UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2005
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to _____
Commission File No. 0-10089
Unioil
(Exact name of small business issuer as specified in its charter)
Nevada 93-0782780
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
3817 Carson Avenue, P.O. Box 200310, Evans, Colorado 80620
(Address of principal executive offices)
(970) 330-6300
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the issuer was required to file such reports) Yes [ ] No [X]
and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]
As of July 31, 2005, 99,941,657 shares of the issuer’s common stock, par value $0.01 per share, were outstanding.
Transitional Small Business Disclosure Format: Yes [ ] No [X]
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements
See attached Financial Statements and Schedules.
Item 2. Management's Discussion and Analysis or Plan of Operation
Liquidity and Capital Resources
In the six months ended June 30, 2005, the Company had three primary sources of liquidity. The first was the Company’s cash position, held primarily in demand-deposit bank accounts. Cash was $670,964 at June 30, 2005. This compares to $420,321 and $311,034 at December 31 and June 30, 2004, respectively. Of the Company’s cash positions at each of the dates stated in this paragraph, $57,377 was held as a reserve for tax liabilities. The substantial increase in the Company’s cash position between the earlier dates and June 30, 2005, is attributable primarily to retained earnings from operations. See “Results of Operations,” below.
The Company’s second primary source of liquidity was cash flow from operations. In the six months ended June 30, 2005, the Company’s monthly cash flow averaged $43,160. This figure compares to average monthly cash flows of $18,750 and $18,487 for fiscal 2004 and for the six months ended June 30, 2004, respectively. The increase in cash flow for the six months ended June 30, 2005, as compared to 2004, is attributable primarily to increases in the prices of oil and natural gas that began toward the end of the final quarter of 2004, and to decreases in the costs of repairs and maintenance at existing well locations. See “Results of Operations,” below.
The Company’s third primary source of liquidity was a loan agreement that the Company entered into in 2003 with Ford Credit Corporation. Pursuant to that agreement, the Company borrowed $48,905 in January of 2003. The loan is secured by a Company-owned vehicle, bears interest at the rate of 1.9% per annum, and matures in January 2008. At June 30, 2005, the Company’s indebtedness for principal and accrued interest under the loan was $25,856. This compares to $30,748 and $35,534 at December 31 and June 30, 2004, respectively.
The Company’s net working capital was $330,651 at June 30, 2005. This compares to net working capital of $94,189 at December 31, 2004, and to the Company’s net working capital deficit of $(33,226) at June 30, 2004. The changes between June 30, 2005, and the earlier dates stated in this paragraph are attributable to increases in, and retention of, earnings. Such improvements resulted primarily from increases in the prices of oil and natural gas.
At June 30, 2005, the Company’s assets exceeded its liabilities by $3,117,122. This figure compares to $2,978,827 and $2,938,713 at December 31 and June 30, 2004, respectively. The increases in net assets between the earlier dates stated in this paragraph and June 30, 2005, are attributable primarily to retained earnings from operations in 2005.
Management considers the Company’s liquidity and capital resources adequate to meet the
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The Company’s liquidity, however, is highly dependent upon market prices for oil and gas. Those prices have a history of rapid and dramatic fluctuation. Management’s assessments of the Company’s liquidity, therefore, must be qualified in recognition of instability in the market prices for the Company’s products. A change in those prices can be expected to have a material effect upon the Company’s liquidity.
Except as described above, the Company’s liquidity and capital resources are inadequate for the Company’s future business, and are insignificant in comparison to other participants in the industry. Such resources are not sufficient to finance any growth in the Company’s business operations. As a result, the Company is, and expects to remain, dependent upon possible industry partners or outside sources of capital. Management is unable to predict the availability of such partners or such capital, or the terms, if any, that might govern the Company’s participation with such partners or the Company’s access to such capital.
Results of Operations
The Company holds a 27.5% after-payout working interest in 43 wells drilled under the Company’s 1996 drilling agreement with Prima Oil & Gas Company (the “Unioil/Prima Agreement”). See Exhibits 10.1, 10.2, 10.3 and 10.4. At December 31, 2004, 22 of the 43 wells had reached payout. This compares to 13 of the 43 wells having reached payout at June 30, 2004. Between the end of fiscal 2004 and June 30, 2005, however, no additional wells had reached payout.
The Company’s revenues from previously drilled wells were $372,459 and $773,458 in the quarter and the six months ended June 30, 2005, respectively. These figures compare to $210,484 and $385,064 for the corresponding periods of the previous fiscal year. The increases in revenues for the quarter and the six months ended June 30, 2005, as compared to 2004, are attributable primarily to the increase in the number of wells that had reached payout under the Unioil/Prima Agreement and to increases in the prices of oil and natural gas.
Costs of production were $93,307 and $178,143 in the quarter and the six months ended June 30, 2005, respectively. These figures compare to $147,689 and $199,651 for the corresponding periods of the previous fiscal year. The decreases in such costs for the quarter and the six months ended June 30, 2005, as compared to 2004, are attributable primarily to a reduction in expenditures for repairs and maintenance at existing well locations.
The Company’s general and administrative expenses were $197,613 and $356,513 in the quarter and the six months ended June 30, 2005, respectively. These figures compare to $60,622 and $122,988 for the corresponding periods of the previous fiscal year. The increases in these expenses for the quarter and the six months ended June 30, 2005, as compared to 2004, are attributable primarily to increases in legal fees and other professional expenses, and consulting fees.
2
Depreciation, depletion and amortization expenses were $48,982 and $106,548 in the quarter and the six months ended June 30, 2005, respectively. These figures compare to $42,801 and $85,778 for the corresponding periods of the previous fiscal year. The increases are primarily a result of increases in the number of wells that had reached payout under the Unioil/Prima Agreement.
Interest and other expenses were $129 and $241 in the quarter and the six months ended June 30, 2005, respectively. These figures compare to $965 and $1,966 for the corresponding periods of the previous fiscal year. The decreases in these expenses for the quarter and the six months ended June 30, 2005, as compared to 2004, are attributable primarily to reductions in the outstanding balance of the Company’s indebtedness to Ford Credit Corporation. See “Liquidity and Capital Resources,” above.
The Company had net incomes of $35,876 and $138,295 in the quarter and the six months ended June 30, 2005, respectively. These figures compare to net losses of $(54,340) and $(45,845) in the corresponding periods of the previous fiscal year. The increases in net incomes for the quarter and the six months ended June 30, 2005, as compared to 2004, are attributable primarily to increases in revenues for the reasons described above.
Item 3. Controls and Procedures
The person who performs the functions of the Company's chief executive officer and chief financial officer, after evaluating the effectiveness of the Company's disclosure controls and procedures (as defined in Rules 13a-14(c) and 15d-14(c) under the Exchange Act) as of a date within 90 days prior to the filing of this report (the "Evaluation Date"), has concluded that, as of the Evaluation Date, the Company's disclosure controls and procedures were effective to ensure the timely collection, evaluation, and disclosure of information relating to the Company that would potentially be subject to disclosure under the Exchange Act, and the rules and regulations promulgated thereunder. There were no significant changes in the Company's internal controls or in other factors that could significantly affect the internal controls subsequent to the Evaluation Date.
Special Note Regarding Forward-Looking Statements
Some of the statements under Item 2. Management’s Discussion and Analysis or Plan of Operation and elsewhere in this Report, and in the Company’s other periodic filings with the Commission, constitute forward-looking statements. These statements involve known and unknown risks, significant uncertainties, and other factors that may cause actual results, levels of activity, performance, or achievements to be materially different from any future results, levels of activity, performance, or achievements expressed or implied by such forward-looking statements.
In some cases, one can identify forward-looking statements by terminology such as “may,” “will,” “should,” “could,” “intends,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” or “continue,” or the negative of such terms or other, similar terminology.
3
The forward-looking statements herein are based on current expectations that involve a number of risks and uncertainties. Such forward-looking statements are based on assumptions that the Company will obtain or have access to adequate financing for each successive phase of its operations or growth, that there will be no material, adverse competitive or technological change affecting the Company’s business, that the Company’s executive officers and other significant employees will remain employed as such by the Company, and that there will be no material, adverse change in the Company’s operations or business, or in governmental regulation affecting the Company. The foregoing assumptions are based on judgments with respect to, among other things, future economic, competitive, and market conditions, and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond th e Company’s control.
Although management believes that the expectations reflected in the forward-looking statements are reasonable, management cannot guarantee future results, levels of activity, performance, or achievements. Moreover, neither management nor any other persons assumes responsibility for the accuracy and completeness of such statements.
PART II—OTHER INFORMATION
Item 1. Legal Proceedings
During the period covered by this report, the Company was not a party to any pending legal proceeding, and none of the property of the Company was the subject of any such proceeding.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
For the period covered by this Report, no information is required to be furnished pursuant to this Item 2.
Item 3. Defaults Upon Senior Securities
For the period covered by this Report, no information is required to be furnished pursuant to this Item 3.
Item 4. Submission of Matters to a Vote of Security Holders
No matter was submitted to a vote of security holders through the solicitation of proxies or otherwise during the period covered by this report. The last meeting of stockholders of the Company was held on December 15, 1999.
Item 5. Other Information
For the period covered by this Report, no information is required to be furnished pursuant to this Item 5.
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Item 6. Exhibits and Reports of Form 8-K
Exhibits
Except as listed below, exhibits to this report consist of documents previously filed, which documents are incorporated herein as exhibits to this report by reference to registration statements and other reports previously filed by the Company pursuant to the Securities Act of 1933 and the Securities Exchange Act of 1934.
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Exhibit No. | Description | Location |
10.1 | Farmout/Farmout Option Agreement, Weld County, Colorado, dated November 7, 1996, by and between Prima Oil & Gas Company and the Company. | Incorporated by reference to Exhibit No. 10.1 to the Registrant’s Annual Report on Form 10-KSB for the fiscal year ended December 31, 1998 (Commission File No. 0-10089) |
10.2 | Extension, dated March 24, 1999, of Farmout/Farmout Option Agreement, Weld County, Colorado, dated November 7, 1996, by and between Prima Oil and Gas Company and the Company | Incorporated by reference to Exhibit No. 10.3 to the Registrant’s Annual Report on Form 10-KSB for the fiscal year ended December 31, 1999 (Commission File No. 0-10089). |
10.3 | Extension, dated February 21, 2001, of Farmout/Farmout Option Agreement, Weld County, Colorado, dated November 7, 1996, by and between Prima Oil and Gas Company and the Company | Incorporated by reference to Exhibit No. 10.4 to the Registrant’s Annual Report on Form 10-KSB for the fiscal year ended December 31, 2001 (Commission File No. 0-10089). |
10.4 | Extension, dated December 13, 2001, of Farmout/Farmout Option Agreement, Weld County, Colorado, dated November 7, 1996, by and between Prima Oil and Gas Company and the Company | Incorporated by reference to Exhibit No. 10.4 to the Registrant’s Annual Report on Form 10-KSB for the fiscal year ended December 31, 2002 (Commission File No. 0-10089). |
31 | Certification of Mr. Ayers Pursuant to Rules 13a-14 or 15d-14 | |
32 | Certification of Mr. Ayers Pursuant to Section 1350 |
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Reports on Form 8-K
During the period covered by this report, the Company did not file any Reports on Form 8-K.
7
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
UNIOIL
Date: August 12, 2005 /s/ Charles E. Ayers, Jr.
Charles E. Ayers, Jr., Chairman
(on behalf of the registrant, and as principal executive
officer, principal financial officer, and principal
accounting officer of the registrant)
8
UNIOIL
UNAUDITED CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2005
UNIOIL
CONTENTS
PAGE
— Unaudited Condensed Balance Sheets,
June 30, 2005 and December 31, 2004 2
— Unaudited Condensed Statements of Operations,
For the three and six months ended
June 30, 2005 and 2004 3
— Unaudited Condensed Statements of Cash Flows,
For the six months ended June 30, 2005 and 2004 4
— Notes to Unaudited Condensed Financial Statements 5 - 6
F-1
UNIOIL
UNAUDITED CONDENSED BALANCE SHEETS
ASSETS
June 30, December 31,
2005 2004
___________ ____________
CURRENT ASSETS:
Cash $ 670,964 $ 420,321
Joint interest and trade accounts receivable, net of
allowance for doubtful accounts of
$6,372 and $6,624, respectively 91,099 85,502
Prepaid assets 4,172 7,838
Current deferred tax asset 855 855
___________ ____________
Total Current Assets 767,090 514,516
PROPERTY AND EQUIPMENT, net 32,165 34,532
INVESTMENT IN OIL AND GAS PRODUCING
PROPERTIES, full cost method, net of depletion 2,771,145 2,871,899
___________ ____________
TOTAL ASSETS $ 3,570,400 $ 3,420,947
=========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Note payable – current portion $ 9,872 $ 9,810
Joint interest and trade accounts payable 129,128 94,423
Accrued payroll taxes 7,633 52,467
Accrued taxes 289,806 263,627
___________ ____________
Total Current Liabilities 436,439 420,327
CONTINGENCIES - -
NOTE PAYABLE, less current portion 15,984 20,938
DEFERRED TAX LIABILITY 855 855
___________ ____________
Total Liabilities 453,278 442,120
___________ ____________
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value, 100,000,000 shares
authorized, 99,941,657 shares issued and outstanding 999,417 999,417
Capital in excess of par value 18,914,190 18,914,190
Retained deficit (16,796,485) (16,934,780)
___________ ____________
Total Stockholders' Equity 3,117,122 2,978,827
___________ ____________
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 3,570,400 $ 3,420,947
&n bsp; =========== ===========
Note: The Balance Sheet at December 31, 2004 was taken from the audited financial statements at that date and condensed.
The accompanying notes are an integral part of these unaudited condensed financial statements.
F-2
UNIOIL
UNAUDITED CONDENSED STATEMENTS OF OPERATIONS
For The Three months ended For The Six months ended
June 30, June 30,
________________________ ______________________
2005 2004 2005 2004
___________ ___________ __________ __________
REVENUE:
Oil and gas sales $ 365,760 $ 203,742 $ 760,303 $ 371,533
Income from serving as operator 6,699 6,742 13,155 13,531
___________ ___________ __________ __________
Total Revenue 372,459 210,484 773,458 385,064
___________ ___________ __________ __________
EXPENSES:
Production costs and related taxes 93,307 147,689 178,143 199,651
General and administrative 197,613 60,622 356,513 122,988
Depreciation, depletion and amortization 48,982 42,801 106,548 85,778
___________ ___________ __________ __________
Total Expenses 339,902 251,112 641,204 408,417
___________ ___________ __________ __________
INCOME (LOSS) BEFORE OTHER
INCOME (EXPENSE) 32,557 (40,628) 132,254 (23,353)
___________ ___________ __________ __________
OTHER INCOME (EXPENSE):
Interest and other income 3,448 (1,406) 6,282 2,156
Interest and other expense (129) (965) (241) (1,966)
___________ ___________ _________ ________
Total Other Income (Expense) 3,319 (2,371) 6,041 190
___________ ___________ _________ ________
INCOME (LOSS) BEFORE INCOME
TAXES 35,876 (42,999) 138,295 (23,163)
CURRENT TAX EXPENSE - - - -
DEFERRED TAX EXPENSE - - - -
___________ ___________ _________ ________
INCOME (LOSS) BEFORE
EXTRAORDINARY ITEM 35,876 (42,999) 138,295 (23,163)
EXTRAORDINARY ITEM,
net of tax effect of $0 - (11,341) - (22,682)
=========== ========= ========= ========
NET INCOME (LOSS) $ 35,876 $ (54,340) $ 138,295 $ (45,845)
=========== ========= ========= ========
INCOME (LOSS) PER COMMON SHARE:
Continuing operations $ .00 $ (.00) $ .00 $ (.00)
Extraordinary item - (.00) - (.00)
___________ ___________ _________ _________
Net Income (Loss) Per Common Share $ .00 $ (.00) $ .00 $ (.00)
=========== ========= ========= ========
The accompanying notes are an integral part of these unaudited condensed financial statements.
F-3
UNIOIL
UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS
Net Increase (Decrease) in Cash
For The Six Months Ended
June 30,
________________________
2005 2004
___________ ___________
Cash Flows From Operating Activities:
Net income (loss) $ 138,295 $ (45,845)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation, depletion and amortization 106,548 85,778
Bad debt expense 2,663 7,863
Changes in assets and liabilities:
(Increase) decrease in joint interest and trade accounts receivable (8,260) 11,092
Decrease in prepaid assets 3,666 363
Increase in joint interest and trade accounts payable 34,705 44,759
Increase (decrease) in accrued payroll taxes (44,834) 8,597
Increase (decrease) in accrued taxes 26,179 (1,685)
___________ ___________
Net Cash Provided by Operating Activities 258,962 110,922
___________ ___________
Cash Flows From Investing Activities:
Purchase of property and equipment (3,427) (5,914)
___________ ___________
Net Cash (Used) by Investing Activities (3,427) (5,914)
___________ ___________
Cash Flows From Financing Activities:
Payments to note payable (4,892) (4,788)
___________ ___________
Net Cash (Used) by Financing Activities (4,892) (4,788)
___________ ___________
Net Increase in Cash 250,643 100,220
Cash at Beginning of Period 420,321 210,814
___________ ___________
Cash at End of Period $ 670,964 $ 311,034
========= ==========
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period:
Interest $ 242 $ 346
Income taxes $ - $ -
Supplemental Schedule of Non-cash Investing and Financing Activities:
For the six months ended June 30, 2005:
None
For the six months ended June 30, 2004:
In June 2004, the Company traded an old copier with a net book value of $100 for a newer copier.
The accompanying notes are an integral part of these unaudited condensed financial statements.
F-4
UNIOIL
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Condensed Financial Statements - The accompanying financial statements have been prepared by the Company without audit. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows at June 30, 2005 and 2004 and for the periods then ended have been made.
Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States of America have been condensed or omitted. It is suggested that these condensed financial statements be read in conjunction with the financial statements and notes thereto included in the Company’s December 31, 2004 audited financial statements. The results of operations for the periods ended June 30, 2005 and 2004 are not necessarily indicative of the operating results for the full year.
Recently Enacted Accounting Standards - Statement of Financial Accounting Standards (“SFAS”) No. 151, “Inventory Costs - an amendment of ARB No. 43, Chapter 4”, SFAS No. 152, “Accounting for Real Estate Time-Sharing Transactions - an amendment of FASB Statements No. 66 and 67”, SFAS No. 153, “Exchanges of Nonmonetary Assets - an amendment of APB Opinion No. 29”, SFAS No. 123 (revised 2004), “Share-Based Payment”, and SFAS No. 154, “Accounting Changes and Error Corrections - a replacement of APB Opinion No. 20 and FASB Statement No. 3”, were recently issued. SFAS No. 151, 152, 153, 123 (revised 2004) and 154 have no current applicability to the Company or their effect on the financial statements would not have been significant.
NOTE 2 - PROPERTY AND EQUIPMENT
The following is a summary of property and equipment - at cost, less accumulated depreciation as of:
June 30, December 31,
2005 2004
___________ ___________
Shop tools and equipment $ 20,869 $ 20,869
Furniture and fixtures 30,099 26,672
Transportation equipment 52,908 52,908
___________ ___________
103,876 100,449
Less: accumulated depreciation (71,711) (65,917)
___________ ___________
Total $ 32,165 $ 34,532
___________ ___________
Depreciation expense for the six months ended June 30, 2005 and 2004 amounted to $5,794 and $5,131, respectively.
NOTE 3 - OIL AND GAS ACTIVITIES
The Company’s activities primarily consist of operating existing wells and monitoring the status of its leases. Depletion expense on oil and gas properties was $100,754 and $80,647 for the six months ended June 30, 2005 and 2004, respectively.
F-5
UNIOIL
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
NOTE 4 - NOTE PAYABLE
In January 2003, the Company signed a note payable in the amount of $48,905 to a financing institution. The note is secured by a vehicle with a net book value of $24,453 at June 30, 2005. The note has an annual interest rate of 1.9% and matures in January 2008.
The note payable matures as follows for the twelve-month periods ended:
June 30, Principal Due
___________ ___________
2006 $ 9,862
2007 10,051
2008 5,933
2009 -
2010 -
___________
$ 25,846
___________
NOTE 5 - RELATED PARTY TRANSACTIONS
The Company paid a shareholder of the Company $-0- and $30,000 as salary during the six months ended June 30, 2005 and 2004, respectively.
The Company paid an officer/shareholder of the Company $30,000 and $20,000 as director’s fees during the six months ended June 30, 2005 and 2004, respectively.
NOTE 6 - CONCENTRATIONS OF CREDIT RISKS
As of June 30, 2005, the Company had cash balances in excess of federally insured amounts of approximately $593,674.
NOTE 7 - INCOME (LOSS) PER SHARE
The following data show the amounts used in computing income (loss) per share:
For The Three months ended For The Six months ended
June 30, June 30,
________________________ _______________________
2005 2004 2005 2004
___________ ___________ ___________ __________
Income (loss) from continuing operations
available to common stockholders
(numerator) $ 35,876 $ (42,999) $ 138,295 $ (23,163)
Extraordinary item (numerator) - (11,341) - (22,682)
___________ ___________ ___________ __________
Income (loss) available to common
stockholders (numerator) $ 35,876 $ (54,340) $ 138,295 $ (45,845)
___________ ___________ ___________ __________
Weighted average number of common
shares outstanding used in income (loss)
per share for the period (denominator) 99,941,657 99,941,657 99,941,657 99,941,657
___________ ___________ ___________ __________
Dilutive income (loss) per share was not presented, as the Company had no options, warrants or other dilutive potential securities outstanding at June 30, 2005 or 2004.
F-6
