FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period of ____________ to ____________
Commission file number 0-10089
UNIOIL
(Exact name of registrant as specified in its charter)
Nevada 93-0782780
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) identification number)
3817 Carson Avenue, P.O. Box 310
Evans, Colorado 80620
(Address of principal executive offices) (ZipCode)
Registrant's phone number, including area code (970) 330-6300
Check whether the issuer (1) has filed all reports
required to be filed by Section 13 or 15(d) of the
Securities Exchange Act during the preceding 12 months (or
for a shorter period that the registrant was required to
file such reports), Yes X No ___
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.
Class Outstanding at September 30, 1997
(Common stock, $.01 par value) 9,441,657
UNIOIL
INDEX
Page No.
Part I Financial Information
Condensed balance sheets- 1
September 30, 1997 and December 31, 1996
Condensed statements of operations- 2
nine months ended September 30, 1997 and 1996
Condensed statements of cash flows- 3
nine months ended September 30, 1997 and 1996
Notes to condensed financial statements 4
Management's Discussion and Analysis of Financial 5
Condition and Results of Operations
Part II Other Information
Item 1 Legal Proceedings 6
Item 2 Changes in Securities 6
Item 3 Defaults upon Senior Securities 6
Item 4 Submission of Matters to a Vote of 7
Security Holders
Item 5 Other Information 7
Item 6 Exhibits and Reports on Form 8-K 7
PART I - FINANCIAL INFORMATION
UNIOIL
CONDENSED BALANCE SHEETS
(Unaudited)
ASSETS
September 30, December 31,
1997 1996
___________ ___________
(Unaudited) *
Current Assets
Cash $ 43,611 $ 118,886
Joint Interest and Trade Acct. Rec. 130,508 124,480
Prepaid Expenses 1,100 3,562
Deferred Loan Costs, net -0- -0-
__________ ________
Total current assets 175,219 246,928
Property and Equipment 50,435 53,524
Less accumulated depreciation 45,950 50,388
__________ ________
4,485 3,136
Investment in Oil and Gas Properties 11,320,762 9,446,260
Less accumulated depletion,
depreciation and amortization 5,813,705 5,716,007
__________ _________
5,507,057 3,730,253
Deferred Tax Assets -0- -0-
Other Assets 2,152 2,152
__________ _________
Total Assets $5,688,913 $3,982,469
LIABILITIES
Current Liabilites
Accounts Payable & Taxes Payable $ 184,191$ 149,734
Accrued Interest 8,530,564 8,096,242
Other Current Liabilities 156,266 156,266
Note Payable 7,680,487 6,141,000
Deferred Tax Liabilities -0- -0-
__________ _________
Total Current Liabilites 16,551,508 14,543,242
Stockholders' Deficit
Common Stock 94,417 94,417
Capital in Excess of Par 4,062,519 4,062,519
Retained Earnings (Deficit) (15,019,531)(14,717,709)
__________ __________
Total Stockholders' Deficit (10,862,595)(10,560,773)
__________ __________
Total Liabilities and
Stockholders' Deficit $ 5,688,913 $ 3,982,469
__________ __________
* Condensed from audited financial statements.
The accompanying notes are an integral part of these
condensed financial statements.
-1-
UNIOIL
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
Nine months ended Three months ended
September 30 September 30
___________________ _________________
1997 1996 1997 1996
________ ________ _______ _______
Revenue
Oil & Gas Sales $614,171 $430,303 $383,663 $283,965
Interest Income 1,604 2,877 135 2,201
Income from serving
as operator 25,128 23,660 8,153 8,365
Other Income-Settlements -0- 177,858 -0- 177,858
Miscellaneous Income 7,567 3,764 5,260 755
Total Revenue 648,470 638,462 397,211 473,144
Costs & Expenses
Production Costs and
Related Taxes 196,775 186,025 80,857 89,945
General and Administrative
Expenses 152,820 143,460 47,426 44,722
Depletion, Depreciation
& Amortization 98,424 77,365 31,189 32,931
Interest Expense 502,273 491,541 197,004 165,792
Total Costs & Expenses 950,292 898,391 356,476 333,390
Loss before income taxes (301,822) (259,929) 40,735 139,754
Income Taxes --- --- --- ---
Net Profit/Loss $ (301,822) $ (259,929) $ 40,735 $ 139,754
Net Profit/Loss per share $ (.03) $ (.03) $ .004 $ .015
The accompanying notes are an integral part of these
condensed financial statements.
-2-
UNIOIL
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine months ended
September 30, September 30,
1997 1996
_________ __________
Cash Flows From (To) Operating Activities
Net Loss $ (301,822) $ (259,929)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation, Depletion & Amortization 93,191 77,365
Changes in Assets and Liabilities
Joint Interest & Trade Receivables (6,031) 2,028
Other Assets 2,463 3,527
Accounts Payable and Taxes Payable 34,459 (10,971)
Accrued Interest Payable 434,322 434,322
_________ _______
558,404 506,271
_________ _______
Net Cash Provided (Used) by Operations 256,582 246,342
Cash Flows From (To) Investing Activities
Disposition of Property & Equipment 3,158 (3,681)
Acquisition of Oil & Gas Properties (1,874,502) ----
__________ _______
Net Cash Provided (Used)
by Investing Activities (1,871,344) (3,681)
Cash Flows From (To) Financing Activities
Proceeds from Notes Payable 1,539,487 52,951
_________ ______
Net Cash Used by Financing Activities 1,539,487 49,270
_________ ______
Net Increase (Decrease) in Cash (75,275) 295,612
Cash at Beginning of Period 118,886 61,636
________ _______
Cash at End of Period $ 43,611 $357,248
Supplemental Schedule of Noncash Investing and Financing
Activities:
None
The accompanying notes are an integral part of these condensed
financial statements.
-3-
UNIOIL
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1: BASIS OF PRESENTATION
The financial information included herein is unaudited; however,
such information reflects all adjustments (consisting soley of
normal recurring adjustments) which are, in the opinion of
management, necessary for a fair presentation of financial
position, results of operation and cash flows for the interim
periods.
The results of operations for the nine month period ending
September 30, 1997 are not necessarily indicative of the results
to be expected for the full year.
NOTE 2: INCOME TAXES
No provision for income taxes has been recorded due to net
operating losses. The Company has net operating loss
carryforwards of approximately $16,100,000 which may be applied
against future taxable income expiring in various years beginning
in 1999 through 2010.
NOTE 3; RELATED PARTY TRANSACTIONS
During 1985, the Company borrowed approximately $6,000,000 from
Joseph Associates, Inc. [JA] in order to fund the reorganization
plan approved by the bankruptcy court. The loan is secured by
basically all of the assets of the Company, including interests
in oil and gas wells. The original term of the loan was for 60
months with the principal and interest payments due the first day
of each month beginning October 1, 1985. Almost from the
beginning, the Company has been in default with respect to
payments due on this loan. In 1989 JA exercised its right under
the loan agreement to receive directly from purchasers all
proceeds derived from the sale of oil and gas by the Company.
Accordingly, all monies received from oil and gas purchasers were
then deposited into a checking account controlled by JA and
transferred as needed to accounts owned by the Company to cover
operating expenditures. During 1990 the rights of Joseph
Associates, Inc. were acquired by Joseph Associates of Greeley,
Inc. and the same procedure is still in effect during 1997. It
is presently contemplated that this debt will be restructured,
but the terms of such restructuring have not been determined or
agreed to as of the date hereof.
At September 30, 1997, the unpaid note balance was $5,791,000.00
and the related Accrued Interest balance was $8,530,564.00.
During the nine months ending September 30, 1997, interest in the
amount of $434,322.00 was accrued on the note and charged to
expense. Additionally, the Company has a non-interest bearing
payable to Joseph Associates of Greeley, Inc. in the amount of
$156,266.00.
On September 28, 1988, the United States Securities and Exchange
Commission filed a complaint against the Company and its former
president for allegedly manipulating its common stock price and
for misleading promotions with regard to the "Soberz" pill. The
Company was also charged with failure to file required SEC
reports. Final judgments and a permanent injunction were entered
against the Company on October 19, 1989. The Company filed a
motion to set aside the judgment which was not granted.
Management believes that the judgment will ultimately be
dismissed as they demonstrate their ability to file currently
required SEC filing (see Legal Proceedings No. 1).
-4-
UNIOIL
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following is management's discussion and analysis of certain
significant factors which have affected the Company's financial position
and operating results during the periods included in the accompanying
condensed financial statements.
LIQUIDITY and CAPITAL RESOURCES
At September 30, 1997, the issuer was insolvent, in that
liabilities greatly exceed assets. Revenues from operations were
insufficient to discharge liabilities or even pay interest accruing
thereon. In such a financial condition, the issuer cannot raise additional
funds to meet such commitments. Continuation as a going concern is
dependent upon the ability of the issuer to negotiate a settlement to
discharge its principal outstanding liability. the issuer has been able to
continue operations only because Joseph Associates of Greeley, Inc.
(JAGI"), whose secured position has priority, has been foregoing its right
to foreclose upon all the issuer's assets, but is asserting its right to
take direct payment of the proceeds of production attributable to the
issuer's interest in oil and gas properties.
However, during 1993, JAGI commenced a foreclosure action against
the assets of the Company in Laramie County, Wyoming. This action was
commenced by JAGI in part to demonstrate its willingness and ability to
foreclose upon all the issuer's assets and thereby extinguish the claims of
other creditors, as a means of inducing such creditors settle their claims
on a reasonable basis or have them extinguished. As of February 10, 1995,
this action was dismissed and JAGI has taken no further action to foreclose
on its Mortgage or to assert any rights under that Mortgage other than the
rights to take the direct payment of the Company's oil and gas proceeds.
As a result of this action and the fact that the Company was able to obtain
a line of credit with which to make cash offers in settlement of its
remaining judgment liabilities, during 1994 the Company was able to reach
settlements with all judgment creditors. Refer to December 31, 1994 Form
10-KSB for details.
There are two major areas of indebtedness of the Company. The
principal one is the secured debt owed to JAGI. With the interest that has
been accrued each year, this debt is in excess of 14 million dollars.
Management of the Company and JAGI intend to work out some restructuring of
this debt; however, at September 30, 1997 and as of the date hereof, the
debt has not been restructured and remains on the books. The other secured
debt is a $350,000 loan from a local bank and is collateralized by a first
lien on the Company's Colorado oil and gas properties. The Company used
approximately $287,500 of these proceeds to settle outstanding judgment
liabilities.
RESULTS OF OPERATIONS
Due to its bankruptcy and adverse financial condition the issuer
had not engaged in drilling any new wells or acquiring any additional
properties since 1985. Operations of the issuer had been limited to
continued operation of wells previously drilled on properties already
acquired. However, during 1996 the Company did enter into two agreements
to resume drilling activity in 1997 with respect to the leasehold interests
of the Company and provide financing for such drilling. In November, 1996
the Company and JAGI entered into an agreement with Prima Oil & Gas Company
("Prima") pursuant to which the Company contributed 26 potential drillsites
and Prima contributed another 26 potential drillsites into a drillsite
pool. Prima will act as operator and finance the drilling of the wells,
for which it will be entitled to 100% of the working interest until payout,
after which the working interest will be divided 72.5% to Prima and 27.5%
to the Company and JAGI. In addition, 8 potential recompletion well sites
were contributed to this pool, on which Prima will also act as operator,
and at its discretion and sole cost, recomplete in return for a 72.5%
working interest after recompletion. Upon recompletion, the Company will
immediately be entitled to its working interest share (27.5%) of all
production payments, without waiting for payout. In December, 1996, the
Company entered into an agreement with PanEnergy Financial Services, Inc.,
now known as Duke Energy Financial Services, Inc. ("Duke") to provide
financing for the drilling and completion costs of wells. Please note that
PanEnergy and Duke Power merged in June and is now known as Duke Energy and
will be referred to as such in the future. Under this agreement, Duke
provided financing on a reimbursement basis for up to 95% of the Company's
working interest costs of drilling and completing 8 wells which the
Company, as operator, considers capable of producing oil and/or gas in
commercial quantities. Duke will be entitled to repayment of the amounts
advanced plus interest at 1% over prime, through a 95% allocation of the
production payments attributable to the Company's interest in these wells.
As of the date of this report the Unioil/Prima agreement has resulted in
the drilling of 16 new wells and the recompletion of 4 wells. Drilling
will continue through November 1997, of approximately 9 more wells. The
Unioil/Duke program began in May and has been completed. This program
resulted in the drilling and completion of 8 new oil & gas wells. The
issuer has continued to incur net losses primarily due to interest
expenses.
-5-
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The issuer had been involved in numerous legal proceedings.
Those legal proceedings have been resolved by the registrant. The
following discussion outlines the current status, to the best knowledge of
present management.
1. On September 28, 1988 the United States Securities and
Exchange Commission ("SEC") filed a complaint in United States District
Court for the District of Columbia (Civil Action No. 88-2803) naming the
issuer and its former President as defendants. The complaint charged
securities laws violations arising from an alleged attempt to manipulate
the price of the Company's stock by conducting an allegedly false and
misleading publicity campaign during 1986 about a purported company product
known as the "Soberz" pill. The pill allegedly lowered a person's blood-
alcohol level rendering a drunk person sober. The complaint also charged
the defendants with violating securities laws by failing to file timely and
accurate periodic reports as required. On October 19, 1989 the SEC
obtained by default final judgments of permanent injunction enjoining the
defendants from violating the securities laws by failing to file such
reports, or violating the anti-fraud provisions of the securities laws.
In October, 1990, after filing the Annual Report on Form 10-K for
the fiscal year ended December 31, 1989 (which report included financial
and other information covering the intervening period since reports had
last been filed), the issuer made a motion to have the injunction against
itself set aside. By order dated January 8, 1991 the U.S. District Court
of the District of Columbia denied the issuer's motion without prejudice
"pending demonstration of Unioil's ability and willingness to comply with
filing requirements in the future over a reasonable period of time." The
issuer intends to renew its motion to set aside the judgment sometime in
the future after it has complied with the filing requirements over a
reasonable period of time. Current management believes that such motion
will be granted at that time.
The legal proceedings regarding the "Soberz" pill were filed
against the issuer and its former President by the SEC in response to
certain meetings held with stockbrokers and others to promote such pill,
two press releases which made certain claims regarding the pill, and a
statement concerning the pill which was included in the issuer's Annual
Report on Form 10-K for the year ended December 31, 1985, which was filed
on or about August 6, 1986. In addition to making the claims about such
pill which resulted in the SEC action, the statement in the Form 10-K
report indicated that the issuer agreed to acquire Guardian Laboratories,
Inc., the company which supposedly had rights to the pill in the form of a
patent pending. The statement further indicated that the issuer agreed to
issue 500,000 shares of its stock in consideration thereof. Successor
management of the issuer has determined from the transfer records that such
stock was in fact issued, but can find no evidence that the issuer ever
received anything in consideration of such issuance. The Board of
Directors has therefore decided to treat such stock as cancelable for lack
of consideration and has placed stop transfer orders with the transfer
agent to prevent any attempted transfer of such stock. The issuer also
notified the recipient of the action taken and instructed him to return the
certificate for cancellation. The issuer received a response which
disputed the issuer's position, but no further action has been taken by
either party in regard to the matter.
Item 2. Changes in Securities
No changes in securities occurred in the third quarter of 1997
covered by this report.
Item 3. Defaults upon Senior Securities
All of the issuer's liabilities are classified as current because
they mature currently or are already past due. The issuer is in default
with respect to its principal outstanding liability. This liability is the
secured indebtedness to Joseph Associates of Greeley, Inc. This item,
including accrued interest, comprise approximately 95% of the issuer's
total liabilities. In its present financial condition, the issuer is not
able to pay off this liability or even pay interest which accrues thereon.
Management is therefore attempting to negotiate some restructuring of the
secured indebtedness as a means of curing such default. There is no
assurance management will be able to do this.
-6-
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 third quarter of 1997
covered by this report. The last meeting of stockholders of Unioil was
held in July, 1983.
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits. None
(b) Reports on Form 8-K. No reports on Form 8-K have been filed
during the third quarter of the year 1997.
-7-
SIGNATURES
Pursuant to the requirements 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.
October 30, 1997 /s/ Charles E. Ayers, Jr.
Date ____________________ ____________________________________
Charles E. Ayers, Jr., Chairman,
Chief Executive Officer and Director
October 29, 1997 /s/ Fred C. Jones
Date ____________________ ____________________________________
Fred C. Jones
Vice President, Secretary and Director