SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1998
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Commission File No. ___________
UTAH RESOURCES INTERNATIONAL, INC.
(Exact Name of Small Business Issuer as Specified in its Charter)
Utah 87-0273519
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
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297 W. Hilton Drive, Suite #4
St. George, Utah 84770
(Address of Principal Executive Offices)
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(801) 628-8080
(Issuer's Telephone Number, Including Area Code)
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(Former Name, Former Address and Former Fiscal Year, if Changed
Since Last Report)
Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act 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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APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes
of common equity as of the latest practicable date: 2,522,808 shares as of
November 13, 1998.
Transitional Small Business Disclosure Format (check one):
Yes No X
<PAGE>
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements.
UTAH RESOURCES INTERNATIONAL, INC.
Consolidated Balance Sheet
<TABLE>
<CAPTION>
09/30/98
------------
<S> <C>
Assets
Cash and cash equivalents $ 33,512
Accounts receivable 136,209
Notes receivable 206,574
Property and equipment, net of
accumulated depreciation and
amortization of $57,311 504
Real estate held for resale 1,038,282
Royalty interest in petroleum and mineral
production, net of amortization of $50,210 0
Other assets 53,287
------------
Total Assets $ 1,468,368
============
Liabilities and Stockholders' Equity
Accounts payable $ 197,003
Accrued expenses 244,720
Unearned revenue 205,922
Earnest money deposits 36,000
Notes payable 581,578
------------
Total liabilities 1,265,223
Minority interest 89,799
Commitments 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 (937,008)
------------
Total stockholders' equity 113,346
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Total Stockholders' Equity and Liabilities $ 1,468,368
============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
UTAH RESOURCES INTERNATIONAL, INC.
Consolidated Statement of Operations
For The Periods Indicated
Three Months Three Months Nine Months Nine Months
Ended Ended Ended Ended
9/30/98 9/30/97 9/30/98 9/30/97
<S> <C> <C> <C> <C>
Sales $ -- $ -- $ -- $ 517,066
Cost of Sales -- -- -- 205,010
------------ ------------ ------------ ------------
Gross profit -- -- -- 312,056
General and administrative 124,730 137,475 582,268 594,349
------------ ------------ ------------ ------------
Income from operations (124,730) (137,475) (582,268) (282,293)
Other income (expense):
Royalty income 60,591 37,919 163,139 144,194
Interest and dividend 136,101 -- 246,501 22,396
income (expense)
Other income 1,000 7,672 1,000 --
------------ ------------ ------------ ------------
Total other income (expense) 197,692 45,591 410,640 166,590
Income (loss) before provision
for income taxes 72,962 (91,884) (171,628) (115,703)
Income tax (provision) benefit -- -- -- --
Income (loss) from continuing
operations 72,962 (91,884) (171,628) (115,703)
------------ ------------ ------------ ------------
Net income (loss) $ 72,962 $ (91,884) $ (171,628) $ (115,703)
============ ============ ============ ============
Weighted Average Shares
Outstanding 2,522,808 2,522,808 2,522,808 2,522,808
------------ ------------ ------------ ------------
Income (loss) per share $ 0.029 $ (0.036) $ (0.068) $ (0.046)
============ ============ ============ ============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
UTAH RESOURCES INTERNATIONAL, INC.
Consolidated Statement of Cash Flows
For The Dates Indicated
Nine Months Nine Months
Ended Ended
09/30/98 09/30/97
<S> <C> <C>
Cash flows from operating activities:
Net (loss) $ (171,628) $ (115,703)
Adjustments to reconcile net (loss)
to net cash (used in) operating activities:
Depreciation and amortization 7,478 5,694
(Increase) decrease in:
Accounts receivable 236,549 (40,892)
Real estate held for resale (183,275) 37,634
(Decrease) increase in:
Accounts payable (83,799) 164,785
Accrued expenses (477,932) (236,315)
Unearned revenue 205,922 --
------------ ------------
Net cash (used in) operating activities (466,685) (184,797)
------------ ------------
Cash flows from investing activities:
(Purchase) disposition of property and equipment 12,011 (512)
Increase (decrease) in notes receivable 29,172 (118,987)
Decrease (increase) in other assets -- 124,629
------------ ------------
Net Cash provided by investing activities 41,183 5,130
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Cash flows from financing activities:
Payments on notes payable -- (3,272)
Proceeds from notes payable 295,784 --
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Net cash provided by (used in) financing activities 295,784 (3,272)
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Increase (decrease) in cash (129,718) (182,939)
Cash and cash equivalents, beginning of period 163,230 517,858
------------ ------------
Cash and cash equivalents, end of period $ 33,512 $ 334,919
============ ============
</TABLE>
<PAGE>
UTAH RESOURCES INTERNATIONAL, INC.
Notes to Condensed Consolidated Financial Statements
(1) The unaudited consolidated financial statements include the accounts
of Utah Resources International, Inc. and include all adjustments
(consisting of normal recurring items) which are, in the opinion of
management, necessary to present fairly the financial position as of
September 30, 1998 and the results of operations for the three months
and nine months ended September 30, 1998 and 1997 and cash flows for
the nine months ended September 30, 1998 and 1997. The results of
operations and cash flows for the three months and nine months ended
September 30, 1998 and 1997 are not necessarily indicative of the
results to be expected for the entire year.
(2) (Loss) per share is based on the weighted average number of shares
outstanding at September 30, 1998 and 1997, respectively.
(3) Year 2000
The Year 2000 issue is the result of computer programs using two digits
rather than four to define the applicable year. Computer programs that
have date-sensitive software may recognize a date using "00" as the
year 1900 rather than the year 2000. This could result in system
failures or miscalculations leading to disruptions in a company's
operations.
The Company is assessing the readiness of its internal computer systems
and expects to implement successfully the systems and programming
changes necessary to address year 2000 issues. The Company does not
believe that the cost of such actions will have a material effect on
the results of operations or financial condition. There can be no
assurance, however, that there will not be a delay in, or increased
costs associated with, the implementation of such changes. Failure to
complete necessary changes could have an adverse effect on future
results of operations or financial condition. The Company is also
assessing the possible effects on the Company's operations of the year
2000 readiness of significant customers, suppliers, and financial
institutions with which it transacts business. Failure by these
significant customers, suppliers, and financial institutions to address
year 2000 issues could have a material impact on the Company's
operations and financial results. However, the potential impact and
related costs are not known at this time.
<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operation.
Results of Operations
The Company had no land sales in the quarter ended September 30, 1998
and no land sales in the quarter ended September 30, 1997. The Company had no
land sales for the nine months ended September 30, 1998 as compared with land
sales of $517,066 for the same period in 1997. The Company had interest income
in the amount of $246,501 during the first nine months of 1998 (which includes
accrued interest under the Inter-Mountain Capital Corporation, a Delaware
corporation ("IMCC") Promissory Note, dated as of July 3, 1996, and which note
is more fully described below), as compared with interest income of $22,396 for
the same period in 1997. Income on royalties from production under oil and gas
and mineral leases amounted to $60,591 for the third quarter of 1998, which was
up from the $37,919 figure for the same period in 1997. The income on royalties
from production under oil and gas and mineral leases for the nine months period
ended September 30, 1998, is $163,139, compared to the $144,194 which was earned
during the same period in 1997.
There was no cost of land sold in the third quarter of 1998 or the
third quarter of 1997. There was no cost of land sold in the first nine months
of 1998 as compared to $205,010 for the same period in 1997.
General and administrative expenses are $124,730 for the third quarter
of 1998 which is a decrease from $137,475 for the same period in 1997. General
and administrative expenses for the year in 1998 are $582,268 as compared to
$594,349 for the same period in 1997.
Liquidity and Capital Resources
The ratio of assets to liabilities at September 30, 1998, was
approximately 1.16 to 1. The Company's assets as of September 30, 1998 totaled
$1,468,368 with liabilities of $1,265,223.
It is anticipated that the Company's need for cash in excess of its
present resources will be met through land sales, royalties and real estate
secured borrowings. The Company is currently negotiating a $1,000,000 revolving
credit agreement to finance investment opportunities, working capital needs and
expected ongoing litigation.
The Company has no additional plans for major capital expenditures
beyond the cost of improving portions of its real property. The Company
anticipates sales of real estate lots in the near future since the Company has
obtained preliminary plat approval and has commenced development.
The Company also expects to be required to expend funds for the cleanup
of gasoline which has apparently leaked from tanks owned by the Service Station
Partnership, which have been replaced. Engineering estimates of total cleanup
costs are not determinable due to uncertainties with respect to state compliance
requirements and the, as yet, unknown extent of the contamination. During the
third quarter of 1998, $16,435 was expended toward this clean-up operation and
approximately $26,611 has been expended by the Company from January 1, 1998 to
date. The Company has expended approximately $341,435 to date.
The Company is continuing in its efforts to effectuate a reverse stock
split and subsequently take the Company to a non-SEC reporting status. In
February 1997, the Company filed a Schedule 13e-3 and Preliminary Proxy
Statement with the SEC. The SEC reviewed the Schedule 13e-3 and Preliminary
Proxy Statement and issued a comment letter to the Company, dated March 28,
1997. The Company revised the Schedule 13e-3 and Preliminary Proxy Statement,
which documents were filed with the SEC on June 5, 1997. On June 27, 1997, the
SEC issued the Company a second comment letter. The SEC's second comment letter
included issues with respect to the financial statements which were a part of
the Company's 1996 Form 10-KSB.
The Company filed its revised Schedule 13e-3 and Preliminary Proxy
Statement, and as a result of the shares being offered to the Company's
shareholders pursuant to the terms of the reverse stock split, the Company also
filed a Form S-1 Registration Statement with the SEC on February 25, 1998. On
March 26, 1998, the Company filed its amended Schedule 13e-3 and Preliminary
Proxy Statement and amended Form S-1 Registration Statement. The SEC commented
on these documents in correspondence to the Company dated April 29, 1998. The
Company filed its response to the April 29, 1998 SEC Comment Letter, a revised
Preliminary Proxy Statement and Schedule 14A, a revised Schedule 13c-3, and
Amendment No. 2 to Form S-1 Registration Statement on October 14, 1998.
The Company holds an annual meeting of the shareholders each year for
the purpose of, among other things, electing directors to serve on the Board.
The Company wishes to minimize the costs and expenses associated with holding
two separate meetings by combining the meeting addressing the issues raised in
the Schedule 13e-3 and Preliminary Proxy Statement and Form S-1 Registration
Statement with the Annual Meeting of the shareholders.
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.
At the end of August 1998, the Company as general partner of Southgate
Resort Limited Partnership and Southgate Plaza Limited Partnership entered into
a Partition Agreement, which agreement, among other things, dissolved Southgate
Plaza, a Utah general partnership, and Southgate Resort, a Utah general
partnership, distributed the assets and liabilities of each partnership to its
respective partners and resolved all claims between the partners regarding these
partnerships. The Company is in the process of winding up Southgate Resort
Limited Partnership and Southgate Plaza Limited Partnership. For financial
accounting purposes, the Company has recorded $205,922 in unearned income as a
result of the dissolution of Southgate Plaza General Partnership and Southgate
Resort General Partnership.
As of July 3, 1996, the Company holds a promissory note from IMCC,
which is wholly owned by John Fife (the President and CEO of the Company), in
the original principal amount of $3,633,159.42 (the "Note"). The Note bears
interest at a rate equal to the short-term applicable federal rate published by
the Internal Revenue Service in effect at the time of closing the Stock Purchase
Agreement, and is adjusted on each anniversary of the Note to the applicable
short-term federal rate in effect on such anniversary date and is payable in
arrears on each anniversary date. 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.
<PAGE>
PART II
OTHER INFORMATION
Item 1. Legal Proceedings.
Case Number 98 CV 0900576.
On or about January 20, 1998, Mark G. Jones, a former director of the
Company together with his wholly owned corporation Mark Technologies Corp., a
greater than 10% shareholder of the Company ("MTC") filed suit against the
Company, John Fife, President, CEO, Chairman of the Board and sole shareholder
of IMCC, the majority shareholder of the Company, David Fife, a director of the
Company, Lyle D. Hurd, Jr., a director of the Company and Gerry Brown, Vice
President of the Company, in the Third Judicial District Court, in Salt Lake
County, Utah, in a suit captioned, Mark G. Jones and Mark Technologies Corp. vs.
Utah Resources International, Inc., et al., case number 98 cv 0900576.
Mr. Jones, on behalf of himself and MTC, claims that the defendants
violated a certain settlement agreement by and among the Company, R. Dee
Erickson, E. Jay Sheen, Lyle D. Hurd, Jr., Mark G. Jones, MTC, Anne Morgan,
Victoria Morgan, Inter-Mountain Capital Corporation, John Fife and Robinson &
Sheen, L.L.C. (the "1996 Settlement Agreement"). A copy of the 1996 Settlement
Agreement is attached as Exhibit 10.38 to the Company's Form 10-KSB for Fiscal
Year End 1995. Mr. Jones alleges that the defendants breached the 1996
Settlement Agreement by: (i) failing to execute a written employment agreement
between John Fife and the Company; (ii) failing to use their best efforts to
unwind the Company's contractual relationship with Morgan Gas & Oil Company;
(iii) recognizing the Company's issuance of stock options to Messrs. Hurd and
Brown; (iv) failing to reimburse Mr. Jones and MTC for all of the additional,
remaining costs which Mr. Jones claimed were not previously reimbursed pursuant
to the 1996 Settlement Agreement; and (v) failing to pay Mr. Jones for expenses
incurred by him while acting as a director of the Company. Mr. Jones and MTC are
seeking relief in the form of specific performance of the Settlement Agreement
and for attorneys' fees and costs incident to the suit.
The Company had moved for summary dismissal of the complaint on the
grounds that the issues complained of are moot and without factual or legal
basis. On June 25, 1998, the Court stayed the Company's motion for summary
dismissal pending discovery. On August 5, 1998, the Company received notice that
the Court denied its motion to dismiss certain counts of the complaint. On
August 19, 1998, plaintiffs filed an amended complaint. The Company has filed an
answer, affirmative defenses and counterclaim to the amended complaint. The
counterclaim seeks damages against Mr. Jones and MTC for their alleged violation
of the Settlement Agreement. Plaintiffs filed their Reply to the Company's
counterclaim on October 26, 1998. The Company is engaged in written discovery.
The Court has scheduled discovery to close on November 16, 1998.
Case Number 98 CV 0500904.
On or about April 17, 1998, MTC and Mark G. Jones filed a second suit
against the Company in the Fifth Judicial District Court, Washington County,
Utah, captioned, Mark Technologies Corp., and Mark G. Jones vs. Utah Resources
International, Inc., et al., case number 98 cv 0500904. The defendants in the
suit are the Company, John Fife, David Fife, Lyle D. Hurd, Jr., Gerry Brown and
Ladd Eldredge, Secretary and Treasurer of the Company.
Mr. Jones, on behalf of himself and MTC, claims that the individual
defendants have, among other things: (i) wasted corporate assets; (ii) failed to
pursue corporate opportunities; (iii) mismanaged the Company; and (iv) failed to
follow general rules of corporate governance. He is seeking appointment of a
receiver and the judicial dissolution of the Company.
On May 29, 1998, the Company filed a motion to strike the complaint as
legally insufficient. The Court has denied the Company's motion to strike. The
Company filed an answer to the complaint on August 21, 1998.
Item 2. Changes in Securities.
None
Item 3. Defaults Upon Senior Securities.
None
Item 4. Submission of Matters to a Vote of Security Holders.
None
Item 5. Other Information.
None
Item 6. Exhibits and Reports on Form 8-K.
None.
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Utah Resources International, Inc.
Date: November 13, 1998 /s/ John Fife
-----------------------------
John Fife, President and CEO
Date: November 13, 1998 /s/ John Fife
-----------------------------
John Fife, Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM UTAH
RESOURCES INTERNATIONAL, INC. SEPTEBMER 30, 1998 FINANCIAL STATEMENTS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 33,512
<SECURITIES> 0
<RECEIVABLES> 342,783
<ALLOWANCES> 0
<INVENTORY> 1,038,282
<CURRENT-ASSETS> 53,287
<PP&E> 57,815
<DEPRECIATION> 57,311
<TOTAL-ASSETS> 1,468,368
<CURRENT-LIABILITIES> 683,645
<BONDS> 581,578
0
0
<COMMON> 252,281
<OTHER-SE> (138,935)
<TOTAL-LIABILITY-AND-EQUITY> 1,468,368
<SALES> 0
<TOTAL-REVENUES> 414,765
<CGS> 0
<TOTAL-COSTS> 582,268
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,125
<INCOME-PRETAX> (171,628)
<INCOME-TAX> 0
<INCOME-CONTINUING> (171,628)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (171,628)
<EPS-PRIMARY> (.068)
<EPS-DILUTED> (.068)
</TABLE>
