<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 September 30, 1996
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; 8,431,950 Shares as of January 24, 1997
Traditional 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>
September 30, December 31,
1996 1995
----------- -----------
(UNAUDITED)
ASSETS
CURRENT ASSETS
<S> <C> <C>
Accounts receivable - oil and gas revenues $ $ 42,809
Accounts receivable - JIB, net of allowance of $20,500 31,730 21,264
Accounts receivable - related party 389,090 264,023
----------- -----------
Total current assets 420,820 328,096
----------- -----------
Properties and equipment, at cost 1,580,837 1,631,706
Less - accumulated depreciation, depletion and amortization 99,578 26,624
----------- -----------
Property and equipment, net 1,481,259 1,605,082
----------- -----------
Other assets 525 225
----------- -----------
TOTAL ASSETS $ 1,902,604 $ 1,933,403
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Cash overdraft $ 21,528 $ 2,660
Accounts payable 124,756 80,081
Production payable 255,853 165,781
Accrued interest payable 34,850 15,748
Accrued payroll taxes payable 10,948
Notes payable 467,963 467,963
----------- -----------
Total current liabilities 904,950 743,181
----------- -----------
STOCKHOLDERS' EQUITY
Common stock - par value $.001, 100,000,000 shares
authorized, 8,706,000 shares issued and outstanding 8,706 7,796
Common shares to be issued 271,475
Additional paid in capital 1,813,636 1,497,571
Retained deficit (824,688) (586,620)
----------- -----------
Total stockholders' equity 997,654 1,190,222
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,902,604 $ 1,933,403
=========== ===========
</TABLE>
<PAGE> 3
LONE STAR INTERNATIONAL ENERGY, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
REVENUES
Oil and gas production $ 43,673 $ 16,227 $ 166,632 $ 16,227
Operating income 1,252 18,675 5,152 85,530
Other income 4 56
----------- ----------- ----------- -----------
Total revenues 44,929 34,902 171,840 101,757
----------- ----------- ----------- -----------
EXPENSES
Production expenses 37,142 23,502 150,565 23,502
Depreciation, depletion and amortization 33,671 4,903 75,562 6,475
Plugged and abandoned 53,674 53,674
General and administrative expenses 49,863 124,526 130,107 299,534
Interest expense 2,917 2,917
Consulting fee 100,000 200,000
----------- ----------- ----------- -----------
Total expenses 174,350 255,848 409,908 532,428
----------- ----------- ----------- -----------
Net income (loss) $ (129,421) $ (220,946) $ (238,068) $ (430,671)
=========== =========== =========== ===========
Net income (loss) per common share $ (0.015) $ (0.03) $ (0.027) $ (0.07)
=========== =========== =========== ===========
Weighted average shares outstanding 8,706,000 6,779,000 8,706,000 6,285,000
=========== =========== =========== ===========
</TABLE>
<PAGE> 4
LONE STAR INTERNATIONAL ENERGY, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $(238,068) $(216,941)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation, depletion and amortization 75,562 1,572
Changes in operating assets and liabilities:
(Increase) decrease -
Accounts receivable (51,295) (147,397)
Increase (decrease) in -
Accounts payable and accrued expenses 13,079 27,946
Revenues payable 129,823 148,701
--------- ---------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (70,899) (186,119)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
(Increase) decrease in other assets (300) 225
(Increase) decrease in due from related parties (41,429) 1,658
Plugged and abandoned leases 53,674
Purchase of property and equipment (5,414) (2,366)
--------- ---------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 6,531 (483)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds (payments) on notes and loans payable, net 7,046
Sale of common stock 45,500 222,000
--------- ---------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 45,500 229,046
--------- ---------
NET INCREASE (DECREASE) IN CASH (18,868) 42,444
CASH, Beginning of period (2,660) 6,548
--------- ---------
CASH, End of period $ (21,528) $ 48,992
========= =========
</TABLE>
<PAGE> 5
LONE STAR INTERNATIONAL ENERGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
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. On December 31, 1993, the Company was 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. Cumberland operates 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 September 30, 1996, the results of operations and changes in cash
flows for the three and nine months then ended, and changes in cash flows for
the nine 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, 1995.
The results of operations for the three and nine months ended September 30,
1996 are not necessarily indicative of the results of operations to be expected
for the full year ended December 31, 1996.
3. SALE OF COMMON STOCK
During the three months ended March 31, 1996, the Company sold 91,000 Units at
a price of $.50 per Unit for total cash considerations of $45,500. Each unit
consists of one share of restricted common stock and one warrant to purchase
common stock at a price of $.75 per share. The warrants expired without being
exercised.
<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 acquire (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.
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 September 30, 1996 and 1995 -
During the last quarter of 1994 the Company commenced business as an
independent contract operator of oil and gas properties. Effective September 1,
1995 the Company purchased working interests in several oil and gas properties
in exchange for 750,000 shares of restricted common stock valued at $1,108,067
and $500,000 in promissory notes due September 15, 1997.
Revenues increased from $34,902 for the three months ended September 30, 1995
to $44,929 for the three months ended September 30, 1996 primarily as a result
of the above described purchase of working interests. Revenues for the three
months ended September 30, 1995 reflect the Company's activity as a contract
oil and gas lease operator for the full three months of the period ($18,675)
and oil and gas sales for one month ($16,227) while the revenue for the three
month period ended September 30, 1996 includes oil and gas sales ($43,673)and
contract operator revenue ($1,252).
The Company believes that the expenses for the three months ended September 30,
1995 as compared to the three months ended September 30, 1996 reflect only
timing differences of the Company commencing its revenue producing activities.
The Company believes that its oil and gas property operating expenses as
compared to oil and gas revenues have been higher than anticipated due to time
constraints placed upon management relating to issues surrounding the Company's
efforts to regain its current filing status under the securities laws and
related issues, rather than the anticipated economics of the respective oil and
gas properties.
<PAGE> 7
Nine months ended September 30, 1996 and 1995 -
Revenues increased from $101,757 for the nine months ended September 30, 1995
to $171,840 for the nine months ended September 30, 1996 primarily as a result
of the above described purchase of working interests. Revenues for the nine
months ended September 30, 1995 reflect the Company's activity as a contract
oil and gas lease operator for the full nine months of the period ($85,530) and
oil and gas sales for one month ($16,227) while the revenue for the nine month
period ended September 30, 1996 includes oil and gas sales ($166,632)and
contract operator revenue ($5,152).
The Company believes that the expenses for the nine months ended September 30,
1995 as compared to the nine months ended September 30, 1996 reflect only
timing differences of the Company commencing its revenue producing activities.
The Company believes that its oil and gas property operating expenses as
compared to oil and gas revenues have been higher than anticipated due to time
constraints placed upon management relating to issues surrounding the Company's
efforts to regain its current filing status under the securities laws and
related issues, rather than the anticipated economics of the respective oil and
gas properties.
PART II--OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27 Financial Data Schedule
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.
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 11, 1997 /s/ C. E. Justice
President (principal executive officer)
Date: March 11, 1997 /s/ Michael D. Herrington
Chief Financial Officer, Treasurer (principal
accounting officer)
<PAGE> 8
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Description Sequential Page No.
<S> <C>
27 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NINE MONTHS
ENDED SEPTEMBER 30, 1996 AND IS QUALIFIED IN IT ENTIRETY BY REFERENCE TO SUCH
THIRD QUARTER 10-QSB 1996.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 441,320
<ALLOWANCES> 20,500
<INVENTORY> 0
<CURRENT-ASSETS> 420,820
<PP&E> 1,580,837
<DEPRECIATION> 99,578
<TOTAL-ASSETS> 1,902,604
<CURRENT-LIABILITIES> 904,950
<BONDS> 0
0
0
<COMMON> 8,706
<OTHER-SE> 988,948
<TOTAL-LIABILITY-AND-EQUITY> 1,902,604
<SALES> 171,784
<TOTAL-REVENUES> 171,840
<CGS> 0
<TOTAL-COSTS> 150,565
<OTHER-EXPENSES> 219,741
<LOSS-PROVISION> 20,500
<INTEREST-EXPENSE> 19,102
<INCOME-PRETAX> (238,068)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (238,068)
<EPS-PRIMARY> (0.027)
<EPS-DILUTED> 0
</TABLE>
