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 June 30, 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
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 June 30, 1998
(Common stock, $.01 par value) 9,441,657
UNIOIL
INDEX
Page No.
Part I Financial Information
Condensed balance sheets- 1
June 30, 1998 and December 31, 1997
Condensed statements of operations- 2
six months ended June 30, 1998 and 1997
Condensed statements of cash flows- 3
six months ended June 30, 1998 and 1997
Notes to condensed financial statements 4
Management's Discussion and Analysis of Financial
Condition and Results of Operations 5
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
June 30, December 31,
1998 1997
---------- ---------
(Unaudited) *
Current Assets
Cash $ 184,536 $ 130,829
Joint Interest and Trade Acct. Rec. 136,024 160,573
Prepaid Expenses 1,100 4,058
Deferred Loan Costs, net -0- -0-
__________ _________
Total current assets 321,660 295,460
__________ _________
Property and Equipment 49,556 49,556
Less accumulated depreciation 45,797 45,313
__________ _________
Total property and equipment 3,759 4,243
__________ _________
Investment in Oil and Gas Properties 11,324,476 11,324,476
Less accumulated depletion, depreciation 6,246,696 6,098,217
and amortization
__________ _________
5,077,780 5,226,259
__________ _________
Deferred Tax Assets -0- -0-
Other Assets 2,152 2,152
__________ _________
Total Assets $ 5,405,351 $ 5,528,114
__________ _________
LIABILITIES
Current Liabilities
Accounts Payable & Other Liabilities $ 413,016 $ 371,773
Accrued Interest 8,964,886 8,675,337
Notes Payable 7,211,823 7,442,185
Deferred Tax Liabilities -0- -0-
__________ _________
Total Current Liabilities 16,589,725 16,489,295
__________ _________
Stockholders' Deficit
Common Stock 94,417 94,417
Capital in Excess of Par 4,062,520 4,062,520
Retained Earnings (Deficit) (15,341,311) (15,118,118)
__________ _________
Total Stockholders' Deficit (11,184,374) (10,961,181)
__________ _________
Total Liabilities and
Stockholders' Deficit $ 5,405,351 $ 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)
Six months ended Three months ended
June 30 June 30
_________________ __________________
1998 1997 1998 1997
________ ________ ________ ________
Revenue
Oil & Gas Sales $446,678 $230,508 $217,767 $114,618
Interest Income 2,345 1,469 1,323 596
Income from serving as operator 14,109 16,975 7,640 8,422
Miscellaneous Income 500 2,307 420 1,231
________ ________ ________ ________
Total Revenue 463,632 251,259 227,150 124,867
________ ________ ________ ________
Costs & Expenses
Production Costs and
Related Taxes 81,187 115,918 36,237 52,764
General and Administrative
Expenses 104,617 105,394 57,412 59,227
Depletion, Depreciation
& Amortization 148,963 67,235 21,359 35,591
Interest Expense 352,059 305,269 180,812 153,475
________ ________ ________ ________
Total Costs & Expenses 686,826 593,816 295,820 301,057
________ ________ ________ ________
Loss before income taxes (223,194) (342,557) (68,670) (176,190)
Income Taxes --- --- --- ---
________ ________ ________ ________
Net Loss $(223,194) $(342,557) $(68,670) $(176,190)
________ ________ ________ ________
Net Loss per share $(.024) $(.036) $(.007) $(.02)
________ ________ ________ ________
The accompanying notes are an integral part of these condensed
financial statements.
-2-
UNIOIL
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
Six months ended
________________________
June 30, June 30,
1998 1997
__________ __________
Cash Flows From (To) Operating Activities
Net Loss $ (223,194) $ (342,557)
__________ __________
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation, Depletion & Amortization 148,963 67,235
Changes in Assets and Liabilities
Joint Interest & Trade Receivables 24,549 6,154
Other Assets 2,958 2,463
Accounts Payable and Taxes Payable 41,243 424,080
Accrued Interest Payable 289,548 289,548
__________ __________
358,298 722,245
__________ __________
Net Cash Provided (Used) by Operations 284,067 446,923
__________ __________
Cash Flows From (To) Investing Activities
Disposition of Property & Equipment -0- (2,076)
Acquisition of Oil & Gas Properties -0- (1,670,270)
Deferred Loan Costs -0- -0-
__________ __________
Net Cash Provided (Used) by
Investing Activities $ -0- $ (1,672,346)
__________ __________
Cash Flows From (To) Financing Activities
Proceeds from Notes Payable (230,362) 1,151,988
__________ __________
Net Cash Used by
Financing Activities (230,362) 1,151,988
__________ __________
Net Increase (Decrease) in Cash 53,707 (73,435)
Cash at Beginning of Period 130,829 118,886
__________ __________
Cash at End of Period $ 184,534 $ 45,451
__________ __________
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 solely 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 six month period ending June 30,
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 moneys 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 June 30, 1998, the unpaid note balance was $5,791,000.00 and the
related Accrued Interest balance was $8,964,886.00.
During the six months ending June 30, 1998, interest in the amount of
$289,548.00 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 June 30, 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 June 30, 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 Financial Services, Inc. which was used
to finance the drilling and completion of eight new wells in 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 $(223,194)
for the six months ended June 30, 1998 compared to $(342,557) for the
six months ended June 30, 1997.
However, the Company's actual results from operations
(before interest income, interest expense and income taxes) improved
significantly during the last current year compared to the preceding
year. The Company had operating income of $126,520 during the
six months ended June 30, 1998, compared to an operating loss of
$(38,757) during the six months ended June 30, 1997. This
resulted from an increase in total revenues to $461,287 during the
six months ended June 30, 1998, which almost doubled compared to
total revenues of $249,790 for the same period in 1997.
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.
The Company's oil revenues for the second quarter 1998 are
less than expected for two reasons: 1) Crude oil prices have been the
lowest in the past 12 years and 2) because of extremely low oil
prices during May and June the Company elected to ship/sell only that
crude oil that was necessary due to tank capacity running low. This
will also be the case during the month of July. As oil prices
increase the company will sell more crude oil taking advantage of
higher prices.
-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 second 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 second
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 second 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.
July 27, 1998 /s/ Charles E. Ayers, Jr.
Date ____________________ ____________________________________
Charles E. Ayers, Jr., Chairman,
Chief Executive Officer and Director
July 24, 1998 /s/ Fred C. Jones
Date ____________________ ____________________________________
Fred C. Jones
Vice President, Secretary and Director