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 MARCH 31, 1999
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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)
<PAGE>
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: 2,400 shares as of May 12,
1999.
Transitional Small Business Disclosure Format (check one):
Yes No X
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<PAGE>
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements.
UTAH RESOURCES INTERNATIONAL, INC.
Consolidated Balance Sheet
03/31/99
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Assets
Cash and cash equivalents 82,623
Marketable securities 178,297
Accounts receivable 43,814
Notes receivable 253,586
Property and equipment, net of
accumulated depreciation and
amortization of $40,411 7,150
Real estate held for resale 911,137
Royalty interest in petroleum and mineral
production, net of amortization of $50,210 0
Other assets 14,545
Total Assets 1,491,152
Liabilities and Stockholders' Equity
Accounts payable 194,188
Accrued expenses 339,430
Notes payable 749,824
Deferred credits 73,385
Total liabilities 1,356,827
Stockholders' equity:
Common stock; par value $100 per share,
5,000 shares authorized,
2,400 shares issued and outstanding 252,281
Additional paid-in capital 4,431,232
Note receivable from stock sale (3,633,159)
Retained deficit (916,029)
Total stockholders' equity 134,325
Total stockholders' equity & liabilities 1,491,152
<PAGE>
UTAH RESOURCES INTERNATIONAL, INC.
Consolidated Statement of Operations
For The Periods Indicated
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
3/31/99 3/31/98
------- -------
<S> <C> <C>
Sales -- --
Cost of Sales -- --
Gross profit -- --
General and administrative 123,090 253,333
Income from operations (123,090) (253,333)
Other income:
Royalty income 46,859 49,723
Interest and dividend income 34,070 54,493
Gain on sale of marketable securities 93,745 --
Other income 1,290 --
Total other income 175,964 104,215
Income (loss) before provision
for income taxes 52,874 (149,118)
Income tax (provision) benefit -- --
Net income (loss) 52,874 (149,118)
Weighted Average Shares
Outstanding 2,400 2,522,808
Earnings (loss) per share 22.03 (0.06)
</TABLE>
<PAGE>
UTAH RESOURCES INTERNATIONAL, INC.
Consolidated Statement of Cash Flows
For The Dates Indicated
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
03/31/99 03/31/98
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net Income (loss) 52,874 (149,118)
Adjustments to reconcile net income (loss)
to net cash (used in) operating activities:
Depreciation 1,695 2,503
Amortization of deferred gain (1,244) --
Gain on sale of marketable securities (93,745) --
(Increase) decrease in:
Accounts receivable (43,814) (67,548)
Real estate held for resale -- (10,732)
(Decrease) increase in:
Accounts payable (34,931) 274,189
Accrued expenses 4,014 (122,154)
Net cash (used in) operating activities (115,151) (72,860)
Cash flows from investing activities:
Proceeds from sale of marketable securities 183,640 --
Purchase of marketable securities (30,000) --
Disposition of property and equipment -- 12,011
Decrease (increase) in notes receivable 17,740 (29,569)
Decrease in other assets -- 12,561
Net Cash provided by (used in) investing activities 171,380 (4,996)
Cash flows from financing activities:
(Payments on) Issuance of notes payable (1,210) 42,119
Net cash provided by (used in) financing activities (1,210) 42,119
Increase (decrease) in cash 55,019 (35,738)
Cash and cash equivalents, beginning of period 27,604 163,230
Cash and cash equivalents, end of period 82,623 127,492
</TABLE>
<PAGE>
Notes to 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 March 31, 1999 and the results of operations
for the three months ended March 31, 1999 and 1998 and cash flows for the three
months ended March 31, 1999 and 1998. The results of operations and cash flows
for the three months ended March 31, 1999 and 1998 are not necessarily
indicative of the results to be expected for the entire year.
(2) On March 8, 1999, the Company held its Annual Meeting of shareholders, at
which meeting shareholders approved a 1 for 1000 reverse stock split of the
Company's issued and outstanding, $.10 par value per share stock (the "Common
Stock"), effective Tuesday, March 16, 1999 (the "Effective Date"). This reverse
stock split reduced the shares outstanding from 2,522,808 to approximately 2,400
from March 31, 1998 to March 31, 1999. The actual number of shares outstanding
will not be known until the reverse stock split is completed. Earnings per share
is based on management's best estimate of the weighted average number of shares
outstanding at March 31, 1999 and the actual weighted average number of shares
outstanding at March 31, 1998, 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 March 31, 1999 and
no land sales in the quarter ended March 31, 1998. There was no cost of land
sold in the first quarter of 1999 or the first quarter of 1998. General and
administrative expenses for the quarter totaled $123,090 which is a decrease of
51% from the comparable 1998 period when the total was $253,333.
The Company had net interest income totaling $34,070 during the quarter
ended March 31,1999 as compared with net interest income totaling $54,493 for
the comparable period in 1998. These interest income amounts include interest
from 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. Income on royalties from production under oil and gas and
mineral leases totaled $46,859 for the quarter ended March 31, 1999, which was
down from $49,723 for the comparable period in 1998.
Liquidity and Capital Resources
The ratio of assets to liabilities as of March 31, 1999 was
approximately 1.1 to 1. The Company's assets as of March 31, 1999 totaled
$1,491,152 while liabilities totaled $1,356,827.
On March 8, 1999, the Company held its Annual Meeting of shareholders.
At the Annual Meeting, the shareholders, among other things voted in favor of a
proposal to amend the Company's Articles of Incorporation to effect the reverse
split of the Company's issued and outstanding, $.10 par value per share stock
(the "Common Stock"), effective Tuesday, March 16, 1999 (the "Effective Date"),
on the basis that each 1,000 shares of Common Stock then outstanding will be
converted into one (1) share of common, $100.00 par value per share (the "New
Stock", with shareholders holding less than 1,000 shares of Common Stock or any
increment thereof (after getting an option to purchase additional shares as
needed to "round up" to the equivalent of 1,000 shares at a purchase price of
$3.35 per share) being paid cash in exchange for the fractional shares at a
price of $3.35 per share of each share outstanding prior to such reverse split
(the "Reverse Split"). The company is in the process of completing the Reverse
Split and providing liquidity to fractional shareholders. The Company believes
that the Reverse Split will significantly reduce operating and administrative
expenses that will be associated with no longer being an SEC reporting company.
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
<PAGE>
requirements and the, as yet, unknown extent of the contamination. During the
first quarter of 1998, $4,145 was expended toward this clean-up operation. As of
March 31, 1999, the Company has expended approximately $345,000 to date.
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. In 1998, the Company executed a one Million ($1,000,000)
Dollar Revolving Credit Note, for the purpose of having a source of funds for
working capital and financing opportunities. To the extent necessary, the
Revolving Credit Note will be used to finance the completion of the Reverse
Split. The note bears interest at the rate of 12.5% per annum payable monthly
and has a maturity of one year with an option to extend the term for an
additional six (6) months at the Company's discretion. The note is secured by
approximately forty (40) acres of the Company's land in the Southgate Hills III
Development.
In 1998, the Company drew down $250,000 from the Revolving Credit Note
to acquire 83,334 shares of convertible preferred stock with warrants in China
Peregrine Food Corporation, a Delaware corporation publicly traded on the NASDAQ
bulleting board system ("China Peregrine"). Chine Peregrine is a distributor of
dairy and non-dairy food products in several major cities in the People's
Republic of China and owns and operates two other dairy processing plants in
China. The convertible preferred stock pays an 8% dividend, which accrues and is
payable in the form of additional common stock. At the Company's discretion, the
preferred stock may be converted to common stock at a 25% discount to the
stock's 10 day trailing average bid price. During the first quarter of 1999, the
Company sold shares of common stock for realized gains totaling $93,745. The
Company is actively seeking other investment opportunities to generate
additional revenues.
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'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,
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
<PAGE>
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.
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.
("MTC"), a greater than ten percent (10%) shareholder of the Company, filed suit
against the Company, John Fife, President, CEO, CFO, 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
<PAGE>
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.
In January, the defendants filed a motion for summary judgment on all
of the claims made by Mr. Jones and MTC. That motion is pending. On April 1,
1999, the Court granted Mr. Jones and MTC leave to take limited discovery to
respond to defendants' motion for summary judgment. Mr. Jones and MTC have been
ordered by the Court to file their response to defendants' motion for summary
judgment within fifteen days of completing the aforementioned limited discovery.
Discovery is currently scheduled to close on May 24, 1999. Mr. Jones response to
defendants' summary judgment motion is due June 7, 1999.
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, Former 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 a response to the complaint on or about August 21, 1998. The Court
granted Plaintiffs' discovery motions on April 21, 1999. The court has not set a
discovery closure at this time.
Item 2. Changes in Securities.
None
Item 3. Defaults Upon Senior Securities.
None
Item 4. Submission of Matters to a Vote of Security Holders.
<PAGE>
The Company held its Annual Meeting of the Shareholders on Monday,
March 8, 1999, at the Sheraton Four Points Hotel, 1450 South Hilton Drive, St.
George, Utah 84770. At the meeting the shareholders were asked to: (i) consider
and vote upon a proposal to amend the Company's Articles of Incorporation to
effect the reverse split of the Company's issued and outstanding common, $.10
par value per share stock (the "Common Stock"), effective Tuesday, March 16,
1999 (the "Effective Date"), on the basis that each 1,000 shares of Common Stock
then outstanding will be converted into 1 share of common, $100.00 par value per
share stock (the "New Stock"), with shareholders holding less than 1,000 shares
of Common Stock or any increment thereof (after being given an option to
purchase additional shares as needed to "round up" to the equivalent of 1,000
shares at a purchase price of $3.35 per share) being paid cash in exchange for
their fractional shares at a price of $3.35 per share of each share outstanding
immediately prior to such reverse split (the "Reverse Split"); (ii) elect five
directors to hold office until the next annual meeting of shareholders or until
their successors have been elected and qualified; and (iii) transact such other
business as may properly come before the meeting and any adjournment thereof.
1. Proposal - Effect the Reverse Split.
To consider and vote upon a proposal to amend the Company's
Articles of Incorporation to effect the reverse split of the Company's issued
and outstanding common, $.10 par value per share stock (the "Common Stock"),
effective Tuesday, March 16, 1999 (the "Effective Date"), on the basis that each
1,000 shares of Common Stock then outstanding will be converted into 1 share of
common, $100.00 par value per share stock (the "New Stock"), with shareholders
holding less than 1,000 shares of Common Stock or any increment thereof (after
being given an option to purchase additional shares as needed to "round up" to
the equivalent of 1,000 shares at a purchase price of $3.35 per share) being
paid cash in exchange for their fractional shares at a price of $3.35 per share
of each share outstanding immediately prior to such reverse split (the "Reverse
Split"). A majority of the votes present were voted in favor of the proposal to
amend the Articles of Incorporation to effect the Reverse Split.
2. Proposal - Election of Board of Directors
The nominees for the Board of Directors were as follows: John Fife,
David Fife, Lyle D. Hurd, Jr., Stuart B. Peterson and Gregory White. All of the
nominees were elected to serve as directors of the Company.
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: May 12, 1999 /s/ John Fife
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John Fife, President and CEO
Date: May 12, 1999 /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. MARCH 31, 1999 FINANCIAL STATEMENTS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 82,623
<SECURITIES> 178,297
<RECEIVABLES> 43,814
<ALLOWANCES> 0
<INVENTORY> 911,137
<CURRENT-ASSETS> 304,734
<PP&E> 47,561
<DEPRECIATION> 40,411
<TOTAL-ASSETS> 1,491,152
<CURRENT-LIABILITIES> 533,618
<BONDS> 749,824
0
0
<COMMON> 252,281
<OTHER-SE> (117,956)
<TOTAL-LIABILITY-AND-EQUITY> 1,491,152
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 123,090
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 19,530
<INCOME-PRETAX> 52,874
<INCOME-TAX> 0
<INCOME-CONTINUING> 52,874
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 52,874
<EPS-PRIMARY> 22.03
<EPS-DILUTED> 22.03
</TABLE>
