<PAGE>
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 December 31, 1997
[ ] Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from ________ to __________
Commission file number: 33-15528-D
MONUMENT RESOURCES, INC.
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(Exact name of Small Business Issuer as Specified in its Charter)
Colorado 84-1028449
- -------------------------------- ---------------------------------
(State of other jurisdiction(IRS Employer Identification No.)
of incorporation or organization)
513 Wilcox Street, Suite 200, PO Box 1450, Castle Rock, CO 80104
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Address of Principal Executive Offices, Including Zip Code
(303) 688-3993
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(Issuer's telephone number, Including Area Code)
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 ----
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: 5,149,000 shares of common
were outstanding at February 13, 1998.
Traditional Small Business Disclosure Format (Check One):
Yes X No ---
<PAGE>
MONUMENT RESOURCES, INC. AND SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION Page Number
Consolidated Balance sheets as of
December 31, 1997 and September 30, 1997 3
Consolidated Statements of Operations
for the Three Months ended December 31, 1997 and 1996 5
Consolidated Statements of Cash Flows
for the Three Months Ended December 31, 1997 and 1996 6
Notes to Consolidated Financial Statements 7
Management's Discussion and Analysis
of Financial Condition and Results of Operations 12
PART II. OTHER INFORMATION 13
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<PAGE>
Item I. Financial Statements.
MONUMENT RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
(Unaudited) (Audited)
December 31, September 30,
1997 1997
----------- ------------
Current Assets:
Cash $ 73,590 $ 43,094
Investment in Securities (Note 5) 305,530 452,018
Accounts Receivable 41,737 25,394
Prepaid Expense 4,979 9,579
---------- ----------
Total Current Assets $ 425,836 $ 530,085
---------- ----------
Mineral Properties 95,718 92,718
Proved and Unproved Oil and Gas
properties, successful efforts
method net of accumulated
depletion (Note 2) 1,657,737 1,667,006
Property and Equipment:
Gas pipeline, net of accumulated
depreciation (Note 4) 260,179 266,139
Property and Equipment, net of
accumulated depreciation (Note 4) 81,072 79,299
---------- ----------
Net Property and Equipment 341,251 345,438
Investment in Securities, at
Market (Note 5) 205,314 233,755
---------- ----------
Total Assets $2,725,856 $2,869,002
========== ==========
See Notes to Consolidated Financial Statements.
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<PAGE>
Item 1. Financial Statements. (Continued)
MONUMENT RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS EQUITY
(Unaudited) (Audited)
December 31, September 30,
1997 1997
---------- ----------
Current Liabilities:
Accounts Payable and Accrued Expenses $ 36,034 $ 30,987
---------- ----------
Total Current Liabilities $ 36,034 $ 30,987
---------- ----------
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; 6,149,000 issued
and outstanding on September 30, 1997
and 5,149,000 shares issued and
6,147,000 shares outstanding on
December 31, 1997 (Note 3) 3,187,210 3,297,210
Accumulated Deficit (689,883) (686,540)
Unrealized Gain on Investment in
Securities 192,495 227,345
---------- ----------
Total Stockholders Equity 2,689,822 2,838,015
---------- ----------
Total Liability and Stockholder's Equity $2,725,856 $2,869,002
========== ==========
See Notes to Consolidated Financial Statements.
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<PAGE>
Item 1. Financial Statements. (Continued)
MONUMENT RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
Three Months
Ended December 31,
1997 1996
--------- ---------
Revenue
Oil & Gas Sales $ 54,790 $ 18,580
Pipeline Income 58,064 39,453
Interest 5,079 10,674
Other 2,094 -
--------- ---------
Total 120,027 68,707
--------- ---------
Expenses
Oil & Gas Operating Expenses 31,980 3,399
Pipeline Operating Expense 22,375 21,499
General and Administrative 50,015 37,550
Depletion, Depreciation
and Amortization 19,000 18,495
--------- ---------
Total 123,370 80,943
--------- ---------
Net Profit (Loss) $ (3,343) $ (12,236)
========= =========
Net Loss Per Share -- --
========= =========
Weighted Average Number of
Shares Outstanding 5,518,565 6,847,200
========= =========
See Notes to Consolidated Financial Statements.
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<PAGE>
Item 1. Financial Statements. (Continued)
MONUMENT RESOURCES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months
Ended December 31,
1997 1996
-------- --------
Cash flows from operating activities:
Net Loss $ (3,343) $(12,236)
Items not affecting cash:
Depreciation, Depletion and Amortization 19,000 18,495
Changes in operating assets and liabilities:
Decrease in prepaid expense 4,601 5,015
Increase in accounts receivable (16,343) (24,800)
Increase (decrease) in accounts
payable and accrued expenses 5,047 (32,183)
-------- --------
Net cash flow from (used in) operations 8,962 (45,709)
Cash flows from investing activities:
Loan to unaffiliated company -- (8,500)
Additions to oil and gas properties (5,544) (3,079)
Additions to mineral properties (3,000) --
Proceeds from bond investment 140,078 --
-------- --------
Net cash flows from investing activities: 131,534 (11,579)
-------- --------
Cash flows from financing activities:
Repurchase of common stock (110,000) --
-------- --------
Net cash flows from financing activities (110,000) --
-------- --------
Net increase (decrease) in cash 30,496 (57,288)
Cash at beginning of period 43,094 329,677
-------- --------
Cash at end of period $ 73,590 $272,389
======== ========
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<PAGE>
Item 1. Financial Statements. (Continued)
MONUMENT RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. GENERAL.
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, Western Canada,
and Sweden. The Company's oil and gas properties and areas of interest are in
Nebraska, Kansas, Ohio, and Texas. Much of the Company's business has focused
primarily on brokering prospects, though in the past two years, it has
acquired oil and gas production in Nebraska, 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 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
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 prices of petroleum production.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited, condensed consolidated financial statements have
been prepared in accordance with Item 310 (b) of Regulation S-B 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 December 31, 1997 are not necessarily indicative
of the results that may be expected for the fiscal year ending September 30,
1998. 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, 1997.
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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<PAGE>
Item 1. Financial Statements. (Continued)
MONUMENT RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
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
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 cost 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 a 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 cost 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 ("EPS"). The statement 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 and diluted EPS on the
face of income statement for all entities with complex capital structures.
The Company is aware of this new standard but does not expect it to have a
material impact on the financial position and the results of operations of the
Company in 1998.
NOTE 2. OIL AND GAS AND MINERAL ACTIVITIES
During the last half of 1997 the Company initiated a major workover program on
its Leavenworth Kansas Gas Project. In addition, the Company purchased
approximately 18 additional gas wells with associated gas gathering and
pipeline system known as the CAMCO/Heim Acquisition. The workovers and the
CAMCO/Heim Acquisition have increased the projects' capable daily production
to nearly 500 MCFPD. The CAMCO/Heim Acquisition added over 379,000 MCF in
proved reserves, which should extend the economic life of the project.
Unfortunately, lower gas prices have somewhat diminished the impact of the
additional production on the Company's oil and gas income.
In June 1997, the Company entered into an agreement to acquire a 50% working
interest in approximately 4,600 acres of prospective Berea formation gas
reserves in Morgan County, Ohio, called the Hackney Project. The Company's
share of the
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<PAGE>
Item 1. Financial Statements. (Continued)
MONUMENT RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
acquisition cost was approximately $20,000. The Company has the right to
participate in future development of the area by drilling four wells within
the next 6 months; and a minimum of five wells are required to be drilled for
each twelve month period thereafter until the entire project is completed.
The Berea formation covers much of eastern Ohio and western West Virginia,
northeastern Kentucky and northern Virginia. This formation historically has
the capability of long-term production with an average life of 40 years. The
Company plans to participate in the drilling of the first test well in April
1998. Based on the results of this test well, a decision will be made as to
the drilling of the remaining 3 wells which would be required to continue the
project's development.
The Company has recently entered into an agreement to acquire a mineral
project in southern Sweden. The agreement is with Michael Bromley-Challenor
d.b.a. Geoforum and covers over 8,000 hectares (19,700 acres) of permitted
lands. The properties consist of three exploration permits with the
government of Sweden and are valid for three years from date of issuance. The
Company has paid $20,000 cash and will issue 50,000 shares of the Company's
common stock to acquire a 70% working interest in the project. The properties
are prospective for shallow strata-controlled zinc, lead, minor precious
metals, and possible fluorite and barite deposits. Exploration procedures
anticipated are geological, geochemical, and geophysical surveys, followed by
sample drilling. The area is easily accessible by road and power is readily
available. The Company is currently seeking an industry partner to fund the
exploration and initial development of the project.
NOTE 3. STOCKHOLDERS' EQUITY.
Effective April 1, 1996, the Company acquired various oil and gas properties
and a gas pipeline from Crescent Oil and Gas Corporation, 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. For accounting
purposes, the Company valued the property purchase at $2,6000,000, which was
the sum of the estimated fair value of the estimated oil and gas reserves, the
present value of the cash flow of the pipeline and the net realizable value of
the equipment.
On April 1, 1997, the Company repurchased 500,000 shares of its restricted
common stock for cash of $90,000 ($.18 per share) from Powerhouse. On June
20, 1997, The Company repurchased 1,000,000 shares of its restricted common
stock for cash of $160,000 ($.16 per share) from Powerhouse. On November 3,
1997, the Company repurchased 1,000,000 shares of its restricted common stock
for cash of $110,000 ($.11 per share). As of December 31, 1997, Powerhouse
owns 500,000 shares or less than 10% of the Company's common stock.
NOTE 4. PROPERTY AND EQUIPMENT.
The following is a summary of property and equipment at cost, less accumulated
depreciation:
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<PAGE>
Item 1. Financial Statements. (Continued)
MONUMENT RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
December 31, September 30,
1997 1997
----------- ------------
Land $ 12,500 $ 12,500
Machinery and Equipment 88,539 84,266
--------- ---------
Total 101,039 96,796
Less: Accumulated depreciation (19,967) (17,467)
--------- ---------
Net property and equipment 81,072 79,299
--------- ---------
Pipeline 300,000 300,000
Less: Accumulated amortization (39,821) (33,861)
--------- ---------
Net pipeline 260,179 266,139
--------- ---------
Net property and equipment $ 341,251 $ 345,438
========= =========
Depreciation expense charged to operations was $8,460 for the three months
ended December 31, 1997 and $35,811 for the fiscal year ended September 30,
1997.
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 stockholders' equity.
The current market value is derived from published newspaper quotations as of
December 31, 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.
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 December 31, 1997 and
September 30, 1997:
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<PAGE>
Item 1. Financial Statements. (Continued)
MONUMENT RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Gross
Unrealized Gain Fair Value at Fair Value at
at December 31 December 31 September 30
--------------- ------------- -------------
Common stock $158,373 $205,314 $233,755
Debt securities 34,122 305,530 452,018
-------- -------- --------
$192,495 $510,844 $685,773
======== ======== ========
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<PAGE>
Item 1. Financial Statements. (Continued)
MONUMENT RESOURCES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 1997, the Company had a total of $73,590 in cash and
$389,802 in working capital compared to $43,094 in cash and working capital of
$499,098 at December 31, 1996. This represents an increase of $30,496 in cash
and a $109,296 decrease in working capital. The increase in cash and the
reduction of working capital during the three months ended December 31, 1997
was the net result of additions to mineral and oil and gas properties of
approximately $8,500, the repurchase of Company common stock for the treasury
of $110,000, a decrease in accounts receivable of $8,500 and net proceeds
received from bond redemptions of approximately $140,000.
At the present time, the Company's primary source of cash for operations and
exploration is its current working capital, cash which can be raised by
selling shares held for investment or its investment in U.S. government
treasury securities and funds derived from its oil and gas operations. 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 holdings 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 exiting 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, gas, and pipeline sales increased significantly for the
quarter ended December 31, 1997 from $58,033 to $112,854, a 95% increase. The
increase was due to the acquisition of additional producing gas wells in
Kansas during the last quarter of 1997, which resulted in improved production
rates in the current quarter. Interest income decreased by $5,595 to $5,079
during the quarter due primarily to bond redemptions used to repurchase the
Company's common stock. Oil, gas and pipeline expense increased significantly
from $24,898 for the quarter ended December 31, 1996 to $54,355 for the
quarter ended December 31, 1997, a 118% increase due to workover expenses on
the existing and newly acquired Kansas properties.
General and administrative expenses totaled $50,015 compared to $37,550 for
the three month period ended December 31, 1996, a 33% increase. The increase
of approximately $12,500 reflects an increase in administrative costs
associated with the new projects acquired as well as increased payroll, audit,
engineering, and legal fees incurred due to the Company's expanded operations.
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<PAGE>
MONUMENT RESOURCES, INC. AND SUBSIDIARIES
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
ITEM 5. OTHER INFORMATION. N/A
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 27 - Financial Data Schedule Filed herewith
electronically.
(b) Reports on Form 8-K.
The Company filed a Current Report on Form 8-K dated November 13,
1997 which reported on Items 4 and 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 by the
undersigned thereunto duly authorized.
MONUMENT RESOURCES, INC.
Date: February 16, 1998 By:/s/ A.G. Foust
A.G. Foust
President (Chief Executive Officer,
Principal Financial and Accounting
Officer) and a Director
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<PAGE>
EXHIBIT INDEX
EXHIBIT METHOD OF FILING
- ------- ------------------------------
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 F-3 through F-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> 3-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> DEC-31-1997
<CASH> 73,590
<SECURITIES> 510,844
<RECEIVABLES> 41,737
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 425,836
<PP&E> 2,094,706
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,725,856
<CURRENT-LIABILITIES> 36,034
<BONDS> 0
<COMMON> 3,187,210
0
0
<OTHER-SE> 192,495
<TOTAL-LIABILITY-AND-EQUITY> 2,725,856
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 120,027
<TOTAL-COSTS> 54,355
<OTHER-EXPENSES> 123,370
<LOSS-PROVISION> 69,015
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> (3,343)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,343)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
