<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[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
Commission File Number 33-55254-07
LONE STAR INTERNATIONAL ENERGY, INC.
(Name of small business issuer in its charter)
NEVADA 87-0434288
(State of incorporation) (IRS Employer Identification Number)
200 PALO PINTO, SUITE 108
WEATHERFORD, TEXAS 76086
(Address of principal executive offices) (Zip code)
(817) 598-0542
Issuer's telephone number
Check whether the issuer (1) filed all the reports required to be filed by
section 13 or 15(d) of the Exchange Act 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
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date:
Common Stock, Par Value $.001; 19,865,283 Shares as of April 17, 1997
Transitional Small Business Disclosure Format: Yes [ ] No [x]
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
LONE STAR INTERNATIONAL ENERGY, INC. AND SUBSIDIARY
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
------------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 200,010 $ 1,397
Accounts receivable - oil and gas revenues 18,786 21,263
Accounts receivable - JIB, net of allowance of $20,500 26,622 22,319
Accounts receivable - related party 487,767 347,589
Prepaid expenses 17,179,452
------------- ------------
Total current assets 17,912,637 392,568
------------- ------------
Properties and equipment, at cost 1,650,887 1,638,403
Less - accumulated depreciation, depletion and amortization 106,797 92,650
------------- ------------
Property and equipment, net 1,544,090 1,545,753
------------- ------------
Other assets 525 525
------------- ------------
TOTAL ASSETS $ 19,457,252 $ 1,938,846
============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 87,591 $ 121,063
Production payable 295,442 232,272
Accrued interest payable 54,011 47,643
Accrued payroll taxes payable 12,626 672
Notes payable 467,963 467,963
Accounts Payable - interest owners 69,514 74,347
Wages payable 51,923
------------- ------------
Total current liabilities 1,039,070 943,960
------------- ------------
STOCKHOLDERS' EQUITY
Common stock - par value $.001, 100,000,000 shares
authorized, 15,431,950 shares issued and outstanding 15,432 8,397
Common shares to be issued 432,500 21,500
Stock subscriptions receivable (5,000) (5,000)
Additional paid in capital 19,290,410 1,797,445
Retained deficit (1,315,160) (827,456)
------------- ------------
Total stockholders' equity 18,418,182 994,886
------------- ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 19,457,252 $ 1,938,846
============= ============
</TABLE>
<PAGE> 3
LONE STAR INTERNATIONAL ENERGY, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1997 1996
------------- -------------
<S> <C> <C>
REVENUES
Oil and gas production $ 55,147 $ 63,120
Operating income 7,000 1,950
Other income 11 36
------------- -------------
Total revenues 62,158 65,106
------------- -------------
EXPENSES
Production expenses 22,377 66,400
Depreciation, depletion and amortization 14,147 26,414
General and administrative expenses 513,338 48,498
------------- ------------
Total expenses 549,862 141,312
------------- -------------
Net income (loss) $ (487,704) $ (76,206)
============= =============
Net income (loss) per common share $ (.0473) $ (0.008)
============= =============
Weighted average shares outstanding 10,309,375 8,706,000
============= =============
</TABLE>
<PAGE> 4
LONE STAR INTERNATIONAL ENERGY, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(UNAUDITED)
<TABLE>
<CAPTION>
1997 1996
------------- ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (487,704) $ (76,206)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation, depletion and amortization 334,695 26,414
Changes in operating assets and liabilities:
(Increase) decrease -
Accounts receivable (1,826) 24,328
Increase (decrease) in -
Accounts payable and accrued expenses 31,940 8,250
Revenues payable 63,170 (24,040)
------------- ------------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (59,725) (41,254)
------------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES
(Increase) decrease in due from related parties (140,178) (20,000)
Purchase of property and equipment (12,484) (388)
------------- ------------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (152,662) (20,388)
------------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Sale of common stock 411,000 45,500
------------- ------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 411,000 45,500
------------- ------------
NET INCREASE (DECREASE) IN CASH 198,613 (16,142)
CASH, Beginning of period 1,397 (2,660)
------------- ------------
CASH, End of period $ 200,010 $ (18,802)
============= ============
</TABLE>
<PAGE> 5
LONE STAR INTERNATIONAL ENERGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
1. ORGANIZATION AND BASIS OF PRESENTATION
Organization - Lone Star International Energy, Inc., a Nevada Corporation (the
"Company"), was incorporated in the state of Utah on April 11, 1986 as
Quiescent Corporation. The Company has reincorporated in the state of Nevada.
The Company was in the development state from incorporation until the
completion of the reverse acquisition described below on May 2, 1995.
Reverse Acquisition - The Company entered into an Agreement dated as of April
10, 1995, with Cumberland Petroleum, Inc., a Texas corporation ("Cumberland"),
pursuant to which, on May 2, 1995 the Company acquired from C.E. Justice, 100%
of the capital stock of Cumberland in the exchange for the issuance of
5,000,000 shares of the Company's common stock. Until 1997 Cumberland operated
oil and gas properties. The Company changed its name to Cumberland Holdings,
Inc. on May 3, 1995, and to Cumberland Companies, Inc. On August 17, 1995, and
to Lone Star International Energy, Inc. on January 30, 1997.
For accounting purposes, the transaction has been treated as a recapitalization
of the Cumberland with Cumberland as the acquirer (reverse acquisition). The
historical financial statements prior to May 2, 1995 are those of Cumberland.
The historical stockholders' equity accounts of Cumberland at December 31, 1994
have been retroactively restated to reflect the equivalent number of shares of
common stock received in this transaction after giving effect to the difference
in par value.
2. COMMENTS
The accompanying consolidated financial statements are unaudited but, in the
opinion of the management of the company, contain all adjustments, consisting
of only normal recurring accruals, necessary to present fairly the financial
position at March 31, 1997, the results of operations and changes in cash flows
for the three months then ended. Certain information and footnote disclosures
normally included in financial statements that have been prepared in accordance
with generally accepted accounting principals have been condensed or omitted
pursuant to the rules and regulations of the Securities and Exchange
Commission, although management of the Company believes that the disclosures
contained in these financial statements are adequate to make the information
presented therein not misleading. For further information, refer to the
Company's annual report on Form 10-KSB for the year ended December 31, 1996.
The results of operations for the three months ended March 31, 1997 are not
necessarily indicative of the results of operations to be expected for the full
year ended December 31, 1997.
3. SALE OF COMMON STOCK
During the three months ended March 31, 1997, the Company sold 1,644,000 shares
of common stock, in reliance on exemptions from registration, at a price of
$.25 per share for total cash considerations of $411,000. This common stock has
not been issued. Also, the Company entered into consulting agreements with ten
separate individuals, where the Company issued each of these individuals
700,000 shares of common stock, for which a registration statement on S-8 is
effective, valued at $2.50 per share for a total of 7,000,000 shares at
$17,500,000.
<PAGE> 6
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
CERTAIN STATEMENTS CONTAINED IN THIS DOCUMENT, INCLUDING WITHOUT LIMITATION
STATEMENTS CONTAINING THE WORDS "BELIEVES", "ANTICIPATES", "INTENDS",
"EXPECTS", AND WORDS OF SIMILAR IMPORT, CONSTITUTE "FORWARD-LOOKING STATEMENTS"
WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT. SUCH
FORWARD LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND
OTHER FACTORS THAT MAY CAUSE THE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS OF
THE COMPANY TO MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR
ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD LOOKING STATEMENTS.
OVERVIEW:
Effective May 2, 1995, the Company acquired Cumberland. Cumberland operates oil
and gas properties, for accounting purposes, the transaction has been treated
as a recapitalization of Cumberland with Cumberland as the acquirer (reverse
acquisition). The historical financial statements prior to May 2, 1995 are
those of Cumberland.
The Company intends to increase production and reserves through development of
existing oil and gas properties and future acquisitions. The Company believes
its current revenue is adequate to meet existing needs. Future acquisitions
will require additional capital and the Company believes it can raise such
capital through either public or private financings, or a combination of both.
The Company does not intend to seek bank financing to expand its operations.
In April 1997, the Company acquired Energy Reclaim Refrigeration, Inc.
(Energy). The Company intends to place Energy into full production during the
current year. This will require additional capital, which the Company plans to
raise through equity financing.
The Company periodically evaluates other businesses within what it broadly
describes as the energy industry. The Company does not expect that any
associated costs to evaluate such business projects will impair its liquidity.
RESULTS OF OPERATIONS:
Three months ended March 31, 1997 and 1996 -
Revenues decreased to $62,158 for the three months ended March 31, 1997 from
$65,106 for the three months ended March 31, 1996. Revenues for the three
months ended March 31, 1997 reflect oil sales of $14,397 and gas sales of
$40,210 while the revenue for the three months ended March 31, 1996 reflect oil
sales of $16,420 and gas sales of $46,699.
Expenses increased to $549,862 for the three months ended March 31, 1997 from
$141,312 for the three months ended March 31, 1996. Production expenses
decreased to $22,377 for the three months ended March 31, 1997 from $66,400 for
the three months ended March 31, 1996. General and administrative expenses
increased to $513,388 for the three months ended March 31, 1997 from $48,498
for the three months ended March 31, 1996. Included in general and
administrative expenses for the three months ended March 31, 1997 are $320,548
of consulting fees resulting from the expensing of the consulting agreements,
referenced in note 3, accrued over the life of the contracts. Also, included in
general and administrative expenses are wages, which increased to $94,640 for
the three months ended March 31, 1997 from $0 for the three months ended
March 31, 1997. Wages increased due to the hiring of personnel during the
three months ended March 31, 1997, while during the three months ended
March 31, 1996 all services were performed by contractors.
<PAGE> 7
PART II--OTHER INFORMATION
NONE
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereto duly
authorized.
LONE STAR INTERNATIONAL ENERGY, INC.
(Registrant)
Date: March 15, 1997 /s/ C. E. Justice
----------------------------------------
President (principal executive officer)
Date: March 15, 1997 /s/ Michael D. Herrington
----------------------------------------
Chief Financial Officer, Treasurer
(principal accounting officer)
<PAGE> 8
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
27 - Financial Data Schedule
</TABLE>
<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> 200,010
<SECURITIES> 0
<RECEIVABLES> 553,375
<ALLOWANCES> 20,500
<INVENTORY> 0
<CURRENT-ASSETS> 17,912,637
<PP&E> 1,650,887
<DEPRECIATION> 106,797
<TOTAL-ASSETS> 19,457,252
<CURRENT-LIABILITIES> 1,039,070
<BONDS> 0
0
0
<COMMON> 15,432
<OTHER-SE> 18,402,750
<TOTAL-LIABILITY-AND-EQUITY> 19,457,252
<SALES> 55,147
<TOTAL-REVENUES> 62,158
<CGS> 0
<TOTAL-COSTS> 22,377
<OTHER-EXPENSES> 527,485
<LOSS-PROVISION> 20,500
<INTEREST-EXPENSE> 6,375
<INCOME-PRETAX> (487,704)
<INCOME-TAX> 0
<INCOME-CONTINUING> (487,704)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (487,704)
<EPS-PRIMARY> (.047)
<EPS-DILUTED> 0
</TABLE>
