<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC
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, 1997
Commission File Number: 33-15528-D
MONUMENT RESOURCES, INC. AND SUBSIDIARIES
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(Exact name of Small Business Issuer as Specified in its Character)
Colorado 84-1028449
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(State of other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
P.O. Box 1450, Castle Rock, CO 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 ( x ) No ( )
As of August 12, 1997, 6,147,000 shares of common stock, no par value per share,
were outstanding.
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MONUMENT RESOURCES, INC. AND SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION Page Number
Balance sheets as of June 30, 1997
and September 30, 1996 3
Statements of Operations for the
Three Months and Nine Months ended
June 30, 1997 and 1996 5
Statements of Cash Flows for the
Nine Months Ended June 30, 1997 and 1996 6
Notes to Financial Statements 8
Management's Discussion and Analysis
of Financial Condition and results of
operations 14
PART II. OTHER INFORMATION 15
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PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
MONUMENT RESOURCES, INC. AND SUBSIDIARIES
BALANCE SHEETS
ASSETS
(Unaudited) (Audited)
June 30, September 30,
1997 1996
---------- ----------
Current Assets:
Cash $ 49,694 $ 329,677
Investment in Securities (Note 5) 624,762 596,325
Accounts Receivable 24,104 15,953
Prepaid Expense 9,357 11,554
---------- ----------
Total Current Assets $ 707,917 $ 953,509
---------- ----------
Mineral Properties 92,718 91,023
Proved and Unproved Oil and Gas
properties, successful efforts
method net of accumulated
depletion (Note 2) 1,683,251 1,676,316
Property and Equipment:
Gas pipeline, net of accumulated
depreciation (Note 4) 291,018 289,978
Property and Equipment, net of
accumulated depreciation (Note 4) 51,789 58,741
---------- ----------
Net Property and Equipment 342,807 348,719
Investment in Securities, at
Market (Note 5) 173,665 491,914
---------- ----------
Total Assets $3,000,358 $3,561,481
---------- ----------
See Notes to Financial Statements
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MONUMENT RESOURCES, INC. AND SUBSIDIARIES
BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS EQUITY
(Unaudited) (Audited)
June 30, September 30,
1997 1996
---------- ----------
Current Liabilities:
Accounts Payable and Accrued
Expenses $ 24,119 $ 22,320
Accounts Payable, stockholder
(Note 3) 120,000 54,431
---------- ----------
Total Current Liabilities $ 144,119 $ 76,751
Stockholder's equity:
Preferred Stock, No Par Value authorized
1,000,000 shares; none issued
Common Stock, No Par Value, authorized
10,000,000 shares; 7,587,000 issued
and outstanding on September 30, 1996
and 7,647,000 shares issued and
6,147,000 shares outstanding on
March 31, 1997 (Note 3) 3,546,210 3,531,210
Accumulated Deficit (607,227) (531,985)
Unrealized Gain on Investment in
Securities 167,256 485,505
---------- ----------
$3,106,239 $3,484,730
Less common stock in treasury,
at cost, 1,500,000 shares (Note 3) (250,000) -0-
Total Stockholders Equity 2,856,239 3,484,730
Total Liability and Stockholder's Equity $3,000,358 $3,561,481
See Notes to Financial Statements
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MONUMENT RESOURCES, INC. AND SUBSIDIARIES
STATEMENT OF OPERATIONS
(UNAUDITED)
Three months Nine months
Ended June 30, Ended June 30,
1997 1996 1997 1996
--------- --------- --------- --------
Revenue
Oil & Gas Sales 78,364 36,793 212,149 41,198
Interest 11,504 5,589 33,373 16,328
Other 10,250 -0- 10,500 -0-
Gain on stock sale -0- 118,221 -0- 187,546
--------- --------- --------- --------
Total 100,118 160,603 256,022 245,072
Expenses
Oil & Gas Operating
Expenses 56,443 35,029 123,924 36,598
Dry Hole Costs -0- -0- 15,000 -0-
General and Admin. 40,958 49,817 134,058 93,110
Depletion, Depreciation
and Amortization 18,569 14,800 58,282 17,772
--------- --------- --------- ---------
Total 115,970 99,646 331,264 147,480
Net Profit (Loss)
Before Taxes (15,852) 60,957 (75,242) 97,592
Income Taxes -0- 423 -0- 7,423
--------- --------- --------- ---------
Net Profit (Loss) (15,582) 60,534 (75,242) 90,169
--------- --------- --------- ---------
Net Profit (Loss)
Per share -0- .01 (.01) .02
--------- --------- --------- ---------
Weighted Average number of
shares outstanding 7,626,330 7,587,000 7,453,690 5,583,350
See Notes to Financial Statements
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MONUMENT RSOURCES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Nine Months
Ended June 30,
1997 1996
-------- ---------
Cash flows from operating activities:
Net Income (Loss) $(75,242) $ 90,169
Items not requiring cash:
Depreciation and Depletion 58,282 17,772
Gain on sale of investment stock -- (187,546)
Changes in operating assets and liabilities:
Increase in investment in securities (28,437)
Increase (decrease)in Accounts
Payable and accrued expenses 67,368 40,807
Increase in Accounts Receivable
and accrued income (8,151) (39,901)
Increase (Decrease)in prepaid expenses 2,197 (9,250)
-------- -------
Net cash flows from operations 16,017 (87,949)
Cash flows from investing activities:
Acquisition of oil & gas properties (57,305) (8,112)
Additions to vehicles & equipment (2,000) --
Additions to mineral properties (1,695) (888)
Proceeds from sale of investment stock -- 187,546
Proceeds from sale of oil and gas
properties -- 565,000
Purchase of bonds -- (392,264)
Net cash flows from investing
activities (61,000) 351,282
Cash flows from financing activities:
Proceeds from sale of common stock 15,000 --
Repurchase of common stock (250,000) --
Net cash flows from financing
activities (235,000) --
Net increase (decrease) in cash (279,983) 263,333
Cash at beginning of period 329,677 446,954
-------- -------
Cash at end of period $ 49,694 $710,287
-------- -------
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,
1997 1996
--------- ---------
Schedule of non cash investing
and financial activities:
Unrealized Gain (loss) on equity security $(318,249) $ (37,371)
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- $ -0-
--------- ----------
See Notes to Financial Statements
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MONUMENT RESOURCES, INC. AND SUBSIDIARIES
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 Montana and Western
Canada.
The Company's oil and gas properties and areas of interest are in Nebraska,
Kansas, Texas and Ohio. Much of the Company's business has focused primarily
on brokering prospects, though in the past year it has acquired oil and gas
properties and production in Nebraska, Kansas, Texas and Ohio.
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 releasable market value of its investment in
Southern Africa Minerals Corporation and Layfield Resources, Inc. based on the
trading price on the Toronto Stock Exchange and the Vancouver Stock Exchange
respectively.
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
the Canadian exchange 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 prices 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, 1997 are not necessarily indicative of the results that may be
expected for the fiscal year ending September 30, 1997. 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, 1996.
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.
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OIL AND GAS PROPERTIES
The Company follows the successful efforts method of accounting for its oil
and gas activities. Under the accounting method, costs associated with the
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 expenses 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 costs and no gain or loss is recognized.
PROPERTY, EQUIPMENT AND GAS PIPELINE
Depreciation and amortization of property and equipment are expenses in
amounts sufficient to relate the expiring costs of depreciable assets to
operation over estimated service lives, principally using the straight-line
method. Estimated service lives range from three to eight years. The gas
pipeline is being amortized on units-of-gas production method based on the
production of the gas wells served by the pipeline. When such assets are sold
or otherwise disposed of, the costs of accumulated depreciation are removed
from the accounts and any resulting gain or loss is reflected in operations in
the period realized.
The Financial Accounting Standards Board recently issued Standard No. 128,
Earnings per Share. The statements simplifies the standards for computing
earnings per share and makes them compatible to international standards.
FAS128 supersedes Accounting Principles board Opinion No. 15 and replaces the
presentation of primary EPS with a presentation of basic EPS. The standard
also requires dual presentation of basic diluted EPS on the face of income
statement for all entities with complex capital structures and provides
evidence computation charges.
The Company is aware of this new standard but does not know what the expected
impact the new standard will have, if any, on the financial position and the
results of operations of the Company once the standard is adopted.
NOTE 2. OIL AND GAS ACTIVITIES
In November 1995, the Company acquired an interest in three producing oil
wells in Kimball county, Nebraska for $22,000 in cash.
Effective April 1, 1996, the Company acquired oil and gas properties and a gas
pipeline from Crescent Oil & Gas Corporation ("Crescent"). The purchase
included the Leavenworth Kansas proved producing and proved undeveloped gas
properties and the nearby gas pipeline, various equipment associated with the
pipeline, proved producing and proved undeveloped gas properties in Texas
known as the Galvan Ranch property and proved producing and proved undeveloped
oil properties and related surface equipment in the East Voss Field. These
properties constitute the major percentage of the oil and gas reserves of the
Company at December 31, 1996. The company valued the purchase at $2,600,000,
based on the estimated fair value of the property. In addition to the oil and
gas properties, the company purchased 100% of the stock of C.O.G. Transmission
Corporation ("COG"), which had title to the gas pipeline prior to the sale to
the Company. No purchase value was allocated to the purchase of COG by the
Company.
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In May 1996, the Company sold half of its interest in the Galvan Ranch
property for $565,000 in cash. The Company recognized no gain or loss on the
transaction such the selling price equaled the basis assigned by the Company
at the time of purchase on April 1, 1996.
In January, 1997, the Company acquired a 5% working interest in three wells to
be drilled in Kimball county, Nebraska for $15,000. These wells were drilled
to the Cretaceous "J" Sand during March of 1997. No commercial quantities of
oil and gas were found and the wells were plugged and abandoned. The costs
incurred by the Company were written off to dry hole expense during the second
quarter.
In June, 1997, the Company entered into an agreement to acquire a 50% working
interest in the recompletion of the St. Clair #1 well located in Morgan
County, Ohio. The Company's share of the recompletion costs are approximately
$30,000. As of August 12, 1997, the results of the recompletion attempt were
not known. If the recompletion attempt is successful, the Company has the
right to participate in future development of the area to continue the
project. Four additional wells need to be drilled within the next 12 months,
and a minimum of five wells are required to be drilled for each twelve-month
period thereafter until the entire project is completed. It is estimated that
as many as 80 wells may be drilled to complete this project. Well costs
through the pipeline are estimated to be approximately $77,000 per well, with
the Company's share estimated to be $38,000 per well.
NOTE 3. STOCKHOLDER'S EQUITY
In 1993, the Company sold 1,152,000 shares of restricted common stock for
$288,000 ($0.25 per share) through a private placement. On warrant was
attached to each share and was exercisable for a period of three years from
the completion of the offering (to 1997) at $0.25 per share. On September 23,
1996, the Company extended the exercise period and amended the exercise price
of the warrants such that the warrrants may be exercised from October 1, 1996
to February 1, 1997 at $0.25 per share and from February 1, 1997 to July 1,
1997 at $0.35 per share. As of June 30, 1997, 60,000 warrants have been
exercised. All additional warrants have expired unexercised.
Effective April 1, 1996, the Company acquired various oil and gas properties
and a gas pipeline from Crescent Oil & Gas Corporation ("Crescent"), a wholly
owned subsidiary of Powerhouse Resources, Inc. ("Powerhouse"), in exchange for
3,000,000 shares of the Company's common stock and $225,000. As part of the
sale, the Company has the first right of refusal to purchase any of its shares
offered for sale by Crescent, at the price offered as any bonafide purchase.
During the quarter ended March 31, 1997, the Company repurchased 500,000
shares of its common stock for $90,000, during the quarter ended June 30,
1997. The company repurchased 1,000,000 of its common stock for $40,000 in
cash and $120,000 in Accounts Payable. The $120,000 payable was retired on
July 11, 1997.
NOTE 4. PROPERTY AND EQUIPMENT
The following is a summary of property and equipment at cost, less accumulated
depreciation:
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June 30, 1997 September 30, 1996
------------- ------------------
Land $ 12,500 $ 12,500
Machinery and Equipment 52,384 51,736
--------- ---------
64,884 64,236
Less: Accumulated depreciation ( 13,095) ( 5,495)
--------- ---------
Net property and equipment 51,789 58,741
--------- ---------
Pipeline 319,185 300,000
Less: Accumulated amortization ( 28,167) ( 10,022)
--------- ---------
Net pipeline 291,018 289,978
--------- ---------
Depreciation expense charged to operations was $58,282 for the nine months
ended June 30, 1997 and $15,033 for the fiscal year ended September 30, 1996.
The useful lives of property and equipment for purposes of computing
depreciation are:
Machinery and equipment 5 years
Pipeline Useful life of gas production,
approximately 5 to 7 years.
NOTE 5. INVESTMENT IN SECURITIES
The Company follows Statement of Financial Accounting Standards ("SFAS") 115,
"Accounting for Certain Investments in Debt and Equity Securities," in
accounting for its security investments. In accordance with SFAS 115, the
Company's investments in securities have been classified as available for sale
since they are being held for an indefinite period of time. Under the
available for sale classification, the securities are recorded at current
market value on the balance sheet with an offsetting amount representing
unrealized gains recorded as a component of stockholder equity.
The current market value is derived from published newspaper quotations as of
June 30, 1997. At the time of sale, a gain or loss is recognized in the
statement of operation using the cost basis of securities sold as determined
by specific identification.
At June 30, 1997, the fair market value of the common stock investment was
$173,665 with an unrealized gain of $167,256. At August 12, 1997, the fair
market value of the common stock was $410,000, which resulted in an unrealized
gain of $403,591.
The Company's investment in bonds consists of various U.S. government
financial instruments. The Company considers these bonds to be currently
available for sale and has no timetable for sale or redemption. Nevertheless,
the Company does not expect to hold the bonds to maturity.
Investments in securities are summarized as follows at June 30, 1997 and
September 30, 1996:
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Available for sale securities:
Gross
Unrealized
Gain Fair Value Fair value
At June 30 At June 30 At September 30
---------- ---------- ---------------
Common stock $167,256 $173,665 $ 491,914
Debt securities -0- 624,762 596,325
-------- -------- ----------
$167,256 $798,427 $1,088,239
-------- -------- ----------
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ITEM 2. MANAGEMENT S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 1997, the Company had a total of $49,694 in cash and $563,798
in working capital compared to $329,677 in cash and $876,758, reflecting a
decrease of $279,983 in cash and a $312,960 decrease in working capital. The
decrease in cash during the nine months ended June 30, 1997 was the result of
additions to mineral, oil and gas properties and vehicles and equipment of
approximately $61,000, the repurchase of company stock for the treasury of
$250,000, an increase in accounts receivable of $8,150 and an increase of
accounts payable of $67,368.
At the present time, the Company's primary source of cash for operations and
exploration is the sale of oil and gas, current working capital, and cash,
which can be raised by selling shares of Southern Africa Minerals or Layfield
and its investment in U.S. government treasury securities. The company has,
in the past and plans in the future, to rely on joint venture partners or
equity funding to supply most of the funds needed to evaluate and develop its
properties. Any inability of the company to raise additional capital through
a stock offering, to liquidate its securities holding or obtain third party
funding may limit development of most of its properties.
Although the company intends to use joint venture or equity funding to
explore, acquire and, if warranted, develop its properties, the natural
resource business is nevertheless very capital intensive.
The company continues to seek joint venture financing for its properties and
to acquire properties with near term revenue generating capability.
Management's efforts to evaluate, identify and/or acquire such revenue
generating prospects and to further develop its existing properties have been
ongoing during this past year and, while management is optimistic, there is no
assurance that the company will be successful in securing the required
capital.
RESULTS OF OPERATIONS
Revenues from oil and gas sales increased significantly for the quarter and
nine months ended June 30, 1997, as compared to the same period ending June
30, 1996, from $36,793 and $41,198 to $78,364 and $212,149. These increases
were due to the acquisition of producing oil and gas properties in Kansas and
Texas during April 1996. Interest income increased by $5,915 to $11,504
during the quarter and by $17,045 to $33,373 for the nine months ended June
30, 1997 due primarily to increased investments in corporate, government and
municipal bonds. Oil and gas operating expenses increased significantly from
$35,024 and $36,598 for the quarter and nine months ended June 30, 1996 to
$56,443 and $123,924 for the same period ended June 30, 1997. This increase
is due to the expenses involved in operating the newly acquired Kansas and
Texas properties. Expenses incurred in the current quarter also include a
settlement with the Operator of the Company's Texas Properties for
approximately $12,000 in lease operating costs for the months September 1996
through March 1997.
General and Administrative expenses totaled $40,958 and $134,058 compared to
$49,817 and $93,110 for the three and nine months periods ended June 30, 1996.
This nine month increase reflects an increase in administrative costs
associated with operating properties acquired in Kansas and Texas as well as
increased audit, accounting and legal fees associated with recent
acquisitions. Office
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expense increased from approximately $900 per quarter to approximately $5,600
per quarter because the company now maintains offices in Denver as well as
Castle Rock, Colorado. Officers' salaries increased from $6,000 per quarter
at June 30, 1996 to $9,000 per quarter at December 31, 1996 and $12,000 per
quarter at March 31, 1997 and June 30, 1997.
MONUMENT RESOURCES, INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEDURES. None.
ITEM 2. CHANGES IN SECURITIES. None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES. None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. None.
ITEM 5. OTHER INFORMATION. None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 27 - Financial Data Schedule Filed herewith
electronically.
(b) Reports on Form 8-K. None.
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 by the
undersigned thereunto duly authorized.
MONUMENT RESOURCES, INC.
By: /s/ A.G. Foust
A.G. Foust
President (Chief Executive Officer,
Principal Financial and Accounting
Date: August 14, 1997 Officer) and a Director
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EXHIBIT INDEX
EXHIBIT METHOD OF FILING
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27. Financial Data Schedule Filed herewith electronically
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
balance sheets and statements of operations found on pages 3-5 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-30-1996
<PERIOD-END> JUN-30-1997
<CASH> 49,694
<SECURITIES> 0
<RECEIVABLES> 24,104
<ALLOWANCES> 0
<INVENTORY> 9,357
<CURRENT-ASSETS> 707,017
<PP&E> 2,118,776
<DEPRECIATION> 0
<TOTAL-ASSETS> 3,000,358
<CURRENT-LIABILITIES> 144,119
<BONDS> 0
<COMMON> 3,546,210
0
0
<OTHER-SE> 250,000
<TOTAL-LIABILITY-AND-EQUITY> 3,000,358
<SALES> 212,149
<TOTAL-REVENUES> 256,022
<CGS> 123,924
<TOTAL-COSTS> 331,924
<OTHER-EXPENSES> 588,166
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (75,242)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (75,242)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> 0
</TABLE>
