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 1997 Registrant did not expend any funds to comply with environmental
regulations. It does not contemplate spending funds incidental to its operation in 1998 to comply withenvironmental regulations.
Registrant did not participate in the drilling of any wells in 1997. 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, 1997 1996 1995 Sales to Unaffiliated Customer
Sales of Oil and Gas 74.615 64,449 46,464
Investment in natural resource properties -0- -0- -0-
Operating profit or (loss)
Sales of oil & gas 20,477 10,393 5,624
Investment in natural resource properties: -0- -0- -0-
Identifiable assets:
Sale of oil & gas 508.563 532,549 546,815
Investment in natural resource properties: 10,156 10,156 10,156
General corporate assets 483,233 345,495 370,171
Item 2
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, 1997 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, 1997 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
1995 1,743 11,414
1996 1,566 12,578
1997 2,444 11,687
The average sales price (including transfers) per unit of oil and gas produced is as follows:
1997 1996 1995 Oil - Barrels 19.30 23.04 18.85
Gas - MCF 2.35 2.26 1.79
The average production (lifting) cost per unit of production is as follows:
1997 1996 1995 Oil - Barrels 7.47 15.10 9.55
Gas - MCF .98 .65 .58
Exploratory Wells
Producers Dry Holes Total Wells Year Drilled Gross Net Gross Net Gross Net
1997 0 0 0 0 0 0
1996 0 0 0 0 0 0
1995 0 0 0 0 0 0
Developed Wells Producters Dry Wells Total Wells Year Drilled Gross Net Gross Net Gross Net
1997 0 0 0 0 0 0
1996 0 0 0 0 0 0
1995 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)
1997 30,263 53,468
1996 31,526 62,924
1995 32,938 73,209
Proved Developed Oil and Gas Reserves:
1997 6,283 53,468
1996 7,556 62,924
1995 8,968 73,209
The following are estimated net revenues from production of oil and gas reserves as of December 31, 1997.
Proved Proved Developed 1998 (31,527) 22,643 1999 75,172 19,692 2000 59,742 17,182 Remainder 161,729 62,719 265,116 122,236
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
Present value of estimated future net reserves, computed using a discount factor of 10% as of December 31, 1997.
1997 140,305 50,585 1996 155,702 65,982
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 inwhich 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, 1997 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 miing 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.
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.
Item 4. Submission of Matters to a Vote of Security Holders.
Not applicable.
PART 11
Item 5.
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
1997 .01 .01 .01 .01 .01 .01 .01 .01
1996 .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, 1998.
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.
Item 6. Selected Financial Data:
1997 1996 1995 1994 1993
Operating revenues $83,599 $73,267 $56,608 $68,299 $69,181
Income (loss from continuing opers. 8,981 (224,760) 4,122 (13,554) (31,192) Income (losses) from continuing operations per share .0004 (.0109) .0003 (.0009) (.002) Total Assets 1,001,852 888,200 927,142 827,895 809,599 Long-term oblig. 335,599 294,800 77,669 84,122 192,000
Cash dividends paid for common share -0- -0- -0- -0- -0-
Item 7.
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 $7,600.00 per month in 1997. This was down $500.00 from year 1996. The average cash in 1996 was up $900.00 from 1995 at $8,100.00. Working capital increased $75,822 primarily in the area of receivables and payables.
Net cash provided in operating activities for 1997 was a negative $135,354. A positive cash flow from investing activities of $8,979 and a positive cash flow from financing activities of $111,485 offset most of operating leaving a net decrease in cash of $14,890 over 1996. 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 1997 for clean-up compliance and none is expected in 1998.
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 1997 averaged approximately $5,200 per month. This is expected to be about the
same in 1998 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.
1997 vs 1996
Total revenues in 1997 were up approximately $11,300.00 over 1996 due primarily to an increase in the oil production.Lease operating expenses decreased significantly as did total expense due to the elimination of managment fees. Consequently there was an increase in profitability (before managements fees and depletion) in 1997 from 1996 of approxiamtely $21,974.
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 acculuated fees due to Comtec superior Managment co. Since 1986. Profitabioity (before depletion and depreciation) decreased approximately $214,500 in 1996 from 1995.
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
Item 8 Financial Statement and Supplementary Data.
Enclosed
Item 9.
Item 9. Disagreements on Accounting and Financial Disclosure.
None
Item 10.
Item 10. Directors and Executive Officers of the Registrant
S. Mort Zimmermann, age 70, has been a director and president of the company since April 16, 1984.
Fred M. Updegraff, age 63, has been a director vice- president and treasurer since April 16, 1984.
Stephen G., Wesstrom, age 48, 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.
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 1997 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.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
The following tabulations shows the name of each person who as of December 31, 1997 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, 1997.
Item 13.
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.
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, 1997.
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: April 7, 1998
/s/ Fred M. Updegraff Fred M. Updegraff Director, Vice President and Treasurer Dated: April 7, 1998
DOL RESOURCES, INC.
BALANCE SHEET
(Unaudited)
ASSETS December 1997 1996
CURRENT ASSETS
Cash $1,201 $16,086
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) 25,685 26,089
Due from related parties - Note 4 436,222 281,240 Prepaid expenses 37,500 37,500
Total Current Assets 502,532 362,839
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 1,653,485 1,654,446 Total cost 1,753,485 1,754,446
Less accumulated depletion 1,327,756 1,311,342
Net Properties 425,729 443,104 FURNITURE & FIXTURES At cost - Note 1 Furniture and fixtures 6,476 6,476
Less accumulated depreciation 5,181 4.533
Net Furniture and Fixtures 1,295 1,943
OTHER ASSETS Undeveloped coal royalties-Note 9 10,155 10,156 Other accounts receivable-Note 12 62,140 70,159 Total Other Assets 72,296 80,314 TOTAL ASSETS 1,001,852 888,200
DOL RESOURCES, INC.
BALANCE SHEET
December 31, CURRENT LIABILITIES 1997 1996 Notes payable - Note 3 408,000 337,310
Accounts payable 28,151 34,970 Accrued expenses -0- -0-
Total current liabilities 436,151 372,280
LONG-TERM LIABILITIES ` Notes payable -0- -0- Other accounts payable - Notes 4 & 12 335.599 294,800 Total Long Term Liabilities 335,599 294,800
STOCKHOLDERS' EQUITY Capital Stock, common, $.01 par value Authorized 25,000,000 shares; issued and outstanding 20,671,254 shares at 12-31-96 and 12-31-97 206,712 206,713
Capital in excess of par value 1,502,741 1,502,741 Accumulated deficit (1,478,977) (1,487,958) Treasury Stock ( 375) ( 375) Total Equity 230,102 221,120
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY 1,001,852 888,200
The accompanying notes are an integral part of this statement.
DOL RESOURCES, INC.
STATEMENT OF INCOME (Unaudited) Years Ended December 31,
1997 1996 1995 REVENUE: Oil and gas sales 74,615 64,449 46,464
Investment and other income 8,984 8,818 10,144 83,599 72,267 56,608
EXPENSES: General and Administrative 9,461 238,458 6,729 Depletion, depreciation and amortization 17,002 14,338 14,271 Lease operating expense 29,707 33,422 22,504 Interest 10,112 4,865 4,085 Production and windfall profit taxes 8,015 6,944 4,713 6,211 Salaries -0- -0- -0-
Lease rentals 261 -0- 184
74,618 298,027 52,486
Net profit (loss) before income taxes 8,981 (224,769) 4,122 (13,554) Provision for income taxes - Note 6 -0- -0- -0- Net Profit (loss) 8.981 (224,760) 4,122
Weighted average number of common shares outstanding 20,671,254 20,671,254 20,671,254
Earnings per common share $.0004 $(.0109) $ .0002
The accompanying notes are an integral part of this statement.
DOL RESOURCES, INC. STATEMENTS OF STOCKHOLDERS EQUITY (Unaudited)
Year ended December 31, 1997, 1996, and 1995
Capital Stock Capital in Number of Excess of Accumulated Treasury Shares Amount Par Value Deficit Stock
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)
Net Income 8,981 Balance at 12-31-97 20,671.254 206,713 1,502,741 (1,478,977) (375)
The accompanying notes are an integral part of this statement.
DOL RESOURCES, INC. STATEMENTS OF CASH FLOWS Years Ended December 31,
1997 1996 1995 INCREASE (DECREASE) in Cash: CASH FLOWS FROM OPERATING ACTIVITIES; Net Income (Loss) 8,981 (224,760) 4,122
Adjustments to Reconcile Net Earnings to net cash provided by operating activities: Depreciation and depletion 17,062 14,338 14,271
Changes in Assets and Liabilities: Accounts Receivable-Trade 404 ( 7,742) 703
Accounts Receivable-Affil. (154,982) ( 8,497)(97,641) Prepaid Expense -0- -0- -0- Accounts Payable - Trade ( 6,819) 6,378 ( 1,167)
Accrued Expenses -0- -0- (28,067) Net Cash Provided by operating Activities ( 135,354) (220,283)(107,779)
Cash Flows from Investing Activities: Proceeds from sale of property and equipment 961 ( 156) -0- Decrease in other assets 8,018 7,869 6,507 Net Cash provided by investing Activities 8,979 7,713 6,507
Cash Flow from Financing Activities: Decrease in Note Payable 111,489 179,441 124,360 Increase in Capital Stock -0- -0- -0- Increase in paid-in capital -0- -0- -0- Net Cash provided by financing Activities 111,489 179,441 124,360 Net Increase (Decrease) in Cash (14,890) ( 33,129) 23,088 Cash at beginning of year 16,086 49,215 26,127 Cash at end of the year 1,196 49,215 26,127
Supplemental Disclosures of Cash Flow Information: Cash paid during the year for: Interest 10,112 4,865 4,085 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.
1997 1996 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
Note 1 due 2-28-97 6.66% 337,310 $ -0-
Note 1 Due 3-14-98 6.64% 408,,000 $ -0-
Further information concerning borrowing:
1997 1996 Maximum unpaid balance 408,000 375,000 Weighted average borrowing 391,500 371,860 Weighted average interest rate 6.64% 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 1997 with an account receivable from Glauber Management Co. (The parent corporation) of $351,222.
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 1996 -0- -0- 1997 -0- -0- After 1997 -0- -0-
DOL Resources
NOTES TO FINANCIAL STATEMENTS
NOTE 6. Income Taxes
The Company as of December 31, 1997 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:
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 217,000 740,000
The Company also had approximately $1,300 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, 1997.
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, 1997 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, 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 Year ended December 31,1997 Assets applicable to industry segment 508,463 10,156 483,233
Exploration Investment for and in Natural General Sale of Oil Resources Corporate and Gas Properties Assets
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) Applicable to Industry Segment Year ended December 31, 1997 Income (loss) $ 27,623 $ -0- $( 18,642)
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 1997. These sales were in the amount of $26,971 and $24,531 respectively.
During the year ended December 31, 1996, the company had sales of oil and gas of $16,636 and $27,433 to three major purchasers, and for the year ended December 31, 1995 $13,539 and $20,812 to three 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 1997 and 1996. There were no coal lease expiration in 1997 and 1996. 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, 1997. 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, 1997 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, 1997 were 15,194 barrels. Proved undeveloped reserves of 23,970 bbls. are estimated at December 31, 1997. 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 12-31-97, 12-31-96, and 12-31-95 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 1997 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 1997 18,043 23,970 Discoveries -0- -0- Revisions of prior year's estimates 1,543 -0- Production ( 4,392) -0- 12-31-97 15,194 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.