UNITED STATES 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 June 30, 2006
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
CONSOLIDATED OIL & GAS, INC.
(Name of Small Business Issuer in its charter)
Nevada 000-51667 91-2008446
------ --------- ----------
(State or other jurisdiction (Commission File No.) (I.R.S. Employer
of incorporation or Identification No.)
organization)
316 Main Street, Suite L
Humble, TX 77338
----------------
(Address of principal executive offices)
(281) 446-7122
--------------
(Issuer's telephone number)
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Act:
Common Stock, par value $0.001
------------------------------
(Title of class)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act of 1934 during the past 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 [
] No [X]
As of August 14, 2006, the Company had 30,958,624 shares of its $.001 par
value common stock issued and outstanding.
Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act. Yes [ ] No [X]
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
TABLE OF CONTENTS
Page
----
PART I - FINANCIAL INFORMATION 3
Item 1. Financial Statements 3
Item 2. Management's Discussion and Analysis or Plan of Operation 12
Item 3. Controls and Procedures 18
PART II - OTHER INFORMATION 18
Item 1. Legal Proceedings 18
Item 2. Unregistered Sales of Securities 18
Item 6. Exhibits and Reports on Form 8-K 18
SIGNATURES 20
2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Page
----
Balance Sheets June 30, 2006 (Unaudited)
and December 31, 2005 4
Statements of Operations (Unaudited)
June 30, 2006 and 2005 6
Statements of Cash Flows (Unaudited)
June 30, 2006 and 2005 7
Notes to the Financial Statements 9
3
CONSOLIDATED OIL & GAS, INC
BALANCE SHEETS
DECEMBER 31, 2005 and JUNE 30, 2006
December 31, June 30,
2005 2006
(Unaudited)
------------ ------------
ASSETS
CURRENT ASSETS $ 159,328 $ 93,390
Cash
Accounts receivable -
Oil and gas 14,952 8,839
Joint interest billings 9,382 8,723
Other 5,000 9,305
Inventory, at cost 28,346 17,500
------------ ------------
Total Current Assets 217,008 137,757
------------ ------------
PROPERTY AND EQUIPMENT
Oil and gas properties 225,711 649,816
Equipment 915,466 1,341,524
Furniture and fixtures 22,160 23,060
------------ ------------
1,163,337 2,014,400
Less accumulated depreciation (449,497) (520,819)
------------ ------------
Net Property and Equipment 713,840 1,493,581
------------ ------------
Total Assets $ 930,848 $ 1,631,338
============ ============
The accompanying notes are an integral part of these financial statements.
4
CONSOLIDATED OIL & GAS, INC
BALANCE SHEETS
DECEMBER 31, 2005 AND JUNE 30, 2006
(CONTINUED)
LIABILITIES AND STOCKHOLDERS' EQUITY
December 31, June 30,
2005 2006
(Unaudited)
------------ ------------
CURRENT LIABILITIES
Accounts payable $ 169,023 $ 764,496
Accrued expenses 35,005 30,717
Billings in excess of costs and estimated earnings
on uncompleted wells 168,415 330,975
Deferred revenue 175,000 25,000
Notes payable 112,568 273,568
Current portion of long-term debt 3,663 6,358
------------ ------------
Total Current Liabilities 663,674 1,431,114
LONG-TERM LIABILITIES
Shareholder payable 6,000 6,000
Long-term debt, net of current maturities 9,160 12,342
Commitments and contingencies -- --
------------ ------------
Total Liabilities 678,834 1,449,456
------------ ------------
STOCKHOLDERS' EQUITY
Common Stock, $.001 par value, 100,000,000 shares
authorized, 30,215,638 and 30,936,124 shares issued
and outstanding at December 31, 2005 and
June 30, 2006, respectively 30,216 30,936
Additional paid-in capital 1,003,481 1,170,758
Retained (deficit) (781,683) (1,019,812)
------------ ------------
Total Stockholders' Equity 252,014 181,882
------------ ------------
Total Liabilities and Stockholders' Equity $ 930,848 $ 1,631,338
============ ============
The accompanying notes are an integral part of these financial statements.
5
CONSOLIDATED OIL & GAS, Inc.
STATEMENTS OF OPERATIONS
FOR THE THREE and SIX MONTHS ENDED JUNE 30, 2005 and 2006
(UNAUDITED)
Three Months Ended Six Months Ended
June 30, June 30,
---------------------------- ----------------------------
2005 2006 2005 2006
------------ ------------ ------------ ------------
Revenues
Gas and oil sales $ 11,509 $ 3,934 $ 18,180 $ 13,635
Contract drilling revenue 169,909 652,172 621,128 1,234,065
Other income -- -- -- --
------------ ------------ ------------ ------------
Total Revenues 181,418 656,106 639,308 1,247,700
------------ ------------ ------------ ------------
Costs and Expenses
Lease operating expenses 12,066 1,670 14,090 5,027
Cost of developing leases 370,084 495,060 735,223 1,099,322
General and administrative 109,602 90,993 194,404 261,744
Interest expense 2,929 100,516 3,469 119,736
------------ ------------ ------------ ------------
Total Costs and Expenses 494,681 688,239 947,186 1,485,829
------------ ------------ ------------ ------------
Loss Before Income Taxes (313,263) (32,133) (307,878) (238,129)
Provision for Income Taxes -- -- -- --
------------ ------------ ------------ ------------
Net (Loss) $ (313,263) $ (32,133) $ (307,878) $ (238,129)
============ ============ ============ ============
Basic and Diluted Loss Per Share $ (0.01) $ nil $ (0.01) $ (0.01)
============ ============ ============ ============
Weighted Average Common Shares Outstanding 29,818,000 30,728,000 29,682,000 30,409,000
============ ============ ============ ============
The accompanying notes are an integral part of these financial statements.
6
CONSOLIDATED OIL & GAS, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Ended
June 30,
----------------------
2005 2006
--------- ---------
Cash Flows From Operating Activities
Net Income (Loss) $(307,878) $(238,129)
Adjustments to reconcile net income loss
to net cash provided by operating activities:
Depreciation 35,752 71,322
Common stock issued for services 62,218 18,800
Changes in operating assets and liabilities:
Accounts receivable 315 2,467
Net change in billings related to costs and
estimated earnings on uncompleted wells 220,040 162,560
Inventory -- 10,846
Other assets 500 --
Accounts payable 10,023 595,473
Accrued liabilities (24,089) (4,288)
Deferred revenues (44,750) (150,000)
--------- ---------
Net Cash Flows Provided (Used) by Operating Activities (47,869) 469,051
--------- ---------
Cash Flows From Investing Activities
Purchase of oil and gas production
equipment and leases (46,138) (846,591)
Purchase of equipment, furniture and fixtures (9,735) (900)
--------- ---------
Net Cash Used by Investing Activities (55,873) (847,491)
--------- ---------
Cash Flows From Financing Activities
Notes payable advances 15,501 273,059
Payments on notes payable (18,562) (106,182)
Proceeds from sale of common stock 27,000 145,625
--------- ---------
Net Cash Provided by Financing Activities 23,939 312,502
--------- ---------
Change in Cash Balance (79,803) (65,938)
Cash at Beginning of Period 92,350 159,328
--------- ---------
Cash at End of Period $ 12,547 $ 93,390
========= =========
The accompanying notes are an integral part of these financial statements.
7
CONSOLIDATED OIL & GAS, INC.
STATEMENTS OF CASH FLOWS
(CONTINUED)
(UNAUDITED)
Six Months Ended
June 30,
-------------------
2005 2006
-------- --------
Supplemental Disclosure of Cash Flow Information
Cash paid during the period for:
Interest $ 3,469 $109,239
======== ========
Income taxes $ -- $ --
======== ========
Non Cash Investing and Financimg Activities
Common stock issued for services $ -- $ 14,000
======== ========
Common stock issued for oil and gas lease $ 30,000 $ 3,572
======== ========
Equipment $ -- $ 4,800
======== ========
8
Consolidated Oil & Gas, Inc.
SELECTED INFORMATION FOR FINANCIAL STATEMENTS
June 30, 2006
(Unaudited)
NOTE 1: BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principals for interim financial information
and with the instructions of Regulation S-B. They do not include all information
and footnotes required by generally accepted accounting principles for complete
financial statements. However, except as disclosed herein, there has been no
material change in the information from the Company's financial statements for
the year ended December 31, 2005 included on the Company's Report on Form 10-SB.
In the opinion of Management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the three-month and six-month periods ended June 30, 2006,
are not necessarily indicative of the results that may be expected for the year
ending December 31, 2006.
NOTE 2: GOING CONCERN CONSIDERATIONS
The Company neither has sufficient cash on hand nor is it generating sufficient
revenues to cover its operating overhead. These facts raise doubts as to the
Company's ability to continue as a going concern. The Company has been operating
over the past year based on loans, stock sales and increases in its accounts
payable. There is no guarantee that such sources of financing will continue to
be available for operations to the company. In order to be able to complete the
wells it is in the process of drilling and completing and to produce those
wells, the Company will be required to obtain significant funding. Management's
plans include attempting to find long-term financing for its equipment and
finding partners for its drilling prospects. Management intends to make every
effort to identify and develop sources of funds. There is no assurance that
Management's plans will be successful.
9
Consolidated Oil & Gas, Inc.
SELECTED INFORMATION FOR FINANCIAL STATEMENTS
June 30, 2006
(Unaudited)
NOTE 3: STOCK TRANSACTIONS
During the six months ended June 30, 2006, the Company issued the following
common shares:
- -------------------------- ------------------- -----------------------------
Number of Shares Value Description
---------------- ----- -----------
- -------------------------- ------------------- -----------------------------
- -------------------------- ------------------- -----------------------------
683,464 $ 145,624 Issued for cash
- -------------------------- ------------------- -----------------------------
37,022 22,372 Issued for services
------- ---------
- -------------------------- ------------------- -----------------------------
720,486 $ 167,996
- -------------------------- ------------------- -----------------------------
- -------------------------- ------------------- -----------------------------
NOTE 4: NOTE PAYABLE
Notes payable are comprised of the following;
Note payable to an unaffiliated individual with a stated
Interest amount of $25,000 (300% annual rate), interest and
principal due July 10, 2006, secured by equipment $100,000
12% Advance from an unaffiliated individual, due
on demand, secured by equipment 165,000
8-5/8% Note payable to a bank, due June 29, 2006,
secured by a truck 8,568
--------
$273,568
The $100,000 note was paid in full with interest on July 7, 2006.
The $162,000 in advances was replaced by a 12% note, interest payable monthly,
with the principal due on July 1, 2008, secured by equipment of the company.
10
Consolidated Oil & Gas, Inc.
SELECTED INFORMATION FOR FINANCIAL STATEMENTS
June 30, 2006
(Unaudited)
NOTE 5: LONG-TERM DEBT
On April 6, 2006 the Company signed a 9.19% note payable to an equipment
manufacturer, payable in monthly installments of $257 for 36 months including
interest. The following summarizes future note payments:
Years Ending Amount
------------ ------
2006 $1,213
2007 2,598
2008 2,847
2009 1,072
------
$7,730
======
11
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following discussion and analysis should be read in conjunction with
the financial statements and the accompanying notes thereto for the period ended
June 30, 2006 and is qualified in its entirety by the foregoing and by more
detailed financial information appearing elsewhere. See "Item 1. Financial
Statements."
Results of Operations - First Six Months of 2006 Compared to First Six Months of
- --------------------------------------------------------------------------------
2005
- ----
The following table sets forth, as a percentage of sales, an analysis of
several line-items of our Statement of Operations.
Three Months Ended Six Months Ended
June 30, June 30,
2005 2006 2005 2006
------- ------- ------- -------
Revenues 100 100 100 100
Cost of Revenues 211 76 117 89
Gross Margin (111) 24 (17) 11
General, Selling and
Administrative Expenses 60 14 30 21
Interest 2 15 1 9
Net Income (Loss) (173) (5) (48) (19)
Results of Operations
Sales
Revenues of $657,106 and 1,247,700 in the three- and six-month periods
ended June 30, 2006 were 3.6 times revenues of $181,418 in the three months
ended June 30, 2005 and 2.0 times revenues of $639,308 in the six months ended
June 30, 2005. The increases of $475,688 and $608,392 for the three- and
six-month periods ended June 30, 2006, respectively, are attributable to an
increase in our drilling activities. The company was doing workover projects in
2005 and is doing new drilling projects in 2006 which are more expensive
projects to complete. Therefore, we charge more to the working interest partners
for these projects. In a work-over project the drilling, testing, casing and
cement work is already done and paid for. In a new drilling project those
functions must be performed, requiring us to charge more for a project.
12
The sources of revenue for the three- and six-month periods ended June 30,
2005 and 2006 are as follows:
Three Months Ended Six Months Ended
June 30, June 30,
Increase Increase
2005 2006 (Decrease) 2005 2006 (Decrease)
---------- ---------- ---------- ---------- ---------- ----------
Gas sales 11,509 3,185 (8,324) 15,707 8,216 (7,491)
Oil Sales -- 749 749 2,473 5,419 2,946
Contract drilling revenue 169,909 653,172 483,263 621,128 1,234,065 612,937
---------- ---------- ---------- ---------- ---------- ----------
181,418 657,106 475,688 639,308 1,247,700 608,392
========== ========== ========== ========== ========== ==========
Gas and oil sales are primarily from one gas well in which we have a 70%
working interest. Sales from this well were lower by $8,324 and $7,491 in the
three- and six-month periods ended June 30, 2006, respectively, as compared to
the 2005 periods. This was due to approximately a 40% decline in production
which was partially offset by approximately a 25% increase in the selling price
of gas in 2006 as compared to 2005. During the quarter ended June 30, 2005 the
gas well was shut in for a portion of time for repairs which further decreased
gas sales in that quarter as compared to 2006. The additional oil revenue in
2006 over 2005 came from the sale of oil from a well which has very little
production. Production from that well is inconsistent and quantities do not
accumulate in sufficient amounts to have monthly sales. Sales from this well may
not be expected again for over a year.
Contract drilling revenue is the revenue derived from the sale of working
interests in the properties which we develop. The company typically buys the
mineral rights to a property and then sells off portions of that property in
working interest to other buyers. The working interest revenue is used to
develop the property. Sale of leases increased $483,263 and $612,937
respectively in the three- and six-month periods ended June 30, 2006 over the
sales in the same 2005 periods. This increase is a result of more business done
in 2006 over 2005.
COSTS and EXPENSES for the three- and six-month periods ended June 30, 2005 and
2006 are as follows.
Three Months Ended Six Months Ended
June 30, June 30,
Increase Increase
2005 2006 (Decrease) 2005 2006 (Decrease)
---------- ---------- ---------- ---------- ---------- ----------
Lease operating expenses 12,066 1,670 (10,396) 14,090 5,027 (9,063)
Cost of developing leases 370,084 495,060 124,976 735,223 1,099,322 364,099
General and administrative 109,602 90,993 (18,609) 194,404 261,744 67,340
Interest 2,929 100,516 97,587 3,469 119,736
---------- ---------- ---------- ---------- ---------- ----------
Total Costs and Expenses 494,681 688,239 193,558 947,186 1,485,829 422,376
========== ========== ========== ========== ========== ==========
Lease operating expenses are costs related to generating gas and oil sales.
These expenses are for such things as utilities, maintenance, and operating
labor for well sites. The increase in expenses of $10,939 and $9,063 in the
three- and six-month periods ended June 30, 2006 over the same periods in 2005
had to do with maintenance on the well in operation.
13
Cost of developing leases is the costs associated with buying a lease and
working over an old well with the hope of either lengthening its life or
increasing its production or both (a re-entry) or drilling a new well. In 2005
the costs were for re-entry of old wells and in 2006 the costs are associated
with drilling new wells. The cost as a percentage of sales was significantly
higher in the three- and six-month periods ended June 30, 2005 than the same
periods in 2006. In the periods ended June 30, 2005 the company started a
re-entry on the Lena Buerger well which had a significant loss associated with
it. Percentage of completion method of accounting required the company to record
all of the anticipated loss in the period in which the loss was known. This
caused a $167,000 charge to cost of development even though it was incurred in a
later period. Major categories of these expenses are as follows:
Three Months Ended Six Months Ended
June 30, June 30,
Increase Increase
2005 2006 (Decrease) 2005 2006 (Decrease)
---------- ---------- ---------- ---------- ---------- ----------
Equipment rent 55,337 25,757 (29,580) 137,725 49,696 (88,029)
Labor 61,738 171,931 110,193 134,538 305,389 170,851
Materials & supplies 105,777 124,056 18,279 165,185 248,332 83,147
Contract work 44,626 63,803 19,177 126,222 252,419 126,197
Repairs to equipment (30) 1,055 1,085 1,194 3,558 2,364
Selling costs 86,726 96,143 9,417 137,726 196,903 59,177
Depreciation on equipment 15,910 12,315 (3,595) 32,633 43,025 10,392
---------- ---------- ---------- ---------- ---------- ----------
Total Cost of Developing
Leases 370,084 495,060 124,976 735,223 1,099,322 364,099
========== ========== ========== ========== ========== ==========
Equipment rent is the amount spent for renting equipment to do tasks that
we do not own equipment for or for which our equipment is not available to do.
The decreases in the periods ended in 2006 are because we purchased significant
amounts of equipment in late 2005 and early 2006 and were able to use our own
equipment on projects we previously rented equipment on.
Labor is the amount spent for labor of people who worked for the company.
It also includes costs associated with the people such as taxes and living
expense while working on the projects. It does not include the salaries of the
administrative staff. The labor expense increases in 2006 over 2005 are because
we used our own crews more as a result of owning more of our own equipment in
the 2006 periods.
Materials & supplies is the amount spent on various materials to work on
the projects. This can include pipe, pumps, tanks, chemicals, pumping units,
water, drilling mud and various other materials used to drill a well. The
increases in the amount spent in 2006 over 2005 are because in the 2005 periods
we were doing reworks of old wells which many times already have pipe, tubing,
casing and other material items. In 2006 we were drilling new wells, and all of
these type items must be provided for a new well.
Contract work is the amount spent on outside contractors to do work which
we are not set up to do or do not have the manpower or equipment to accomplish.
The cost increases in 2006 over 2005 were because of the high volume of
additional services required to drill new wells as compared to reworking an old
14
well which was being done in 2005. Some of these additional costs include mud
loggers, cement crews for casing installation and additional perforating.
Repairs to equipment is the cost of repairing equipment owned by us. While
this cost did not increase significantly in 2006 over 2005, we expect it to
continue to increase because of the additional equipment which has recently been
purchased.
Selling costs are the expenses incurred in the selling of working interests
in the wells and are made up mostly of commissions.
Depreciation on equipment is the depreciation taken on the equipment owned
by us. The increase for the six months ended June 30, 2006 over the same period
in 2005 is because the company had more equipment in use in 2006. The decrease
for the three-month period ended June 30, 2006 as compared to 2005 was because
in the 2006 period $19,073 of depreciation was capitalized as a cost of the
wells developed for the company.
GENERAL AND ADMINISTRATIVE expense for the three- and six-month periods
ended June 30, 2005 and 2006 are as follows.
Three Months Ended Six Months Ended
June 30, June 30,
Increase Increase
2005 2006 (Decrease) 2005 2006 (Decrease)
---------- ---------- ---------- ---------- ---------- ----------
Consulting (131) 5,820 5,951 23,032 41,023 17,991
Auto 9,540 8,441 (1,099) 12,405 21,849 9,444
Payroll 43,787 24,402 (19,385) 65,214 50,961 (14,253)
Office 35,846 10,169 (25,677) 59,144 38,554 (20,590)
Professional fees 6,244 27,674 21,430 14,096 84,834 70,738
Project Analysis 186 6,648 6,462 186 6,648 6,462
Travel 12,977 3,237 (9,740) 18,021 8,651 (9,370)
Depreciation 1,153 4,602 3,449 2,306 9,224 6,918
---------- ---------- ---------- ---------- ---------- ----------
Total General & Administrative
Expenses 109,602 90,993 (18,609) 194,404 261,744 67,340
========== ========== ========== ========== ========== ==========
Consulting expenses are for hiring people to locate properties, advise on
the likelihood of properties having oil and other miscellaneous outside
consultants. The company hired some outside consultants to do some geological
work on some properties it was considering acquiring which increased this
expense in 2006 over 2005.
Auto expense is the expense related to the operation of autos and trucks
and also includes any leased autos and mileage paid to employees for the
operation of their personal vehicles. In 2005, there was only one person
operating a vehicle for the company. In 2006 the company had purchased three
additional trucks and paid mileage to another employee causing the increase in
cost.
Payroll decreased in 2006 from the same periods in 2005. This was because
the salaries of some employees who were considered administrative in 2005 could
be charged to the cost of jobs in 2006 and are a part of cost of developing
15
leases. The 2006 payroll expense is consistent with what we anticipate in the
future.
Office expenses include supplies, insurance, computer maintenance,
recording fees, software maintenance and most other general and administrative
items not classified elsewhere. In the periods ended June 30, 2005, office
expenses included $24,516 in equipment repairs. We did not have these expenses
again in 2006.
Professional fees increased $21,430 to $27,674 and $70,738 to $84,834
respectively for the three- and six-month periods ended June 30, 2006. The
increase was mainly attributable to legal and audit fees in connection with the
filing of our Form 10-SB. Our general accounting cost increased $7,867 and
$12,084, respectively, for the three- and six-month periods ended June 30, 2006
over the same periods in 2005.
Travel expenses decreased $9,740 and $9,370, respectively, for the three-
and six-month periods ended June 30, 2006 as compared to the same periods in
2005. In 2006 home office management was not required to travel to the drilling
locations as much because local managers were hired in 2006 to take care of the
tasks previously done at locations by home office personnel.
Depreciation is on office furniture and fixtures and computers. The
increases in 2006 over 2005 are mostly due to new computers and an oil and gas
software program.
INTEREST EXPENSE increased from $2,929 for the three months ended June 30, 2005
to $100,516 for the same period in 2006, an increase of $97,587 and from $3,469
for the six months ended June 30, 2005 to $119,736 for the same period in 2006,
an increase of $116,267. This is because we took out a short-term note of
$100,000 (increased in early 2006 to $200,000) for an equipment purchase in late
2005 at a rate of 4% per month (48% annual). We were in a cash crunch when the
note was due and at times were required to pay as much as 25% per month (300%
annual) to extend the note. Since the end of the period that ended June 30, 2006
we have retired this note (on July7, 2006) and have obtained financing at a 12%
annual rate.
Net Income (Loss)
We suffered a net loss of ($32,133) in the three months ended June 30, 2006
compared to a net loss of ($313,263) in the same period in 2005. The decrease of
loss in the three month period is attributable primarily to an increase in gross
profit on leases developed and sold, $157,112 in 2006 compared to a loss of
($200,175) in 2005 which was partially offset by an increase in interest expense
of $97,587. We also had a decrease in general and administrative expenses of
$18,609 and an increased gross profit of $2,821 on oil and gas revenues all of
which created a decrease in our loss for the quarter by $281,130 as compared to
the same 2005 quarter.
We suffered a net loss of ($238,129) in the six months ended June 30, 2006
compared to a net loss of ($307,878) in the same period in 2005. The decrease of
loss in the six-month period is attributable primarily to an increase in gross
profit on leases developed and sold, $134,743 in 2006 compared to a loss of
($114,095) in 2005 which was partially offset by an increase in interest expense
16
of $116,267 and general and administrative expenses of $67,340. The balance of
increase in net income for the period was due to an increased gross profit of
$4,518 on oil and gas revenues, all of which created a decrease in our loss for
the six months ended June 30, 2006 by $69,749 as compared to period in 2005.
We financed our loss of ($238,129) for the six months ended June 30, 2006
primarily through an increase of $603,745 in current liabilities, a decrease in
current assets of $79,251, an increase in notes payable of $166,877 and
issuances of $167,997 worth of common stock for cash and services. These funds
were also used to purchase new equipment and leases of $779,741.
Liquidity and Sources of Liquidity
We do not have capital sufficient to meet our cash needs during the next
twelve months, including the costs of compliance with the continuing reporting
requirements of the Securities Exchange Act of 1934. We will have to seek loans,
equity placements, and sell off working interests in projects we acquire to
cover such costs. While we have been successful in such activities in the past,
there can be no assurance that we will be able to continue to obtain additional
funds, which may impact our ability to continue as a going concern. The
accompanying financial statements do not include any adjustments related to the
recoverability and classification of assets or the amounts and classifications
of liabilities that might be necessary should we be unable to continue
operations as a going concern.
No commitments to provide additional funds have been made by management or
other stockholders. Accordingly there can be no assurance that any additional
funds will be available to the company to allow it to acquire and develop
additional properties or cover its expenses as they may be incurred.
Should our cash assets prove to be inadequate to meet our operational
needs, we might seek to compensate providers of services by issuances of stock
in lieu of cash.
Off-Balance Sheet Arrangements
Our company has not entered into any transaction, agreement or other
contractual arrangement with an entity unconsolidated with us under which we
have
o an obligation under a guarantee contract,
o a retained or contingent interest in assets transferred to the
unconsolidated entity or similar arrangement that serves as credit,
liquidity or market risk support to such entity for such assets,
o any obligation, including a contingent obligation, under a contract that
would be accounted for as a derivative instrument, or
o any obligation, including a contingent obligation, arising out of a
variable interest in an unconsolidated entity that is held by us and
material to us where such entity provides financing, liquidity, market risk
or credit risk support to, or engages in leasing, hedging or research and
development services with us.
17
Item 3. Controls and Procedures
Evaluation of disclosure controls and procedures. The Company carried out
an evaluation, under the supervision and with the participation of the Company's
management, including the Company's Chief Executive Officer and Chief Financial
Officer, of the effectiveness of the design and operation of the Company's
disclosure controls and procedures as of the end of the period covered by this
report. Based upon that evaluation, the Chief Executive Officer and Chief
Financial Officer concluded that the Company's disclosure controls and
procedures provide reasonable assurances that the information the Company is
required to disclose in the reports it files or submits under the Securities
Exchange Act of 1934 is recorded, processed, summarized and reported within the
time period required by the Commission's rules and forms. There were no
significant changes in the Company's internal control over financial reporting
during the period covered by this report that have materially affected, or are
reasonably likely to materially affect our internal controls over financial
reporting.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
Neither our company nor any of its property is a party to, or the subject
of, any material pending legal proceedings other than ordinary, routine
litigation incidental to our business.
Item 2. Unregistered Sales of Equity Securities
Set forth below are the sales of our common stock since April 24, 2006 in
transactions exempt from registration pursuant to the provisions of Regulation
D, Rule 506.
----------- --------------------------- --------- ---------- --------------
No. of Type of
Date Person Shares Price Consideration
----------- --------------------------- --------- ---------- --------------
05-12-06 Donald W. Rogers 25,000 $ 2,500 Cash
----------- --------------------------- --------- ---------- --------------
05-12-06 Richard and Carol Rogers 75,000 7,500 Cash
----------- --------------------------- --------- ---------- --------------
05-12-06 Judy H. Webb 50,000 5,000 Cash
----------- --------------------------- --------- ---------- --------------
05-26-06 David and Lisa Wyatt 25,000 2,500 Cash
----------- --------------------------- --------- -------------------------
06-16-06 James J. Schroeder 50,000 5,000 Cash
----------- --------------------------- --------- ---------- --------------
06-01-06 Richard Spires 6,250 625 Cash
----------- --------------------------- --------- ---------- --------------
06-30-06 Dan or Quinn West, Jr. 15,000 1,500 Cash
----------- --------------------------- --------- ---------- --------------
06-30-06 Ronald & Helen Swatzyna 15,000 1,500 Cash
----------- --------------------------- --------- ---------- --------------
07-11-06 Kreiser Living Trust 22,500 2,250 Cash
----------- --------------------------- --------- ---------- --------------
All of the persons purchasing shares of common stock were known to
management, they were all accredited investors
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
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Exhibit No. Description
----------- -----------
3(i) Articles of Incorporation of Iowa Industrial Technologies,
Inc. (new name Consolidated Oil & Gas, Inc.)*
3(ii) Articles of Merger between Iowa Industrial Technologies,
Inc. (the surviving entity) and Consolidated Oil & Gas, Inc.
(the merging entity). These Articles change the name of the
surviving company to Consolidated Oil & Gas, Inc.***
3(iii) Bylaws of Iowa Industrial Technologies, Inc. (now named
Consolidated Oil & Gas, Inc.)**
10 Assignment of Oil, Gas and Mineral Leases and Bill of Sale
from RCI Energy to Consolidated Oil & Gas, Inc. dated August
1, 2000.+
10.1 Representative Operating/Working Interest Owner Agreement++
10.2 Promissory Note and Bill of Sale dated November 9, 2005++
16 Letter of March 8, 2006 of Clyde Bailey PC agreeing with the
statements made in this Form 10-SB by Consolidated Oil &
Gas, Inc., concerning Consolidated's change of principal
independent accountants.***
31 Certification of Chief Executive Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
31.1 Certification of Chief Financial Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
32 Certification of Chief Executive Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
32.1 Certification of Chief Financial Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
* Previously filed on June 25, 2001 as Exhibit 2.1 to Form 10-SB of Iowa
Industrial Technologies, Inc. (new name Consolidated Oil & Gas, Inc.),
EDGAR Accession Number 0001015402-01-501621; incorporated herein.
** Previously filed on June 25, 2001 as Exhibit 2.2 to Form 10-SB of Iowa
Industrial Technologies, Inc. (new name Consolidated Oil & Gas, Inc.),
EDGAR Accession Number 0001015402-01-501621; incorporated herein.
***Previously filed on March 10, 2006, with Form 10-SB, Commission File No.
000-51667, EDGAR Accession Number 0001010549-06-000133; incorporated
herein.
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+ Previously filed on May 23, 2006, as Exhibit 10 to Form 10-QSB,
Commission File No. 000-51667, EDGAR Accession Number 0001010549-06-000344;
incorporated herein.
++ Previously filed on June 21, 2006, with Amendment No. 3 to Form 10-SB,
Commission File No. 000-51667, EDGAR Accession Number 0001010549-06-000400;
incorporated herein.
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.
Dated: August 16, 2006 CONSOLIDATED OIL & GAS, INC.
By /s/ James C. Yeatman
-----------------------------------
James C. Yeatman, President and CEO
20