73,458,000
The accompanying table reflects the standardized measure of dis-
counted future net cash flows relating to Petro Union, Inc.'s
interest in proved reserves as of September 30, 1996:
LIMESTONE
Future cash inflows $367,290,000
Future Costs:
Development (18,000,000)
Production (202,000,000)
Future income tax expense (44,074,800)
Future net cash flows 102,841,200
10% discount to reflect
timing of cash flows (77,698,967)
Standardized measure of
discounted future net
cash flows 25,142,233
Discounted future net cash
flows before income tax $ 35,917,475
Future cash inflows are computed by applying year-end prices of
limestone and oil relating to the year-end quantities of those
re- serves. Future development 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 reflect the timing of the
future net cash flows. The standardized 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
include 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
con- tract. 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
applicable to the discontinued segment have been removed from the
appropriate accounts and presented as a separate line item in the
statement of operations.
NOTE 4. COMMITMENTS AND CONTINGENCIES:
The Company is obligated on an operating lease for office space
requiring rentals of $600 per month, and expiring in September,
1997. The Company has an option to renew the lease for an
additional one year period at the rate of $700 per month.
The Company has licensed certain directional drilling technology
from several major companies. The license requires annual
minimum payments of $15,000 or $1,500 per well for each well
drilled under the license.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
COMPARISON OF THREE MONTHS ENDED MARCH 31, 1997
TO THE THREE MONTHS ENDED MARCH 31, 1996
Revenues for the three months ended March 31, 1997 increased
$106,364 or 722% over the same period in 1996 due to increased
horizontal drilling service work performed in this period.
Cost of Revenue decreased $9,824 or 16% and General and
Administrative Expenses decreased $27,198 or 41% over the same
period in 1996, due to a reduction of legal and consulting
charges as a result of the Registrant's Chapter 11
Reorganization. Net loss from operations for the
three months ended March 31, 1997 decreased to ($6,349) from
($108,982) principally as a result of increased revenue from
drilling activity.
LIQUIDITY AND CAPITAL RESOURCES
Working capital of $40,302 at March 31, 1997 increased $23,191 as
compared to working capital of $17,109 for the three months ended
March 31, 1996 primarily due to cash flow from the increase of
horizontal drilling service activities.
The Company has been unable to meet its financial obligations and
on May 13, 1996 filed for Chapter 11 Reorganization in the U.S.
Bankruptcy Court. Management is devoting the majority of its
time seeking funding for the Company, particularly from those
parties that demonstrated interest in the Company but were
reluctant due to the liabilities and contingent liabilities
associated with the Company. If the Registrant's financing
efforts are not successful in the immediate term, Management
cannot reasonably predict the outlook for continuing operations.
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" pursuant 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 Company, 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. If the Registrant's financing
efforts are not successful in the immediate term, Management
cannot reasonable predict the outlook for continuing operations.
It is the intent of Management to file a Plan of Reorganization
on or before June 16, 1997 as mandated by the United States
Bankruptcy Court for the Southern District of Indiana.
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
27.1 Financial Data Schedule
(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: May 20, 1997 /s/ Richard D. Wedel
Richard D. Wedel, President
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 71,752
<SECURITIES> 0
<RECEIVABLES> 120,786
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 192,538
<PP&E> 4,221,045
<DEPRECIATION> 0
<TOTAL-ASSETS> 4,413,583
<CURRENT-LIABILITIES> 295,791
<BONDS> 0
0
0
<COMMON> 16,268,330
<OTHER-SE> (36,768,802)
<TOTAL-LIABILITY-AND-EQUITY> 4,413,583
<SALES> 123,473
<TOTAL-REVENUES> 123,473
<CGS> 50,151
<TOTAL-COSTS> 50,151
<OTHER-EXPENSES> 39,020
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,000
<INCOME-PRETAX> (6,349)
<INCOME-TAX> 0
<INCOME-CONTINUING> (6,349)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,349)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
