U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[X] Annual report under Section 13 or 15(d) of the Securities Exchange Act of
1934 For the fiscal year ended September 30, 2000.
[ ] Transition report under Section 13 or 15(d) of the Securities Exchange
Act of 1934.
Commission file number 33-15528-D
-----------
MONUMENT RESOURCES, INC.
---------------------------------------------------------
(Name of Small Business Issuer as Specified in its Charter)
Colorado 84-1028449
------------------------------ ------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
513 Wilcox Street, 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
Securities registered under Section 12(b) of the Exchange Act: None.
Securities registered under Section 12(g) of the Exchange Act: None.
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
----- -----
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [X]
The Issuer's revenues for its most recent fiscal year were $369,449.
The Issuer had 4,869,000 shares of its Common Stock outstanding at December 15,
2000.
The Issuer's Common Stock is quoted on the OTC Bulletin Board -- Symbol MNMN.
Documents incorporated by reference: None.
<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS.
This Report contains forward-looking statements that involve risks and
uncertainties. The Company's actual results could differ materially from those
discussed herein. Factors that could cause or contribute to such differences
include, but are not limited to, those discussed in this Item, including Item 6
under "Management's Discussion and Analysis or Plan of Operations" and in Item 2
under "Description of Properties" and "Oil and Gas Reserves."
(a) General Development Of Business. The Company was incorporated as Copper
Mountain Ventures, Inc. under the laws of the State of Colorado on October 1,
1984. The Company's name was later changed to Monument Resource Development,
Inc. and lastly, in June 1987 to Monument Resources, Inc.
(b) Narrative Description Of Business. The Company's primary activities are
to search for, acquire, evaluate, and market oil and gas and mineral properties
and interests therein. Although the Company has acquired properties in the past,
the Company may not be able to acquire additional properties in the future
because of its limited financial resources and industry competition. Since
exploration, development, and production of minerals and oil and gas typically
require substantial amounts of capital, the Company cannot engage in major
exploration and development activities, except on a carried interest basis.
The Company owns an interest in approximately 50 gas wells, a gas gathering
system and related equipment in Leavenworth County, Kansas. The Company
continues to evaluate and recomplete its gas wells to determine their potential
for additional productivity. As of December 2000, several of the gas wells have
been placed on production and current aggregate production is from 400 to 600
MCF of gas per day. The Company expects the daily production to increase with
the recompletion of additional wells.
The Company analyzes and evaluates a number of properties each year as a
part of its business plan. If a property at any stage appears, based on
management's criteria, to lack favorable parameters, the Company may decide that
no further Company expenditures should be made. The Company intends to abandon,
sell, or otherwise dispose of certain properties rather than incur significant
holding costs.
PRINCIPAL PRODUCTS PRODUCED AND SERVICES RENDERED
The Company's products during fiscal year ended September 30, 2000, were
crude oil, natural gas, and other petroleum products. Crude oil, natural gas,
and other petroleum products are generally sold to various producers, including
pipeline companies, which usually service the area in which the Company's
producing wells are located. In the fiscal year ended September 30, 2000, crude
oil and natural gas sales accounted for $349,164 or virtually all of the
Company's revenues. The Company did not receive any mineral revenues during
fiscal 2000.
1
<PAGE>
ITEM 1. DESCRIPTION OF BUSINESS (Continued)
COMPETITIVE CONDITIONS
The exploration for and development and production of oil, gas, and other
minerals are subject to intense competition. The principal methods of
competition in the industry for the acquisition of oil, gas, and mineral leases,
and producing properties are the payment of cash bonus payments at the time of
acquisition of leases, delay rentals, location damage supplement payments, and
stipulations requiring exploration and production commitments by the lessee.
Companies with greater financial resources, existing staff and labor forces,
equipment for exploration, and experience are in a better position than the
Company to compete for such leases. In addition, the ability of the Company to
market any oil and gas which it might produce could be severely limited by its
inability to compete with larger companies operating in the same area, which may
be willing or able to offer any oil and gas produced by them at a price lower
than that of the Company. Exploration and production costs of minerals,
particularly precious metals, may impede the ability of the Company to offer
such production at competitive prices.
In addition, the availability of a ready market for oil and gas will depend
upon numerous factors beyond the Company's control, including the extent of
domestic production and imports of oil and gas, proximity and capacity of
pipelines, and the effect of federal and state regulation of oil and gas sales,
as well as environmental restrictions on exploration and usage of oil and gas
prospects that will become even more intense in the future. The Company has a
minimal competitive position in the oil and gas industry.
The acquisition of mining claims prospective for precious metals or other
minerals is subject to intense competition from a large number of companies and
individuals. The ability of the Company to acquire additional leases or
additional mining claims could be curtailed severely as a result of this
competition.
The principal methods of competition in the industry for the acquisition of
mineral leases is the payment of bonus payments at the time of acquisition of
leases, delay rentals, advance royalties, the use of differential royalty rates,
the amount of annual rental payments, stipulations requiring exploration,
development and production commitments by the lessee. Companies with far greater
financial resources, existing staff and labor forces, equipment for exploration
and mining, and experience will be in a better position than the Company to
compete for such leases.
SOURCES AND AVAILABILITY OF RAW MATERIALS
Raw materials requisite to the transaction of the Company's business
include such items as drilling rigs and other equipment, casing pipe, drilling
mud, and other supplies, core drilling equipment and mining equipment. Such
items are commonly available from a number of sources and the Company foresees
no short supply or difficulty in acquiring any raw materials relevant to the
conduct of its business.
DEPENDENCE UPON ONE OR A FEW MAJOR CUSTOMERS
In the oil and gas segment of the Company's business in fiscal year ended
September 30, 2000, two companies purchased in excess of 10% of the Company's
total oil and gas production. The availability of oil and gas purchasers is
such, however, that any buyer discontinuing purchases from the Company could
most likely be replaced by another buyer.
EFFECT OF EXISTING OR PROBABLE GOVERNMENTAL REGULATION
Oil and gas exploration and production, as well as mining activities, are
subject to significant governmental regulation including worker health and
safety laws, employment regulations, and environmental regulations. Operations,
which sometimes occur on public lands, may be subject to regulation by, among
other state and federal agencies, the Bureau of Land Management, the U.S. Army
Corps of Engineers or the U.S. Forest Service.
2
<PAGE>
1. BUSINESS - (CONTINUED)
COSTS AND EFFECTS OF COMPLIANCE WITH ENVIRONMENTAL LAWS (FEDERAL, STATE, AND
LOCAL)
Because the Company is engaged in exploiting natural resources, it is
subject to various federal, state, and local provisions regarding environmental
and ecological matters. Therefore, compliance with environmental laws may
necessitate significant capital outlays, may materially affect the Company's
earnings potential, and could cause material changes in the Company's proposed
business. At the present time, however, the existence of environmental laws does
not materially hinder nor adversely affect the Company's business. Capital
expenditures relating to environmental control facilities have not been material
to the operations of the Company since its inception.
EMPLOYEES AND CONSULTANTS
The Company currently has two full-time employees, A.G. Foust, President
and Jeff D. Ogden, Kansas Gas Field Supervisor, and a part-time contract oil and
gas accounting consultant. Stewart A. Jackson, one of the Company's directors,
also spends some of his time on the Company's business. The Company may hire
additional personnel as required by its operations and may also engage the
services of geological and engineering consultants from time to time to assist
in its operations.
ITEM 2. DESCRIPTION OF PROPERTIES.
The Company has interests in a number of oil and gas projects, one
undeveloped gold and silver prospect in the United States, and one undeveloped
gold prospect in British Columbia, Canada.
The following subsections set forth information concerning each of the
Company's prospects.
OIL AND GAS PROSPECTS
Galvan Ranch Property, Webb County, Texas
The Company acquired an interest in this property as of April 1, 1996. The
property consisted of over 60,000 acres of oil and gas leases. The Company's
original interest consisted of a 15% working interest and a 2% overriding
royalty in the leases. During May 1996, the Company sold a portion of its
interest in the property for $565,000 cash and retains a 15% working interest
and a 2% overriding royalty in approximately 13 producing gas wells plus a 2%
working interest and a 0.35% to 0.76% overriding royalty on the balance of the
acreage. Third party exploration drilling was conducted on the property during
1997 which resulted in two dry holes. In the third fiscal quarter of 2000, the
Company recorded a $245,000 write down of the undeveloped portion of the
property. The Company was recently notified that the landowner had filed suit to
cancel the Galvan Ranch Lease under which the Company holds its royalty
interest. If such occurs, the Company could lose any rights it has in the
undeveloped portion of the property. It is currently reviewing its legal options
with counsel. Thus, the book value of the Galvan Ranch Property is attributed
only to the existing gas wells.
Kansas Gas Project - Leavenworth County, Kansas
The Company acquired its original interest in this property in April 1996,
and acquired an additional interest in the area in September 1997. The project
consists of approximately 3,500 acres of oil and gas leases with right-of-ways
and approximately 50 gas wells, over 20 miles of a gas gathering and pipeline
system, and necessary equipment and facilities to produce and market the gas
production. Currently, several of these wells are producing an aggregate of from
400 to 600 MCF per day. During fiscal 2000, the Company conducted a workover
program on a number of the wells, which increased the production to its current
level. Management believes a continued modest workover program will maintain the
production at its current level. However, a more aggressive recompletion effort
could significantly increase the production. The Company is currently evaluating
the potential of additional zones to recomplete that may add to the project's
reserves and productivity. In addition, the Company is evaluating the potential
to acquire additional wells and property in the area to enhance the project's
potential.
3
<PAGE>
ITEM 2. PROPERTIES - (CONTINUED)
East Voss Waterflood - Knox County, Texas
The Company acquired an interest in this property in April 1996. The
property consists of approximately 330 acres of unitized oil and gas leases
containing 21 oil and injection wells. As of July 1, 1999, the Company entered
into an agreement to transfer operations of its East Voss property in Knox
County, Texas. The agreement provided that the new operator would assume all the
rights and obligations associated with the project in exchange for a cash
payment of $10,000, future payments of $40,000 and a perpetual overriding
royalty (ORR) interest of 7.5%. The purchaser failed to make a required $20,000
payment in January 2000. Hence, the Company instituted legal action to protect
its rights. As of June 30, 2000, the Company settled its lawsuit against the
purchasers of the East Voss property. The settlement, in general, provides that
the Company will receive the full payment of $40,000 in three equal installments
(including interest) on June 30, 2000, September 30, 2000 and December 31, 2000.
The June 30, 2000 and the September 30, 2000 payments have been received. In
addition, the payable to the Company is secured by a Deed of Trust on the East
Voss Property and equipment. The Company will also receive its ORR interest of
7.5% on all past and future production.
Kimball County, Nebraska
During November 1995, the Company purchased interests in three producing
oil wells in Kimball County, Nebraska for $22,000. The Company's net revenue
interest in the three wells are 7.50%, 3.93% and 3.33%. These wells were drilled
approximately 6 years ago and are currently generating approximately $700 per
month cash flow to the Company.
MINING PROSPECTS
Dobler Gold Mine Prospect, Broadwater County, Montana
The Company owns a 100% ownership in a certain mining property in
Broadwater County, Montana, known as the Dobler Mine prospect. The prospect
consists of 80 acres of fee land (including minerals) and mineral rights to 280
surrounding acres, which the Company acquired during 1989 by exercising an
option it held.
The Company believes that this property is prospective for gold and silver
through either a high grade underground mine or a low grade open pit operation.
However, due to the property's location, the Company is assessing the property's
potential real estate value and most likely will sell the property for real
estate if an acceptable buyer and purchase price can be obtained.
Wisconsin Gold Prospect, Near Kootenay Lake, B.C., Canada
The Company acquired, in exchange for 110,000 shares of its common stock, a
100% interest in the Wisconsin Gold Prospect located on the west side of
Kootenay lake in the Nelson Mining District, B.C. The property consists of two
Crown granted mineral claims totaling 25.84 hectares (63.85 acres).
The Company plans to hold this property for future joint venture or
development upon an increase in gold prices. In addition, the property has a
residual value for its real estate and the Company is actively marketing the
property for this potential.
Skane Zinc Prospect, Sweden
The Skane Zinc Prospect consisted of approximately 19,700 acres of
exploration licenses in southern Sweden. The properties were prospective for
shallow zinc, lead, minor precious metals, and possible fluorite and barite
deposits. The Company owned a 70% working interest in the project which is
operated by Geoforum Scandinavia AB which owns the remaining 30% working
interest. The Company elected not to renew the exploration licenses which
expired in mid 2000 and thus has relinquished all rights to the project.
4
<PAGE>
ITEM 2. PROPERTIES - (CONTINUED)
NEW MINERAL PROSPECTS
The Company continues to pursue the evaluation of a number of oil and gas
and mineral prospects. During their respective careers, management has made
numerous contacts in the oil and gas and mining industry and has accumulated
knowledge concerning location, current ownership, and other information with
respect to mineral prospects. Based on this experience and knowledge, management
believes that the Company will be able to continue evaluation of prospects on a
cost efficient basis. Even if properties are acquired, substantial additional
financing will be required to pursue particular projects. The Company's primary
emphasis is directed toward oil and gas and precious metals properties although
other situations and minerals may be examined.
PRODUCTION INFORMATION
NET PRODUCTION, AVERAGE SALES PRICE, AND AVERAGE PRODUCTION COSTS
The table below sets forth the net quantities of oil and gas production
attributable to the Company for the fiscal years ended September 30, 2000 and
1999 and the average sales prices, average production costs, and direct lifting
costs per unit of production.
Year Ended September 30,
--------------------------
Net Production 2000 1999
-------------- ---- ----
Oil (BBLS) 645 951
Gas (MCF) 103,999 99,081
Average Sales Prices
--------------------
Oil (per BBL) $24.64 $13.85
Gas (per MCF) 1.57 1.40
Average Production Cost
-----------------------
Per equivalent* MCF of gas $ 1.55 $ 1.47
Average Lifting Costs
---------------------
Per equivalent* MCF of gas $ .70 $ .76
Production costs include all expenses, depreciation, depletion, and
amortization, lease operating expenses and all associated taxes. Direct lifting
costs do not include impairment expense, ceiling write down or depreciation,
depletion and amortization.
*Equivalency assumes that one barrel of oil equals 6 MCF of gas.
5
<PAGE>
ITEM 2. PROPERTIES - (CONTINUED)
RESERVE INFORMATION
OIL AND GAS RESERVES
Oil and gas reserves for the Company's properties have been evaluated as of
September 30, 2000.
Reserve calculations by independent petroleum engineers involve the
estimation of future net recoverable reserves of oil and gas and the timing and
amount of future net revenues to be received therefrom. Those estimates are
based on numerous factors, many of which are variable and uncertain. Reserve
estimators are required to make numerous judgments based upon professional
training, experience, and educational background. The extent and significance of
the judgments in themselves are sufficient to render reserve estimates
inherently imprecise. Since reserve determinations involve estimates of future
events, actual production, revenues and operating expenses may not occur as
estimated. Accordingly, it is common for the actual production and revenues
later received to vary from earlier estimates. Estimates made in the first few
years of production from a property are generally not as reliable as later
estimates based on a longer production history. Reserve estimates based upon
volumetric analysis are inherently less reliable than those based on lengthy
production history. Also, potentially productive gas wells may not generate
revenue immediately due to lack of pipeline connections and potential
development wells may have to be abandoned due to unsuccessful completion
techniques. Hence, reserve estimates may vary from year to year.
ESTIMATED PROVED RESERVES
The following tables set forth the estimated proved developed oil and gas
reserves and proved undeveloped oil and gas reserves of the Company for the
years ended September 30, 1999 and 2000. See Note 12 to the Consolidated
Financial Statements for required Securities and Exchange Commission disclosure.
Proved Reserves
---------------
Oil (M BBLS) Gas (MMCF)
----------- ---------
Estimated quantity, September 30, 1998 149 1,800
Revisions of previous estimates (133) (231)
Production -- (99)
----- -----
Estimated quantity, September 30, 1999 16 1,470
Revision of previous estimates -- (528)
Production -- (104)
----- -----
Estimated quantity, September 30, 2000 16 838
===== =====
Developed Undeveloped Total
--------- ----------- -----
Oil (M BBLS)
September 30, 1999 -- 16 16
September 30, 2000 -- 16 16
Gas (MMCF)
September 30, 1999 858 612 1,470
September 30, 2000 838 -- 838
6
<PAGE>
ITEM 2. PROPERTIES - (CONTINUED)
OIL AND GAS TITLES
As is customary in the oil and gas industry, the Company performs only a
perfunctory title examination at the time of acquisition of undeveloped
properties. Prior to the commencement of drilling, in most cases, and in any
event where the Company is the operator, a thorough title examination is
conducted and significant defects remedied before proceeding with operations.
The Company believes that the title to its properties is generally acceptable to
a reasonably prudent operator in the oil and gas industry. The properties owned
by the Company are subject to royalty, overriding royalty, and other interests
customary in the industry, liens incidental to operating agreements, current
taxes and other burdens, minor encumbrances, easements, and restrictions. The
Company does not believe that any of these burdens materially detract from the
value of the properties or will materially interfere with their use in the
operation of the Company's business.
MINING TITLES
The Company does not have title opinions on its mining claims or leases
and, therefore, has not identified potential adverse claimants nor has it
quantified the risk that any adverse claimant may successfully contest all or a
portion of its title to the claims. Furthermore, the validity of all federal
unpatented mining claims is dependent upon inherent uncertainties such as the
sufficiency of the discovery of minerals, proper positing and marking of
boundaries, and possible conflicts with other claims not determinable from
descriptions of record. In the absence of a discovery of valuable minerals, a
mining claim is open to location by others unless the claimant is in actual
possession of and diligently working the claim. No assurance can be given with
respect to unpatented mining claims in the exploratory stage that a discovery of
a valuable mineral deposit will be made.
To maintain ownership of the possessory title created by an unpatented
mining claim against subsequent locators, the locator or his successor in
interest must pay an annual fee of $100 per claim. Title examinations for a
particular claim will be made when and if a significant discovery is made on
that claim. As of September 30, 2000, the Company had no unpatented mining
claims.
OFFICE FACILITIES
The Company's Denver, Colorado office consists of approximately 1,088
square feet and continues to lease the office on a month to month basis at $930
per month.
ITEM 3. LEGAL PROCEEDINGS.
The Company knows of no material pending legal proceedings to which the
Company is a party or of which any of its properties is the subject and no such
proceedings are known to the Company to be contemplated by governmental
authorities or others. The Company knows of no legal proceedings, pending or
threatened, or judgments entered against, any Director or Officer of the Company
in his capacity as such.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There were no matters submitted to a shareholder vote during the fourth
quarter of the fiscal year ended September 30, 2000.
7
<PAGE>
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
(a) Market Information. The Company's common stock was traded on the
over-the-counter market until November 1992, and has been quoted only
sporadically since November 1992. See the cover page of this report.
The Company's common stock is currently quoted on the OTC Bulletin
Board and the quote as of December 13, 2000 was $0.19 bid and $0.45
ask.
(b) Holders. The estimated number of beneficial owners of the Company's
common stock at December 15, 2000 was approximately 145.
(c) Dividends. Holders of common stock are entitled to receive such
dividends as may be declared by the Company's Board of Directors. No
dividends have been paid with respect to the Company's common stock
and no dividends are anticipated to be paid in the foreseeable future.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 2000, the Company had a total of $78,831 in cash and
$358,531 in working capital compared to $56,373 in cash and working capital of
$295,420 at September 30, 1999. This represents an increase of $22,458 in cash
and an increase of $63,111 in working capital. The increase in working capital
during the 12 months ended September 30, 2000 was the result of an increase in
accounts receivable of $26,000 from the sale of The East Voss Field, an increase
in corporate cash of $22,500 due to increased prices received for oil and gas
sold and a reduction of trade payables incurred during the last quarter of
fiscal 1999. Proceeds from bond investments were $26,400 and were largely offset
by the case of a dry hole drilled in California during the first quarter of
fiscal 2000.
At the present time, the Company's primary source of cash for operations
and exploration is its current working capital, cash flow from operations, and
cash which can be raised by selling shares of South African Minerals Corporation
or Layfield Resources, Inc. and its investment in debt securities. The Company
has in the past and plans in the future, to rely on joint venture partners or
equity funding to supply most of the capital 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. Based upon the Company's current status and plans,
approximately $50,000 will be needed in 2001 to fund necessary holding expenses
on the Company's 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 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.
8
<PAGE>
ITEM 6. MANAGEMENT'S DISCUSSION - (CONTINUED)
RESULTS OF OPERATIONS
Revenues from oil, gas and pipeline sales increased significantly for the
twelve months ended September 30, 2000, from $231,576 to $349,164, a 51%
increase. This increase was due to the improvement of prices the Company
receives for its oil and gas. The average price received from pipeline sales for
fiscal 1999 was approximately $1.98 per MCF compared to $2.65 per MCF received
in fiscal 2000, an increase of 34%. Interest income declined $6,774 from $24,432
in 1999 to $17,658 in 2000, a 28% decline due primarily to a draw down in funds
available in the bond investment account.
Investment in The Skane Swedish Zinc project was written off during fiscal
2000 in the amount of $35,000. There were no stock or bond sales during fiscal
2000; during 1999 the Company realized a gain from the sale of stocks and bonds
of $36,931.
Oil and gas pipeline operating costs remained fairly constant when
comparing the two years, while depletion and depreciation expenses decreased
$13,742 or 13%. The decrease in depletion expense was due to an impairment of
the Galvan Ranch properties located in Webb County, Texas in the amount of
$245,000. The impairment reduced the depletable basis of the producing
properties and hence the associated depletion expense.
During fiscal 2000, the Company participated in the drilling of an oil well
in Kerr County, California. The test was unsuccessful and the Company's $21,000
share of drilling costs were written off during the first quarter of fiscal
2000.
ITEM 7. FINANCIAL STATEMENTS.
The Report of the Independent Certified Public Accountants appearing at
Page F-1 and the Consolidated Financial Statements and Notes to Consolidated
Financial Statements appearing at Pages F-2 through F-25 hereof are incorporated
herein by reference.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
9
<PAGE>
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
The Directors and Officers of the Company are as follows:
Served as a
Name Age Position Director Since
---- --- -------- --------------
A.G. Foust 57 President and a October 1, 1984
Director
Stewart A. Jackson 58 Director January 1, 1992
John J. Womack 80 Director June 20, 1986
Ray K. Davis 58 Secretary N/A
Dru E. Campbell 49 Assistant Secretary N/A
All Directors of the Company will hold office until the next annual meeting
of stockholders or until their successors have been elected and qualified. The
Officers of the Company, who are appointed at the annual meeting of the Board of
Directors, hold office until their successors are chosen and qualified, or until
their death, resignation or removal. The Company presently has no audit,
nominating or executive committee or committees performing substantially similar
functions.
The business experience and principal occupations of each Director and
Officer of the Company for at least the past five years are as follows:
A.G. Foust has been President of the Company since May 1, 1995, and he has
been a Director since its inception. He also served as President of the Company
since its inception in 1984 until September 1993. From June of 1984 to June of
1986, he was employed as a licensed registered representative and Vice President
of Corporate Finance of B. J. Leonard & Company, Inc., a brokerage firm located
in Denver, Colorado. From January 1976 to May 1984, he was President and
Director of Minerals Engineering Company, a corporation with a class of equity
securities registered under the Securities Exchange Act of 1934. Minerals
Engineering Company, now a wholly-owned subsidiary of Hecla Mining Co., is in
the mining business. Mr. Foust has over 30 years of experience in the natural
resources industry. From April 1972 through January 1976, he served as Assistant
Vice President and Loan Officer of the First National Bank of Denver. His
responsibilities as a loan officer included providing financial services for
natural resource and mining companies. From November 1969 to April 1972, he was
operations manager at Chorney Oil Company, a privately owned oil and gas
exploration and production Company, and was responsible for all drilling
completions, production and engineering. From 1968 through 1969, he served as a
consulting engineer associated with Minerals Management, Inc., Casper, Wyoming.
From April 1968 through November 1968, he served as District Engineer of
Consolidated Oil and Gas, Inc., operating out of Denver, Colorado. From June
1964 through April 1968, Mr. Foust was employed as a chemical engineer with
Shell Oil Company, designing and supervising production of water and chemical
flood installations. Mr. Foust has a BS degree in Chemical Engineering from
Montana State University.
10
<PAGE>
ITEM 9. DIRECTORS - (CONTINUED)
Stewart A. Jackson was President of the Company from September 1993 until
May 1995 and has been a Director since early 1992. He had also served as a
director of Layfield Resources, Inc., a publicly-held Company listed on the
Vancouver Stock Exchange, from 1993 to May 1995. Mr. Jackson has 34 years
experience in the mineral industry and has been associated with the Company in a
geological consulting capacity for the past three years and as a Director since
January 1, 1992. He is actively involved in exploration and development of both
base and precious metal deposits in a wide range of environments for both large
and small companies. He was responsible for the discovery and development of
several major mineral discoveries, including the Red Dog multi-billion dollar
zinc deposit in northwestern Alaska for Cominco Resources, Inc., where he was
Supervisory Geologist from 1969 to 1977. He was involved in the discovery and
development of the Borealis, Sout McCoy and Manhattan gold deposits in Nevada
for Houston Oil and Minerals where he held the position of Manager-Minerals
Exploration from 1977 to 1981. He formed Crown Resource Corp. in 1981 and acted
as President of that Company until 1987. Crown Resource Corp. (now Crown
Resources Corporation) currently has three major gold discoveries in production
and several other gold deposits under development. He raised $20 million for the
discovery and development of these and other properties before leaving Crown. He
is currently involved in exploration and development projects including gold,
silver, diamonds and base metals. Mr. Jackson earned a Bachelor of Science
degree in Geology from the University of Western Ontario, Master of Science
degree in Stratigraphy and Mineral Deposits from the University of Toronto and a
Ph.D. in Stratigraphy and Economic Geology from the University of Alberta. In
addition to these accomplishments, he has also been author and co-author of
numerous geologic publications and received prestigious awards for some. Mr.
Jackson resigned as President in May 1995, in order to devote more of his time
to his foreign mining activities, and is currently on the Board of a number of
Canadian mining companies.
John J. Womack has been a Director of the Company since June 20, 1986. Mr.
Womack retired in early 1982 as Adjutant General and Director of Military
Affairs, Department of Defense, State of Montana, a position he had held since
1969. General Womack holds a BA degree (1947) and a MA degree (1955) from
Western Montana College. In 1954 he formed Pacific Mining and Exploration
Company, which developed the Carter Creek iron property in Madison and
Beaverhead Counties, Montana. In 1962 he formed Southmont Exploration Company to
explore Beaverhead County, Montana for tungsten. In 1980 and 1981, he owned and
supervised operations for a heap leach gold venture at the Franklin Mine in
Lewis and Clark Counties, Montana. From 1971 through June 1984, he was a
Director of Minerals Engineering Company. General Womack has been retired since
June 1984.
Ray K. Davis has been associated with Monument Resources since March 1996
in the capacity of Financial Consultant and provides the Company with
administrative services, accounting, SEC and tax support. He has over 30 years
experience in the oil and gas and mining industries, with emphasis on asset
acquisition, mergers and project due diligence. Merger and acquisition
negotiations as well as due diligence projects have taken him to Russia, Alaska,
Mexico, and Europe. Mr. Davis has been a consultant to the oil and gas
industries since November 1984. From May of 1977 through October 1984, he was
treasurer of Macey and Mershon Oil, Inc. responsible for financial planning and
operations of the Company and its owners. From June 1973 to April 1977, he was a
partner in the firm of Ballard-Davis Associates which provided financial and
accounting services to small and newly formed companies in the oil and gas
industry. From November 1969 to March 1973 Mr. Davis was Controller of the
Baumgartner Companies with oil, gas, mining, and drilling operations in the
United States and Canada. From November 1968 to November 1969, he was Assistant
Controller of The Colorado Corporation, a wholly owned subsidiary of King
Resources, Inc. Mr. Davis is a 1967 graduate of the University of Denver,
Denver, Colorado with a Bachelor of Science degree in Business Administration.
Mr. Davis is a past officer and director of the Colorado Society of Petroleum
Accountants. For three years, he taught oil and gas accounting at Arapahoe
Community College.
Dru E. Campbell has been employed by the Company on a full and part-time
basis since its inception as the office secretary. Ms. Campbell was appointed to
fill the position of Secretary of the Corporation in January of 1989. On
November 1, 1997, Ms. Campbell resigned as Corporate Secretary and assumed the
position of Assistant Secretary. Ms. Campbell has over 29 years office and
secretarial experience.
11
<PAGE>
<TABLE>
<CAPTION>
ITEM 9. DIRECTORS - (CONTINUED)
No family relationship exists between or among any of the persons named
above except that A.G. Foust and Dru Campbell are married to each other. None of
the Company's Directors are directors of any other Company having a class of
equity securities registered under the Exchange Act or any Company registered as
an investment Company under the Investment Company Act of 1940. All persons
whose activities are material to the operations of the Company have been
described herein.
The Company's Directors, Officers, and 10% or more shareholders are not
presently subject to Section 16 (a) of the Exchange Act because the Company does
not have a class of securities registered under Section 12(b) or (g) of that
Act.
ITEM 10. EXECUTIVE COMPENSATION.
The following table sets forth information regarding executive compensation
for the Company's President and Chief Executive Officer. No executive officer
received compensation in excess of $100,000 for either of the years ended
September 30, 1999 and 2000.
SUMMARY COMPENSATION TABLE
--------------------------
Long Term Compensation
----------------------
Annual Compensation Awards Payouts
------------------- ------ -------
Restricted Options/
Name and Principal Fiscal Other Annual Stock SARs LTIP All Other
Position Year Salary Bonus Compensation Award(s) (Number) Payouts Compensation
--------------------- ---- ------ ----- ------------ ---------- -------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
A.G. Foust, President 1999 $48,000 -0- -0- -0- -0- -0- -0-
and Chief Executive 2000 $48,000 -0- -0- -0- -0- -0- -0-
Officer
OPTION/SAR GRANTS IN FISCAL YEAR ENDED SEPTEMBER 30, 2000
---------------------------------------------------------
Percent of Total
Options/SARs
Options/ Granted to Exercise
SARs Employees in or Base
Name (Number) Fiscal Year Price ($/Sh) Expiration Date
---------- -------- ------------ ------------ ---------------
A.G. Foust 150,000 33-1/3 $0.15 March 1, 2005
At the present time, the Company has no retirement, pension or profit
sharing programs for the benefit of its employees. However, in its discretion,
may adopt one or more of such programs in the future.
Refer to Note 7 to the Consolidated Financial Statements for status of
current outstanding stock options.
12
</TABLE>
<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth, as of December 15, 2000, the number and
percentage of shares of the Company's no par value Common Stock (its only class
of voting securities), owned beneficially by each Officer and Director, each
person known by the Company to own more than five percent of the Company's
common stock, and all Directors and Officers as a group:
Name and Address of Amount and Nature of Percent of
Beneficial Owner Beneficial Ownership Options (2) Class
------------------- -------------------- ----------- ----------
A.G. Foust 900,000 (1) 150,000 21.0%
4810 West Delaware Drive
Larkspur, CO 80118
Stewart A. Jackson 464,450 100,000 11.0%
6025 S. Eaton Lane
Littleton, CO 80123
Ray K. Davis -- 50,000 1.0%
2050 South Oneida Suite 106
Denver, CO 80224
Dru E. Campbell 182,500 -- 3.7%
4810 West Delaware Drive
Larkspur, CO 80118
John J. Womack 125,000 100,000 4.5%
208 E. Bannack
Dillon, MT 59725
All Officers and Directors as a 1,671,950 -- 41.2%
Group (4 Persons)
(1) Does not include the 182,500 shares of common stock owned by Mr. Foust's
wife, Dru E. Campbell, who is Assistant Secretary of the Company. Mr. Foust
disclaims beneficial ownership of his wife's shares.
(2) Represents options to purchase shares of common stock granted under the
2000 Stock Option Plan at an exercise price of $0.15 per share.
To the Company's knowledge, each person listed has sole voting and investment
power over the shares stated as beneficially owned.
The Company is unaware of any arrangements, including a pledge of securities,
which may cause a change in control of the Company.
13
<PAGE>
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
During the fiscal year ended September 30, 2000, there were no transactions
between the Company and any of its officers, directors or principal
shareholders.
PART IV
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS. None
(b) No reports were filed on Form 8-K during the Company's fourth quarter
ended September 30, 2000.
14
<PAGE>
INDEX TO FINANCIAL STATEMENTS
TITLE PAGE
Independent Auditors' Report F-1
Consolidated Balance Sheets as of
September 30, 2000 and 1999 F-2 to F-3
Consolidated Statements of Operations
for the Years Ended September 30, 2000 and 1999 F-4
Consolidated Statements of Stockholders' Equity for the
Years Ended September 30, 2000 and 1999 F-5
Consolidated Statements of Cash Flows
for the Years Ended September 30, 2000 and 1999 F-6
Notes to Consolidated Financial Statements F-7 to F-24
15
<PAGE>
INDEPENDENT AUDITOR'S REPORT
Board of Directors
Monument Resources, Inc. and Subsidiaries
Denver, Colorado
We have audited the consolidated balance sheets of Monument Resources, Inc. and
Subsidiaries as of September 30, 2000 and 1999 and the related consolidated
statements of operations, stockholders' equity, and cash flows for the years
ended September 30, 2000 and 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Monument Resources, Inc. and Subsidiaries as of September 30, 2000 and 1999, and
the consolidated results of their operations and cash flows for the years ended
September 30, 2000 and 1999 in conformity with generally accepted accounting
principles.
/s/ GORDON, HUGHES & BANKS, LLP
-------------------------------
GORDON, HUGHES & BANKS, LLP
Lakewood, Colorado
November 16, 2000
F-1
<PAGE>
<TABLE>
<CAPTION>
MONUMENT RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2000 AND 1999
ASSETS
2000 1999
---------- ----------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 78,831 $ 56,373
Investment in securities (Note 3) 192,003 224,060
Accounts receivable 56,560 30,477
Note receivable (Note 12) 27,660 --
Prepaid expense 10,425 8,416
---------- ----------
Total current assets 365,479 319,326
Mineral properties (Note 4) 92,718 127,837
Proved oil and gas properties, successful efforts
method, net of accumulated depletion (Note 12) 659,786 997,364
Property and equipment:
Gas pipeline, net of accumulated depreciation (Note 5) 183,022 207,555
Property and equipment, net of accumulated
depreciation (Note 5) 31,072 45,343
---------- ----------
Net property and equipment 214,094 252,898
Investment in securities, at market (Note 3) 60,991 152,630
---------- ----------
Total assets $1,393,068 $1,850,055
========== ==========
See accountants' report and notes to consolidated financial statements F-2
</TABLE>
<PAGE>
MONUMENT RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2000 AND 1999
(CONTINUED)
LIABILITIES AND STOCKHOLDERS' EQUITY
2000 1999
----------- -----------
Current liabilities:
Accounts payable and accrued expenses $ 6,948 $ 23,906
----------- -----------
Total current liabilities 6,948 23,906
Stockholders' equity (Notes 3 and 6):
Preferred stock, no par value, authorized
1,000,000 shares; none issued -- --
Common stock, no par value, authorized
10,000,000 shares; issued and outstanding
4,869,000 in 2000 and 4,919,000 in 1999 3,167,782 3,164,210
Accumulated (deficit) (1,834,595) (1,488,288)
Unrealized gain on investment
in securities (Note 3) 52,933 150,227
----------- -----------
Total stockholders' equity 1,386,120 1,826,149
----------- -----------
Total liabilities and stockholders' equity $ 1,393,068 $ 1,850,055
=========== ===========
See accountants' report and notes to consolidated financial statements F-3
<PAGE>
MONUMENT RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED SEPTEMBER 30, 2000 AND 1999
2000 1999
----------- -----------
Revenue:
Oil and gas sales $ 178,769 $ 152,020
Gas pipeline 170,395 79,556
Gain on the sale of investments (Note 3) -- 36,931
Interest 17,658 24,432
Other income 2,627 2,328
----------- -----------
Total 369,449 295,267
Expenses:
Oil and gas operating expense 75,980 79,512
Pipeline operating expense 96,168 95,658
Depreciation, depletion, and amortization 94,244 107,986
Impairment of oil and gas properties (Note 12) 245,000 --
Abandonment of mineral properties (Note 4) 35,119 --
Dry hole expense (Note 12) 20,987 --
General and administrative 148,258 156,852
----------- -----------
Total 715,756 440,008
----------- -----------
Net (loss) $ (346,307) $ (144,741)
=========== ===========
Basic and diluted (loss) per common share $ (0.07) $ (0.03)
=========== ===========
Basic and diluted weighted average number
of shares outstanding 4,894,068 4,954,780
=========== ===========
See accountants' report and notes to consolidated financial statements F-4
<PAGE>
<TABLE>
<CAPTION>
MONUMENT RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED SEPTEMBER 30, 2000 AND 1999
Accumulated
Other
Common No Par Value Accumulated Comprehensive Comprehensive
Shares Stock Accumulated (Deficit) Income (Loss) Total Income (Loss)
--------- ----------------- --------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balances, September 30, 1998 5,199,000 $ 3,197,210 $ (1,343,547) $ 219,103 $ 2,072,766 --
Stock repurchase at $0.11
per share (Note 6) (500,000) (55,000) -- -- (55,000) --
Common stock issued for
mining property at $.10
per share (Note 6) 220,000 22,000 -- -- 22,000 --
Net (loss) -- -- (144,741) -- (144,741) $ (144,741)
Comprehensive income (loss)
Unrealized (loss) on securities
held for sale (Note 3) -- -- -- (68,876) (68,876) (68,876)
----------
Comprehensive income (loss) -- -- -- -- -- $ (213,617)
==========
--------- ----------- ------------ --------- -----------
Balances, September 30, 1999 4,919,000 3,164,210 (1,488,288) 150,227 1,826,149
Return and cancellation of shares
issued for mining property (Note 6) (50,000) -- -- -- -- --
Equity compensation for services -- 3,572 -- -- 3,572 --
Net (loss) -- -- (346,307) -- (346,307) $ (346,307)
Comprehensive income (loss)
Unrealized (loss) on securities
held for sale (Note 3) -- -- -- (97,294) (97,294) (97,294)
----------
Comprehensive income (loss) -- -- -- -- -- $ (443,601)
==========
--------- ----------- ------------ --------- -----------
Balances, September 30, 2000 4,869,000 $ 3,167,782 $ (1,834,595) $ 52,933 $ 1,386,120
========= =========== ============ ========= ===========
See accountants' report and notes to consolidated financial statements F-5
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MONUMENT RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
FOR THE YEARS ENDED SEPTEMBER 30, 2000 AND 1999
2000 1999
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net (loss) $(346,307) $(144,741)
Items not affecting cash:
Depreciation, depletion and amortization 94,244 107,985
Impairment of oil and gas property 245,000 --
Gain of sale of securities -- (36,931)
Equity compensation for services 3,572 --
Abandonment of mineral property 35,119 --
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable (26,083) (9,340)
(Increase) decrease in prepaid expenses (2,010) 2,760
Increase (decrease) in accounts payable (16,958) 5,971
--------- ---------
Net cash flows (used) by operating activities (13,423) (74,296)
Cash flows from investing activities:
Proceeds from the sale of oil and gas properties 12,340 10,000
Purchase of equipment (2,862) (1,963)
Proceeds from sale of securities -- 24,727
Proceeds from sale of bond investment 26,403 84,518
--------- ---------
Net cash flows provided by investing activities 35,881 117,282
Cash flows from financing activities
Exercise of stock warrants -- 22,000
Purchase of common stock -- (55,000)
--------- ---------
Net cash flows (used) by financing activities -- (33,000)
Net increase in cash 22,458 9,986
--------- ---------
Cash and cash equivalents
Beginning of period 56,373 46,387
--------- ---------
End of period $ 78,831 $ 56,373
========= =========
SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES
------------------------------------------------------
2000 1999
--------- ---------
(Decrease) in unrealized gain on
securities available for sale $ (97,294) $ (68,876)
========= =========
See accountants' report and notes to consolidated financial statements F-6
</TABLE>
<PAGE>
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 (1999 only). 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 would require
significant additional 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. 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, 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. 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.
RECLASSIFICATIONS
Certain 1999 amounts have been reclassified to conform to the 2000 presentation.
MINERAL PROPERTIES
Costs of acquiring 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.
F-7
<PAGE>
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 Statement of Financial Accounting Standards ("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
the 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.
F-8
<PAGE>
MONUMENT RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INVESTMENT IN SECURITIES
The Company follows SFAS No. 115, "Accounting for Certain Investments in Debt
and Equity Securities," ("SFAS No. 115") 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 and
losses recorded as a component of stockholders' equity. The current market value
is derived from published newspaper quotations as of September 30th of each
fiscal year. 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,
note receivable and investments in securities.
The Company maintains cash with various financial institutions. The Company
periodically evaluates the financial standing 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 has recorded a note receivable from the sale of property which has
been secured by the property. The Company believes the note receivable to be
fully collectible and the credit risk to be minimal.
The Company's investment in U.S. Government securities is 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.
F-9
<PAGE>
MONUMENT RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Fair Value
----------
The carrying amount of the Company's financial instruments is equivalent to
their fair value as follows:
Cash and cash equivalents, trade receivables and payables and note
receivable - 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 are accounted for using the
available-for-sale accounting method.
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 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.
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 and directors.
F-10
<PAGE>
MONUMENT RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
EARNINGS PER SHARE
The Company has adopted SFAS No. 128, "Earnings Per Share" ("SFAS No. 128").
SFAS No. 128 requires two presentations of earnings per share - "basic" and
"diluted." Basic earnings (loss) per share is computed by dividing income
available to common stockholders (the numerator) by the weighted-average number
of common shares (the denominator) for the period. The computation of diluted
earnings per share is similar to basic earnings per share, except that the
denominator is increased to include the number of additional common shares that
would have been outstanding if the potentially dilutive common shares had been
issued. In the case of an operating net (loss), the diluted calculation is
considered equivalent to the basic earnings per share.
CAPITAL STRUCTURE
The Company utilizes SFAS No. 129, "Disclosure of Information about Capital
Structure" ("SFAS No. 129"), which requires companies to disclose all relevant
information regarding their capital structure.
COMPREHENSIVE INCOME
The Company has adopted Financial Accounting Standards Board issued SFAS No.
130, "Reporting Comprehensive Income" ("SFAS No. 130"), which establishes
standards for reporting of comprehensive income. This pronouncement requires
that all items recognized under accounting standards as components of
comprehensive income, as defined in the pronouncement, be reported in a
financial statement that is displayed with the same prominence as other
financial statements. Comprehensive income includes changes in equity during a
period, except those resulting from investments by owners and distributions to
owners. Under comprehensive income, the Company reports unrealized gains and
losses on investments in debt and equity securities as changes in equity.
SEGMENT REPORTING
The Company has adopted SFAS No. 131, "Disclosure about Segments of an
Enterprise and Related Information" ("SFAS No. 131"), which requires a public
enterprise to report financial and descriptive information about its reportable
operating segments. Operating segments, as defined in the pronouncement, are
components of an enterprise about which separate financial information is
available that is evaluated regularly by the Company in deciding how to allocate
resources and in assessing performance. The financial information is required to
be reported on the basis that is used internally for evaluating segment
performance and deciding how to allocate resources to segments.
F-11
<PAGE>
MONUMENT RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
RECENTLY ISSUED ACCOUNTING STANDARDS
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
The FASB issued Statement of Financial Accounting Standards No. 133, "Accounting
for Derivative Instruments and Hedging Activities" ("SFAS No. 133"), which
establishes standards for recognizing all derivative instruments including those
for hedging activities as either assets or liabilities in the statement of
financial position and measuring those instruments at fair value. In June 1999,
the FASB issued SFAS No. 137 which delayed the effective date of FASB No. 133.
SFAS NO. 137 is effective for fiscal years beginning after June 15, 2000.
Additionally, in August 2000, the FASB issued statement No. 138 "Accounting for
Certain Derivative Instruments and Certain Hedging Activities," which addresses
a limited number of issues causing implementation difficulties for numerous
entities that apply FASB No. 133. The Company adopted SFAS No. 133 and its
subsequent amendments in the fiscal year 2000 with no resulting impact on its
financial statements.
MORTGAGE BACKED SECURITIES RETAINED AFTER THE SECURITIZATION OF MORTGAGE LOANS
BY MORTGAGE BANKING ENTERPRISES
The Financial Accounting Standards Board recently issued Statement of Financial
Accounting Standards No. 134, "Accounting for Mortgage Backed Securities
Retained after the Securitization of Mortgage Loans Held by Mortgage Banking
Enterprises" ("SFAS No. 134"). SFAS No. 134 establishes new reporting standards
for certain activities of mortgage banking enterprises. The Company believes
this statement has no impact on its financial statements.
NOTE 2 - MANAGEMENT'S USE OF ESTIMATES
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.
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).
F-12
<PAGE>
MONUMENT RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
NOTE 3 - INVESTMENT 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 SFAS No. 115, "Accounting
for Certain Investments in Debt and Equity Securities" ("SFAS 115"). During
fiscal year 2000, no shares were sold; however during fiscal year 1999, 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 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. During fiscal 2000
and 1999, the Company sold bonds for a net gain on sale of $-0- and $13,005,
respectively.
Investments in securities are summarized as follows at September 30, 2000:
Unrealized Fair Market
Gain (Loss) Value
--------- ---------
Available-for-sale securities
Common Stock $ 58,588 $ 60,991
Debt Securities (maturing 1 to 18 years) (5,655) 192,003
--------- ---------
$ 52,933 $ 252,994
========= =========
Investments in securities are summarized as follows at September 30, 1999:
Unrealized Fair Market
Gain Value
--------- ---------
Available-for-sale securities
Common Stock $ 149,845 $ 152,630
Debt Securities (maturing 1 to 19 years) 382 224,060
--------- ---------
$ 150,227 $ 376,690
========= ==========
F-13
<PAGE>
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 September 30, 2000 and
1999, 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. An
alternative use is to sell 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. 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 $33,198 at September 30, 2000
and 1999.
SKANE ZINC PROSPECT, SWEDEN
The Skane Zinc Prospect, with 1999 capitalized costs of $35,119, consisted of
approximately 19,700 acres of exploration licenses in southern Sweden. The
Company abandoned the project in fiscal year 2000.
ALL MINERAL PROPERTIES
Total mineral costs for all properties capitalized were $92,718 and $127,837 as
of September 30, 2000 and 1999.
F-14
<PAGE>
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:
2000 1999
---------- ----------
Land $ 12,500 $ 12,500
Machinery 77,885 77,885
---------- ----------
Total 90,385 90,385
Less: accumulated depreciation (59,313) (45,042)
---------- ----------
Net property, plant and equipment 31,072 45,343
Pipeline 300,000 300,000
Less: accumulated depreciation (116,978) (92,445)
---------- ----------
Net pipeline 183,022 207,555
---------- ----------
Net property, plant, equipment and pipeline $ 214,094 $ 252,898
========== ==========
Depreciation expense charged to operations was $38,804 and $43,395 in fiscal
2000 and 1999, respectively.
The useful lives of property and equipment for purposes of computing
depreciation are as follows:
Machinery and equipment 3 - 8 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
September 30, 2000, no shares of preferred stock have been issued.
On December 10, 1999, the Company repurchased 500,000 shares of its restricted
common stock held by Powerhouse Resources, Inc. for cash of $55,000 ($.11 per
share).
On January 11, 1999, the Company's president and assistant secretary exercised
options to acquire 160,000 and 60,000 common shares, respectively, for cash of
$22,000 ($.10 per share).
During fiscal year 2000, the Company abandoned the Skane zinc prospect (Note 4).
Concurrently, the joint venture partner returned 50,000 shares of the Company's
common stock that had been issued in October 1997 for no consideration. The
Company cancelled the shares.
During fiscal year 2000, the Company granted stock options to a consultant at a
value of $3,572. (Note 7)
F-15
<PAGE>
MONUMENT RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
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
were outstanding under this Plan. The Company cancelled the Employees' Plan
during fiscal year 2000.
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 were outstanding under the
Directors' Plan. The Company cancelled the Directors' Plan during the fiscal
year 2000.
In January 1993, the Company granted stock options (exclusive of the above
plans) to the officers in lieu of compensation. The options were for 540,000
shares and were 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, 2000,
exercisable at $.10 per share. Options for 220,000 shares were exercised January
11, 1999. Of these exercised options, options for 160,000 shares were exercised
by the Company's president, A.G. Foust, and options for 60,000 shares were
exercised by Dru E. Campbell, assistant secretary of the Company. No options
were outstanding under this plan. The Company cancelled the plan in fiscal year
2000.
During 2000, the Company adopted a new Stock Option Plan (the " 2000 Plan"). The
exercise price of the shares covered by options granted pursuant to the 2000
Plan may not be less than the fair market value of the common stock on the grant
date. Further, the exercise price shall not be less than 110% of the fair market
value of the common stock on the day of grant if the optionee owns 10% or more
of the Company's common stock. With respect to each individual option granted
under the 2000 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. As of September 30, 2000, the Company had an aggregate of
750,000 common shares reserved for issuance under the 2000 Plan. Additionally,
as of September 30, 2000, options to purchase 450,000 common shares had been
granted to three board members, an employee and a consultant.
The Company applies SFAS No. 123 in accounting for options granted to
consultants. Accordingly, the fair value of each option granted to the
consultant is estimated on the date of grant using the Black-Scholes
option-pricing model with the following weighted average assumptions: no
dividend yield, expected volatility of 100%, risk free interest rates of 8.5%
and expected lives of 5 years. Based on the model, $3,572 of compensation
expense was recorded for the grant of options to the consultant in conformity
with SFAS No. 123 requirements.
F-16
<PAGE>
MONUMENT RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
NOTE 7 - STOCK OPTION PLANS (CONTINUED)
The following schedule summarizes information with respect to options granted
under the Company's equity plans:
Number Weighted Average
of Exercise Price of
Shares Shares Under Plans
-------- ------------------
Outstanding September 30, 1998 220,000 $ .10
Granted -- --
Exercised (220,000) .10
Forfeited or expensed -- --
-------- --------
Outstanding September 30, 1999 -- --
Granted 450,000 .15
Exercised -- --
Forfeited or expensed -- --
-------- --------
Outstanding September 30, 2000 450,000 $ .15
-------- ========
The Company applies APB 25 in accounting for options granted to employees and
directors. The exercise price of the employees and directors options equaled or
exceeded the fair market value of the common shares on the date of grant and,
accordingly, no compensation cost has been recognized for options granted to
employees and directors under the provisions of APB 25 for stock options. Under
SFAS 123, compensation cost is measured at the grant date based on the value of
the award and is recognized over the service (or vesting) period. Had
compensation cost for the options granted to employees and directors been
determined under SFAS 123, based on the fair market value at the grant date, the
Company's pro forma net loss and net loss per share would have been reflected as
follows:
2000 1999
--------- ---------
Net earnings
As reported $(346,307) $(144,741)
Pro forma $(374,882) $(144,741)
Net earnings per share
As reported $ (.07) $ (.03)
Pro forma $ (.08) $ (.03)
NOTE 8 - INCOME TAXES
There is no current or deferred tax expense for the years ended September 30,
2000 and 1999 because the Company had net losses for income tax purposes in both
years.
The deferred tax consequences of temporary differences in reporting items for
financial statement and income tax purposes are recognized, if appropriate.
Realization of future tax benefits related to the deferred tax assets is
dependent on many factors, including the Company's ability to generate taxable
income within the net operating loss carryforward period. Management has
considered these factors in reaching its conclusion as to the valuation
allowance for financial reporting purposes.
F-17
<PAGE>
MONUMENT RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
NOTE 8 - INCOME TAXES (CONTINUED)
The income tax effect of temporary differences comprising the deferred tax
assets and deferred tax liabilities on the accompanying balance sheet at
September 30, 2000 and 1999 is the result of the following:
2000 1999
---------- ----------
Deferred tax liabilities $ -- $ --
Deferred tax assets:
Net operating loss 436,542 277,881
Securities valuation 105,224 124,629
Oil and gas properties 209,392 160,766
Pipeline depreciation (39,447) (44,390)
---------- ----------
Total 711,711 518,886
Less: valuation allowance (711,711) (518,886)
---------- ----------
Net deferred tax assets $ -- $ --
========== ==========
A reconciliation between the statutory federal income tax rate and the effective
rate of income tax expense for the two years ended September 30 is as follows:
2000 1999
-------- --------
Statutory federal income tax rate (34%) (34%)
State tax net of federal benefit -- --
Increase in net operating loss carryforwards 34% 34%
-------- --------
Effective rate --% --%
======== ========
The temporary differences causing the deferred tax asset are expected to reverse
over the next ten years. At September 30, 2000 and 1999, the Company has
operating loss carryforwards of $1,283,947 and $712,516, respectively. The
operating loss carryforwards expire beginning in 2011($105,585 in 2011 and
$1,178,362 thereafter).
NOTE 9 - RELATED PARTY TRANSACTIONS
At September 30, 2000 and 1999, the Company's current president owned 18.48% and
18.30% of the outstanding shares of common stock, respectively, the Company's
assistant secretary owned 3.75% and 3.71%, respectively, and one of the
Company's current directors (formerly president) owned 9.54% and 9.4%,
respectively.
During the year ended September 30, 2000, the Company granted stock options to
three board members, an employee and a consultant. (Note 8)
F-18
<PAGE>
MONUMENT RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
NOTE 10 - MAJOR CUSTOMERS
The Company derived in excess of 10% of its revenue from various sources (oil
and gas sales and sale of securities) as follows:
Company Company
A B
------- -------
Year ended:
September 30, 2000 79% 12%
September 30, 1999 66% *
* Less than 10%
NOTE 11 - SEGMENT INFORMATION
The Company operates in three industry segments: (1) oil and gas exploration and
development, (2) gas transmission pipeline and (3) mineral exploration and
development.
Identified assets by industry are those assets that are used in the Company's
operations in each industry. Corporate assets are principally cash, investment
in stocks and bonds, and furniture and fixtures.
The Company has adopted Statement of Financial Accounting Standards No. 131,
"Disclosures about Segments of an Enterprise and Related Information" ("SFAS No.
131"). The adoption of SFAS No. 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 and
prospect generation and administrative overhead fees charged to participants in
its oil and gas ventures.
The gas transmission pipeline segment receives its income from the
transportation and sale of natural gas from the Company's Leavenworth County,
Kansas, properties.
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. Currently, this segment is inactive.
During the years ended September 30, 2000 and 1999, there were no inter-segment
revenues. The accounting policies applied by each segment are the same as those
used by the Company in general.
Net sales to one customer of the oil and gas segment totaled approximately
$287,753 and $195,129 of revenues or 79% and 66% for the years ended September
30, 2000 and 1999, respectively.
F-19
<PAGE>
<TABLE>
<CAPTION>
MONUMENT RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
NOTE 11 - SEGMENT INFORMATION (CONTINUED)
There have been no differences from the last annual report in the basis 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. Segment
information consists of the following:
Oil and Gas Pipeline Mining Corporate Consolidated
----------- -------- ------ --------- ------------
<S> <C> <C> <C> <C> <C>
Revenues:
2000 $ 178,769 $ 170,395 $ -0- $ 20,285 $ 369,449
1999 152,020 79,556 -0- 63,691 295,267
Income (Loss) From Operations
2000 $ (264,288) $ 46,433 $ -0- $(128,452) $ (346,307)
1999 (2,512) (48,973) -0- (93,256) (144,741)
Identifiable Assets (net)
2000 $ 721,418 $ 235,544 $ 92,718 $ 343,388 $1,393,068
1999 1,035,998 243,123 127,837 443,097 1,850,055
Depreciation, Depletion and Valuation
Charged to Identifiable Assets
2000 $ 310,970 $ 27,794 $ -0- $ 480 $ 339,244
1999 75,022 32,869 -0- 95 107,986
Capital Expenditures
2000 $ 2,862 $ -0- $ -0- $ -0- $ 2,862
1999 1,963 -0- -0- -0- 1,963
</TABLE>
NOTE 12 - OIL AND GAS ACTIVITIES
During the year ended September 1999, the Company entered into an agreement to
transfer operations of its East Voss property in Knox County, Texas to an
unrelated party. The agreement provides that the new operator will assume all
the rights and obligations associated with the project in exchange for a cash
payment of $10,000, note payable to the Company of $40,000 plus interest at 10%
per annum and a perpetual overriding royalty (ORR) interest of 7.5%. During the
year ended September 30, 2000, the parties agreed to the terms of the contract
and the transfer was recorded. As of September 30, 2000, the outstanding balance
of the note payable to the Company is $27,660.
CAPITALIZED COSTS
Capitalized costs associated with oil and gas producing activities, excluding
the Kansas pipeline, are as follows:
F-20
<PAGE>
MONUMENT RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
NOTE 12 - OIL AND GAS ACTIVITIES (CONTINUED)
CAPITALIZED COSTS (CONTINUED)
September 30,
---------------------------------
2000 1999
----------- -----------
Proved properties $ 1,638,997 $ 1,726,135
Impairment Allowance (806,448) (561,448)
Accumulated depreciation, depletion,
and amortization (222,764) (167,323)
----------- -----------
Net capitalized costs $ 659,786 $ 997,364
=========== ===========
In 2000, the Company recorded an impairment of $245,000 to its Galvin Ranch
proved undeveloped oil field. The impairment valuation was based on a
determination of the fair market value of the property.
COSTS INCURRED
Information relating to the Company's costs incurred in its oil and gas property
acquisition, exploration, and development activities is summarized as follows:
September 30,
---------------------------------
2000 1999
----------- -----------
Acquisition of properties $ -- $ --
Development costs 2,862 1,963
Exploration costs 20,987 --
----------- -----------
Total costs incurred $ 22,756 $ 1,963
=========== ===========
For the year ended September 30, 2000, the Company participated in the drilling
of one dry well at a cost of $20,987. There were no exploration costs incurred
for the year ended September 30, 1999.
RESULTS OF OPERATIONS
Results of operations for oil and gas producing and pipeline activities are as
follows:
September 30,
---------------------------------
2000 1999
----------- -----------
Revenues $ 349,164 $ 231,576
Production costs (228,255) (175,170)
Impairment of oil and gas properties (245,000) --
Depreciation and depletion (93,764) (107,891)
----------- -----------
Results of operations (excluding
corporate overlap) $ (217,855) $ (51,485)
=========== ===========
F-21
<PAGE>
MONUMENT RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
NOTE 12 - OIL AND GAS ACTIVITIES (CONTINUED)
UNAUDITED OIL AND GAS RESERVE QUANTITIES
The following unaudited reserve estimates presented as of September 30, 2000 and
1999 were prepared by Sure Engineering. There are many uncertainties inherent in
estimating proved reserve quantities and in projecting future production rates
and the timing of development expenditures. In addition, reserve estimates of
new discoveries that have little production history are more imprecise than
those of properties with more production history. Accordingly, these estimates
are expected to change as future information becomes available.
UNAUDITED OIL AND GAS RESERVE QUANTITIES (CONTINUED)
Proved oil and gas reserves are the estimated quantities of crude oil,
condensate, natural gas and natural gas liquids which geological and engineering
data demonstrate with reasonable certainty to be recoverable in future years
from known reservoirs under existing economic and operating conditions.
Proved developed oil and gas reserves are those reserves expected to be
recovered through existing wells with existing equipment and operating methods.
Unaudited net quantities of proved developed reserves of crude oil (including
condensate) and natural gas (all located within the United States) are as
follows:
Changes in proved reserves (M BBLS) (MMCF)
-------- ------
Estimated quantity, September 30, 1998 149 1,800
Revisions of previous estimate (133) (231)
Production -- (99)
------ ------
Estimated quantity, September 30, 1999 16 1,470
Revisions of previous estimate -- (528)
Production -- (104)
------ ------
Estimated quantity, September 30, 2000 16 838
====== ======
Proved reserves at year end Developed Undeveloped Total
--------------------------- --------- ----------- -----
Oil (M BBLS):
September 30, 2000 -- 16 16
September 30, 1999 -- 16 16
Gas (MMCF):
September 30, 2000 838 -- 838
September 30, 1999 858 612 1470
F-22
<PAGE>
MONUMENT RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
NOTE 12 - OIL AND GAS ACTIVITIES (CONTINUED)
UNAUDITED STANDARDIZED MEASURE
The following table presents a standardized measure of the discounted future net
cash flows attributable to the Company's proved oil and gas reserves. Future
cash inflows were computed by applying year-end prices of oil and gas to the
estimated future expenditures (based on current costs) to be incurred in
developing and producing the proved reserves, assuming continuation of existing
economic conditions.
Future income tax expenses were computed by applying statutory income tax rates
to the difference between pre-tax net cash flows relating to the Company's
proved oil and gas reserves and the tax basis of proved oil and gas reserves and
available net operating loss carryforwards. Discounting the future net cash
inflows at 10% is a method to measure the impact of the time value of money.
The following presents the unaudited principal sources of the changes in the
standardized measure of the discounted future net cash flows:
September 30,
---------------------------
2000 1999
---------------------------
(in thousands)
Future cash inflows $ 2,186 $ 3,314
Future production and development costs (794) (1,592)
Future income tax expense -- --
------- -------
Future net cash flows 1,392 1,722
10% annual discount for estimated timing
of cash flows (584) (830)
------- -------
Standardized measure of discounted cash
flows $ 808 $ 892
======= =======
The following presents the unaudited principal source of the changes in the
standardized measure of discounted future net cash flows:
Years ended September 30,
---------------------------
2000 1999
---------------------------
(in thousands)
Standard measure of discounted future net
cash flows:
Beginning of year $ 892 $ 1,085
------- -------
Sales and transfers of oil and gas
produced, net of production costs (103) (88)
Net changes in prices and production costs
and other 211 209
Changes in future development costs 231 168
Revisions of previous quantity estimates (295) (585)
Other (217) (45)
Net change in income taxes -- 39
Accretion of discount 89 109
------- -------
(84) (193)
------- -------
End of year $ 808 $ 892
======= =======
F-23
<PAGE>
MONUMENT RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
NOTE 13 - LEASES
The Company has an operating lease for a gas compressor that it uses in its
pipeline operation. Lease costs for the equipment amounted to $18,042 and
$18,882 in fiscal 2000 and 1999, respectively. The lease was renewed in October
1, 1996 for six months at $1,573 per month. Thereafter, the lease is renewable
on a month-to-month basis.
The Company's Castle Rock, Colorado, office consisted of approximately 100
square feet and has been leased from an unaffiliated third party for $100 per
month on a month-to-month basis since September 1, 1997. The lease was
terminated during fiscal year 2000. In addition, the Company maintains offices
on a month-to-month basis in Denver, Colorado, at a cost of $930 per month.
Lease costs for the office space totaled $10,158 and $10,680, respectively, for
the years ended September 30, 2000 and 1999.
NOTE 14 - SUBSEQUENT EVENT
Subsequent to year end, the common stock of Layfield (Note 3) commenced a five
for one reverse stock split, reducing the Company's number of shares held. In
addition, Layfield changed its name to Playfair Mining LTD.
F-24
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Company has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
MONUMENT RESOURCES, INC.
December 21, 2000 By /s/ A.G. Foust
----------------- -------------------
Date A.G. Foust, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Company and in
the capacities and on the dates indicated.
Signature Title Date
By: /s/ A.G. Foust President (Chief Executive December 21, 2000
-------------------- Officer, Principal Financial
A.G. Foust and Accounting Officer)
and Director
By: /s/ Stewart A. Jackson Director December 21, 2000
----------------------------
Stewart A. Jackson
By: /s/ John J. Womack Director December 21, 2000
------------------------
John J. Womack
F-25
