<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 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: 0-12185
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DAUGHERTY RESOURCES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
PROVINCE OF BRITISH COLUMBIA NOT APPLICABLE
(State or other jurisdiction of incorporation or (I.R.S. EMPLOYER
organization) IDENTIFICATION NO.)
120 PROSPEROUS PLACE, SUITE 201
LEXINGTON, KENTUCKY 40509-1844
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (606) 263-3948
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Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 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 X No .
THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE REGISTRANT'S CLASSES OF
COMMON STOCK, AS OF JUNE 30, 1998, WAS 2,028,266*.
Transitional Small Business Disclosure Format (check one):
Yes No X .
--- ---
* GIVING EFFECT TO A 1 FOR 5 REVERSE STOCK SPLIT EFFECTIVE JUNE 29, 1998.
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<PAGE> 2
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
The information required by this Item 1 appears on pages 8 through 10 of
this Report, and is incorporated herein by reference.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The following is a discussion of the Company's financial condition and
results of operations. This discussion should be read in conjunction with the
Financial Statements of the Company described in Item 1 of this Report.
Statements contained in this "Management's Discussion and Analysis of Financial
Condition and Results of Operations," which are not historical facts may be
forward looking statements. Reliance upon such information involves risks and
uncertainties, including those created by general market conditions, competition
and the possibility that events may occur which could limit the ability of the
Company to maintain or improve its operating results or execute its primary
growth strategy. Although management believes that the assumptions underlying
the forward-looking statements are reasonable, any of the assumptions could be
inaccurate, and there can be no assurances that the forward-looking statements
included herein will prove to be accurate. The inclusion of such information
should not be regarded as a representation by management or any other person
that the objectives and plans of the Company will be achieved. Moreover, such
forward-looking statements are subject to certain risks and uncertainties which
could cause actual results to differ materially from those projected. Readers
are cautioned not to place undue reliance on these forward-looking statements
that speak only as of the date hereof.
Daugherty Resources, Inc., formerly Alaska Apollo Resources Inc., (the
"Company" or the "Registrant") is a diversified natural resources company with
assets in oil and gas, wood products, manufacturing, and gold prospects.
Originally formed in 1979 to develop gold properties, the Company in the fourth
quarter of 1993, acquired its wholly owned subsidiary, Daugherty Petroleum, Inc.
The purchase of Daugherty Petroleum, Inc. and the subsequent purchase of 80% of
Red River Hardwoods, Inc. in the fourth quarter of 1996 have given the Company a
diversified revenue and asset base that primarily is located in Appalachia.
Since acquiring Daugherty Petroleum, Inc., the Company has increased its
reserves through the acquisition of oil and gas properties in the Appalachian
and Illinois Basins, and the drilling of wells through joint venture and turnkey
drilling programs, where Daugherty Petroleum, Inc. is the primary decision
maker. The Company continues to aggressively seek acquisitions and drilling
programs.
At the Annual General Meeting held on June 22, 1998, shareholders
approved special resolutions, effective June 30, 1998, including one that
changed the Company's name from Alaska Apollo Resources Inc. to Daugherty
Resources, Inc., a name that management believes more closely represents the
Company's current revenue generating activities. Further, special resolutions
were approved that increased the Company's capital structure as follows:
1. The Company's authorized common shares were increased from
20,000,000 common shares without par value, of which 10,141,331 are issued, to
50,000,000 common shares without par value, of which 10,141,331 will be issued;
2. The Memorandum of the Company was altered so that the
authorized capital was increased by creating 6,000,000 preferred shares without
par value;
3. Special rights and restrictions were attached to the common
shares and preferred shares;
4. The 50,000,000 common shares and 6,000,000 preferred shares
were consolidated by a 1 for 5 reverse stock split, resulting in the authorized
capital of the Company being 11,200,000 shares, divided into
2
<PAGE> 3
10,000,000 common shares without par value, with 2,028,266 common shares issued
and outstanding and 1,200,000 preferred shares without par value.
The issuance of preferred stock by the Company will allow the planned
acquisition of certain operating wells in Kentucky, Louisiana and Tennessee.
Management believes this acquisition will close in the third quarter of 1998. In
addition, the Company has signed a program agreement to drill 100 wells in
southeastern Kentucky, in which the Company will retain from 15% to 50% working
interests.
Red River Hardwoods, Inc. has continued to diversify the Company by
adding lumber activities. Since its acquisition by the Company, Red River
Hardwoods has experienced increased revenues that are reflected on the
consolidated financial statement. Management has initiated a change in Red
River's product mix from primarily oak furniture to poplar mouldings and
furniture parts. Poplar, a predominant species in eastern Kentucky, has
increasingly become a substitute for western pine in the wood products industry.
With its close proximity to significant supplies of poplar, Red River will
continue to manufacture good quality, price-competitive products.
Along with revenues from Red River's operations, the Company continues
its tradition of realizing revenues from its oil and gas operations. For the six
months ending June 30, 1998, the Company drilled seven natural gas wells and
completed four natural gas wells. Additionally, the Company extended its gas
gathering system located in Knox County, Kentucky by 13,500 feet. By comparison,
for the same period of 1997, the Company drilled seven natural gas wells and
completed six natural gas wells. Drilling operations for the first six months of
1998 were primarily related to a joint venture on the Company's farmout acreage
acquired from Equitable Resources Energy Corporation.
LIQUIDITY
The Company continues to acquire natural gas and oil properties.
Daugherty Petroleum, Inc. has provided the Company with a diversified asset base
which includes natural resources other than its original gold and silver mining
properties. During the first six months of 1998, management continued to invest
in areas it deemed crucial in developing an infrastructure suitable to support
future growth. These areas included ongoing expenses in management, professional
and operational personnel, and other expenses deemed necessary to position the
Company for future acquisitions and financing.
Historically, the Company's revenues have been from its interests in
the producing natural gas and oil wells it operates and in which it owns
interests, from its activities as "turnkey driller" and operator for various
drilling programs in its geographic area, and sales of wood products. Daugherty
Petroleum, Inc. has reduced its dependence on activities as "turnkey driller"
for private investors and instead concentrated on joint ventures with industry
partners. During the first six months of 1998, approximately 27% of the
Company's revenues were derived from joint venture drilling. Natural gas and oil
operations and revenues accounted for 9% of the revenues. Manufacturing sales
related to Red River accounted for 64% of the revenues.
The Company plans to drill 25 wells during 1998 and will attempt to
earn interests ranging from 12.5% to 50% interest in each well it drills.
Working capital for the period ending June 30, 1998, was a negative
$2,451,792 compared to the same period in 1997, when working capital was a
negative $190,837.
During the first six months of 1998, and compared to the same period in
1997, the changes in the composition of the Company's current assets were: cash
balances decreased $77,113 from 278,905 to $201,792, accounts receivable
balances decreased $425,365 from $983,172 to $557,807; and inventories increased
$18,124 from $645,045 to $663,169. Other current assets such as prepaids and
notes receivable decreased $56,534 from $65,607 to $9,073. Overall, current
assets decreased by $540,888 to $1,431,841.
Current liabilities for the period ended June 30, 1998 were $3,883,633
compared to $2,163,566 for the period ended June 30, 1997. Drilling pre-payments
expected to be used during 1998 accounted for $1,120,154 of the increase.
3
<PAGE> 4
While management believes that its cash flow resulting in operating
revenues will contribute significantly to its short-term financial commitments
and operating costs, it has continued to refine its long range strategy in 1998
to meet the Company's financial obligations. This strategy involves:
- ACQUISITION OF REVENUE-PRODUCING PROPERTIES: In November 1997,
Daugherty Petroleum signed a Letter of Intent to acquire
producing oil and gas properties in Kentucky, Louisiana and
Tennessee. Management believes that the addition of these
properties will favorably impact the Company's cash flow.
Daugherty Petroleum is continually reviewing existing
properties in its area of interest that are for sale.
- ACQUIRING A LINE OF CREDIT: The Company has received a
preliminary term sheet for a $1,000,000 line of credit from
Compass Bank of Houston, Texas. Management believes that this
credit facility will be secured in August of 1998.
- INSTALLATION OF ADDITIONAL NATURAL GAS GATHERING SYSTEM: The
Company plans to expand its natural gas pipeline by 45,000
feet in 1998. The extension will allow for substantially more
natural gas to be transported to market from wells drilled in
1997 and 1998.
- ADDITIONAL FUNDING FOR RED RIVER HARDWOODS, INC.: The Company
is seeking additional capital for Red River Hardwoods, Inc.
that will allow it to increase its inventory, which would
permit Red River to operate at a more efficient capacity, and
thereby increase its revenues.
RESULTS OF OPERATIONS
For the six month period ending June 30, 1998, the Company's gross
revenues increased $410,449 to $2,956,729 from $2,546,280 for the same period in
1997. The Company experienced a net loss of $538,960 in this period compared to
a net loss of $544,946 in the same period of 1997.
The Company's gross revenues were derived from drilling contract
revenues of $788,046 (27%) from natural gas and oil operations and production
revenues of $280,333 (9%) and lumber sales and product manufacturing revenues of
$1,888,350 (64%).
The increase in gross revenues of $410,449 was attributable to the
increased drilling activities and lumber sales during the period. Contract
revenues from drilling activities increased by $173,571 from $614,475 in the
first six months of 1997 to $788,046 in the first six months of 1998.
Manufacturing revenues related to Red River Hardwoods increased by $267,187 from
$1,621,163 in the first six months of 1997 to $1,888,350 in the first six months
of 1998.
During the first six months of 1998, total direct costs increased by
$576,971 to $2,598,699 compared to $2,021,728 in the first quarter of 1997.
These direct costs included Red River Hardwoods' expenses and drilling costs for
six natural gas wells.
The Company believes there are several factors that will increase
revenues for 1998. First, the prices received for natural gas produced are up
over 1997's overall average price. Secondly, the natural gas gathering system
expansion planned for 1998 will dramatically increase Daugherty Petroleum's
ability to transport natural gas to the market. Thirdly, The Company will
receive additional revenues from the pending acquisition of oil and gas
properties. Further, the commencement of drilling on the 100 well drilling
contract should positively impact earnings for the second half of 1998.
4
<PAGE> 5
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
None.
ITEM 5. OTHER INFORMATION.
Not Applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
<TABLE>
<CAPTION>
(a) List of Documents Filed with this Report.
-----------------------------------------
PAGE
<S> <C> <C>
(1) Balance Sheet for the Period Ended June 30, 1998.......................... 8
Income Statement for the Period Ended June 30, 1998....................... 9 - 10
</TABLE>
All schedules have been omitted since the information required to be
submitted has been included in the financial statements or notes or has been
omitted as not applicable or not required.
(2) Exhibits--
The exhibits indicated by an asterisk (*) are incorporated by
reference.
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------ ----------------------
3(a)* Memorandum and Articles for Catalina Energy & Resources
Ltd., a British Columbia corporation, dated January 31,
1979, filed as an exhibit to Form 10 Registration Statement
filed May 25, 1984. File No. 0-12185.
3(b)* Certificate for Catalina Energy & Resources Ltd., a British
Columbia corporation, dated November 27, 1981, changing the
name of Catalina Energy & Resources Ltd. to Alaska Apollo
Gold Mines Ltd., and further changing the authorized capital
of the Company from 5,000,000 shares of common stock,
without par value per share, to 20,000,000 shares of common
stock, without par value per share, filed as an exhibit to
Form 10 Registration Statement filed May 25, 1984. File No.
0-12185.
3(c)* Certificate of Change of Name for Alaska Apollo Gold Mines
Ltd., a British Columbia corporation, dated October 14,
1992, changing the name of Alaska Apollo Gold Mines Ltd. to
Alaska Apollo Resources Inc., and further changing the
authorized capital of the Company from 20,000,000 shares of
common stock, without par value per share, to 6,000,000
shares of common stock, without par value per share.
3(d)* Altered Memorandum of Alaska Apollo Resources Inc., a
British Columbia corporation, dated September 9, 1994,
changing the authorized capital of the Company from
6,000,000 shares of common stock, without par value per
share, to 20,000,000 shares of common stock, without par
value per share.
3(e) Certificate of Change of Name for Alaska Apollo Resources
Inc., a British Columbia corporation, dated June 24, 1998,
changing the name of Alaska Apollo Resources Inc. to
Daugherty Resources, Inc. and further changing the
authorized capital of the Registrant from 20,000,000 shares
of common stock, without par value per share, to 50,000,000
shares of
5
<PAGE> 6
common stock, without par value, and authorizing the
creation of 6,000,000 shares of preferred stock,
without par value per share.
3(f) Altered Memorandum of Daugherty Resources, Inc., a British
Columbia corporation, dated June 24, 1998, changing the
authorized common stock of the Registrant from 50,000,000
shares of common stock, without par value per share, to
10,000,000 shares of common stock, without par value.
3(g) Altered Memorandum of Daugherty Resources, Inc., a British
Columbia corporation, dated June 25, 1998, changing the
authorized preferred stock of the Registrant from 6,000,000
shares of preferred stock, without par value per share, to
1,200,000 shares of preferred stock, without par value.
4* See Exhibit No. 3(a).
10(a)* Alaska Apollo Resources Inc. 1997 Stock Option Plan,
filed as Exhibit 10(a) to Form 10-K for the Company for the
fiscal year ended December 31, 1996. (File No. 0-12185).
10(b)* Incentive Stock Option Agreement by and between Alaska
Apollo Resources Inc. and William S. Daugherty dated
March 7, 1997, filed as Exhibit 10(b) to Form 10-K for the
Company for the fiscal year ended December 31, 1996.
(File No. 0-12185).
10(c)* Warrant Agreement by and between Alaska Apollo Resources
Inc. and Jayhead Investments Limited dated March 7, 1997,
filed as Exhibit 10(c) to Form 10-K for the Company for the
fiscal year ended December 31, 1996. (File No. 0-12185).
10(d)* Warrant Agreement by and between Alaska Apollo Resources
Inc. and Trio Growth Trust dated March 7, 1997, filed as
Exhibit 10(d) to Form 10-K for the Company for the fiscal
year ended December 31, 1996. (File No. 0-12185).
10(e)* Warrant Agreement by and between Alaska Apollo Resources
Inc. and Exergon Capital S.A. dated March 7, 1997, filed
as Exhibit 10(e) to Form 10-K for the Company.
11 Computation of Per Share Earnings
27 Financial Data Schedule.
(b) Reports on Form 8-K.
--------------------
Current Report on Form 8-K for the Company dated June 29,
1998, File No. 0-12185, reported the results of the General
Annual Meeting shareholder vote on special resolutions,
resulting in name change and change in capital structure.
(Item 5. Other Events.)
(c) Financial Statement Schedules.
-----------------------------
No schedules are required as all information required has
been presented in the audited financial statements.
6
<PAGE> 7
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf of the
undersigned hereunto duly authorized.
ALASKA APOLLO RESOURCES INC.
By: /s/ William S. Daugherty
------------------------------------
William S. Daugherty, President
Dated: August 14, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ William S. Daugherty Chairman of the Board, President, August 14, 1998
- ----------------------- Director of the Registrant
WILLIAM S. DAUGHERTY
James K. Klyman* Director of the Registrant August 14, 1998
- -----------------------
JAMES K. KLYMAN
Charles L. Cotterell* Director of the Registrant August 14, 1998
- -----------------------
CHARLES L. COTTERELL
/s/ Daryl J. Greattinger Chief Financial Officer August 14, 1998
- -----------------------
DARYL J. GREATTINGER
*By William S. Daugherty
- -----------------------
William S. Daugherty,
Attorney-in-Fact
</TABLE>
7
<PAGE> 8
DAUGHERTY RESOURCES, INC.
SUMMARY CONSOLIDATED BALANCE SHEETS
(United States Dollars)
Unaudited
<TABLE>
<CAPTION>
6/30/97 6/30/98
----------- ------------
ASSETS
CURRENT ASSETS
- --------------
<S> <C> <C>
Cash $ 278,905 $ 201,792
Accounts receivable 983,172 557,807
Inventory 645,045 663,169
Other current assets 65,607 9,073
------------ ------------
TOTAL CURRENT ASSETS 1,972,729 1,431,841
OIL & GAS PROPERTIES (NET) 3,772,372 4,284,367
- --------------------------
MINING PROPERTY (NET) 11,252,733 11,227,733
- ---------------------
PROPERTY & EQUIPMENT (NET) 2,099,674 1,863,741
===========================
OTHER ASSETS
- ------------
Related party loans 54,442 83,066
Bonds & deposits 68,282 54,224
Other assets 322,108 293,884
Goodwill, net of amortization of $900,460 1,414,676 1,204,209
------------ ------------
1,859,508 1,635,383
============ ============
TOTAL ASSETS $ 20,957,016 $ 20,443,065
============ ============
LIABILITIES & STOCKHOLDER'S EQUITY
----------------------------------
CURRENT LIABILITIES
- -------------------
Short-term loans & notes $ 88,324 $ 32,000
Current portion of LT debt 493,425 1,011,195
Accounts payable 991,464 1,179,082
Accrued liabilities 590,353 541,202
Drilling prepayments -- 1,120,154
------------ ------------
TOTAL CURRENT LIABILITIES 2,163,566 3,883,633
LONG-TERM LIABILITIES 3,717,265 2,942,360
- ---------------------
PAYABLE TO RELATED PARTIES -- 37,612
- -------------------------- ------------ ------------
5,880,831 6,863,605
MINORITY INTEREST 1,503 757
=================
STOCKHOLDER'S EQUITY
- --------------------
Common stock 20,670,461 21,054,304
Common stock subscribed -- --
Additional paid in capital -- --
Retained earnings (deficit) (5,050,087) (6,936,641)
Current income (loss) (545,692) (538,960)
============ ============
15,074,682 13,578,703
------------ ------------
TOTAL LIABILITIES &
STOCKHOLDER'S EQUITY $ 20,957,016 $ 20,443,065
============ ============
</TABLE>
Unaudited-Internally prepared by Company management
8
<PAGE> 9
DAUGHERTY RESOURCES, INC.
SUMMARY CONSOLIDATED STATEMENTS OF INCOME
(United States Dollars)
Unaudited
<TABLE>
<CAPTION>
For the six month period ended
6/30/97 6/30/98
-------------------------- --------------------------
GROSS REVENUE $ 2,546,280 100.00% $ 2,956,729 100.00%
- -------------
DIRECT EXPENSES 2,021,728 79.40% 2,598,699 87.89%
- --------------- ---------- ------ ---------- ------
<S> <C> <C> <C> <C>
GROSS PROFIT 524,552 20.60% 358,030 12.11%
GENERAL & ADMINISTRATIVE EXPENSES
- ---------------------------------
Salaries & wages 173,766 6.82% 181,867 6.15%
Accounting & audit 14,271 0.56% 73,546 2.49%
Advertising & promotion 21,979 0.86% 5,658 0.19%
Amortization 105,234 4.13% 105,234 3.56%
Bad debts 6,619 0.26% - 0.00%
Depreciation 33,451 1.31% 34,911 1.18%
General consulting 87,407 3.43% 90,753 3.07%
Insurance 39,239 1.54% 18,673 0.63%
Legal 126,063 4.95% 50,288 1.70%
License & fees 3,352 0.13% - 0.00%
Office & general 48,395 1.90% 107,962 3.65%
Payroll & property tax 16,583 0.65% 16,095 0.54%
Rent 43,900 1.72% 23,397 0.79%
Repairs & maintenance 4,298 0.17% 2,809 0.10%
Shareholder & investor information 29,345 1.15% 28,738 0.97%
Travel & entertainment 30,376 1.19% 30,715 1.04%
------- ----- ------- -----
TOTAL G & A EXPENSES 784,278 30.80% 770,646 26.06%
OTHER INCOME (EXPENSE)
- ----------------------
Interest & dividend income 3,096 0.12% 14,277 0.48%
Miscellaneous 16,070 0.63% 28,727 0.97%
Gain (loss) on sale of equipment (174,052) -6.84% - 0.00%
Interest expense (130,334) -5.12% (169,348) -5.73%
--------- ------ --------- ------
INCOME BEFORE INCOME TAX & OTHER (544,946) -21.40% (538,960) -18.23%
- --------------------------------
Income tax expense (benefit) - 0.00% - 0.00%
MINORITY PORTION (746) -0.03% - 0.00%
- ---------------- ----- ------ ---------- -----
NET INCOME (LOSS) $ (545,692) -21.43% $ (538,960) -18.23%
=========== ======= =========== =======
DEFICIT, beginning of period (5,050,087) $ (6,936,641)
DEFICIT, end of period (5,595,779) $ (7,475,601)
Shares outstanding 9,535,269 9,821,754
EARNINGS PER SHARE ($0.06) ($0.05)
</TABLE>
Unaudited-Internally prepared by Company management
9
<PAGE> 10
DAUGHERTY RESOURCES, INC.
SUMMARY CONSOLIDATED STATEMENTS OF CASH FLOWS
(United States Dollars)
Unaudited
<TABLE>
<CAPTION>
For the six month period ended
6/30/97 6/30/98
---------------- ----------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
- ------------------------------------
Net income (loss) $ (545,692) $ (538,960)
Adjustments to reconcile net income (loss) to net cash
cash provided by operating activities:
Depreciation, depletion, & amortization 257,303 287,577
Minority interest 746 -
Changes in current assets & liabilities
(Increase) decrease in:
Accounts receivable (290,844) (64,085)
Inventory (64,730) 14,975
Other current assets (27,762) 55,589
Increase (decrease) in:
Short-term loans & notes (15,000) (34,100)
Accounts payable 116,141 (293,630)
Accrued liabilities - 180,806
Drilling prepayments - (283,153)
-- ---------
Net cash provided by (used in) operating activities (569,838) (674,981)
CASH FLOWS FROM INVESTING ACTIVITIES
- -------------------------------------
Change in oil & gas properties 432,323 (387,104)
Change in mining properties (21,486) 4,496
Change in property & equipment (41,681) (39,422)
Change in other assets (184,094) (90,189)
---------- -----------
Net cash provided by (used in) investing activities 185,062 (512,219)
CASH FLOWS FROM FINANCING ACTIVITIES
- ------------------------------------
Issuance of common stock 149,991 99,868
Change in long-term liabilities 242,600 38,275
Change in payable to related party - 11,289
--------- ----------
Net cash provided by (used in) financing activities 392,591 149,432
---------- ----------
NET INCREASE (DECREASE) IN CASH 7,815 (1,037,768)
- -------------------------------
CASH AT BEGINNING OF PERIOD 271,090 1,239,560
- --------------------------- ---------- ---------
CASH AT END OF PERIOD $ 278,905 $ 201,792
- --------------------- ========== =========
</TABLE>
Unaudited-Internally prepared by Company management
10
<PAGE> 1
Exhibit 3(e)
(Emblem)
BRITISH NUMBER: 186138
COLUMBIA
CERTIFICATE
OF
CHANGE OF NAME
COMPANY ACT
I HEREBY CERTIFY that
ALASKA APOLLO RESOURCES INC.
has this day changed its name to
DAUGHERTY RESOURCES, INC.
ISSUED under my hand at Victoria, British Columbia
on June 24, 1998
Signature /s/ John S. Powell
---------------------
(Seal)
John S. Powell
Registrar of Companies
PROVINCE OF BRITISH COLUMBIA
CANADA
<PAGE> 1
Exhibit 3(f)
FORM 19
(Section 348)
PROVINCE OF BRITISH COLUMBIA
Certificate of
Inc. No. 186138
COMPANY ACT
-----------
SPECIAL RESOLUTION
The following special resolution was passed by the undermentioned
Company on the date stated:
NAME OF COMPANY: ALASKA APOLLO RESOURCES INC.
DATE RESOLUTION PASSED: JUNE 22, 1998
RESOLUTION:
RESOLVED AS SPECIAL RESOLUTIONS THAT:
1. The Memorandum of the Company be altered by changing the name of the
Company to "Daugherty Resources, Inc."
2. Paragraph 1 of the Memorandum be altered to read as follows:
"1. The name of the Company is Daugherty Resources, Inc."
3. The Memorandum of the Company be altered so that the authorized capital
of the Company which presently consists of 20,000,000 common shares
without par value, of which 10,141,331 are issued, be increased to
50,000,000 common shares without par value of which 10,141,331 will be
issued.
4. The Memorandum of the Company be altered so that the authorized capital
of the Company be increased by creating 6,000,000 preferred shares
without par value.
5. There be created special rights and restrictions attached to the common
shares and the preferred shares as set forth in the schedule attached to
these resolutions.
6. The Articles of the Company be amended by adding thereto Part 23 as set
forth in the schedule attached to these resolutions.
7. The Company consolidate all of the 50,000,000 common shares without par
value of which 10,141,331 common shares are issued and outstanding, into
10,000,000 common shares without par value, of which 2,028,266.2 common
shares will be
<PAGE> 2
issued and outstanding, every five (5) common shares without par value
being consolidated into one (1) common share.
8. Paragraph 2 of the Memorandum be altered to read as follows:
"2. The authorized capital of the Company consists of 16,000,000
shares divided into:
10,000,000 common shares without par value; and 6,000,000
preferred shares without par value
having attached thereto the special rights and restrictions
set forth in the Articles of the Company."
The Memorandum, as altered, is attached hereto as Schedule "A".
Certified a true copy the 22nd day of June, 1998.
(Signature) /s/ Ron Paton
----------------------
(Relationship to Company) Solicitor
<PAGE> 3
SCHEDULE "A" ATTACHED TO AND FORMING PART OF A SPECIAL RESOLUTION OF ALASKA
APOLLO RESOURCES INC. PASSED ON THE 22ND DAY OF JUNE, 1998.
- ------------------------------------------------------------------------------
COMPANY ACT
-----------
ALTERED MEMORANDUM
1. The name of the Company is Daugherty Resources, Inc.
2. The authorized capital of the Company consists of 16,000,000 shares
divided into:
10,000,000 common shares without par value; and 6,000,000 preferred
shares without par value
having attached thereto the special rights and restrictions set
forth in the Articles of the Company.
<PAGE> 4
SCHEDULE "B"
PART 23 - SPECIAL RIGHTS AND RESTRICTIONS
23.1 The preferred shares in the capital of the Company shall have the
following special rights and restrictions attached thereto:
(a) Preferred shares may be issued for such consideration and for such
corporate purposes as the board of directors may from time to time determine.
No shareholder of the Company shall by reason of his holding shares of any
class have any preemptive or preferential right to purchase or subscribe to
any shares of any class of the Company now or hereafter to be authorized or
any notes, debentures, bonds, or other securities convertible into or carrying
options or warrants to purchase shares of any class, now or hereafter to be
authorized, whether or not the issuance of any such shares, or such notes,
debentures, bonds or to the securities would adversely affect dividend or
voting rights of such shareholder, other than such rights, if any, as the
board of directors in its discretion may fix; and the board of directors may
issue shares of any class of the Company, or any notes, debentures, bonds, or
other securities convertible into or carrying options or warrants to purchase
shares of any class, without offering any such shares of any class, either in
whole or in part to the existing shareholders of any class.
(b) The preferred shares may be issued from time to time in one or more
series. Initially the preferred shares will be authorized as a single series,
but may be expanded to include additional series pursuant to proper
shareholder approval. The preferred shares may be converted into common shares
of the Company at the election of the holder thereof at any time within two
years of the day of issue of the preferred shares, on a share for share basis.
The preferred shares may be converted into common shares by the Company at any
time within two years of the date of issue of the preferred shares, on a share
for share basis, if the following conditions are met: (i) the last sales price
per share of common shares, as noted on the Company's principal trading
exchange equals or exceeds US$2.00 for at least 20 consecutive days, and (ii)
proper notice of conversion is given to the Company by the holder no sooner
than one day after, and no later than 10 days after the expiration of the
referenced 20 consecutive trading day period. Any preferred shares not
converted by the Company or the holder before the second anniversary of its
issue shall be automatically converted by the Company into common shares on a
share for share basis on the second anniversary of issue. Any preferred shares
converted automatically by the Company on the second anniversary of issue,
shall receive a conversion bonus of common shares equal to 12 percent of the
number of preferred shares which remain unconverted on the second anniversary
date. Any preferred shares converted by the Company prior to the second
anniversary date shall receive a conversion bonus of common shares equal to
0.5 percent per month of the number of preferred shares which are converted,
times the total number of months elapsed from the date of issuance of the
preferred shares to the date of conversion.
(c) The holders of the preferred shares of each series shall be entitled
to received non-cumulative ordinary dividends prior and in preference to the
common shares, when and as properly declared by the board of directors of the
Company, out of any funds legally available therefor.
(d) In the event of any liquidation, dissolution or winding up of the
affairs of the Company, then, before any distribution or payment shall be made
to the holders of the common shares or any other class of shares of the
Company ranking junior to the preferred shares in respect of dividends or
distribution of assets on liquidation, the holders of the preferred shares of
the respective series shall be entitled to be paid in full the respective
amounts fixed for such series, plus in each case a sum equal to accrued and
unpaid dividends thereon to the date of payment thereof. After such payment
shall have been made in full to the holders of the preferred share, the
remaining assets and funds of the Company shall be distributed among the
holders of the shares of the Company ranking junior to the preferred shares
according to their
4
<PAGE> 5
respective rights. In the event that the assets of the Company available for
distribution to holders of the preferred shares shall not be sufficient to
make the payment herein required to be made in full, such assets shall be
distributed to the holders of the respective preferred shares pro rata in
proportion to the amounts payable hereunder upon each share thereof.
(e) Except as otherwise provided in this Article or in any resolution of
the board of directors providing for the issuance of any particular series of
the preferred shares, preferred shares redeemed or otherwise retired by the
Company shall assume the status of authorized but unissued preferred shares
and may thereafter, subject to the provisions of this Article and of any
restrictions contained in any resolution of the board of directors providing
for the issuance of any particular series of the preferred shares, be reissued
in the same manner as other authorized but unissued preferred shares.
(f) So long as any preferred shares of any series are outstanding; (i)
the Company shall not without the consent of the holders of at least three
quarters of the number of preferred shares at the time outstanding, given in
person or by proxy, either in writing or by vote at an extraordinary general
meeting, amend, alter or repeal any of the provisions of this Article (other
than provisions relating exclusively to the preferred shares of a particular
series) so as to affect adversely the rights, powers or preferences of the
preferred shares, and shall not, without the consent of the holders of at
least three-quarters of the number of preferred shares of such serios at the
time outstanding given in or by proxy, either in writing or by a vote at an
extraordinary general meeting, amend, alter or repeal any of the provisions of
this Article or of any resolution or resolutions relating exclusively to the
preferred shares of such series, so as to affect adversely the rights, powers
or preferences of the preferred shares of such series; (ii) the Company shall
not, without the consent of the holders of at least three-quarters of the
number of preferred shares at the time, outstanding given in person or by
proxy, either in writing or by vote at an extraordinary general meeting,
create or authorize any additional class of shares ranking prior to the
preferred shares in respect of dividends or distribution of assets on
liquidation or increase the authorized amount of any additional class of
shares ranking prior to the preferred shares in respect of dividends or
distribution of assets on liquidation, or create or authorize any obligation
or security convertible into or evidencing the right to purchase shares of any
additional class ranking prior to the preferred shares in respect of dividends
or distributions of assets on liquidation; and (iii) the Company shall not,
without the consent of the holders of at least three-quarters of the number of
preferred shares at the time outstanding, given in person or by proxy, either
in writing or by vote at an extraordinary general meeting, create or authorize
any class of shares ranking on a parity with the preferred shares in respect
of dividends or distribution of assets on liquidation, or increase the
authorized amount of the preferred shares or of any class of shares ranking on
a parity with the preferred shares in respect of dividends or distribution of
assets on liquidation, or create or authorize any obligation or security
convertible into or evidencing the right to purchase shares of any class
ranking or a parity with the preferred shares in respect of dividends or
distribution of assets on liquidation. Any action specified in this Paragraph
(f) as requiring the consent of the holders of at least a specified proportion
of the number of preferred shares or of any particular series thereof at the
time outstanding or represented at a meeting may be taken with such consent
and with such additional vote or consent, if any, of the shareholders as may
be from time to time required by these Articles, as amended from time to time,
or by law.
(g) Except as otherwise provided herein or by law, the holders of
preferred share shall not be entitled to vote on any manner involving the
Company.
23.2 The common shares in the capital of the Company shall have the following
special rights and restrictions attached thereto:
(a) Subject to the prior and superior rights of the preferred shares
with respect to which any such prior and superior rights are provided in this
Article or by the board of directors as herein authorized, and on the
conditions set forth in the foregoing part of these Articles pertaining to the
preferred shares or in any resolution of the board of directors providing for
the issuance of any particular series of preferred shares and not otherwise,
such dividends (payable in cash, shares or otherwise) as may be determined by
5
<PAGE> 6
the board of directors, may be declared and paid on the common shares from
time to time out of any funds legally available therefor.
(b) Each holder of common shares shall be entitled to one vote for each
common share held and except as otherwise provided herein or by law, the
common shares and any preferred shares having voting rights shall vote
together as a class. At each election for directors every shareholder entitled
to vote at such election shall have the right to vote, in person or by proxy,
the number of common shares owned by him for as many persons as there are
directors to be elected and for whose election he has a right to vote. It is
expressly prohibited for any shareholder to cumulate his votes in any election
of directors.
(c) After payment shall be made in full to the holders of preferred
shares in the event of any liquidation, dissolution or winding up of the
affairs of the Company, the remaining assets and funds of the Company shall be
distributed among the holders of the common shares according to their
respective shareholdings.
6
<PAGE> 1
Exhibit 3(g)
FORM 19
(Section 348)
PROVINCE OF BRITISH COLUMBIA
Certificate of
Inc. No. 186138
COMPANY ACT
-----------
SPECIAL RESOLUTION
The following special resolution was passed by the undermentioned
Company on the date stated:
NAME OF COMPANY: ALASKA APOLLO RESOURCES INC.
DATE RESOLUTION PASSED: JUNE 22, 1998
RESOLUTION:
RESOLVED AS SPECIAL RESOLUTIONS THAT:
1. The Company consolidate all of the 6,000,000 preferred shares without
par value of which none are issued and outstanding, into 1,200,000
preferred shares without par value, every five (5) preferred shares
without par value being consolidate into one (1) preferred share.
2. Paragraph 2 of the Memorandum be altered to read as follows:
"2. The authorized capital of the Company consists of 11,200,000
shares divided into:
10,000,000 common shares without par value; and
1,200,000 preferred shares without par value
having attached thereto the special rights and
restrictions set forth in the Articles of the
Company."
The Memorandum, as altered, is attached hereto as Schedule "A".
Certified a true copy the 25nd day of June, 1998.
(Signature) /s/ Ron Paton
-------------------------------
(Relationship to Company) Solicitor
<PAGE> 2
SCHEDULE "A" ATTACHED TO AND FORMING PART OF A SPECIAL RESOLUTION OF ALASKA
APOLLO RESOURCES INC. PASSED ON THE 22ND DAY OF JUNE, 1998.
- ------------------------------------------------------------------------------
COMPANY ACT
-----------
ALTERED MEMORANDUM
1. The name of the Company is Daugherty Resources, Inc.
2. The authorized capital of the Company consists of 11,200,000 shares
divided into:
10,000,000 common shares without par value; and 1,200,000
preferred shares without par value
having attached thereto the special rights and restrictions
set forth in the Articles of the Company.
2
<PAGE> 1
Exhibit 11
COMPUTATION OF PER SHARE EARNINGS
The table below presents information necessary for the computation of
loss per share of the common stock, on both a primary and fully diluted basis,
for the six months ended June 30, 1998 and 1997, and the years ended December
31, 1997, 1996 and 1995. The computations below reflect the 1 for 5 Reverse
Stock Split effective June 30, 1998.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30 YEAR ENDED DECEMBER 31
------- ----------------------
1998 1997 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net loss applicable to share of
Common Stock and Common
Stock equivalents $ (538,690) $ (545,692) $ (1,708,418) $ (733,973) $ (1,440,003)
Average number of shares of
Common Stock Outstanding 1,968,891 1,907,054 1,964,351 1,700,991 1,548,542
Common Stock equivalents 1,425,404 283,293 1,425,404 283,293 190,333
Total shares of Common Stock
and Common Stock equivalents 3,394,295 2,190,347 3,389,755 1,984,284 1,738,875
Primary loss per share of
Common Stock $ (.27) $ (.29) $ (.87) $ (.43) $ (.93)
Fully diluted loss per share of
Common Stock $ (.16) $ (.25) $ (.50) $ (.37) $ (.83)
- --------------
<FN>
Common Stock equivalents are considered anti-dilutive because of the
net losses incurred by the Company.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<CURRENCY> U.S. DOLLAR
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> APR-01-1998
<PERIOD-END> JUN-30-1998
<EXCHANGE-RATE> 1
<CASH> 201,792
<SECURITIES> 0
<RECEIVABLES> 566,880
<ALLOWANCES> 0
<INVENTORY> 663,169
<CURRENT-ASSETS> 1,431,841
<PP&E> 19,011,224
<DEPRECIATION> 0
<TOTAL-ASSETS> 20,443,065
<CURRENT-LIABILITIES> 3,883,633
<BONDS> 2,980,729
0
0
<COMMON> 21,054,304
<OTHER-SE> (7,475,601)
<TOTAL-LIABILITY-AND-EQUITY> 20,443,065
<SALES> 2,956,729
<TOTAL-REVENUES> 2,956,729
<CGS> 2,598,699
<TOTAL-COSTS> 2,598,699
<OTHER-EXPENSES> 727,642
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 169,348
<INCOME-PRETAX> (538,960)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (538,960)
<EPS-PRIMARY> (.27)
<EPS-DILUTED> (.16)
</TABLE>
