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 March 31, 1998
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 identification number)
of incorporation or organization)
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 March 31, 1998
_____________________________ _____________________________________
(Common stock,$.01 par value) 9,441,657
UNIOIL
INDEX
Page No.
Part I Financial Information
Condensed balance sheets- 1
March 31, 1998 and December 31, 1997
Condensed statements of operations- 2
three months ended March 31, 1998 and 1997
Condensed statements of cash flows- 3
three months ended March 31, 1998 and 1997
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
March 31, December 31,
1998 1997
____________ ______________
(Unaudited) *
Current Assets
Cash $ 203,903 $ 130,829
Joint Interest and Trade Acct. Rec. 130,266 160,573
Prepaid Expenses 2,283 4,058
Deferred Loan Costs, net -0- -0-
____________ ______________
Total current assets 336,452 295,460
____________ ______________
Property and Equipment 49,556 49,556
Less accumulated depreciation 45,555 45,313
____________ ______________
Total property and equipment 4,001 4,243
_____________ ______________
Investment in Oil and Gas Properties 11,324,476 11,324,476
Less accumulated depletion, depreciation 6,225,579 6,098,217
and amortization ______________ ______________
5,098,897 5,226,259
______________ ______________
Deferred Tax Assets -0- -0-
Other Assets 2,152 2,152
______________ ______________
Total Assets $ 5,441,502 $ 5,528,114
_____________ ______________
LIABILITIES
Current Liabilites
Accounts Payable & Other Liabilities $ 416,073 $ 371,773
Accrued Interest 8,820,111 8,675,337
Notes Payable 7,321,022 7,442,185
Deferred Tax Liabilities -0- -0-
______________ ______________
Total Current Liabilites 16,557,2061 6,489,295
______________ ______________
Stockholders' Deficit
Common Stock 94,417 94,417
Capital in Excess of Par 4,062,520 4,062,520
Retained Earnings (Deficit) (15,272,641) (15,118,118)
_______________ _____________
Total Stockholders' Deficit (11,115,704) (10,961,181)
________________ ______________
Total Liabilities and
Stockholders' Deficit $ 5,441,502 $ 5,528,114
________________ _____________
* Condensed from audited financial statements.
The accompanying notes are an integral part of these condensed financial
statements.
-1-
UNIOIL
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended
March 31, March 31,
1998 1997
_____________________
Revenue
Oil & Gas Sales $228,911 $115,890
Interest Income 1,022 873
Income from serving as operator 6,469 8,553
Miscellaneous Income 80 1,076
_____________________
Total Revenue 236,482 126,392
Costs & Expenses
Production Costs and Related Taxes 44,950 63,154
General and Administrative Expenses 47,205 46,167
Depletion, Depreciation & Amortization 127,604 31,644
Interest Expense 171,247 151,794
_____________________
Total Costs & Expenses 391,006 292,759
_____________________
Loss before income taxes (154,524) (166,367)
Income Taxes --- ---
Net Loss $ (154,524) $ (166,367)
______________________
Net Loss per share $ (.02) $ (.02)
______________________
The accompanying notes are an integral part of these condensed financial
statements.
-2-
UNIOIL
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
Three months ended
March 31, March 31,
1998 1997
________________________
Cash Flows From (To) Operating Activities
Net Loss $ (154,524) $ (166,367)
Adjustments to reconcile net loss to net cash ____________ ___________
used in operating activities:
Depreciation, Depletion & Amortization 127,604 31,644
Changes in Assets and Liabilities
Joint Interest & Trade Receivables 30,307 11,542
Other Assets 1,775 1,478
Accounts Payable and Taxes Payable 44,299 5,075
Accrued Interest Payable 144,774 144,774
_____________ ___________
348,759 194,513
_____________ ___________
Net Cash Provided (Used) by Operations 194,235 28,146
Cash Flows From (To) Investing Activities
Disposition of Property & Equipment --- (33,076)
Acquisition of Oil & Gas Properties --- ----
Deferred Loan Costs --- ----
_____________ ___________
Net Cash Provided (Used) by Investing
Activities --- (33,076)
Cash Flows From (To) Financing Activities
Proceeds from Notes Payable (121,163) -0-
_____________ ___________
Net Cash Used by Financing Activities (121,163) -0-
_____________ ___________
Net Increase (Decrease) in Cash 73,072 (4,930)
Cash at Beginning of Period 130,829 118,886
_____________ ___________
Cash at End of Period $ 203,901 $ 113,956
_____________ ___________
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 three month period ending March
31, 1998 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
$17,616,189 which may be applied against future taxable income expiring
in various years beginning in 1999 through 2012.
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 1998. 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 March 31, 1998, the unpaid note balance was $5,791,000.00 and the related
Accrued Interest balance was $8,820,112.00.
During the three months ending March 31, 1998, interest in the amount of
$144,774.00 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.
NOTE 4: LITIGATION
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 March 31, 1998, the issuer was insolvent; liabilities greatly
exceed assets and 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.
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.
There are three 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 17 million dollars. Management of
the Company and JAGI intend to work out some restructuring of this debt;
however, at March 31, 1998 and as of the date hereof, the debt has not been
restructured and remains on the books. The second 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. The third secured
debt is to Duke Energy which was used to finance the drilling and completion
of eight new wells during 1997.
RESULTS OF OPERATIONS
Due to its bankruptcy and adverse financial condition the Issuer did
not engage in drilling any new wells or acquiring any additional properties
from 1985 through 1996. Operations of the Issuer were 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. One of these agreements has
thus far resulted in the drilling of 21 new wells and the recompletion of 4
wells. The other program began in May, 1997, and has now been completed. This
program resulted in the drilling and completion of 8 new oil and gas wells.
The Issuer has continued to incur net losses due primarily to interest
expenses. After netting interest income and expense, which includes an annual
accrual of $579,096 of interest expense on the secured debt owed to JAGI, the
Company's net loss was $(400,408) in 1997 compared to $(435,302) in 1996.
However, the Company's actual results from operations have improved
significantly during the last fiscal year compared to the preceding fiscal year.
The Company had operating income of $260,105 in 1997, compared to an operating
loss of $(5,350) in 1996. This resulted from an increase in total revenues to
$1,164,277 in 1997, which almost doubled compared to total revenues of $653,878
in 1996. The increase is primarily the result of the resumption of drilling
activity in 1997. With the Company having been able to enter into agreements
providing for drilling activity to resume with respect to the Company's
leasehold interests, management is hopeful the Company's results of operations
will continue to improve; however, there is absolutely no assurance of this.
-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 first quarter of 1998 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 first quarter of 1998
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 first quarter of the year 1998.
-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.
Date May 19, 1998 /s/ Charles E. Ayers
Charles E. Ayers, Jr., Chairman,
Chief Executive Officer and Director
Date May 14, 1998 /s/ Fred C. Jones
Fred C. Jones
Vice President, Secretary and Director