-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VE/LfeHSsCOTsWm+jDZOinSm8RPMAnbbXEgJb+gOQDjAMHYlss0uJtdl4SROOOXt C8f0m+VtrJXsfLlD9PLTOw== 0000029504-97-000006.txt : 19970501 0000029504-97-000006.hdr.sgml : 19970501 ACCESSION NUMBER: 0000029504-97-000006 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970430 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: DOL RESOURCES INC CENTRAL INDEX KEY: 0000029504 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 820219465 STATE OF INCORPORATION: WY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-08447 FILM NUMBER: 97591651 BUSINESS ADDRESS: STREET 1: 13636 NEUTRON RD CITY: DALLAS STATE: TX ZIP: 75244 BUSINESS PHONE: 2146615869 MAIL ADDRESS: STREET 2: 13636 NEUTRON RD CITY: DALLAS STATE: TX ZIP: 752444410 10-K 1 UNITED STATES SECURITIES & EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) (X) ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED) For the fiscal year ended December 31, 1996 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED) For the transition period from to Commission File Number 0-8847 DOL RESOURCES, INC. (Exact Name of Registrant as Specified in Charter) 83-0219465 Wyoming I.R.S. Employer State of Other Jurisdiction of Identification No. Incorporation or Organization 13636 Neutron Road, Dallas,Texas 75244-4410 (Address of Principal Executive Office) (Zip code) Registrant's Telephone Number:(214) 661 5869 SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT Title of each class Name of each exchange on which registered None None SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: Common Stock, $0.01 Par Value (Title of Class) Indicate by check mark whether Registrant has (i) filed all reports required by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the proceeding twelve months, and (ii) been subject to such filings requirements for the past ninety (90) days. Yes. X No. Indicate by check mark if disclosure of delinquent filers pursuant to Item 4-05 of Regulations S-K is not contained here, and will not be contained, to the best of registrant's knowledge in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ( ) At March 1, 1997 the aggregate market value of the shares of Common Stock held by non-affiliates of the registrant was approximately $137,754. At such date there were 20,671,254 shares of the registrant's Common Stock outstanding. PART 1 Item 1. Business DOL Resources, Inc. ("Registrant" or "the company") was incorporated November 6,1973 under the laws of the State of Wyoming. The Company buys, leases and sells oil and gas properties. It also explores and develops these properties usually with others through joint ventures or farmouts. The economic success of Registrant depends on its ability to locate and purchase or lease valuable oil and gas prospects or mineral deposits. It must further sell or lease these deposits or prospects to others at a profit or develop the properties itself in conjunction with others. To accomplish these goals, Registrant will encounter competition from major oil companies and dependent operators attempting to acquire prospective oil and gas leases and other mineral interests. These sources of competition maybe both large and small energy oriented companies operating in states in which Registrant does business. Some of these competitors are major oil and gas companies with substantial reserves and earnings records. Others are small independents with varying degrees of stability. Some not only produce oil and gas but refine and market petroleum products. Registrant may be in a position by competitive disadvantage with many of these companies in that they have a greater source of capital, technical and management talent, research facilities and sources of information. Registrant has sold certain coal properties to others retaining an overriding royalty interest. Although Registrant had no additional expense in developing these properties in which a royalty is retained, it also has no control over when-if ever- these properties are developed. If coal is discovered under lease in which Registrant owns an economic interest, the availability of a ready-market for coal will depend upon numerous factors beyond Registrant's control including the expense of domestic production and imports of coal, proximity of transportation and the effect of state and federal regulations on production of coal. Compliance with statutory requirements respecting environmental quality may necessitate significant capital outlays which may materially affect the earning power of the Company, or may cause material changes in its proposed business. In 1996 Registrant did not expend any funds to comply with environmental regulations. It does not contemplate spending funds incidental to its operation in 1997 to comply with environmental regulations. Registrant did not participate in the drilling of any wells in 1996. Registrant had no paid employees. The business of the Company is seasonal only to the extent that weather conditions, particularly snow and cold in the winter, impede the ability of it or others who may be devloping properties in which it has an interest to conduct exploratory activities or drilling or mining operations. Registrant is engaged in two lines of business (1) the exploration for the sales of oil and gas, and (2) investments in natural resource properties. The operations pertaining to the exploration of and sales of oil and gas involve actively participating in drilling for oil and gas and sale of subsequent production. The investment in natural resource properties involves buying and selling the right to explore for or produce the resources from the land owners property. The following details Registrant's operations in the described lines of business: Year Ended December 31, 1996 1995 1994 Sales to Unaffiliated Customer Sales of Oil and Gas 64,449 46,464 56,627 Investment in natural resource properties -0- -0- -0- Operating profit or (loss) Sales of oil & gas 10,393 5,624 10,028 Investment in natural resource properties: -0- -0- -0- Identifiable assets: Sale of oil & gas 532,549 546,815 567,644 Investment in natural resource properties: 10,156 10,156 10,156 General corporate assets 345,495 370,171 250,095 Item 2 Oil and Gas Properties: For the following discussion, gross well or acre is a well or acre in which an interest is owned. The number of gross wells is the total number of wells in which a working interest is owned. A net well or acre is deemed to exist when the sum of fractional ownership working interests in gross wells to acres equals one. the number of net wells or acres is the sum of the fractional working interests owned in gross wells or acres as expressed as whole numbers and fractions thereof. A summary of Registrant's oil and gas properties as of December 31, 1996 is as follows: Gross Acres Net Acres Costs Undeveloped acres: Leasehold Interest: Oil and Gas: Wyoming 792 792 -0- North Dakota 280 8 -0- 1,072 800 -0- Developed Acres: Leasehold Interest: Oil and Gas: Wyoming 7,768.4 363 986,133 Louisiana 640 13 17,106 New Mexico 1,240 30 110,464 North Dakota 40 1 44,770 Texas 80 1 7,876 New York 522 1.3 -0- 10,289.4 409.3 1,116,349 Oil and Gas Production: As of December 31, 1996 the Company owns the following productive wells: Oil and Gas Oil Gas (Dual Producers) Gross Wells 13 5 13 Net Wells 1.32215 .54217 .82369 From the drilling efforts and from production purchased from others, Registrant's yearly production of crude oil and gas has been as follows: Year Crude Oil in Barrels Gas in MCFs 1994 1,723 14,603 1995 1,743 11,414 1996 1,566 12,578 The average sales price (including transfers) per unit of oil and gas produced is as follows: 1996 1995 1994 Oil - Barrels 23.04 18.85 15.97 Gas - MCF 2.26 1.79 1.99 The average production (lifting) cost per unit of production is as follows: 1996 1995 1994 Oil - Barrels 15.10 9.55 9.64 Gas - MCF .65 .58 .62 Exploratory Wells Producers Dry Holes Total Wells Year Drilled Gross Net Gross Net Gross Net 1996 0 0 0 0 0 0 1995 0 0 0 0 0 0 1994 0 0 0 0 0 0 Developed Wells Producters Dry Wells Total Wells Year Drilled Gross Net Gross Net Gross Net 1996 0 0 0 0 0 0 1995 0 0 0 0 0 0 1994 0 0 0 0 0 0 Reserves: The following are reserve estimates as of December 31, Proved Oil and Gas Reserves: Oil (bbls) (Gas (MCF) 1996 31,526 62,924 1995 32,938 73,209 1994 34,567 84,423 Proved Developed Oil and Gas Reserves: 1996 7,556 62,924 1995 8,968 73,209 1994 10,597 84,423 The following are estimated net revenues from production of oil and gas reserves as of December 31, 1996. Proved Proved Developed Reserves 1997 (28,163) 26,007 1998 78,123 22,643 1999 62,252 19,692 Remainder 178,911 79,901 291,123 148,243 As of December 31, 1995. 1996 (24,419) 29,751 1997 81,487 26,007 1998 65,203 22,643 Remainder 198,603 99,593 320,874 177,994 Present value of estimated future net reserves, computed using a discount factor of 10% as of December 31, 1995. 1996 155,702 65,982 1995 175,078 85,358 The reserve estimates for all properties were completed by management. No reserve figures have been filed with or reported to any other regulatory authorities or agencies. All of the reserves of Registrant are located entirely in the United States. Registrant has annual rental obligation from $.24 to $1.00 per acre on all of it's leasehold oil, gas and coal properties on which there is no production. If these payments are not made when due, the leases terminate. Additionally, the leases terminate at the end of this term unless production is obtained in which case the lease continues as long as production continues. Coal Properties: In 1975, Registrant acquired certain coal properties. These properties were located primarily in the Powder River Basin portion of the State of Wyoming. Subsequently, some of these leases were sold and an overriding royalty retained. No coal leases have been sold since 1977. Royalty interest as of December 31, 1996 are: Gross acres - - 2,901 Net acres - - 58 Cost - - 10,156 None of the coal properties described above are producing and Registrant is attempting to find others to purchase these properties. Registrant follows the policy of capitalizing all property acquisition costs. Such costs are charged to operations through depletion when production is obtained. At the time of the sale of a lease where no interest is retained in the property, the costs of the property is charged to operations at that time. If at the time of the sale Registrant retains a nonoperating interest, the carrying value of the property is written down in an amount representing its estimated realizable value computed on the basis of geological estimates of proven primary reserves. If no geological estimates of proven primary reserves are available on the nonoperating interest retained, the entire cost associated with the property is charged to operations at the time of the sale. If Registrant determines that a property is not capable of profitable development, all nonrecoverable costs applicable to the property are charged against operations at the time such determination is made. Gold Properties: In 1980, Registrant acquired placer gold mining claims in the Mesquite Mining District of Imperial County, California by cancelling a promissory note from non-affiliated entities in the sum of $125,247, principal and accrued interest. These claims cover approximately 20,800 acres. In 1983, the Company sold this property for $20,000. DOL retained a royalty interest valued at $10,000. In 1985 the claims were abandoned and expensed. Item 3. Legal Proceedings: On November 20, 1979, Phillips Petroleum Company (Phillips) filed a complaint (Docket No. C1-80-70-000) with Federal Energy Regulatory Commission (FERC) against Registrant and other producers alleging certain producer respondents had abandoned the sale of natural gas from the Miller Jacobs #1 (the well) to Phillips without having obtained necessary Commission authorization under Section 7 (b) of the Natural Gas Act. The commission ruled in favor of Phillips on April 16, 1985. Effective December 1, 1985 Registrant's share of the settlement to be paid from future production from the Well is $160,000 payable out of 30% of gas revenues accruing to its interest for the period December 1, 1985 through November 30, 1989 and 50% of gas revenues accruing to its interest in production on and after December 1, 1989. This situation arose prior to present management's ownership in Registrant and management has since entered into an agreement with former management whereby Registrant is to recover 100% of the amount withheld by Phillips. There are no other pending legal proceedings to which Registrant is a party or of which any of its property is subject. Item 4. Submission of Matters to a Vote of Security Holders. Not applicable. PART 11 Item 5. Market for Registrant's Common Equity and Related Stockholders Matters. The company's shares are traded over-the-counter. The range of quoted bid prices are as follows: 1st quarter 2nd quarter 3rd quarter 4th quarter High Low High Low High Low High Low 1996 .01 .01 .01 .01 .01 .01 .01 .01 1995 .01 .01 .01 .01 .01 .01 .01 .01 The source for the prices quoted is as reported by the National Association of Securities Dealers and does not include retail markups, mark-downs, commissions or other adjustments, and does not represent actual transactions. There were approximately 2,491 holders of record of Company's of the common stock as of March 16, 1997. No dividends have been declared in the Company's history. Wyoming law generally provides that dividends may be declared and paid only out of the unreserved and unrestricted earned surplus of the corporation except when the Articles of Incorporation of a corporation engaged in the business of exploiting natural resources so provide, dividends may be declared and paid out of the depletion reserves. Registrant presently has no unreserved and unrestricted earned surplus and its Articles of Incorporation do not provide that dividends may be paid from deletion reserves. Item 6. Selected Financial Data: 1996 1995 1994 1993 1992 Operating revenues $73,267 $56,608 $68,299 $69,181 $77,275 Income (loss from continuing opers. (224,760) 4,122 (13,554) (31,192) (23,417) Income (losses) from continuing operations per share (.0109) .0003 (.0009) (.002) (.0016) Total Assets 888,200 927,142 827,895 809,599 846,132 Long-term oblig. 294,800 77,669 84,122 192,000 197,487 Cash dividends paid for common share -0- -0- -0- -0- -0- Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. Liquidity Registrant's recurring monthly average cash flow from the sale of oil and gas was approximately $8,100.00 per month in 1996. This was up $900.00 from year 1995. The average cash in 1995 was down $1500.00 from 1994 at $7,200.00. Working capital increased $14,422 primarily in the area of receivables and payables. Net cash provided in operating activities for 1996 was a negative $220,283. A positive cash flow from investing activities of $7713 and a positive cash flow from financing activities of $179,441 offset most of operating leaving a net decrease in cash of $33,129 over 1995. There are no plans to seek long-term credit or equity capital for any project. If Registrant should experience a major oil or salt water spill, compliance with statutory requirements respecting environmental quality could necessitate significant capital outlays which would materially decrease its liquidity and profitability. No funds were expended in 1996 for clean-up compliance and none is expected in 1997. Registrant has made no commitments for capital expenditures as of the end of the fiscal year. However, Registrant intends to continue to pursue its drilling activities with both joint ventures and partnerships, and for its own account providing financing is made available in a sufficient amount to justify same. Interest in oil and gas drilling activities is presently at a low level, however, if prices continue their upward trend this could change in the future. Cash requirements for the fiscal year 1996 averaged approximately $9,900 per month. This is expected to be about $3,000.00 less in 1997 provided there are no major repairs or workovers. Results of Operations Losses in revenues over the past three (3) years are attributable primarily to price declines, normal decline in production and shutting in of non-economic wells. Management continues to update existing production of re-working the wells and continues to reduce recurring expenses when practicable. 1996 vs 1995 Total revenues in 1996 were up approximately $16,600.00 over 1995 due (primarily to increases in the price of oil and gas. Lease operating expenses increased due to some work-overs. General administration expense increased substantially, due to the recording of accumulated fees due to Comtec Superior Management Co. since 1986. Profitability (before depletion and depreciation) decreased approximately $214,500 in 1996 from 1995. 1995 vs 1994 Total revenues in 1995 were down approximately $11,700,000 from 1994 due primarily to a decline in oil and gas production. The average price of oil increased $3.00 per bbl. Lease operating expenses decreased significantly as did total expense due to the eliminating of salaries. Consequently there was an increase in profitability (before depreciation and depletion) in 1995 from 1994 of approximately $11,678. Management expects a slow upward trend in oil and gas prices to continue beyond $20.00 per Bbl. this would not only increase revenues and cash flow but would enhance our ability to raise much needed funds for drilling additional wells. It is the opinion of management that a minimum of $25.00 per Bbl. oil is need in order to expand operations and replace depleted reserves. Meanwhile a continuing effort is being made to increase the production, and consequently revenues by seeking out and negotiating joint-venture recompletion projects where positive reserve information exists. At the year-end there was nothing specific to indicate a material change in income and expenses over the next twelve (12) months. During 1994, an $100,000 payable to an affiliate was converted to equity by the issuance of 5,000,000 shares of common stock. Relative to the restructuring of long-term debt, a collateral fee of $37,500 was paid to an affiliate by the issuance of 750,000 shares of common stock. Restructuring of debt was finalized in 1995. Item 8 Financial Statement and Supplementary Data. Enclosed Item 9. Disagreements on Accounting and Financial Disclosure. None Item 10. Directors and Executive Officers of the Registrant S. Mort Zimmermann, age 69, has been a director and president of the company since April 16, 1984. Fred M. Updegraff, age 62, has been a director vice- president and treasurer since April 16, 1984. Stephen G., Wesstrom, age 47, has been a director and vice-president of the company since April 16, 1984. There is no family relationship between any of the officers and directors of the company. Item 11. Executive Compensation The following is information regarding remuneration received by management of the Company in the calendar year 1996. Name Capacities Cash and cash-equivalent Aggregate Individual in which Forms and remuneration contingent or person served Salaries, Fees, Securities forms in group director's fees, or property remuneration Commissions Insurance bonuses benefits or reimbursement, personal benefit. Name None -0- -0- -0- All officers Directors -0- -0- -0- and directors president, as a group vice president and secretary treasurer Joe B. Abbey, Attorney at Law, which represents the Company as general counsel. The Company contracts for necessary legal services with the law firms on an as needed basis. In 1996 the Company was not billed for any attorney's fees by the firm. The Company adopted a stock plan for key employees and a restricted plan bonus in 1981. Neither of these programs has been implemented. Item 12. Security Ownership of Certain Beneficial Owners and Management. The following tabulations shows the name of each person who as of December 31, 1996 was known by the Company to own beneficially more than 5% of the Company's outstanding Common Stock. Amount and Nature of Per cent Name Beneficial Ownership Of Class Glauber Management Co. 5,672,630 27.4% Owned directly Interfederal Capital, Inc. 5,750,000 27.8% Owned directly Managements does not own any voting common stock of the Company as of December 31, 1996. Item 13. Certain Relationships and Related Transactions As reported in the Registrant's 10-Q for the quarter ended June 30, 1984 Featherstone Development Corporation owned 3,245,099 shares, Featherstone, Ltd. owned 609,058 shares, and Olen F. Featherstone II owned 654,0978 of DOL Resources, Inc. common stock from January 1, 1982 to April, 1984. On April 16, 1984 all of their restricted shares of DOL Resources, were exchanged for restricted shares in Petro Imperial Corporation, Dallas, Texas, a Utah Corporation controlled by Commercial Technology, Inc. Item 14. Exhibits, Financial Statements Schedules, and Reports on Form 8-K. (1) The following financial statements are included in Item Page Balance Sheet 13-14 Statement of Income 15 Statements of Stockholders' Equity 16 Statements of Changes in Financial Position 17 Notes to Financial Statements 18 - 26 (2) Exhibits No Exhibits are filed as part of this. There are no reports on Form 8-K filed in the last quarter of the period covered by this report. The financial statements included herein have been prepared by internal accountants of the Registrant, without audit, due to the inability of the Registrant to pay for a certified audit. Financial statements have been prepared in accordance with generally accepted accounting principles and in the opinion of management presents fairly the financial position of the Company at December 31, 1996. SIGNATURE Pursuant to the requirement of Section 13 or 15(d) 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. DOL RESOURCES, INC. By: /s/ Fred M. Updegraff Fred M. Updegraff Treasurer and Chief Financial Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the date indicated. /s/ S. Mort Zimmerman S. Mort Zimmerman Chairman of the Board and President Dated: March 24, 1996 /s/ Fred M. Updegraff Fred M. Updegraff Director, Vice President and Treasurer Dated: March 24, 1996 DOL RESOURCES, INC. BALANCE SHEET (Unaudited) ASSETS December 1996 1995 CURRENT ASSETS Cash $16,086 $49,215 Marketable Securities, at lower of aggregate cost or market, cost $24,175 in 1995 and 1994 - Note 2 1,924 1,924 Trade accounts receivable, less allowance for doubtful accounts of $1,711, ($1,711 in 1994 Note 1) 26,089 18,347 Due from related parties - Note 4 281,240 272,743 Prepaid expenses 37,500 37,500 Total Current Assets 362,839 379,729 PROPERTIES - Using full costing - Note 1. 100,000 100,000 Production payment Exploration, acquisition & development cost, net of allowance for reduction of oil & gas assets of $137,083 in 1985 1,654,446 1,654,290 Total cost 1,754,446 1,754,290 Less accumulated depletion 1,311,342 1,297,651 Net Properties 443,104 456,639 FURNITURE & FIXTURES At cost - Note 1 Furniture and fixtures 6,476 6,476 Less accumulated depreciation 4,533 3,885 Net Furniture and Fixtures 1,943 2,591 OTHER ASSETS Undeveloped coal royalties-Note 9 10,155 10,156 Other accounts receivable-Note 12 70,159 78,027 Total Other Assets 80,314 88,183 TOTAL ASSETS 888,200 927,142 DOL RESOURCES, INC. BALANCE SHEET December 31, CURRENT LIABILITIES 1996 1995 Notes payable - Note 3 337,310 375,000 Accounts payable 34,970 28,592 Accrued expenses -0- Total current liabilities 372,280 403,592 LONG-TERM LIABILITIES ` Notes payable -0- Other accounts payable - Notes 4 & 12 294,800 77,669 Total Long Term Liabilities 294,800 77,669 STOCKHOLDERS' EQUITY Capital Stock, common, $.01 par value Authorized 25,000,000 shares; issued and outstanding 20,671,254 shares at 12-31-94 and 12-31-95 206,712 206,713 Capital in excess of par value 1,502,741 1,502,741 Accumulated deficit (1,487,958) (1,263,198) Treasury Stock ( 375) 375) Total Equity 221,120 445,881 TOTAL LIABILITIES AND STOCKHOLDERS EQUITY 888,200 927,142 The accompanying notes are an integral part of this statement. DOL RESOURCES, INC. STATEMENT OF INCOME (Unaudited) Years Ended December 31, 1996 1995 1994 REVENUE: Oil and gas sales 64,449 46,464 56,627 Investment and other income 8,818 10,144 11,672 72,267 56,608 68,299 EXPENSES: General and Administrative 238,458 6,729 4,985 Depletion, depreciation and amortization 14,338 14,271 16,184 Lease operating expense 33,422 22,504 24,851 Interest 4,865 4,085 -0- Production and windfall profit taxes 6,944 4,713 6,211 Salaries -0- -0- 29,820 Lease rentals -0- 184 100 298,027 52,486 82,153 Net profit (loss) before income taxes (224,769) 4,122 (13,554) Provision for income taxes - Note 6 -0- -0- - 0- Net Profit (loss) (224,760) 4,122 (13,554) Weighted average number of common shares outstanding 20,671,254 20,671,254 15,400,421 Earnings per common share $(.0109) $ .0002 $(.0009) The accompanying notes are an integral part of this statement. DOL RESOURCES, INC. STATEMENTS OF STOCKHOLDERS EQUITY (Unaudited) Year ended December 31, 1996, 1995, and 1994 Capital Stock Capital in Number of Excess of Accumulated Treasury Shares Amount Par Value Deficit Stock Balance at 12-31-93 14,921,254 149,213 1,422,693 (1,253,765) (375) Net Loss ( 13,554) Stock Issued for Loan Collateral Fee 750,000 7,500 30,000 Stock issued in payment of account 5,000,000 50,000 50,048 Balance at 12-31-94 20,671,254 206,713 1,502,741 (1,267,319) (375) Net Income 4,121 Balance at 12-31-95 20,671,254 206,713 1,502,741 (1,263,198) (375) Net Loss ( 224,760) Balance at 12-31-96 20,671,254 206,713 1,502,741 (1,487,958) (375) The accompanying notes are an integral part of this statement. DOL RESOURCES, INC. STATEMENTS OF CASH FLOWS Years Ended December 31, 1996 1995 1994 INCREASE (DECREASE) in Cash: CASH FLOWS FROM OPERATING ACTIVITIES; Net Income (Loss) (224,760) 4,122 (13,554) Adjustments to Reconcile Net Earnings to net cash provided by operating activities: Depreciation and depletion 14,338 14,271 16,184 Changes in Assets and Liabilities: Accounts Receivable-Trade ( 7,742) 703 2,875 Accounts Receivable-Affil. ( 8,497) (97,641) 15,762 Prepaid Expense -0- -0- (37,500) Accounts Payable - Trade 6,378 ( 1,167) 2,202 Accrued Expenses -0- (28,067) -0- Net Cash Provided by operating Activities (220,283)(107,779) (14,031) Cash Flows from Investing Activities: Proceeds from sale of property and equipment ( 156) -0- ( 2) Decrease in other assets 7,869 6,507 7,853 Net Cash provided by investing Activities 7,713 6,507 7,851 Cash Flow from Financing Activities: Decrease in Note Payable 179,441 124,360 (107,900) Increase in Capital Stock -0- -0- 57,000 Increase in paid-in capital -0- -0- 85,048 Net Cash provided by financing Activities 179,441 124,360 29,648 Net Increase (Decrease) in Cash ( 33,129) 23,088 23,468 Cash at beginning of year 49,215 26,127 2,659 Cash at end of the year 16,086 49,215 26,127 Supplemental Disclosures of Cash Flow Information: Cash paid during the year for: Interest 4,865 4,085 -0- Income taxes -0- -0- -0- DOL RESOURCES, INC. NOTES TO FINANCIAL STATEMENTS NOTE 1. Summary of Significant Accounting Policies Organization and Operations The Company was organized on November 1, 1983 under the laws of the State of Wyoming. Its primary activities have been the acquisition of interests in various oil and gas properties, coal properties (Note 8) and exploration for oil and gas. Allowance for bad debts Accounts receivable from participants in oil and gas exploration are estimated to be at least 93% collectible, consequently a 7% allowance for bad debts has been established against those receivables. Receivables from the sale of oil and gas are fully collectible, since accruals are based primarily on collection of oil and gas sales subsequent to year-end. Properties The Company uses the full cost method of accounting for oil and gas acquisition, exploration and development costs. The Company has operations only within the continental United States and consequently has only one cost center. All costs associated with property acquisition, exploration and development activities are capitalized within the cost center. No costs related to production, general corporate overhead or similar activities are capitalized. Capitalized costs within the cost center are amortized on the units-of-production basis using proved oil and gas reserves. The carrying value of capitalized cost is limited to the sum of (A) the present value of future net revenues from estimated production of proved oil and gas reserves, plus (B) the cost of properties note being amortized, plus (C) the lower of cost or estimated fair value of unproved properties included in the costs being amortized less (D) income tax effects related to differences between book and tax basis of the properties involved. For the year ended December 31, 1985, total capitalized costs exceeded the cost center ceiling by $137,083. The excess was expensed in 1985 operations. DOL RESOURCES, INC. NOTES TO FINANCIAL STATEMENTS NOTE 1. Properties: (Con't). Sales and abandonments of oil and gas properties are accounted for as adjustments of capitalized costs, with no gain or loss recognized. Drilling in progress is included in the cost center with depletion being calculated on all costs within the cost center. Furniture and Fixtures Deprecation is computed by the straight-in line method on the cost of the automobiles and furniture and fixtures at rates based on their estimated service lives. Estimated lives in use are as follows: Furniture and Fixtures 5 - 12 years During the year ended 12-31-87, all furniture and fixtures were sold. Additional furniture and fixtures were acquired from an affiliate during 1988 as payment on accounts receivable. Earnings per common share Earnings per common share were computed by dividing the net loss by the weighted average number of common shares outstanding during the year. NOTE 2. Marketable Securities Marketable securities are valued at the lower of cost of value. 1996 1995 Aggregate cost 24,172 24,172 Aggregate market cost 1,924 1,924 Unrealized loss: 22,251 22,251 *The unrealized loss on marketable securities is charged to operations. DOL Resources, Inc. NOTES TO FINANCIAL STATEMENTS (Continued) NOTE 3. Notes Payable Notes payable consist of the following: Monthly Interest Due Within Due After Installment Rate One Year One Year 1996 Note 1 due 2-28-97 6.66% 337,310 $ -0- 1995 Note 1 Due 1-9-96 7.08% 375,000 $ -0- Further information concerning borrowing: 1995 1996 Maximum unpaid balance 375,000 375,000 Weighted average borrowing 375,000 371,860 Weighted average interest rate 7.08% 6.66% A settlement of existng debt was negotiated with the R.T.C. (Resolution Trust Corporation) in January, 1995. This resulted in a consolidated refinancing with a local financial institution. The new note includes accrued interest and approximately $100,000. of debt assumed from the parent corporation thus increasing the inter-company receivable by approximately $100,000.00. DOL Resources, Inc. NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE 4. Related Party Transactions As reported in our registrant's 10-Q for the quarter ended 30, 1984, Featherstone Development Corporation owned 3,245,099 shares, Featherstone Farms, Ltd., owned 609,058 shares, and Olen F. Featherstone II owned 654,097 shares of DOL Resources, Inc. common stock from January 1, 1982 to April 16, 1984. The Featherstone group had a total of 4,508,254 shares of common stock representing approximately 31.9% of the total outstanding common stock of DOL Resources, Inc. at December 31, 1983. On April 16, 1984 all of their restricted shares in DOL Resources, Inc. were exchanged for restricted shares in Petro Imperial Corporation of Dallas, Texas, a Utah Corporation controlled by Commercial Technology, Inc. Petro Imperial Corporation purchased an additional 500,000 shares of DOL Resources, Inc. common stock also on that date. The Company acquired by assignment from Petro Imperial Corp. in 1987 accounts receivable of $100,000 from Comtec Superior Management Co. and $139,719 from Comtec Glauber Management Co. as contributed capital. Both are affiliated companies. This was reversed in 1991. The Company also had accounts receivable from RCT Petro, Ltd. of $7,414 in 1990. This was written off as uncollectible in 1991. The Company ended 1995 with an account receivable from Glauber Management Co. (The parent corporation) of $281,240. A long-term payable if $100,148 was created to an affiliate during 1989 when a bank was holding, as collateral, a Certificate of Deposit belonging to the Affiliate applied the proceeds of the C.D. to accrued interest and a principal payment on one of the company's matured notes. In 1994 5,000,000 shares of stock were issued to the affiliate in payment of the $100,148. ($.02 per share). NOTE 5. Commitments: The Company had the following lease obligations: Coal Oil & Gas Leases Leases 1995 -0- -0- 1996 -0- -0- After 1996 -0- -0- DOL Resources NOTES TO FINANCIAL STATEMENTS NOTE 6. Income Taxes The Company as of December 31, 1996 has a net operating loss carryover for income tax purposes of approximately $888,000. The carryover is available to offset taxable income of future years and expires as follows: 1997 148,000 1998 241,000 1999 14,000 2000 109,000 2001 40,000 2002 48,000 2003 3,000 2004 34,000 2007 14,000 2008 19,000 2009 1,000 2011 217,000 888,000 The Company also had approximately $17,000 of investment tax credits available for carryover against future federal income tax liabilities. For financial reporting purposes, the net operating loss has been used to offset prior deferred income taxes. To the extent that the net operating loss carryovers are utilized for income tax purposes in future years, the deferred income taxes eliminated to give recognition to the carryovers as well as credits related to timing difference of the current year not recorded will be reinstated. Because of timing differences related principally to intangible drilling costs, cumulative losses for] income tax reporting purposes exceed those reported by approximately $554,000. Because of the uncertainty as to realization, no future tax benefits are recognized at December 31, 1996. DOL Resources NOTES TO FINANCIAL STATEMENTS NOTE 7. Operations in Difference Industries: The company operates principally in two industries (1) the exploration for and sale of oil and gas, and (2) investment in natural resource properties. The operations pertaining to the exploration for and sale of oil and gas involve actively participating in drilling for oil and gas and sale of subsequent production. The investment in natural resource properties as of December 31, 1996 includes investments in coal royalties of $10,156. Certain financial information concerning the company's operations in the described industries is as follows: Exploration Investment for and in Natural General Sale of Oil Resource Corporate and Gas Properties Assets Year ended December 31, 1994 Assets applicable to industry segment 567,644 10,156 250,095 Year ended December 31, 1995 Assets applicable to industry segment 546,815 10,156 370,171 Year ended December 31,1996 Assets applicable to industry segment 534,261 10,156 343,783 Exploration Investment for and in Natural General Sale of Oil Resources Corporate and Gas Properties Assets Year ended December 31, 1994 Income (loss) $ 10,028 $ -0- $(23,572) Applicable to Industry Segment Year ended December 31, 1995 Income (loss) $ 5,624 $ -0- $( 1,502) Applicable to Industry Segment Year ended December 31, 1996 Income (loss) $ 10,393 $ -0- $(235,153) DOL Resources, Inc. NOTES TO FINANCIAL STATEMENTS NOTE 8. Major Customers: The company had sales of oil and gas to three primary customers (purchasers of over 10% of product) in 1996. These sales were in the amount of $16,636 and $27,433 respectively. During the year ended December 31, 1995, the company had sales of oil and gas of $13,539 and $20,812 to three major purchasers, and for the year ended December 31, 1994 $16,922 and $29,457 to four major purchasers. NOTE 9. Undeveloped Coal Royalties: The undeveloped coal royalties were received in exchange of stock in the company from Discovery Oil, Ltd. (at the time the parent company of DOL Resources, Inc. ) in related party transaction in prior years. These coal royalties cover approximately 2,901 gross acres and 58 net acres at the end of 1996 and 1995. There were no coal lease expiration in 1996 and 1995. Development is not under control of the company. NOTE 10. Undeveloped Gold Properties The undeveloped gold properties, which were obtained on March 1, 1980 through foreclosure of a note by a placer gold mining claim in California, were sold for $20,000 during 1983 and $10,000 overriding royalty interest was retained by DOL Resources, Inc. In 1985, the pacer gold mining claim project was abandoned. The remaining cost was expensed during 1985. NOTE 11. Supplementary information as to Oil and Gas Producing Activities (Unaudited) Supplementary disclosures for oil and gas producing activities in accordance with Financial Accounting Standard No. 69 set forth below. The following table represents the Company's estimate of its proved oil and gas reserves at December 31, 1996. The company emphasized that reserve estimates are inherently imprecise. Accordingly, the estimates are expected to change as future information becomes available. These estimates, as they relate to December 31, 1996 information, have been prepared by Company personnel. DOL Resources, Inc. NOTES TO FINANCIAL STATEMENTS NOTE 11. Supplementary Information to Oil and Gas Producing Activities (Unaudited) (continued) Proved developed reserves at December 31, 1996 were 18,043 barrels. Proved undeveloped reserves of 23,970 bbls. are estimated at December 31, 1996. Gas reserves are included in the estimated barrels at 6 MCF per barrel. Disclosure of the standardized measure of discount future net cash flows for the year ending 12-31-96, 12-31-95, and 12-31-94 have not been included in this note due to the following: (1) Future gas flows are based on year and prices with changes in pricing considered only to the extend of contractual arrangements existing at year-end. Due to the significant fluxuation in oil and gas prices during 1996 future cash inflows based on year-end prices would be inaccurate and would result in a material misstatement. (2) Future development costs and production costs based on year-end cost and assuming continuation of continuing economic conditions would also result in a misstatement due to the price decline. (3) Future income tax expense, if any, would be difficult to determine due to large net operating losses incurred for both financial reporting and tax purposes. Proved Developed Proved Undeveloped Reserves (In Barrels) (In Barrels Reserves: Beginning of 1996 21,170 23,970 Discoveries -0- -0- Revisions of prior year's estimates 535 -0- Production ( 3,662) -0- 12-31-96 18,043 23,970 DOL Resources, Inc. NOTES TO FINANCIAL STATEMENTS NOTE 12. Legal Proceedings: On November 20, 1979, Phillips Petroleum Company filed a complaint with the Federal Energy Regulatory Commission (Docket No. C180-70--00) against DOL Resources, Inc. and other producers alleging that certain producer respondents abandoned the sales of natural gas to Phillips without first obtaining necessary Commission authorization under Section 7(b) of the Natural Gas Act. The Commission ruled in favor of Phillips on April 16, 1985. Effective December 1, 1985, DOL's share of the settlement to be paid from future production from the Miller-Jacobs #1 well is as follows: $160,000 payable out of 30% of gas reserves accruing to its interest in production for the period December 1, 1985 through November 30, 1989, and payable out of 50% of gas revenues accruing to its interest in production on or after December 1, 1989. The situation arose prior to present management's association with DOL Resources, Inc. DOL has since entered into an agreement with past management and will recover the entire amount on the basis of the amounts' of production withheld by Phillips. EX-27 2
5 12-MOS DEC-31-1996 DEC-31-1996 16,086 1,924 27,800 1,711 0 362,839 1,760,922 1,315,875 888,200 372,280 0 0 0 206,712 14,408 888,200 64,449 72,267 0 293,162 0 0 4,865 (224,769) 0 0 0 0 0 (224,760) (.01) 0
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