<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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, 1996
Commission file number: 33-15528-D
MONUMENT RESOURCES, INC.
(Exact Name of small business issuer as specified in its charter)
Colorado 84-1028449
(State or Other Jurisdiction of (IRS Employer Identification
Incorporation or Organization) Number)
513 WILCOX STREET, SUITE 220
P.O. BOX 1450
CASTLE ROCK, COLORADO 80104
(Address of Principal Executive Offices including zip code)
(303) 688-3993
(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.
Yes --- No -X-
As of August 13, 1996, 7,587,000 shares of common stock, no par value per
share, were outstanding.
Transitional Small Business Disclosure Format (check one): Yes--- No X
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MONUMENT RESOURCES, INC.
FORM 10-Q
INDEX
Page No.
PART I. FINANCIAL INFORMATION
Balance Sheets as of June 30, 1996
and September 30, 1995 3
Statements of Operations for the Three and
Nine Months Ended June 30, 1996 and 1995 5
Statements of Cash Flows for the
Nine Months Ended June 30, 1996 and 1995 6
Notes to Financial Statements 8
Management's Discussion and Analysis of
Financial Condition and Results of Operations 10
PART II. OTHER INFORMATION 12
Item 1. Legal Proceedings
Item 2. Changes in Securities 12
Item 3. Defaults Upon Senior Securities 12
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 5. Other Information 12
Item 6. Exhibits and Reports on Form 8-K 13
Item 7. Signatures 13
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MONUMENT RESOURCES, INC. AND SUBSIDIARY
PART I. FINANCIAL INFORMATION
CONSOLIDATED BALANCE SHEET (Unaudited)
JUNE 30 SEPTEMBER 30
1996 1995
ASSETS
Current assets:
Cash $ 710,287 $446,954
Accounts Receivable 39,901 --
Prepaid Expense 9,250 --
Trading Securities (Note 5) 392,264 --
---------- --------
Total Current Assets 1,151,702 446,954
Property and equipment:
Mineral properties 96,927 96,039
Proved and unproved oil and gas properties,
successful efforts method, net of
accumulated depletion (Note 2) 2,093,082 67,730
Office equipment, net of accumulated
depreciation 0 12
---------- --------
Net property and equipment 2,190,009 163,781
Equity Securities, at market 137,629 175,000
---------- --------
Total Assets $3,479,340 785,735
---------- --------
See Notes to Financial Statements.
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MONUMENT RESOURCES, INC. AND SUBSIDIARY
PART I. FINANCIAL INFORMATION
CONSOLIDATED BALANCE SHEET (Unaudited)
JUNE 30 SEPTEMBER 30
1996 1995
LIABILITIES AND STOCKHOLDER EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 245,876 $ 5,175
Oil and gas royalty interest payable 3,377 --
Income Taxes Payable 21,729 --
--------- ----------
Total current liabilities 270,982 5,175
Stockholders equity:
Preferred stock, no par value,
authorized 1,000,000 shares,
none issued.
Common stock, no par value,
authorized 10,000,000 shares:
issued and outstanding 7,587,000
shares at 06/30/96 and 4,587,000
shares at 09/30/95. (Note 2) 3,531,210 1,156,210
Deficit accumulated during exploration
stage (454,072) (544,241)
Unrealized gain on equity securities 131,220 168,591
---------- ----------
Total stockholders equity 3,208,358 780,560
---------- ----------
Total liabilities and
stockholders equity $3,479,340 $ 785,735
---------- ----------
See Notes to Financial Statements.
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MONUMENT RESOURCES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
THREE MONTHS NINE MONTHS
ENDED JUNE 30, ENDED JUNE 30,
1996 1995 1996 l995
Revenue:
Oil & Gas sales $ 36,793 $ -- $ 41,198 $ --
Interest Income 5,589 2,025 16,328 4,014
Gain on sale of stock 118,221 362,969 187,546 362,969
-------- -------- -------- --------
160,603 364,994 245,072 366,984
Expenses:
General & Admin 49,817 30,895 93,110 92,109
Exploration &
dry hole costs
& impairment -- 250 -- 769
Lease operating expense 35,029 -- 36,598 --
Depletion 14,800 -- 17,760 --
Depreciation -- 6 12 17
-------- -------- -------- --------
99,646 31,151 147,480 92,895
Net profit (loss) before
income taxes 60,957 333,843 97,592 274,089
Income taxes 423 20,279 7,423 20,279
-------- -------- -------- --------
Net profit (loss) $ 60,534 $313,565 $ 90,169 $253,810
-------- -------- -------- --------
Net profit (loss) per
share $ .01 $ .08 $ .02 $ .06
-------- -------- -------- --------
Weighted average
number of shares
outstanding 7,587,000 4,141,545 5,583,350 4,263,144
--------- --------- --------- ---------
See Notes to Financial Statements.
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MONUMENT RESOURCES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
NINE MONTHS
ENDED JUNE 30,
1996 1995
Cash flows from operating activities:
Net Income $ 90,169 $ 253,810
Items not requiring cash:
Depreciation and Depletion 17,772 17
Services contributed by officers -- 22,500
Gain on sale of investment stock (187,546) (362,969)
Deferred offering costs -- 6,550
Deferred income tax expense -- 20,279
Changes in operating assets and liabilities:
Increase (decrease) in accounts
payable and accrued expenses 40,807 (12,194)
Increase in accounts
receivable and accrued income (39,901) --
Increase in prepaid expense (9,250) --
--------- ---------
Net cash flows from operations (87,949) (72,007)
--------- ---------
Cash flows from investing activities:
Acquisition of oil & gas properties (8,112) (25,000)
Additions to mineral properties (888) (250)
Proceeds from sale of investment stock 187,546 404,628
Proceeds from sale of oil and gas properties 565,000 --
Purchase of bonds (392,264) --
--------- --------
Net cash flows from investing activities: 351,282 379,378
--------- --------
Cash flows from financing activities:
Proceeds from sale of common stock -- 32,000
Repayment of notes payable -- (13,552)
--------- --------
Net cash flows from financing
activities: -- 18,448
--------- --------
Net increase in cash 263,333 325,819
Cash at beginning of period 446,954 158,272
--------- ---------
Cash at end of period $ 710,287 $ 484,091
--------- ---------
See Notes To Financial Statements.
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MONUMENT RESOURCES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)
NINE MONTHS
ENDED JUNE 30,
1996 1995
Schedule of non cash investing
and financial activities:
Unrealized Gain (loss) on equity security $ (37,371) $168,591
Issuance of common stock
for oil and gas properties 2,375,000
Exchange of accounts payable
for oil and gas properties 225,000
-----------
Total purchase of oil and gas properties 2,600,000
Oil and gas reserves (2,200,000)
Lease and well equipment (50,000)
Rolling stock (50,000)
Pipeline (300,000)
-----------
Cash paid through June 30, 1996 0
-----------
See Notes To Financial Statements.
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MONUMENT RESOURCES, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
NOTE 1. NATURE OF OPERATIONS
The Company is engaged in the acquisition of mineral prospects and oil and gas
properties. The Company's mineral prospects are in Colorado, Montana and
western Canada. The Company's oil and gas properties and areas of interest
are in Nebraska, Kansas and Texas. Much of the Company's business has focused
on brokering prospects, though in the fiscal quarter it has acquired oil and
gas production in Kansas and Texas.
USE OF ESTIMATES
The Company uses estimates in the preparation of its financial statements,
primarily in the determination of depletion and realizable value of its
investments in securities. Management has calculated depletion costs of its
producing oil properties based on its estimate of recoverable reserves.
Management has estimated the realizable market value of its investment in
Southern Africa Minerals Corporation based on the trading price on the Toronto
Exchange.
CONCENTRATION OF CUSTOMERS
The Company's revenues and cash flow in the near term will come from the sale
of its investments in securities and from its oil and gas properties. The cash
realized from the sale of securities is dependent on the market prices on
Canadian exchanges and on the demand for large blocks of stock. Revenues and
cash from oil and gas operations will likely be concentrated in a few
purchasers as well as the then market price of petroleum production.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited, condensed financial statements have been prepared
in accordance with Item 310 of Regulation SB and do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring adjustments) considered necessary
for a fair presentation have been included. Operating results for the period
ended June 30, 1996 are not necessarily indicative of the results that may be
expected for the fiscal year ending September 30, 1996. These statements
should be read in conjunction with the financial statements and notes thereto
included in Form 10-KSB for the fiscal year ended September 30, 1995.
MINERAL PROPERTIES
Costs of acquiring, exploring and developing specific mineral properties are
capitalized on a property by property basis until the commercial viability of
each property is determined. When a property reaches the production stage, the
related capitalized costs will be amortized, using the units of production
method on the basis of periodic estimates of ore reserves. Mining properties
are periodically assessed for impairment of value and any impairments are
charged to operations at the time of impairment. Should a property be sold or
abandoned, its capitalized costs are charged to operations and gain or loss
recognized.
OIL AND GAS PROPERTIES
The Company follows the successful efforts method of accounting for its oil
and gas activities. Under this accounting method, costs associated with the
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acquisition, drilling and equipping of successful exploratory and development
wells are capitalized. Geological and geophysical costs, delay rentals and
drilling costs of unsuccessful exploratory wells are charged to expense as
incurred. Depletion and depreciation of the capitalized costs for producing
oil and gas properties are provided by the unit-of-production method based on
proved oil and gas reserves. Undeveloped properties are periodically assessed
for possible impairment due to unrecoverability of costs invested. Cash
received for partial conveyances of property interests are treated as a
recovery of cost and no gain or loss is recognized.
NOTE 2. OIL AND GAS ACTIVITIES
In May 1995, the Company acquired a 100% leasehold interest in approximately
22,000 acres of undeveloped oil and gas leases in Perkins County, Nebraska for
$25,000 cash and 175,000 shares of the Company's restricted common stock. A
portion of this property has been optioned to a third party for a 12 well
program pursuant to an agreement whereby the Company will be reimbursed for
its acreage costs and will retain an overriding royalty. As of December 31,
1995, the Company has received $2,500 for acreage reimbursement and title
clearing and an additional $10,000 for drilling sites. Under the 12 well
program, two wells have been drilled and cased and are currently being
evaluated.
In November 1995, the Company acquired an interest in three producing oil
wells in Kimball County, Nebraska for $22,000. A total of $12,300 in income
was received during the nine month period ending June 30, 1996, and a total of
$3,500 in lease operating expenses was paid. Although the wells are generating
some income at this time, no study of oil and gas reserves on this property by
independent petroleum engineers has been performed and therefore there is no
assurance of long term revenue potential.
Pursuant to a February 23, 1996 Agreement and Plan of Reorganization with
Powerhouse Resources, Inc., and Crescent Oil and Gas Corporation and an
addendum dated March 22, 1996, the Company acquired from Powerhouse Resources,
Inc. 100% of Crescent Oil & Gas Corporation. The Company issued 1,000 shares
of convertible preferred stock to Powerhouse as payment for Crescent. The
number of shares of the Company's Common Stock to be issued on conversion of
the preferred stock was to range from 3,000,000 to 4,600,000 depending upon
Powerhouse fulfilling certain financial commitments and upon the Company's
decision to accept or reject an offshore oil and gas storage depot site in
China.
On August 5, 1996 the Company, Powerhouse Resources Inc., and Crescent Oil and
Gas Corporation entered into a supplement to the agreement dated February 23,
1996 which substantially modified the original plan of the Company acquiring
Crescent Oil and Gas. Effective April 1, 1996 the Company will now acquire
only the assets of Crescent known as (a) the Galvin Ranch property, Webb
County, Texas; (b) the Levenworth, Kansas gas system pipeline, wells,
buildings and equipment; and (c) the East Voss property in Knox County, Texas.
In exchange for the acquired properties the Company will issue 3 million
shares of its common stock subject to the execution of documents necessary to
assign the properties and clear liens and encumbrances against the properties.
In addition, one million shares of the Company's Common Stock held in escrow,
payable to Powerhouse under certain circumstances, will be canceled and
returned to the Company as well as the 1,000 shares of the Company's
convertible preferred stock originally issued to Powerhouse Resources, Inc.
As part of the above transaction, the Company will also pay Powerhouse
Resources, Inc. the sum of $225,000 cash. The value of the purchase is
$2,600,000, including the $225,000 cash paid based on the fair market value of
the oil and gas assets acquired. The purchase is being accounted for by
Monument using the purchase method of accounting.
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The assets acquired from Crescent include: (1) gas wells and a gas gathering
system in Kansas; (2) a potential oil water flood unit containing 30 well
sites in Knox County, Texas; (3) a 15% working interest and a 2% overriding
royalty interest in a major oil and gas lease known as the Galvin Ranch
totaling approximately 69,000 acres in Webb County, Texas.
On May 10, 1996 the Company sold approximately one half of its interest in the
Galvin Ranch property located in Webb County, Texas to Union Pacific Resources
Company, an unaffiliated third party, for $565,000. No gain or loss was
recognized on this transaction because the Company assigned a basis of
$565,000 to the acquisition of this interest in the Galvin Ranch property, and
wrote off that basis against the sales price.
NOTE 3. NOTE RECEIVABLE
Pursuant to a letter agreement dated December 15, 1995, the Company provided
Crescent Oil and Gas Corporation ("Crescent"), a non-revolving line of credit
for up to $200,000. $81,000 was advanced to Crescent during the quarter ended
December 31, 1995 and the remaining $119,000 was advanced during the quarter
ending March 31, 1996. The full amount of the note was due March 14, 1996,
plus 8% interest. In February, 1996, the Company agreed to loan Crescent an
additional $100,000 and the original note was amended to include this amount
and an extension of the March 14, 1996 due date was granted. Concurrently with
the advance on this line of credit, the Company received a $20,000 payment
from Crescent for the right to negotiate a potential merger/acquisition
arrangement between the two companies. On April 5, 1996 Crescent repaid the
$300,000 loan. See Note 2 for information on the acquisition of oil and gas
properties.
NOTE 4. INCOME TAXES
For the nine months ended June 30, 1996 the Company has accrued an estimated
income tax liability in the amount of $21,729. For income tax purposes the
Company has no net operating loss carry forwards.
NOTE 5. SECURITIES PURCHASES
During the quarter ended June 30, 1996 the Company purchased bonds classified
as trading securities with an estimated fair value of approximately $392,000.
The principal reason for this purchase was to enjoy the higher yield of bonds
as compared to holding these funds in a money market account.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 1996, the Company had a total of $1,102,551 in cash and
marketable securities compared to $446,954 in September 30, 1995. The
increase of $665,597 during this period was primarily the result of a $565,000
sale of an oil and gas property, as well as the sale of stocks held for
investment at various times during the period.
The Company has been gradually liquidating the securities it holds and using
the proceeds in its business. During the nine month period the Company sold a
total of 500,000 share of Layfield Resources, Inc. stock and netted $187,546
in cash. The Company's primary sources of capital for operations is (1)
existing working capital, (2) the potential value of its investments in
securities of others, which may fluctuate, and (3) income generated from
producing oil and gas properties acquired during the quarter ended June 30,
1996. Management will continue to monitor the value of the securities held
and possible investment
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opportunities available to maximize the value of these assets. The Company
will continue to seek joint venture financing for acquisitions, development
and maintenance of its natural resource properties. Management believes that
its current cash and investment position will enable it to meet all short-term
obligations and seek additional investment opportunities with current and
future revenue potential.
In connection with the acquisition of the producing properties of Crescent Oil
and Gas, (See Note 2 above), the Company is obligated to maintain the acquired
properties which will require routine maintenance and capital expenditures in
an undetermined amount. All of the properties require workover of certain
wells in order to continue and, hopefully, increase production and to operate
on a more profitable basis. Also associated with these properties are royalty
payments and equipment lease payments, which the Company is currently
renegotiating. It is anticipated that during this transition period,
additional expenses for consulting, contract labor, legal and accounting fees
will increase significantly, some of which will continue during the long term.
In order to meet these immediate and short term obligations, and in an effort
to minimize future development expenses associated with some of the properties
acquired, the Company has sold a portion of the acquired interest in the
property known as the Galvin Ranch (reported herein at Note 2) for $565,000
and it will utilize a portion of the cash received to satisfy these
commitments.
RESULTS OF OPERATIONS
In addition to the revenue realized from the sale of Layfield shares noted
above, during the quarter ended June 30, 1996, the Company realized a total of
$5,589 in interest compared to $2,205 during the quarter ended June 30, 1995.
For the nine month period ended June 30, 1996, interest income totaled $16,328
compared to $4,014 for the same period in 1995. An additional $36,793 has
been generated from oil and gas properties during the quarter ended June 30,
1996, which was not realized during the same period of 1995.
General and administrative expenses for the quarter and nine months ended June
30, 1996 were up as compared to the comparable periods of the prior year. The
quarterly amounts increased from $30,895 in 1995 to $49,817 in 1996, and the
nine month amounts increased from $92,110 to $93,110.
In summary, the results for this nine month period show a decrease in revenue
of $121,912 over the same period ended June 30, 1995 and a $54,585 increase in
expenses.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
N/A
ITEM 2. CHANGES IN SECURITIES
N/A
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
N/A
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
N/A
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ITEM 5. OTHER INFORMATION
In the Company's prior Form 10-QSB, the Company reported that on April 5,
1996, Monument Resources, Inc. (the "Company") acquired all of the outstanding
stock of Crescent Oil & Gas Corporation ("Crescent") from Powerhouse
Resources, Inc. ("Powerhouse") in exchange for 1,000 shares of the Company's
Series A Convertible Preferred Stock (the "Preferred Stock"). The shares of
Preferred Stock would have been convertible into a total of up to 4,600,000
shares of the Company's Common Stock upon the occurrence of certain events.
The actual number would have ranged from 3,000,000 shares to 4,600,000 shares
depending upon whether Powerhouse fulfills certain financial commitments and
whether the Company decided to accept or reject an offshore oil and gas
storage depot site in China. If all such shares of Common Stock were to be
issued upon conversion, those shares would represent approximately 50.1% of
the Company's Common Stock then outstanding.
The stock issuances were to be made pursuant to an Agreement and Plan of
Reorganization ("Agreement") among the Company, Crescent and Powerhouse, the
sole shareholder of Crescent. The terms of the Agreement were the result of
negotiations between the managements of the Company and Powerhouse. The Board
of Directors did not obtain any independent "fairness" opinion or other
evaluation regarding the terms of the Agreement due to the cost of obtaining
such options or evaluations.
Under the terms of the Agreement, the Company had agreed to file a
registration statement under the Securities Act of 1933, as amended, covering
the shares of Common Stock issuable upon the conversion of the Preferred Stock
to enable Powerhouse to sell such shares of Common Stock or make a pro rata
distribution of such Common Stock to the shareholders of Powerhouse, which is
a publicly held company.
Pursuant to the terms of the Agreement, effective on the closing of the
acquisition the Company's Board of Directors was expanded to six (6) persons,
and the following persons are now Directors of the Company:
A.G. Foust (1)
Stewart A. Jackson (1)
John J. Womack (1)
Dennis C. Dowd(2)
Hunter G. Swanson (2)
(1) Continuing Director of the Company.
(2) Designees of Powerhouse.
The sixth director was to selected by the five persons currently on the Board
at a later date.
On August 5, 1996 the Company, Powerhouse Resources, Inc. and Crescent Oil and
Gas Corporation entered into a supplement to the agreement dated February 23,
1996, which substantially modified the original plan of the Company acquiring
Crescent Oil and Gas. Effective April 1, 1996 the Company will now acquire
only the assets of Crescent known as (a) the Galvin Ranch property, Webb
County, Texas; (b) the Levenworth, Kansas gas system pipeline, wells,
buildings and equipment; and (c) the East Voss property in Knox County, Texas.
The Company did not acquire the Suimork oil depot in China. In exchange for
the acquired properties the Company will issue three million shares of its
common stock subject to the execution of documents necessary to assign the
properties and clear liens and encumbrances against the properties. In
addition, one million shares of the Company's common stock held in escrow,
payable to Powerhouse under certain circumstances, will be cancelled and
returned to the Company as well as
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the 1,000 shares of the Company's convertible preferred stock originally
issued to Powerhouse Resources, Inc. In addition to the issuance of 3,000,000
shares, the Company will pay Powerhouse Resources, Inc. the sum of $225,000
cash.
On July 31, 1996 Mr. Hunter G. Swanson, a member of the Board of Directors
resigned.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
N/A
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
MONUMENT RESOURCES, INC.
Date: August 13, 1996 By:/s/ A.G. Foust
A.G. Foust, President (Chief
Executive Officer, Principal
Financial and Accounting Officer)
and a Director
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheets and consolidated statements of operations found on
pages 2 - 4 of the Company's Form 10-QSB for the year to date, and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> JUN-30-1996
<CASH> 710,287
<SECURITIES> 392,264
<RECEIVABLES> 39,901
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,151,702
<PP&E> 2,190,009
<DEPRECIATION> 0
<TOTAL-ASSETS> 3,479,340
<CURRENT-LIABILITIES> 270,982
<BONDS> 0
<COMMON> 3,531,210
0
0
<OTHER-SE> (322,852)
<TOTAL-LIABILITY-AND-EQUITY> 3,479,340
<SALES> 245,072
<TOTAL-REVENUES> 245,072
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 147,480
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 97,592
<INCOME-TAX> 7,423
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 90,169
<EPS-PRIMARY> .02
<EPS-DILUTED> 0
</TABLE>
