U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
(Mark One)
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended June 30, 1998
( ) TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE EXCHANGE ACT
For the transition period from N/A to N/A
Commission file number 0-15078
NOVA NATURAL RESOURCES CORPORATION
(Exact name of small business issuer as specified in its charter)
Colorado 84-1227328
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
789 Sherman Street, Suite 550
Denver, Colorado 80203
(Address of principal executive offices)
(303) 863-1997
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. X Yes No
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: 5,788,506
Transitional Small Business Disclosure Format (Check One):
Yes ; No X
<PAGE>
<TABLE>
<CAPTION>
NOVA NATURAL RESOURCES CORPORATION
BALANCE SHEET
JUNE 30, 1998
(Unaudited)
<S> <C>
ASSETS
1998
CURRENT ASSETS:
Cash and equivalents $ 8,842
Accounts receivable:
Oil and gas 2,702
Other 551
Current maturities of note receivable 63,689
Accrued Interest receivable 20,098
Prepaid expenses and other 6,956
_________
Total current assets 102,838
OIL AND GAS PROPERTIES, at cost
(using the full
cost method of accounting):
Unproved properties not being amortized 34,924
Properties being amortized 5,971,364
_________
6,006,288
Accumulated depreciation, depletion
and amortization (5,926,334)
___________
Net oil and gas properties 79,954
MINERAL PROPERTIES, at cost 153,692
__________
OTHER ASSETS:
Note receivable, net of current maturities 307,862
Furniture and technical equipment,
net of accumulated depreciation
of $127,734 1,666
_______
Total other assets 309,528
_______
TOTAL ASSETS $ 646,012
<FN>
See accompanying notes to these financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NOVA NATURAL RESOURCES CORPORATION
BALANCE SHEET, CONTINUED
JUNE 30, 1998
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C>
CURRENT LIABILITIES:
Current maturities of long-term debt $ 8,612
Accounts payable 43,711
Accrued expenses 58,115
Short term note 78,348
_________
Total current liabilities 188,786
_________
LONG TERM DEBT, less current maturities 276,494
_________
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Convertible preferred stock, $1.00
par value; 3,000,000 shares
authorized; 1,792,267 shares
issued and outstanding,
liquidation preference $1,792,267 1,792,267
Common stock, $.10 par value;
17,000,000 shares authorized;
5,788,506 shares issued and
outstanding; 578,850
Additional paid-in capital 7,217,801
Accumulated deficit (9,408,186)
___________
Total Stockholders' equity 180,732
TOTAL LIABILITIES
AND STOCKHOLDERS' EQUITY $ 646,012
<FN>
See accompanying notes to these financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NOVA NATURAL RESOURCES CORPORATION
Condensed Statements of Operations
(Unaudited)
Three Months Ended Nine Months Ended
June 30, June 30, June 30, June 30,
1998 1997 1998 1997
________ ________ ________ ________
<S> <C> <C> <C> <C>
REVENUES:
Mineral sales:
Kaolin $ 0 $ 326,725 $ 584 $ 518,280
Gravel Royalties 0 0 1,320 1,914
Oil and gas sales 13,271 24,174 51,276 101,895
________ ________ _______ _______
13,271 350,899 53,180 622,089
EXPENSES:
Mining costs:
Kaolin operations 0 282,106 0 441,461
Oil and gas
production costs 22,158 12,733 61,843 70,313
Depletion, depreciation,
and amortization 3,756 11,966 12,715 28,729
Mineral property abandonments 0 0 6,938 60
General and administrative 55,963 109,993 214,202 324,742
Total costs and expenses 81,877 416,798 295,698 865,305
_______ _______ _______ _______
OPERATING LOSS $ (68,606) $ (65,899) $ (242,518)$ (243,216)
========= ======== ======== =======
OTHER INCOME(EXPENSES):
Equity in losses of
NovaChek LLC 0 (17,635) 0 (29,454)
Interest income 9,308 876 30,916 6,742
Interest expense (8,704) (7,391) (23,056) (20,271)
Gain on sale of assets 0 0 0 76,557
Other Miscellaneous income 0 2,650 410 2,650
________ ________ ________ ________
604 (21,500) 8,270 36,224
Net loss $ (68,002) $ (87,399) (234,248) (206,992)
Loss per share(Note 5) $ (.01) $ (.01) $ (.04)$ (.03)
WEIGHTED AVERAGE SHARES
OUTSTANDING 5,788,506 5,985,846 5,788,935 6,496,188
========= ========= ========= =========
<FN>
See accompanying notes to condensed financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NOVA NATURAL RESOURCES CORPORATION
Condensed Statements of Cash Flows
(Unaudited)
Three Months Ended Nine Months Ended
June 30, June 30, June 30, June 30,
1998 1997 1998 1997
________ ________ ________ ________
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (68,002) $ (87,399) $ (234,248) $ (206,993)
Adjustments to reconcile net
loss to net cash
used by operating activities:
Depletion, depreciation,amortization 3,756 11,967 12,715 28,730
Gain on sale of assets -- -- -- (76,557)
Change in operating assets and liabilities:
Decrease (increase) in:
Accounts receivable (6,096) (204,868) 10,800 204,636
Prepaid expenses and other 372 1,748 (1,460) 2,441
Deposits -- -- -- (550)
Increase (decrease) in:
Accounts payable 5,968 209,895 (44,996) (25,326)
Accrued expenses (6,798) 6,250 55,271 (27,243)
Note payable 78,348 -- 78,348
_______ _______ _______ _______
Net cash provided by (used in)
operating activities 7,548 (62,407) (123,570) (100,862)
_______ _______ _______ _______
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of assets -- -- 13,890 229,957
Investment in and advances to
NovaChek, LLC -- 17,471 -- (40,962)
Capital expenditures (361) (2,664) (47,184) (16,416)
Collection of principal on
note receivable -- -- 36,366
_______ _______ _______ _______
Net cash provided by (used in)
investing activities (361) 14,807 3,072 172,579
_______ _______ _______ _______
CASH FLOWS FROM FINANCING ACTIVITIES:
Purchase of Kane stock -- -- -- (150,000)
Discount on note payable -- 1,140 -- 1,521
Principal payments on long-term debt -- -- (4,670) --
Purchase and retirement of common
and preferred stock -- -- (16,475) --
_______ _______ _______ _______
Net cash provided by (used in)
financing activities -- 1,140 (21,145) (148,479)
_______ _______ _______ _______
INCREASE (DECREASE) IN CASH 7,187 (46,460) (141,643) (76,762)
CASH, at beginning of period 1,655 49,525 150,485 79,827
_______ _______ _______ _______
CASH, at end of period $ 8,842 $ 3,065 $ 8,842 $ 3,065
======= ======= ======= =======
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest $ 1,577 $ 12,500 $ 14,077 $ 12,500
======= ======= ======= =======
<FN>
See accompanying notes to condensed financial statements.
</FN>
</TABLE>
<PAGE>
NOVA NATURAL RESOURCES CORPORATION
Notes to Condensed Financial Statements
Nine Months Ended June 30, 1998 and 1997
(1) The condensed financial statements included herein are unaudited. In the
opinion of management, all adjustments, consisting of normal recurring accruals,
have been made which are necessary for a fair presentation of the financial
position of the Company at June 30, 1998 and the results of operations for the
three and nine month periods ended June 30, 1998 and 1997. Certain amounts have
been reclassified for comparability with the 1998 presentation. Quarterly
results are not necessarily indicative of expected annual results because of
fluctuations in the price received for oil and gas products, demand for natural
gas, and other factors. For a more complete understanding of the Company's
operations and financial position, reference is made to Management's Discussion
and Analysis of Financial Condition and Results of Operations herein and the
financial statements of the Company, and related notes thereto, filed with the
Company's annual report on Form 10-KSB for the year ended September 30, 1997,
previously filed with the Securities and Exchange Commission.
(2) During fiscal 1997, the Company offered to purchase common shares from the
shareholders desiring to sell for $.04 per share. Through September 30, 1997
the Company purchased and retired 13,700 shares for $548. In October 1997, an
additional 411,477 shares were purchased for $16,458 and retired. In March
1998, a final 426 shares were purchased for $17 and retired.
(3) In an action effective January 30, 1998 the Board of Directors of the
Company cancelled all outstanding options to purchase shares of the Company's
common stock held by the employees under the Nova Natural Resources Corporation
1989 Incentive Stock Option Plan, and cancelled all options held by the
Directors under the Nova Natural Resources Corporation 1989 Nonqualified Stock
Option Plan. These options had a strike price of $.10 per share. A total of
1,250,000 options were outstanding. In the same action the Board of Directors
granted options to purchase shares of the Company's common stock under the 1998
Nonqualified Stock Option Plan to all Directors and employees. Options were
granted to purchase a total of 3,373,577 shares at $.03 per share.
(4) In March, 1998 the Company secured a short term loan from Foothills Bank
of $101,348. The loan is to be used to cover operating costs and matures
December 30, 1998. The interest rate is 2 points over prime. Interest is to
be paid monthly, with a principal payment of $101,348 to be paid on December 30,
1998. This loan is guaranteed by the President and by Robert E. McDonald, a
director and large shareholder. The Company intends to repay this loan
primarily with the proceeds from the collection of principal on the note
receivable associated with the sale of the kaolin mine.
(5) Net loss per common share is determined by dividing net loss attributable
to common stock by the weighted average number of common shares outstanding
during each period. Common share equivalents including convertible preferred
stock, stock options, and convertible debentures were not included in the
computation of diluted earnings per share as their effect was anti-dilutive for
1998 and 1997.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
FORWARD-LOOKING STATEMENTS
Management's discussion of anticipated future operations contains predictions
and projections which may constitute forward looking statements. The Private
Securities Litigation Reform Act of 1995, including provisions contained in
Section 21E of the Securities & Exchange Act of 1934, provides a safe harbor for
forward-looking statements. In order to comply with the terms of the safe
harbor, the Company notes that a variety of factors could cause the Company's
actual results and experience to differ materially from the anticipated results
or other expectations expressed in the Company's forward-looking statements.
The risks and uncertainties that may affect the operations, performance,
development and results of the Company's business include the following:
(a) The Company may not be able to enter into an agreement with a new
partner to assist the Company in carrying its paper-grade kaolin
project to the commercial feasibility stage on terms acceptable to Nova.
(b) The paper-grade kaolin project may encounter difficulties, currently
unforeseen, which will prevent attainment of commercial feasibility.
(c) The Company may not be able to find industry partners to evaluate its
oil & gas prospects.
(d) Present and anticipated sources of funds may be insufficient to meet the
Company's working capital needs.
RESULTS OF OPERATIONS
The Company realized net losses for the three month period and nine month
periods ended June 30, 1998 of $68,002 and $234,248, respectively, compared to
net losses of $87,399 and $206,992 for the same periods in 1997.
Mineral product sales were $0 for the three months ended June 30, 1998 and
$326,725 for the same period in 1997. Mineral product sales decreased from
$518,280 to $584 for the nine months ended June 30, 1998 compared to the same
period in 1997. In July, 1997 the Company obtained shareholder approval for the
sale of its cement-grade Kaolin mine, which sale was effective in July 1997.
The sale of the mine was wholly responsible for the severe drop in sales.
Oil and gas sales for the three months and nine months ended June 30, 1998
decreased $10,903 and $50,619, respectively, to $13,271 and $51,276 compared to
$24,174 and $101,895 for the three months and nine months ended June 30, 1997.
The Company sold several oil & gas producing assets as of November 1, 1996,
primarily overriding royalty interests in producing oil & gas wells in the
Wyoming Overthrust Belt. The decrease in oil and gas sales in the nine month
period is primarily attributable to the lower volume of oil and gas produced net
to the Company's interest as a result of this sale, and to the dramatic decrease
in the price of oil for the three month and nine month periods ended June 30,
1998. The Company's future oil and gas production volumes will be at this
substantially reduced level, less normal production decline, as a result of this
sale unless new production can be brought on stream from as yet undrilled
properties, which is speculative. The sales volumes and average sales prices
during the periods were as follows:
Three Months Ended
June 30, 1998 June 30,1997
Sales
Oil (Bbl) 1,066 1,227
Gas (MCF) 1,526 3,163
Average Sales Price
Oil ($/Bbl) $10.85 $18.70
Gas ($/MCF) $ 1.11 $ 1.10
Nine Months Ended
June 30, 1998 June 30, 1997
Sales
Oil (Bbls) 3,248 4,764
Gas (MCF) 6,575 16,039
Average Sales Price
Oil ($/Bbl) $12.78 $19.05
Gas ($/MCF) $ 1.39 $ 1.41
Mining costs, including transportation and royalties were $0 for the three
months and nine months ended June 30, 1998 compared to $282,106 and $441,461 for
the same periods in 1997. The decline is due to the sale of the cement-grade
kaolin mine in July, 1997.
Oil and Gas lease operating expenses including production taxes increased
$9,425 for the three months and decreased $8,470 for the nine months ended June
30, 1998 as compared to 1997. The decrease is primarily attributable to the
lower production volume in the 1998 period as a result of the production sale.
The increase in the three month period is due to the increased costs normally
incurred in aging wells. Since the 1996 production sale involved primarily
royalties, which are free of most production costs, production costs did not
decline as sharply as oil and gas sales, since the remaining properties held are
primarily working interests.
General and administrative expenses decreased $54,030 for the three month
period and $110,540 for the nine month period ending June 30, 1998 compared to
the same periods ending June 30, 1997. This decrease is primarily due to higher
legal and printing expenses associated with the pending sale of the Company's
kaolin mine, as well as legal costs incurred in connection with the repurchase
of common and preferred stock from a major shareholder, both one-time
events occurring in the 1997 quarters. In February, 1997 the Company moved to
smaller space which decreased the rent and incurred moving costs for that
period. Travel was also dramatically reduced in the 1998 periods. Accounting
expenses were also lower in the 1998 periods, due to the fact that the company
engaged a new accounting firm which had a lower level of fees than the previous
firm and to the extra accounting work associated with both the pending sale of
the kaolin mine and the stock repurchase in the 1997 periods. Staff salaries
have been reduced to a minimum, and all expenses are continually scrutinized for
deduction or elimination.
Depletion, depreciation, and amortization decreased 69% to $3,756 and 56%
to $12,715, respectively, in the three months and nine months ended June 30,
1998, compared to $11,966 and $28,729 in the fiscal 1997 periods. This decrease
was primarily the result of the sale of the cement-grade kaolin mine which
eliminated mineral depletion and of producing assets, which substantially
reduced the full-cost pool.
Mineral property abandonments increased to $6,938 for the nine months ended
June 30, 1998, compared to $60 for the comparable period in 1997, and was at $0
for both three month periods. This is due to the abandonment of the Querida
Gold prospect in the 1998 fiscal period.
The Company's share of losses of NovaChek in the three and nine months
periods ending June 30, 1997 were $17,635 and $29,454 respectively as compared
to $0 for the periods ending June 30, 1998. During fiscal 1997, NovaChek LLC
commenced dredging operations but management determined that it was not possible
to operate economically. In December 1997, the managers of NovaChek LLC decided
to liquidate the LLC by the end of 1997 and they determined that the net
realizable value of NovaChek LLC's assets would not be sufficient to satisfy all
of the liabilities. In September 1997, the Company wrote its investment in
NovaChek down to $4,000, which it received in February, 1998. The assets in
NovaChek were sold to a bidder in Nome, Alaska for $18,000 which will be paid
by November, 1998. These funds will be divided among all the creditors of
NovaChek. The Company's share will be approximately $12,800.
Interest income increased to $9,308 and $30,916 in the three months and
nine months ended June 30, 1998, respectively, compared to $876 and $6,742 in
the 1997 periods. The increase is due to the accrued interest on the note
receivable from the sale of the cement grade kaolin mine. Interest expense
increased to $8,704 compared to $7,391 for the three month period, and increased
to $23,056 from $20,271 for the nine month period. This increase is due to the
accrued interest on the note payable for the repurchase of the common and
preferred stock from a former director and a short term loan from Foothills Bank
of $101,348. This loan is being used to cover operating costs.
A gain of $76,557 on the one-time sale of producing assets was recorded in
the nine month period ended June 30, 1997. There was no such gain in the 1998
period.
CAPITAL RESOURCES-SOURCES OF CAPITAL
The Company's primary sources of cash flow during the nine months ended
June 30, 1998 were the collection of accounts receivable, proceeds from the non-
recurring sale of an oil and gas prospect, collection of principal on the note
receivable associated with the sale of the kaolin mine, and a short term note
payable against the Company's receivable from the mine sale. During the three
months ended June 30, 1998, almost all the operating costs were taken from the
short term note. Cash provided by operations totaled $7,548 for the three month
period and cash used by operations was $123,570 for the nine month period ended
June 30, 1998 as compared to $62,407 and $100,862 used in the comparable periods
in 1997. The decrease in cash and cash equivalents was $141,643 for the nine
month period of 1998 and for the three month period cash was increased $7,187.
The decrease in 1997 was $76,762 for the nine months and $46,460 for the three
months. Cash on hand at June 30, 1998 was $8,842 as compared to $3,065 for the
1997 period.
CAPITAL RESOURCES-UTILIZATION OF CAPITAL
For the nine month period ended June 30, 1998 the Company reduced accounts
payable by $44,996. Proceeds from the sale of properties were $13,890, and
collection of principal on the note receivable was $36,366. Capital
expenditures were $47,184 resulting in cash provided by investing activities of
$3,072. All funds for the remainder of the year will be provided by the
proceeds from the loan against future accounts receivable from the mine sale,
proceeds from drilling arrangements and/or outright sale of drilling prospects,
fees and other payments in connection with a potential joint venture on the
Company's paper kaolin properties, and/or the sale of an interest in the kaolin
properties, or the sale of stock in a private placement, none of which possible
events are guaranteed.
LIQUIDITY
At June 30, 1998, the Company's working capital totaled ($85,948) as
compared to $147,876 at September 30, 1997. Liquidity for the nine months ended
June 30, 1998 was provided by the sale of an oil & gas prospect, collection of
principal on note receivable, and a short term loan against the receivable from
the mine sale.
FUTURE TRENDS
The Company asked its partner in its Minnesota paper kaolin exploration
project to withdraw from the project, and an agreement of termination was signed
on January 9, 1998. It is the Company's intent to replace its former partner
with a new partner who will financially support the work needed to bring the
project to final feasibility. The Company and its former partner have expended
in excess of $3 Million on this project through June, 1998. The cost of
reaching final feasibility has been estimated by the Company at an additional
$4 Million, which it is contemplated would be expended over the next 2 - 3
years. The Company now controls 100% of the interest in the project, but must
make a future payment of $300,000 to its former partner within four years to
retain that interest or the properties will revert to its former partner.
The Company is proposing a program of development to potential industry
partners, which proposal includes overhead and management fees which the Company
would receive in return for operating the program to the point of commercial
feasibility. It is proposed that an industry partner would earn a majority
interest in the project by expending these funds, and Nova and its partner would
either arrange the sale of the project at the point of commercial feasibility,
or Nova's partner would finance or arrange financing for a processing plant
which would be required to initiate production on the properties committed to
the project, which would require an estimated investment of $45 Million. It is
the Company's goal to enter into an agreement with a new partner and profitably
put the properties into production. While the Company believes it will be
successful in entering into an agreement with a new partner on terms favorable
to the Company, that the project will prove to be economically feasible, and
that it will be put into profitable production, there can be no assurance that
any of these events will occur.
While this project is projected to generate substantial financial returns
over the first 25 years of contemplated operations, it can only be successful
by taking market share from established suppliers, whose financial resources and
expertise are considerable. The Company has a substantial transportation cost
advantage, however, since the Company's properties are much closer to the target
markets than all of its competitors, and the Company believes its products may
also have quality advantages over its competitors products. The Company's
processing costs are expected to be higher than those of its competitors, and
its mining costs may also be higher. It is contemplated that the Company's
efforts will be concentrated primarily on this project over the next several
years, and that overhead and management fees connected with this project, which
would be paid by its new partner, will be adequate to cover the Company's costs
and prevent any further deterioration in its working capital. However, until
an acceptable industry partner is located, the Company expects a continuing
decline in working capital.
The Company is in discussions with multiple potential partners in regard
to this project, and has supplied samples of its paper kaolin to more than one
potential partner for evaluation.
If the Company is unable to obtain a new partner to fund this project in
the next several months, the Company will be forced to consider merger or sale
opportunities, other sources of financing, or liquidation. In that event, the
project will likely be taken off the market while the Company determines whether
to continue in business, to merge or to liquidate. The Company has been
approached by a party which is interested in acquiring the Company, and
exchanging the Company's remaining natural resources assets, primarily its paper
kaolin properties, to the holders of the Company's preferred stock in exchange
for that stock, which has liquidation rights. Others have also expressed an
interest in acquiring the Company as a public vehicle. The Company has not
entered into serious discussions with any of these parties. If the Company were
to liquidate, the Company's assets would be inadequate to cover the amount due
in liquidation to the preferred shareholders, and accordingly all of the
Company's net assets would be distributed to the preferred shareholders, and no
assets would be available after payment of liabilities for distribution to the
common shareholders.
The Company has reduced its overhead substantially over the past two years,
and further reductions, including salary reductions, have been implemented until
an industry partner for the kaolin project can be secured.
YEAR 2000
The Company does not have a year 2000 problem since the bulk of its
computing is performed on MacIntosh machines, and the PC which it does use for
its accounting will be obsolete and it and its software will be replaced prior
to the year 2000. The cost of replacing this equipment will not be material.
A PC is used for mapping and ore reserve computations, but the work done on this
machine will not be affected by the year 2000 problem. Nova's business is not
materially dependent on suppliers who may have year 2000 problems.
OIL & GAS PROSPECTS
The Company holds a 50% interest in the Luman prospect, an exploratory gas
prospect in the State of Wyoming. The other 50% interest is held by the REM
Family Trust, Robert E. McDonald, Trustee. Mr. McDonald is the Company's
largest shareholder and a Director. The Company and the Trust have not been
successful in seeking an industry partner to drill this prospect, and the
properties are being offered to the industry for sale, with a retained royalty.
There is no certainty that a sale under terms acceptable to the Company will be
made. A second prospect, also in Wyoming, was sold to an industry partner, but
the leases expired on December 31, 1997, before the prospect could be drilled.
The industry partner was the successful bidder on these leases when they were
auctioned in August, 1998. If the leases are drilled and are successfully
completed, Nova will receive an override on production. The Luman prospect
leases have considerable time remaining before they are subject to expiration.
The Company holds a similar interest in leases in the Great Salt Lake in
Utah, also jointly owned with the Trust. These leases will expire in one and
one-half years if not held by production or extended prior to expiration.
Significant effort has been expended with third parties to sell this lease
position to an industry partner with the capability to develop them. It cannot
be determined at this time whether these efforts will be successful.
The Company is a participant in a lawsuit filed by a group of royalty
owners against Chevron, USA, seeking redress of what the plaintiffs believe is
a substantial underpayment of royalties by Chevron on certain properties in
Wyoming as well as breach of implied covenants to prevent drainage. The amount
claimed by the group is in excess of $20 million, which amount includes a
substantial amount of interest. Nova's share is presently estimated to be in
excess of $100,000, half of which would be net to Nova after payment of
contingent fees. Chevron has counterclaimed a substantial amount reputed to be
back taxes, but in the Company's opinion, such counterclaims are without merit.
It is not possible to determine whether the group will be successful in this
litigation, nor is it possible to determine the actual amount which will be
collected in the event of a successful outcome, or when this matter will be
resolved. Trial is scheduled to commence in November of this year in Evanston,
Wyoming.
NOME PROSPECT
The Company has reduced its lease position offshore Nome, Alaska, and has
entered into royalty arrangements on all of the remaining leases whereby an
unaffiliated third party will pay the rentals and other costs associated with
these leases, and attempt to establish commercial gold production on them. The
Company retained a term royalty interest in any gold production from these
leases, with a maximum royalty amount of $360,000. However, there is no
certainty that royalty income will result from these arrangements, nor as to the
amount should the Company realize income from them. The Company will incur no
further costs in connection with these leases.
A more complete description of these prospects is contained in the
Company's report on Form 10-KSB for fiscal 1997.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits. Exhibit 27, Financial Data Schedule (Submitted only in
electronic format.
(b) Form 8-K. A report on Form 8-K was filed on February 20, 1998.
<PAGE>
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 thereunto duly authorized.
NOVA NATURAL RESOURCES CORPORATION
Date: August 14, 1998 By: /s/ Brian B. Spillane
Brian B. Spillane,
President, Director, and
Chief Executive Officer
Date: August 15, 1998 By: /s/ James R. Schaff
James R. Schaff,
Secretary-Treasurer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> SEP-30-1998 SEP-30-1998
<PERIOD-END> JUN-30-1998 JUN-30-1998
<CASH> 8,842 8,842
<SECURITIES> 0 0
<RECEIVABLES> 87,040 87,040
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 102,838 102,838
<PP&E> 6,289,380 6,289,380
<DEPRECIATION> 6,054,068 6,054,068
<TOTAL-ASSETS> 646,012 646,012
<CURRENT-LIABILITIES> 188,786 188,786
<BONDS> 250,000 250,000
0 0
1,792,267 1,792,267
<COMMON> 578,850 578,850
<OTHER-SE> (2,190,385) (2,190,385)
<TOTAL-LIABILITY-AND-EQUITY> 646,012 646,012
<SALES> 13,271 53,180
<TOTAL-REVENUES> 22,579 84,506
<CGS> 0 0
<TOTAL-COSTS> 81,877 295,698
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 8,704 23,056
<INCOME-PRETAX> (68,002) (234,248)
<INCOME-TAX> (68,002) (234,248)
<INCOME-CONTINUING> (68,002) (234,248)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (68,002) (234,248)
<EPS-PRIMARY> (.01) (.04)
<EPS-DILUTED> (.01) (.04)
</TABLE>
