SECURITIES AND EXCHANGE COMMISSION PRIVATE
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 March 31, 1998
---------------
[ ] 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
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(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
stock were outstanding at May 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
March 31, 1998 and September 30, 1997 3
Consolidated Statements of Operations
for the Six Months Ended
March 31, 1998 and 1997 5
Consolidated Statements of Cash Flows
for the Six Months Ended
March 31, 1998 and 1997 6
Notes to Consolidated Financial Statements 7
Management's Discussion and Analysis
of Financial Condition and Results of Operations 10
PART II. OTHER INFORMATION 14
2
<PAGE>
Item 1. Financial Statements.
MONUMENT RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
March 31, September 30,
1998 1997
----------- -------------
(Unaudited) (Audited)
Current assets
Cash $ 39,679 $ 43,094
Investment in securities 335,388 452,018
Accounts receivable 105,674 25,394
Prepaid expense 1,200 9,579
---------- ----------
Total current assets 481,941 530,085
---------- ----------
Mineral properties 115,718 92,718
Proved and unproved oil and gas
properties, successful efforts method,
net of accumulated depletion 1,647,170 1,667,006
Property and equipment
Gas pipeline, net of accumulated
depreciation 254,219 266,139
Property and equipment, net of
accumulated depreciation 78,599 79,299
---------- ----------
Net property and equipment 332,818 345,438
Investment in securities, at market 404,950 233,755
---------- ----------
Total assets $2,982,597 $2,869,002
========== ==========
See notes to consolidated financial statements.
3
<PAGE>
Item 1. Financial Statements. (Continued)
MONUMENT RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
March 31, September 30,
1998 1997
----------- -------------
(Unaudited) (Audited)
Current liabilities
Accounts payable and accrued expenses $ 21,013 $ 30,987
----------- -----------
Total current liabilities 21,013 30,987
----------- -----------
Stockholders' equity:
Preferred stock authorized
1,000,000 shares; none issued
Common stock authorized
10,000,000 shares; 6,149,000
issued and outstanding on
September 30, 1997 and
5,149,000 shares issued and
outstanding on March 31, 1998 3,187,210 3,297,210
Accumulated deficit (642,472) (686,540)
Unrealized gain on investment in securities 416,846 227,345
----------- -----------
Total stockholders' equity 2,961,584 2,838,015
----------- -----------
Total liabilities and stockholders' equity $ 2,982,597 $ 2,869,002
=========== ===========
See notes to consolidated financial statements.
4
<PAGE>
<TABLE>
<CAPTION>
Item 1. Financial Statements. (Continued)
MONUMENT RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Six Months
Ended March 31, Ended March 31,
1998 1997 1998 1997
----------- ----------- ----------- -----------
Revenue
<S> <C> <C> <C> <C>
Oil and gas sales $ 45,893 $ 35,943 $ 100,683 $ 54,523
Pipeline income 24,347 39,809 82,411 79,262
Interest 6,697 11,195 11,776 21,869
Other 1,025 9,454 3,119 9,454
Gain on stock sale 78,492 -- 78,492 --
----------- ----------- ----------- -----------
Total 156,454 96,401 276,481 165,108
----------- ----------- ----------- -----------
Expenses
Oil and gas operating
expense 23,948 22,079 55,928 25,478
Pipeline operating expense 23,123 20,504 45,498 42,003
Dry hole costs -- 15,000 -- 15,000
General and administrative 42,972 55,550 92,987 93,100
Depletion, depreciation and
amortization 19,000 21,218 38,000 39,713
----------- ----------- ----------- -----------
Total 109,043 134,351 232,413 215,294
----------- ----------- ----------- -----------
Net income (loss) $ 47,411 $ (37,950) $ 44,068 $ (50,186)
=========== =========== =========== ===========
Net income (loss) per share 0.01 * 0.01 *
----------- ----------- ----------- -----------
Weighted average number
of shares outstanding 5,149,000 7,626,330 5,335,813 7,606,662
=========== =========== =========== ===========
* "Less than $0.01 per share"; there is no difference between basic and primary
earnings.
See notes to consolidated financial statements.
5
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Item 1. Financial Statements. (Continued)
MONUMENT RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Ended March 31,
1998 1997
----------------------------------------
Cash flows from operating activities:
<S> <C> <C>
Net gain (loss) $ 44,068 $ (50,186)
Items not affecting cash:
Depreciation, depletion and amoritzation 38,000 39,713
Changes in operating assets and liabilities:
Decrease in prepaid expense 8,380 8,379
Increase in accounts receivable (80,280) (27,790)
Decrease in accounts payable
and accrued expenses (9,974)
Sale of stock (78,492) --
--------- ---------
Net cash flow from operations (78,298) (77,184)
--------- ---------
Cash flows from investing activities:
Additions to securities held (11,565) (17,573)
Proceeds from sale of stock 78,492 --
Additions to oil and gas properties (8,544) (39,281)
Additions to mineral properties (20,000) (1,695)
Additions to vehicles and equipment -- (2,000)
Proceeds from investment bond sales 146,500 --
--------- ---------
Net cash flows from investing activities: 184,883 (60,549)
Cash flows from financing activities:
Sale of common stock -- 15,000
Repurchase of common stock (110,000) (90,000)
--------- ---------
Net cash flows from financing activities (110,000) (75,000)
--------- ---------
Net decrease in cash (3,415) (212,733)
Cash at beginning of period 43,094 329,677
--------- ---------
Cash at end of period $ 39,679 $ 116,944
========= =========
6
</TABLE>
<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,
for its own account, 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 in the 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
securities (i.e. Southern Africa Minerals Corporation and Layfield Resources,
Inc.) based on the trading price of these securities 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 product sales from its oil and gas properties.
The cash realized from the sale of securities is dependent on market prices on
relevant Canadian exchanges. 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.
The company sells its products to four customers.
Customer A = 75%
Customer B = 16%
Customer C = 6%
Customer D = 3%
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 March 31, 1998 are not necessarily indicative of
7
<PAGE>
Item 1. Financial
Statements. (Continued)
MONUMENT RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
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. If 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
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 expensed in amounts
sufficient to relate the expiring costs of depreciable assets to operations over
estimated service lives, principally using the straight-line method. Estimated
service lives range from three to eight years. The Leavenworth, Kansas 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 assets are sold or
otherwise disposed of, the cost of accumulated depreciation will be removed from
the accounts and any resulting gain or loss will be reflected in operations in
the period realized.
8
<PAGE>
Item 1. Financial Statements. (Continued)
MONUMENT RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NET INCOME (LOSS) PER COMMON SHARE
Net income (loss) per common share is based on the weighted average number of
shares outstanding during the period.
ADOPTION OF STOCK BASED COMPENSATION PLAN
The Company utilizes APB 25 in accounting for its stock based compensation plan.
In January 1993, the Company adopted an employee stock based compensation plan
whereby certain key employees were granted stock options. The exercise price of
the option was determined at the date of the grant and approximate the fair
market value of the stock on that date. Options were granted for 220,000 shares
of common stock on January 13, 1993 and are exercisable at $.10 per share prior
to January 13, 1999. At the measurement date of the stock option grant, the
exercisable price of the option exceeded the discounted bid price and no
employee compensation was recorded.
BASIC EARNINGS PER SHARE
The Company computes earnings per share in accordance with Statement of
Financial Accounting Standard No. 128. The Company has presented only basic
earnings per share, as it had no material dilutive potential common shares
outstanding during 1997 or 1998. Basic earnings per share have been computed
based on the weighted average number of shares outstanding.
YEAR 2000 ISSUE
The Company is aware of the issues associated with the programming code in
existing computer systems as the millenium (year 2000) approaches. Accordingly,
as of March 31, 1998, the Company has converted all of its computer software to
accommodate the "year 2000" issue. The amount expensed in 1998 was immaterial.
9
<PAGE>
Item 1. Financial Statements. (Continued)
MONUMENT RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 2. INVESTMENT IN SECURITIES.
Investments in securities are summarized as follows at March 31, 1998 and
September 30, 1997:
Gross
Unrealized Fair Fair
Gain Value Value
At March 31 At March 31 At September 30
----------- ----------- ---------------
common stock $ 171,195 $ 404,950 $ 233,755
debt securities 18,305 335,387 452,018
---------- ---------- ----------
$ 189,500 $ 740,337 $ 685,773
---------- ---------- ----------
Item 2. MONUMENT RESOURCES, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 1998, the Company had a total of $39,679 in cash and $460,928 in
working capital compared to $43,094 in cash and working capital of $499,098 at
September 30, 1997. This represents a decrease of $3,415 in cash and a $38,170
decrease in working capital. The decrease in cash and working capital during the
six months ended March 31, 1998 were the net result of additions to mineral and
oil and gas properties of approximately $28,500, the repurchase of Company
common stock for the treasury of $110,000, a decrease in accounts payable of
$9,974 and net proceeds received from investment bond liquidation of
approximately $146,500, and sales of common investment stock of Southern Africa
Minerals Corporation and Layfield Resources, Inc. totaling $78,500.
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
10
<PAGE>
Item 2. Financial Statements. (Continued)
MONUMENT RESOURCES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
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.
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 are ongoing.
RESULTS OF OPERATIONS
Revenues from oil and gas sales increased significantly during the three and six
months ended March 31, 1998. Oil and gas sales were $100,683 for the six months
ended March 31, 1998 and increase of $46,160 or 85%. Oil and gas sales for the
three months ended March 31, 1998 were $45,893 compared to $35,943 an increase
of $9,950 or 28%. 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 for the last six months. Production increases of
approximately 26,000 MCF (68,950 MCF compared to 42,780) for the six months
period were the primary reason for the increase in oil and gas revenues. Prices
were constant at $1.30 per MCF.
Oil and gas operating expenses increased $30,450 (from $25,478 to $55,928) an
increase of 120% due primarily to workover requirements of the newly acquired
Kansas gas wells. Operating costs for the three months ended March 31, 1998 and
1997 were comparable and constant.
Pipeline income, which represents Kansas gas sold by the Company's wholly owned
subsidiary, COG Transmission Corporation, to third party purchasers held fairly
constant for the six months ended March 31, 1998. However, pipeline revenue
declined $15,462 or 39% from $39,809 to $24,347. This decrease was caused by a
decline in the average price of gas sold of $.85 per MCF (from $2.88/MCF to
$2.03/MCF) and a decrease in volumes sold of 15,914 MCF, from 40,261 MCF to
24,347 MCF, a decrease of approximately 40%. This decrease in volume sold was
caused by a modification of the gas purchaser's pipeline, which cut back on the
volumes the Company was able to sell. Management hopes to negotiate a solution
to this problem but there is no assurance that it will be able to do so.
General and administrative expense held fairly constant when comparing the two
six month periods ended March 31, but expenses declined approximately 23% or
11
<PAGE>
Item 2. Financial Statements. (Continued)
MONUMENT RESOURCES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
$12,578 from $55,550 to $42,972 for the three months ended March 31, 1997 and
March 31, 1998. This decline was caused by recording certain auditing and
accounting fees during the first quarter of 1997 and recording similar expenses
in the second quarter of 1998. Overall general and administrative expense were
comparable for the two periods.
Interest income decreased by $10,093 to $11,776 during the quarter due primarily
to investment bond liquidation used to repurchase the Company's common stock.
Oil, gas and pipeline expense increased from $67,481 for the six months ended
March 31, 1997 to $101,426 for the six months ended March 31, 1998, a 50%
increase due to workover expenses on the existing and newly acquired Kansas
properties.
OIL AND GAS AND MINERALS ACTIVITIES
During the last half of 1997, the Company initiated a major workover program on
its Leavenworth, Kansas Gas Project. In addition, the Company purshased
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
500MCFPD. 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 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 rquired 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. During the record
Quarter of 1998, the Company assumed management of the project's Farmout Option
Agreement. The Company plans to participate in the drilling of the first test
well in May 1998. Based on the results of this test well, a decision will be
made as to the drilling of the remaining three wells which would be required to
continue the project's development in 1998. Future development of this project
12
<PAGE>
Item 2. Financial Statements. (Continued)
MONUMENT RESOURCES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
will depend on the results of the 1998 program. Based on 20 acre spacing, the
project could have locations for a large number of wells (100 to 200). The
Company plans to be cautious in its development of this project should the
initial wells prove to be economical.
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.
STOCKHOLDERS' EQUITY
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 March 31, 1998, Powerhouse owned 500,000 shares
or less than 10% of the Company's common stock. These purchases have reduced the
number of the Company's outstanding common shares from 7,649,000 to 5,149,000,
which has enhanced the shareholders earnings and equity per share.
13
<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. None.
14
<PAGE>
MONUMENT RESOURCES, INC. AND SUBSIDIARIES
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.
(Registrant)
By: /s/ A.G. Foust
--------------------------------------
A.G. Foust
President (Chief Executive Officer,
Principal Financial and Accounting
Officer) and a Director
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 12-MOS
<FISCAL-YEAR-END> SEP-30-1998 SEP-30-1997
<PERIOD-END> MAR-31-1998 SEP-30-1997
<CASH> 39,679 43,094
<SECURITIES> 740,338 685,773
<RECEIVABLES> 105,674 25,394
<ALLOWANCES> 0 0
<INVENTORY> 1,200<F1> 9,579
<CURRENT-ASSETS> 0 0
<PP&E> 489,941 530,085
<DEPRECIATION> 145,178 107,178
<TOTAL-ASSETS> 0 0
<CURRENT-LIABILITIES> 21,013 30,987
<BONDS> 0 0
(642,472)<F2> (686,540)
416,846<F3> 227,345
<COMMON> 3,187,210 3,297,210
<OTHER-SE> 0 0
<TOTAL-LIABILITY-AND-EQUITY> 2,982,597 2,869,002
<SALES> 183,094 133,785
<TOTAL-REVENUES> 276,481 165,108
<CGS> 101,426 67,481
<TOTAL-COSTS> 242,413 215,294
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> 44,068 (50,186)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 44,068 (50,186)
<EPS-PRIMARY> .008 (.007)
<EPS-DILUTED> .008 (.007)
<FN>
<F1>Prepaid Expense
<F2>Accumulated Deficit
<F3>Unrealized Gain on Investment in Securities
</FN>
</TABLE>
