UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
----------------------------
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________________ to ______________________
Commission File Number 0-4395
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COBB RESOURCES CORPORATION
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(Exact name of registrant as specified in its charter)
New Mexico 85-0206160
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
302 East Jackson, West Columbia, Texas 77486
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(409) 345-5666
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(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 of 15(d) of the Securities Exchange Act of
1934 during the preceding 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.
YES XXX NO
---- ----
As of October 27, 1998, the Registrant had outstanding 8,534,257 shares of
common stock, par value $.10 per share.
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COBB RESOURCES CORPORATION
TABLE OF CONTENTS
FORM 10-QSB FOR THE QUARTER ENDED SEPTEMBER 30, 1998
PAGE
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of September 30, 1998
and June 30, 1998 . . . . . . . . . . . . . . . . . . . . F-1
Consolidated Statements of Operations for the three
months ended September 30, 1998 and 1997. . . . . . . . . F-2
Consolidated Condensed Statements of Cash Flows for
the three months ended September 30, 1998 and 1997. . . . F-3
Selected Notes to Consolidated Financial Statements . . . . F-4
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations. . F-5
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . F-8
Signature Page. . . . . . . . . . . . . . . . . . . . . . . F-9
Exhibit 27 - Financial Data Schedule. . . . . . . . . . . . F-10
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
- -------- ---------------------
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COBB RESOURCES CORPORATION
CONSOLIDATED BALANCE SHEETS
ASSETS SEPTEMBER 30, JUNE 30,
- -----------------------------------------------
1998 1998
(UNAUDITED) (NOTE)
--------------- ------------
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Current assets:
Cash and cash equivalents . . . . . . . . . . $ 163,777 $ 179,588
Certificate of deposit. . . . . . . . . . . . 10,000 10,000
Marketable equity securities, trading . . . . 197,800 372,560
Accounts receivable - mining royalty. . . . . 76,500 60,000
Notes receivable. . . . . . . . . . . . . . . 60,000 60,000
Accrued interest receivable . . . . . . . . . 8,500 6,986
--------------- ------------
Total current assets. . . . . . . . . . . . 516,577 689,134
Property and equipment, net . . . . . . . . . . 23,786 25,967
Non-producing oil and gas properties. . . . . . 179,873 150,040
Notes receivable. . . . . . . . . . . . . . . . 12,500 12,500
--------------- ------------
Total assets. . . . . . . . . . . . . . . . . $ 732,736 $ 877,641
=============== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
- -----------------------------------------------
Current liabilities:
Notes payable and current portion of
long-term debt. . . . . . . . . . . . . . . $ 6,696 $ 7,024
Accounts payable and accrued liabilities. . . 10,000 10,000
--------------- ------------
Total current liabilities . . . . . . . . . 16,696 17,024
Long-term debt, net of current portion. . . . . 6,093 7,825
--------------- ------------
Total liabilities . . . . . . . . . . . . . . 22,789 24,849
--------------- ------------
Commitments and contingencies
Stockholders' equity:
Common Stock, par value $.10; authorized
25,000,000 shares; issued and outstanding
8,534,257 shares at September 30, 1998 and
June 30, 1998 . . . . . . . . . . . . . . . 853,426 853,426
Additional paid-in capital. . . . . . . . . . 6,156,172 6,156,172
Accumulated deficit . . . . . . . . . . . . . (6,299,651) (6,150,806)
Treasury stock, at cost . . . . . . . . . . . - (6,000)
--------------- ------------
Total stockholders' equity. . . . . . . . . 709,947 852,792
--------------- ------------
$ 732,736 $ 877,641
=============== ============
<FN>
NOTE: The balance sheet at June 30, 1998 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
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See Selected Notes to Consolidated Financial Statements.
F-1
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COBB RESOURCES CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED
SEPTEMBER 30,
-----------------------
1998 1997
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Revenues:
Mining royalty income, net. . . . . . . . $ 16,500 $ 16,500
----------- -----------
Costs and expenses:
Property lease expenses . . . . . . . . . 7,869 400
Depreciation, depletion and
amortization. . . . . . . . . . . . . . 2,181 8,000
General and administrative. . . . . . . . 60,683 6,323
----------- -----------
Total costs and expenses. . . . . . . . 70,733 14,723
----------- -----------
Income (loss) from operations . . . . . (54,233) 1,777
----------- -----------
Other income (expenses):
Interest and other income . . . . . . . . 13,326 133
Realized loss on marketable equity
securities. . . . . . . . . . . . . . . (47,386) (19,377)
Unrealized gain (loss) on marketable
equity securities . . . . . . . . . . . (59,884) 60,000
Interest expense. . . . . . . . . . . . . (668) -
----------- -----------
Total other income (expense). . . . . . (94,612) 40,756
----------- -----------
Net income (loss) . . . . . . . . . . . $ (148,845) $ 42,533
=========== ===========
Net income (loss) per common share. . . . . $ (0.02) $ 0.00
=========== ===========
Weighted average number of common shares
and common share equivalents outstanding. 8,534,257 8,534,257
=========== ===========
<FN>
NOTE: The company's financial statements include no additional elements of
comprehensive income. Accordingly, comprehensive income and net income are
identical.
</TABLE>
See Selected Notes to Consolidated Financial Statements.
F-2
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COBB RESOURCES CORPORATION
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
(UNAUDITED)
THREE MONTHS ENDED
SEPTEMBER 30,
----------------------
1998 1997
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Cash flows from operating activities:
Net income (loss). . . . . . . . . . . . . . . . $(148,845) $ 42,533
Adjustments to reconcile net income to
net cash provided by operating activities:. . . 164,927 (175,969)
---------- ----------
Net cash provided by (used in)
operating activities . . . . . . . . . . 16,082 (133,436)
---------- ----------
Cash flows from investing activities:
Purchase of property and equipment, net. . . . . (29,833) (10,000)
---------- ----------
Net cash used in investing activities. . . (29,833) (10,000)
---------- ----------
Cash flows from financing activities:
Principal payments on notes payable. . . . . . . (2,060) (2,331)
---------- ----------
Net cash used in financing
activities . . . . . . . . . . . . . . . (2,060) (2,331)
---------- ----------
Net decrease in cash and cash equivalents. . . . . (15,811) (145,767)
Cash and cash equivalents at beginning
of period. . . . . . . . . . . . . . . . . . . . 179,588 446,654
---------- ----------
Cash and cash equivalents at end of
period . . . . . . . . . . . . . . . . . . . . . $ 163,777 $ 300,887
========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest expense . . . . . . . . . . $ 668 $ -
========== ==========
</TABLE>
See Selected Notes to Consolidated Financial Statements.
F-3
<PAGE>
COBB RESOURCES CORPORATION
SELECTED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES
------------------------------------------------
For a summary of significant accounting principles, see Notes to
Consolidated Financial Statements and Note 1 thereof contained in the unaudited
Annual Report on Form 10-K of Cobb Resources Corporation (the "Company") for the
year ended June 30, 1998, which is incorporated herein by reference. The
Company follows the same accounting policies during interim periods as it does
for annual reporting purposes.
The accompanying consolidated financial statements are condensed and
unaudited and have been prepared pursuant to the rules and regulations of the
Securities and Exchange Commission ("SEC"). In the opinion of management, the
unaudited interim financial statements furnished reflect all adjustments of a
normal recurring nature which are necessary to a fair statement of the results
for the interim periods presented. Certain information and note disclosures
normally included in annual financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted pursuant
to SEC rules or regulations; however, the Company believes that the disclosures
made are adequate to make the information presented not misleading. These
financial statements should be read in conjunction with the unaudited financial
statements and the notes thereto included in the Company's unaudited Form 10-K
for the year ended June 30, 1998.
(2) COMPREHENSIVE INCOME
---------------------
Effective July 1, 1998, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 130, Reporting Comprehensive Income, which
requires a Company to display an amount representing comprehensive income as
part of the Company's basic financial statements. Comprehensive income includes
such amounts as unrealized gains or losses on certain investment securities and
certain foreign currency translation adjustments. The Company's financial
statements include none of the additional elements that affect comprehensive
income. Accordingly, comprehensive income and net income are identical
(3) RECLASSIFICATIONS
-----------------
Certain amounts included in the financial statements for the three
ended September 30, 1997 have been reclassified to conform to the current
presentation.
F-4
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Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Company's
consolidated financial statements and related notes included elsewhere in this
Report. See Financial Statements. Certain statements in the following
Management's Discussion and Analysis of Financial Condition and Results of
Operations ("MD&A") are forward looking statements. Words such as "expect",
"anticipates", "estimates" and similar expressions are intended to identify
forward looking statements. Such statements are subject to risks and
uncertainties that could cause actual results to differ materially from those
projected.
OVERVIEW
- --------
Cobb Resources Corporation's (the "Company") operations are funded
primarily through internally generated funds from operations and the sale of
certain marketable equity securities. The Company is currently placing renewed
emphasis on its minerals sector and selective oil and gas prospects. Management
intends to continue to hold fixed and administrative expenditures to low levels
which are consistent with the Company's balance sheet financial ratios and
anticipated income.
RESULTS OF OPERATIONS
- -----------------------
THREE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO THREE MONTHS ENDED SEPTEMBER
- --------------------------------------------------------------------------------
30, 1997
- ---------
The Company reported mining royalty income for the September 30, 1998 and
1997 quarters of $16,500 and $16,500 respectively. The royalty income reflects
the Company's proportionate share of the annual minimum royalty payment related
to the Copper Flat property. Interest income and other income for the September
30, 1998 and 1997 quarters totaled $13,326 and $133 respectively.
There were oil and gas property lease expenses for the September 30, 1998
and 1997 quarters of $7,869 and $400 respectively. Depreciation, depletion and
amortization for the September 30, 1998 and 1997 quarters was $2,181 and $8,000
respectively. General and administrative expenses were for the September 30,
1998 and 1997 quarters were $60,683 and $6,323 respectively. These expenses
increased due to increased compensation to the Company's president and
increased amounts paid for legal, accounting and other professional services.
The Company realized net loss on the sale of marketable equity securities
for the September 30, 1998 and 1997 quarters of $47,386 and $19,377
respectively.
F-5
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The Company had net unrealized loss on marketable equity securities for the
September 30, 1998 quarter of $59,884 compared to a net gain of $60,000 for the
September 1997 quarter.
Primarily reflecting the factors discussed above, the Company reported a
net loss of $148,845 compared to a gain of $42,533 in the September 30, 1997
quarter.
LIQUIDITY AND CAPITAL RESOURCES
- ----------------------------------
The Company's primary source of operating income has been the royalty
interest on its Copper Flat property in southern New Mexico and proceeds from
the sale of certain marketable equity securities and office building. Since
1990 the Copper Flat property has been held for possible development by Copper
Flat Mining Company, Ltd., a subsidiary of Gold Express Corporation ("Gold
Express") with the payment of annual delay rentals to the Company of $150,000
per year on a gross basis. Such amounts are then divided on a 51/49% basis with
Hydro Resources Corporation. Annual royalty payments from the Copper Flat
property are due and payable not later than September 30 of each year, although
such payment may be paid within a 60 day grace period following written
notification and demand.
On January 26, 1994, the Company and Hydro entered into an agreement with
Alta Gold Company, a Nevada Corporation, ("Alta") whereby the royalty interests
held by the Company and Hydro in the Copper Flat property would be adjusted in
order to make the development of the Copper Flat property viable. In
consideration of the foregoing, Alta agreed to provide the Company/Hydro with
375,000 restricted shares of Alta stock within thirty days of Alta's acquisition
of the Copper Flat property. At any time within two years from the date on
which the stock is issued, Alta shall have the right to repurchase 125,000
shares for $4.00 per share, upon giving the Company/Hydro thirty days notice.
The Company/Hydro will have the option, upon written demand to Alta within
thirty days after the second anniversary date of the stock issuance, if the
market price of the stock on the second anniversary is less than $4.00 per
share, to demand that Alta pay to the Company/Hydro the difference between $4.00
per share and the market price per share on the second anniversary date as
multiplied by a maximum of 250,000 shares. Alta shall have 60 days from the
date of said demand to pay same.
As a result of the agreement, Alta will be obligated to pay the
Company/Hydro a 2-1/2% Net Smelter Return for as long as Alta operates the
Copper Flat property which amends the 5% Net Smelter Return as above. The
annual minimum royalty payment will be credited against future production
royalties after Alta acquires the Copper Flat property. If the Copper Flat
property is not in production at the end of said five year period, the annual
minimum royalty payment will no longer be credited against future production
royalty. In no event, however, will the production royalty due the
Company/Hydro be less than $150,000 per year.
Cash and cash equivalents decreased to $163,771 from $179,588 a net
decrease of $15,811 at September 30, 1998 as compared to September 30, 1997.
At present, the Company plans to remain a public entity operating
principally in the minerals and oil and gas business. The Company holds
interests in several oil and gas prospects and its royalty interest in the
Copper Flat property.
F-6
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IMPACT OF YEAR 2000
- ----------------------
The Year 2000 issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Any of the Company's
computer programs that have time sensitive software may recognize a date using
"00" as the year 1900 rather than the year 2000. This could result in a system
failure or miscalculation causing disruption of business activities.
Based on ongoing assessments, the Company believes that no significant
modifications of existing computer software will be required. The Company
believes that for applications in which computer systems are utilized, such
computer systems will function properly with respect to dates in the year 2000
and thereafter. The Company also believes that costs related to the Year 2000
issue will not be significant.
The Company is currently assessing its relationships with suppliers and
major customers to determine the extent to which the Company is vulnerable to
any third party's failure to remedy their own Year 2000 issues. Based on
preliminary assessments, management believes that significant exposure does not
exist with respect to third parties. In the worst case, management believes
that it could experience delays in its ability to trade securities and obtain
proceeds from such trades, resulting in losses for the Company.
INFORMATION REGARDING AND FACTORS AFFECTING FORWARD LOOKING STATEMENTS
- -----------------------------------------------------------------------------
The Company is including the following cautionary statement in this
Quarterly Report on Form 10-QSB to make applicable and take advantage of the
safe harbor provision of the Private Securities Litigation Reform Act of 1995
for any forward looking statements made by, or on behalf of the Company.
Forward looking statements include statements concerning plans, objectives,
goals, strategies, future events or performance and underlying assumptions and
other statements which are other than statements of historical facts. Certain
statements contained herein are forward looking statements and, accordingly,
involve risks and uncertainties which could cause actual results or outcomes to
differ materially from those expressed in the forward looking statements. The
Company's expectations, beliefs and projections are expressed in good faith and
are believed by the Company to have a reasonable basis, including without
limitations, management's examination of historical operating trends, data
contained in the Company's records and other data available from third parties,
but there can be no assurance that management's expectation, beliefs or
projections will result, or be achieved, or be accomplished.
F-7
<PAGE>
PART II
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS REQUIRED BY ITEM 601 OF REGULATION SB
(1) Exhibit 27. Financial Data Schedule
(b) REPORTS ON FORM 8-K
NONE.
F-8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
COBB RESOURCES CORPORATION
Date: November 16, 1998 By: /S/ CHARLES COBB, IV
------------------ -----------------------
Charles Cobb, IV
President
Principal Financial Officer
F-9
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<TABLE> <S> <C>
<ARTICLE> 5
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<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 163777
<SECURITIES> 207800
<RECEIVABLES> 76500
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 516577
<PP&E> 223497
<DEPRECIATION> 19838
<TOTAL-ASSETS> 732736
<CURRENT-LIABILITIES> 16696
<BONDS> 0
<COMMON> 853426
0
0
<OTHER-SE> (143497)
<TOTAL-LIABILITY-AND-EQUITY> 732736
<SALES> 0
<TOTAL-REVENUES> 29826
<CGS> 0
<TOTAL-COSTS> 178003
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 668
<INCOME-PRETAX> (148845)
<INCOME-TAX> 0
<INCOME-CONTINUING> (148845)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (148845)
<EPS-PRIMARY> (.02)
<EPS-DILUTED> (.02)
</TABLE>
