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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, 1997
Commission file number
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 X No
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(2) Yes X No
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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 1997 Fiscal Year was $954,420.
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 prior to year end 1997, which occurred December 29,
1997, at approximately $1.25 per share, is $1,148,232.50.
The number of shares of Common Stock, $.10 par value, outstanding on
November 19, 1997 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
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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
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
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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
at the time and controlling shareholder of Mark Technologies Corporation,
brought a shareholders derivative suit captioned as Mark Technologies Corp., et
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al. v. Utah Resources International, Inc. et al., which was filed as Civil No.
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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 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, 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, as defined below. A copy of the Morgan Settlement
Agreement is attached as Exhibit 10.37 to the Company's Form 10-KSB for the
fiscal year ending December 31, 1995, filed with the SEC on January 8, 1997.
The "1993 Settlement Agreement" was the result of the settlement of a
shareholders' derivative action captioned as Ernest Muth, et al. v. John H.
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Morgan, Jr. et al., which was filed as Civil Number C-87-1632 in the Third
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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, Jr., 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, 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 to the Company's Form 10-KSB for the
fiscal year ending December 31, 1995, filed with the SEC on January 8, 1997.
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
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Agreement which were attached as Exhibits 10.37 and 10.38 respectively to the
Company's Form 10-KSB for the fiscal year ending December 31, 1995, filed with
the SEC on January 8, 1997. 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 (a director of the Company at the time),
Gerard E. Morgan, John C. Morgan and Karen J. Morgan (together the
"Objectors"). On August 22, 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.
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 time to time.
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 as a director of the Company. John Fife and David Fife were
appointed 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 has since been
elected director by a majority vote of the shareholders and
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President, Chief Executive Officer and Chairman of the Board of the Company by
unanimous vote of the directors.
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 "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.
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As a result of the reverse split, the Company is expected to become a
non-SEC-reporting company. A company with assets of over $10 million becomes a
"reporting company" when its shareholders number 500 or more and it complies
with applicable state and federal securities laws. To thereafter be allowed to
become a "non-SEC-reporting company" and cease reporting to the Securities and
Exchange Commission, the number of shareholders must decline to less than 300
and the Company must comply with applicable state and federal securities laws.
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, the Board of
Directors does not believe that being a "reporting 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.
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
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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 the
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
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 next $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 as compensation
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, 38,000
shares each of the Company's Common Stock and $104,000 in cash.
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
2:95CV661J, captioned as Anne Morgan et al. v. R. Dee Erickson, et al. (the
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"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
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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 as Exhibit 10.36 to the Company's
Form 10-KSB for the fiscal year ending December 31, 1995, filed with the SEC on
January 8, 1997. 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 canceled. RD Wolff ceased to be the
President of URI. Midwest received a net intercompany transfer of
approximately $316,974 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, then URI would pay Midwest the difference; or
(ii) more than $316,974, 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 were 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 were 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, with 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 Company's accountants have determined that Midwest owes the Company $45,469
in taxes, of which $35,469 remains due. Midwest also owes the Company the
additional amount of $54,184.61 related to Ladd Eldredge's salary, audit and
other expenses.
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(b) Business of Company.
URI is a real property development corporation. The Company directly owns
approximately 400 acres of undeveloped land in St. George, Utah, approximately
354 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 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.
Real Property Development Activities
Through year end 1997, the Company had sales in the amount of $530,553.
In 1996, the Company sold a total of four (4) improved residential building
lots: consisting of three (3) lots sold from its Southgate Hills Phase II
subdivision and one (1) lot from its Southgate Hills Phase I subdivision,
generating $163,500 in gross revenues. 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 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 1997 sales of
6.67 acres for the sum of $317,066 and 1996 sales of 2.11 acres for the sum of
$106,432. From July 1992 through December 31, 1997, Kay Traveler exercised his
option for a cumulative total of 40.68 of the 75.98 acres available, for the
sum of $1,315,438. As of December 31, 1997 approximately 35.3 acres remain
under option to Mr. Traveler at prices ranging from $22,000 to $50,000 per
acre.
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
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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 second quarter of 1998. 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 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 residential
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
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<PAGE> 12
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
The consolidated financial statements include the financial statements of
the Company, Tonaquint and a number of the limited partnerships of which the
Company has ownership in excess of fifty percent (50%) and has management
responsibility. All material intercompany transactions and balances have been
eliminated in consolidation of the Company and partnerships. The Company is
both a general and limited partner in the following limited partnerships:
Tonaquint-Indian Hills Partnership (75.86%), Service Station Partnership (79%),
Southgate Palms Limited Partnership (100%), Southgate Plaza Limited Partnership
(52.5%), Southgate Resort Partnership (100%), Country Club Partnership
(84.04%), URI-MGO Partnership (70%), and Resources Limited Partnership
(83.63%).
In 1989, The Service Station #2 Limited Partnership replaced its gasoline
underground storage tanks, which the partnership was informed had been leaking.
From November of 1992 through December 31, 1997, the partnership has spent
approximately $300,000 on efforts to remediate the soil contamination by
gasoline and other hydrocarbons which is alleged to have occurred from the
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.
Morgan Gas & Oil Co., a limited partner of the Service Station Limited
Partnership #2, claims that the Company is indebted to it in the amount of
$124,340.69, which amount and the basis for said amount, the Company disputes.
The Company is performing an internal audit to verify the legitimacy of the
claim and its proper characterization, before it determines whether to
acknowledge and pay the claim.
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 $176,572 in 1997 as compared to $153,051 in 1996. 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
12
<PAGE> 13
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 1997, the Company employed three full-time employees and no part-time
employees. Pursuant to the Stock Purchase Agreement, the Company and John Fife
entered into an employment agreement, dated as of February 27, 1998, but
commencing as of July 13, 1996, which provided for the employment of Mr. Fife
as President and CEO of the Company with an annual salary of $195,000. 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. Ladd
Worth Eldredge is employed by the Company as its 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
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 25% interest in
approximately 8.03 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 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
13
<PAGE> 14
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. John Fife, President and CEO of the Company, maintains
his office at 360 E. Randolph Street, Suite 2402, Chicago, Illinois 60601,
where he carries out the business of the Company. To date, the Company has not
reimbursed Mr. Fife for the cost of the office space and related administrative
costs incurred on behalf of the Company and these costs have not been accrued
by the Company.
ITEM 3. LEGAL PROCEEDINGS
No material litigation has been filed.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held an Annual Meeting of the Shareholders on Thursday,
December 11, 1997, at 1:00 p.m., M.S.T., at the Salt Lake Hilton, in Salt Lake
City, Utah. At the meeting the shareholders were asked to: (i) elect a new
Board of Directors for the coming year; (ii) vote on three proposals submitted
by Mark Technologies Corporation, a greater than 10% shareholder. The first
Mark Technologies Corporation proposal required that the Company appoint a
special Shareholders' Legal Affairs Committee, the second proposal required
that the Company appoint a special Shareholders' Fiduciary Duty Committee, and
the third proposal required that the Company offer to purchase from all of its
shareholders, at a purchase price of $4 per share, shares of the Company's
common stock; (iii) vote on one proposal submitted by Inter-Mountain Capital
Corporation, a corporation wholly owned by John Fife ("IMCC"),
14
<PAGE> 15
which proposal required that the Company's Board of Directors organize a Board
of Directors' subcommittee for the purpose of receiving and reviewing the
shareholders' claims and complaints and making recommendations to the Company's
Board of Directors regarding those claims and complaints; (iv) vote on one
proposal submitted by Gerry Brown, which proposal required the Company to hold
a shareholders' meeting to consider and vote upon the reverse stock split,
described in the 1996 Settlement Agreement, as soon as practicable following
the SEC's completion of its review of the Schedule 13e-3 and Preliminary Proxy
Statement and any related documents (including a registration statement); and
(v) transact such other business as may properly come before the meeting and
any adjournment thereof.
A. ELECTION OF DIRECTORS.
The Company's nominees for the Board of Directors were: John Fife, David
Fife, Lyle D. Hurd, Stuart B. Peterson and Gregory White. All of the nominees
were elected to serve as directors of the Company. The votes were cast as
follows:
<TABLE>
<CAPTION>
NOMINEE FOR % AGAINST % WITHHOLD %
- ------- --- - ------- - -------- -
<S> <C> <C> <C> <C> <C> <C>
John Fife 1,504,062 60.0 357,960 14.0 10,916 0.4
David Fife 1,504,062 60.0 357,960 14.0 10,916 0.4
Lyle D. Hurd 1,364,294 54.0 357,960 14.0 150,684 6.0
Stuart B. Peterson 1,504,262 60.0 357,960 14.0 10,716 0.4
Gregory White 1,504,262 60.0 357,960 14.0 10,716 0.4
</TABLE>
B. MARK TECHNOLOGIES CORPORATION PROPOSALS.
1. APPOINT A SPECIAL SHAREHOLDERS' LEGAL AFFAIRS COMMITTEE. Mark G.
Jones, a director of the Company at the time, on behalf of Mark Technologies
Corporation, a greater than 10% shareholder of the Company, submitted the
following proposal: to appoint a special Shareholders' Legal Affairs
Committee, the sole purpose of which is to select and engage new general
counsel, make a binding determination regarding the settlement, continued
prosecution or other disposition of pending litigation to which the Company is
a party and to make binding determinations regarding counsel selection in the
future and future litigation in which the Company may be a party. This
proposal was not approved by a majority of the Company's shareholders. The
votes were cast as follows:
<TABLE>
<CAPTION>
FOR % AGAINST % ABSTAIN %
- --- - ------- - ------- -
<S> <C> <C> <C> <C> <C>
352,441 14.0 1,516,997 60.0 3,500 0.1
</TABLE>
2. APPOINT A SPECIAL SHAREHOLDERS' FIDUCIARY DUTY COMMITTEE. Mark G.
Jones, a director of the Company at the time, on behalf of Mark Technologies
Corporation, a greater than 10% shareholder of the Company, submitted the
following proposal: to appoint a special Shareholders' Fiduciary Duty
Committee, the sole purpose of which was to make a binding determination, upon
consultation with the Company's new general counsel, regarding
15
<PAGE> 16
the activities of the Company's Board of Directors, officers and counsel to
consider whether actions, complaints or other redress, if any, should be taken
by the Company against such individuals. This proposal was not approved by a
majority of the Company's shareholders. The votes were cast as follows:
<TABLE>
<CAPTION>
FOR % AGAINST % ABSTAIN %
- --- - ------- - ------- -
<S> <C> <C> <C> <C> <C>
383,521 15.0 1,485,777 59.0 3,640 0.1
</TABLE>
3. $4 PER SHARE COMPANY SPONSORED TENDER OFFER. Mark G. Jones, a
director of the Company at the time, on behalf of Mark Technologies Corporation,
a greater than 10% shareholder of the Company, submitted the following proposal:
to cause the Company to offer to purchase from all of its shareholders, at a
purchase price of $4 per share, shares of the Company's Common Stock.
Acceptance of the Company's offers was to be voluntary, and the offer shall not
be designed to require acceptance by any shareholder. This proposal was not
approved by a majority of the Company's shareholders. The votes were cast as
follows:
<TABLE>
<CAPTION>
FOR % AGAINST % ABSTAIN %
- --- - ------- - ------- -
<S> <C> <C> <C> <C> <C>
410,929 16.0 1,459,060 58.0 2,949 0.1
</TABLE>
C. IMCC PROPOSAL.
John Fife, President, CEO and Chairman of the Board of the Company, on
behalf of IMCC, the majority shareholder of the Company, submits the following
proposal: to cause the Company' Board of Directors to organize a Board of
Directors' subcommittee, composed of two directors, one of whom is an outside
director, for the purpose of receiving and reviewing shareholders' claims and
complaints and making recommendations to the Company's Board of Directors
regarding those claims and complaints. This proposal was approved by a
majority of the Company's shareholders. The votes were cast as follows:
<TABLE>
<CAPTION>
FOR % AGAINST % ABSTAIN %
- --- - ------- - ------- -
<S> <C> <C> <C> <C> <C>
1,434,568 57.0 404,100 16.0 34,270 1.0
</TABLE>
D. GERRY BROWN PROPOSAL.
Gerry Brown, Vice President and shareholder of the Company, submitted the
following proposal: to cause the Company to hold a shareholders' meeting to
consider and vote upon the reverse stock split, described in the 1996
Settlement Agreement, as soon as practicable following the Security and
Exchange Commissions' completion of its review of the Schedule 13e-3 and
Preliminary Proxy Statement and any related documents (including a registration
statement). This proposal was approved by a majority of the Company's
shareholders. The votes were cast as follows:
16
<PAGE> 17
<TABLE>
<CAPTION>
FOR % AGAINST % ABSTAIN %
- --- - ------- - ------- -
<S> <C> <C> <C> <C> <C>
1,290,619 51.0 541,377 21.0 40,942 2.0
</TABLE>
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock is listed on the OTC Bulletin Board system
through the Automated Quotation System, under the symbol "UTRS." The following
table sets forth the quarterly closing bid prices for 1996 and 1997 for the
Company's Common Stock during the last two fiscal years of the Company, as
reported by National Quotation Bureau, Inc. 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.
<TABLE>
<CAPTION>
1997 1996
LOW HIGH LOW HIGH
--- ---- --- ----
<S> <C> <C> <C> <C>
1st quarter $.875 $.875 $.625 $1.00
2nd quarter $.875 $.875 $.75 $1.50
3rd quarter $.875 $.875 $.875 $1.00
4th quarter $.25 $.875 $.875 $.875
</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 Company declared a $.10 cash
dividend which was paid on January 26, 1995, to shareholders of record on
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. Approximately 479
shareholders hold less than 1,000 shares of the Company's Common Stock.
17
<PAGE> 18
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
RESULTS OF OPERATIONS
The Company had sales of $530,553 in 1997 as compared with sales of
$451,406 in 1996. Income on royalties from production under oil and gas and
mineral leases amounted to $176,572 and $153,051 for 1997 and 1996,
respectively. The increase in royalties income is due to expanded production.
Cost of land sold rose to $207,691 in 1997 from $139,175 in 1996. General
and administrative expenses fell by $308,248 to $1,222,040. The Company had a
net loss of $444,623 in 1997 as compared to a net loss of $852,202 for 1996.
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; (c) interest income earned on money held in interest bearing
accounts, and (d) from proceeds from the sale of its Common Stock.
The Company presently anticipates that cash on hand, cash from land sales
and royalties will be the primary sources for future additional liquidity for
the Company.
The Company 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 1997, approximately $71,214 was expended toward this clean-up operation and
approximately $300,000 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 is affected by
fluctuations in the price of oil and the related decisions to drill new wells
and the rates at which wells are pumped. The Company has no control over the
oil and gas field operations.
As of July 3, 1996, the Company holds a promissory note from IMCC in the
original principal amount of $3,633,159 (the "Note"). The Note bears interest
at a rate equal to the
18
<PAGE> 19
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 - JULY 3, 1996
See Part I, Item 1.
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, 1996 and 1997 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.
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.
19
<PAGE> 20
CURRENT DIRECTORS
DAVID FIFE, 35, 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, 37, 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. 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. 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.
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 has served as a director of the Company since
May, 1993.
STUART B. PETERSON, 36, was elected a director of the Company on
December 11, 1997. Mr. Peterson has served as a director for C.R.
England, Inc., a Two Hundred Million Dollar, privately owned trucking
company based in Salt Lake City, where he sets the prices for customer
contracts and is responsible for the profitable execution of sales and
operating activities from 1995 to the present. Mr. Peterson worked for
Powder River, Inc., from 1993 through 1994, where he directed sales,
marketing and distributions. Mr. Peterson's background includes real
estate investment banking
20
<PAGE> 21
experience with Trammell Crow Company, where he participated in the
securitization and sales of extensive commercial real estate properties
held by Trammell Crow partnerships throughout the United States. After
completing the sale of a One Hundred Sixty Million Dollar commercial real
estate portfolio, Mr. Peterson supervised the properties, and issued the
quarterly financial reports to investors. Mr. Peterson has also
performed the valuation and marketing of a Four Million Dollar
manufacturing company based in California, cumulating in a leveraged
acquisition in 1994. Mr. Peterson received his M.B.A. degree from
Harvard University in 1990 and his A.B. in government from Harvard in
1986.
GREGORY WHITE, 34, was elected a director of the Company on December
11, 1997. Mr. White has served as a consultant for Shorebank Corporation
from 1995 through the present, where he provided consulting services to
emerging entrepreneurs to expand their business and evaluated equity and
subordinated debt deals, structured investments, performed management due
diligence, designed and prepared management reports, and worked
intensively with portfolio companies to maximize performance. Mr. White
acted as a fixed income salesman for Salomon Brothers from 1993 through
1995, where he sold a variety of fixed income securities to institutional
clients. From 1990 to 1993, Mr. White acted as an account officer for
Continental Bank. From 1986 to 1988 he acted as an associate research
analyst for The Rouse Company and from 1985 to 1986, he was an assistant
field officer for The Enterprise Foundation. Mr. White earned his M.B.A.
degree from Harvard University in 1990 and his B.A. with honors at Brown
University in 1985.
EXECUTIVE OFFICERS FOR THE PERIOD COVERED BY THIS REPORT
JOHN FIFE, see description above.
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. 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,
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<PAGE> 22
Nevada, a position he held for two years. Mr. Eldredge has a Masters of
Accountancy degree from Southern Utah University.
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 fiscal year ended December 31, 1997, the
Company's officers, directors and greater than ten-percent beneficial owners
complied with all applicable Section 16(a) filing requirements.
ITEM 10. EXECUTIVE COMPENSATION
EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
NAME POSITION AGE
- ---- -------- ---
<S> <C> <C>
John Fife Chairman of the 37
Board, Chief
Executive Officer,
President and
Director
</TABLE>
EXECUTIVE COMPENSATION
The following table summarizes the compensation for John Fife as the
President and CEO of the Company in 1997.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION AWARDS
------------------- ------
NAME AND FISCAL SALARY BONUS SHARES ALL OTHER
PRINCIPAL YEAR ------ ----- UNDERLYING COMPENSATION
POSITION ---- OPTIONS ------------
- -------- -------
<S> <C> <C> <C> <C> <C>
John Fife, CEO 1997 $195,000(1) - - $2,400(1a)
and President
</TABLE>
(1) Pursuant to the terms of the Stock Purchase Agreement, the Company and
Mr. Fife entered into an employment agreement, dated as of February 27, 1998,
but commencing as of July 13, 1996, which provided for the employment of Mr.
Fife as President and Chief Executive Officer of the Company with an annual
salary of $195,000.
22
<PAGE> 23
(1a) Mr. Fife received $2,400 in directors fees for attending 12 meetings.
No options were granted by the Company during 1997.
No SARs were outstanding in 1997.
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 vested 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.
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.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of November 19, 1997, 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 named executive officers; and (3) the Company's directors and
officers as a group. The Company had no named executive officers, other than
John Fife as President and CEO, who earned compensation in excess of $100,000
during 1997.
23
<PAGE> 24
<TABLE>
<CAPTION>
==============================================================================================
UTAH RESOURCES INTERNATIONAL, INC.
COMMON STOCK OWNERSHIP BY DIRECTORS AND NAMED EXECUTIVE OFFICERS
AS OF NOVEMBER 19, 1997
- ----------------------------------------------------------------------------------------------
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, Chief 1,275,912(1) 50.6% 1,275 53%
shareholder of IMCC Executive Officer,
President and
Chairman of the
Board
- ----------------------------------------------------------------------------------------------
Lyle Hurd Director 2,000 .1% 2(2) .1%
- ----------------------------------------------------------------------------------------------
Stuart B. Peterson Director 0% 0 0%
- ----------------------------------------------------------------------------------------------
Gregory White Director 0 0% 0 0%
==============================================================================================
DIRECTORS AND Directors & Officers 1,277,912 50.7% 1,277 53.1%
OFFICERS AS A GROUP (5 persons)
==============================================================================================
</TABLE>
* Assumes No Small-Lot Shareholder exercises the Round Up Option, and no
remaining shareholder elects to purchase the Returned Shares.
(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) 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."
================================================================================
PRINCIPAL STOCKHOLDERS
The following table sets forth information as of November 19, 1997,
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.
24
<PAGE> 25
<TABLE>
<CAPTION>
=================================================================
UTAH RESOURCES INTERNATIONAL, INC.
5% OR GREATER BENEFICIAL OWNERS
AS OF NOVEMBER 19, 1997
- -----------------------------------------------------------------
NUMBER OF SHARES AND
NAME AND ADDRESS OF NATURE OF PERCENT OF COMPANY
BENEFICIAL OWNER BENEFICIAL OWNER SHARES OUTSTANDING
- -----------------------------------------------------------------
<S> <C> <C>
Inter-Mountain 1,275,912 50.6%
Capital Corporation(1)
- -----------------------------------------------------------------
Mark Technologies 326,310 13%
Corporation(2)
- -----------------------------------------------------------------
</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 G. Jones holds 100 shares individually and an
additional 326,210 shares in his capacity as the controlling
shareholder of Mark Technologies Corporation.
=================================================================
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
JOHN FIFE TRANSACTION
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."
1996 SETTLEMENT AGREEMENT TRANSACTION AND RELATED TRANSACTIONS
The following amounts were paid through December 31, 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, a director of the Company at the time;
Campbell, Maack & Sessions, approximately $86,987.68 for services
performed as legal counsel for Mark Technologies Corporation, a corporation
controlled by Mark G. Jones, a director of the Company at the time;
Dorton, Jones, Nicolatus & Stuart Inc., approximately $4,225, as experts
for Mark Technologies Corporation, a corporation controlled by Mark G. Jones;
25
<PAGE> 26
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;
Robinson & Sheen, L.L.C. $100,486.88, as counsel for the Company;
Jardine, Linebaugh & Dunn, approximately $26,696.86, as counsel for the
Company;
Wildman, Harrold, Allen & Dixon, approximately $218,427.50, 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, $25,946.53, as local Utah counsel
for IMCC, a company wholly owned by John Fife, director, CEO, President
and Chairman of the Board of the Company; and
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.
LEGAL REPRESENTATION OF THE COMPANY
During 1996, the law firm of Robinson & Sheen, L.L.C. provided legal
representation to the Company. E. Jay Sheen, a former director of the Company,
is a partner at Robinson & Sheen. In 1996, Robinson & Sheen received
approximately $230,065 in legal fees.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits - See Exhibit Index below.
INCORPORATED BY REFERENCE TO EXHIBIT INDEX
ANNUAL REPORT ON FORM 10-KSB - 1997
UTAH RESOURCE INTERNATIONAL, INC.
SEC FILE NO. 0-9791
<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 13D-A
as filed September 9, 1996
3.1 Articles of Incorporation of Utah Incorporated by reference to Exhibit 3.A to the
Resources International, Inc. Company's registration statement on Form 10
</TABLE>
26
<PAGE> 27
<TABLE>
<S> <C> <C>
as filed June 22, 1981
3.2 Bylaws of Utah Resources Incorporated by reference to Exhibit 3.B to the
International, Inc. Company's registration statement on Form 10 as filed
June 22, 1981
3.3 Amendment of Bylaws dated Incorporated by reference to Exhibit 3.3 to the
November 17, 1992 Company's Annual Report of Form 10-KSB for
the year ended December 31, 1992
3.4 Amendment of Bylaws - Incorporated by reference to Exhibit 3.4 to the
December, 1994 Company's Annual Report of 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
Incorporation adopted by Company's Annual Report of Form 10-KSB for
shareholders January 26, 1995 the year ended December 31, 1994
10.1 Share Exchange Agreement Incorporated by reference to Exhibit 3 to
Form 8-K as filed July 20, 1995
10.2 Stock Purchase Agreement Incorporated by reference to Exhibit 1 to
Form 13D-A as filed September 9, 1996
10.3 Splitoff Agreement Incorporated by reference to Exhibit 10.36 to the
Company's Annual Report on Form 10-KSB for
the year ended December 31, 1995
10.4 Morgan Settlement Agreement Incorporated by reference to Exhibit 10.37 to the
Company's Annual Report on Form 10-KSB for
the year ended December 31, 1995
10.5 1996 Settlement Agreement Incorporated by reference to Exhibit 10.38 to the
Company's Annual Report on Form 10-KSB for
the year ended December 31, 1995
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.
(b) Reports on Form 8-K -- The Company did not file any reports
on Form 8-K during the fiscal year ended December 31, 1997.
27
<PAGE> 28
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: 3/25/98 By: /s/ John Fife
------------------ ------------------------------
John Fife
Its director, President,
Chairman of the Board, and CEO
Date: 3/25/98 /s/ Ladd Eldredge
------------------ ------------------------------
Ladd Eldredge, CFO
Date: 3/25/98 /s/ David Fife
------------------ ------------------------------
David Fife, director
Date: 3/25/98 /s/ Lyle D. Hurd, Jr.
------------------ ------------------------------
Lyle D. Hurd, Jr., director
Date: 3/25/98 /s/ Stuart B. Peterson
------------------ ------------------------------
Stuart B. Peterson, director
Date: 3/25/98 /s/ Gregory White
------------------ ------------------------------
Gregory White, director
28
<PAGE> 29
UTAH RESOURCES
INTERNATIONAL, INC.
CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES
29
<PAGE> 30
UTAH RESOURCES INTERNATIONAL, INC.
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
CONTENTS
PAGE
----
<TABLE>
<S> <C>
Independent Auditors' Report F-1
Consolidated balance sheet, December 31, 1997 F-2
Consolidated statements of operations for the
years ended December 31, 1997 and 1996 F-3
Consolidated statement of stockholders' equity for
the years ended December 31, 1997 and 1996 F-4
Consolidated statement of cash flows for the
years ended December 31, 1997 and 1996 F-5
Notes to consolidated financial statements F-8
Consolidated schedules of supplementary information
on oil and gas operations F-19
</TABLE>
30
<PAGE> 31
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, 1997 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, 1997 and the
results of their operations and their cash flows for the two years ended
December 31, 1997, in conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplementary information included
in the Schedule of Supplementary Information on oil and gas operations is
presented for the purposes of additional analysis and is not a required part of
the basic financial statements. Such information, except for that portion
marked "unaudited," on which we express no opinion, has been subjected to the
auditing procedures applied in the audits of the basic financial statements
and, in our opinion, is fairly stated in all material respects in relation to
the basic financial statements taken as a whole.
Salt Lake City, Utah
January 28, 1998, except for note 15
which is dated February 27, 1998
F-1
<PAGE> 32
UTAH RESOURCES INTERNATIONAL, INC., AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS
------
<S> <C>
Cash and cash equivalents $ 163,230
Accounts receivable from related parties 372,757
Notes receivable 235,746
Property and equipment, net of accumulated depreciation
and amortization of $52,314 17,512
Real estate held for resale 855,007
Royalty interest in petroleum and mineral production, net
of amortization of $47,729 2,481
Other assets 53,287
-----------
$ 1,700,020
===========
===============================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Accounts payable $ 280,802
Accrued expenses 722,652
Earnest money deposits 36,000
Notes payable 285,794
-----------
Total liabilities 1,325,248
-----------
Minority interest 89,798
Commitment and contingencies -
Stockholders' equity:
Common stock; par value $.10 per share, 5,000,000
shares authorized, 2,522,808 shares issued and outstanding 252,281
Additional paid-in capital 4,431,232
Note receivable from stock sale (3,633,159)
Retained deficit (765,380)
-----------
Total stockholders' equity 284,974
-----------
$ 1,700,020
===========
</TABLE>
- -------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements. F-2
<PAGE> 33
UTAH RESOURCES INTERNATIONAL, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31,
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1997 1996
-------------------------
<S> <C> <C>
Sales $ 530,553 $ 451,406
Cost of sales 207,691 139,175
-------------------------
Gross profit 322,862 312,231
General and administrative expenses 1,222,040 1,530,288
-------------------------
Loss from operations (899,178) (1,218,057)
-------------------------
Other income (expense):
Royalty income 176,572 153,051
Interest and dividend income 247,295 156,895
Interest expense (22,517) (86,405)
Other income (expense) (18,900) (8,772)
-------------------------
Total other income (expense) 382,450 214,769
-------------------------
Loss before minority interest and provision
for income taxes (516,728) (1,003,288)
Minority interest in net loss of subsidiaries 21,105 23,385
-------------------------
Loss before provision for income taxes and
discontinued operations (495,623) (979,903)
Income tax benefit 51,000 54,000
-------------------------
Loss from continuing operations (444,623) (925,903)
Discontinued operations:
Loss from discontinued operations net of
income taxes of $-0- - (19,365)
Income from disposal of discontinued operations
net of income taxes benefit of $-0- - 93,066
-------------------------
Total discontinued operations - 73,701
-------------------------
Net loss $ (444,623) $ (852,202)
=========================
Loss per share - continued operations (.18) (.45)
Income per share - discontinued operation - .04
-------------------------
Total loss per share $ (.18) $ (.41)
=========================
</TABLE>
- -------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements. F-3
<PAGE> 34
UTAH RESOURCES INTERNATIONAL, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1997 AND 1996
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NOTES
COMMON SHARES ADDITIONAL RECEIVABLE
------------------- PAID-IN FROM STOCK RETAINED
SHARES AMOUNT CAPITAL SALES EARNINGS
---------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance,
January 1, 1996 1,851,198 $185,120 $ 348,757 $ - $ 531,445
Common stock
retired through
split-off of
subsidiary (590,000) (59,000) 59,000 - -
Repurchase of
common stock (40,552) (4,055) (131,794) - -
Common stock issued
for:
Cash and note
receivable 1,275,912 127,591 4,146,714 (3,633,159) -
Accounts payable 26,250 2,625 8,555 - -
Net loss - - - - (852,202)
---------------------------------------------------------
Balance,
December 31, 1996 2,522,808 252,281 4,431,232 (3,633,159) (320,757)
Net loss - - - - (444,623)
---------------------------------------------------------
Balance,
December 31, 1997 2,522,808 $252,281 $4,431,232 $(3,633,159) $(765,380)
=========================================================
</TABLE>
- -------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements. F-4
<PAGE> 35
UTAH RESOURCES INTERNATIONAL, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
YEARS ENDED DECEMBER 31,
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1997 1996
---------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(444,623) $(852,202)
Add loss from discontinued operations - 19,365
Income from disposition of discontinued operations - (93,066)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization 12,253 12,567
Minority interest in net loss of subsidiaries (21,105) (23,385)
Loss (gain) on disposition of assets - 1,221
(Increase) decrease in:
Accounts receivable (110,089) 109,954
Other assets 83,724 (32,935)
Real estate held for resale 21,081 87,834
Income tax receivable - 212,328
(Decrease) increase in:
Accounts payable 28,338 (23,982)
Accrued expenses 176,582 153,787
---------------------
Net cash used in
continued operations (253,839) (428,514)
Net cash provided by
discontinued operations - 136,993
---------------------
Net cash used in operating activities (253,839) (291,521)
---------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from disposition of assets - 500
Payments on notes receivable 63,459 189,367
Purchase of property and equipment (399) -
Increase in notes receivable (158,533) (151,050)
Decrease in minority interest - (17,825)
---------------------
Cash (for) from investing activities - continuing
operations (95,473) 20,992
Cash for investing activities - discontinued operations - (38)
---------------------
Net cash (used in) provided by
investing activities (95,473) 20,954
---------------------
</TABLE>
- -------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements. F-5
<PAGE> 36
UTAH RESOURCES INTERNATIONAL, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
CONTINUED
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1997 1996
--------------------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on notes payable (5,316) (419,449)
Issuance of common stock - 641,146
Retirement of common stock - (135,849)
--------------------
Cash (for) from financing activities - continued
operations (5,316) 85,848
Cash for financing activities - discontinued operations - (63,254)
--------------------
Net cash provided by (used in)
financing activities (5,316) 22,594
--------------------
Decrease in cash (354,628) (247,973)
Cash and cash equivalents, beginning of year 517,858 765,831
--------------------
Cash and cash equivalents, end of year $ 163,230 $ 517,858
====================
</TABLE>
1996
- ----
The Company issued 1,275,912 shares of stock in exchange for cash and a note
receivable in the amount of $3,633,159.
The Company issued 26,250 shares of stock as payment of a liability in the
amount of $11,180.
The Company redeemed and retired 590,000 shares of stock in conjunction with
the divesture of Midwest Railroad at no value.
- -------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements. F-6
<PAGE> 37
UTAH RESOURCES INTERNATIONAL, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
CONTINUED
- -------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
<TABLE>
<CAPTION>
1997 1996
----------------------
<S> <C> <C>
Cash paid during the year for:
Interest $ 2,259 $ 51,301
======================
Income taxes $ - $ -
======================
</TABLE>
- -------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements. F-7
<PAGE> 38
UTAH RESOURCES INTERNATIONAL, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997 AND 1996
- -------------------------------------------------------------------------------
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.
The Company is both a general and limited partner in the following limited
partnerships.
<TABLE>
<CAPTION>
PERCENT
PARTNERSHIP OWNED
----------- -------
<S> <C>
Country Club Partnership 84.04%
URI - MGO Partnership 70.00%
Southgate Palms Ltd. Partnership 100.00%
Southgate Plaza Ltd. Partnership 52.50%
Southgate Resort Partnership 100.00%
Resources Limited Partnership 83.63%
Tonaquint Indian Hills Partnership 75.86%
Service Station Partnership 79.00%
</TABLE>
Discontinued operations include Midwest Railroad Construction and
Maintenance Corporation (Midwest) from June 13, 1995 (date of acquisition)
through March 31, 1996 (date of disposition). The Company disposed of
Midwest effective March 31, 1996, (see notes 7 and 8).
- -------------------------------------------------------------------------------
F-8
<PAGE> 39
UTAH RESOURCES INTERNATIONAL, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
- -------------------------------------------------------------------------------
1. SUMMARY OF
SIGNIFICANT
ACCOUNTING
POLICIES
CONTINUED
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.
METHOD OF RECOGNITION OF INCOME
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.
The Company follows the full-cost accounting method of capitalizing all
exploration and development costs including nonproductive drilling
expenses, lease abandonments, and other related costs. Under this method
of accounting, no gains or losses are recognized from the sale or
disposition of properties with insignificant proved oil and gas reserves.
If capitalized costs exceed the present value of future net operations,
the excess is charged to expense.
PROPERTY AND EQUIPMENT
Property and equipment is carried at cost. Depreciation is computed using
the straight-line method based upon useful lives of 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.
- -------------------------------------------------------------------------------
F-9
<PAGE> 40
UTAH RESOURCES INTERNATIONAL, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
- -------------------------------------------------------------------------------
1. SUMMARY OF
SIGNIFICANT
ACCOUNTING
POLICIES
CONTINUED
ROYALTY INTEREST IN PETROLEUM AND MINERAL PRODUCTION
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 of 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 computation of basic earnings per common share is based on the weighted
average number of shares outstanding during each year.
The computation of diluted earnings per common share is based on the
weighted average number of shares outstanding during the year plus the
common stock equivalents which would arise from the exercise of stock
options and warrants outstanding using the treasury stock method and the
average market price per share during the year. Common stock equivalents
have not been included as the exercise price is in excess of the market
price and the amounts are antidilutive.
STATEMENT OF CASH FLOWS
For purposes of the statement 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.
- -------------------------------------------------------------------------------
F-10
<PAGE> 41
UTAH RESOURCES INTERNATIONAL, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
- -------------------------------------------------------------------------------
1. SUMMARY OF
SIGNIFICANT
ACCOUNTING
POLICIES
CONTINUED
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 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 at December 31, 1997, include $120,086 which is due
from an entity which has some shareholders in common with the Company,
$98,796 due from the principal shareholder of the Company, and $153,875
which is due from various partnerships related by ownership.
3. NOTES
RECEIVABLE
The Company has the following notes receivable at December 31, 1997:
<TABLE>
<S> <C>
Note receivable from an individual with interest at
9%, secured by real estate and due when real estate
is sold $231,225
Note receivable from a company with interest at
8.5%, unsecured 4,521
--------
$235,746
========
</TABLE>
Future maturities of notes receivable are as follows:
<TABLE>
<CAPTION>
YEAR AMOUNT
---- ------
<S> <C>
1998 $4,521
1999 231,225
--------
Total $235,476
========
</TABLE>
- -------------------------------------------------------------------------------
F-11
<PAGE> 42
UTAH RESOURCES INTERNATIONAL, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
- -------------------------------------------------------------------------------
4. REAL ESTATE
HELD FOR
RESALE
Real estate held for resale consists of approximately 403 acres of real
estate of which approximately 383 acres is currently planned for single
family dwelling lots, commercial development and multiple housing in St.
George, Utah. The aggregate cost of the raw land and partially developed
land is $855,007 at December 31, 1997.
5. ACCRUED
EXPENSES
Accrued expenses at December 31, 1997 consist of the following:
<TABLE>
<S> <C>
Deficit in investment in partnerships $231,842
Accrued interest 145,134
Accrued costs for clean up of gasoline tanks 50,533
Accrued payroll and payroll taxes 288,022
Other accrued expenses 7,121
--------
Total $722,652
========
</TABLE>
6. NOTES
PAYABLE
The Company has the following notes payable at December 31, 1997:
<TABLE>
<S> <C>
Notes payable to a shareholder of the Company
with interest rates ranging from 7.5% to 9.5% $110,932
Notes payable to a governmental entity requiring
annual payments of approximately $15,000 plus
interest at 5.94%, secured by real estate 91,551
Note payable to an entity requiring annual
payments of $10,386 including interest at 9% 67,282
Note payable to a financial institution requiring
monthly payments of $491 including interest at
10.5%, secured by a vehicle 16,029
--------
Total $285,794
========
</TABLE>
- -------------------------------------------------------------------------------
F-12
<PAGE> 43
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>
1998 $162,454
1999 25,992
2000 27,057
2001 23,421
2002 22,799
Thereafter 24,071
--------
$285,794
========
</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, 1997, 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 spun off Midwest to its former owner.
The Company returned to the former Midwest owner all of the common stock of
Midwest and in return received 590,000 shares of its restricted common stock
and agreed to forgive net cash advances made to Midwest over the ownership
period. 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.
In 1996, the aggregate loss on the disposal of Midwest was reduced by
$93,066 due primarily to the offsetting of certain costs against the
advances made to Midwest incurred on behalf of Midwest.
- -------------------------------------------------------------------------------
F-13
<PAGE> 44
UTAH RESOURCES INTERNATIONAL, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
- -------------------------------------------------------------------------------
7. INVESTMENT
IN MIDWEST
CONTINUED
For the three months ended March 31, 1996, Midwest had a loss of $19,365
resulting in a net gain on disposition in 1996 of $73,701. The Company
realized an aggregate total loss of $659,934 on the disposal of Midwest.
8. DISCONTINUED
OPERATIONS
Condensed financial information for Midwest, which was discontinued, is as
follows for the period January 1, 1996 through March 31, 1996 (date of
disposition).
<TABLE>
<CAPTION>
JANUARY 1, 1996
THROUGH MARCH 31,
1996 (DATE OF
DISPOSITION)
------------
<S> <C>
Revenues $2,690,730
Costs and expenses 2,710,095
----------
Net loss before income tax (19,365)
Income tax expense -
----------
Net loss $ (19,365)
==========
</TABLE>
9. INCOME
TAXES
The benefit for income taxes is as follows:
Continuing Operations
<TABLE>
<CAPTION>
1997 1996
------------------
<S> <C> <C>
Current $51,000 $54,000
Deferred - -
------------------
Total discontinued operations $51,000 $54,000
==================
</TABLE>
- -------------------------------------------------------------------------------
F-14
<PAGE> 45
UTAH RESOURCES INTERNATIONAL, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
- -------------------------------------------------------------------------------
9. INCOME
TAXES
CONTINUED
Discontinued Operations
<TABLE>
<CAPTION>
1997 1996
-----------------------
<S> <C> <C>
Current $ - $ -
Deferred - -
-----------------------
Total continuing operations $ - $ -
=======================
</TABLE>
The benefit for income taxes differs from the amount computed at the
federal statutory rate as follows:
Continuing Operations
<TABLE>
<CAPTION>
1997 1996
-----------------------
<S> <C> <C>
Income tax benefit at federal
statutory rates $ 151,000 $ 333,000
State income taxes 5,000 49,000
Valuation allowance (105,000) (328,000)
-----------------------
Total current income taxes $ 51,000 $ 54,000
=======================
</TABLE>
Discontinued Operations
<TABLE>
<CAPTION>
1997 1996
-----------------------
<S> <C> <C>
Income tax (expense) benefit at
federal statutory rates $ - $ (11,000)
State income taxes - (4,000)
Other - 15,000
-----------------------
Total $ - $ -
=======================
</TABLE>
- -------------------------------------------------------------------------------
F-15
<PAGE> 46
UTAH RESOURCES INTERNATIONAL, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
- -------------------------------------------------------------------------------
9. INCOME
TAXES
CONTINUED
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>
1997 1996
-------------------------
<S> <C> <C>
Net operating loss carryforward (433,000) (328,000)
Valuation allowance 433,000 328,000
-------------------------
Total $ - $ -
=========================
</TABLE>
The Company has a net operating loss carryforward of approximately
$1,447,000, which expires between 2011 and 2012. The benefit of the net
operating loss (NOL) carryforwards available to offset future taxes will be
limited by the tax laws in effect at the time such NOL's can be utilized.
Significant changes in the ownership of the Company or tax laws could limit
the amount of NOL benefit.
10. LOSS PER
SHARE
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128 (SFAS 128) "Earnings
Per Share," which requires companies to present basic earnings per share
(EPS) and diluted earnings per share, instead of the primary and fully
diluted EPS that was previously required. The new standard also requires
additional informational disclosures, and makes certain modifications to
the previously applicable EPS calculations defined in Accounting Principles
Board No. 15. The new standard is required to be adopted by all public
companies for reporting periods ending after December 15, 1997, and
requires presentation of EPS for all prior periods reported. During the
year ended December 31, 1997, the Company adopted this standard.
- -------------------------------------------------------------------------------
F-16
<PAGE> 47
UTAH RESOURCES INTERNATIONAL, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
- -------------------------------------------------------------------------------
10. LOSS PER
SHARE
CONTINUED
Loss per share information in accordance with SFAS 128 is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
---------------------------------------
INCOME SHARES PER-SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
---------------------------------------
<S> <C> <C> <C>
Net loss $(444,623)
Less preferred stock
dividends -
---------
BASIC EPS
Income available to
common stockholders (444,623) 2,522,808 $(.18)
=====
EFFECT OF DILUTIVE SECURITIES
Stock options - -
-------------------------
DILUTED EPS
Income available to common
stockholders plus assumed
conversions $(444,623) 2,522,808 $(.18)
====================================
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
---------------------------------------
INCOME SHARES PER-SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
---------------------------------------
<S> <C> <C> <C>
Net loss $(852,202)
Less preferred stock
dividends -
---------
BASIC EPS
Income available to
common stockholders (852,202) 2,072,105 $(.41)
=====
EFFECT OF DILUTIVE SECURITIES
Stock options - -
-------------------------
DILUTED EPS
Income available to common
stockholders plus assumed
conversions $(852,202) 2,072,105 $(.41)
====================================
</TABLE>
- -------------------------------------------------------------------------------
F-17
<PAGE> 48
UTAH RESOURCES INTERNATIONAL, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
- -------------------------------------------------------------------------------
11. STOCK
SUBSCRIPTION
RECEIVABLE
The Company has a promissory note receivable at December 31, 1997 in the
amount of $3,633,159. The note bears interest at the short-term Federal
Internal Revenue Service rate (6.77% at December 31, 1997). Interest is
due annually in July of each year with the principal balance due August 1,
2001. The note is secured by 1,285,912 shares of the Company's common
stock. Accrued interest receivable at December 31, 1997 is $99,138 and is
reflected in related party receivables.
12. CONTINGENCIES
The Company is aware of certain claims made against the Company which
could result in liabilities in excess of amounts accrued in the financial
statements. Management believes that any such claim, if asserted, will not
result in any adverse effect 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.
13. COMMITMENTS
The Company leases its office facility under a year lease requiring
monthly payments of $500 which expires in 1998. Lease expense was $6,000
in 1997. The Company has an employment agreement with its president for an
annual salary of $195,000 per year.
On February 27, 1998, the Company, in connection with the execution of the
stock purchase agreement in 1996, entered into an employment agreement with
the president of the Company for a salary of $195,000 per year. The
agreement commences the salary on July 13, 1996. Accrued and expensed
salary to the president for the year ended December 31, 1997 is $286,356.
14. SIGNIFICANT
CUSTOMERS
The Company had land sales of approximately $331,000 and $106,000 to a
significant customer in 1997 and 1996, respectively:
15. STOCKHOLDERS'
PROPOSAL
The Company is in process of filing with the Securities and Exchange
Commission (SEC) registrations, which if accepted by the SEC and if
approved by the shareholders of the Company, will result in the Company
effectuating a 1 for 1,000 share reverse stock split and the Company
becoming a non-public company with no SEC filing requirements.
- -------------------------------------------------------------------------------
F-18
<PAGE> 49
UTAH RESOURCES INTERNATIONAL, INC., AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF SUPPLEMENTARY INFORMATION ON OIL AND GAS OPERATIONS
- -------------------------------------------------------------------------------
The information on the Company's oil and gas operations as shown in this
schedule is based on the full-cost method of accounting and is presented in
conformity with the disclosure requirements of Statement of Financial
Accounting Standards NO. 69 "Disclosures about Oil and Gas Producing
Activities."
COSTS INCURRED IN OIL AND GAS PROPERTY ACQUISITION,
EXPLORATION AND DEVELOPMENT ACTIVITIES
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1997 1996
-----------------------
<S> <C> <C>
Acquisition of proved properties $ - $ -
=======================
Exploration and affiliate costs $ - $ -
=======================
Development costs $ - $ -
=======================
</TABLE>
RESULTS OF OPERATIONS FOR PRODUCING ACTIVITIES
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1997 1996
------------------
<S> <C> <C>
Royalty income $176,572 $153,051
Production costs - -
Exploration costs - -
Depreciation, depletion, amortization, and valuation provisions (3,347) (3,348)
------------------
Results of operations from producing activities before taxes 173,225 149,703
Income tax expense (59,000) (51,000)
------------------
Results of operations from producing activities (excluding
corporate overhead and interest costs) $114,225 $ 98,703
==================
</TABLE>
- -------------------------------------------------------------------------------
F-19
<PAGE> 50
UTAH RESOURCES INTERNATIONAL, INC., AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF SUPPLEMENTARY INFORMATION
CONTINUED
- -------------------------------------------------------------------------------
CAPITALIZED COSTS RELATING TO OIL AND GAS PRODUCING ACTIVITIES
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-------------------
1997 1996
-------------------
<S> <C> <C>
Proved oil and gas properties $ 50,210 $ 50,210
Accumulated depreciation, depletion, amortization and
valuation allowances (47,729) (44,382)
-------------------
Net capitalized costs $ 2,481 $ 5,828
===================
</TABLE>
ESTIMATED QUANTITIES OF RESERVES (UNAUDITED)
The estimated quantities of proved oil and gas reserves disclosed in the table
below are based upon estimates prepared by American Energy Advisors, Inc.,
petroleum engineers. Such estimates are inherently imprecise and may be
subject to substantial revisions.
All quantities shown in the table are proved developed reserves and are located
within the United States.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1997
-------------------
BARRELS MCF
-------------------
<S> <C> <C>
Proved oil and gas reserves:
Balance at beginning of year $ 45,000 $437,000
Revisions of previous estimates - -
Improved recovery and acquisition of minerals in place - -
Extensions and discoveries - -
Production (2,000) (51,000)
-------------------
Balance at end of year $ 43,000 $386,000
===================
</TABLE>
- -------------------------------------------------------------------------------
F-20
<PAGE> 51
UTAH RESOURCES INTERNATIONAL, INC., AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF SUPPLEMENTARY INFORMATION
CONTINUED
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1996
----------------------
BARRELS MCF
----------------------
<S> <C> <C>
Proved oil and gas reserves:
Balance at beginning of year $ 51,000 $ 488,000
Revisions of previous estimates - (40,000)
Improved recovery and acquisition of minerals in place - -
Extensions and discoveries - -
Production (6,000) (11,000)
----------------------
Balance at end of year $ 45,000 $ 437,000
======================
</TABLE>
STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS
RELATING TO PROVED OIL AND GAS RESERVES (UNAUDITED)
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
----------------------
1997 1996
----------------------
<S> <C> <C>
Future cash in flows $1,651,000 $1,830,000
Future production and development costs (62,000) (70,000)
Future income tax expenses (540,000) (598,000)
----------------------
Future net cash flows 1,049,000 1,162,000
10% annual discount for estimated timing of cash flows (529,000) (508,000)
----------------------
Standardized measure of discounted future net cash flows $ 520,000 $ 654,000
======================
</TABLE>
- -------------------------------------------------------------------------------
F-21
<PAGE> 52
UTAH RESOURCES INTERNATIONAL, INC., AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF SUPPLEMENTARY INFORMATION
CONTINUED
- -------------------------------------------------------------------------------
CHANGES RELATING TO STANDARDIZED MEASURE OF DISCOUNTED
FUTURE NET CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
----------------------
1997 1996
----------------------
<S> <C> <C>
Sales, net of production costs $(177,000) $ (153,000)
Net changes in prices (80,000) -
Acquisition and improved recover, less related costs - -
Revisions of previous quantity estimates - (85,000)
Accretion of discount 65,000 74,000
Net change in income taxes 58,000 80,000
----------------------
Net change $(134,000) $ (84,000)
======================
</TABLE>
- -------------------------------------------------------------------------------
F-22
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE DECEMBER
31, 1997 FINANCIAL STATEMENTS OF UTAH RESOURCES INTERNATIONAL, INC. AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 163,230
<SECURITIES> 0
<RECEIVABLES> 608,503
<ALLOWANCES> 0
<INVENTORY> 855,007
<CURRENT-ASSETS> 0
<PP&E> 69,826
<DEPRECIATION> 52,314
<TOTAL-ASSETS> 1,700,020
<CURRENT-LIABILITIES> 0
<BONDS> 285,794
0
0
<COMMON> 252,281
<OTHER-SE> 32,693
<TOTAL-LIABILITY-AND-EQUITY> 1,700,020
<SALES> 530,553
<TOTAL-REVENUES> 954,420
<CGS> 207,691
<TOTAL-COSTS> 1,222,040
<OTHER-EXPENSES> 18,900
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 22,517
<INCOME-PRETAX> (495,623)
<INCOME-TAX> (51,000)
<INCOME-CONTINUING> (444,623)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (444,623)
<EPS-PRIMARY> (0.18)
<EPS-DILUTED> (0.18)
</TABLE>
