<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[ x ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: March 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to ________
Commission File Number: 0-9204
MINERAL DEVELOPMENT, INC.
(Exact name of registrant as specified in its charter)
Texas 74-1492779
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
9400 N. Central
Ste. 1209, L.B. 196
Dallas, Texas
75231
(Address of principal executive offices)
(Zip Code)
(214)368-2084
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has
filed all reports required to be filed by Section 13 or 15(d)
of the Securities Exchange Act of 1934 during the preceding
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 X NO ___
Indicate the number of shares outstanding of each of
the issuer's classes of common stock, as of March 31, 1996.
Class: Common stock, par value $0.01 per share
Outstanding at March 31, 1996: 3,975,721 shares
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MINERAL DEVELOPMENT, INC.
INDEX
Page
Number
Part I. Financial Information:
Item 1. Financial Statements 2
Condensed Balance Sheets - March 31, 1996
and December 31, 1995 (Unaudited) 2
Condensed Statements of Operations
Three Months Ended March 31, 1996 and 1995
(Unaudited) 3
Condensed Statements of Cash Flows - Three
Months Ended March 31, 1996 and 1995 (Unaudited) 4
Notes to Financial Statements 5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
Part II. Other Information:
Item 6. Exhibits and Reports on Form 8-K 8
Signatures 8
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<PAGE>
Part I. Financial Information
Item 1. Financial Statements
MINERAL DEVELOPMENT, INC.
CONDENSED BALANCE SHEETS (UNAUDITED)
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
--------- ------------
<S> <S> <S>
ASSETS
CURRENT ASSETS:
Cash $ 225,627 $ 220,785
Accounts receivable 367,713 359,546
Other 9,459 1,193
---------- ----------
TOTAL CURRENT ASSETS 602,799 581,524
PROPERTY AND EQUIPMENT, AT COST:
Undeveloped oil and gas properties 69,181 68,626
Proved developed oil and gas
properties, based on successful
efforts method 5,495,763 5,488,225
Office and field equipment 372,248 372,248
---------- ----------
5,937,192 5,929,099
Allowance for depreciation,
depletion and amortization (5,009,127) (4,979,936)
---------- ----------
928,065 949,163
---------- ----------
$1,530,864 $1,530,687
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 264,505 $ 475,872
Joint interest prepayments 35,481 69,188
Revenues and royalties payable 85,114 87,793
Current portion of long-term debt 28,190 28,561
Note payable 200,000 200,000
---------- ----------
TOTAL CURRENT LIABILITIES 613,290 861,414
LONG TERM DEBT, LESS CURRENT PORTION 32,761 39,548
STOCKHOLDERS' EQUITY:
Common stock, $0.01 par value;
25,000,000 shares authorized,
3,975,721 shares and 3,375,721
shares issued and outstanding,
respectively 39,757 33,757
Capital in excess of par value 9,063,005 8,844,005
Deficit (8,217,949) (8,248,037)
---------- ----------
TOTAL STOCKHOLDERS' EQUITY 884,813 629,725
---------- ----------
$1,530,864 $1,530,687
========== ==========
</TABLE>
See accompanying notes to financial statements.
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<PAGE>
MINERAL DEVELOPMENT, INC.
CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------
1996 1995
---- ----
<S> <C> <C>
REVENUES:
Oil and gas $ 220,385 $ 134,247
Management fees and other 52,991 55,803
Gain (loss) on disposition of
properties -- (3,527)
---------- ----------
273,376 186,523
COSTS AND EXPENSES
Oil and gas production costs 107,522 101,373
Dry hole and abandonment costs 265 4,665
Depreciation, depletion and
amortization 29,192 39,371
General and administrative 100,316 147,722
Interest 5,993 1,677
---------- ----------
243,288 294,808
---------- ----------
NET INCOME (LOSS) $ 30,088 $ (108,285)
========== ==========
INCOME (LOSS) PER COMMON SHARE $ .01 $ (.03)
========== ==========
Weighted average shares outstanding 3,388,908 3,375,721
</TABLE>
See accompanying notes to financial statements.
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<PAGE>
MINERAL DEVELOPMENT, INC.
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------
1996 1995
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 30,088 $(108,285)
Adjustments to reconcile net income
(loss) to net cash provided (used)
by operating activities:
Depreciation, depletion and
amortization 29,192 39,371
Loss (gain) on disposition of
property and equipment -- 3,527
Net (increase) decrease in:
Accounts receivable (8,167) (204,745)
Other current assets (8,266) 2,755
Net increase (decrease) in
accounts payable and other
current liabilities (247,753) 409,710
--------- ---------
Net cash provided (used) by
operating activities (204,906) 142,333
Cash flows from investing activities:
Additions to property and equipment (8,093) (51,873)
Proceeds from disposition of
property and equipment -- 12,147
--------- ---------
Net cash provided (used) by
investing activities (8,093) (39,726)
Cash flows from financing activities:
Proceeds from long-term dt -- 9,318
Payments on long-term debt (7,159) (6,303)
Proceeds from issuance of common
stock 225,000 --
--------- ---------
Net cash provided by
financing activities 217,841 3,015
--------- ---------
Net increase (decrease) in cash 4,842 105,622
Cash at beginning of year 220,785 40,106
--------- ---------
Cash at end of period $ 225,627 $145,728
========= ========
Supplemental information:
Interest paid $ 5,993 $ 1,677
========= ========
Federal income tax paid $ -- $ --
========= ========
</TABLE>
See accompanying notes to financial statements.
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<PAGE>
MINERAL DEVELOPMENT, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996
1 - Statement by Management Concerning Interim Financial
Information
The financial information included herein is unaudited and
does not include all information and footnotes required by
generally accepted accounting principles for complete financial
statements; however, such information reflects all adjustments
(consisting solely of normal recurring adjustments), which are, in
the opinion of management, necessary for a fair presentation of the
results of operation for the interim period. It is recommended
that these interim financial statements be read in conjunction with
the financial statements and the notes thereto included in the
Company's Annual Report on Form 10-K for the nine month transition
period ended December 31, 1995.
2 - Income Per Common Share
The Income per common share was computed by dividing the net
income for each period by the weighted average number of common
shares outstanding during the quarter. Common stock options are not
considered to be common stock equivalents as their effect would be
anti-dilutive.
3 - Changes in Stockholders' Equity
Balances in Common stock and in Capital in excess of par value
at March 31, 1996 reflect the issuance of 600,000 shares of common
stock to a director of the Company upon the exercise of a stock
option during the current quarter. The proceeds were used
subsequent to the end of the quarter to repay the $200,000 note
payable to a bank.
4 - Subsequent Event
The Board of Directors has approved, subject to shareholder
approval, a one-for-five reverse stock split of the Company's
common stock. The Company is actively seeking additional capital
and has announced that it intends to file a registration statement
with the Securities and Exchange Commission relating to a public
offering of up to 5,000,000 post-split shares of its common stock.
The proceeds of the anticipated offering would be used for
acquisitions of producing oil and gas properties and would assist
the Company in meeting certain Nasdaq listing requirements. Any
offering will be made only by means of a prospectus.
The Company has entered into an employment agreement with an
individual for the position of President and Chief Executive
Officer
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<PAGE>
of the Company. The agreement provides for an annual salary of
$140,000 adjusted for incentive, as determined by the Board of
Directors for the period June 1, 1996 through June 1, 1999.
Additionally, the employment agreement requires that the
Company's stock option plan be amended to increase the number of
pre-split shares of its Company's common stock subject to the grant
of options from 1,000,000 to 2,000,000. Pursuant to the employment
agreement, options to purchase 500,000 pre-split shares of the
Company's common stock are to be granted at a purchase price per
share of $.60. The options are to have a ten-year term. The
employment agreement will not become effective unless the Company
is successful in raising a minimum of $9,000,000 in its
contemplated registered public offering.
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<PAGE>
Item 2.
MINERAL DEVELOPMENT, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations - Comparison of Three Months Ended March 31,
1996 and 1995
Net income for the quarter ended March 31, 1996 was $30,088,
compared to a loss of $108,285 for the corresponding quarter of
1995. The net income (loss) per share for the quarters ended March
31, 1996 and 1995, was $.01 and $(.03), respectively.
Revenues for the three month period ended March 31, 1996 were
$273,376 compared with revenues of $186,523 for the corresponding
three month period of the prior fiscal year, a 47% increase. The
improvement in revenues was primarily due to the increase in oil &
gas revenues, which resulted from higher oil and gas prices and oil
and gas production from new wells that more than offset normal
production declines.
Costs and expenses for the three month period ended March 31,
1996, decreased $51,520, or 17%, to $243,288 from $294,808 in the
three month period ended March 31, 1995, due primarily to a $47,406
decrease in general and administrative costs. This decrease was
due to cost savings resulting from the resignation effective
December 31, 1995, of the Company's Chairman of the Board,
President and CEO, and the assumption by Mr. David N. Fitzgerald of
these positions without salary. This executive realignment
resulted in cost savings to the Company in the current quarter,
which more than offset the extra expenses in the current quarter
for accounting, legal and reserve evaluation fees due to the change
of the Company's fiscal year from March 31 to December 31.
Liquidity and Capital Resources
The Company's working capital at March 31, 1996 was a negative
$10,491 compared to a negative $279,890 at December 31, 1995.
Changes in the Company's working capital position since
December 31, 1995 relate primarily to the effects of the exercise
of a stock option by a director of the Company during the quarter
ended March 31, 1996. The option exercise resulted in $225,000 in
cash for the Company. This addition to working capital [was]
utilized primarily to pay off the Company's note payable in the
second quarter of the current year. Also impacting the Company's
working capital was positive earnings before interest, taxes,
depreciation, depletion and amortization ("EBITDDA"). EBITDDA for
the quarter ended March 31, 1996 was $65,273 as compared to a
negative $67,237 in the quarter ended March 31, 1995. This cash
flow was used primarily for property acquisitions, well workovers
and capital expenditures on new wells as well as to reduce current
liabilities.
Management is of the opinion that the Company's cash flow and
ability to raise additional capital will be adequate to meet its
current obligations as well as fund additional property
acquisitions, new projects, and generation and/or participation in
new drilling and recompletion work.
-7-
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27.1 Financial Data Schedule
(b) Reports on Form 8-K - The Company filed one Report on
Form 8-K during the three months ended March 31, 1996.
On February 13, 1996, the Company filed a Report on Form
8-K reporting the change in its fiscal year from March 31
to December 31.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed in
its behalf by the undersigned thereunto duly authorized.
MINERAL DEVELOPMENT, INC.
(Registrant)
Date: May 15, 1996 /s/ Glenn L. Seitz
Glenn L. Seitz, Treasurer
-8-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED FINANCIAL STATEMENTS FOR MINERAL DEVELOPMENT, INC. AS OF AND FOR THE
THREE-MONTH PERIOD ENDED MARCH 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 225,627
<SECURITIES> 0
<RECEIVABLES> 367,713
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 602,799
<PP&E> 5,937,192
<DEPRECIATION> 5,009,127
<TOTAL-ASSETS> 1,530,864
<CURRENT-LIABILITIES> 613,290
<BONDS> 0
0
0
<COMMON> 39,757
<OTHER-SE> 845,056
<TOTAL-LIABILITY-AND-EQUITY> 1,530,864
<SALES> 220,385
<TOTAL-REVENUES> 273,376
<CGS> 0
<TOTAL-COSTS> 243,288
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,993
<INCOME-PRETAX> 30,088
<INCOME-TAX> 30,088
<INCOME-CONTINUING> 30,088
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 30,088
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
</TABLE>
