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 March 31, 1999
-------------------------------
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
- ---------------------------------------------------------------------------
(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
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(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 May 13, 1999, the Registrant had outstanding 8,534,257 shares of
common stock, par value $.10 per share.
<PAGE>
COBB RESOURCES CORPORATION
TABLE OF CONTENTS
FORM 10-QSB FOR THE QUARTER ENDED MARCH 31, 1999
PAGE
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of March 31, 1999
and June 30, 1998 F-1
Consolidated Statements of Operations for the three
months ended March 31, 1999 and 1998 F-2
Consolidated Statements of Operations for the nine
months ended March 31, 1999 and 1998 F-3
Consolidated Condensed Statements of Cash Flows for
the nine months ended March 31, 1999 and 1998 F-4
Selected Notes to Consolidated Financial Statements F-5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations F-6
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K F-9
Signature Page F-10
Exhibit 27 - Financial Data Schedule F-11
<PAGE>
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
- ------- ---------------------
COBB RESOURCES CORPORATION
CONSOLIDATED BALANCE SHEETS
ASSETS MARCH 31, JUNE 30,
------ ------------ ------------
1999 1998
(UNAUDITED) (NOTE)
------------ ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents . . . . . . . . . . $ 130,299 $ 179,588
Certificate of deposit. . . . . . . . . . . . - 10,000
Marketable equity securities, trading . . . . 428,495 372,560
Accounts receivable - mining royalty, net . . - 60,000
Notes receivable. . . . . . . . . . . . . . . 60,000 60,000
Accrued interest receivable . . . . . . . . . 12,148 6,986
------------ ------------
Total current assets. . . . . . . . . . . . 630,942 689,134
Property and equipment, net . . . . . . . . . . 19,424 25,967
Non-producing oil and gas properties. . . . . . 188,426 150,040
Notes receivable. . . . . . . . . . . . . . . . 12,500 12,500
------------ ------------
Total assets. . . . . . . . . . . . . . . $ 851,292 $ 877,641
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Notes payable and current portion of
long-term debt. . . . . . . . . . . . . . . $ 7,033 $ 7,024
Accounts payable and accrued liabilities. . . 10,000 10,000
------------ ------------
Total current liabilities . . . . . . . . . 17,033 17,024
Long-term debt, net of current portion. . . . . 2,485 7,825
------------ ------------
Total liabilities . . . . . . . . . . . . . . . 19,518 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 March 31, 1999 and
June 30, 1998 . . . . . . . . . . . . . . . 853,426 853,426
Additional paid-in capital. . . . . . . . . . 6,156,172 6,156,172
Accumulated deficit . . . . . . . . . . . . . (6,177,824) (6,150,806)
Treasury stock, at cost . . . . . . . . . . . - (6,000)
------------ ------------
Total stockholders' equity. . . . . . . . . 831,774 852,792
------------ ------------
. . . . . . . . . . . . . . . . . . . . $ 851,292 $ 877,641
============ ============
</TABLE>
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
See Selected Notes to Consolidated Financial Statements.
F-1
<PAGE>
<TABLE>
<CAPTION>
COBB RESOURCES CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31,
------------------------
1999 1998
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<S> <C> <C>
Revenues:
Mining royalty income, net . . . . . . . . . . $ 16,500 $ -
----------- -----------
Costs and expenses:
Depreciation, depletion and amortization . . . 2,181 8,000
General and administrative . . . . . . . . . . 79,390 48,292
----------- -----------
Total costs and expenses . . . . . . . . . . 81,571 56,292
----------- -----------
Loss from operations . . . . . . . . . . . . (65,071) (56,292)
----------- -----------
Other income (expenses):
Interest and other income. . . . . . . . . . . 6,916 4,710
Realized loss on marketable equity securities. (171,928) (34,049)
Unrealized gain (loss) on marketable equity
securities . . . . . . . . . . . . . . . . . 245,542 (79,280)
Interest expense . . . . . . . . . . . . . . . (243) -
----------- -----------
Total other income . . . . . . . . . . . . . 80,287 (108,619)
----------- -----------
Net income (loss). . . . . . . . . . . . . . $ 15,216 $ (164,911)
=========== ===========
Net income (loss) per common share . . . . . . . $ 0.00 $ (0.02)
=========== ===========
Weighted average number of common shares
and common share equivalents outstanding . . . 8,534,257 8,534,257
=========== ===========
</TABLE>
NOTE: The company's financial statements include no additional elements of
comprehensive income. Accordingly, comprehensive income and net income are
identical.
See Selected Notes to Consolidated Financial Statements.
F-2
<PAGE>
<TABLE>
<CAPTION>
COBB RESOURCES CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
NINE MONTHS ENDED
MARCH 31,
------------------------
1999 1998
----------- -----------
<S> <C> <C>
Revenues:
Mining royalty income, net . . . . . . . . . $ 49,500 $ 76,500
----------- -----------
Costs and expenses:
Property lease expenses. . . . . . . . . . . 6,016 3,079
Depreciation, depletion and amortization . . 6,543 24,000
General and administrative . . . . . . . . . 204,214 66,072
----------- -----------
Total costs and expenses . . . . . . . . . 216,773 93,151
----------- -----------
Loss from operations . . . . . . . . . . . (167,273) (16,651)
----------- -----------
Other income (expenses):
Interest and other income. . . . . . . . . . 48,087 9,284
Realized gain (loss) on marketable equity
securities . . . . . . . . . . . . . . . . (208,944) 121,968
Unrealized gain (loss) on marketable equity
securities . . . . . . . . . . . . . . . . 302,314 (79,280)
Interest expense . . . . . . . . . . . . . . (1,202) (769)
----------- -----------
Total other income . . . . . . . . . . . . 140,255 51,203
----------- -----------
Net income (loss). . . . . . . . . . . . . $ (27,018) $ 34,552
=========== ===========
Net income (loss) per common share . . . . . . $ (0.00) $ 0.00
=========== ===========
Weighted average number of common shares
and common share equivalents outstanding . . 8,534,257 8,534,257
=========== ===========
</TABLE>
NOTE: The company's financial statements include no additional elements of
comprehensive income. Accordingly, comprehensive income and net income are
identical.
See Selected Notes to Consolidated Financial Statements.
F-3
<PAGE>
<TABLE>
<CAPTION>
COBB RESOURCES CORPORATION
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
(UNAUDITED)
NINE MONTHS ENDED
MARCH 31,
--------------------
1999 1998
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income. . . . . . . . . . . . . . . . . . . $(27,018) $ 34,552
Adjustments to reconcile net income
net cash provided by (used in) operating
activities: . . . . . . . . . . . . . . . . . 11,319 (33,395)
--------- ---------
Net cash provided by (used in) operating
activities. . . . . . . . . . . . . . . . (15,699) 1,157
--------- ---------
Cash flows from investing activities:
Maturity of certificate of deposit. . . . . . . 10,127 -
Purchase of property and equipment. . . . . . . (38,386) (38,058)
--------- ---------
Net cash used in investing activities . . . (28,259) (38,058)
--------- ---------
Cash flows from financing activities:
Principal payments on notes payable . . . . . . (5,331) (7,157)
--------- ---------
Net cash used in financing activities . . . (5,331) (7,157)
--------- ---------
Net increase (decrease) in cash and cash
equivalents . . . . . . . . . . . . . . . . . . (49,289) (44,058)
Cash and cash equivalents at beginning
of period . . . . . . . . . . . . . . . . . . . 179,588 419,280
--------- ---------
Cash and cash equivalents at end of period. . . . $130,299 $375,222
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest expense. . . . . . . . . . $ 1,202 $ -
========= =========
</TABLE>
See Selected Notes to Consolidated Financial Statements.
F-4
<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 audited Form 10-KSB
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 nine months
ended March 31, 1998 have been reclassified to conform to the current
presentation.
F-5
<PAGE>
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
unaudited consolidated interim financial statements and related notes thereto
included in this quarterly report and in the unaudited consolidated Financial
Statements and Management's Discussion and Analysis of Financial Condition and
Results of Operations ("MD&A") contained in the Company's 10-K for the year
ended June 30, 1998. Certain statements in the following MD&A are forward
looking statements. Words such as "expects", "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 Corporations's 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.
LIQUIDITY AND CAPITAL RESOURCES
----------------------------------
In conjunction with its current business objectives, the Company has
terminated all cost for full-time employees. The Company anticipates that for
the near term, the Company's operating expenditures will continue to be strictly
limited.
Cash and cash equivalents decreased from $179,588 to $130,299, a net
decrease of $49,289 for the nine months ended March 31, 1999. Such decrease
resulted from the loss on sale of certain marketable equity securities. For the
nine months ended March 31, 1999 the Company used $15,699 of cash from
operating activities compared to cash provided by operating activities of $1,157
for the prior year nine months. On a consolidated basis as of March 31, 1999
the Company had working capital of $646,909 compared to working capital of
$672,110 as of June 30, 1998.
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 non-producing oil and gas prospects and its royalty
interest in the Copper Flat property.
In April 1999, the operator of the copper flat property filed for
reorganization under Chapter 11 of the Federal Bankruptcy Code. As a result of
this reorganization, the Company fully reserved $49,500 of royalties receivable
recognized by the Company during the nine months ended March 31, 1999.
F-6
<PAGE>
RESULTS OF OPERATIONS
- -----------------------
COMPARISON OF THE NINE MONTHS ENDED MARCH 31, 1999 AND 1998
- ---------------------------------------------------------------------
The Company reported mining royalty income of $49,500 and $76,500,
respectively, for the nine months ended March 31, 1999 and 1998. The royalty
income reflects the Company's proportionate share of the annual minimum royalty
payment related to the Copper Flat property. For additional information
concerning the Copper Flat property, see Notes to Consolidated Financial
Statements and Note 2 in the Company's Annual Report on Form 10K. Interest and
other income increased to $48,087 for the nine months ended March 31, 1999
compared to $9,284 for the nine months ended March 31, 1998. The increase was
primarily the result of lease payments from oil and gas properties received in
the nine months ended March 31, 1999.
Depreciation, depletion and amortization was $6,543 and $24,000 for the
nine months ended March 31, 1999 and 1998, respectively. General and
administrative expenses increased to $204,214 for the nine months ended March
31, 1999 compared to $66,072 for the prior nine months. The increase was the
result of (i) a $49,500 provision for bad debts recognized during the quarter
ended March 31, 1999; (ii) the Company paying a larger amount of fees for legal
and other professional services; and (iii) higher officer compensation in the
nine months ended March 31, 1999. General and administrative expenses for the
nine months ended March 31, 1999 and 1998 primarily include administrative,
legal, consulting and other professional services, officer compensation, bad
debt and general expenses.
The Company realized a net loss on the sale of marketable equity securities
for the nine months ended March 31, 1999 of $208,944 compared to a net gain of
$121,968 in the nine months ended March 31, 1998. Such current year losses
resulted from the sale of various common stocks.
The Company had net unrealized gain on marketable equity securities for the
nine months ended March 31, 1999 of $302,314 compared to a loss of $79,280 in
the nine months ended March 31, 1998.
Primarily reflecting the factors discussed above, the Company reported net
loss of $27,018 for the nine months ended March 31, 1999 compared to a net
income of $34,552 for the nine months ended March 31, 1998.
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.
F-7
<PAGE>
INFORMATION REGARDING AND FACTORS AFFECTING FORWARD LOOKING STATEMENTS
---------------------------------------------------------------------------
The Company is including the following cautionary statement in this
Quarterly Report on Form 10-Q 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-8
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
-------------------------------------
(a) Exhibits
Financial Data Schedule.
(b) Reports on Form 8-K
None.
F-9
<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: May 13, 1999 By: /s/ Charles Cobb, IV
-------------- --------------------------
Charles Cobb, IV
President
Principal Financial Officer
F-10
<PAGE>
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<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 130299
<SECURITIES> 428495
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 630942
<PP&E> 232050
<DEPRECIATION> 24200
<TOTAL-ASSETS> 851292
<CURRENT-LIABILITIES> 17033
<BONDS> 0
<COMMON> 853426
0
0
<OTHER-SE> (21652)
<TOTAL-LIABILITY-AND-EQUITY> 851292
<SALES> 0
<TOTAL-REVENUES> 399901
<CGS> 0
<TOTAL-COSTS> 425717
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1202
<INCOME-PRETAX> (27018)
<INCOME-TAX> 0
<INCOME-CONTINUING> (27018)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (27018)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
