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, 1998
Commission file number
UTAH RESOURCES INTERNATIONAL, INC.
(Name of small business issuer in its charter)
Utah 87-0273519
(State of Incorporation) (I.R.S. Employer Identification No.)
297 W. Hilton Drive, Suite #4
St. George, Utah 84770
(Address of principal executive offices including zip code)
Issuer's telephone number: (801) 628-8080
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Title of Class
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, 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 1998 Fiscal Year were $674,016.
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 1998, which occurred December 14, 1998,
at approximately $1.00 per share, is $1,191,808.
The number of shares of Common Stock, $.10 par value, outstanding on
February 5, 1999 was 2,522,808 shares.
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Transitional Small Business Disclosure Format (check one):
Yes No X
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DOCUMENTS INCORPORATED BY REFERENCE
PART OF FORM 10-KSB DOCUMENT
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
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,
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pursuant to Section 12(g)(4) of the Securities Exchange Act of 1934. In order to
obtain a copy of the Letter of Intent and for a more detailed description of the
terms of the Letter of Intent, see Schedule 13D filed by IMCC with the SEC on
April 16, 1996. The Company entered into the Letter of Intent over the
objections of Mark Jones and Jenny Morgan, being two directors of the Company.
On May 17, 1996, Mark G. Jones, a shareholder and director of the
Company at the time and controlling shareholder of Mark Technologies
Corporation, brought a shareholders derivative suit captioned as Mark
Technologies Corp., et al. v. Utah Resources International, Inc. et al., which
was filed as Civil No. 96-090-3332CV in the Third Judicial Court of Salt Lake
County, Utah (the "Second State Action") against the Company, E. Jay Sheen, R.
Dee Erickson and Lyle Hurd, directors of the Company and IMCC. The Second State
Action, included, among other things, a request for the issuance of a temporary
restraining order and injunction against the transactions contemplated in the
Letter of Intent.
On 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. Morgan, Jr. et
al., which was filed as Civil Number C-87-1632 in the Third Judicial District
Court of Salt Lake County, Utah (the "First State Action"), where plaintiffs
therein alleged, among other things, that the officers and directors of the
Company committed various breaches of their fiduciary duties to the Company. A
settlement agreement in the First State Action was entered on April 6, 1993 (the
"1993 Settlement Agreement"). On or about July 21, 1995, attorneys for the
Company on behalf of the Company filed an action against John H. Morgan, 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 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
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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 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,
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distributions or other payments made to the shareholder of the Company on the
Returned Shares/New Stock to payment of the unpaid balance of the Returned Share
Note. Returned Shares, as converted into New Stock, purchased by an exercising
shareholder shall be fully votable in accordance with the terms of the Company's
organizational documents and other agreements binding the Company for so long as
the exercising shareholder is not in default under the pledge agreement or the
Returned Share Note.
As a result of the reverse split, the Company is expected to become a
non-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.
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 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 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").
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
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liability to the Company's shareholders, its officers or directors, whether
brought directly by the person or in a derivative capacity arising from
Midwest's or the Wolffs' negotiation, execution, or consummation of the Share
Exchange Agreement; (ii) execute a three year employment agreement between RD
Wolff and the Company, whereby RD Wolff would act as the President of Midwest;
(iii) apply for a listing of its stock on the NASDAQ; and (iv) lend Midwest, in
the form of a line of credit, a sum not to exceed $250,000, with the first draw
available after February 15, 1995, evidenced by a promissory note in standard
form, bearing an interest rate of 1% over the posted prime lending rate at First
Security Bank of Utah, N.A., as of February 15, 1995, and adjusted each three
months thereafter. Prior to 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 Three Hundred
Fifty Thousand Dollars ($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 One
Hundred Twenty-Five Thousand Dollars ($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 Twenty-Five Thousand Dollars ($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) five percent
(5%) of the first Two Hundred Thousand Dollars ($200,000) in net earnings of
Midwest, (b) seven percent (7%) of the next Two Hundred Thousand Dollars
($200,000), and (c) ten percent (10%) of all amounts over the first Four Hundred
Thousand Dollars ($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 One Hundred Four
Thousand Dollars ($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
"First Federal Action"). The complainants alleged, among other things that the
defendants had violated proxy solicitation rules, violated disclosure rules
under the Exchange Act of 1934, breached their fiduciary duties to the Company's
shareholders, breached professional duties, committed fraud, wasted and looted
the Company's assets, converted Company property, engaged in self-dealing,
mismanaged the Company and breached their duty of loyalty. The complaint sought,
among other things, the rescission of the Share Exchange Agreement.
The terms of the Letter of Intent between IMCC and the Company required
that the Company rescind the Share Exchange Agreement. For the foregoing reason,
Midwest and the Company entered into a Splitoff Agreement, dated as of April 25,
1996 (the "Splitoff Agreement"), whereby the Share Exchange Agreement was
rescinded. A copy of the Splitoff Agreement is attached 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
Three Hundred Sixteen Thousand Nine Hundred Seventy-Four Dollars ($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 Three
Hundred Sixteen Thousand Nine Hundred Seventy-Four Dollars ($316,974), then URI
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would pay Midwest the difference; or (ii) more than Three Hundred Sixteen
Thousand Nine Hundred Seventy-Four Dollars ($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 Three
Hundred Twelve Thousand Dollars ($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 twelve installments. Simultaneous with the
execution of the Splitoff Agreement, Midwest paid the Company the sum of Ten
Thousand Dollars ($10,000) as an initial tax payment. The balance due the
Company is to be paid in eleven additional equal monthly installments, with each
such installment due on the first day of each month until all eleven
installments have been paid in full. The first of the eleven 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 Forty-Five Thousand
Four Hundred Sixty-Nine Dollars ($45,469) in taxes, of which Thirty-Five
Thousand Four Hundred Sixty-Nine Dollars ($35,469) remains due. Midwest also
owes the Company the additional amount of Fifty-Four Thousand One Hundred
Eighty-Four Dollars and 61/100 ($54,184.61) related to Ladd Eldredge's salary,
audit and other expenses. Midwest has disputed the amounts claimed by the
Company as owed by Midwest. The Company and Midwest have had ongoing discussions
regarding resolving this matter.
(b) Business of Company.
URI is a real property development corporation. The Company directly
owns approximately 396 acres of undeveloped land in St. George, Utah,
approximately 350 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.
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.
The Company also 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 has invested Two Hundred Fifty Thousand Dollars ($250,000) in
China Peregrine Food Corporation, a Delaware corporation traded publicly on the
NASDAQ bulletin board system ("China Peregrine"). China Peregrine distributes
dairy and non-dairy food products in several major cities in the People's
Republic of China. The Company acquired 88,333 shares of convertible preferred
stock on November 13, 1998. The Company is now converting its preferred stock
into common stock and selling it on the public market. The Company's investment
in China Peregrine is substantially less than ten percent (10%) of the
outstanding stock of China Peregrine.
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Real Property Development Activities
Through year end 1998, the Company had sales in the amount of Two
Hundred Thirty-Four Thousand Seven Hundred Eighteen Dollars ($234,718) as
compared to land sales in the amount of Five Hundred Thirty Thousand Five
Hundred Fifty-Three Dollars ($530,553) in 1997.
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 Three
Hundred Fifty Thousand Dollars ($350,000) (Twenty-Five Thousand Dollars
($25,000) per acre, and grant Mr. Traveler an option to acquire an additional 40
acres at option exercise prices ranging from Twenty Thousand Dollars ($20,000)
to Fifty Thousand Dollars ($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 Twenty Thousand Dollars ($20,000) to Fifty Thousand Dollars ($50,000)
per acre. The Kay Traveler Sale and Option Agreement resulted in 1998 sales of
4.11 acres for the sum of Two Hundred Thirty-Four Thousand Seven Hundred
Eighteen ($234,718) and 1997 sales of 6.67 acres for the sum of Three Hundred
Seventeen Thousand Sixty-Six Dollars ($317,066) and 1996 sales of 2.11 acres for
the sum of One Hundred Six Thousand Four Hundred Thirty-Two Dollars ($106,432).
From July 1992 through December 31, 1998, Kay Traveler exercised his option for
a cumulative total of 44.79 of the 75.98 acres available, for the sum of One
Million Five Hundred Fifty Thousand One Hundred Fifty-Six Dollars ($1,550,156).
As of December 31, 1998 approximately 31.2 acres remain under option to Mr.
Traveler at prices ranging from Twenty-Two Thousand Dollars ($22,000) to Fifty
Thousand Dollars ($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 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. In 1998, The Company received approval and has commenced construction
for the development of all 37 acres for a total of 76 lots. The approval process
took 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. To finance the construction costs,
the Company secured development financing from the State Bank of Southern Utah
in the amount of One Hundred Sixty-Five Thousand Dollars ($165,000) during March
1999. John Fife has personally guaranteed the repayment of such financing.
Currently, the Company is excavating, building roads, bringing utilities to the
property, constructing curbs and gutters, and selling the improved lots in the
first phase. To date, the Company has received earnest money deposits reserving
three of the six lots in the first phase of development.
In 1998, the Company received preliminary approval from the Planning
and Zoning Commission and the city of St. George for the development of
Southgate Village, a 67 unit, 9.6 acre townhouse community located at the
northwest of the Southgate golf course and adjacent to the proposed Southgate
Valley subdivision. The townhomes range from approximately 1,400-1,800 square
feet. The Company is preparing construction drawings, soils reports, excavation
plans, and bids. In the fourth quarter of 1998, the City of St. George granted
the Company an excavation permit, and in the first quarter of 1999 the Company
excavated the entire 9.6 acres. Currently, the Company is waiting to receive
final approval on its revised construction drawings; after which, the Company
expects to start construction on the first phase of 20 lots at the end of the
first quarter 1999.
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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 may have an impact on the viability of current real estate
development by the Company.
The real property development industry is highly competitive. Several
development companies with interests in St. George have longer operating
histories, greater financial strength and more experience in the industry than
does the Company. The Company's development activities historically have
represented less than five percent (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.
Partnerships
In 1998, the Company dissolved the following general and limited
partnerships: Southgate Resort General Partnership, Southgate Plaza General
Partnership, URI-MGO Health Venture General Partnership, Service Station #2
Limited Partnership, Southgate Resort Limited Partnership, Southgate Plaza
Limited Partnership, Country Club Partnership, and Tonaquint Indian Hills
Limited Partnership.
In August 1998, the Company dissolved Southgate Resort, a Utah general
partnership, and Southgate Plaza, a Utah general partnership, pursuant to a
Partition Agreement among the partners of those partnerships (the "Parties). The
Parties included Southgate Plaza Limited Partnership, Southgate Resort Limited
Partnership, Vera R. Hughes Grandchildren Trust ("Hughes Trust"), and Jacquetta
Brown Ogden Properties, L.C. ("Brown Properties"). The Parties agreed to
distribute all of the assets and liabilities of the partnerships to the Parties,
and resolve any and all disputes existing among them. Specifically, the Parties
caused Southgate Resort to transfer the real property owned by it to the Hughes
Trust (approximately 0.606 acres). The Parties also caused Southgate Plaza to
transfer its real properties to Southgate Plaza Limited Partnership
(approximately 2.21 acres) (52.5% owned by the Company), Hughes Trust
(approximately 2.2 acres), and Brown Properties (approximately 2.02 acres). The
Partition Agreement further required that Southgate Plaza transfer to Soutgate
Plaza Limited Partnership, Hughes Trust, and Brown Properties, as tenants in
common, approximately .4524 acres of real property. The Parties also assumed
equal shares of the liabilities of the partnerships. Furthermore, the Parties
agreed to pay their pro
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rata shares of certain special improvement district payments allocated to the
transferred properties payable to the city of St. George. In addition, the
Parties released all causes of action and/or claims each may have had against
each other with respect to Southgate Resort and Southgate Plaza, their
properties, activities, and management. As a result of the Partition Agreement,
the Company dissolved Southgate Resort Limited Partnership, which was owned
entirely by the Company.
On December 15, 1998, the Company, Tonaquint, Inc., a wholly-owned
subsidiary of the Company ("Tonaquint"), John H. Morgan, Jr. ("JH Morgan"),
Daisy R. Morgan ("DR Morgan"), Morgan Gas & Oil Company ("MGO"), the Estate of
John Morgan Sr. (the "Morgan Estate"), and the John Morgan Sheltered Trust (the
"Morgan Sheltered Trust") (collectively the "Morgan Parties") entered into a
Partnership Settlement Agreement ("PS Agreement") pursuant to which the Company
and related entities resolved certain disputes and controversies involving the
Company, Tonaquint, JH Morgan, DR Morgan, MGO, the Morgan Estate and the Morgan
Sheltered Trust. Pursuant to the terms of the PS Agreement, the Morgan Parties
transferred to the Company all of their interests in URI-MGO Health Venture,
Service Station #2 Limited Partnership, Country Club Partnership and Tonaquint
Indian Hills Limited Partnership (collectively, the "Partnerships"). In
exchange, the Company (i) delivered a promissory note to MGO for Eighty Thousand
Four Hundred Ninety-One Dollars ($80,491) bearing an interest rate of nine
percent (9%) per annum with a maturity of two years, or upon the sale of certain
Company properties securing the note; (ii) transferred to MGO 137,102 shares of
MGO stock representing all of the MGO stock owned by the Company; (iii) assigned
to MGO 33.3334% of the net proceeds from the future sale of certain real
property owned by the Company; (iv) delivered to the Morgan Sheltered Trust a
promissory note for Twenty-Two Thousand Six Hundred Ninety Dollars ($22,690);
(v) assigned to the Morgan Sheltered Trust 14.663% of the net proceeds from the
future sale of certain real property owned by the Company; and (vi) paid to JH
Morgan the sum of Seven Thousand Dollars ($7,000). In addition, the Morgan
Estate paid the Company Seven Thousand One Hundred Twenty-Four Dollars ($7,124).
The Morgan Parties also agreed to cooperate with the Company in winding up the
Partnerships. The parties also agreed to release each other from all causes of
action and claims arising from or related to the matters described in PS
Agreement.
Pursuant to the PS Agreement, the Company assumed the liabilities and
clean-up costs associated with the gas station previously owned by Service
Station #2 Limited Partnership. 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, 1998, the partnership spent approximately Three Hundred Forty-Five
Thousand Dollars ($345,000) 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. On or about April 16, 1997, the Partnership
sold the service station property but retained the obligation to complete the
remediation of the property. The Company has hired consultants and engineers and
is following their recommendations to remediate the property as required by Utah
law and regulations.
As a result of the PS Agreement, the Company owned one hundred percent
(100%) of the interests in the Partnerships with the exception of Country Club
Partnership and Tonaquint Indian Hills Partnership, in which the Company owned
96.64% and 85.57% of the interests, respectively. Prior to December 31, 1998,
the Company purchased the remaining 3.36% interests in Country Club Partnership
from the remaining partners for Five Hundred Four and 59/100 Dollars ($504.59),
which represented the balance of such partners capital accounts. Prior to
December 31, 1998, Tonaquint Indian Hills Partnership terminated in accordance
with its terms. As part of the termination, the Company caused Tonaquint Indian
Hills Partnership to distribute its assets to its partners.
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
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properties have been received in cash. The Company received royalties in the
amount of One Hundred Ninety-Four Thousand Eight Hundred Forty-Three Dollars
($194,843) in 1998 as compared to One Hundred Seventy-Five Thousand Five Hundred
Seventy-Two Dollars ($176,572) in 1997. URI has not engaged in the acquisition
and sale of oil and gas leases for many years and has no intention of doing so
in the future, nor does it have facilities or means to perform the exploration,
development and operation of oil and gas wells on properties in which it has
interests. Mineral or oil and gas exploration and development is undertaken by
third parties. If production is realized on any properties in which URI has an
interest, it receives a share of gross production revenues based upon the
percentage overriding royalty interest it has retained.
China Peregrine
The Company has invested Two Hundred Fifty Thousand Dollars ($250,000)
in China Peregrine Food Corporation, a Delaware corporation traded publicly on
the NASDAQ bulletin board system ("China Peregrine"). China Peregrine
distributes dairy and non-dairy food products in several major cities in the
People's Republic of China. The Company closed on the acquisition of 88,333
shares of convertible preferred stock on November 13, 1998. The Company is now
converting its preferred stock into common stock and selling it into the public
market.
Employees
In 1998, the Company employed two full-time 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 One Hundred Ninety-Five Thousand Dollars
($195,000). In 1998, the Board voted unanimously to have Mr. Fife assume the
responsibilities of CFO. The Company and Tonaquint, Inc., its wholly owned
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, and Tonaquint, Inc. 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. During 1998, the Company replaced
Ladd Eldredge who had been acting as the Company's Secretary, Treasurer, CFO,
and office manager. Mr. Eldredge has agreed to provide services to the Company
on an hourly basis. The Company hired a part-time bookkeeper, and appointed
Jonathan K. Hansen as Secretary. As noted above, Mr. Fife assumed the
responsibilities of CFO. No employees are party to a collective bargaining
agreement with the Company.
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. The Company
is also engaged in selling undeveloped parcels to other developers. Furthermore,
management believes that approximately 25 acres of the Company's lands are
suitable for commercial development.
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. The Company owns overriding royalty interests of from .025 of
1% to 3% of production.
The Company 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. The Company has no unamortized investment in oil and gas
properties at December 31, 1998.
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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 the
Company 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 fifty percent (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. The Company has no value for this asset recorded in the
financial statements at December 31, 1998.
Office Space
URI leases an office for its headquarters at 297 W. Hilton Drive, Suite
#4, St. George, Utah. John Fife, President, CEO, CFO and Chairman of the Board
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 along
with the responsibilities of other business ventures unrelated to the Company.
To date, the Company does not have an agreement with Mr. Fife for use of the
space and 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
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
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ccertain 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.
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 judgement. 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.
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 a response to
the complaint on or about August 21, 1998. Mr. Jones and MTC have filed
discovery related motions which are scheduled to be heard on April 21, 1999.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of the security holders
during the fourth quarter of the 1998 fiscal year covering this report.
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.
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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. The votes were
cast as follows:
FOR % AGAINST % ABSTAIN %
- --- - ------- - ------- -
1,649,852 65.3 366,529 14.5 2,167 .08
2. Proposal - Election of Board of Directors
The Companies nominees for the Board of Directors were: 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. The votes were cast
as follows:
NOMINEE FOR % WITHHOLD %
- ------- --- - -------- -
John M. Fife 1,715,609 81.6 385,573 18.4
David Fife 1,715,609 81.6 385,573 18.4
Lyle D. Hurd, Jr. 1,715,609 81.6 385,573 18.4
Stuart B. Peterson 1,715,609 81.6 385,573 18.4
Gregory White 1,715,609 81.6 385,573 18.4
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 1997 and 1998 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.
1998 1997
---- ----
- ---------------- --------------- ---------------- ------------- ------------
Period High Low High Low
- ---------------- --------------- ---------------- ------------- ------------
First Quarter $.75 $.625 $.875 $.875
- ---------------- --------------- ---------------- ------------- ------------
Second Quarter $.625 $.625 $.875 $.875
- ---------------- --------------- ---------------- ------------- ------------
Third Quarter $.9375 $.50 $.875 $.875
- ---------------- --------------- ---------------- ------------- ------------
Fourth Quarter $.75 $.75 $.875 $.25
- ---------------- --------------- ---------------- ------------- ------------
Except for certain transactions including: (i) the Split-Off Agreement
by and between MidWest Railroad Construction and Maintenance Corporation
("Midwest") and the Company (the "Split-Off Agreement"), wherein the Company
returned its Midwest shares to Robert D. Wolff and Judith J. Wolff (together the
"Wolffs") in exchange for the 590,000 shares of the Company's stock held by the
Wolffs, (ii) the 1996 Settlement Agreement, by and among the Company, R. Dee
Erickson, E. Jay Sheen, Lyle D. Hurd, Mark G. Jones, Mark Technologies
Corporation, Anne Morgan, Victoria Morgan, IMCC, John Fife and Robinson & Sheen,
L.L.C. (the "1996 Settlement Agreement"), wherein the 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 Proxy Statement. (See "RISK
FACTORS/IMCC Transaction and Settlement Agreements.") IMCC has made no
additional purchases of the Company's stock, since July 3, 1996, when it
acquired 1,275,912 shares of the Company's stock to obtain a majority ownership
interest in the Company. Since July 3, 1996, John Fife, individually, has
acquired 51,193 shares of the Company's stock. He purchased these shares during
the third and fourth quarters of 1998 (2,500 shares on 8/6/98, 2,500 shares on
8/18/98, 2,500 shares on 9/14/98, 4,000 shares on 9/16/98, 2,000 shares on
9/21/98, 2,100 shares on 10/7/98 and 35,593 shares on 12/11/98). The low and
high purchase prices were $.875 and $1.00, respectively. The average purchase
prices for the third and fourth quarters of 1998 were $.79 and $.78,
respectively. The Company did declare a $.10 cash dividend which was paid
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January 26, 1996, to shareholders of record January 12, 1996. 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.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
RESULTS OF OPERATIONS
The Company had sales of Two Hundred Thirty-Four Thousand Seven Hundred
Eighteen Dollars ($234,718) in 1998 as compared with land sales of Five Hundred
Thirty Thousand Five Hundred Fifty-Three Dollars ($530,553) in 1997. Income on
royalties from production under oil and gas and mineral leases amounted to) One
Hundred Ninety-Four Thousand Eight Hundred Forty-Three Dollars ($194, 843) and
One Hundred Seventy-Six Thousand Five Hundred Seventy-Two Dollars ($176,572) for
1998 and 1997, respectively. The increase in royalties income is due to expanded
production.
Cost of land sold declined to Sixteen Thousand Four Hundred Ninety-Four
Dollars ($16,494) in 1998 from Two Hundred Seven Thousand Six Hundred Ninety-One
Dollars ($207,691) in 1997. General and administrative expenses were Eight
Hundred Fifty Six Thousand Three Hundred Thirty-Nine ($856,339) in 1998, as
compared to One Million Two Hundred Twenty-Two Thousand Forty Dollars
($1,222,040) in 1997. The Company had a net loss of Two Hundred Three Thousand
Five Hundred Twenty-Four Dollars ($203,524) in 1998 as compared to a net loss of
Four Hundred Forty-Four Thousand and Six Hundred Twenty-Three Dollars ($444,623)
for 1997.
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, (d) from proceeds from the sale of its Common Stock to IMCC, and (e)
proceeds from investments made by the Company. Certain investments of the
Company and expenses paid were made from proceeds of loans secured by the
Company's real estate holdings. The Company presently anticipates that cash on
hand, cash from land sales, royalties, and investments will be the primary
sources for future additional liquidity for the Company. It is anticipated that
the Company's need for cash which exceeds its present resources and operating
revenues will be met through real estate secured borrowings. In 1998, the
Company executed a One Million Dollar ($1,000,000) Revolving Credit Note with
Mr. Layton Ott for purposes of having a source of funds for working capital and
financing investment opportunities. 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 months at the Company's discretion. The
note is secured by approximately forty acres of the Company's land in the
Southgate Hills III development.
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 1998,
approximately $42,400 was expended toward this clean-up operation and
approximately Three Hundred Forty-Five Thousand Dollars ($345,000) has been
expended by the Company to date.
In 1998, the Company drew down Two Hundred Fifty Thousand Dollars
($250,000) from the Revolving Credit Note to acquire 88,333 shares of
convertible preferred stock in China Peregrine Food Corporation, a Delaware
corporation publicly traded on the NASDAQ bulletin board system ("China
Peregrine"). China 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 large dairy processing plants in China. The convertible preferred
stock pays an 8% dividend, which accrues and is payable quarterly in the form of
additional common stock. At the Company's discretion, the preferred stock may be
sold on the open market and converted to common stock at a 25% discount to the
stock's 10-day trailing
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average bid price. Through year end 1998, the Company sold 14,000 shares for a
realized gain of Four Thousand Three Hundred Twenty-Four Dollars ($4,324). The
Company is actively seeking other investment opportunities to generate
additional revenues.
No separate financing commitment has been obtained for the purpose of
completing the 1,000 to 1 reverse stock split.
The Company 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 Three Million Six Hundred Thirty-Three Thousand
One Hundred Fifty-Nine Dollars ($3,633,159) (the "Note"). The Note bears
interest at a rate equal to the short-term applicable federal rate published by
the Internal Revenue Service in effect at the time of closing the Stock Purchase
Agreement, and is adjusted on each anniversary of the Note to the applicable
short-term federal rate in effect on such anniversary date. Interest on the Note
is to be paid currently in arrears on each anniversary of the Note. At the
closing, IMCC paid the Company One Hundred Ninety-Seven Thousand Eight Hundred
Seventy-Two and 52/100 Dollars ($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 twenty-five percent (25%)
of all amounts due under the Note.
STOCK PURCHASE AGREEMENT - JULY 3, 1996
See Part I, Item 1.
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 the year 2000 issues. The Company does not believe that the
cost of such acttions 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 of 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 addres 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.
ITEM 7. FINANCIAL STATEMENTS
See Index to Financial Statements appearing on page F-1 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, 1997 and 1998 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.
16
<PAGE>
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CENTRAL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Certain information regarding the Company's directors and executive
officers and their backgrounds is set out below. The Company has been
provided with the information from certain of the people listed below.
In addition to the primary affiliations noted below, the nominees are
active in various cultural, charitable, professional and trade
associations and organizations.
CURRENT DIRECTORS
DAVID FIFE, 36, 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, 38, 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 was named Chief
Financial Officer of the Company in 1998. 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 fifty and 5/10ths
percent (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, JR., 61, 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, 37, 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 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
17
<PAGE>
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, 35, 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, 57, 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, was employed by the Company from July, 1994
through June 30, 1998. During his tenure, he acted as the Secretary,
Treasurer, CFO and office manager for the Company. Mr. Eldredge was
appointed Treasurer of the Company in November, 1994 and Secretary and
CFO of the Company in November, 1995. Prior to his employment by the
Company, Mr. Eldredge was the Chief Accountant at the Peppermill Resort
in Mesquite, Nevada, a position he held for two years. Mr. Eldredge has
a Masters of Accountancy degree from Southern Utah University.
Currently, Mr. Eldredge works for the Company on an hourly basis, as
needed.
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, 1998, the Company's officers, directors and
greater than ten-percent beneficial owners complied with all applicable
Section 16(a) filing requirements.
18
<PAGE>
ITEM 10. EXECUTIVE COMPENSATION
EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
------------------------ ------------------------------------------------------- ------------------------
<S> <C> <C>
Name Position Age
John Fife Chairman of the Board, Chief Executive Officer, Chief 38
Financial Officer, President and Director
------------------------ ------------------------------------------------------- ------------------------
</TABLE>
EXECUTIVE COMPENSATION
The following table summarizes the compensation for John Fife as the
President, CEO, and CFO of the Company in 1998. No other executive officers
received compensation in excess of One Hundred Thousand Dollars ($100,000)
during the Fiscal year end 1998.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
- ------------------- ----------------- ----------------- ----------------- ----------------- -------------------------
<S> <C> <C> <C> <C> <C>
Name and Fiscal Year Salary Bonus Shares All Other Compensation
Principal Position Underlying
Options
- ------------------- ----------------- ----------------- ----------------- ----------------- -------------------------
John Fife, CEO, 1998 $195,000(1)(2) - - $1,200(3)
CFO, 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.
(2) To date, all of Mr. Fife's compensation has been applied to
interest on the IMCC Note or has been loaned back to the Company.
(3) Mr. Fife received $1,200 in directors fees for attending six
board meetings.
No options were granted by the Company during 1998.
No SARs were outstanding in 1998.
DIRECTORS COMPENSATION
Each director receives Two Hundred Dollars ($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 February 5, 1999, 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 executive officers, other than John Fife as
President, CEO, and CFO who earned compensation in excess of One Hundred
Thousand Dollars ($100,000) during 1998.
19
<PAGE>
<TABLE>
<CAPTION>
==================================================================================================================
UTAH RESOURCES INTERNATIONAL, INC.
COMMON STOCK OWNERSHIP BY DIRECTORS AND NAMED EXECUTIVE OFFICERS
AS OF FEBRUARY 5, 1998
==================================================================================================================
Before Stock Split After Stock Split(1)
---- ---------------------- --------------- --------------- ----------------- ---------------- -------------------
<S> <C> <C> <C> <C> <C> <C>
Name of Beneficial Position Number of Percentage of Number of Percentage of
Owner(2) Shares Outstanding Shares Outstanding Shares
Shares
---- ---------------------- --------------- --------------- ----------------- ---------------- -------------------
John Fife, Director, 1,331,000 53% 1,331 53%
individually, and as CEO, CFO,
sole shareholder of President and
IMCC(3) Chairman of
the Board
---- ---------------------- --------------- --------------- ----------------- ---------------- -------------------
David Fife Director 0 0% 0 0%
---- ---------------------- --------------- --------------- ----------------- ---------------- -------------------
Lyle d. Hurd, Jr. Director 2,000 .08% 2 .08%
---- ---------------------- --------------- --------------- ----------------- ---------------- -------------------
Stuart B. Peterson Director 0 0% 0 0%
---- ---------------------- --------------- --------------- ----------------- ---------------- -------------------
Gregory White Director 0 0% 0 0%
---- ---------------------- --------------- --------------- ----------------- ---------------- -------------------
DIRECTORS AND Directors & 1,333,000 53% 1,333 53%
OFFICERS AS A GROUP Officer
(5 persons)
---- ---------------------- --------------- --------------- ----------------- ---------------- -------------------
</TABLE>
(1) Assumes No Small-Lot Shareholder exercises the Round Up Option, and no
remaining shareholder elects to purchase the Returned Shares.
(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 Options. For a
more detailed description of this Returned Shares Option, see "ITEM 1
DESCRIPTION OF BUSINESS/Stock Purchase Agreement--July 3, 1996."
(3) 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.
==============================================================================
PRINCIPAL STOCKHOLDERS
The following table sets forth information as of February 5, 1999,
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.
20
<PAGE>
<TABLE>
<CAPTION>
==================================================================================================================
UTAH RESOURCES INTERNATIONAL, INC.
5% OR GREATER BENEFICIAL OWNERS
AS OF FEBRUARY 5, 1999
- -------------------------------------- ------------------------------------- -------------------------------------
<S> <C> <C>
Name and Address of Beneficial Owner Number of Shares and Nature of Percent of Company Shares
Beneficial Owner Outstanding
- -------------------------------------- ------------------------------------- -------------------------------------
Inter-Mountain Capital Corporation 1,276,000 50.6%
- -------------------------------------- ------------------------------------- -------------------------------------
Mark Technologies Corporation 326,310 13%
- -------------------------------------- ------------------------------------- -------------------------------------
(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.
==================================================================================================================
</TABLE>
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There were no reportable related transactions during the past two years
in which the Company conducted business with individuals holding a direct or
indirect material interest in the Company.
LEGAL REPRESENTATION OF the Company
During 1998, the law firm of Wildman Harrold Allen & Dixon provided
legal representation to the Company. In 1998, Wildman Harrold Allen & Dixon
received approximately Two Hundred Seventy-Six Thousand Five Hundred Seventy-Six
Dollars ($276,576) in legal fees.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits - See Exhibit Index below.
<TABLE>
<CAPTION>
INCORPORATED BY REFERENCE TO EXHIBIT INDEX
ANNUAL REPORT ON FORM 10-KSB - 1998
UTAH RESOURCE INTERNATIONAL, INC.
SEC FILE NO. 0-9791
<S> <C> <C>
- ---------------- ------------------------------------------- ---------------------------------------------------------
Exhibit No Exhibit Description Location/Incorporation by Reference
- ---------------- ------------------------------------------- ---------------------------------------------------------
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 as filed Incorporated by reference to Exhibit 3 to Form 8-K as
September 9, 1996 filed July 20, 1995
- ---------------- ------------------------------------------- ---------------------------------------------------------
3.1 Articles of Incorporation of Utah Incorporated by reference to Exhibit 1 to 13D as filed
Resources International June 22, 1981
- ---------------- ------------------------------------------- ---------------------------------------------------------
</TABLE>
21
<PAGE>
<TABLE>
<S> <C> <C>
- ---------------- ------------------------------------------- ---------------------------------------------------------
3.2 Bylaws of Utah Resources International, Incorporated by reference to Exhibit 3.B to the
Inc. Company's Registration statement on Form 10 as filed
June 22, 1981
- ---------------- ------------------------------------------- ---------------------------------------------------------
3.3 Amendment of Bylaws dated November 17, Incorporated by reference to Exhibit 3.3 to the
1992 Company's Annual Report of Form 10-KSB for the year
ended December 31, 1992
- ---------------- ------------------------------------------- ---------------------------------------------------------
3.4 Amendment of Bylaws- December , 1994 Incorporated by reference to Exhibit 3.4 to the
Company's Annual Report of Form 10-KSB for the year
ended December 31, 1994
- ---------------- ------------------------------------------- ---------------------------------------------------------
3.5 Amendment of Articles of Incorporation Incorporated by reference to Exhibit 3.5 to the adopted
by shareholders January 26, 1995 Company's Annual Report
of Form 10-KSB for the year ended December 31, 1994
- ---------------- ------------------------------------------- ---------------------------------------------------------
3.6 Amendment to Articles of Incorporation Filed herein
adopted by shareholders March 8, 1999,
effective March 16, 1999
- ---------------- ------------------------------------------- ---------------------------------------------------------
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 Split Off 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, 1998.
22
<PAGE>
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: 4/14/99 By: /s/ John Fife
------- ----------------------------------------
John Fife
Its director, President,
Chairman of the Board, CEO and CFO
Date: 4/14/99 By: /s/ David Fife
------- ----------------------------------------
David Fife, director
Date: 4/14/99 By: /s/ Lyle D. Hurd, Jr.
------- ----------------------------------------
Lyle D. Hurd, Jr., director
Date: 4/14/99 By: /s/ Stuart B. Peterson
------- ----------------------------------------
Stuart B. Peterson, director
Date: 4/14/99 By: /s/ Gregory White
------- ----------------------------------------
Gregory White, director
23
<PAGE>
UTAH RESOURCES INTERNATIONAL, INC., AND SUBSIDIARIES
Consolidated Financial Statements
Contents
- --------------------------------------------------------------------------------
Page
Independent Auditors' Report F-1
Consolidated balance sheet, December 31, 1998 F-2
Consolidated statements of operations for the years
ended December 31, 1998 and 1997 F-3
Consolidated statement of stockholders' equity for the
years ended December 31, 1998 and 1997 F-4
Consolidated statement of cash flows for the years ended
December 31, 1998 and 1997 F-5
Notes to consolidated financial statements F-7
Consolidated schedule of supplementary information
on oil and gas operations F-17
<PAGE>
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, 1998 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, 1998 and the
results of their operations and their cash flows for the two years ended
December 31, 1998, 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.
TANNER + Co.
Salt Lake City, Utah
April 6, 1999
F-1
<PAGE>
<TABLE>
<CAPTION>
UTAH RESOURCES INTERNATIONAL, INC., AND SUBSIDIARIES
Consolidated Balance Sheet
December 31, 1998
- ----------------------------------------------------------------------------------------------------------
Assets
<S> <C>
Cash and cash equivalents $ 27,604
Marketable securities 238,191
Notes receivable 271,326
Real estate held for resale 911,137
Property and equipment, net of accumulated depreciation
and amortization of $38,716 8,845
Other assets 14,545
------------------
$ 1,471,648
------------------
- ----------------------------------------------------------------------------------------------------------
Liabilities and Stockholders' Equity
Accounts payable $ 229,119
Accrued expenses 335,416
Notes payable 751,034
Deferred credits 74,629
------------------
Total liabilities 1,390,198
------------------
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 (968,904)
------------------
Total stockholders' equity 81,450
------------------
$ 1,471,648
------------------
- ----------------------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
F-2
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
UTAH RESOURCES INTERNATIONAL, INC., AND SUBSIDIARIES
Consolidated Statements of Operations and Comprehensive Income
Years Ended December 31,
- ----------------------------------------------------------------------------------------------------------
1998 1997
-----------------------------------
<S> <C> <C>
Sales $ 234,718 $ 530,553
Cost of sales 16,494 207,691
-----------------------------------
Gross profit 218,224 322,862
General and administrative expenses 856,339 1,222,040
-----------------------------------
Loss from operations (638,115) (899,178)
-----------------------------------
Other income (expense):
Royalty income 194,843 176,572
Interest and dividend income 244,455 247,295
Interest expense (28,145) (22,517)
Other income (expense) 23,438 (18,900)
-----------------------------------
Total other income (expense) 434,591 382,450
-----------------------------------
Loss before minority interest and provision
for income taxes (203,524) (516,728)
Minority interest in net loss of subsidiaries - 21,105
-----------------------------------
Loss before provision for income taxes (203,524) (495,623)
Income tax benefit - current - 51,000
-----------------------------------
Net loss (203,524) (444,623)
Other comprehensive income - -
-----------------------------------
Comprehensive loss $ (203,524) $ (444,623)
-----------------------------------
Loss per share $ (.08) $ (.18)
-----------------------------------
- ----------------------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
F-3
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
UTAH RESOURCES INTERNATIONAL, INC., AND SUBSIDIARIES
Consolidated Statement of Stockholders' Equity
Years Ended December 31, 1998 and 1997
- ----------------------------------------------------------------------------------------------------------
Notes
Additional Receivable
Common Shares Paid-In from Stock Retained
-------------------------------
Shares Amount Capital Sales Earnings
-------------------------------------------------------------------------------
Balance,
<S> <C> <C> <C> <C> <C>
January 1, 1997 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)
Net loss - - - - (203,524)
-------------------------------------------------------------------------------
Balance,
December 31, 1998 2,522,808 $ 252,281 $ 4,431,232 $ (3,633,159) $ (968,904)
-------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
F-4
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
UTAH RESOURCES INTERNATIONAL, INC., AND SUBSIDIARIES
Consolidated Statement of Cash Flows
Years Ended December 31,
- ----------------------------------------------------------------------------------------------------------
1998 1997
-----------------------------------
Cash flows from operating activities:
<S> <C> <C>
Net loss $ (203,524) $ (444,623)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 9,364 12,253
Gain on disposition of assets (6,462) -
Gain on sale of marketable securities (4,324) -
Minority interest in net loss of subsidiaries - (21,105)
(Increase) decrease in:
Accounts receivable 99,079 (110,089)
Real estate held for resale (56,130) 21,081
Other assets 14,540 83,724
(Decrease) increase in:
Accounts payable (51,683) 28,338
Accrued expenses (130,892) 176,582
-----------------------------------
Net cash used in
continued operations (330,032) (253,839)
-----------------------------------
Cash flows from investing activities:
Proceeds from disposition of assets 8,246 -
Proceeds from sale of marketable securities 16,133 -
Purchase of property and equipment - (399)
Purchase of marketable securities (250,000) -
Increase in notes receivable (117,359) (158,533)
Payments on notes receivable 81,779 63,459
-----------------------------------
Net cash used in
investing activities (261,201) (95,473)
-----------------------------------
Cash flows from financing activities:
Payments on notes payable (4,393) (5,316)
Issuance of notes payable 460,000 -
-----------------------------------
Net cash provided by (used in)
financing activities 455,607 (5,316)
-----------------------------------
Decrease in cash (135,626) (354,628)
Cash and cash equivalents, beginning of year 163,230 517,858
-----------------------------------
Cash and cash equivalents, end of year $ 27,604 $ 163,230
-----------------------------------
- ----------------------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
F-5
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
UTAH RESOURCES INTERNATIONAL, INC., AND SUBSIDIARIES
Consolidated Statement of Cash Flows
Continued
- ----------------------------------------------------------------------------------------------------------
Supplemental disclosure of cash flow information:
1998 1997
-----------------------------------
Cash paid during the year for:
<S> <C> <C>
Interest $ 14,681 $ 2,259
-----------------------------------
Income taxes $ - $ -
-----------------------------------
</TABLE>
<TABLE>
<CAPTION>
During the year ended December 31, 1998 the Company purchased the minority
interest of its subsidiaries through the exchange of certain assets and
liabilities. The exchange resulted in deferred credits of $74,629 as follows:
<S> <C>
Accounts receivable from related party $ (273,678)
Other assets (24,202)
Accrued liabilities 292,344
Long-term debt (9,633)
Minority interest liability 89,798
------------------
Deferred credits $ 74,629
------------------
- ----------------------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
F-6
</TABLE>
<PAGE>
UTAH RESOURCES INTERNATIONAL, INC., AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 1998 and 1997
- --------------------------------------------------------------------------------
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
it was the general partner. During the year ended December 31, 1998 the Company
acquired a 100% ownership interest in all the partnerships, dissolved the
partnerships and consolidated their operations into Utah Resources
International, Inc. At December 31, 1997 the Company consolidated the following
entities which it has a controlling interest in and recorded minority interest
for the percentage of ownership it did not own:
Percent
Partnership Owned
-----------------
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%
All material intercompany transactions and balances have been eliminated in
consolidation of the Companies and partnerships.
Cash and Cash Equivalents
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.
- --------------------------------------------------------------------------------
F-7
<PAGE>
UTAH RESOURCES INTERNATIONAL, INC., AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Continued
- --------------------------------------------------------------------------------
1. Summary of Significant Accounting Policies Continued
Marketable Securities
The Company classifies its marketable debt and equity securities as "held to
maturity" if it has the positive intent and ability to hold the securities to
maturity. All other marketable debt and equity securities are classifieds as
"available for sale." Securities classified as "available for sale" are carried
int he financial statements at fair value. Realized gains and losses, determined
using the specific identification method, are included in earnings; unrealized
holding gains and losses are reported as a separate component of stockholders'
equity. Securities classified as held to maturity are carried at amortized cost.
For both categories of securities, declines in fair value below amortized cost
that are other than temporary are included in earnings.
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.
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.
Deferred Credits
Deferred credits consist of the excess of assets assumed and liabilities
relieved over the purchase price of the minority interests of the subsidiaries.
In the transactions all tangible assets were written to zero resulting in the
remaining amount being recorded as deferred credits. The deferred credits will
be amortized over a period of five years.
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.
- --------------------------------------------------------------------------------
F-8
<PAGE>
UTAH RESOURCES INTERNATIONAL, INC., AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Continued
- --------------------------------------------------------------------------------
1. Summary of Significant Accounting Policies
Continued
Method of Recognition of Income - continued
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.
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.
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, for the year ended December 31, 1997.
- --------------------------------------------------------------------------------
F-9
<PAGE>
UTAH RESOURCES INTERNATIONAL, INC., AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Continued
- --------------------------------------------------------------------------------
1. Summary of Significant Accounting Policies
Continued
Concentration of Credit Risk
Financial instruments which potentially subject the Company to concentration of
credit risk consist primarily of trade receivables. In the normal course of
business, the Company provides credit terms to its customers. Accordingly, the
Company performs ongoing credit evaluations of its customers and maintains
allowances for possible losses which, when Realized, have been within the range
of management's expectations.
The Company maintains its cash in bank deposit accounts which, at times, may
exceed federally insured limits. The Company has not experienced any losses in
such account and believes it is not exposed to any significant credit risk on
cash and cash equivalents.
Use of Estimates in the Preparation of Financial Statements The preparation of
financial statements in conformity with generally accepted accounting principles
requires management to make estimates 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. Notes Receivable
The Company has notes receivable of $271,326 from an individual with interest at
9%. The note is secured by real estate and due when the real estate is sold.
3. Real Estate Held for Resale
Real estate held for resale consists of approximately 396 acres of real estate
of which approximately 350 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 $911,137 at
December 31, 1998.
4. Marketable Securities
The Company owns 79,752 shares of convertible preferred stock of another
company. The ownership is less than 10% of the stock of another company. The
Company converted 8,831 shares of preferred stock into common stock which were
sold in 1998 for a gain of $4,324.
- --------------------------------------------------------------------------------
F-10
<PAGE>
UTAH RESOURCES INTERNATIONAL, INC., AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Continued
- --------------------------------------------------------------------------------
4. Marketable Securities
Continued
At December 31, 1998 the Company estimates that the fair market value of the
marketable securities held closely approximates the cost of the asset.
Therefore, no unrealized gains/losses recorded for the year then ended.
5. Notes Payable
The Company has the following notes payable at December 31, 1998:
Line of credit with another entity for which the Company may borrow up to
$1,000,000 requiring monthly interest payments at 12.5% and due in
November 1999, secured by real estate $ 310,000
Note payable to an individual requiring quarterly
interest payments at 11% and due in June 2000,
secured by real estate 150,000
Notes payable to a governmental entity requiring
annual payments of approximately $15,000 plus
interest at 5.94%, secured by real estate 108,935
Notes payable to entities controlled by a former
shareholder of the Company bearing interest at
9% and due in December 2000 103,181
Note payable to an entity requiring annual
payments of $10,386, holding interest at 9%
unsecured 67,282
Note payable to a financial institution requiring
monthly payments of $491 including interest at
10.5%, secured by a vehicle 11,636
-----------------
Total $ 751,034
-----------------
- --------------------------------------------------------------------------------
F-11
<PAGE>
UTAH RESOURCES INTERNATIONAL, INC., AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Continued
- --------------------------------------------------------------------------------
5. Notes Payable
Continued
Future maturities of notes payable are as follows:
Year Amount
-----------------
1999 $ 383,091
2000 280,238
2001 23,450
2002 22,800
2003 23,478
Thereafter 17,977
-----------------
$ 751,034
-----------------
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, 1998, does not differ materially from the aggregate carrying values of its
financial instruments recorded in the accompanying balance sheet.
6. Income Taxes
The benefit for income taxes differs from the amount computed at the federal
statutory rate as follows:
1998 1997
-----------------------------------
Income tax benefit at
federal statutory rates $ 63,000 $ 151,000
State income taxes 8,000 5,000
Valuation allowance (71,000) (105,000)
-----------------------------------
Total current income taxes $ - $ 51,000
-----------------------------------
- --------------------------------------------------------------------------------
F-12
<PAGE>
UTAH RESOURCES INTERNATIONAL, INC., AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Continued
- --------------------------------------------------------------------------------
6. 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:
1998 1997
-----------------------------------
Net operating loss carryforward $ (504,000) $ (433,000)
Valuation allowance 504,000 433,000
-----------------------------------
Total $ - $ -
-----------------------------------
The Company has a net operating loss carryforward of approximately $2,015,000,
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.
7. Loss Per Share
Loss per share information in accordance with SFAS 128 is as follows:
Year Ended December 31, 1998
-----------------------------------------------
Income Shares Per-Share
(Numerator) (Denominator) Amount
-----------------------------------------------
Net loss $ (203,524)
Less preferred stock
dividends -
----------------
Basic EPS
Income available to
common stockholders (203,524) 2,522,808 $ (.08)
--------------
Effect of Dilutive Securities
Stock options - -
---------------------------------
Diluted EPS
Loss available to common
stockholders plus assumed
conversions $ (203,524) 2,522,808 $ (.08)
-----------------------------------------------
- --------------------------------------------------------------------------------
F-13
<PAGE>
UTAH RESOURCES INTERNATIONAL, INC., AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Continued
- --------------------------------------------------------------------------------
7. Income (loss) Per Share
Continued
Year Ended December 31, 1997
-----------------------------------------------
Income Shares Per-Share
(Numerator) (Denominator) Amount
-----------------------------------------------
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)
-----------------------------------------------
8. Stock Subscription Receivable
The Company has a promissory note receivable at December 31, 1998 in the amount
of $3,633,159. The note bears interest at the short-term Federal Internal
Revenue Service rate (5.56% at December 31, 1998). 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. At December 31, 1998
the Company had received unearned interest in the amount of $149,128. This is
recorded in accrued expenses.
9. 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.
- --------------------------------------------------------------------------------
F-14
<PAGE>
UTAH RESOURCES INTERNATIONAL, INC., AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Continued
- --------------------------------------------------------------------------------
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.
10. Commitments
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, 1998 and 1997 is $195,000 and
$286,356, respectively.
The Company has agreements with former shareholders whereby upon sale of certain
pieces of property, a portion of the net proceeds is to be paid to the former
shareholder
11. Significant Customers
The Company had land sales of approximately $235,000 and $331,000 to a
significant customer in 1998 and 1997, respectively:
12. 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.
13. Recent Accounting Pronouncements
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This statement establishes accounting and
reporting standards for derivative instruments and requires recognition of all
derivatives as assets or liabilities in the statement of financial position and
measurement of those instruments at fair value. The statement is effective for
fiscal years beginning after June 15, 1999. The Company believes that the
adoption of SFAS 133 will not have any material effect on the financial
statements of the Company.
- --------------------------------------------------------------------------------
F-15
<PAGE>
UTAH RESOURCES INTERNATIONAL, INC., AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Continued
- --------------------------------------------------------------------------------
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
December 31,
------------------
1998
------------------
Acquisition of proved properties $ -
------------------
Exploration and affiliate costs $ -
------------------
Development costs $ -
------------------
Results of Operations for Producing Activities
December 31,
------------------
1998
------------------
Royalty income $ 194,843
Production costs -
Exploration costs -
Depreciation, depletion, amortization, and valuation
provisions (2,481)
------------------
Results of operations from producing activities before
taxes 192,362
Income tax expense (65,000)
------------------
Results of operations from producing activities (excluding
corporate overhead and interest costs) $ 127,362
------------------
- --------------------------------------------------------------------------------
F-16
<PAGE>
UTAH RESOURCES INTERNATIONAL, INC., AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Continued
- --------------------------------------------------------------------------------
Capitalized Costs Relating to Oil and Gas Producing Activities
Year Ended
December 31,
------------------
1998
------------------
Proved oil and gas properties $ 50,210
Accumulated depreciation, depletion, amortization and
valuation allowances (50,210)
------------------
Net capitalized costs $ -
------------------
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.
Year Ended
December 31, 1998
-----------------------------------
Barrels MCF
-----------------------------------
Proved oil and gas reserves:
Balance at beginning of year $ 43,000 $ 386,000
Revisions of previous estimates (3,000) (2,000)
Improved recovery and acquisition
of minerals in place - -
Extensions and discoveries - -
Production (5,000) (43,000)
-----------------------------------
Balance at end of year $ 35,000 $ 341,000
-----------------------------------
- --------------------------------------------------------------------------------
F-17
<PAGE>
UTAH RESOURCES INTERNATIONAL, INC., AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Standardized Measure of Discounted Future Net Cash Flows
Relating to Proved Oil and Gas Reserves (Unaudited)
Years Ended
December 31,
------------------
1998
------------------
<S> <C>
Future cash in flows $ 795,000
Future production and development costs -
Future income tax expenses (270,000)
------------------
Future net cash flows 525,000
10% annual discount for estimated timing of cash flows (269,000)
------------------
Standardized measure of discounted future net cash flows $ 256,000
------------------
</TABLE>
Changes Relating to Standardized Measure of Discounted
Future Net Cash Flows (Unaudited)
<TABLE>
<CAPTION>
Years Ended
December 31,
------------------
1998
------------------
<S> <C>
Sales, net of production costs $ (195,000)
Net changes in prices (196,000)
Acquisition and improved recover, less related costs -
Revisions of previous quantity estimates (195,000)
Accretion of discount 52,000
Net change in income taxes 270,000
------------------
Net change $ (264,000)
------------------
- ----------------------------------------------------------------------------------------------------------
F-18
</TABLE>
ARTICLES OF AMENDMENT TO
ARTICLES OF INCORPORATION OF
UTAH RESOURCES INTERNATIONAL, INC.
To the Secretary of State:
Pursuant to the provisions of the Utah Business Corporation Act,
Section 16-10a-1003, the undersigned corporation hereby amends its Articles of
Incorporation, and for that purpose submits the following statement:
(1) The name of the corporation is: Utah Resources International,
Inc.;
(2) The text of each amendment adopted is:
The Articles of Incorporation of Utah Resources International, Inc.
(the "Company"), are hereby amended as follows. Article Fourth of the Company's
Articles of Incorporation is hereby deleted and replaced with the following:
FOURTH. That the total authorized capital stock of this
corporation is Five Hundred Thousand Dollars ($500,000)
divided into 5,000 shares of the common capital stock with a
par value of One Hundred Dollars ($100) per share.
Shareholders shall have no preemptive rights to acquire
additional shares of this corporation.
(3) The manner (if not set forth in the amendment) of
implementation of any exchange, reclassification, or
cancellation of issued shares is as follows:
Immediately prior to the filing of the Articles of Amendment, the total
number of shares of all classes of stock which the Company has authority to
issue is 5,000,000 shares of common, $.10 par value per share stock (the
"Common Stock"). As of 4:30 p.m., on the date of the filing of this Amendment
with the Secretary of State of Utah (the "Filing Date"), and subject to
majority approval by the Company's shareholders, each 1,000 shares of common,
$.10 par value per share stock then outstanding shall be converted into one
share of common $100.00 par value per share stock of the Company (the "New
Stock"), with shareholders holding fewer than 1,000 shares or any increment
thereof (the "Fractional Shareholders") being given the option to either (A)
receive cash in lieu of fractional shares of stock, or (B) purchase from the
Company that portion of fractional shares of the Common Stock needed to
increase their share holdings to the next one whole share of New Stock (the
"Reverse Split"). The Company will then have 5,000 authorized shares of
common, $100.00 par value per share stock. The Reverse Split is designed to
result in reducing the number of the Company's shareholders to less than 300,
so that the Company will no longer be required to be an SEC-reporting company.
These Articles of Amendment will not effect a change in the amount of stated
capital in the Company.
<PAGE>
Fractional Shareholders who do not elect to round up their holdings at
least ten days prior to March 16, 1999 (the "Effective Date") will have their
fractional shares automatically converted into the right to receive cash in
lieu of the fractional shares of New Stock otherwise issuable to such holder
at $3.35 per share.
Fractional shareholders who do elect to round up their holdings to
aggregate one whole share of New Stock at least ten days prior to March 16,
1999 will, on the Annual Meeting Date, have their then whole shares of Common
Stock automatically converted into shares of New Stock.
Holders of record of 1,000 or more shares of Common Stock on February
5, 1999 (the "Record Date") will have their shares automatically converted
after the Reverse Split into the number of whole and fractional shares of New
Stock equal to the number of shares of Common Stock outstanding and held by
them on the Record Date, prior to the Effective Date divided by 1,000.
(4) Amendment's Adoption:
The Company's Board approved the Amendment on January 22, 1997, which
action was ratified by the unanimous written consent of the Board of Directors
on December 21, 1998 and the Shareholders approved the Amendment at their Annual
Meeting on Monday, March 8, 1999, to be effective immediately.
There are 2,522,808 issued shares of the Company's stock. Of this, at
least 1,649,852 or 65.3% was voted in favor of the Amendment, which was
sufficient for its approval.
Dated as of March 8, 1999
UTAH RESOURCES INTERNATIONAL, INC.
/s/
----------------------------------------
John Fife, CEO, CFO and Chairman of the Board
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE UTAH
RESOURCES INTERNATIONAL, INC. FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 27,604
<SECURITIES> 238,191
<RECEIVABLES> 271,326
<ALLOWANCES> 0
<INVENTORY> 911,137
<CURRENT-ASSETS> 1,448,258
<PP&E> 47,561
<DEPRECIATION> 38,716
<TOTAL-ASSETS> 1,471,648
<CURRENT-LIABILITIES> 947,626
<BONDS> 751,034
0
0
<COMMON> 252,281
<OTHER-SE> (170,831)
<TOTAL-LIABILITY-AND-EQUITY> 1,471,648
<SALES> 234,718
<TOTAL-REVENUES> 697,454
<CGS> 16,494
<TOTAL-COSTS> 900,978
<OTHER-EXPENSES> 28,145
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 28,145
<INCOME-PRETAX> (203,524)
<INCOME-TAX> 0
<INCOME-CONTINUING> (203,524)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (203,524)
<EPS-PRIMARY> (0.08)
<EPS-DILUTED> (0.08)
</TABLE>
