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, 1998.
[ ] Transition report under Section 13 or 15(d) of the Securities Exchange Act.
For the transition period from _________ to ____________
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 (I.R.S. Employer Identification No.)
incorporation or organization)
513 Wilcox Street, Suite 200, P.O. Box 1450, Castle Rock, Colorado 80104
------------------------------------------------------------------------
(Address of Principal Executive Offices, Including Zip Code)
(303) 688-3993
--------------
(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: 4,919,000 shares of common were
outstanding at February 12, 1999.
Traditional Small Business Disclosure Format (Check One):
Yes X No
<PAGE>
MONUMENT RESOURCES, INC. AND SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION Page Number
Item 1. Consolidated Balance sheets as of
December 31, 1998 and September 30, 1998 3
Consolidated Statements of Operations
for the Three Months ended 5
December 31, 1998 and 1997
Consolidated Statements of Cash Flows
for the Three Months ended 6
December 31, 1998 and 1997
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations 17
PART II OTHER INFORMATION 19
2
<PAGE>
Item 1. Financial Statements.
MONUMENT RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
December 31, September 30,
1998 1998
---- ----
(Unaudited)
Current assets
Cash $ 20,481 $ 46,387
Investment in securities 295,967 325,304
Accounts receivable 32,044 21,137
Prepaid expense 6,562 11,174
---------- ----------
Total current assets 355,054 404,002
---------- ----------
Mineral properties 127,837 127,837
Proved and unproved oil and gas
properties, successful efforts method
net of accumulated depletion 1,060,235 1,069,993
Property and equipment:
Gas pipeline, net of accumulated depreciation 229,920 237,164
Property and equipment, net of
accumulated depreciation 56,497 59,129
---------- ----------
Net property and equipment 286,417 296,293
Investment in securities, at market 210,900 192,576
---------- ----------
Total assets $2,040,443 $2,090,701
========== ==========
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
December 31, September 30,
1998 1998
---- ----
(Unaudited)
Current liabilities
Accounts payable and accrued expenses $ 40,673 $ 17,935
----------- -----------
Total current liabilities 40,673 17,935
----------- -----------
Stockholders' equity:
Preferred Stock, no par value, authorized
1,000,000 shares; none issued
Common Stock, no par value, authorized
1,000,000 shares; 5,199,000 issued
and outstanding on September 30, 1998
and 4,699,000 shares outstanding on
December 31, 1998 3,142,210 3,197,210
Accumulated deficit (1,374,492) (1,343,547)
Unrealized gain on investment in securities 232,052 219,103
----------- -----------
Total stockholders' equity 1,999,770 2,072,766
----------- -----------
Total liability and stockholders' equity $ 2,040,443 $ 2,090,701
=========== ===========
See Notes to Consolidated Financial Statements.
4
<PAGE>
Item 1. Financial Statements. (Continued)
MONUMENT RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
Three Months Three Months
Ended Ended
December 31, December 31,
1998 1997
---- ----
Revenue
Oil and gas sales $ 36,514 $ 54,790
Pipeline income 18,478 58,064
Interest and other 7,185 7,173
Gain on sale of investment stock 23,926 - - -
----------- -----------
Total 86,103 120,027
----------- -----------
Expenses
Oil and gas operating expense 15,189 31,980
Pipeline operating expense 28,714 22,375
General and administrative 51,549 50,015
Depletion, depreciation and amortization 21,596 19,000
----------- -----------
Total 117,048 123,370
----------- -----------
Net profit (loss) $ (30,945) $ (3,343)
=========== ===========
Basic loss per common share (.01) - - -
=========== ===========
Diluted loss per common share (.01) - - -
=========== ===========
Weighted average number of shares outstanding 5,084,869 5,518,565
=========== ===========
See Notes to Consolidated Financial Statements.
5
<PAGE>
Item 1. Financial Statements. (Continued)
MONUMENT RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
Three Months Ended
December 31,
1998 1997
---- ----
Cash flows from operating activities:
Net loss $ (30,945) $ (3,343)
Items not affecting cash:
Depreciation, Depletion and Amortization 21,595 19,000
Gain on sale of securities (23,926) --
Changes in operating assets and liabilities:
Decrease in prepaid expense 4,612 4,601
Increase in accounts receivable (10,907) (16,343)
Increase in accounts payable and accrued expenses 22,738 5,047
--------- ---------
Net cash flow from operations (16,833) 8,962
--------- ---------
Cash flows from investing activities:
Proceeds from sale of investment securities 24,727 --
Additions to oil and gas properties (1,961) (5,544)
Additions to mineral properties -- (3,000)
Proceeds from bond investment 23,161 140,078
--------- ---------
Net cash flows from investing activities: 45,927 131,534
--------- ---------
Cash flows from financing activities:
Repurchase of common stock (55,000) (110,000)
--------- ---------
Net cash flows from financing activities (55,000) (110,000)
--------- ---------
Net increase (decrease) in cash (25,906) 30,496
Cash at beginning of period 46,387 43,094
--------- ---------
Cash at end of period $ 20,481 $ 73,590
========= =========
6
<PAGE>
Item 1. Financial Statements. (Continued)
MONUMENT RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
THE COMPANY
Monument Resources, Inc. and Subsidiaries (the "Company") was organized under
the laws of the State of Colorado on October 1, 1984. The Company is in the
business of acquiring and brokering mineral and oil and gas properties and
exploring, developing, and selling production from its oil and gas properties.
The Company's mineral properties are in Montana, British Columbia, Canada and
Sweden. The Company's oil and gas properties are in Webb and Knox counties,
Texas, Leavenworth County, Kansas and Kimball County, Nebraska. The Company also
operates a gas pipeline in conjunction with its Leavenworth gas wells.
The Company has a substantial investment in mineral and oil and gas properties.
The Company may not have sufficient capital to fully explore its mineral
holdings or to develop some of its oil and gas properties, which will require
significant investment. The Company has in the past relied on joint venture
partners to supply most of the funds needed to explore or develop its
properties, and may also rely on such partners for similar funding in the
future. As a result, the ability of the Company to obtain outside funding may be
critical to the Company's exploration and development of some of its properties.
As a result of these factors, recovery by the Company of its investments in
these properties cannot be assured.
CONSOLIDATION
The accompanying consolidated financial statements include the accounts of the
Company and its wholly owned Canadian subsidiary, formed for the purpose of
owning real property in British Columbia, and its wholly owned Kansas
subsidiary, COG Transmission Corporation, acquired in 1996. All intercompany
transactions and balances have been eliminated in consolidation.
STATEMENT OF CASH FLOWS
For statement of cash flow purposes, the Company considers short-term
investments with original maturities of three months or less to be cash
equivalents. Cash restricted from use in operations beyond three months is not
considered a cash equivalent.
MANAGEMENT'S USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make certain estimates and
assumptions that affect the reported amounts of assets and liabilities, the
disclosure of contingent liabilities at the date of the financial statements and
reported amounts of revenues and expenses. Actual results could differ from
those estimates.
The mining and oil and gas industries are subject, by their nature, to
environmental hazards and cleanup costs for which the Company carries insurance.
At this time, management knows of no substantial costs from environmental
accidents or events for which it may be currently liable. In addition, the
Company's oil and gas business makes it vulnerable to changes in wellhead prices
of crude oil and natural gas. Such prices have been volatile in the past and can
be expected to be volatile in the future. By definition, proved reserves are
based on current oil and gas prices and estimated reserves. Price declines
reduce the estimated quantity of proved reserves and increase annual
amortization expense (which is based on proved reserves).
7
<PAGE>
Item 1. Financial Statements. (Continued)
MONUMENT RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
IMPAIRMENT OF LONG-LIVED ASSETS
The Company evaluates the carrying value of assets, other than investments in
marketable securities, for potential impairment on an ongoing basis under the
tenets of SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed of," effective 1995. Under SFAS No. 121,
the Company periodically evaluates the carrying value of long-lived assets and
long-lived assets to be disposed of and certain identifiable intangibles and
goodwill related to those assets for potential impairment. The Company considers
projected future operating results, cash flows, trends and other circumstances
in making such estimates and evaluations and reduces the carrying value of
impaired assets to fair value.
EARNINGS PER SHARE
In February 1997, the Financial Accounting Standards Board issued Financial
Accounting Standard No. 128 ("SFAS No. 128"), addressing earnings per share.
SFAS No. 128 changed the methodology of calculating earnings per share and
renamed the two calculations basic earnings per share and diluted earnings per
share. The calculations differ by eliminating any common stock equivalents (such
as stock options, warrants, and convertible preferred stock) from basic earnings
per share and changes certain calculations when computing diluted earnings per
share. The Company has adopted SFAS No. 128 in fiscal year 1998. Earnings per
share during the first quarter ended December 31, 1997, is unchanged by the
retroactive application of SFAS No. 128.
The following is a reconciliation of the numerators and denominators used in the
calculations of basic and diluted earnings (loss) per share for the quarters
ended December 31, 1998, and 1997:
<TABLE>
<CAPTION>
1998 1997
-------------------------------- ---------------------------
Per Per
Net Share Net Share
(Loss) Shares Amount (Loss) Shares Amount
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Basic Earnings per share:
Net income (loss)
and share amounts $ (30,945) 5,084,869 $ (.01) $ (3,343) 5,518,565 --
Dilutive securities:
stock warrants -- -- -- -- -- --
Repurchased shares -- -- -- -- -- --
--------- --------- ------- --------- --------- ---
Diluted earnings per share:
Net (loss) and assumed
share conversion $ (30,945) 5,084,869 $ (.01) $ (3,343) 5,518,565 --
========= ========= ======= ========= ========= ===
</TABLE>
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. Proved and unproved
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.
8
<PAGE>
Item 1. Financial Statements. (Continued)
MONUMENT RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(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 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 and unproved properties are periodically
assessed for possible impairment due to unrecoverability of costs invested.
Developed and proved properties are periodically assessed under the accounting
rules of SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed of." 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 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 gas pipeline is being depreciated 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 cost
and accumulated depreciation are removed from the accounts and any resulting
gain or loss is reflected in operations in the period realized.
INCOME TAXES
Deferred taxes are provided on the liability method whereby deferred tax assets
are recognized for deductible temporary differences and operating loss
carryforwards and deferred tax liabilities are recognized for taxable temporary
differences. Temporary differences are the differences between the reported
amounts of assets and liabilities and their tax bases. Deferred tax assets are
reduced by a valuation allowance when, in the opinion of management, it is more
likely than not that some portion or all of the deferred tax assets will not be
realized. Deferred tax assets and liabilities are adjusted for the effects of
changes in tax laws and rates on the date of enactment.
INVESTMENTS 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 No. 115, the
Company's investments in securities have been classified as available for sale
because they are being held for an indefinite period of time. Under the
available for sale classification, the securities are recorded as an asset at
current market value on the balance sheet with an equal 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,
1998, and September 30, 1998. At the time of sale, a gain or loss is recognized
in the statement of operations using the cost basis of securities sold as
determined by specific identification.
FINANCIAL INSTRUMENTS
Concentration of Credit Risk
- ----------------------------
Financial instruments, which potentially subject the Company to significant
concentrations of credit risk, consist principally of cash, trade receivables
and investments in securities.
9
<PAGE>
Item 1. Financial Statements. (Continued)
MONUMENT RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
The Company maintains cash with various financial institutions. The Company
periodically evaluates the financial services of these institutions and believes
the credit risk to be minimal.
The Company has recorded trade accounts receivable from the business operations.
The Company periodically evaluates the collectibility of trade receivables and
believes the receivables to be fully collectible and the credit risk to be
minimal.
The Company's investment in U.S. Government securities are subject to moderate
price volatility due to interest rate changes; however, realization of these
investments has minimal risk. The Company's investment in common stock of two
companies is subject to substantial price volatility due to the nature of
Canadian stock markets, the nature of the extractive industries business and
variations in the Canadian dollar exchange rate.
Fair Value
- ----------
The carrying amount of the Company's financial instruments is equivalent to
their fair value as follows:
Cash and cash equivalents - The carrying amount approximates fair value
because of the short maturities of these instruments.
Marketable securities - The carrying amounts approximate the fair value
because the securities are valued at the market prices based on published
trading price information and was accounted for using the available for
sale accounting method.
STOCK-BASED COMPENSATION
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS No. 123"), was issued in October, 1995 by the Financial
Accounting Standards Board. SFAS No. 123 provides an alternative method of
accounting for stock-based compensation arrangements, based on fair value of the
stock-based compensation utilizing various assumptions regarding the underlying
attributes of the options and stock, rather than the existing method of
accounting for stock-based compensation which is provided in Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees"
("APB No. 25"). The Financial Accounting Standards Board encourages entities to
adopt the fair-value based method but does not require adoption of this method.
The Company will continue its current accounting policy under APB No. 25 but has
adopted the disclosure-only provisions of SFAS No. 123 for any options and
warrants issued to employees, directors or consultants.
NOTE 2 - ESTIMATES AND RISKS
The process of preparing financial statements in conformity with generally
accepted accounting principles requires the use of estimates and assumptions
regarding certain types of assets, liabilities, revenues and expenses. Such
estimates primarily relate to impairments of mineral and oil and gas properties,
oil and gas reserves and future dismantlement, restoration and abandonment
costs. The actual future results in the above areas may differ from the
estimated amounts.
Financial statement accounts, which potentially subject the Company to
concentrations of credit risk, consist primarily of cash and investments in
securities. The Company attempts to deposit its cash with high quality financial
institutions in amounts less than the federal insurance limit of $100,000 in
order to limit credit risk. The Company's investment in bonds is considered to
have minimum credit risk since they are U.S. government instruments. The
Company's investments in common stock are considered to have substantial credit
risk since the stock is in companies without a long history of successful
operations and whose market values are variable and cyclical.
10
<PAGE>
Item 1. Financial Statements. (Continued)
MONUMENT RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
NOTE 2 - ESTIMATES AND RISKS (CONTINUED)
The mining and oil and gas industries are subject, by their nature, to
environmental hazards and cleanup costs for which the Company carries
catastrophe insurance. At this time, management knows of no substantial costs
from environmental accidents or events for which it may be currently liable. In
addition, the Company's oil and gas business makes it vulnerable to changes in
wellhead prices of crude oil and natural gas. Such prices have been volatile in
the past and can be expected to be volatile in the future. By definition, proved
reserves are based on current oil and gas prices. Price declines reduce the
estimated quantity of proved reserves and increase annual amortization expense
(which is based on proved reserves).
NOTE 3 - INVESTMENTS IN SECURITIES
The Company has recorded its investment in 75,000 shares of Southern Africa
Minerals Corporation ("SAMC") (Toronto Exchange), a Canadian company, and
1,900,000 shares of Layfield Resources, Inc. ("Layfield") (Vancouver Exchange),
a Canadian company, at fair value in accordance with Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities" ("SFAS 115"). During the quarter ended December 31, 1998, the
Company sold 50,000 shares of Layfield and 25,000 shares of Southern Africa,
recognizing a gain of $23,926. Based on the demonstrated liquidity and
marketability of the Layfield and SAMC shares, and in the accordance with SFAS
115, the Company has recorded its investments in the stocks based on published
market listings and on the closing bid price on the stocks' respective
exchanges. These shares are classified by the Company as available for sale and
non-current, since such sale may not necessarily be consummated in the near
term.
The Company's investment in debt securities 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, 1998:
Unrealized Fair
Gain Value
---- -----
Available-for-sale securities:
Common stock $178,766 $210,900
Debt securities (maturing in 1 to 21 years) 53,286 295,967
-------- --------
$232,052 $506,867
======== ========
Investments in securities are summarized as follows at September 30, 1998:
Unrealized Fair
Gain Value
---- -----
Available-for-sale securities:
Common stock $189,372 $192,576
Debt securities (maturing in 1 to 3 years) 29,731 325,304
-------- --------
$219,103 $517,880
======== ========
11
<PAGE>
Item 1. Financial Statements. (Continued)
MONUMENT RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
NOTE 4 - MINERAL PROPERTIES
DOBLER PROSPECT, BROADWATER COUNTY, MONTANA
The Dobler prospect, with capitalized costs of $59,520 at December 31, 1998, and
September 30, 1998, consists of 80 acres of fee simple land (including minerals)
and mineral rights to the 280 surrounding acres.
The Company is continually trying to locate joint venture opportunities to
further explore the property and has considered selling the property.
Alternative uses of the mineral property are supplying flux to a nearby smelter
or selling the property as ranch land. The property's value as ranch land or as
a homesite approximates the Company's capitalized costs in the prospect.
WISCONSIN MINE PROPERTY, BRITISH COLUMBIA, CANADA
The Company's Wisconsin Mine Property consists of two patented gold mining
claims covering approximately 64 acres, plus ten surrounding unpatented mining
claims. An alternative use for the property is the harvesting of timber or sale
as real estate. The fair value of the property approximates, at minimum, the
capitalized cost of $33,197 at December 31, 1998, and September 30, 1998.
SKANE ZINC PROSPECT, SWEDEN
The Skane Zinc Prospect, with capitalized costs of $35,120, at December 31,
1998, consists of approximately 19,700 acres of exploration licenses in southern
Sweden. The properties are prospective for shallow zinc, lead, minor precious
metals, and possible fluorite and barite deposits. The company owns a 70%
working interest in the project which is operated by Geoforum Scandinavia AB
which owns the remaining 30% working interest. The company is currently seeking
an industry partner to fund the exploration and development of the project.
ALL MINERAL PROPERTIES
Total mineral costs for all properties capitalized were $127,837 as of December
31, 1998, and September 30, 1998.
12
<PAGE>
Item 1. Financial Statements. (Continued)
MONUMENT RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
NOTE 5-PROPERTY AND EQUIPMENT
The following is a summary of property and equipment at cost, less accumulated
depreciation:
December 31, September 30,
1998 1998
---- ----
(Unaudited)
Land $ 12,500 $ 12,500
Machinery and equipment 77,885 77,885
--------- ---------
Total 90,385 90,385
Less: Accumulated depreciation (33,888) (31,256)
--------- ---------
Net property and equipment 56,497 59,129
--------- ---------
Pipeline 300,000 300,000
Less: Accumulated depreciation (70,080) (62,836)
--------- ---------
Net pipeline 229,920 237,164
--------- ---------
Net property and equipment $ 286,417 $ 296,293
========= =========
Depreciation expense charged to operations was $9,876 for the first quarter
ended December 31, 1998, and $42,264 for the fiscal year ended September 30,
1998.
The useful lives of property and equipment for purposes of computing
depreciation are:
Machinery and equipment 5 years
Pipeline Useful life of related gas production,
approximately 5 to 7 years
NOTE 6 - STOCKHOLDERS' EQUITY
The Company's amended Articles of Incorporation authorize the issuance of
1,000,000 shares of preferred stock with no par value. The preferred stock may
be issued from time to time with such designation, rights, preferences and
limitations as the Board of Directors may determine by resolution. As of
December 31, 1998, no shares of preferred stock have been issued.
On December 10, 1998, the Company repurchased 500,000 shares of its restricted
stock for cash of $55,000 ($.11 per share) from Powerhouse Resources, Inc.
NOTE 7 - STOCK OPTION PLANS
During 1986, the Company adopted an Employees' Incentive Stock Option Plan (the
"Employees' Plan"). The exercise price of the shares covered by stock options
granted pursuant to the Employees' Plan must be, at a minimum, 100% of the
quoted market value of the stock at the time the option is granted. No options
are outstanding under this Plan.
13
<PAGE>
Item 1. Financial Statements. (Continued)
MONUMENT RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
NOTE 7 - STOCK OPTION PLANS (CONTINUED)
During 1986, the Company adopted a Directors' Stock Option Plan (the "Directors'
Plan") for the benefit of the non-employee directors of the Company. The
exercise price of the shares covered by options granted pursuant to the
Directors' Plan must be $.80 per share. With respect to each individual option
granted under the Directors' Plan, the Board of Directors will determine
separately the number of shares, the option period, and the limitations which
will apply to the exercise of options. No options are outstanding under the
Directors' Plan.
In January 1993, the Company granted stock options (exclusive of the above
plans) to the officers in lieu of compensation. The options are for 540,000
shares and are exercisable for the five years beginning January 14, 1993 at a
price of $.10 per share, which price was in excess of market value of the
Company's shares at the date of grant. In May 1995, the Company's former
President, Stewart Jackson, exercised all of his options for 320,000 shares of
the Company's common stock at $.10 per share. On December 8, 1997, the board of
directors extended the options granted on 220,000 shares to January 13, 1999,
exercisable at $.10 per share. Options for 220,000 shares are outstanding at
September 30, 1998. Of these outstanding options, options for 160,000 shares are
held by the Company's president, A.G. Foust, and options for 60,000 shares are
held by Dru E. Campbell, assistant secretary of the Company. On January 13,
1999, the Company president and assistant secretary exercised their options for
the 220,000 shares of common stock at $.10 per share.
The following schedule summarizes information with respect to options granted
under the Company's equity plans:
Weighted Average
Number of Exercise Price of
Shares Shares Under Plans
------ ------------------
Outstanding September 30, 1998 220,000 $ .10
Granted -- --
Exercised -- --
Forfeited or expensed -- --
-------- -------
Outstanding December 31, 1998 220,000 $ .10
Granted -- --
Exercised (220,000) $ .10
Forfeited or expensed -------- -------
Outstanding February 12, 1999 -0- -0-
======== =======
NOTE 8 - SEGMENT INFORMATION
The Company operates in three industry segments within the United States: (1)
oil and gas exploration and development, (2) mineral exploration and
development, and (3) gas transmission pipeline.
Identified assets by industry are those assets that are used in the Company's
operations in each industry. Corporate assets are principally cash, investment
securities, furniture, and fixtures.
During the third quarter of 1998, the Company adopted Statement of Financial
Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and
Related Information" (SFAS 131). The adoption of SFAS 131 requires the
presentation of descriptive information about reportable segments which is
consistent with that made available to the management of the Company to assess
performance.
The oil and gas segment derives its revenues from the sale of oil and gas. The
mining segment receives its revenues primarily from the sale of minerals and
precious metals and from time to time from the sale of a mineral venture that it
has originated. Corporate income is primarily derived from interest income on
funds held in money market accounts and the sale of securities. The pipeline
segment derives revenue from the sale of natural gas from the Company's gas
field in Leavenworth, Kansas.
During the three months ended December 31, 1998, there were no intersegment
revenues. The accounting policies applied by each segment are the same as those
used by the Company in general.
14
<PAGE>
Item 1. Financial Statements. (Continued)
MONUMENT RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
NOTE 8 - SEGMENT INFORMATION (CONTINUED)
Net sales to one customer of the gas transmission pipeline segment totaled
approximately 81% of revenues for the three months ended December 31, 1998.
There have been no differences from the last annual report in the bases of
measuring segment profit or loss. There have been no material changes in the
amount of assets for any operating segment since the last annual report except
for the corporate segment which sold approximately $24,000 of securities during
the period.
Segment information consists of the following:
December 31, September 30,
1998 1998
---- ----
Revenues:
Oil and gas $ 36,514 $ 167,923
Gas pipeline 18,478 112,770
General corporate 31,111 99,596
--------- ---------
Total revenue $ 86,103 $ 380,289
========= =========
Results of operations
Oil and gas $ 9,604 $(583,069)
Gas pipeline (17,480) (11,169)
Mineral exploration -- --
General corporate operations (23,069) (62,769)
--------- ---------
Net income (loss) $ (30,945 $(657,007)
========= =========
Depreciation, depletion, amortization and valuation
charged to identifiable assets:
Oil and gas depletion $ 14,328 $ 57,312
Oil and gas impairment -- 561,448
Gas pipeline 7,244 32,238
General corporate 24 95
--------- ---------
Total $ 21,596 $ 651,093
========= =========
15
<PAGE>
Item 1. Financial Statements. (Continued)
MONUMENT RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
NOTE 8 - SEGMENT INFORMATION (CONTINUED)
December 31, September 30,
1998 1998
---- ----
(Unaudited)
-----------
Capitalized cash expeditures:
Oil and gas $ 1,961 34,383
========== ==========
Gas pipeline $ -- $ 3,648
========== ==========
Mineral $ -- $ 25,120
========== ==========
Corporate $ -- $ --
========== ==========
Identifiable assets, net of accumulated
depreciation, depletion, impairment and
amortization:
Oil and gas $1,103,589 $1,119,584
Gas pipeline 273,418 266,125
Mineral exploration 127,837 127,837
General corporate operations 535,599 577,155
---------- ----------
Total $2,040,443 $2,090,701
========== ==========
NOTE 9 - OIL AND GAS ACTIVITIES
During the quarter ended December 31, 1998, the Company reevaluated the status
of its oil and gas properties. Due to the depressed oil and gas prices,
management decided to put the majority of its oil and gas projects on hold until
a more realistic price for its oil and gas products can be assured. The Company
did, however, continue to work over and upgrade its Leavenworth, Kansas, gas
project to maintain the project at a reasonable level of gas sales.
The Company will continue to evaluate new prospects and projects as they may
become available for acquisition. If any of these projects meet management's
criteria for acquisition (considering the current and projected oil and gas
prices), the Company's board will attempt to add such properties to the current
inventory. The Company's ability to be successful in future acquisitions will
depend on a number of facts, the primary one being the Company's financial
capability.
The Company's primary activity for new projects is directed toward its
Leavenworth gas storage program. The Company is working with a number of
potential industry partners to engineer and fund this project.
16
<PAGE>
Item 2. Financial Statements.
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, 1998, the Company had a total of $20,481 in cash and $314,381
in working capital compared to $73,590 in cash and working capital of $389,802
at December 31, 1997. This represents a decrease of $53,109 in cash and a
$75,421 decrease in working capital. The decrease in cash and working capital
during the three months ended December 31, 1998, were the result of additions to
oil and gas properties of approximately $2,000, the repurchase of Company common
stock for the treasury of $55,000, an increase in accounts receivable of $10,900
and net proceeds received from the sale of investment stock of approximately
$24,000.
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 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, gas, and pipeline sales decreased significantly for the
quarter ended December 31, 1998, from $112,854 to $54,992, a 49% decrease. The
decrease was due to the continued erosion of prices the Company receives for its
oil and gas. Interest income remained constant during the quarter. Oil, gas and
pipeline expense decreased from $54,355 for the quarter ended December 31, 1997,
to $43,903 as compared to the quarter ended December 31, 1998, a 19% decrease
due to reduced workover expenses on the Kansas properties.
General and administrative expenses totaled $51,549 compared to $50,015 for the
three-month period ended December 31, 1997. The fairly constant general and
administrative costs when comparing the two periods reflects management's
continuing efforts to contain costs wherever possible.
17
<PAGE>
Item 2. Financial Statements.
MONUMENT RESOURCES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
YEAR 2000
The following Year 2000 statements constitute a Year 2000 Readiness Disclosure
with the meaning of the Year 2000 Information and Readiness Disclosure Act of
1998.
Year 2000 issues result from the inability of certain electronic hardware and
software to accurately calculate, store or use a date subsequent to December 31,
1999. These dates can be erroneously interpreted in a number of ways, e.g., the
year 2000 could be interpreted as the year 1900. This inability could result in
a system failure or miscalculations that could in turn cause operational
disruptions. These issues could affect not only information technology ("IT")
systems, such as computer systems used for accounting, land, engineering and
seismic processing, but also systems that contain embedded chips.
The Company has completed an assessment of its IT systems to determine whether
these systems are Year 2000 compliant. The Company has determined that these
systems are either compliant or with relatively minor modifications or upgrades
(many of which would have been made in any event as part of the Company's
continuing effort to enhance its IT systems) will be compliant. All necessary
modifications and upgrades and the testing thereof are expected to be completed
by the end of the second quarter of 1999.
The Company is assessing its non-information systems to ascertain whether these
systems contain embedded computer chips that will not properly function
subsequent to December 31, 1999. These systems include office equipment and the
automatic wellhead equipment used to operate wells. All of these systems have
been determined to be Year 2000 compliant.
To date the Company has relied upon its internal staff to access its Year 2000
readiness. The costs associated with assessing the Company's Year 2000 internal
compliance and related systems modification, upgrading and testing are not
currently expected to be material.
The Company is in the process of communicating with certain of its significant
suppliers, service companies, gas gatherers and pipelines, electricity providers
and financial institutions to determine the vulnerability of the Company to
third parties' failure to address their Year 2000 issues. While the Company has
not yet received definitive responses indicating all such entities are Year 2000
compliant, it has not received information suggesting the Company is vulnerable
to potential year 2000 failures by these parties. These communications are
expected to continue into the second quarter of 1999. At this time the Company
has not developed any contingency plans to address third party non-compliance
with Year 2000 matters. However, should its communications with any third
parties indicate any vulnerability, appropriate contingency plans will be
developed.
The Company does not anticipate any significant disruptions of its operations
due to Year 2000 issues. Among the potential "worst case" problems the Company
could face would be the loss of electricity used to power well pumps and
compressors that would result in wells being shut-in, or the inability of a
third party gas gathering company or pipeline to accept gas from the Company's
wells or gathering lines which would also result in the Company's wells being
shut-in. A disruption in production would result in the loss of income.
18
<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.
19
<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)
Date: February 12, 1999 by: /s/ A.G. Foust
----------------- -----------------------------------
A.G. Foust
President (Chief Executive Officer,
Principal Financial and Accounting
Officer) and a Director
20
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> SEP-30-1999 SEP-30-1998
<PERIOD-START> OCT-01-1998 OCT-01-1997
<PERIOD-END> DEC-31-1998 SEP-30-1998
<CASH> 20,481 46,387
<SECURITIES> 295,967 325,304
<RECEIVABLES> 32,044 21,137
<ALLOWANCES> 0 0
<INVENTORY> 6,562<F1> 11,174<F1>
<CURRENT-ASSETS> 355,054 404,002
<PP&E> 1,474,489 1,494,123
<DEPRECIATION> 210,900<F2> 192,576<F2>
<TOTAL-ASSETS> 2,040,443 2,090,701
<CURRENT-LIABILITIES> 40,673 17,935
<BONDS> 0 0
0 0
(1,374,492)<F3> (1,343,547)<F3>
<COMMON> 3,142,210 3,197,210
<OTHER-SE> 232,052<F4> 219,103<F4>
<TOTAL-LIABILITY-AND-EQUITY> 2,040,443 2,090,701
<SALES> 54,992 112,854
<TOTAL-REVENUES> 86,103 120,027
<CGS> 43,903 54,355
<TOTAL-COSTS> 117,048 123,370
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> (30,945) (3,343)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (30,945) (3,343)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (30,945) (3,343)
<EPS-PRIMARY> (.01) 0
<EPS-DILUTED> (.01) 0
<FN>
<F1> Prepaid Expense
<F2> Investment in Securities
<F3> Accumulated Deficit
<F4> Unrealized Gain of Investments
</FN>
</TABLE>
