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AMENDMENT NO. 2 TO
FORM 10-KSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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, 1995
Commission file number
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UTAH RESOURCES INTERNATIONAL, INC.
(Name of small business issuer in its charter)
Utah 87-0273519
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(State of Incorporation) (I.R.S. Employer Identification No.)
297 W. Hilton Drive, Suite #4
St. George, Utah 84770
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(Address of principal executive offices including zip code)
Issuer's telephone number: (801) 628-8080
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Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Title of Class
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Common Stock
Par Value $.10 Per Share
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the
past 90 days.
(1) Yes No X
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(2) Yes X No
--- ---
Check if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge,
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in definitive proxy or information statements incorporated by reference in Part
III of this Form 10-KSB or any amendments of this Form 10-KSB. [ ]
Issuer's revenues for its most recent 1995 Fiscal Year was $787,369
(excluding any revenues from Midwest which have been classified as discontinued
operations).
The aggregate market value of the voting stock held by non-affiliates
computed by reference to the price at which the stock was sold, based on the
last sales transaction which occurred December 9, 1996 at approximately $.875
per share, is $795,403.13.
The number of shares of Common Stock, $.10 par value, outstanding on
October 8, 1996 was 2,522,808 shares.
DOCUMENTS INCORPORATED BY REFERENCE
PART OF FORM 10-KSB DOCUMENT
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PART I None
PART II None
PART III
Item 13 - Exhibits and Exhibits as specified in
Reports on Form 8-K Item 13 of this Report
Attached as amendment number 2 to this Form 10-KSB, is: (1) a revised
text of the Form 10-KSB; (2) revised financial statements; and (3) the
inclusion of the Financial Data Schedule, which was the subject of amendment
number 1 to this Form 10-KSB. The first two revisions were made pursuant to
comments from the SEC. Specifically, revisions were made to "ITEM 6
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS" to explain the
reasons that the Company sold a 50.5% controlling interest in the July 3, 1996
transaction. Revisions were also made to "ITEM 6 MANAGEMENT'S DISCUSSION AND
ANALYSIS OR PLAN OF OPERATIONS": (i) to discuss how the $3.35 per share
valuation was determined and whether or not that was fair value; (ii) if the
$3.35 was fair value, describe the basis for the conclusion that the $3.35 was
fair value and include disclosure of the value assigned to real estate held for
sale and to the royalty interests. Finally, revisions were made to the 1994
and 1995 INDEPENDENT AUDITORS' REPORTS (pages F-1 and F-18 respectively) to
identify the auditor, to reflect the signatures on such reports and the city
and state where such reports were issued.
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PART I
ITEM 1. DESCRIPTION OF BUSINESS.
(a) BUSINESS DEVELOPMENT.
FORM AND YEAR OF ORGANIZATION
Utah Resources International, Inc. ("URI" or the "Company") is a Utah
corporation, organized in 1966 as Utah Industrial, Inc. It was renamed Utah
Resources International, Inc. in 1969. The Company's executive offices are
located at 297 W. Hilton Drive, Suite #4, St. George, Utah 84770.
STOCK PURCHASE AGREEMENT - JULY 3, 1996
Subsequent to the period covered by this report, on April 5, 1996,
Inter-Mountain Capital Corporation, a Delaware corporation wholly owned by John
Fife ("IMCC"), entered into a Letter of Intent with the Company (the "Letter of
Intent"), whereby IMCC agreed, if certain conditions were met, to purchase a
51% interest in the Company at a purchase price of $3.35 per share. One of the
conditions for consummating the transaction contemplated by the Letter of
Intent was the spinoff of Midwest Railroad Construction and Maintenance
Corporation ("Midwest"). Pursuant to the Letter of Intent, IMCC agreed to pay
10% of the purchase price at closing with the remaining 90% owing to be
evidenced by a five year promissory note. The Letter of Intent also provided
that the Company grant IMCC a ten year option to purchase an additional 150,000
or more shares of URI's stock, so that IMCC, at all times would have the right
to own a 51% interest in the Company. The Letter of Intent also provided that
subsequent to the closing and subject to financing and other conditions, the
Company would cause either a: (i) 12,500 to 1 share reverse split of the
Company's stock, at $3.35 per share, with fractional shareholders given the
option to round-up and maintain their shareholder status; or (ii) tender offer
for its shares at $3.35 per share subject to certain payment options. Under
the terms of the Letter of Intent, the Company agreed to indemnify IMCC and
its shareholders and directors from and against any liability to the Company's
shareholders, officers and/or directors arising out of IMCC's negotiation,
execution and/or consummation of the Letter of Intent, the Stock Purchase
Agreement and the transactions contemplated by the Letter of Intent.
Furthermore, IMCC agreed to take all actions necessary to cause the Company to
honor the Company's obligations to indemnify its officers and directors to the
fullest extent permitted by law, including, but not limited to, the advancement
of their legal fees and costs in connection with all present and future
litigation involving them in their capacities as officers and directors of the
Company. The Company entered into the Letter of Intent on April 5, 1996. On
April 16, 1996, IMCC filed its Schedule 13D informing the company's
shareholders of its intent to engage in the two step transaction consisting of
the acquisition of a majority interest and conducting a reverse stock split or
a tender offer. It also gave notice of IMCC's intent to cause a class of
securities of the Company to be delisted from a national securities exchange or
cause a class of securities to cease to be authorized to be quoted in an
inter-dealer quotation system of a registered national securities association,
pursuant to Section 12(g)(4) of the Securities Exchange Act of 1934. In order
to obtain a copy of the Letter of Intent and for a more detailed description
of the terms of the Letter of Intent, see Schedule 13D filed by IMCC with the
SEC on April 16, 1996. The Company entered into the Letter of Intent over the
objections of Mark Jones and Jenny Morgan, being two directors of the Company.
On May 17, 1996, Mark G. Jones, a shareholder and director of the
Company and controlling shareholder of Mark Technologies Corporation, brought a
shareholders derivative suit captioned as MARK TECHNOLOGIES CORP., ET AL. V.
UTAH RESOURCES INTERNATIONAL, INC. ET AL., which was filed as Civil No.
96-090-3332CV in the Third Judicial Court of Salt Lake County, Utah (the
"Second State Action") against the Company, E. Jay Sheen, R. Dee Erickson and
Lyle Hurd, directors of the Company and IMCC. Mark G. Jones, a director of the
Company, is the controlling shareholder of Mark Technologies Corporation. The
Second State Action, included, among other things, a request for the issuance
of a temporary restraining order and injunction against the transactions
contemplated in the Letter of Intent.
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On or about June 26, 1996, the Company entered into two settlement
agreements. The first settlement agreement was by and among the Company, John
H. Morgan, Daisy R. Morgan, IMCC, John Fife, Robinson & Sheen, L.L.C., R. Dee
Erickson, Lyle D. Hurd, and E. Jay Sheen (the "Morgan Settlement Agreement"),
whereby certain disputes among the parties were resolved and settled and the
parties agreed to use their best efforts to terminate the 1993 Settlement
Agreement. A copy of the Morgan Settlement Agreement is attached as Exhibit
10.37. The "1993 Settlement Agreement" was the result of the settlement of a
shareholders' derivative action captioned as ERNEST MUTH, ET AL. V. JOHN H.
MORGAN, JR. ET AL., which was filed as Civil Number C-87-1632 in the Third
Judicial District Court of Salt Lake County, Utah (the "First State Action"),
where plaintiffs therein alleged, among other things, that the officers and
directors of the Company committed various breaches of their fiduciary duties
to the Company. A settlement agreement in the First State Action was entered
on April 6, 1993 (the "1993 Settlement Agreement"). On or about July 21, 1995,
attorneys for the Company on behalf of the Company filed an action against John
H. Morgan and Daisy R. Morgan, directors of the Company, to enforce the 1993
Settlement Agreement in the First State Action which resulted in certain
findings of fact and conclusions of law and an order enforcing the 1993
Settlement Agreement entered by Judge Michael R. Murphy on October 4, 1995 (the
"Murphy Order"). The Murphy Order was appealed by John H. Morgan, Jr. and
Daisy R. Morgan and cross-appealed by the Company. An Order to Show Cause was
subsequently filed in the First State Action on behalf of the Company by
attorneys for the Company against John H. Morgan, Jr., Daisy R. Morgan, and
Mark G. Jones and others (the "Order to Show Cause"). The second settlement
agreement was by and among the Company, R. Dee Erickson, E. Jay Sheen, Lyle D.
Hurd, Mark G. Jones, Mark Technologies Corporation, Anne Morgan, Victoria
Morgan, IMCC, John Fife and Robinson & Sheen, L.L.C. (the "1996 Settlement
Agreement), whereby the parties, among other things, agreed to dismiss the
Second State Action and to use their best efforts to terminate the 1993
Settlement Agreement and to settle certain other litigation. A copy of the
1996 Settlement Agreement is attached as Exhibit 10.38. For a more detailed
description of the Company's legal proceedings, see "Item 3. Legal
Proceedings," and copies of the Morgan Settlement Agreement and the 1996
Settlement Agreement which are attached hereto as Exhibits 10.37 and 10.38
respectively. In addition, the 1996 Settlement Agreement amended certain
provisions of the Letter of Intent including, the elimination of the option
that IMCC would cause the Company to initiate a tender offer for its shares and
the reduction in the reverse split from 12,500 shares to 1 to 1,000 shares to 1
and an increase in the IMCC payment at closing from 10% of the purchase price
to 15%. On or about August 9, 1996, a Motion to Intervene was filed by
shareholders Jenny T. Morgan, Gerard E. Morgan, John C. Morgan (together the
"Objectors"). On August 23, 1996, the court denied the Objector's petition.
The 1996 Settlement Agreement and the Morgan Settlement were approved by the
Third Judicial District Court of Salt Lake County, West Valley Department of
Utah, on or about August 23, 1996. The First Federal Action and the Second
State Action were dismissed with prejudice on August 28, 1996. The Order to
Show Cause was dismissed with prejudice and the 1993 Settlement Agreement was
terminated on August 29, 1996.
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On July 3, 1996, pursuant to the Letter of Intent and the 1996
Settlement Agreement, the Company and IMCC entered into a Stock Purchase
Agreement (the "Stock Purchase Agreement"), whereby the Company issued and sold
1,275,912 shares (the "Purchased Shares") of its common, $.10 par value per
share stock (the "Common Stock") to IMCC, so that IMCC owned a 50.5% interest
in the Company. IMCC acquired the Purchased Shares at a price equal to $3.35
per share for an aggregate purchase price of $4,274,305.20 (the "Purchase
Price"), of which $641,145.78 was paid in cash by IMCC to the Company at the
closing. The remaining portion of the purchase price of $3,633,159.42 was
evidenced by IMCC's promissory note (the "Note"). The Note bears interest at a
rate equal to the short-term applicable federal rate published by the Internal
Revenue Service in effect at the time of closing, and is adjusted on each
anniversary of the Note to the applicable short-term federal rate in effect on
such anniversary date. Interest on the Note is to be paid currently in arrears
on each anniversary of the Note. At the closing, IMCC paid $197,872.52 to the
Company, which amount represented the present value first year of interest due
under the Note. The principal and any unpaid interest accrued under the Note
is due and payable August 1, 2001. The Note is secured by the Purchased Shares
as evidenced by a stock pledge agreement, dated as of July 3, 1996, by and
between IMCC and the Company (the "Stock Pledge Agreement"). Pursuant to a
separate written guaranty agreement, John Fife personally guaranteed payment of
25% of all amounts due under the Note from to time. For a more detailed
description of the Stock Purchase Agreement, see Form 8-K filed by the Company
on July 19, 1996, and to review a copy of the Stock Purchase Agreement, see
Schedule 13D-A filed by IMCC on September 9, 1996.
As required by the Stock Purchase Agreement, E. Jay Sheen and R. Dee
Erickson, submitted their resignations as directors of the Company, effective
July 13, 1996. As further required by the Stock Purchase Agreement, John Fife
was appointed a director of the Company. David Fife, the brother of John Fife,
was also appointed a director of the Company. John Fife and David Fife were
appointed as directors of the Company as part of the Muth Group pursuant to the
1993 Settlement Agreement, effective July 13, 1996. As required by the Stock
Purchase Agreement, John Fife was elected President and Chief Executive Officer
of the Company in July, 1996 pursuant to a 3-0 vote of the Board (Mark G. Jones
and Jenny Morgan were not present for the vote). John Fife also serves as
Chairman of the Board of the Company pursuant to a 3-2 vote of the Board.
The Stock Purchase Agreement contemplated that subject to applicable
state and federal securities and state corporate law, the Company would cause a
1,000 to 1 share reverse split of the Company's stock to the shareholders of
record at $3.35 per share, with fractional shareholders given the option to
either purchase additional fractional shares to round up to one whole share
following the reverse split or sell their fractional shares for cash to the
Company. IMCC was granted a ten year option to purchase 150,000 or more
additional shares of stock at a purchase price equal to $3.35 per share and on
the same terms and conditions as those provided under the Stock Purchase
Agreement, so that after the reverse split IMCC may maintain its 50.5% majority
interest in the Company. Subsequent to the reverse split and subject to
applicable state and federal securities and state corporate law, any Company
shares redeemed by the Company pursuant to the reverse split (the "Returned
Shares") may be acquired by the remaining shareholders, other than IMCC or its
affiliates, in increments of 1,000 shares (the
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"Returned Share Option"), at a purchase price equal to the pre-reverse-split
price of $3.35 per share (the "Returned Share Purchase Price"). Only those
shares for which the Company has received a fully and properly executed letter
of transmittal, accompanied by the required documents, will qualify as Returned
Shares for the purposes of this Returned Share Option. Such Common Stock shall
be purchased in blocks of 1,000 shares of Common Stock such that each purchase
of a 1,000 share block of Common Stock shall be converted into one (1) share of
common $100.00 par value per share stock of the Company (the "New Stock"). In
the event the Returned Share Option is over-subscribed, then each of the
exercising shareholders may purchase the Returned Shares on a pro-rata basis
(as determined by the number of shares held by each of the exercising
shareholders as of the record date less those shares held by IMCC), but in no
event in less than 1,000 share blocks. In the event of such over-subscription,
each qualified shareholder could elect to purchase that percentage of Returned
Shares equal to x/(y-z) where "x" equals the number of New Stock shares owned
by the qualified shareholder wishing to purchase the Returned Shares, "y"
equals the total number of issued shares of New Stock, and "z" equals the
number of issued shares of New Stock owned by IMCC. Twenty-five percent (25%)
of the Returned Share Purchase Price shall be payable in cash upon exercise,
with the remaining balance of $2.51 per share being evidenced by a note (the
"Returned Share Note"), payable in three (3) years. Subject to applicable
Internal Revenue Service rules, the Returned Share Note shall bear simple
interest at the short term applicable federal rate as stated in June, 1996,
which interest shall be payable annually in arrears. Payment of the Returned
Share Note will be secured by a pledge of the Returned Shares purchased, as
converted into share(s) of New Stock, pursuant to a stock pledge agreement to
be provided by the Company. Exercising shareholders purchasing Returned Shares
shall be required to apply any dividends, distributions or other payments made
to the shareholder of the Company on the Returned Shares/New Stock to payment
of the unpaid balance of the Returned Share Note. Returned Shares, as
converted into New Stock, purchased by an exercising shareholder shall be fully
votable in accordance with the terms of the Company's organizational documents
and other agreements binding the Company for so long as the exercising
shareholder is not in default under the pledge agreement or the Returned Share
Note.
As a result of the reverse split, the Company is expected to become a
non-reporting company. A company with assets of over $5 million becomes a
"reporting company" when its shareholders number 500 or more. To thereafter be
allowed to become a "non-reporting company" and cease reporting to the
Securities and Exchange Commission, the number of shareholders must decline to
less than 300. Of the approximately 558 shareholders, approximately 479
shareholders of record own fewer than 1,000 shares, leaving approximately 79
shareholders post reverse-split if none of these shareholders exercise their
option to round up.
In addition to the contractual requirement that a reverse stock split
occur, as provided for in the Stock Purchase Agreement, the Company's senior
management and its Board of Directors have assessed the advantages and
disadvantages of the Company's status as a "reporting company" under the
Exchange Act. First, such reporting is very costly. Furthermore, a majority
of the Board of Directors does not believe that being a "reporting
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company" has given the Company any significant advantage the Company would not
otherwise have had as a "non-SEC reporting company." The Company's
registration with the SEC has not improved flexibility for current or future
financing of corporate expansion through the building of a broader equity base,
nor has it made the valuation of shares of the Common Stock significantly
easier (since no active market exists for the sale of stock which is reflective
of the Company's operations and earnings potential). Finally, such
registration has not resulted in the development of an active public market for
the Common Stock and thus has not provided substantially increased liquidity
for shareholders who desire to sell their Common Stock. For a more detailed
description of the history of the Stock Purchase Agreement see "ITEM 3 LEGAL
PROCEEDINGS," Schedule 13D/A filed September 9, 1996, Form 8-K filed July 19,
1996, and Schedule 13D filed April 16, 1996.
SHARE EXCHANGE AGREEMENT
On June 13, 1995, the Company consummated the exchange of 590,000
shares of its common stock, representing approximately 33% of the total issued
and outstanding shares of the Company's common stock following the transaction,
in return for receipt of all of the issued and outstanding stock of Midwest
Railroad Construction and Maintenance Corporation ("Midwest") pursuant to a
Plan of Share Exchange and Share Exchange Agreement, dated February 16, 1995 by
and among the Company, Midwest, Robert D. Wolff ("RD Wolff") and Judith J.
Wolff ("JJ Wolff") (the "Share Exchange Agreement"). The Share Exchange
Agreement was approved by a 3-2 vote of the Board. Directors John H. Morgan,
Jr. and Daisy R. Morgan voted against the Share Exchange Agreement. All of
the common stock of Midwest was owned by RD Wolff and JJ Wolff. The Share
Exchange Agreement was accomplished as a tax free reorganization pursuant to
Section 368(a)(1)(B) of the Internal Revenue Code of 1986, as amended (the
"Code"). Midwest, headquartered in Salt Lake City, Utah, is in the railroad
construction and maintenance business, operating out of five regional offices
located in Utah, Wyoming, Colorado, Nebraska and New Mexico. Midwest also
provides railroad engineering, surveying, bridge and structural maintenance,
grade crossing and in-plant switching services. Pursuant to the terms of the
Share Exchange Agreement, the Company agreed to: (i) indemnify Midwest and the
Wolffs from any liability to the Company's shareholders, its officers or
directors, whether brought directly by the person or in a derivative capacity
arising from Midwest's or the Wolffs' negotiation, execution, or consummation
of the Share Exchange Agreement; (ii) execute a three year employment agreement
between RD Wolff and the Company, whereby RD Wolff would act as the President
of Midwest; (iii) apply for a listing of its stock on the NASDAQ; and (iv) lend
Midwest, in the form of a line of credit, a sum not to exceed $250,000, with
the first draw available after February 15, 1995, evidenced by a promissory
note in standard form, bearing an interest rate of 1% over the posted prime
lending rate at First Security Bank of Utah, N.A., as of February 15, 1995, and
adjusted each three months thereafter. Prior to closing of the Share Exchange
Agreement, Midwest borrowed a total of $100,000 against the line of credit.
Pursuant to the terms and conditions of the Share Exchange Agreement, the line
of credit from the Company became subordinate to Midwest's existing credit line
of $350,000. The line of credit was secured by the assets and equipment of
Midwest. The Company entered into an employment agreement with RD Wolff, dated
as of June 13, 1995 (the "Wolff Employment
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Agreement"), and an operating agreement between Midwest and RD Wolff, dated as
of June 13, 1995 (the "Operating Agreement"). Pursuant to the Wolff Employment
Agreement, RD Wolff was to serve as CEO of the Company and Midwest, and RD
Wolff was to receive $125,000 per year in compensation during the term of the
Wolff Employment Agreement. Furthermore, during the first five quarters of the
Wolff Employment Agreement, beginning July 1, 1995, RD Wolff was to receive
$25,000 in additional compensation per quarter. In addition to his base
salary, RD Wolff was to receive an annual bonus computed on the after tax net
earnings of Midwest, as follows: (a) 5% of the first $200,000 in net earnings
of Midwest, (b) 7% of the net $200,000, and (c) 10% of all amounts over the
first $400,000 in net earnings of Midwest. RD Wolff was also entitled to
participate in the Company's health and benefit plans. Pursuant to the terms
of the Operating Agreement and for services performed in connection with the
consummation of the Share Exchange Agreement, the Company paid to each of R.
Dee Erickson and E. Jay Sheen, both of whom were directors of the Company at
the time of the execution of the Share Exchange Agreement, as compensation,
38,000 shares each of the Company's Common Stock and $104,000 in cash. For a
more detailed description of the Share Exchange Agreement, the Wolff Employment
Agreement and the Operating Agreement and for copies of the above listed
agreements see Form 8-K filed on behalf of the Company on July 20, 1995.
On July 18, 1995, Anne Morgan and Victoria Morgan, at the time
shareholders of the Company and the adult daughters of John H. Morgan, Jr. ("JH
Morgan") and Daisy R. Morgan ("DR Morgan"), both former directors and
shareholders of the Company, filed a shareholders derivative action against R.
Dee Erickson ("Erickson"), E. Jay Sheen ("Sheen"), Lyle D. Hurd ("Hurd")
(Messrs. Erickson, Sheen and Hurd were three of the five directors of the
Company at the time the suit was filed, with JH Morgan and DR Morgan being the
remaining two directors), the Company, Midwest, RD Wolff and JJ Wolff, in the
United States District Court for the Central District of Utah, Case Number
2:95CV 661J, captioned as ANNE MORGAN ET AL. V. R. DEE ERICKSON, ET AL. (the
"First Federal Action"). The complainants alleged, among other things that the
defendants had violated proxy solicitation rules, violated disclosure rules
under the Exchange Act of 1934, breached their fiduciary duties to the
Company's shareholders, breached professional duties, committed fraud, wasted
and looted the Company's assets, converted Company property, engaged in
self-dealing, mismanaged the Company and breached their duty of loyalty. The
complaint sought, among other things, the rescission of the Share Exchange
Agreement.
The terms of the Letter of Intent between IMCC and the Company
required that the Company rescind the Share Exchange Agreement. For the
foregoing reason, Midwest and the Company entered into a Splitoff Agreement,
dated as of April 25, 1996 (the "Splitoff Agreement"), whereby the Share
Exchange Agreement was rescinded. A copy of the Splitoff Agreement is attached
hereto as Exhibit 10.36. Pursuant to the terms of the Splitoff Agreement, URI
transferred all of the outstanding shares of Midwest stock held by the Company
to the Wolffs in exchange for the 590,000 shares of URI stock then held by the
Wolffs which transfer was accomplished tax free in accordance with Section 355
of the Code. Furthermore, the Share Exchange Agreement, the Wolff Employment
Agreement and the Operating Agreement were cancelled. RD Wolff ceased to be
the President of URI. Midwest received a net intercompany
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transfer of approximately $316,974.17 through March 31, 1996, which Midwest
retained. Furthermore, the parties to the Splitoff Agreement agreed that in
the event intercompany transfers for the period from July 1, 1995 through March
31, 1996 were: (i) less than $316,974.17, then URI would pay Midwest the
difference; or (ii) more than $316,974.17, then Midwest would pay URI the
difference.
Pursuant to the Splitoff Agreement, URI agreed to indemnify Midwest
and the Wolffs and their respective agents, employees, attorneys, officers,
directors and assigns from any and all claims, causes of action, liabilities,
damages, costs, expenses and attorneys' fees arising from or relating in any
way to URI or the Share Exchange Agreement. This indemnification provision
would not apply to acts of fraud, gross negligence or willful misconduct by RD
Wolff. The Wolffs and Midwest agreed to indemnify URI and its respective
agents, employees, attorneys, officers, directors, successors and assigns from
any and all claims, causes of action, liabilities and damages arising from or
relating in any way to the Splitoff Agreement, which indemnification obligation
is limited to $312,000. Within 30 days from the date of execution of the
Splitoff Agreement, the Company's accountants are to calculate the federal,
state and local income taxes attributable to Midwest's business operations
(excluding any impact of salary payable or paid to RD Wolff or any intercompany
charges to the Company for rent, overhead and administrative expenses) for the
period commencing June 1, 1995 and terminating on December 31, 1995. Such
taxes are to be determined on the basis as if the Company and Midwest were not
filing a consolidated tax return for the same period or part thereof (whether
or not a consolidated return is filed). The amount of such taxes is to be
considered an intercompany receivable between the Company and Midwest.
Pursuant to the terms of the Splitoff Agreement, Midwest agreed to pay such
tax amount to the Company in 12 installments. Simultaneous with the execution
of the Splitoff Agreement, Midwest paid the Company the sum of $10,000 as an
initial tax payment. The balance due the Company is to be paid in 11
additional equal monthly installments, each such installment due on the first
day of each month until all 11 installments have been paid in full.
The first of the 11 monthly installments is due and payable on the first day of
the month following the determination of the taxes owed by Midwest to the
Company. The taxes to be paid have not yet been determined.
(b) BUSINESS OF COMPANY.
URI is a real property development corporation. The Company directly
owns approximately 394 acres of undeveloped land in St. George, Utah, 353 acres
of which are developable on which it conducts its real property development
business, primarily through its wholly-owned subsidiary, Tonaquint, Inc.
("Tonaquint"). Most of the land is near the Southgate golf course. URI also
has interests in partnerships that own and are developing other real property
in St. George. The Company receives revenues from its ownership of overriding
royalty interests in producing oil and gas leases in Utah and Wyoming, dating
from the Company's historic business of acquiring and selling oil, gas and
mineral leases.
The Company's undeveloped real property is adjacent to Interstate
Highway 15, a major traffic route from Salt Lake City to Las Vegas and Southern
California. URI's real estate
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development activities in recent years have concentrated on subdividing and
selling improved lots for residential construction, as the financial condition
of the Company and the St. George, Utah real estate market have permitted. The
Company's lands include premium priced hillside view lots, as well as
lower-priced lots. In addition, the Company pursues commercial real estate
development of some of its undeveloped real property.
On June 13, 1995, the Company consummated the exchange of 590,000
shares of its common stock, representing approximately 33% of the total issued
and outstanding shares of the Company's common stock, for all of the issued and
outstanding stock of Midwest Railroad Construction and Maintenance Corporation
("Midwest") pursuant to a Plan of Share Exchange and Share Exchange Agreement,
dated February 16, 1995 by and among the Company, Midwest, Robert D. Wolff ("RD
Wolff") and Judith J. Wolff ("JJ Wolff") (the "Share Exchange Agreement"). All
of the common stock of Midwest was owned by RD Wolff and JJ Wolff. The Share
Exchange Agreement was accomplished as a tax free reorganization pursuant to
Section 368(a)(1)(B) of the Internal Revenue Code of 1986, as amended.
Midwest, headquartered in Salt Lake City, Utah, is in the railroad construction
and maintenance business, operating out of five regional offices located in
Utah, Wyoming, Colorado, Nebraska and New Mexico. Midwest also provides
railroad engineering, surveying, bridge and structural maintenance, grade
crossing and in-plant switching services. Through the remainder of 1995 and
through April 25, 1996, Midwest and URI conducted the above activities. On
April 25, 1996, Midwest and URI entered into a Splitoff Agreement, whereby,
among other things, the Share Exchange Agreement was rescinded. For 1995
reporting purposes, Midwest's operations are classified as discontinued
operations, with a net income of approximately $93,000 from operations and a
net loss on disposal of discontinued items of approximately $684,000 to the
Company. For a more detailed description of Midwest and the Splitoff Agreement
see, "ITEM 3 LEGAL PROCEEDINGS."
REAL PROPERTY DEVELOPMENT ACTIVITIES
In 1995, the Company sold a total of three (3) improved residential
building lots in its Southgate Hills Phase II subdivision, generating $145,000
in gross revenues. Three (3) residential lots remained in inventory at year
end, 1995 and one lot remains in inventory as of this filing in 1997. The
Company sold its one/half interest in a one and one/half acre parcel of golf
course commercial property through the partnership of Southgate Resort located
on Tonaquint Drive, for $171,098. In 1994, the Company sold a total of 17
improved residential building lots in its Southgate Hills Phase II subdivision
generating approximately $800,000 in gross revenues. In mid-1993 the City of
St. George began condemnation proceedings against 8.45 acres of real property
owned by Tonaquint, Inc., located directly south of the St. George airport.
The City needed the property to accommodate runway expansion at the airport.
The matter was settled in early 1994. The City paid Tonaquint $135,000 for the
acreage, which the Company accepted under threat of condemnation (Section 1033
of the Internal Revenue Code of 1986, as amended).
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In July of 1992, Tonaquint executed a Sale and Option Agreement with
Kay H. Traveler (the "Sale and Option Agreement"), pursuant to which Tonaquint
was to sell 14 acres to Mr. Traveler, for a total purchase price of $350,000
($25,000 per acre), and grant Mr. Traveler an option to acquire an additional
40 acres at option exercise prices ranging from $20,000 to $50,000 per acre,
exercisable over five years, so long as minimum option exercises occurred each
year. Mr. Traveler's inspection of the 14 acres disclosed adverse soil
conditions, resulting in the execution of an Addendum to the Sale and Option
Agreement by the parties in March of 1993. Mr. Traveler was granted an option
to acquire a total of 56 acres at prices ranging from $22,000 to $50,000 per
acre. The Kay Traveler Sale and Option Agreement resulted in 1995 sales of
3.48 acres for the sum of $152,137. From July 1992 through December 31, 1995,
Kay Traveler exercised his option for a cumulative total of 30.57 of the 75.98
acres available, for the sum of $836,206. Approximately 45.41 acres remain
under option to Mr. Traveler.
During the latter half of 1994, the Company began its development
efforts for Southgate Phase III, consisting of a total of 37 acres of land
above the Southgate golf course, suitable for view-lot residential
construction. The land to be developed is on the hillside directly to the
south of the Southgate golf course and directly to the west of Interstate 15.
The sloping topography of the land requires that the Hillside Ordinance
Committee of the St. George Planning and Zoning Commission approve the
Company's planned development of the acreage. The Company is seeking approval
for development of all 37 acres for a total of 79 lots. This approval has
taken longer than originally anticipated, due in part to the restrictions of
the hillside ordinance and the increasing political pressure to restrict real
estate development generally in St. George, which has resulted in an increasing
regulatory burden on real estate development. Approval is expected no earlier
than the first quarter of 1997. Thereafter, the Company anticipates, upon
Board approval, excavating, building roads, bringing utilities to the property,
constructing curbs and gutters, and selling the improved lots.
Beginning in late 1994, the Company began planning for the development
of its Southgate Valley subdivision, 125 lots on 32 acres of the Company's
property located west of the Southgate golf course. The Company received
approval from the St. George Planning and Zoning Commission for development of
the property. The Company is considering alternative development opportunities
from residential to commercial, based upon zoning requirements and market need.
REAL PROPERTY DEVELOPMENT INDUSTRY OVERVIEW, GOVERNMENT REGULATION, AND
COMPETITION
The real estate development industry in general and the residential
real estate development industry in particular is a high risk industry, subject
to changes in general economic conditions, fluctuating interest rates, and
changing demand for the types of developments being considered. Volatility in
local and regional land use demands, as well as changing supply and demand for
the specific uses for which the real property is being developed are also
factors in assessing the relative risks of the business. The demand for
residential real estate development is particularly sensitive to changing
interest rates and shifting demographics. Both of these
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factors affecting the demand for residential housing are highly unpredictable
over both the short and long-term.
Real estate development is a government regulated industry. The
regulation of real estate development is often carried out in an unpredictable
fashion, reflective of both political and rational considerations. Regulation
is carried on by municipal, county, state and federal agencies, but municipal
and county governments have the greatest regulatory impact. St. George City,
in which URI operates, has been adopting increasingly restrictive regulations
associated with development activities, including the adoption of more
restrictive building codes and ordinances, greater emphasis on land use
planning, pressure to increase the number of low density resident developments,
and heightened public concern aimed at limiting development as a means to
control growth. Development in some areas close to the Company's lands may be
limited by governmental environmental protection activities. Government
regulation can have an effect on the viability of real estate development by
the Company.
The real property development industry is highly competitive. Several
development companies with interests in St. George have longer operating
histories, greater financial strength and more experience in the industry than
does the Company. The Company's development activities historically have
represented less than 5% of total real estate development activity in the area
in and around St. George, and, in management's view, that percentage is likely
to decrease in the near term given the increase in overall development
activities in the area. The perceived strength of the St. George real estate
market has recently attracted many more developers to the area, increasing the
competition for the Company. The Company has very little debt, which has
served it well in being able to weather the ups and downs in the St. George
real estate market. Management believes that the Company's positive equity to
debt ratio could provide the Company with increased liquidity through improved
borrowing capabilities.
PARTNERSHIPS
TONAQUINT-INDIAN HILLS LIMITED PARTNERSHIP
All but approximately $15,500 of the remaining assets of
Tonaquint-Indian Hills Limited Partnership, which constructed 26 condominium
townhomes on 4 acres of land in the late 1980's, were distributed in 1993. The
Company plans to dissolve the partnership in 1997 and distribute its remaining
assets. The Tonaquint-Indian Hills Limited Partnership has been inactive
through 1995.
SERVICE STATION PARTNERSHIP
The Company, effective April 30, 1993, discontinued operations of the
Partnership other than the environmental remediation described below, and the
operations up to that date are included in discontinued operations on the
Company's financial statements. The Company, together with Tonaquint, owned as
of December 31, 1995, partnership interests representing an approximate 79%
interest in the Service Station Limited Partnership #2, a Utah limited
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partnership organized to build and operate a service station/mini-grocery store
adjacent to the St. George Hilton Inn in St. George, Utah. In a transaction
coincident with the sale of the St. George Hilton Inn, the partnership entered
into a put/call option contract with St. George Inn, L.C., dated May 21, 1993.
Under the terms of the option contract, St. George Inn, L.C. granted the
partnership a one-year put option to require St. George Inn, L.C. to purchase
the service station for $200,000 in cash, subject only to the requirement that
the partnership complete the environmental clean-up of the site prior to
exercising the option and a simultaneous call option granting St. George Inn,
L.C. a two year option to purchase the site for $200,000 in cash whether or not
the environmental remediation has occurred. The clean-up had not been
completed by May 15, 1994, when the partnership's put option expired. Further,
the environmental remediation had not been completed by May 15, 1995 when the
two year option to St. George, L.C. had expired. St. George Inn, L.C. has
claimed that the option was extended by the partnership and that the
partnership has not completed its remediation operations. Negotiations are
ongoing with St. George Inn, L.C. to resolve this matter.
In 1989, the partnership replaced its gasoline underground storage
tanks, which the partnership was informed had been leaking. From November of
1992 through the end of 1995, the partnership has spent $164,578 on efforts to
remediate the soil contamination by gasoline and other hydrocarbons which is
alleged to have occurred from operation of the service station. The Company
has hired consultants and engineers and is following their recommendations to
remediate the property as required by Utah law and regulations. Recently, the
Company received notice from St. George Inn, L.C. that it intends to develop
its property located adjacent to the service station property along with a
demand that the partnership accelerate clean-up efforts on the property owned
by St. George Inn, L.C. Negotiations to settle the matter with St. George Inn,
L.C. are continuing.
The Company leased the service station property to St. George Inn,
L.C., for a term of two years, commencing June 24, 1993, for the sum of $1.00
per month. In return, St. George Inn, L.C. agreed to maintain the care of the
property and keep the property in a clean and good condition. The Company was
responsible for all expenses associated with the property, including utilities
under the lease and environmental clean-up expenses. The lease expired in
1995.
Morgan Gas & Oil Co., a limited partner of the Service Station
Partnership #2, holds notes in the total principal amount of $110,932 from the
Service Station Partnership #2, ostensibly representing loans made by Morgan
Gas & Oil Co. to the partnership. Morgan Gas & Oil Co. claims the loans are
overdue. However, since the transactions were between related parties, all of
whom were controlled by John H. Morgan, Jr. at the times of the transactions,
and since the Company also advanced funds to the Service Station, the Company
is performing an internal audit to verify the legitimacy of the loans and their
proper characterization, before it determines whether to acknowledge and pay
the debt. These notes payable are included in net assets of discontinued
operations.
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SOUTHGATE PARTNERSHIPS
The Company is a general partner in three separate Utah limited
partnerships, Southgate Palms, Southgate Resort and Southgate Plaza,
respectively, each of which is (or was) a partner in one of three separate
general partnerships having the same names, whose initial purpose was the
development of certain real property located near the St. George Hilton Inn.
This property consisted of the present Southgate Golf Course (formerly the Lava
Hills Resort Golf Course) and certain property acquired from Tonaquint
contiguous to or located near the Southgate Golf Course.
Southgate Palms General Partnership constructed the Fairway Hills
subdivision. During 1994, the homeowners association for the subdivision,
demanded the partnership build a tennis court, or pay an amount to each
homeowner constituting the value of a tennis court, claiming the partnership's
agents represented that one of the amenities in the project would be a tennis
court. The partnership denied liability but, in May of 1995, settled the
dispute by paying the homeowners $32,000 and forgiving a disputed debt of
approximately $11,000. The Company paid its 1/3rd share of the settlement.
Southgate Plaza General Partnership is selling parcels of its
property, primarily for commercial development. In 1995, the partnership sold
two parcels totalling 2.4 acres, with proceeds to URI in the amount of
$183,992. Sales of 23 acres occurred in 1994, where the Company's portion of
the proceeds totaled $658,612. In 1993, no sales were made. The Company intends
to dissolve Southgate Palms and Southgate Resort partnerships.
OVERRIDING ROYALTIES IN OIL AND GAS LEASES
URI has overriding royalty interests in oil and gas properties held by
various other parties. All revenues from the Company's interests in the
properties have been received in cash. The Company received royalties in the
amount of $61,000 in 1995 as compared to $92,000 in 1994. URI has not engaged
in the acquisition and sale of oil and gas leases for many years and has no
intention of doing so in the future, nor does it have facilities or means to
perform the exploration, development and operation of oil and gas wells on
properties in which it has interests. Mineral or oil and gas exploration and
development is undertaken by third parties. If production is realized on any
properties in which URI has an interest, it receives a share of gross
production revenues based upon the percentage overriding royalty interest it
has retained.
EMPLOYEES
In 1995, the Company employed two full-time employees and six
part-time employees. Currently, the Company employs two full-time employees
and no part-time employees. Pursuant to the Stock Purchase Agreement, the
Company and John Fife have agreed to enter into an employment agreement which
would provide for, among other things, (i) the employment of Mr. Fife as
President, CEO, Chairman of the Board of the Company and (ii) compensation
to be paid to Mr. Fife of no more than $200,000 for any year during the
employment period.
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At this time no employment agreement has been entered into with Mr. Fife. The
Company's Board, in a 3-2 vote passed a resolution delaying the negotiation of
the terms of the John Fife employment agreement until after the shareholders
vote on the proposed reverse stock split. To date, John Fife has received no
compensation from the Company for his services as President. URI and its
subsidiary currently employ Gerry Brown on a full-time basis, to act as the
Vice President of the Company, where he provides real estate planning,
development and sales services for the Company, Tonaquint, Inc., the Company's
wholly-owned subsidiary, and various affiliated partnerships. Mr. Brown is
currently the President of Tonaquint, Inc., where he assists in land use
planning, negotiating sales and financing arrangements, obtaining government
approvals, arranging for construction contracts, and supervising the
performance of engineering services as have been required. The Company
executed and presented Mr. Brown with a three year employment agreement on
June 28, 1995, which employment agreement remains unexecuted by Mr. Brown.
Mr. Brown received compensation from the Company during the years 1993, 1994
and 1995, as set forth in the Compensation Table on page 31. Ladd Worth
Eldredge is employed by the Company as its Secretary, Treasurer, CFO and
office manager. Robert D. Wolff, Gerry Brown and Ladd Worth Eldredge served as
employees of the Company in 1995. From June 1995 through April 1996, Robert D.
Wolff served as the CEO of the Company, with an annual salary of $125,000 and
quarterly bonus of $25,000. Gerry Brown served as President of the Company.
Ladd Worth Eldredge was employed as the Company's Secretary, Treasurer, CFO and
Office Manager. No employees are party to a collective bargaining agreement
with URI.
ITEM 2. DESCRIPTION OF PROPERTY
ST. GEORGE PROPERTIES
As of December 31, 1995, Tonaquint, Inc., a wholly-owned subsidiary of
the Company, owned approximately 394 acres of undeveloped land in the general
area of the St. George Hilton Inn and the Southgate Golf Course in St. George,
Utah, 353 acres of which are developable. As of December 31, 1995,
approximately 45.51 acres remained under option to Kay Traveler, at prices
ranging from $22,000 to $50,000 per acre.
The Company intends to develop its property, primarily through
subdividing and selling improved lots for residential construction, although
sales of undeveloped parcels to other developers are also occurring.
Additionally, management believes that approximately 25 acres of the Company's
lands are suitable for commercial development. URI owns a combined 27%
interest in 7.5 acres of land owned by the partnerships identified above,
primarily Southgate Plaza General Partnership.
Oil & Gas Interests
The Company has overriding royalty interests in oil and gas wells
producing primarily in the Unitah Basin, Unitah County, Utah, and Sublette
County, Wyoming. URI owns overriding royalty interests of from .025 of 1% to
3% of production.
URI was not the original lessee on several of the oil and gas property
leases. The original lessees were affiliates of, or related parties to, the
Company. As to those lessees, the
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Company's royalty interest was obtained by assignment from the original
lessees. In some cases, the assignments have not been recorded. As to some
royalty interests, the precise acreage held by the Company cannot be determined
without unreasonable effort and expense. The Company does not have available
to it reserve reports on the properties. Any reserve analyses that have been
made on the properties were made by third parties, who view such information as
confidential, making it unavailable to the Company.
Many oil, gas and hydrocarbon leases issued by the State of Utah or
the United States are issued for definite periods of time, often from five to
ten years. If, at the end of the lease period, production has been realized
and is continuing on the property subject to the lease, the term of the lease
continues for the period of commercial production. Thus, the continuing
interest of URI in state and federal leases is dependent upon the ability of
the third party operators to develop significant production on the properties
subject to those leases. The expense of compliance with environmental
regulations on lands in which the Company may have overriding royalty interests
is not borne by the Company.
Through its wholly-owned subsidiary, New Mercur Gold Exploration,
Inc., the Company holds a 50% joint interest in ten patented lode mining claims
covering approximately 137 acres in Tooele County, Utah. The claims have been
leased to Barrick Mercur Gold Mines for a nominal amount. There is presently
no production on the properties. Development of the Company's mineral
properties may be affected by federal and state regulation relating to the
protection of the environment. Such regulation may prevent the development of
properties owned by the Company, or those in which it retains an overriding
royalty interest.
OFFICE SPACE
URI leases an office for its headquarters at 297 W. Hilton Drive,
Suite #4, St. George, Utah. Until April of 1995, it also shared in the
expenses of an office at 1604 Walker Center, Salt Lake City, Utah, in which
John H. Morgan, Jr., the Company's co-founder, former director, and
shareholder maintains his offices, along with Morgan Gas & Oil Co., a Utah
corporation which had been under the control of Mr. Morgan and in which he
currently serves as both an officer and director, and the Huntsman World Senior
Games, of which Mr. Morgan is the President.
ITEM 3. LEGAL PROCEEDINGS
Over the past nine years, the Company has been involved in various
disputes and controversies involving its ownership, operation and management.
A shareholders derivative action captioned as ERNEST MUTH, ET AL. V. JOHN H.
MORGAN, JR., ET AL., was filed as Civil Number C-87-1632 in the Third Judicial
District Court of Salt Lake County, Utah (the "First State Action"), alleging
among other things that the officers and directors of the Company committed
various breaches of their fiduciary duties to the Company. A settlement
agreement was entered into in the First State Action on April 6, 1993 (the
"1993 Settlement Agreement"), wherein, among other things, parties to the
lawsuit agreed to the manner in which directors of
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the Company would be selected until such time as the 1993 Settlement Agreement
was terminated. On or about July 21, 1995, attorneys for the Company on behalf
of the Company filed an action against John H. Morgan, Jr. and Daisy R. Morgan
to enforce the 1993 Settlement Agreement in the First State Action which
resulted in certain findings of fact and conclusions of law and an order
enforcing the 1993 Settlement Agreement, entered by Judge Michael R. Murphy on
October 4, 1995 (the "Murphy Order"). The Murphy Order was appealed by John H.
Morgan, Jr. and Daisy R. Morgan and cross-appealed by the Company. An Order
to Show Cause was subsequently filed in the First State Action on behalf of the
Company by attorneys for the Company against John H. Morgan, Jr. and Daisy R.
Morgan (the "Order to Show Cause").
On or about February 16, 1995, pursuant to a Plan of Share Exchange
Agreement by and among the Company, Midwest Railroad Construction and
Maintenance Corporation of Wyoming, a Wyoming corporation ("Midwest"), Robert
D. Wolff ("RD Wolff") and Judith J. Wolff ("JJ Wolff") (the "Share Exchange
Agreement"), the Company acquired all of the outstanding shares of Midwest from
RD Wolff and JJ Wolff in exchange for 590,000 restricted shares of authorized
but unissued shares of the Company. Pursuant to the Share Exchange Agreement,
RD Wolff became the President of the Company. For a more detailed description
of the Share Exchange Agreement see "ITEM 1 DESCRIPTION OF BUSINESS/(a)
Business Development Share Exchange Agreement" and Form 8-K filed July 20,
1995. A shareholders derivative action captioned as ANNE MORGAN ET AL. V. R.
DEE ERICKSON, ET AL., was filed as Case Number 2:95CV-0661C in the United
States District Court for the District of Utah, Central Division (the "First
Federal Action"), alleging that the defendants had, among other things,
violated proxy solicitation rules, violated disclosure rules under the Exchange
Act of 1934, breached their fiduciary duties to the Company's shareholders,
breached professional duties, committed fraud, wasted and looted the Company's
assets, converted Company property, engaged in self-dealing, mismanaged the
corporation and breached the duty of loyalty. The complaint sought, among
other things, rescission of the Share Exchange Agreement. In April 1996, the
Company, Midwest, RD Wolff and JJ Wolff entered into a Split-Off Agreement
whereby, among other things, the Share Exchange Agreement was rescinded (the
"Recision Agreement") and the shares of Midwest acquired by the Company were
returned to RD Wolff and JJ Wolff.
On April 5, 1996, the Company entered into a letter of intent ("Letter
of Intent") with IMCC to sell a controlling interest in the Company to IMCC, at
a purchase price equal to $3.35 per share. On May 17, 1996, Mark G. Jones, a
shareholder and director of the Company and controlling shareholder of Mark
Technologies Corporation, brought a shareholders derivative suit captioned as
MARK TECHNOLOGIES CORP. ET AL. V. UTAH RESOURCES INTERNATIONAL, INC., ET AL.,
which was filed as Civil No. 96-090-3332CV in the Third Judicial Court of Salt
Lake County, Utah (the "Second State Action") against the Company, E. Jay
Sheen, R. Dee Erickson and Lyle Hurd, directors of the Company, and IMCC. The
Second State Action included, among other things, a request for the issuance
of a temporary restraining order and injunction against the transactions
contemplated in the Letter of Intent. On June 26, 1996, the Company entered
into two settlement agreements. The first settlement agreement was by and
among the Company, John H. Morgan, Jr., Daisy R. Morgan, IMCC, John Fife,
Robinson & Sheen, L.L.C., R. Dee Erickson, Lyle D. Hurd and
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E. Jay Sheen ("Morgan Settlement Agreement"), whereby certain disputes among
the parties were resolved and settled and the parties agreed to use their best
efforts to terminate the 1993 Settlement Agreement. The second settlement
agreement was among the Company, R. Dee Erickson, E. Jay Sheen, Lyle D. Hurd,
Mark G. Jones, Mark Technologies Corporation, Anne Morgan, Victoria Morgan,
IMCC, John Fife and Robinson & Sheen, L.L.C. (the "1996 Settlement Agreement"),
whereby the parties agreed, among other things, to dismiss the First Federal
Action, the Order to Show Cause, the Second State Action and to use their best
efforts to terminate the 1993 Settlement Agreement. On July 19, 1996, the
notice of hearing on proposed settlement of the Second State Action, the First
State Action and the First Federal Action and the notice of hearing on petition
to terminate the 1993 Settlement Agreement was mailed to all the Company's
shareholders of record as of June 24, 1996. Among other things, the notice
provided that the 1996 Settlement Agreement and the Morgan Settlement Agreement
(together the "Settlement Agreements") were to be considered approved by the
court on August 12, 1996, and that all objections to the Settlement Agreements
had to be presented at that time. On August 9, 1996, shareholders Jenny T.
Morgan (a shareholder and director of the Company), Gerard E. Morgan, John C.
Morgan and Karen J. Morgan ("Objectors") filed an objection to the hearing and
requested that the court continue the settlement approval hearing until after
the Company's shareholders vote on the Settlement Agreements and the IMCC
Stock Purchase Agreement. In their objections and request for continuance of
hearing, the Objectors, among other things, claimed that they had insufficient
information with which to evaluate the Stock Purchase Agreement between IMCC
and the Company; that they had insufficient information regarding John Fife,
the sole shareholder of IMCC, and that they needed additional time and
information to evaluate the fairness of the Stock Purchase Agreement, and to
have the opportunity to solicit other competitive bids to sell the Company.
Further, the Objectors alleged that the Company had failed to provide
documentation relating to the Stock Purchase Agreement to them. After
considering the Objectors' and the parties' initial arguments, the court
granted both the parties and the Objectors an additional seven days, through
August 19, 1996, to submit written memoranda in support of their positions.
Both the Objectors and the parties submitted written memoranda supporting
their positions in regard to the Settlement Agreements and the Stock Purchase
Agreement. On or about August 23, 1996 the court in the Second State Action
reviewed and considered the 1996 Settlement Agreement, the Stock Purchase
Agreement and the 1993 Settlement Agreement, written memoranda submitted by
various parties and other comments and objections and ordered that: (1) the
notice given pursuant to Rule 23.1 of the applicable rules of civil procedure
for the State of Utah was adequate, fair and proper: (2) the procedural and
substantive objections of Jenny T. Morgan (a director and shareholder of the
Company). Gerald E. Morgan, John C. Morgan and Karen J. Morgan be overruled:
(3) the 1996 Settlement Agreement was fair, adequate and reasonable: (4) the
Petition to Terminate the 1993 Settlement Agreement was fair, adequate and
reasonable: and (5) the 1996 Settlement Agreement and Petition to Terminate the
1993 Settlement Agreement was approved. As required by the Transaction
Agreements, as defined below, the 1996 Settlement Agreement and the Morgan
Settlement Agreement were approved by the Third Judicial District Court of
Salt Lake County, West Valley Department Utah, on or about August 28, 1996.
The Order to Show Cause was dismissed with prejudice and the 1993 Settlement
Agreement was terminated on August 29, 1996.
On July 3, 1996, following the execution of the Letter of Intent, the
Morgan Settlement Agreement and the 1996 Settlement Agreement, the Company and
IMCC entered into a Stock Purchase Agreement (the "Stock Purchase Agreement")
(the Letter of Intent, the Morgan Settlement Agreement, the 1996 Settlement
Agreement and the Stock Purchase Agreement are hereinafter collectively
referred to as the "Transaction Agreements") whereby the Company issued and
sold 1,275,912 shares (the "Purchased Shares") of common, $.10 par value per
share stock (the "Common Stock") to IMCC, which is wholly owned by John Fife,
so that IMCC owned a 50.5% interest in the Company. IMCC acquired the
Purchased Shares at a price equal
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to $3.35 per share for an aggregate purchase price of $4,274,305.20 (the
"Purchase Price"), of which $641,145.78 was paid in cash by IMCC to the Company
at the closing. The remaining $3,633,159.42 was evidenced by IMCC's promissory
note (the "Note"). The Note bears interest at a rate equal to the short-term
applicable federal rate published by the Internal Revenue Service in effect at
the time of closing, and is adjusted on each anniversary of the Note to the
applicable short-term federal rate in effect on such anniversary date.
Interest on the Note is paid currently in arrears on each anniversary of the
Note. At the closing, IMCC paid $197,872.52 to the Company which amount
represented the present value first year of interest due under the Note. The
principal and any unpaid interest accrued under the Note is due and payable
August 1, 2001. The Note is secured by the Purchased Shares as evidenced by a
stock pledge agreement, dated as of July 3, 1996, by and between IMCC and the
Company (the "Stock Pledge Agreement"). Pursuant to a separate written
guaranty agreement, John Fife personally guaranteed payment of 25% of all
amounts due under the Note. For a more detailed description of the Stock
Purchase Agreement, see Form 8-K filed by the Company on July 19, 1996, and to
review a copy of the Stock Purchase Agreement, see Schedule 13D-A filed by IMCC
on September 9, 1996.
As required by the Stock Purchase Agreement, E. Jay Sheen and R. Dee
Erickson submitted their resignations as directors of the Company, effective
July 13, 1996. As further required by the Stock Purchase Agreement, John Fife
was appointed a director of the Company. David Fife, the brother of John Fife,
was also appointed a director of the Company. John Fife and David Fife were
appointed as directors of the Company by the Muth Group pursuant to the 1993
Settlement Agreement effective July 13, 1996. As required by the Stock
Purchase Agreement, John Fife was elected President and Chief Executive Officer
of the Company in July, 1996, pursuant to a 3-0 vote of the Board (Mark G. Jones
and Jenny Morgan were not present to vote). John Fife also serves as Chairman
of the Board of the Company pursuant to a 3-2 vote of the Board.
The Letter of Intent and the Transaction Agreements, including the
Stock Purchase Agreement, contemplated that subject to applicable state and
federal securities and state corporate law, the Company would cause a 1,000 to
1 share reverse split of the Company's Common Stock to the shareholders of
record at $3.35 per share (the "Reverse Split"), with fractional shareholders
given the option to either purchase additional fractional shares to round up to
one whole share following the reverse split or sell their fractional shares for
cash to the Company. IMCC was granted a ten year option to purchase 150,000 or
more additional shares of stock at a price equal to $3.35 per share and on the
same terms and conditions as those provided under the Stock Purchase Agreement,
so that after the Reverse Split IMCC may maintain its 50.5% majority interest
in the Company. Subsequent to the Reverse Split and subject to applicable
state and federal securities and state corporate law, any Company shares
redeemed by the Company pursuant to the Reverse Split (the "Returned Shares")
may be acquired by the remaining shareholders, other than IMCC or its
affiliates, in increments of 1,000 shares (the "Returned Share Option") at a
purchase price equal to the pre-Reverse-Split $3.35 per share (the "Returned
Share Purchase Price"). Only those shares for which the Company has received a
fully and properly executed letter of transmittal, accompanied by the required
documents, will qualify as Returned Shares for the purposes of this Returned
Share Option.
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Such Common Stock shall be purchased in blocks of 1,000 shares of Common Stock
such that each purchase of a 1,000 share block of Common Stock shall be
converted into 1 share of common, $100.00 par value per share stock of the
Company (the "New Stock"). In the event the Returned Share Option is
over-subscribed, then each of the exercising shareholders may purchase the
Returned Shares on a pro-rata basis. Twenty-five percent (25%) of the Returned
Share Purchase Price will be payable in cash upon exercise, with the remaining
balance of $2.51 per share being evidenced by the Return Share Note. The terms
and conditions of the Reverse Split are described in greater detail in "ITEM 1
DESCRIPTION OF BUSINESS/Stock Purchase Agreement July 3, 1996."
In December, 1995, Mark Technologies Corporation received 201,210
shares of the Company's Common Stock from Morgan Gas & Oil Co., as partial
payment of a promissory note. The promissory note was in consideration of the
sale to Morgan Gas & Oil Co. from Mark Technologies Corporation of a limited
partnership interest in Alta Mesa Wind Partners, a California limited
partnership in the wind generated power business. The Company is a shareholder
of Morgan Gas & Oil Co. The Company brought a shareholders derivative action
in the United States District Court for the District of Utah, Central Division,
against Morgan Gas & Oil Co. and its directors and against Mark Jones, Mark
Technologies Corporation, Alta Mesa Wind Partners, John H. Morgan, Jr., Daisy
R. Morgan, Sylvia Wunderly, John Wunderly, and Melbourne Romney, III, alleging
among other things, that in connection with the sale of Alta Mesa Wind Partners
limited partnership interest to Morgan Gas & Oil Co., Mark Jones, Mark
Technologies Corporation and Alta Mesa Wind Partners concealed and
misrepresented material information to be provided to Morgan Gas & Oil Co.
directors and that the Morgan Gas & Oil Co. directors (including John H.
Morgan, Jr., Daisy R. Morgan, Sylvia Wunderly, John Wunderly and Melbourne
Romney, III) committed a breach of fiduciary duty and a wasting of corporate
assets (the "MGO Action"). The Company sought rescission of the sale. Legal
counsel advised the Company that due to the releases contained in the 1996
Settlement Agreement, the Company should not continue to pursue the MGO Action
against Mark G. Jones, a shareholder and director of the Company and signatory
to the 1996 Settlement Agreement and Mark Technologies Corporation, a
shareholder of the Company and signatory to the 1996 Settlement Agreement. A
majority of the Board of Directors voted to have the suit dismissed without
prejudice. Directors Jenny Morgan and Mark G. Jones objected to the dismissal
without prejudice and proposed that the MGO Action be dismissed with prejudice.
The suit has been dismissed without prejudice, so that other shareholders of
Morgan Gas & Oil Co. will not be precluded from seeking relief based upon the
same cause of action.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock is listed on the National Association of
Securities Dealers bulletin board system and is traded in the over- the-counter
securities through the Automated Quotation System, under the NASDAQ symbol
"UTRS". The following table sets forth the quarterly high and low bid prices
for 1994 and 1995 and the closing bid prices for 1996 for the Company's Common
Stock during the last two fiscal years of the Company, as reported by the
National Quotations Bureau. The quotations reflect inter-dealer prices,
without retail mark-up, mark-down or commission, and do not represent actual
transactions and have not been adjusted for stock dividends or splits.
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<PAGE> 21
<TABLE>
<CAPTION>
1996 1995 1994
LOW HIGH LOW HIGH LOW HIGH
--- ---- --- ---- --- ----
<S> <C> <C> <C> <C> <C> <C>
1st quarter $.625 $1.00 $1.25 $4.00 $2.00 $3.00
2nd quarter $.75 $1.50 $1.00 $2.00 $1.25 $2.25
3rd quarter $.875 $1.00 $1.00 $1.75 $1.00 $1.75
4th quarter $.875 $.875 $ .50 $1.00 $1.25 $2.00
</TABLE>
Except for certain transactions including: (i) the Splitoff Agreement
by and between Midwest and the Company, wherein the Company returned its
Midwest shares to RD Wolff and JJ Wolff in exchange for the 590,000 shares of
the Company's stock held by the Wolffs; (ii) the 1996 Settlement Agreement,
wherein the Company redeemed 22,950 shares of Anne Morgan's URI stock and
17,602 shares of Victoria Morgan's URI stock, in cash, at $3.35 per share; and
(iii) the conclusion of the exchange of 10.6 acres of land and 34,150 shares of
C.E.C. Industries Corporation stock for 103,488 shares of the Company's stock,
the Company has made no repurchases of its stock during the Company's second
full fiscal year preceding this Form 10-KSB. The Splitoff Agreement and the
1996 Settlement Agreement are described in greater detail in "ITEM 3 LEGAL
PROCEEDINGS." The Company did declare a $.10 cash dividend payable January 26,
1995, to shareholders of record January 12, 1995. A decision to pay dividends
in the future will depend upon the Company's profitability, need for liquidity
and other financial considerations. There are approximately 558 shareholders
of the 2,522,808 outstanding shares of the Company's Common Stock.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
RESULTS OF OPERATIONS
The Company had land sales of $587,163 in 1995 as compared with land
sales of $2,274,222 in 1994. Management attributes the reduced sales in 1995
to a slowdown in the sale of high-end market lots as well as there being only a
limited amount of developed lots available. Interest income was higher in 1995
due to the fact that the Company held more money in interest bearing accounts.
Income on royalties from production under oil and gas and mineral leases
amounted to $61,006 and $92,455 for 1995 and 1994, respectively. Decline in
royalties income reflects the decline in oil and gas prices during this period
due to production fluctuations. Twelve Thousand Five Hundred Dollars ($12,500)
in revenue was received from leases on commercial signs adjacent to the
interstate freeway.
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<PAGE> 22
Cost of land sold decreased from $567,453 in 1994 to $156,250 in 1995,
reflecting a decline in sales from 1994 to 1995. General and administrative
expenses increased by approximately 55% from 1994 to 1995, due to the cost of
acquiring Midwest and the cost of litigating subsequent lawsuits. For a more
detailed description of the Company's lawsuits see "ITEM 3 LEGAL PROCEEDINGS."
1995 reflects an income tax benefit of $179,000 which resulted from the
utilization of the 1995 Net Operating Loss.
LIQUIDITY AND CAPITAL RESOURCES
Cash requirements of URI are met by funds provided from operations
consisting of (a) the sale of improved lots and undeveloped property; (b)
royalty income; and (c) interest income earned on money held in interest
bearing accounts. The ratio of current assets to current liabilities at
December 31, 1995 was approximately 2.16 to 1, down from the ratio at December
31, 1994 of 4.7 to 1. The Company's current assets as of December 31, 1995
were valued at $1,350,781, as against current liabilities of $624,920.
The Company presently anticipated that cash from land sales and
royalties will be the primary sources for future additional liquidity for the
Company.
From January, 1995, through July, 1996, litigation expenses imposed a
significant drain on the Company's liquidity. The litigation which occasioned
such expenses has been terminated by settlement, and management expects future
legal fees will decrease dramatically. For a more detailed description of the
Company's litigation, see "ITEM 3 LEGAL PROCEEDINGS."
The Company also expects to be required to expend funds for the
cleanup of gasoline which has apparently leaked from tanks owned by the Service
Station Partnership, which have been replaced. Engineering estimates of total
cleanup costs are not determinable due to uncertainties with respect to State
compliance requirements and the, as yet, unknown extent of the contamination.
In 1995, approximately $55,000 was expended toward this clean-up operation and
more than $164,000 has been expended by the Company to date.
It is anticipated that the Company's need for cash in excess of its
present resources will be met through revenues and real estate secured
borrowings. No firm financing commitment has been obtained for the purpose of
completing the 1,000 to 1 reverse stock split. The Company does not have
backup lines of credit.
URI has no plans for major capital expenditures beyond the cost of
improving portions of its real property.
The Company's business is influenced by interest rates, inflation and
market demands. Its royalty income from oil and gas interests affected by
fluctuations in the price of oil and the related decisions to drill new wells
and the rates at which well are pumped. The Company has no control over the
oil and gas field operations.
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<PAGE> 23
As of July 3, 1996, the Company holds a promissory note from IMCC in
the original principal amount of $3,633,159.42 (the "Note"). The Note bears
interest at a rate equal to the short-term applicable federal rate published by
the Internal Revenue Service in effect at the time of closing the Stock
Purchase Agreement, and is adjusted on each anniversary of the Note to the
applicable short-term federal rate in effect on such anniversary date.
Interest on the Note is to be paid currently in arrears on each anniversary of
the Note. At the closing, IMCC paid the Company $197,872.52, which amount
represented the present value first year of interest due under the Note. The
principal and any unpaid interest accrued under the Note is due and payable
August 1, 2001. The Note is secured by the 1,275,912 shares purchased by IMCC
as evidenced by a stock pledge agreement, dated as of July 3, 1996 between IMCC
and the Company (the "Stock Pledge Agreement"). Pursuant to a separate written
guaranty agreement, John Fife personally guaranteed payment of 25% of all
amounts due under the Note.
STOCK PURCHASE AGREEMENT
In late 1995 and early 1996, the Board of Directors began
investigating potential buyers and soliciting offers to purchase a controlling
interest in the Company. The Board of Directors wished to: (i) spin off the
Midwest Railroad Construction and Maintenance Corporation of Wyoming, and
remove Robert D. Wolff as CEO of the Company, for a more detailed description of
the Share Exchange Agreement, the subsequent litigation and the Split-Off
Agreement, see the Sections entitled "ITEM 1. DESCRIPTION OF BUSINESS (a)
Business Development/Share Exchange Agreement", "ITEM 3, LEGAL PROCEEDINGS",
and "ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION/Discontinued Operations:" (ii) infuse capital into the Company; and
(iii) provide a mechanism whereby the minority shareholders would have the
opportunity to receive fair value for their shares. With respect to the
Board's third goal, the Company's history of sporadic trading in a narrow margin
rendered the shares virtually illiquid and the protracted and costly litigation
engulfing the Company consumed corporate assets and the time and attention of
the Board of Directors and the management, thereby significantly reducing the
Company's profits and distributions. In a ten year period ending January 1995,
the Company made only one $.10 distribution in January 1995. John H. Morgan,
Jr. and Daisy R. Morgan resigned as directors of the Company in December 1995.
Pursuant to the terms of the 1993 Settlement Agreement, John H. Morgan, Jr.
and Daisy R. Morgan exercised their powers of appointment and appointed Jenny
T. Morgan and Mark G. Jones, respectively, to serve as directors in their
place. John H. Morgan, Jr. and Daisy R. Morgan were parties to the 1993
Settlement Agreement. The remaining members of the Board of Directors
demanded that both Jenny T. Morgan and Mark G. Jones, agree, in writing, to be
bound by the terms of the 1993 Settlement Agreement as though they had been
made parties to the 1993 Settlement Agreement before commencing their
responsibilities as directors of the Company. Mark G. Jones and Jenny T.
Morgan refused to enter into that written agreement until April 1996, at which
time they executed a written commitment to be bound by the terms of the 1993
Settlement Agreement and were seated as directors of the Company.
In addition to pursuing outside buyers for the Company, the Company was
also actively pursuing settlement of all litigation with the Company. In
February and March of 1996, the Company had discussions with John Fife, the
President and sole shareholder of IMCC regarding a transaction or transactions
between the Company and IMCC. During the course of these discussions, the
Company communicated its goals to John Fife. Prior to entering into the Letter
of Intent (as hereinafter defined), John Fife entered into a letter agreement
by and among John Fife, Ernest Muth, a party to the 1993 Settlement Agreement
("Muth"), Thomas Ralphs, a party to the 1993 Settlement Agreement ("Ralphs")
and Precious Metals, Inc. dated as of March 30, 1996 (the "Letter Agreement"),
which Letter Agreement was assigned to IMCC. Under the terms of the Letter
Agreement, John Fife had the option to purchase all, but not less than all, of
the shares of stock of the Company held by or beneficially owned or controlled
by Muth and Ralphs (approximately 90,000 shares), at an option exercise price
of $4.00 per share. John Fife paid Muth and Ralphs an aggregate of
$15,000 which amount is a non-refundable option payment to be applied to the
ultimate purchase price. During the option, which expired 60 days after March
30, 1996, John Fife was granted a proxy to vote the shares held by Muth and
Ralphs. In addition, the Letter Agreement provided that upon the exercise of
the option to purchase the shares of the Company, Muth and Ralphs would assign
their rights and obligations under the 1993 Settlement Agreement to John Fife.
IMCC, in turn, submitted its letter of intent to the Board of Directors of the
Company, dated as of April 5, 1995 (the "Letter of Intent"). The Letter of
Intent provided that: (1) the Company would issue and IMCC would purchase
shares which would represent a 51% ownership interest in the Company; (2) IMCC
would pay the Company $3.35 per share for the stock; (3) IMCC would pay 10% of
the purchase price in cash at the closing with the balance due pursuant to a
five year promissory note; (4) the note would be secured with the stock
purchased by IMCC; (5) IMCC would have a ten year option to purchase 150,000
or more additional shares of stock in order to maintain its 51% ownership
interest in the Company; (6) following the closing of the purchase of stock,
IMCC would cause the Company to undertake a 12,500 to 1 reverse stock split
at $3.35 per share with fractional shareholder being given the option to
purchase additional shares to round up to the next whole share or a tender
offer; (7) the Company agreed to indemnify IMCC and its shareholders and
directors from and against any liability to the Company's shareholders,
officers and/or directors arising out of IMCC's negotiation, execution and/or
consummation of the Letter of Intent, the Stock Purchase Agreement and the
transactions contemplated by the Letter of Intent; and (8) IMCC agreed to take
all actions necessary to cause the Company to honor the Company's obligations
to indemnify its officers and directors to the fullest extent permitted by law,
including, but not limited to, the advancement of their legal fees and costs
in connection with all present and future litigation involving them in their
capacities as officers and directors of the Company. In addition to reviewing
the IMCC offer, the Company entertained other written offers including one
from Mark Jones, a director and shareholder of the Company. The Company
entered into the Letter of Intent on April 5, 1996. On April 16, 1996 IMCC
filed its Schedule 13D informing the Company's shareholders of its intent to
engage in the two step transaction consisting of the acquisition of a majority
interest and conducting a reverse stock split or tender offer. It also gave
notice of IMCC's intent to cause a class of securities of the Company to be
delisted from a national securities exchange or cause a class of securities to
cease to be authorized to be quoted in an inter-dealer quotation system of a
registered national securities association, pursuant to Section 12(g)(4) of
the Securities Exchange Act of 1934.
On April 5, 1996, the Company entered into the Letter of Intent with
the Company, over the objections of Directors Mark G. Jones and Jenny Morgan.
Thereafter the Company and IMCC began negotiating the terms of the stock
purchase agreement and IMCC began its due diligence investigation of the
Company. On May 17, 1996, Mark G. Jones, a shareholder and Director of the
Company and controlling shareholder of Mark Technologies Corporation, brought a
shareholders derivative suit against the Company. E. Jay Sheen, R. Dee Erickson
and Lyle Hurd, Directors of the Company and IMCC, captioned as MARK
TECHNOLOGIES CORP., ET AL. V. UTAH RESOURCES INTERNATIONAL, INC., ET AL., which
was filed as Civil No. 96-090-3332CV in the Third Judicial Court of Salt Lake
County (the "Second State Action"), seeking a temporary restraining order and
injunction. For a more detailed description of the Second State Action
litigation, see the Sections entitled "ITEM 1. DESCRIPTION OF THE BUSINESS,
(a) Business Development/Stock Purchase Agreement - July 3, 1996" and "ITEM 3.
LEGAL PROCEEDINGS."
During late May and early June of 1996, the Company and IMCC: (1)
prepared for trial in the Second State Action, which included extensive
discovery; and (2) continued to negotiate the terms of the stock purchase
agreement. Ongoing negotiations between the Company and IMCC resulted in the
amendment to the Letter of Intent, dated as of May 31, 1996. The parties
agreed to increase the percentage of the purchase price to be paid at closing
from 10% to 15%. In addition to the stock pledge agreement which secured the
five year note, John Fife agreed to personally guarantee 25% of the outstanding
balance due the Company under the IMCC note. Ongoing negotiations among the
parties to the Second State Action led to the settlement of the Second State
Action the morning of the hearing, June 26, 1996. The Company entered into two
settlement agreements. The first settlement agreement was by and among the
Company, John H. Morgan, Jr., Daisy R. Morgan, IMCC, John Fife, Robinson &
Sheen, L.L.C., R. Dee Erickson, Lyle D. Hurd, and E. Jay Sheen (the "Morgan
Settlement Agreement"), whereby certain disputes among the parties were
resolved and settled and the parties agreed to use their best efforts to
terminate the 1993 Settlement Agreement. The second settlement agreement was
by and among the Company. R. Dee Erickson, E. Jay Sheen, Lyle D. Hurd, Mark G.
Jones, Mark Technologies Corporation, Anne Morgan, Victoria Morgan, IMCC, John
Fife and Robinson & Sheen, L.L.C. (the "1996 Settlement Agreement"), wherein
the parties, among other things, agreed to terms regarding IMCC's purchase of
50.5% of the Company's outstanding stock, agreed to dismiss the First Federal
Action, the Order to Show Cause and the Second State Action, and agreed to use
their best efforts to terminate the 1993 Settlement Agreement. For a more
detailed description of the litigation and the settlement of the litigation,
see the Section entitled "ITEM 3. LEGAL PROCEEDINGS." Pursuant to the 1996
Settlement Agreement, the terms of the Stock Purchase Agreement by and between
the Company and IMCC were to include, among other things, the following
provisions: (1) IMCC would purchase a 50.5% interest in the Company at a
purchase price of $3.35 per share; (2) IMCC would pay 15% of the purchase
price at closing with the balance due pursuant to a five year promissory note,
secured by a pledge of the Company's stock purchased by IMCC and a personal
guaranty by John Fife of 25% of the remaining balance due under the note; (3)
the Company would conduct a 1,000 to 1 reverse stock split at $3.35 per share
with fractional shareholders being given the option to purchase additional
shares at $3.35 per share to round up to the next whole share. IMCC intends to
exercise the round-up option; (4) that any shares redeemed by the Company
pursuant to the reverse stock split would be made available for purchase by the
remaining shareholders, other than IMCC. Mark G. Jones has communicated to
the Company that Mark Technologies Corporation intends to exercise its right to
purchase as many additional shares pursuant to this pool as possible; (5) IMCC
would have a ten year option to purchase 150,000 or more additional shares of
stock to maintain its 50.5% interest in the Company; (6) that E. Jay Sheen and
R. Dee Erickson would resign as directors of the Company immediately; (7) that
Mark G. Jones would be guaranteed a position of Director of the Company for a
period of one year from the closing of the IMCC stock purchase; (8) that the
Company and John Fife would enter into an employment agreement which would pay
to Mr. Fife compensation not to exceed $200,000 per year; and (9) any
distributions and other payments otherwise payable to IMCC on its Company stock
would be applied to reduce the outstanding principal balance of the IMCC Note.
For a more detailed description of the terms of the Stock Purchase Agreement,
see the Section entitled, "ITEM 1. DESCRIPTION OF THE BUSINESS, (a) Business
Development/Stock Purchase Agreement - July 3, 1996." On July 3, 1996, the
Company and IMCC entered into the Stock Purchase Agreement.
On July 19, 1996, the notice of hearing on proposed settlement of the
Second State Action, the First State Action and the First Federal Action and the
notice of hearing on petition to terminate the 1993 Settlement Agreement was
mailed to all the Company's shareholders of record as of June 24, 1996. For a
more detailed description of the notice procedure for the settlement of the
actions and subsequent objections see the Section entitled, "ITEM 3. LEGAL
PROCEEDINGS." The court in the Second State Action reviewed and considered the
1996 Settlement Agreement, the Stock Purchase Agreement and the 1993 Settlement
Agreement, written memoranda submitted by various parties and other comments and
objections and ordered that; (1) the notice given pursuant to Rule 23.1 of the
applicable rules of civil procedure for the State of Utah was adequate, fair and
proper; (2) the procedural and substantive objections of Jenny T. Morgan (a
director and shareholder of the Company), Gerald E. Morgan, John C. Morgan and
Karen J. Morgan be overruled; (3) the 1996 Settlement Agreement was fair,
adequate and reasonable; (4) the Petition to Terminate the 1993 Settlement
Agreement was fair, adequate and reasonable; and (5) the 1996 Settlement
Agreement and Petition to Terminate the 1993 Settlement Agreement was approved.
DISCONTINUED OPERATIONS
On June 13, 1995, the Company consummated the exchange of 590,000
shares of its common stock, representing approximately 33% following the
transaction,of the total issued and outstanding shares of the Company's common
stock in return for receipt of all of the issued and outstanding stock of
Midwest Railroad Construction and Maintenance Corporation ("Midwest") pursuant
to a Plan of Share Exchange Agreement, dated February 16, 1995 (the "Share
Exchange Agreement"). All of the common stock of Midwest was owned by Robert D.
Wolff ("RD Wolff") and Judith J. Wolff ("JJ Wolff"). The Share Exchange
Agreement was accomplished as a tax free reorganization pursuant to Section
368(a)(1)(B) of the Internal Revenue Code of 1986, as amended (the "Code").
Midwest, headquartered in Salt Lake City, Utah, is in the railroad construction
and maintenance business, operating out of five regional offices located in
Utah, Wyoming, Colorado, Nebraska and New Mexico. Midwest also provides
railroad engineering, surveying, bridge and structural maintenance, grade
crossing and in-plant switching services. Pursuant to the terms of the Share
Exchange Agreement, the Company agreed to: (i) indemnify Midwest and the Wolffs
from any liability to the Company's shareholders, its officers or directors,
whether brought directly by the person or in a derivative capacity arising from
Midwest's or the Wolffs' negotiation, execution, or consummation of the Share
Exchange Agreement; (ii) execute a three year employment agreement between RD
Wolff and the Company, where RD Wolff would act as the President of Midwest;
(iii) apply for a listing of Midwest's stock on the NASDAQ; and (iv) lend
Midwest, in the form of a line of credit, a sum not to exceed $250,000, with the
first draw available after February 15, 1995, evidenced by a promissory note in
standard form, bearing an interest rate of 1% over the posted prime lending rate
at First Security Bank of Utah, N.A., as of February 15, 1995, and adjusted each
three months thereafter. Prior to closing, Midwest borrowed a total of $100,000
against the line of credit. Pursuant to the terms and conditions of the Share
Exchange Agreement, the line of credit from the Company became subordinate to
Midwest's existing credit line of $350,000, following the closing. The line of
credit was secured by the assets and equipment of Midwest. In order to carry
out the above listed covenants, the Company entered into an employment agreement
with RD Wolff, dated as of June 13, 1995 (the "Wolff Employment Agreement"), and
an operating agreement with Midwest and RD Wolff, dated as of June 13,
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<PAGE> 24
1995 (the "Operating Agreement"). Pursuant to the terms of the Operating
Agreement and for services performed by R. Dee Erickson and E. Jay Sheen in
connection with the consummation of the Share Exchange Agreement, the Company
paid to each of R. Dee Erickson and E. Jay Sheen, both of whom were directors
of the Company at the time of the execution of the Share Exchange Agreement, as
compensation, 38,000 shares each of the Company's Common Stock and $104,000 in
cash. For a more detailed description of the Share Exchange Agreement, see
Form 8-K filed July 20, 1995.
On July 18, 1995, Anne Morgan and Victoria Morgan, at the time
shareholders of the Company and the adult daughters of John H. Morgan, Jr. and
Daisy R. Morgan, former directors and shareholders of the Company, filed a
shareholders derivative action against R. Dee Erickson ("Erickson"), E. Jay
Sheen ("Sheen"), Lyle D. Hurd ("Hurd") (Messrs. Erickson, Sheen and Hurd were
three of the five directors of the Company at the time the suit was filed, with
JH Morgan and DR Morgan being the remaining two directors), the Company,
Midwest, RD Wolff and JJ Wolff, in the United States District Court for the
Central District of Utah, Case Number 2:95CV 661J, captioned as ANNE MORGAN ET
AL. V. R. DEE ERICKSON, ET AL. (the "First Federal Action"). The complainants
alleged, among other things that the defendants had, among other things,
violated proxy solicitation rules, violated disclosure rules under the Exchange
Act of 1934, breached their fiduciary duties to the Company's shareholders,
breached professional duties, committed fraud, wasted and looted the Company's
assets, converted Company property and engaged in self-dealing, mismanaged the
corporation and breached the duty of loyalty. The complaint sought, among
other things, the rescission of the Share Exchange Agreement.
The terms of the Letter of Intent between IMCC and the Company
required that the Company rescind the Share Exchange Agreement. For the
foregoing reason, Midwest and the Company entered into a Splitoff Agreement,
dated as of April 25, 1996 (the "Splitoff Agreement"), whereby the Share
Exchange Agreement was rescinded. According to the terms of the Splitoff
Agreement, URI transferred all of the outstanding shares of Midwest Stock to
the Wolffs in exchange for the 590,000 shares of URI stock then held by the
Wolffs which transfer was accomplished tax free in accordance with Section 355
of the Code. Furthermore, the Share Exchange Agreement, the Wolff Employment
Agreement and the Operating Agreement were cancelled. RD Wolff ceased to be
the President of URI. Midwest received a net intercompany transfer of
approximately $316,974.17 through March 31, 1996, which Midwest retained.
Furthermore, the parties to the Splitoff Agreement agreed that in the event
intercompany transfers for the period from July 1, 1995 through March 31, 1996
were: (i) less than $316,974.17, then URI would pay Midwest the difference;
and (ii) more than $316,974.17, then Midwest would pay URI the difference.
Pursuant to the Splitoff Agreement, the Company agreed to indemnify
Midwest and the Wolffs and their respective agents, employees, attorneys,
officers, directors and assigns from any and all claims, causes of action,
liabilities, damages, costs, expenses and attorneys' fees arising from or
relating in any way to URI or the Share Exchange Agreement. This
indemnification provision would not apply to acts of fraud, gross negligence or
willful
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<PAGE> 25
misconduct done by RD Wolff. The Wolffs and Midwest agreed to indemnify URI
and its respective agents, employees, attorneys, officers, directors,
successors and assigns from any and all claims, causes of action, liabilities,
and damages arising from or relating in any way to the Splitoff Agreement,
which indemnification obligation is limited to $312,000. Within 30 days from
the date of execution of the Splitoff Agreement, the Company's accountants are
to have calculated the federal, state and local income taxes attributable to
Midwest's business operations (excluding any impact of salary payable or paid
to RD Wolff or any intercompany charges to the Company for rent, overhead and
administrative expenses) for the period commencing June 1, 1995 and terminating
on December 31, 1995. Such taxes are to be determined on the basis as if the
Company and Midwest were not filing a consolidated tax return for the same
period or part thereof (whether or not a consolidated return is filed). The
amount of such taxes would be considered an intercompany receivable between the
Company and Midwest. Midwest agreed to pay such tax amount to the Company in
12 installments. Simultaneous with the execution of the Splitoff Agreement,
Midwest paid the Company the sum of $10,000 as an initial tax payment. The
balance due the Company was to be paid in 11 additional equal monthly
installments, each such installment due on the first day of each month until
all 11 installments have been paid in full. The first of the 11 monthly
installments is due and payable on the first day of the month following the
determination of the taxes owed by Midwest to the Company. The taxes to be
paid have not yet been determined.
For 1995 reporting purposes, Midwest's operations are classified as
discontinued operations, with income of approximately $93,000 from operations
and a net loss on disposal of discontinued items of approximately $684,000 to
the Company. For a more detailed description of both the acquisition of
Midwest and its subsequent Splitoff, see "ITEM 3 LEGAL PROCEEDINGS," and Form
8-K filed July 20, 1996.
ITEM 7. FINANCIAL STATEMENTS
See Index to Financial Statements appearing on page F-1B of this Form
10-KSB Annual Report.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
Tanner + Co. of Salt Lake City, Utah has been the independent public
accountant for the Company's December 31, 1993, 1994, and 1995 financial
statements.
During the Company's two most recent fiscal years, there were no
disagreements between the Company and Tanner + Co. on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedure that, if not resolved to the satisfaction of Tanner + Co., would have
caused Tanner + Co. to make a reference to the subject matter of the
disagreement in connection with its reports on the Company's financial
statements.
The Company currently engages the independent public accounting firm
of Tanner + Co.
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<PAGE> 26
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CENTRAL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Certain information regarding the Company's directors and executive
officers and their backgrounds is set out below. The Company has been provided
with the information from certain of the people listed below. In addition to
the primary affiliations noted below, the nominees are active in various
cultural, charitable, professional and trade associations and organizations.
CURRENT DIRECTORS
DAVID FIFE, 33, was appointed a director of the Company
effective July 13, 1996 by the Muth Group pursuant to the terms of the
1993 Settlement Agreement. Mr. Fife is currently the President and
sole beneficial owner of Home Equity Lending L.L.C. a mortgage
origination and finance company located in Salt Lake City, Utah.
Prior to 1993, Mr. Fife was the President of Property Tax Assessor
Records Corp., a Chicago based real estate tax consulting company.
David Fife and John Fife are brothers.
JOHN FIFE, 35, was appointed as a director of the Company
effective July 13, 1996, by the Muth Group pursuant to the 1993
Settlement Agreement. Mr. Fife was appointed the President and Chief
Executive Officer of the Company in July, 1996. He was named Chairman
of the Board of the Company on October 10, 1996. He is an investor
and venture capitalist and has pursued this course since July, 1990.
Mr. Fife is the President and sole shareholder of J.F. Venture, Inc.
and IMCC, both of which are investment companies. IMCC acquired a
50.5% (majority interest) in the Company on July 3, 1996. For a more
detailed description of IMCC's acquisition of a majority interest in
the Company, see "ITEM 3 LEGAL PROCEEDINGS." He also serves as
President of Property Tax Assessor Records Corp., a Chicago-based real
estate tax consulting company. Mr. Fife also serves as a director of
Hyatt Research Corporation, a magazine publisher in Middlebury,
Vermont and as a director of Trans-Wasatch Company, L.L.C., which is a
land development company in Park City, Utah. Prior to 1993, Mr. Fife
held the position of Assistant Vice President of Continental Equity
Capital Corp. ("CECC"), a subsidiary of Continental Bank. At CECC, he
negotiated, structured and financed LBO's and later stage venture
capital investments in the Mortgage Banking, Retail, Cable and
Cellular Telephone industries. Prior to CECC, Mr. Fife worked as a
financial analyst in the commercial real estate department of Trammel
Crow Company. Mr. Fife earned his M.B.A. degree from Harvard in 1990
and his B.S. in statistics and computer science from Brigham Young
University in 1986. John Fife and David Fife are brothers.
-26-
<PAGE> 27
LYLE D. HURD, 60, is a director of the Company and has
performed services as Marketing Consultant/Assistant to the President.
He is president of Hurd Owens Hafen Inc., a publisher of magazines and
periodicals located in St. George, Utah, since December of 1990. Hurd
Owens Hafen Inc. is the publisher of the St. George Magazine and
various other magazines and periodicals. For approximately 16 years
prior to December, 1990, Mr. Hurd provided marketing consulting
services to magazine publishers through Hurd & Associates, Inc., a
privately owned consulting firm. Mr. Hurd was appointed as an
independent director of the Company in May, 1993, pursuant to the
terms of the 1993 Settlement Agreement.
MARK G. JONES, 43, is a director of the Company and was
designated as such in January, 1996 by the Morgan Group pursuant to
the 1993 Settlement Agreement. Mr. Jones is President of Mark
Technologies Corporation in San Francisco, California, a real estate
and alternative energy development firm, and has held that position
for 16 years.
JENNY TATE MORGAN, 41, was appointed as a director of the
Company, effective January, 1996, by John H. Morgan, Jr., her
relative, pursuant to the terms of the 1993 Settlement Agreement.
From 1992 to the present, Ms. Morgan, through JT Morgan Financial
Consulting Services, has provided financial consulting services to
clients in the areas of investments, liquidity management, financial
strategy, tactical asset allocation, plan design, re-engineering an
entire retirement plan structure, analysis of securities portfolio,
strategic analysis and workouts. From 1993 to 1996, she served as
Vice President/Institutional Trust Services for First Interstate Bank
of California. Before that, Ms. Morgan worked for one year as a
Financial Services/Account Executive for Citibank, F.S.B. From July,
1982 to April, 1992, Ms. Morgan was the Director of Sales and
Marketing for Purcell International, Inc. Ms. Morgan earned her
M.B.A. from the University of Southern California, Los Angeles in
1995, where her course-work included providing consulting services to
Munchkin Bottling Company, Inc. and Reebok, International. Ms. Morgan
earned her B.S. from the University of Arizona, in 1978. Ms. Morgan
is a licensed California Life and Disability Agent and has published
articles addressing 401(K) Plans in the Los Angeles Business Journal.
DIRECTORS FOR THE PERIOD COVERED BY THIS REPORT
E. JAY SHEEN, 42, was appointed a director of the Company by
the Muth Group in June, 1993, pursuant to the terms of the 1993
Settlement Agreement, and Secretary of the Company in January, 1994.
He resigned as a director and Secretary of the Company, effective July
13, 1996, pursuant to the terms of the Stock Purchase Agreement. He
is a member of the law firm of Robinson & Sheen, L.L.C. Prior to
April 1995, he was a partner in the law firm of Moyle & Draper, P.C.
in Salt Lake City, where he had practiced law since 1982.
-27-
<PAGE> 28
R. DEE ERICKSON, 53, was appointed a director of the Company
by the Muth Group in May, 1993 pursuant to the terms of the 1993
Settlement Agreement, and appointed Chairman of the Board in March,
1995. He served in these capacities for the Company until his
resignation, effective July 13, 1996, which took place pursuant to the
terms of the Stock Purchase Agreement. He is a self-employed real
estate developer and property manager, and has been so engaged since
June 1, 1987. From February, 1974 to May, 1987, he was employed by
Hercules Incorporated in the Hercules Aerospace Products Group
variously as a manager, superintendent and supervisor directing
technical personnel in the planning, development, implementation and
enhancement of computer systems for manufacturing and engineering.
JOHN H. MORGAN, JR., 72, served as the President and Chief
Executive Officer of the Company from the date of its incorporation
until January, 1993 and October 1994, respectively. He served as the
Chairman of the Board until March of 1995 and served as a director
until January, 1996, at which time he appointed Jenny Morgan to serve
as his replacement pursuant to the terms of the 1993 Settlement
Agreement. Mr. Morgan is the husband of Daisy Morgan. He is the
controlling shareholder, President and a member of the board of
directors of Morgan Gas & Oil Co. Until May 7, 1993, Mr. Morgan was
also a general partner in Resources Limited Partnership (the former
owner of the St. George Hilton Inn), and Service Station Limited
Partnership #2, and a limited partner in the Tonaquint- Indian Hills
Partnership. Until May 7, 1993, Mr. Morgan was also a general and/or
limited partner in most of the partnerships owned by the Company for
the development of the Company's real property in St. George, Utah.
Mr. Morgan is President of the Huntsman Senior World Games, which
sponsors athletic events for persons over the age 55 in St. George,
Utah in the fall. Currently, Mr. Morgan serves as chairman emeritus
for the Company, and has done so since July 3, 1996, pursuant to the
terms of the Morgan Settlement Agreement.
DAISY R. MORGAN is the wife of John H. Morgan, Jr. Until
April, 1995 she served as the Vice President of the Company. From
1982 to January, 1996 she served as a director of the Company, at
which time she appointed Mark Jones as a replacement director,
pursuant to the terms of the 1993 Settlement Agreement. Ms. Morgan
served as manager of the St. George Hilton Inn for Resources Limited
Partnership from November, 1979 through December, 1984. Until May,
1993, Ms. Morgan was also a co-general partner in the Tonaquint Indian
Hills Limited Partnership. Ms. Morgan is the Vice President and
member of the Board of Directors of Morgan Gas & Oil Co., a former
affiliate and shareholder of the Company.
LYLE D. HURD, see description above.
EXECUTIVE OFFICERS FOR THE PERIOD COVERED BY THIS REPORT
GERRY T. BROWN, 56, was appointed Vice President of the
Company July 3, 1996. He served as President of the Company from June
19, 1993 to July 3, 1996.
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<PAGE> 29
Mr. Brown has been employed by the Company or its affiliates and
related parties since March, 1985. He has provided real estate
planning, development and sales services for the Company, Tonaquint,
Inc., the Company's wholly-owned subsidiary, and various affiliated
partnerships. Mr. Brown is currently the President of Tonaquint, Inc.
Mr. Brown has assisted in land use planning, negotiating sales and
financing arrangements, obtaining government approvals, arranging for
construction contracts, and supervising the performance of engineering
services as have been required in connection with the Company's
property development and sales.
LADD WORTH ELDREDGE, 44, has been employed by the Company
since July, 1994, and is the Secretary, Treasurer, CFO and office
manager for the Company. Mr. Eldredge was appointed Treasurer of the
Company in November, 1994 and Secretary and CFO of the Company in
November, 1995. Prior to his employment by the Company, Mr. Eldredge
was the Chief Accountant at the Peppermill Resort in Mesquite, Nevada,
a position he held for two years. Mr. Eldredge has a Masters of
Accountancy degree from Southern Utah University.
ROBERT D. WOLFF, 56, became CEO of the Company on or about
July 1, 1995, pursuant to the terms of the Wolff Employment Agreement.
Mr. Wolff ceased to be the CEO of the Company when the Share Exchange
Agreement was rescinded on April 25, 1996.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE.
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers, and persons who own more than ten
percent of a registered class of the Company's equity securities, to file with
the Securities and Exchange Commission initial reports of ownership and reports
of changes in ownership of Common Stock and other equity securities of the
Company. Officers, directors and greater than ten percent shareholders are
required by SEC regulation to furnish the Company with copies of all Section
16(a) forms they file.
To the Company's knowledge, based solely on review of the copies of
such reports furnished to the Company and written representations that no other
reports were required, during the two fiscal years ended December 31, 1995, the
Company's officers, directors and greater than ten-percent beneficial owners
complied with all applicable Section 16(a) filing requirements, except for the
following individuals with respect to the following forms:
R. Dee Erickson, Forms 4 and 5;
E. Jay Sheen, Forms 4 and 5;
Robert D. Wolff, Forms 4 and 5;
Lyle Hurd, Form 5; and
Gerry Brown, Form 5.
-29-
<PAGE> 30
ITEM 10. EXECUTIVE COMPENSATION
<TABLE>
<CAPTION>
EXECUTIVE OFFICERS
- ------------------
NAME POSITION AGE
---- -------- ---
<S> <C> <C>
John Fife Chairman of the Board, Chief 35
Executive Officer, President and
Director
Robert D. Wolff Former CEO 56
E. Jay Sheen Former Recorder of Minutes and 42
Former Director
R. Dee Erickson Former Chairman of the Board and 53
Former Director
Lyle Hurd Former Director of Marketing and 60
Director
Ladd Worth Eldredge CFO, Secretary Treasurer 44
Gerry T. Brown Former President and current Vice 56
President
</TABLE>
-30-
<PAGE> 31
EXECUTIVE COMPENSATION
The following table summarizes the compensation for Robert D. Wolff as
the CEO of the Company 1995, and John Fife as the CEO of the Company in 1996,
E. Jay Sheen, R. Dee Erickson, Lyle Hurd, Ladd Worth Eldredge and Gerry T.
Brown.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION AWARDS
------------------- ------
NAME AND SHARES
PRINCIPAL FISCAL UNDERLYING ALL OTHER
POSITION YEAR SALARY BONUS OPTIONS COMPENSATION
-------- ---- ------ ----- ------- ------------
<S> <C> <C> <C> <C> <C>
John Fife, CEO, 1996 $200,000(1) - - -
President, Chairman
of the Board and
Director
Robert D. Wolff, June 1995- $125,000(2a) $25,000/ - -
Former CEO(2) April 1996 quarter(2b)
E. Jay Sheen, Former 1995 $6,000 - 8,000 $298,066 (3) (3a)
Recorder of Minutes 1994 $6,000 - 9,000 $101,704 (4)
and Former Director 1993 - - -
R. Dee Erickson, 1995 $6,000 - 8,000 $106,600 (5) (5a)
Former Chairman of 1994 - - 9,000 $12,400 (6)
the Board and Former 1993 - - -
Director
Lyle Hurd, Former 1995 $30,000 - 8,000 $24,615 (7)
Director of 1994 - - 9,000 $18,340 (8)
Marketing and 1993 - - -
Director
Ladd Worth Eldredge, 1995 $34,583 - - -
CFO, Secretary and 1994 $12,550 $500 - -
Treasurer 1993 - - - -
Gerry T. Brown, 1995 $70,000 - 8,000 $8,237 (9)
Former President and 1994 $70,000 $1,000 9,000 $14,412(10)
Vice President 1993 $70,000 - - $9,766(11)
</TABLE>
-31-
<PAGE> 32
(1) Pursuant to the terms of the Stock Purchase Agreement, the
Company and Mr. Fife agreed to enter into an employment agreement to provide
for, among other things, (i) the employment of Mr. Fife as President, Chief
Executive Officer, and Chairman of the Board of the Company, and (ii) an annual
compensation to be paid to Mr. Fife of no more than $200,000 for any year
during the employment period. At this time no employment agreement has been
entered into with Mr. Fife.
(2) Mr. Wolff served as the CEO of the Company during the term
that the Share Exchange Agreement was in place, July 1, 1995 through April 25,
1996.
(2a) Mr. Wolff actually received approximately $57,292 as his
pro-rated portion for 1995.
(2b) Mr. Wolff actually received approximately $45,833 as his
pro-rated portion for 1995.
(3) Mr. Sheen, in addition to providing services as a recorder of
the minutes, served as a director of the Company, for which he received fees in
the amount of $2,600; and his law firms served as legal counsel to the Company,
for which his respective law firms were paid approximately $191,466 in 1995.
Mr. Sheen also received 38,000 shares of the Company's stock and $104,000 for
services performed with respect to the Share Exchange Agreement.
(3a) The market value of the 38,000 shares of the Company's stock
received by Mr. Sheen in 1995 is not included in the column.
(4) Mr. Sheen received fees as director of the Company in the
amount of $2,400. Mr. Sheen's law firm also served as legal counsel to the
Company for which his law firm was paid approximately $99,304 in 1994.
(5) Mr. Erickson received $2,600 in directors fees and 38,000
shares of the Company's stock and $104,000 for services performed with respect
to the Share Exchange Agreement in 1995.
(5a) The market value of the 38,000 shares of the Company's stock
received by Mr. Sheen in 1995 is not included in the column.
(6) Mr. Erickson received $2,400 in directors fees and $10,000 for
consulting services rendered.
(7) In 1995, Mr. Hurd received $2,600 in directors fees, $13,750
in consulting fees and an additional $8,265 was paid by the Company to St.
George Magazine for advertising. Mr. Hurd is the owner of Hurd Owens Hafen
Inc., which publishes St. George Magazine.
(8) In 1994, Mr. Hurd received $2,400 in directors' fees, $12,500
in consulting fees and $3,440 was paid to St. George Magazine for advertising.
Mr. Hurd is the owner of Hurd Owens Hafen, Inc., which publishes St. George
Magazine.
(9) Mr. Brown received $8,237 in commissions from sales of real
estate.
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<PAGE> 33
(10) Mr. Brown received $14,412 in commissions from sales of real
estate.
(11) Mr. Brown received $9,766 in commissions from sales of real
estate.
The following table shows the total number of options granted to each
of the named persons during 1995 (both as the number of shares of Common Stock
subject to such options and as a percentage of all options granted to employees
during 1995) and, for each of these grants, the exercise price per share of
Common Stock and option expiration date.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARS
UNDERLYING GRANTED TO EXERCISE OR
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION
NAME GRANTED (#) FISCAL YEAR ($/SH) DATE
---- ----------- ----------- ------ ----------
<S> <C> <C> <C> <C>
IMCC(1) 150,000 or more (3) $3.35 2006
(50.5% interest)(2)
Robert D. Wolff - - - -
R. Dee Erickson 8,000(4) 16.7% $2.50 4/7/2004
Lyle Hurd 8,000(4) 16.7% $2.50 4/7/2004
Ladd Worth Eldredge - - - -
Gerry Brown 8,000(4) 16.7% $2.50 4/7/2004
E. Jay Sheen 8,000(4) 16.7% $2.50 4/7/2004
</TABLE>
- ---------------------------
(1) John Fife, CEO of the Company is the sole shareholder of IMCC.
(2) For a more detailed description of the IMCC Option, see "ITEM 1
DESCRIPTION OF BUSINESS/Stock Purchase Agreement - July 3, 1993."
(3) This option was not granted as a part of John Fife's employment.
(4) The option granted was made pursuant to the Company's 1994 Stock
Option Plan, described below. The plan was approved by the
shareholders in January 1995. None of these options were exercised
during 1995. All of these presently exercisable options are above the
market price of the underlying Common Stock.
No SARs were outstanding in 1995 and 1996.
-33-
<PAGE> 34
The Company has no long-term incentive compensation plans other than
the 1994 Stock Option Plan described herein. Gerry Brown, as the former
President of the Company, is a participant in the Company's 1994 Stock Option
Plan. Under the Plan, each of the six individuals were granted options for
25,000 shares of the Company's Common Stock, pursuant to the terms of a
Non-Qualified Stock Option Agreement between each person and the Company, dated
April 7, 1994. The option exercise price is $2.50 per share, the market price
of the stock on the date of grant. Each of the granted options vest as
follows: (a) 9,000 shares on the date of the Option Agreement; and (b) 8,000
shares on each of the next two anniversary dates of the Agreement (April 7,
1995, and April 7, 1996).
URI and its subsidiary currently employ Gerry Brown on a full time
basis, to act as the Vice President of the Company where he provides real
estate planning, development and sales services for the Company, Tonaquint,
Inc., the Company's wholly-owned subsidiary, and various affiliated
partnerships. Mr. Brown is currently the President of Tonaquint, Inc., where
he assists in land use planning, negotiating sales and financing arrangements,
obtaining government approvals, arranging for construction contracts, and
supervising the performance of engineering services as have been required. The
Company executed and presented Mr. Brown with a three year employment agreement
on June 28, 1995, which employment agreement remains unexecuted by Mr. Brown.
Mr. Brown received compensation from the Company during the years 1993, 1994
and 1995, as set forth on the Summary Compensation Table on page 31.
DIRECTORS COMPENSATION
Each director receives $200 per director's meeting. Also, directors
who travel out of town to attend the meetings are, upon Board approval,
reimbursed for their travel, lodging and meals. During 1995 through August 24
1996, the directors served pursuant to the 1993 Settlement Agreement. The 1993
Settlement Agreement was terminated on August 29, 1996.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth, as of October 8, 1996, certain
information regarding the beneficial ownership of the Company's Common Stock
by: (1) each of the current directors of the Company; (2) each of the
Company's current executive officers; and (3) the Company's directors and
officers as a group.
-34-
<PAGE> 35
UTAH RESOURCES INTERNATIONAL, INC.
COMMON STOCK OWNERSHIP BY DIRECTORS AND NAMED EXECUTIVE OFFICERS
AS OF OCTOBER 8, 1996
<TABLE>
<CAPTION>
BEFORE STOCK SPLIT AFTER STOCK SPLIT*
PERCENT OF PERCENT OF
NAME OF BENEFICIAL NUMBER OF OUTSTANDING NUMBER OF OUTSTANDING
OWNER POSITION SHARES SHARES SHARES SHARES
- -------------------- -------- -------- ----------- -------- -----------
<S> <C> <C> <C> <C> <C>
David Fife Director 0 0% 0 0%
John Fife, as sole Director, 1,275,912(1) 50.5% 1276** 52%
shareholder of IMCC Chief
Executive
Officer,
President and
Chairman of
the Board
Lyle Hurd Director 2,000(2) .08% 2(3) .08%
Mark Jones Director 326,310 13% 327**(3) 13%
Jenny Morgan Director 9,523 .38% 10**(3) .41%
Gerry Brown Vice 2,000(2) .08% 2(3) .08%
President
Ladd Worth Eldredge CFO, 0 0% 0 0%
Secretary,
Treasurer
DIRECTORS AND OFFICERS AS Directors & 1,613,745(2) 64% 1,617 66%
A GROUP Officers
(7 persons)
</TABLE>
* Assumes No Small-Lot Shareholder exercises the Round Up Option, and no
remaining shareholder elects to purchase the Returned Shares.
** Assumes that Roundup Option is exercised by fractional shareholders.
(1) IMCC also holds a ten year option to purchase 150,000 or more additional
shares of stock, so as to maintain its 50.5% interest in URI.
(2) Lyle Hurd and Gerry Brown each contend that he was granted an option for
25,000 shares pursuant to the Share Exchange Agreement. There is a dispute
as to whether the option was granted. This issue will be resolved following
an investigation in the coming year.
(3) In the event the proposed reverse split is effected, each of these
individuals will be granted an option to purchase additional shares of URI's
stock pursuant to the terms of the Returned Shares Option. For a more
detailed description of this Returned Shares Option, see "ITEM 1 DESCRIPTION
OF BUSINESS/Stock Purchase Agreement - July 3, 1996."
-35-
<PAGE> 36
The following table sets forth, as of December 31, 1995, certain
information regarding the beneficial ownership of the Company's Common Stock
by: (1) each of the current directors of the Company; (2) each of the
Company's current executive officers; and (3) the Company's directors and
officers as a group.
UTAH RESOURCES INTERNATIONAL, INC.
COMMON STOCK OWNERSHIP BY DIRECTORS AND NAMED EXECUTIVE OFFICERS
AS OF DECEMBER 31, 1995
<TABLE>
<CAPTION>
PERCENT OF
NUMBER OF OUTSTANDING
NAME OF BENEFICIAL OWNER POSITION SHARES SHARES
------------------------ -------- --------- -----------
<S> <C> <C> <C>
E. Jay Sheen Director 40,000 2.161%
R. Dee Erickson Director 48,100 2.598%
Lyle Hurd Director 2,000(1) .108%
John H. Morgan, Jr. Director 1,916(2) .104%
Daisy R. Morgan Director 38,617 2.086%
Robert D. Wolff CEO 590,000(3) 31.871%
Gerry Brown President 2,000(1) .108%
Ladd Worth Eldredge CFO, Secretary, 0 0%
Treasurer
DIRECTORS AND OFFICERS Directors & Officers 722,633 39.036%
AS A GROUP (8 persons)
</TABLE>
(1) Lyle Hurd and Gerry Brown each contend that he was granted an option for
25,000 shares pursuant to the Share Exchange Agreement. There is a dispute
as to whether the option was granted. This issue will be resolved following
an investigation in the coming year.
(2) As record holder only.
(3) Mr. Wolff held these shares in joint tenancy with his wife, Judith J.
Wolff.
PRINCIPAL STOCKHOLDERS
The following table sets forth information as of October 8, 1996
regarding each person other than directors of the Company who were known by the
Company to own beneficially more than 5% of the outstanding shares of Common
Stock. Each person named has sole voting and investment power with respect to
the shares beneficially owned by such person.
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<PAGE> 37
UTAH RESOURCES INTERNATIONAL, INC.
5% OR GREATER BENEFICIAL OWNERS
AS OF OCTOBER 8, 1996
<TABLE>
<CAPTION>
NUMBER OF SHARES AND
NAME AND ADDRESS OF NATURE OF PERCENT OF COMPANY
BENEFICIAL OWNER BENEFICIAL OWNER SHARES OUTSTANDING
------------------- -------------------- ------------------
<S> <C> <C>
Inter-Mountain Capital 1,275,912 50.5%
Corporation(1)
Mark Technologies Corporation2 326,310 13%
</TABLE>
(1) John Fife, Director, President, CEO and Chairman of the Board of the
Company, is the sole shareholder of Inter-Mountain Capital Corporation.
(2) Mark Jones, Director of the Company, holds 100 shares individually and an
additional 326,210 shares in his capacity as the controlling shareholder of
Mark Technologies Corporation.
The following table sets forth information as of December 31, 1995
regarding each person other than directors of the Company who were known by the
Company to own beneficially more than 5% of the outstanding shares of Common
Stock. Each person named has sole voting and investment power with respect to
the shares beneficially owned by such person.
UTAH RESOURCES INTERNATIONAL, INC.
5% OR GREATER BENEFICIAL OWNERS
AS OF DECEMBER 31, 1995
<TABLE>
<CAPTION>
NUMBER OF SHARES AND
NAME AND ADDRESS OF NATURE OF PERCENT OF COMPANY
BENEFICIAL OWNER BENEFICIAL OWNER SHARES OUTSTANDING
-------------------- -------------------- ------------------
<S> <C> <C>
Mark Technologies Corporation 201,210 10.869%
Robert D. Wolff and Judith J. 590,000 31.871%
Wolff, as Joint Tenants
</TABLE>
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
John H. Morgan, Jr., his wife, Daisy Morgan, the Estate of John H.
Morgan, Sr. and Morgan Gas & Oil Co., a company controlled by John H. Morgan,
Jr., and other members of
-37-
<PAGE> 38
Mr. Morgan's family, have owned interests in several entities (mostly
partnerships) in which the Company also owns interests or with which the
Company has engaged in certain transactions. Mr. Morgan is a co-personal
representative of the Estate of John H. Morgan, Sr. The sole beneficiary of
the Estate of John H. Morgan, Sr. is the John H. Morgan Sr. Sheltered Trust, of
which Mr. Morgan is a co-trustee and a beneficiary. The Morgans and their
affiliates' ownership in these partnerships was one of the subjects of the
shareholders derivative lawsuit captioned as ERNEST MUTH, ET AL. V. JOHN
MORGAN, JR. ET AL., which was filed as Civil Number L-87-1632 in the Third
Judicial Court of Salt Lake County, Utah (the "First State Action").
TONAQUINT-INDIAN HILLS LIMITED PARTNERSHIP
Tonaquint-Indian Hills was involved in developing condominiums in St.
George in the 1980's. It has been inactive since before 1990, although it
continues to hold liquid assets of approximately $15,500, which will be
distributed when the partnership is dissolved. Effective May 7, 1993, all of
the partnership interests held by John H. Morgan, Jr., Daisy R. Morgan, Dawn
Delvie, and the Estate of John H. Morgan, Sr. were transferred to Utah
Resources pursuant to the 1993 Settlement Agreement, aggregating 7.66% of the
total partnership interests. After that, Mr. and Mrs. Morgan's daughters and
Mr. Morgan's other sisters continued to own approximately 8.5% of the
partnership interests, the Estate of John H. Morgan, Sr. owned 1.255%, and
Morgan Gas & Oil Co. owned 8.46%.
In the settlement of the shareholder's derivative lawsuit in 1993,
approximately $120,000 of the amounts paid to the plaintiffs for their
attorneys fees came from the liquidation of the remaining assets in
Tonaquint-Indian Hills Limited Partnership. The partnership will be dissolved.
RESOURCES LIMITED PARTNERSHIP (ST. GEORGE HILTON INN)
Effective May 1, 1993, URI owned 83.62% of Resources Limited
Partnership, which owned and operated the St. George Hilton Inn. On that date,
all of the partnership interests held by John H. Morgan, Jr., Daisy R. Morgan,
Dawn Delvie, and the Estate of John H. Morgan, Sr. were transferred to URI
pursuant to the 1993 Settlement Agreement aggregating 10.2955% of the total
partnership interests. After that, Mr. and Mrs. Morgan's other sisters
continued to own approximately .2% of the partnership interests, the Estate of
John H. Morgan, Sr. owned .9765%, and Morgan Gas & Oil owned 7.49%
Effective May 1, 1993, the St. George Hilton Inn was sold to St.
George Inn L.C., an independent party. From the proceeds of the sale allocable
to the sale of the St. George Hilton Inn, Resources Limited Partnership has
paid all of the monies owned to the Company for the various loans and advances
made to Resources Limited Partnership by the Company. Also, a portion of the
purchase price was paid through the assumption by St. George Inn L.C. of the
remaining obligations of Resources Limited Partnership on the notes described
in the proceeding paragraph, and the Company and the other co-makers and
guarantors were released. Resources Limited Partnership will be dissolved.
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<PAGE> 39
SERVICE STATION LIMITED PARTNERSHIP #2
Effective May 1, 1993, URI owned 79% of Service Station Limited
Partnership, which owned and operated the Texaco Service Station next to the
St. George Hilton Inn. On that date, all of the partnership interests held by
John H. Morgan, Jr. and one-half interests held by the Estate of John H.
Morgan, Sr. were transferred to URI pursuant to the settlement of the
shareholders derivative lawsuit, aggregating 12% of the total partnership
interests. After that, the Estate of John H. Morgan, Sr. continues to own 7%
of the partnership interests and Morgan Gas & Oil Co. owns 14%.
Morgan Gas & Oil Co. holds notes in the total principal amount of
$110,932 from the Service Station Partnership #2, ostensibly representing loans
made by Morgan Gas & Oil to the partnership. Morgan Gas & Oil claims the loans
are overdue. However, since the transactions were between related parties, all
of whom were controlled by John H. Morgan, Jr. at the time of the transactions,
and since the Company also advanced funds to the Service Station, the Company
is performing an internal audit to verify the legitimacy of the losses and
their proper characterization, before it determines whether to acknowledge and
pay the debt. These notes payable are included in net assets of discontinued
operations.
COUNTRY CLUB PARTNERSHIP
In the mid-1980s, the Country Club Partnership, together with a
partnership owned by two unrelated persons, owned approximately 6.9 acres of
real property contiguous to the Southgate Golf Course, next to the St. George
Hilton Inn. Effective May 1, 1993, all of the partnership interests held by
John H. Morgan, Jr., Daisy R. Morgan, Dawn Delvic, and the Estate of John H.
Morgan, Sr. were transferred to URI pursuant to the 1993 Settlement Agreement,
aggregating 9.2% of the total partnership interests. Thereafter, the John H.
Morgan, Sr. Sheltered Trust continued to own 4.2% of the partnership interests,
and Morgan Gas & Oil Co. owned 8.4%. The partnership is in dissolution.
SOUTHGATE PLAZA
URI owns 52.5% of the partnership interests in Southgate Plaza Limited
Partnership, which is one of three general partners in Southgate Plaza General
Partnership. The general partnership is involved in real property development
activities in St. George, comprised mostly of selling its undeveloped
properties for commercial development. Before May 1, 1993, the Company's
ownership interest was 33.33%. After that date, interests held by John H.
Morgan, Jr., Daisy R. Morgan, Dawn Delvie, and the John H. Morgan, Sr.
Sheltered Trust were transferred to URI pursuant to the 1993 Settlement
Agreement, aggregating 19.16% of the total partnership interests.
-39-
<PAGE> 40
SOUTHGATE PALMS
Prior to May 1, 1993, URI and Tonaquint, Inc. owned 98% of the
partnership interests in Southgate Palms Limited Partnership, which was one of
the three general partners of the Southgate Palms General Partnership, formed
to conduct real property development activities in St. George in the mid-1980s.
Effective May 1, 1993, the 2% partnership interests held by Mr. and Mrs. Morgan
were transferred to URI pursuant to the 1993 Settlement Agreement, resulting in
the dissolution of the partnership.
SOUTHGATE PARTNERSHIP TRANSACTIONS
The Company, John H. Morgan, Jr. and Daisy R. Morgan have signed a
number of notes as general partner, co-makers or guarantors, the proceeds of
which were used by the three Southgate general partnerships discussed above.
The balance of the only remaining bank note of approximately $396,000 was paid
in full during 1993, and was extinguished during 1994. Payments on this note,
as well as other expenses of the Southgate general partnerships are made in
equal thirds between the respective limited partnerships, and Mike Hughes and
the Estate of Ralph O. Brown, the other two general partners in the Southgate
general partnerships. The limited partnerships' shares of such payments are
made by the Company and its subsidiary.
MARK G. JONES TRANSACTIONS
On December 22, 1995, Mark Technologies Corporation, a California
corporation ("MTC") which is a wholly owned subsidiary of METC, Inc., a
California corporation ("METC") whose controlling shareholder and board member
is Mark G. Jones (a director of the Company), acquired 201,210 shares of common
stock of the Company from Morgan Gas & Oil Co., in consideration for the pay
down of a promissory note dated as of January 1, 1995 associated with the sale
of a limited partnership interest in a California limited partnership owned by
MTC. The promissory note issued by Morgan Gas & Oil Co. to MTC was credited by
the amount of $603,630 ($3.00 per share) as consideration of the transfer of
the 201,210 shares of URI Common Stock to MTC. One hundred (100) shares of URI
Common Stock were previously acquired by Mark G. Jones, by gift from JH Morgan
and DR Morgan on May 9, 1995.
Subsequent to the period covered by this report, on April 20, 1996,
Mark Technologies Corporation, a California corporation ("MTC") which is a
wholly owned subsidiary of METC, Inc., a California corporation ("METC") whose
controlling shareholder and board member is Mark G. Jones, acquired 125,000
shares of URI stock from the Morgan Charitable Trust. A promissory note was
issued to the Morgan Family Charitable Trust by MTC in the principal amount of
$375,000 ($3.00 per share) as the entire consideration received for the
transfer of the 125,000 shares of URI stock. The promissory note is secured by
certain project revenues otherwise payable to a wholly-owned subsidiary of
METC.
-40-
<PAGE> 41
JOHN FIFE TRANSACTION
Subsequent to the period covered by this report, John Fife, as the
sole shareholder of IMCC, acquired a 50.5% interest in the Company on July 3,
1996. For a more detailed description of this acquisition see "ITEM 1
DESCRIPTION OF BUSINESS/Stock Purchase Agreement -- July 3, 1996."
SHARE EXCHANGE AGREEMENT TRANSACTION
On June 13, 1995 the Company consummated the exchange of 590,000
shares of its common stock in exchange for the receipt of all issued and
outstanding stock of Midwest (the "Share Exchange Agreement"). Midwest was
wholly owned by Robert D. Wolff, subsequent CEO of the Company, and Judith J.
Wolff. Among other things, the Share Exchange Agreement provided for the
payment of compensation, for services rendered, by the Company to R. Dee
Erickson and E. Jay Sheen (both directors of the Company) in the amount of
38,000 shares each of the Company's Common Stock and $104,000 each. For a more
detailed description of the Share Exchange Agreement, see "ITEM 1 DESCRIPTION
OF BUSINESS/Share Exchange Agreement."
1996 SETTLEMENT AGREEMENT TRANSACTION AND RELATED TRANSACTIONS
The following amounts were paid through August 14, 1996 by the Company
in connection with the 1996 Settlement Agreement, the Morgan Settlement
Agreement and the IMCC Stock Purchase Agreement:
Hunter & Brown, approximately $34,843.08, as legal counsel for Mark G.
Jones, director of the Company;
Campbell, Maack & Sessions, approximately $167,987.68, as legal
counsel, as follows, $81,000 for legal services performed for Anne and Victoria
Morgan, daughters of John H. Morgan, Jr. and Daisy R. Morgan, both directors of
the Company in 1995, pursuant to the 1996 Settlement Agreement with the balance
of $86,987.68 for services performed as legal counsel for Mark Technologies
Corporation, a corporation controlled by Mark G. Jones, director of the Company;
Dorton, Jones, Nicolatus & Stuart Inc., approximately $4,225, as
experts for Mark Technologies Corporation, a corporation controlled by Mark G.
Jones;
Mark Technologies Corporation, approximately $10,090.03, a corporation
controlled by Mark G. Jones, a director of the Company, for a retainer paid to
Dorton, Jones, Nicolatus & Stuart, Inc. and for certain out-of-pocket expenses;
Victoria Morgan, daughter of John H. Morgan, Jr. and Daisy R. Morgan,
in the amount of $58,966.70 for repurchase of all shares owned in the Company
by Ms. Morgan;
-41-
<PAGE> 42
Anne Morgan, daughter of John H. Morgan, Jr. and Daisy R. Morgan, in
the amount of $76,882.50 for a repurchase of all shares owned in the Company by
Ms. Morgan;
John H. Morgan, Jr., in the amount of $89,229.81, representing the
total monetary judgment collected from him by the Company pursuant to the
Murphy Order and all amounts covered by the Order regarding Stay of Execution
and Acceptance of Undertaking under the Murphy Order;
Robinson & Sheen, L.L.C. $76,133.54, as counsel for the Company;
Jardine, Linebaugh & Dunn, approximately $22,732.97, as counsel for
the Company;
Wildman, Harrold, Allen & Dixon, approximately $72,433.52, as counsel
for IMCC, a company wholly owned by John Fife, director, CEO, President and
Chairman of the Board of the Company;
Giauque, Crockett, Bendinger & Peterson, $22,391.68, as local Utah
counsel for IMCC, a company wholly owned by John Fife, director, CEO, President
and Chairman of the Board of the Company;
IMCC, a company wholly owned by John Fife, director, CEO, President
and Chairman of the Board of the Company, approximately $5,014.79 for
reimbursement of the retainer to Giauque, Crockett, Bendinger & Peterson; and
Brown Wright & Associates, approximately $19,937.45 as experts for the
Company.
LEGAL REPRESENTATION OF THE COMPANY
During 1994 and 1995, the law firms of Moyle Draper and Robinson &
Sheen, L.L.C. provided legal representation to the Company. E. Jay Sheen, a
former director of the Company, was a partner at Moyle Draper and currently is
a partner at Robinson & Sheen. During 1994, Moyle Draper received
approximately $99,304 in legal fees. During 1995, Robinson & Sheen received
approximately $144,800.29 in legal fees and Moyle Draper received approximately
$46,666 in legal fees.
COMMISSION AND CONSULTING FEES
1994
During 1994, Lyle Hurd and R. Dee Erickson, both directors of the
Company, received consulting fees from the Company in the amounts of $12,500
and $10,000, respectively. An additional $3,440 was paid by the Company to St.
George Magazine for advertising. Mr. Hurd, who also served as Director of
Marketing of the Company, is the owner of Hurd Owens Hafen,
-42-
<PAGE> 43
Inc., which publishes St. George Magazine. In 1994, Gerry Brown, President of
the Company, received $14,412 in commissions for sales of real estate.
1995
During 1995, Lyle Hurd, a director of the Company and Director of
Marketing, received $13,750 in consulting fees. An additional $8,265 was paid
by the Company to St. George Magazine for advertising. Mr. Hurd, who also
served as Director of Marketing of the Company, is the owner of Hurd Owens
Hafen, Inc., which publishes St. George Magazine, among others. In 1995, Gerry
Brown, the President of the Company, received $8,327 in commissions.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits - See Exhibit Index below.
(b) Reports on Form 8-K -- The registrant filed no reports on Form
8-K during the last quarter of the fiscal year ended December
31, 1995.
-43-
<PAGE> 44
EXHIBIT INDEX
ANNUAL REPORT ON FORM 10-KSB - 1995
UTAH RESOURCES INTERNATIONAL, INC.
SEC FILE NO.
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT DESCRIPTION LOCATION/INCORPORATION BY REFERENCE
<S> <C> <C>
2.1 Share Exchange Agreement Incorporated by reference to Exhibit 3 to Form 8-K as filed July 20, 1995
2.2 Stock Purchase Agreement Incorporated by reference to Exhibit 1 to Form 13D-A as filed
September 9, 1996
3.1 Articles of Incorporation of Incorporated by reference to Exhibit 3.A to the Company's registration
Utah Resources International, statement on Form 10 as filed June 22, 1981
Inc.
3.2 Bylaws of Utah Resources Incorporated by reference to Exhibit 3.B to the Company's registration
International, Inc. statement of form 10-KSB as filed June 22, 1981
Amendment of bylaws dated Incorporated by reference to Exhibit 3.3 to the Company's Annual Report of
November 17, 1992 Form 10-KSB for the year ended December 31, 1992
3.4 Amendment of Bylaws - Incorporated by reference to Exhibit 3.4 to the Company's Annual Report of
December, 1994 Form 10-KSB for the year ended December 31, 1994
3.5 Amendment to Articles of Incorporated by reference to Exhibit 3.5 to the company's Annual report of
Incorporation adopted by Form 10-KSB for the year ended December 31, 1994
shareholders January 26, 1995
10.1 B & E Securities Profit Incorporated by reference to Exhibit 10 to the Company's registration
Sharing Agreement statement on Form 10 as amended and filed May 20, 1982
10.2 Southgate Palms Partnership Incorporated by reference to Exhibit 10.2 to the Company's Annual Report on
Agreement Form 10-KSB for the year ended December 31, 1986
10.3 Southgate Palms Plaza Limited Incorporated by reference to Exhibit 10.3 to the Company's Annual Report on
Partnership Agreement Form 10-KSB for the year ended December 31, 1986
10.4 Southgate Plaza Partnership Incorporated by reference to Exhibit 10.4 to the Company's Annual Report on
Agreement Form 10-KSB for the year ended December 31, 1986
</TABLE>
<PAGE> 45
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT DESCRIPTION LOCATION/INCORPORATION BY REFERENCE
<S> <C> <C>
10.5 Southgate Plaza Limited Incorporated by reference to Exhibit 10.5 to the Company's Annual Report on
Partnership Agreement Form 10-KSB for the year ended December 31, 1985
10.6 Southgate Resort Partnership Incorporated by reference to Exhibit 10.6 to the Company's Annual Report on
Agreement Form 10-KSB for the year ended December 31, 1985
10.7 Southgate Resort Limited Incorporated by reference to Exhibit 10.7 to the Company's Annual Report on
Partnership Agreement Form 10-KSB for the year ended December 31, 1985
10.8 Resources Limited Partnership Incorporated by reference to Exhibit 10.8 to the Company's Annual Report on
Agreement with amendments Form 10-KSB for the year ended December 31, 1985
10.9 Tonaquint-Indian Hills Limited Incorporated by reference to Exhibit 10.9 to the Company's Annual Report on
Partnership Agreement Form 10-KSB for the year ended December 31, 1985
10.10 Lease Agreement - Court Club Incorporated by reference to Exhibit 10.10 to the Company's Annual Report on
Property Form 10-KSB for the year ended December 31, 1985
10.11 Service Station Limited Incorporated by reference to Exhibit 10.11 to the Company's Annual Report on
Partnership #2-Partnership Form 10-KSB for the year ended December 31, 1986
Agreement
10.20 Settlement Agreement dated Incorporated by reference to Exhibit 10.20 to the Company's Annual Report on
July 31, 1989, with C.E.C. Form 10-KSB for the year ended December 31, 1989
Industries Corp.
10.21 Addendum to Settlement Incorporated by reference to Exhibit 10.21 to the Company's Annual Report on
Agreement with C.E.C. Form 10-KSB for the year ended December 31, 1989
Industries Corp.
10.22 Option Agreement dated Incorporated by reference to Exhibit 10.22 to the Company's Annual Report on
November 29, 1989 re: C.E.C. Form 10-KSB for the year ended December 31, 1989
Industries Corp.
10.23 Trust Deed Note dated November Incorporated by reference to Exhibit 10.23 to the Company's Annual Report on
29, 1989 re: C.E.C. Form 10-KSB for the year ended December 31, 1989
Industries Corp.
10.24 Trust Deed dated November 29, Incorporated by reference to Exhibit 10.24 to the Company's Annual Report on
1989 re: C.E.C. Industries Form 10-KSB for the year ended December 31, 1989
Corp.
10.25 Mutual Releases re: C.E.C. Incorporated by reference to Exhibit 10.25 to the Company's Annual Report on
Industries Corp. Form 10-KSB for the year ended December 31, 1989
10.26 Mutual Release re: Counterclaim Incorporated by reference to Exhibit 10.26 to the Company's Annual Report on
Form 10-KSB for the year ended December 31, 1989
</TABLE>
<PAGE> 46
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT DESCRIPTION LOCATION/INCORPORATION BY REFERENCE
<S> <C> <C>
10.27 Dissolution Agreement dated Incorporated by reference to Exhibit 10.27 to the Company's Annual Report on
April 28, 1989 re: Southgate Form 10-KSB for the year ended December 31, 1989
Palms
10.28 Promissory Note dated March 29, Incorporated by reference to Exhibit 10.28 to the Company's Annual Report on
1991 executed by Resources Form 10-KSB for the year ended December 31, 1990
Limited Partnership
10.29 Deed of Trust dated March 29, 1991 Incorporated by reference to Exhibit 10.29 to the Company's Annual Report on
executed by Resources Limited Form 10-KSB for the year ended December 31, 1990
Partnership
10.30 Settlement Agreement dated April Incorporated by reference to Exhibit 10.30 to the Company's Annual Report on
6, 1993** Form 10-KSB for the year ended December 31, 1992
10.31 Real Estate Contract dated May 3, Incorporated by reference to Exhibit 10.31 to the Company's Annual Report on
1993 between Resources Limited Form 10-KSB for the year ended December 31, 1992
Partnership, Tonaquint, Inc., and
St. George Inn, L.C.
10.32 Options Contract dated May 21, Incorporated by reference to Exhibit 10.32 to the Company's Annual Report on
1993, between Service Station Form 10-KSB for the year ended December 31, 1992
Limited Partnership #2 and St.
George Inn, L.C.
10.33 Assignment of Partnership and Incorporated by reference to Exhibit 10.33 to the Company's Annual Report on
Limited Partnership Interests Form 10-KSB for the year ended December 31, 1992
dated May 7, 1993
10.34 Share Exchange Agreement Incorporated by reference to Exhibit 3 to Form 8-K as filed July 20, 1995
10.35 Stock Purchase Agreement Incorporated by reference to Exhibit 1 to Form 13D-A as filed September
9, 1996
10.36 Splitoff Agreement Incorporated by reference to Exhibit 10.36 to Form 10-KSB as filed January 8,
1997
10.37 Morgan Settlement Agreement Incorporated by reference to Exhibit 10.37 to Form 10-KSB as filed January 8,
1997
10.38 1996 Settlement Agreement Incorporated by reference to Exhibit 10.38 to Form 10-KSB as filed January 8,
1997
21 List of Subsidiaries Incorporated by reference to Exhibit 21 to the Company's Annual Report on
Form 10-KSB for the year ended December 31, 1992
27 Financial Data Schedule Filed Herein
</TABLE>
- ------------------------------
** Confidential treatment has been granted with respect to information
contained in this exhibit.
<PAGE> 47
SIGNATURES
Pursuant to the requirements 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.
Utah Resources International, Inc.
Date: 11/12/97 By: /s/ John Fife
----------------- ----------------------------
John Fife
Its Director, President and
Chairman of the Board, and CEO
-44-
<PAGE> 48
-45-
<PAGE> 49
UTAH RESOURCES
INTERNATIONAL, INC.
CONSOLIDATED FINANCIAL STATEMENTS
-46-
<PAGE> 50
UTAH RESOURCES INTERNATIONAL, INC.
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report F-1
Balance sheet, December 31, 1994 F-2
Statements of operations for the years
ended December 31, 1994 and 1993 F-3
Statement of stockholders' equity for the
years ended December 31, 1994 and 1993 F-4
Statement of cash flows for the years ended
December 31, 1994 and 1993 F-5
Notes to consolidated financial statements F-7
Independent Auditors' Report F-18
Consolidated balance sheet, December 31, 1995 F-19
Consolidated statements of operations for the years
ended December 31, 1995 and 1994 F-20
Consolidated statements of stockholders' equity for the
years ended December 31, 1995 and 1994 F-21
Consolidated statement of cash flows for the years
ended December 31, 1995 and 1994 F-22
Notes to consolidated financial statements F-24
</TABLE>
<PAGE> 51
Salt Lake City, Utah
INDEPENDENT AUDITORS' REPORT
TO THE BOARD OF DIRECTORS OF
UTAH RESOURCES INTERNATIONAL, INC.,
AND SUBSIDIARIES
We have audited the accompanying consolidated balance sheet of Utah
Resources International, Inc., and subsidiaries at December 31, 1994 and the
related consolidated statements of operations, stockholders' equity and cash
flows for the two years then ended. These consolidated financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the
consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Utah Resources International, Inc., and subsidiaries as of December 31,
1994 and the results of their operations and their cash flows for the two
years ended December 31, 1994, in conformity with generally accepted
accounting principles.
/s/ Tanner + Co.
----------------
Tanner + Co.
March 24, 1995
F-1
<PAGE> 52
UTAH RESOURCES INTERNATIONAL, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
ASSETS
DECEMBER 31, 1994
<TABLE>
<CAPTION>
ASSETS
------
<S> <C>
Cash and cash equivalent $2,138,795
Accounts receivable 254,312
Note receivable from related party 10,899
Notes receivable 200,267
Property and equipment, net of
accumulated depreciation and
amortization of $42,098 30,027
Real estate held for resale 627,214
Royalty interest in petroleum and mineral
production, net of amortization of $37,687 12,523
Other assets 19,799
-------
$3,293,836
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Accounts payable $ 160,534
Accrued expenses 291,331
Earnest money deposits 36,000
Notes payable 657,545
Income taxes payable 201
Deferred income taxes 300,000
---------
Total liabilities 1,445,611
---------
Minority interest 183,121
Commitment and contingencies -
Stockholders' equity:
Common stock; par value $.10 per share,
5,000,000 shares authorized,
1,284,027 shares issued and outstanding 128,403
Additional paid-in capital 127,174
Retained earnings 1,409,527
---------
Total stockholders' equity 1,665,104
---------
$3,293,836
==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-2
<PAGE> 53
UTAH RESOURCES INTERNATIONAL, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
-----------
1994 1993
---- ----
<S> <C> <C>
Sales $ 2,274,222 758,114
Cost of sales 567,453 113,396
--------- -------
Gross profit 1,706,769 644,718
General and administrative expenses 678 368 628,462
--------- -------
Income from operations 1,028,401 16,256
--------- -------
Other income (expense):
Rental income 32,183 87,904
Royalty income 92,455 98,554
Interest and dividend income 50,458 52,109
Interest expense (60,020) (64,837)
Litigation settlement - (690,000)
Other income (expense) (18,074) 9,430
--------- -------
Total other income (expense) 97,002 (506,840)
--------- -------
Income (loss) before minority interest and
provision for income taxes 1,125,403 (490,584)
Minority interest in net income of subsidiaries 29,109 380
--------- -------
Income (loss) before provision for income taxes 1,154,512 (490,204)
Income tax (provision) benefit (436,000) 144,000
--------- -------
Income (loss) from continuing operations 718,512 (346,204)
Discontinued operations:
Income from discontinued operations - 7,878
(Loss) income from disposal of discontinued
operations net of income taxes (benefit)
expense of $(16,000) and $82,000 (31,416) 160,867
--------- -------
Total discontinued operations (31,416) 168,745
--------- -------
Netincome(loss) $687,096 (177,459)
========= =======
Earnings (loss) per share $.54 (.12)
==== ====
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE> 54
UTAH RESOURCES INTERNATIONAL, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1994 AND 1993
<TABLE>
<CAPTION>
ADDITIONAL
COMMON STOCK PAID-IN RETAINED TREASURY
STOCK SHARES AMOUNT CAPITAL EARNINGS SHARES AMOUNT
- ----- ------ ------ ------- --------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1,1993 2,205,822 $220,582 730,913 899,890 654,795 713,918
Treasury shares cancelled (654,795) (65,479) (648,439) - (654,795) (713,918)
Common stock acquired in
litigation and cancelled (285,000) (28,500) 28,500 - - -
Common stock issued for
services 18,000 1,800 16,200 - - -
Net (loss) - - - (177,459) - -
--------- ---------- ---------- --------- --------- ---------
Balance, December 31, 1993 1,284,027 128,403 127,174 722,431 - -
Net income _ - - 687,096 - -
--------- ---------- ---------- --------- --------- ---------
Balance, December 31, 1994 1,284,027 $128,403 127,174 1,409,527 - -
========== ========== ========== ========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 55
UTAH RESOURCES INTERNATIONAL, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
------------
1994 1993
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 687,096 (177,459)
Adjustments to reconcile net income (loss)
to net cash provided by (used in) operating
activities:
Depreciation and amortization 22,756 40,667
Minority interest in net (income)
of subsidiaries (29,109) (380)
(Gain) loss on disposition of assets (36,267) 5,890
Bad debt expense - 22,003
Loss on marketable securities - 6,194
Common stock issued for services - 18,000
(Increase) decrease in:
Accounts receivable (238,503) 29,748
Prepaid expenses 76,403 (15,702)
Real estate held for resale 100,263 (157,879)
Refundable income taxes 443,201 (443,000)
(Decrease) increase in:
Accounts payable 8,302 108,304
Accrued expenses 171,488 (7,777)
Ernest money deposits (10,000) (65,141)
Deferred income tax 300,000 (88,052)
---------- --------
Net cash provided by (used in)
operating activities 1,495,630 (724,584)
---------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from marketable securities 29,920 329,038
Proceeds from disposition of assets 390,000 4,155
Payments on notes receivable 160,989 121,413
Decrease (increase) in net assets of
discontinued operations - 264,833
Purchase of property and equipment (7,601) (3,560)
Increase in notes receivable (206,843) (151,836)
Increase (decrease) in minority interest (51,126) 178,103
Decrease (increase) in other assets 3,289 (8,363)
---------- --------
Net cash provided by (used in)
Investing activities 318,628 733,783
---------- --------
</TABLE>
F-5
<PAGE> 56
UTAH RESOURCES INTERNATIONAL, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS - CONTINUED
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
-------------------------
1994 1993
---- ----
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable 27,249 400,000
Payments on notes payable (72,315) (89,346)
---------- -------
Net cash provided by (used
in) financing activities (45,066) 310,654
---------- -------
Increase in cash 1,769,192 319,853
Cash and cash equivalents, beginning of year 369,603 49,750
---------- -------
Cash and cash equivalents, end of year $2,138,795 369,603
========== =======
</TABLE>
SUPPLEMENTAL SCHEDULE OF NON-CASH ACTIVITIES:
1993
The Company acquired a vehicle for a note payable of $23,049
The Company retired its treasury stock
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Interest $ 36,992 64,837
========= ======
Income taxes $ - -
========= ======
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE> 57
UTAH RESOURCES INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1994 AND 1993
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS
Utah Resources International, Inc., and consolidated entities (the
Company) is engaged primarily in the development of real estate including
the sale of developed and undeveloped real estate. The Company's assets
are located in the Rocky Mountain West.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the financial statements
of Utah Resources, Inc., Tonnequint Inc. and a number of general
partnerships of which the Company has ownership in excess of 50 percent
and has management responsibility. All material intercompany transactions
and balances have been eliminated in consolidation of the Companies and
partnerships.
Effective April 30, 1993, the Company sold the St. George Hilton Inn
(Hilton) for cash and closed the service station adjacent to the Hilton.
The financial statements reflect the operations of the Hilton and the
service station as discontinued operations for the period January 1, 1993
through April 30, 1993. The net assets of discontinued entities are
included on the balance sheet in other assets.
METHOD OF RECOGNITION OF INCOME
Real Estate
Profits on sale of developed lots, developed land and raw land are
recognized in accordance with standards established for the real estate
industry which generally provide for deferral of all or part of the profit
on a sale if the buyer does not meet certain down payment requirements or
certain other tests of the buyer's financial commitment to the purchase,
or the seller is required to perform significant obligations subsequent to
the sale.
Cost of sales include a pro rata portion of acquisition and
development costs (including estimated costs to complete) along with sales
commissions, closing costs and other costs specifically related to the
sale.
F-7
<PAGE> 58
UTAH RESOURCES INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
METHOD OF RECOGNITION OF INCOME - CONTINUED
Other
Royalty income is recognized when received. The Company has overriding
mineral and oil and gas royalty interests and thus exercises no control
over the activities of the royalty payors and is notified of the amounts
or royalties due when the cash is received.
PROPERTY AND EQUIPMENT
Property and equipment is carried at cost. Depreciation is computed
using the straight-line method based upon the following useful lives:
Building 15-30 years
Furniture and equipment 3-10 years
REAL ESTATE HELD FOR RESALE
Real estate held for resale includes developed lots, land
underdeveloped and raw land. Real estate held for resale is carried at the
lower of cost or market. The cost of development of building lots includes
the land and the related costs of development (planning, survey,
engineering and other) which are capitalized. The cost of interest and
property taxes are expensed.
INTANGIBLE ASSETS
The cost of identifiable intangible assets, consisting of royalties,
is being amortized on a straight-line basis over the expected productive
life of the asset, 15 years. The intangible costs during the construction
of the Hilton were being amortized over 40 years on a straight line basis.
The unamortized intangible costs of construction were offset in
determining the gain on disposal of discontinued operations.
INCOME TAXES
Deferred income taxes are provided for temporary differences in
reporting income for financial statement and tax purposes arising
primarily from differences between financial reporting and income tax
reporting in the methods of accounting for depreciation of property and
equipment and construction contracts.
F-8
<PAGE> 59
UTAH RESOURCES INTERNATIONAL, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements - Continued
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
INCOME TAXES - CONTINUED
Effective January 1, 1993, the Company adopted the provision of SFAS
109 "Accounting for Income Taxes." The adoption of SFAS 109 changed the
Company's method of accounting for income taxes from the deferred method
(APB 11) to an asset and liability method. The asset and liability method
requires the recognition of deferred tax liabilities and assets for the
expected future tax consequences of temporary differences between tax
bases and financial reporting bases of other assets and liabilities.
EARNINGS PER SHARE
The weighted average of outstanding common shares is approximately
1,284,000 shares and 1,418,000 shares for the years ended December 31,
1994 and 1993, respectively.
STATEMENT OF CASH FLOWS
For purposes of the statements of cash flows, the Company considers
all highly liquid debt instruments purchased with a maturity of three
months or less to be cash equivalents.
CONCENTRATION OF CREDIT RISK
Financial instruments which potentially subject the Company to
concentration of credit risk consist primarily of trade receivables. In
the normal course of business, the Company provides credit terms to its
customers. Accordingly, the Company performs ongoing credit evaluations of
its customers and maintains allowances for possible losses which, when
realized, have been within the range of management's expectations.
The Company maintains its cash in bank deposit accounts which, at
times, may exceed federally insured limits. The Company has not
experienced any losses in such account and believes it is not exposed to
any significant credit risk on cash and cash equivalents.
RECLASSIFICATIONS
Certain prior period amounts have been reclassified to be consistent
with the current year presentation.
(2) ACCOUNTS RECEIVABLE
The Company has included in accounts receivable $130,963 which is from
a company controlled by the majority shareholder of the Company and
$121,854 which is from various related partnerships.
F-9
<PAGE> 60
UTAH RESOURCES INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(3) NOTE RECEIVABLE FROM RELATED PARTY
The Company has the following note receivable from a related party at
December 31, 1994:
Note receivable from a stockholder and director
requiring monthly payment of $500 including
interest at 8%, secured by real estate $10,899
=======
Future maturities of the note receivable from a related party are as
follows:
<TABLE>
<CAPTION>
YEAR AMOUNT
----- -------
<S> <C>
1994 $ 8,029
1995 2,870
-------
Total $10,899
=======
</TABLE>
(4) NOTES RECEIVABLE
The Company has the following notes receivable at December 31, 1994:
<TABLE>
<CAPTION>
<S> <C>
Note receivable from an individual at
9.0% interest, due in March, 1996,
secured by real estate $175,267
Note receivable from an individual at
8% interest, due in January 1995 25,000
--------
$200,267
========
Future maturities of notes receivable are as follows:
YEAR AMOUNT
- ----- --------
1995 $ 25,000
1996 175,267
--------
Total $200,267
========
</TABLE>
F-10
<PAGE> 61
UTAH RESOURCES INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(5) REAL ESTATE HELD FOR RESALE
Real estate held for resale consists of the following real estate in
the St. George, Utah area at December 31, 1994:
DEVELOPED
The Company has 7 developed residential lots along with approximately
3.5 acres of commercial developed real estate with an aggregate cost of
$152,924.
RAW LAND AND PARTIALLY DEVELOPED LAND
The Company has approximately 410 acres of real estate that is
currently planned for single family dwelling lots, commercial development
and multiple housing. The aggregate cost of the raw land and partially
developed land is $474,290.
(6) ACCRUED EXPENSES
Accrued expenses at December 31, 1994 consist of the following:
<TABLE>
<S> <C>
Deficit in investment in partnership $180,993
Accrued interest 33,036
Other accrued expenses 77,302
--------
Total $291,331
========
</TABLE>
(7) NOTES PAYABLE
The Company has the following notes payable at December 31, 1994:
<TABLE>
<S> <C>
Note payable to a trust requiring quarterly
interest payments at 10%, principal due
in 1996 secured by certain real estate held
for resale $400,000
</TABLE>
F-11
<PAGE> 62
UTAH RESOURCES INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(7) NOTES PAYABLE - CONTINUED
<TABLE>
<S> <C>
Notes payable to a governmental entity
requiring annual payments of approximately
$21,000 plus interest at 5.94%, secured
by real estate 164,576
Note payable to entity requiring annual
payments of $10,386 including interest
at 9%, secured by real estate 74,372
Note payable to a financial institution
requiring monthly payments of $477
including interest at 8.75%, secured
by a vehicle 18,597
--------
Total $657,545
========
Future maturities of notes payable are as follows:
YEAR AMOUNT
---- ------
<S> <C>
1995 $ 49,964
1996 429,346
1997 30,441
1998 30,796
1999 20,940
Thereafter 96,058
--------
Total $657,545
========
</TABLE>
(8) DISCONTINUED OPERATIONS
Effective May 1, 1993, the Company sold the Hilton Inn in St. George,
Utah, along with four acres of adjoining land. The Company realized gross
cash proceeds of $1,700,000. At December 31, 1994 and 1993, net assets
(liabilities) of discontinued assets were $9,975 and $(12,509),
respectively. The consolidated statements of operations have been restated
to report the operations of the Hilton Inn as income from discontinued
operations.
F-12
<PAGE> 63
UTAH RESOURCES INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(8) DISCONTINUED OPERATIONS - CONTINUED
The service station adjacent to the Hilton Inn was also closed and has
been included in discontinued operations.
The results of operations for the period January 1, to April 30, 1993
of these businesses are summarized as follows:
<TABLE>
<S> <C>
Net sales $1,191,591
==========
Income from operations before income taxes 7,878
Income taxes -
-----
Income from discontinued operations $7,878
======
</TABLE>
(9) INCOME TAXES
Effective January 1, 1993, the Company adopted SFAS 109 "Accounting for
Income Taxes." Under provisions of SFAS 109 the Company elected not to
restate prior years and has determined that the cumulative implementation
was immaterial. The effect of this change in the 1993 operations was also
not material.
The (provision) benefit for income taxes is as follows:
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Current $(136,000) 55,948
Deferred (300,000) 88,052
--------- -------
$(436,000) 144,000
========= =======
</TABLE>
F-13
<PAGE> 64
UTAH RESOURCES INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(9) INCOME TAXES - CONTINUED
The (provision) benefit for income taxes differs from the amount
computed at the federal statutory rate as follows:
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Income tax (expense) benefit at federal statutory rates $(392,000) 60,000
State income taxes (50,000) 10,000
Common stock received in settlement - (26,000)
Income taxes for discontinued operations 16,000 82,000
Other (10,000) 18,000
--------- -------
$(436,000) 144 000
========= =======
</TABLE>
Deferred income taxes have been established to reflect timing
differences between financial reporting and income tax purposes. The
primary differences are as follows:
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Condemnation sales $300,000 -
======== ====
</TABLE>
(10) STOCKHOLDERS' EQUITY
In 1993 the Company settled litigation (see note 11). As part of the
settlement, the Company's largest stockholder and other individuals
contributed to the Company 285,000 shares of the Company's common stock
which were then retired by the Company. No value was recorded on the
receipt of the common stock.
In 1993 the Company also retired the 654,795 shares it held in treasury
stock.
In 1989 the Company settled litigation with another entity which
provided the other entity the right to purchase up to 42.4 acres of real
estate from the Company in exchange for 409,716 shares of common stock of
the Company. Under terms of the settlement agreement, the other entity
could purchase up to 10.6 acres per year in exchange for 102,429 shares of
common stock. As of December 31, 1994, the other entity has the option to
acquire a total of 10.6 acres for 102,429 shares of the Company's common
stock.
F-14
<PAGE> 65
UTAH RESOURCES INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(11) LITIGATION
In 1993 the Company settled litigation between certain shareholders
and the Company and its board of directors relating to breaches of
fiduciary responsibility and wasting of the Company's assets. The
litigation had been on going for several years. Under terms of the
settlement agreement, the Company received 285,000 shares of the Company's
common stock along with $100,000 cash. In addition, certain minority
partnership interests were transferred to the Company. The shareholders
were also allocated two members on the Company's five member board of
directors. The Company in turn was required to pay the stockholders
related legal expenses and out-of-pocket costs. The Company realized a
loss of $690,000 in 1993 as a result of the litigation settlement.
The Company is involved in certain other litigation where the Company
has prevailed. The opposing side has filed an appeal of the decision. It
is not known the final outcome but the Company is vigorously defending
its position. Management believes that the final outcome will not have a
material effect on the financial position of the Company.
(12) CONTINGENCIES
The Company, through predessor entities, has understandings where
certain individuals may be entitled to an interest in the ownership or
profits on unidentified projects. This contingency is currently in
litigation on appeal.
In addition, the Company has accrued amounts totaling $82,969 for
potential amounts owing from transactions which took place a number of
years ago. It cannot be determined if and when such amounts will be paid.
That balance is included in accrued expenses.
The Company is aware of certain unasserted claims which could result
in claims in excess of amounts accrued in the financial statements.
Management believes that any such claim, if asserted, will not result in
any adverse affect on the financial position of the Company.
The Company is in the process of remediation of the service station
property. It is not known if any additional costs over what the Company
has accrued will be needed to complete the remediation.
F-15
<PAGE> 66
UTAH RESOURCES INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(13) COMMITMENTS
The Company leases its office facility under a year lease requiring
monthly payments of $950 which expires in August 1995. Lease expense was
$4,750 in 1994.
The Company leases certain office equipment under operating lease
agreements. Those agreements require monthly payments of $198 which expire
between 1995 and 1996. Annual lease expense under these agreements is
$2,375 and $1,974 for the years ended December 31, 1994 and 1993. Minimum
payments under the noncancellable operating leases are as follows:
<TABLE>
<CAPTION>
YEAR AMOUNT
---- ------
<S> <C>
1995 $2,375
1996 395
-----
Total $2,770
======
</TABLE>
(14) SIGNIFICANT CUSTOMERS
The Company had land sales to the following significant customers in
1994 and 1993:
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Customer A $979,000 -
Customer B $254,000 352,000
</TABLE>
(15) STOCK OPTION PLAN
In 1994, the Company established a stock option plan wherein the five
directors and the Company's president were each granted options to acquire
25,000 shares of the Company's stock at $2.50 per share. The options vest
as follows: 9,000 shares at the option date and 8,000 shares in 1995 and
8,000 shares in 1996
F-16
<PAGE> 67
UTAH RESOURCES INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
16) SUBSEQUENT EVENTS
ACQUISITION
The Company has entered into a preliminary agreement where it has
agreed to acquire Midwest Construction and Maintenance through a stock for
stock transactions. Completion of the transaction is dependent upon certain
future events including a valuation analysis and appraisal of both
company's boards of directors and shareholders.
DIVIDENDS
The Company declared a paid a cash dividend of $.10 per share on
January 26, 1995. The total cash paid for the dividends was approximately
$128,000.
F-17
<PAGE> 68
Salt Lake City, Utah
INDEPENDENT AUDITORS' REPORT
TO THE BOARD OF DIRECTORS OF
UTAH RESOURCES INTERNATIONAL, INC.,
AND SUBSIDIARIES
We have audited the accompanying consolidated balance sheet of Utah
Resources International, Inc., and subsidiaries at December 31, 1995 and the
related consolidated statements of operations, stockholders' equity and cash
flows for the two years then ended. These consolidated financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the consolidated
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Utah Resources International, Inc., and subsidiaries as of December 31, 1995
and the results of their operations and their cash flows for the two years
ended December 31, 1995, in conformity with generally accepted accounting
principles.
/s/ Tanner + Co.
----------------
Tanner + Co.
June 21, 1996 except for note 15,
which is dated July 10, 1996
F-18
<PAGE> 69
UTAH RESOURCES INTERNATIONAL, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
ASSETS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
ASSETS
------
<S> <C>
Cash and cash equivalents $ 765,831
Accounts receivable from related parties 372,622
Notes receivable 178,989
Income tax receivable 212,328
Property and equipment, net of
accumulated depreciation and
amortization of $36,409 36,959
Real estate held for resale 854,821
Royalty interest in petroleum and mineral
production, net of amortization of $41,034 9,176
Other assets 10,599
Net assets of discontinued operations 657
----------
$2,441,982
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 276,446
Accrued expenses 312,474
Earnest money deposits 36,000
Notes payable 599,627
----------
Total liabilities 1,224,547
----------
Minority interest 152,113
Commitment and contingencies -
Stockholders' equity:
Common stock; par value $.10 per share,
5,000,000 shares authorized,
1,851,198 shares issued and outstanding 185,120
Additional paid-in capital 348,757
Retained earnings 531,445
----------
Total stockholders' equity 1,065,322
----------
$2,441,982
==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-19
<PAGE> 70
UTAH RESOURCES INTERNATIONAL, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
---------------------
1995 1994
---------- ---------
<S> <C> <C>
Sales $ 587,663 2,274,222
Cost of sales 156,250 567,453
---------- ---------
Gross profit 431,413 1,706,769
General and administrative expenses 1,045,854 678,368
---------- ---------
Income (loss) from operations (614,441) 1,028,401
---------- ---------
Other income (expense):
Rental income - 32,183
Royalty income 61,006 92,455
Interest and dividend income 102,794 50,458
Interest expense (51,279) (60,020)
Other income (expense) 35,906 (18,074)
---------- ---------
Total other income (expense) 148,427 97,002
---------- ---------
Income (loss) before minority interest and
provision for income taxes (466,014) 1,125,403
Minority interest in net (loss) of subsidiaries 26,988 29,109
---------- ---------
Income (loss) before provision for income taxes
and discontinued operations (439,026) 1,154,512
Income tax (provision) benefit 179,000 (436,000)
---------- ---------
Income (loss) from continuing operations (260,026) 718,512
Discontinued operations:
Income from discontinued operations net of income
taxes of $48,000 93,407 -
Loss from disposal of discontinued operations
net of income taxes benefit of $275,000
and $16,000 (583,000) (31,416)
---------- ---------
Total discontinued operations (489,593) (31,416)
---------- ---------
Net income (loss) $ (749,619) 687,096
========== =========
Earnings (loss) per share $(.46) .54
===== ===
</TABLE>
See accompanying notes to consolidated financial statements.
F-20
<PAGE> 71
UTAH RESOURCES INTERNATIONAL, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
-------------------- PAID-IN RETAINED
SHARES AMOUNT CAPITAL EARNINGS
--------- -------- ---------- ---------
<S> <C> <C> <C> <C>
Balance, January 1, 1993 1,284,027 $128,403 127,174 722,431
Net income - - - 687,096
--------- -------- ------- ---------
Balance, December 31, 1994 1,284,027 128,403 127,174 1,409,527
Common stock issued to
purchase subsidiary valued
at book value of subsidiary
($.43 per share) 590,000 59,000 196,503 -
Common stock issued for
services in acquisition
of subsidiary valued at
$.43 per share 76,000 7,600 25,080 -
Repurchase of stock
through land issuance at
$.10 per share (102,429) (10,243) - -
Common stock issued in
settlement of dispute valued
at $.10 per share 3,600 360 - -
Dividends - - - (128,463)
Net loss - - - (749,619)
--------- -------- ------- ---------
Balance, December 31, 1995 1,851,198 $185,120 348,757 531,445
========= ======== ======= =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-21
<PAGE> 72
UTAH RESOURCES INTERNATIONAL, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
-----------------------
1995 1994
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (749,619) 687,096
Less income from discontinued operation (93,407) -
Add loss from disposition of discontinued operation 583,000 -
Adjustments to reconcile net income (loss)
to net cash provided by (used in) operating
activities:
Depreciation and amortization 12,349 22,756
Minority interest in net income
of subsidiaries (26,988) (29,109)
Gain on disposition of assets (3,106) (36,267)
Bad debt expense 10,899 -
Common stock issued for services 33,040 -
(Increase) decrease in:
Accounts receivable (118,310) (238,503)
Other assets (775) 76,403
Real estate held for resale (237,850) 100,263
Income tax receivable (212,529) 443,201
(Decrease) increase in:
Accounts payable 115,912 8,302
Accrued expenses 21,143 171,488
Ernest money deposits - (10,000)
Deferred income tax (300,000) 300,000
----------- ---------
Net cash provided by (used in)
continued operation (966,241) 1,495,630
Net cash used in discontinued operations (104,846) -
----------- ---------
Net cash provided by (used in)
operating activities (1,071,087) 1,495,630
----------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from marketable securities - 29,920
Proceeds from disposition of assets 18,140 390,000
Payments on notes receivable 137,348 160,989
Purchase of property and equipment (2,690) (7,601)
Increase in notes receivable (112,137) (206,843)
Decrease in minority interest (4,020) (51,126)
Decrease in other assets - 3,289
----------- ---------
Cash from investing activities - continuing operation 36,641 318,628
Cash from investing activities - discontinued
operation 76,839 -
----------- ---------
Net cash provided by
Investing activities 113,480 318,628
----------- ---------
</TABLE>
F-22
<PAGE> 73
UTAH RESOURCES INTERNATIONAL, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS - CONTINUED
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
-----------------------
1995 1994
----------- ---------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of dividends (128,463) 27,249
Payments on notes payable (90,129) (72,315)
----------- ---------
Cash for financing activities - continued operation (218,592) (45,066)
Cash for financing activities - discontinued
operation (196,765) -
----------- ---------
Net cash (used in)
financing activities (415,357) (45,066)
----------- ---------
(Decrease) increase in cash (1,372,964) 1,769,192
Cash and cash equivalents, beginning of year 2,138,795 369,603
----------- ---------
Cash and cash equivalents, end of year $ 765,831 2,138,795
=========== =========
</TABLE>
SUPPLEMENTAL SCHEDULE OF NON-CASH ACTIVITIES:
1995
- ----
The Company purchased the assets of another company for common stock
valued at $255,503.
The Company financed the purchase of equipment with debt in the amount of
$28,278.
The Company purchased and retired 102,429 shares of common stock through
the issuance of 10.6 acres of land under the terms of a prior year agreement.
The Company disposed of debt in the amount of $3,933, which was assumed in
the sale of land for which the Company received a note receivable.
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for
<TABLE>
<CAPTION>
1995 1994
------- ------
<S> <C> <C>
Interest $62,427 36,992
======= ======
Income taxes - -
======= ======
</TABLE>
See accompanying notes to consolidated financial statements.
F-23
<PAGE> 74
UTAH RESOURCES INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995 AND 1994
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS
Utah Resources International, Inc., and consolidated entities
(the Company) is engaged primarily in the development of real estate
including the sale of developed and undeveloped real estate. The
Company's assets are located in the Rocky Mountain West.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the financial
statements of Utah Resources, Inc., Tonaquint Inc. and a number of limited
partnerships of which the Company has ownership in excess of 50 percent
and has management responsibility. All material intercompany transactions
and balances have been eliminated in consolidation of the Companies and
partnerships.
Discontinued operations include Midwest Railroad Construction and
Maintenance Corporation (Midwest) from June 13, 1995 ( date of
acquisition) through December 31, 1995. The Company disposed of Midwest
effective March 31, 1996, see note 7. Discontinued operations also
included those of a Service Station which was closed in 1993. The Service
Station has continued to incur costs to resolve certain environmental
issues since the closing of the station.
METHOD OF RECOGNITION OF INCOME
Real Estate
Profits on sale of developed lots, developed land and raw land are
recognized in accordance with standards established for the real estate
industry which generally provide for deferral of all or part of the profit
on a sale if the buyer does not meet certain down payment requirements or
certain other tests of the buyer's financial commitment to the purchase,
or the seller is required to perform significant obligations subsequent to
the sale.
Cost of sales include a pro rata portion of acquisition and
development costs (including estimated costs to complete) along with sales
commissions, closing costs and other costs specifically related to the
sale.
F-24
<PAGE> 75
UTAH RESOURCES INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
METHOD OF RECOGNITION OF INCOME - CONTINUED
Other
Royalty income is recognized when received. The Company has
overriding mineral and oil and gas royalty interests and thus exercises
no control over the activities of the royalty payers and is notified of
the amounts or royalties due when the cash is received.
PROPERTY AND EQUIPMENT
Property and equipment is carried at cost. Depreciation is computed
using the straight-line method based upon the following useful lives:
Building 15-30 years
Furniture and equipment 3-10 years
REAL ESTATE HELD FOR RESALE
Real estate held for resale includes developed lots, land under
development and raw land. Real estate held for resale is carried at the
lower of cost or market. The cost of development of building lots
includes the land and the related costs of development (planning, survey,
engineering and other) which are capitalized. The cost of interest and
property taxes are expensed.
INTANGIBLE ASSETS
The cost of identifiable intangible assets, consisting of royalties,
is being amortized on a straight-line basis over the expected productive
life of the asset, 15 years.
INCOME TAXES
Deferred income taxes are provided in amounts sufficient to give
effect to temporary differences between financial statement and tax
reporting purposes. The differences are primarily a result of differing
methods of accounting for land sales and depreciation of property and
equipment.
EARNINGS PER SHARE
The weighted average of outstanding common shares is approximately
1,619,000 shares and 1,284,000 shares for the years ended December 31,
1995 and 1994, respectively. Common stock equivalents have not been
included as the exercise price is in excess of the market price and the
amounts are antidilutive in 1995.
F-25
<PAGE> 76
UTAH RESOURCES INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
STATEMENT OF CASH FLOWS
For purposes of the statements of cash flows, the Company considers
all highly liquid debt instruments purchased with a maturity of three
months or less to be cash equivalents.
CONCENTRATION OF CREDIT RISK
Financial instruments which potentially subject the Company to
concentration of credit risk consist primarily of trade receivables. In
the normal course of business, the Company provides credit terms to its
customers. Accordingly, the Company performs ongoing credit evaluations of
its customers and maintains allowances for possible losses which, when
realized, have been within the range of management's expectations.
The Company maintains its cash in bank deposit accounts which, at
times, may exceed federally insured limits. The Company has not
experienced any losses in such account and believes it is not exposed to
any significant credit risk on cash and cash equivalents.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
principally related to estimated costs to complete uncompleted contracts
and assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amount of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
(2) ACCOUNTS RECEIVABLE FROM RELATED PARTIES
Accounts receivable include $132,843 which is due from an entity
which has some shareholders in common with the Company and $131,573 which
is due from various related partnerships. Also included is $87,263 due
from one of the shareholders of the Company.
F-26
<PAGE> 77
UTAH RESOURCES INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(3) NOTES RECEIVABLE
The Company has the following notes receivable at December 31, 1995:
<TABLE>
<S> <C>
Note receivable from an individual
due in March, 1996, with interest at
9%, secured by real estate $138,989
Note receivable from an individual
due in September 1995, with interest at
8% 40,000
--------
$178,989
========
</TABLE>
Future maturities of notes receivable are as follows:
<TABLE>
YEAR AMOUNT
---- ------
<S> <C>
1996 $ 40,000
1997 138,989
--------
Total $178,989
========
</TABLE>
(4) REAL ESTATE HELD FOR RESALE
Real estate held for resale consists of the following real estate
located in the St. George, Utah area at December 31, 1995:
DEVELOPED
The Company has three developed residential lots with an aggregate
cost of $67,106.
RAW LAND AND PARTIALLY DEVELOPED LAND
The Company has approximately 390 acres of real estate of which
approximately 350 acres is currently planned for single family dwelling
lots, commercial development and multiple housing. The aggregate cost of
the raw land and partially developed land is $797,958.
F-27
<PAGE> 78
UTAH RESOURCES INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(5) ACCRUED EXPENSES
Accrued expenses at December 31, 1995 consist of the following:
<TABLE>
<S> <C>
Deficit in investment in partnership $168,857
Accrued interest 34,775
Other accrued expenses 108,842
--------
Total $312,474
========
</TABLE>
(6) NOTES PAYABLE
The Company has the following notes payable at December 31, 1995:
<TABLE>
<S> <C>
Note payable to a trust requiring quarterly
interest payments at 10%, principal due
in 1996 secured by certain real estate held
for resale $400,000
Notes payable to a governmental entity
requiring annual payments of approximately
$15,000 plus interest at 5.94%, secured
by real estate 106,810
Note payable to entity requiring annual
payments of $10,386 including interest
at 9%, secured by real estate 67,282
Note payable to a financial institution
requiring monthly payments of $491
including interest at 10.5%, secured
by a vehicle 23,600
Other 1,935
--------
Total $599,627
========
</TABLE>
F-28
<PAGE> 79
UTAH RESOURCES INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(6) NOTES PAYABLE - CONTINUED
Future maturities of notes payable are as follows:
<TABLE>
<CAPTION>
YEAR AMOUNT
---- --------
<S> <C>
1996 $425,849
1997 24,949
1998 25,490
1999 25,992
2000 27,057
Thereafter 70,290
--------
Total $599,627
========
</TABLE>
None of the Company's debt instruments are held for trading purposes.
The Company estimates that the fair value of all financial instruments at
December 31, 1995, does not differ materially from the aggregate carrying
values of its financial instruments recorded in the accompanying balance
sheet.
(7) INVESTMENT IN MIDWEST
Effective June 13, 1995, the Company acquired 100% ownership of Midwest
through the issuance of 590,000 shares of the Company's common stock for
all of the outstanding stock of Midwest. The acquisition was accounted
for as a purchase. The fair market value of the Midwest assets and
liabilities approximated the historical cost of the assets and liabilities
and no goodwill was therefore recorded. The net equity of Midwest at the
date of acquisition was $255,503.
Effective March 31, 1996, the Company sold Midwest to its former
owner. The Company received back its 590,000 shares of common stock and
agreed to forgive $317,000 due from Midwest as a result of net cash
advances made to Midwest by the Company. The return of the 590,000 shares
of common stock to the Company was recorded at no value as the Company
exchanged its ownership in Midwest for the return of the shares of the
Company. The 1995 financial statements reflect a write down of
approximately $780,000 for its investment in Midwest to its estimated
realizable value.
F-29
<PAGE> 80
UTAH RESOURCES INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(8) DISCONTINUED OPERATIONS
The Company has included in net assets of discontinued operations
those of Midwest and the Service Station.
Condensed financial information for Midwest is as follows at December
31, 1995 and for the period June 13, 1995 (date of acquisition) through
December 31, 1995:
BALANCE SHEET
DECEMBER 31, 1995
<TABLE>
<CAPTION>
ELIMINATIONS
AND
ADJUSTMENT
SERVICE TO
MIDWEST STATION REALIZABILITY TOTAL
---------- --------- ------------- ---------
<S> <C> <C> <C> <C>
Assets $3,836,017 - (731,994) 3,104,023
========== ========= ============= =========
Liabilities 3,439,107 159,077 (542,818) 3,055,366
Equity 396,910 (159,077) (237,176) 657
---------- --------- ------------- ---------
Total liabilities
and equity $3,836,017 - (779,994) 3,056,023
========== ========= ============= =========
</TABLE>
Included in the adjustment is $731,994 loss recognized on disposition
of discontinued operations.
STATEMENT OF OPERATIONS
PERIOD ENDING DECEMBER 31, 1995
<TABLE>
<CAPTION>
MIDWEST
-------------
JUNE 13, 1995 SERVICE
(DATE OF STATION
ACQUISITION) ----------
THROUGH YEAR ENDED
DECEMBER 31, DECEMBER 31,
1995 1995 TOTAL
---------- ---------- ---------
<S> <C> <C> <C>
Revenues $5,598,542 - 5,598,542
Costs and expenses 5,457,135 - 5,457,135
---------- ---------- ---------
Net income before income tax 141,407 - 141,107
Income tax expense 48,000 - 48,000
---------- ---------- ---------
Net income $ 93,407 - 93,407
========== ========== =========
</TABLE>
F-30
<PAGE> 81
UTAH RESOURCES INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(8) DISCONTINUED OPERATIONS - CONTINUED
At December 31, 1995, the net loss from disposal of discontinued
operations was $731,994 from Midwest and $78,006 from Service Station less
$275,000 of income tax benefit. For the year ended December 31, 1994, the
net loss was $47,416 from disposal of the Service Station less income tax
benefit of approximately $16,000.
(9) INCOME TAXES
The (provision) benefit for income taxes is as follows:
<TABLE>
<CAPTION>
Continuing operations
1995 1994
-------- --------
<S> <C> <C>
Current $106,000 (136,000)
Deferred 73,000 (300,000)
-------- --------
Total continuing operations $179,000 (436,000)
======== ========
</TABLE>
Discontinued operations
<TABLE>
<CAPTION>
1995 1994
-------- -------
<S> <C> <C>
Current $ - (16,000)
Deferred 227,000 -
-------- -------
Total continuing operations $227,000 (16,000)
======== =======
</TABLE>
The (provision) benefit for income taxes differs from the amount
computed at the federal statutory rate as follows:
<TABLE>
<CAPTION>
Continuing operations
1995 1994
-------- --------
<S> <C> <C>
Income tax (expense) benefit at federal
statutory rates $158,000 (392,000)
State income taxes 23,000 (50,000)
Other (2,000) 6,000
-------- --------
Total current income taxes $179,000 (436,000)
======== ========
</TABLE>
F-31
<PAGE> 82
UTAH RESOURCES INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(9) INCOME TAXES - CONTINUED
<TABLE>
<CAPTION>
Discontinued Operations
1995 1994
-------- --------
<S> <C> <C>
Income tax (expense) benefit at
federal statutory rates $227,000 (7,000)
State income taxes 20,000 (2,000)
Other (20,000) (7,000)
-------- -------
Total $227,000 (16,000)
======== =======
</TABLE>
Deferred income taxes have been established to reflect timing
differences between financial reporting and income tax purposes. The
primary differences are as follows:
<TABLE>
<CAPTION>
1995 1994
--------- -------
<S> <C> <C>
Condemnation sales $ 300,000 300,000
Discontinued operations (227,000) -
Net operating loss carryforward (73,000) -
--------- -------
$ - 300,000
========= =======
</TABLE>
(10) LITIGATION
The Company is involved in certain litigation where the Company has
prevailed. The opposing side has filed an appeal of the decision. It is
not known the final outcome but the Company is vigorously defending its
position. Management believes that the final outcome will not have a
material adverse effect on the financial position, operations, and cash
flow of the Company.
The Company in June 1996, entered into a settlement agreement with
shareholders and former officers of the Company which had filed litigation
against certain of the Company's Board of Directors and officers and who
the Company had filed litigation against. The terms of the settlement
provide that the Company pay all legal costs related to the legal action
for all parties with the exception of the majority shareholder which will
receive reimbursement up to $81,000. The Company will sell 1,275,912
shares of its common stock for $3.35 per share to an other entity with the
Company providing limited recourse financing for a portion of the purchase
price and the purchase 40,552 shares at $3.35 per share from certain
existing shareholders. Certain existing employment agreements are
terminated and the Company will enter into new employment agreements with
a former shareholder and the new majority shareholder.
F-32
<PAGE> 83
UTAH RESOURCES INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(11) CONTINGENCIES
The Company, through predecessor entities, has understandings where
certain individuals may be entitled to an interest in the ownership or
profits on unidentified projects. This contingency is currently in
litigation on appeal.
In addition, the Company has accrued amounts totaling $37,771 for
potential amounts owing from transactions which took place a number of
years ago. It cannot be determined if and when such amounts will be paid.
That balance is included in accrued expenses.
The Company is aware of certain unasserted claims which could result in
claims in excess of amounts accrued in the financial statements.
Management believes that any such claim, if asserted, will not result in
any adverse affect on the financial position, operations, and cash flows
of the Company.
The Company is in the process of remediation of the service station
property. It is not known if any additional costs over what the Company
has accrued will be needed to complete the remediation.
(12) COMMITMENTS
The Company leases its office facility under a year lease requiring
monthly payments of $950 which expires in August 1996. Lease expense was
$11,400 in 1995.
The Company leases certain equipment under operating lease agreements.
Those agreements require monthly payments of $531 which expire between
1996 and 1998. Annual lease expense under these agreements is $6,089 and
$2,375 for the years ended December 31, 1995 and 1994. Minimum payments
under the noncancellable operating leases are as follows:
<TABLE>
<CAPTION>
YEAR AMOUNT
----- -------
<S> <C>
1996 $ 6,761
1997 6,366
1998 2,653
-------
Total $15,780
=======
</TABLE>
F-33
<PAGE> 84
UTAH RESOURCES INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(13) SIGNIFICANT CUSTOMERS
The Company had land sales to the following significant customers in
1995 and 1994:
<TABLE>
<CAPTION>
1995 1994
------- -------
<S> <C> <C>
Customer A $ - 979,000
Customer B $152,000 254,000
</TABLE>
(14) STOCK OPTION PLAN
In 1994, the Company established a stock option plan wherein the five
directors and the Company's president were each granted options to acquire
25,000 shares of the Company's stock at $2.50 per share. The options vest
as follows: 9,000 shares at the option date and 8,000 shares in 1995 and
8,000 shares in 1996.
(15) SUBSEQUENT EVENTS
The Company had the following material subsequent events:
- Effective March 31, 1996, the Company disposed of Midwest Railroad
which was a wholly owned subsidiary. See note 7.
- The Company settled certain litigation relating to shareholders
and members of the Board of Directors. See note 11.
- The Company entered into an agreement where it agreed to purchase
40,552 shares of the Company stock for a cash price of $3.35 per
share.
- The Company entered into an agreement where it sold 1,275,912
shares of the Company at $3.35 per share or $4,274,305. The stock
sell price included $641,146 cash plus a note receivable of
$3,633,159. The note requires interest based upon the federal
rate published by the Internal Revenue Service. Interest on the
note for the first year is paid at closing with the remaining
interest to be paid annually commencing on the second anniversary
date of the note. All principal and unpaid interest is due August
1, 2001. The note is secured by the stock sold plus a guarantee
from the purchaser of 25% of the original outstanding note.
F-34
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM UTAH
RESOURCES INTERNATIONAL, INC. FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 765,831
<SECURITIES> 0
<RECEIVABLES> 763,939
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 73,368
<DEPRECIATION> 36,409
<TOTAL-ASSETS> 2,441,982
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 185,120
<OTHER-SE> 880,202
<TOTAL-LIABILITY-AND-EQUITY> 2,441,982
<SALES> 587,663
<TOTAL-REVENUES> 787,369
<CGS> 156,250
<TOTAL-COSTS> 1,199,104
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 51,279
<INCOME-PRETAX> (439,026)
<INCOME-TAX> (179,000)
<INCOME-CONTINUING> (260,026)
<DISCONTINUED> (489,593)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (749,619)
<EPS-PRIMARY> (.46)
<EPS-DILUTED> (.46)
</TABLE>
