<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
Commission file number 0-18836
MIDLAND RESOURCES, INC.
(EXACT NAME OF SMALL BUSINESS ISSUER AS SPECIFIED IN ITS CHARTER)
Texas 75-2286814
(STATE OR OTHER JURISDICTION (IRS EMPLOYER
OF INCORPORATION) IDENTIFICATION NUMBER)
616 FM 1960 West, Suite 600, Houston, Texas 77090
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(281) 580-9989
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 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
----- -----
APPLICABLE ONLY TO CORPORATE ISSUERS:
State the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
Common Stock, $.001 par value: 4,434,872 shares outstanding at June 30, 1997
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MIDLAND RESOURCES, INC.
TABLE OF CONTENTS
PAGE
----
PART I. FINANCIAL INFORMATION
Consolidated Balance Sheets as of June 30, 1997 (Unaudited)
and December 31, 1996 3
Unaudited Consolidated Statements of Operations for the three and six
month periods ended June 30, 1997 and June 30, 1996 5
Unaudited Consolidated Statements of Cash Flows for the three and six
month periods ended June 30, 1997 and June 30, 1996 7
Note to Unaudited Financial Statements 9
Management's Discussion and Analysis of Financial Condition
and Results of Operation 10
PART II. OTHER INFORMATION 13
SIGNATURES 14
Page 2
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PART I - FINANCIAL INFORMATION
MIDLAND RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30, December 31,
1997 1996
----------- ------------
Unaudited
ASSETS
Current assets:
Cash $ 80,380 $ 366,677
Accounts receivable:
Oil and gas sales 668,137 834,269
Related parties - 360,479
Property operations and other 414,430 359,600
Property and equipment held for sale 114,347 1,241,515
Other current assets 83,903 104,180
Deferred tax asset 378,000 378,000
----------- -----------
Total current assets 1,739,197 3,644,720
Property and equipment, at cost, partially pledged:
Oil and gas properties and equipment,
using successful efforts method 28,314,749 26,936,826
Transportation equipment 213,273 282,532
Computer equipment and software 244,138 229,155
Office furniture and equipment 96,732 94,299
Land, building and leasehold improvements 23,014 105,559
Wells in progress - 241,209
Less accumulated depreciation, depletion
and amortization (14,950,908) (14,076,100)
----------- -----------
Property and equipment, net 13,940,998 13,813,480
Other assets:
Investment in oil and gas limited partnership 1,566,151 -
Goodwill, net of amortization 733,928 747,271
Contracts and leases, net of amortization 396,158 414,633
Note receivable 310,850 317,759
Other 31,939 38,783
----------- -----------
Total assets $18,719,221 $18,976,646
----------- -----------
----------- -----------
THE ACCOMPANYING NOTE IS AN INTEGRAL PART
OF THE FINANCIAL STATEMENTS.
Page 3
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MIDLAND RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30, December 31,
1997 1996
--------- ------------
Unaudited
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 1,290,163 $ 1,680,830
Accounts payable and accrued expenses 1,875,365 1,194,344
Drilling advances - 393,254
----------- -----------
Total current liabilities 3,165,528 3,268,428
Long-term debt, net of discount 7,012,488 7,166,421
Deferred income tax liability 1,753 47,044
Payable for the purchase of subsidiary and other 212,701 317,493
----------- -----------
Total liabilities 10,392,470 10,799,386
Stockholders' equity:
Preferred stock, par value $0.01 per share;
20,000,000 shares authorized; none issued - -
Common stock, par value $0.001 per share;
80,000,000 shares authorized; 4,434,872
shares issued at June 30, 1997, and
4,401,031 shares at December 31, 1996 4,435 4,401
Additional paid in capital 8,395,092 7,898,199
Unearned compensation (264,953) -
Retained earnings 192,177 274,660
----------- -----------
Total stockholders' equity 8,326,751 8,177,260
----------- -----------
Total liabilities and stockholders' equity $18,719,221 $18,976,646
----------- -----------
----------- -----------
THE ACCOMPANYING NOTE IS AN INTEGRAL PART
OF THE FINANCIAL STATEMENTS.
Page 4
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MIDLAND RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Three months ended June 30,
---------------------------
1997 1996
---------- ----------
Unaudited Unaudited
Operating revenue:
Oil and gas sales $1,518,560 $1,612,185
Management fees - 15,000
Property operator fees 24,071 21,491
Partnership income 99,007 -
Other 5,850 1,477
---------- ---------
Total operating revenue 1,647,488 1,650,153
---------- ---------
Operating costs and expenses:
Oil and gas production 712,040 740,504
Exploration costs, including exploratory
dry holes 351,729 342,122
Impairment losses 356,000 -
Depreciation, depletion and amortization 319,452 239,059
General and administrative 483,334 320,982
---------- ---------
Total operating costs and expenses 2,222,555 1,642,667
---------- ---------
(575,067) 7,486
Other income and (expenses):
Gain on sale of property 25,426 32,566
Interest and other income 8,199 16,240
Interest expense (198,195) (160,375)
---------- ---------
Net other income and expenses (164,570) (111,569)
---------- ---------
Loss before income taxes (739,637) (104,083)
Deferred federal income tax benefit (251,416) (35,389)
---------- ---------
Net loss $ (488,221) $ (68,694)
---------- ---------
---------- ---------
Net loss per common share $ (0.11) $ (0.02)
---------- ---------
---------- ---------
Average shares outstanding 4,426,658 4,394,001
---------- ---------
---------- ---------
THE ACCOMPANYING NOTE IS AN INTEGRAL PART
OF THE FINANCIAL STATEMENTS.
Page 5
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MIDLAND RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Six months ended June 30,
------------------------
1997 1996
---------- ----------
Unaudited Unaudited
Operating revenue:
Oil and gas sales $3,346,815 $3,105,326
Management fees - 30,000
Property operator fees 51,150 43,589
Partnership income 99,007 -
Other 8,655 2,630
---------- ----------
Total operating revenue 3,505,627 3,181,545
---------- ----------
Operating costs and expenses:
Oil and gas production 1,449,529 1,422,289
Exploration costs, including
exploratory dry holes 360,284 518,778
Impairment losses 356,000 -
Depreciation, depletion and amortization 634,233 473,161
General and administrative 817,183 626,828
---------- ----------
Total operating costs and expenses 3,617,229 3,041,056
---------- ----------
(111,602) 140,489
Other income and (expenses):
Gain on sale of property 376,505 30,677
Interest and other income 18,155 32,674
Interest expense (410,832) (312,582)
---------- ----------
Net other income and expenses (16,172) (249,231)
---------- ----------
Loss before income taxes (127,774) (108,742)
Deferred federal income tax benefit (45,291) (36,971)
---------- ----------
Net loss $ (82,483) $ (71,771)
---------- ----------
---------- ----------
Net loss per common share $ (0.02) $ (0.02)
---------- ----------
---------- ----------
Average shares outstanding 4,416,345 4,390,116
---------- ----------
---------- ----------
THE ACCOMPANYING NOTE IS AN INTEGRAL PART
OF THE FINANCIAL STATEMENTS.
Page 6
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MIDLAND RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three months ended June 30,
--------------------------
1997 1996
----------- -----------
Unaudited Unaudited
Cash flows from operating activities:
Net loss $ (488,221) $ (68,694)
Deferred federal income tax benefit (251,416) (35,389)
Depreciation, depletion and amortization 319,452 239,059
Impairment losses 356,000 -
Gain on sale of property and equipment (23,575) (32,566)
Non-cash stock based compensation 73,969 -
Decrease in accounts receivable 26,101 222,097
Increase in accounts payable 98,816 126,916
Increase (decrease) in other current assets 76,600 (82,119)
Other 12,764 (91,959)
----------- -----------
Net cash provided by operating activities 200,490 277,345
----------- -----------
Cash flows from investing activities:
Proceeds from sale of marketable equity securities - 9,847
Proceeds from sales of property and equipment 23,575 33,000
Additions to property and equipment (244,976) (1,351,888)
Payments to minority interests in Summit (7,767) -
Investment in marketable equity securities - (32,617)
Investment in limited partnership (963,619) -
----------- -----------
Net cash used in investing activities (1,192,787) (1,341,658)
----------- -----------
Cash flows from financing activities:
Exercise of warrants and options 82,114 8,271
Collection on note receivable 3,489 -
Long-term borrowings 650,000 1,220,000
Principal payments on short-term debt - (70,000)
Principal payments on long-term debt (5,421) (107,731)
Drilling advances 457,121 -
Reduction in drilling advances (457,121) -
----------- -----------
Net cash provided by financing activities 730,182 1,050,540
----------- -----------
Net decrease in cash (262,115) (13,773)
Cash, beginning of the period 342,495 58,511
----------- -----------
Cash, end of period $ 80,380 $ 44,738
----------- -----------
----------- -----------
The accompanying note is an integral part
of the financial statements.
Page 7
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MIDLAND RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six months ended June 30,
--------------------------
1997 1996
------------ ------------
Unaudited Unaudited
Cash flows from operating activities:
Net loss $ (82,483) $ (71,771)
Deferred federal income tax benefit (45,291) (36,972)
Depreciation, depletion and amortization 634,233 473,161
Impairment losses 356,000 -
Gain on sale of property and equipment (374,654) (30,677)
Non-cash stock based compensation 117,047 -
(Increase) decrease in accounts receivable 111,302 (51,192)
Increase in accounts payable 711,451 276,780
(Increase) decrease in other current assets 20,277 (22,375)
Other 20,774 (38,179)
------------ ------------
Net cash provided by operating activities 1,468,656 498,775
------------ ------------
Cash flows from investing activities:
Proceeds from sale of marketable equity securities - 9,847
Proceeds from sales of property and equipment 1,672,982 34,000
Additions to property and equipment (1,225,268) (1,818,719)
Payments to minority interests in Summit (104,792) -
Investment in marketable equity securities - (344,866)
Investment in limited partnership (1,566,151) -
Cost reimbursement from limited partnership 360,479 -
------------ ------------
Net cash used in investing activities (862,750) (2,119,738)
------------ ------------
Cash flows from financing activities:
Exercise of warrants and options 114,927 17,503
Collection on note receivable 6,909 6,896
Long-term borrowings 1,056,250 1,820,000
Principal payments on long-term debt (1,677,035) (693,308)
Drilling advances 457,121 -
Reduction in drilling advances (850,375) -
------------ ------------
Net cash provided by (used in) financing
activities (892,203) 1,151,091
------------ ------------
Net decrease in cash (286,297) (469,872)
Cash, beginning of the period 366,677 514,610
------------ ------------
Cash, end of period $ 80,380 $ 44,738
------------ ------------
------------ ------------
The accompanying note is an integral part
of the financial statements.
Page 8
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MIDLAND RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND BASIS OF PRESENTATION
Midland Resources, Inc. ("Company") was organized in 1990 with the
issuance of common stock and warrants in exchange for oil and gas partnership
interests. The Company and its wholly owned subsidiaries are headquartered in
Houston, Texas. The Company is involved in the acquisition, exploration,
development and production of oil and gas and owns producing properties and
undeveloped acreage in Texas, North Dakota, Colorado, Illinois and Oklahoma.
The majority of its activities are centered in the Permian Basin of West Texas.
Midland Resources Operating Company, Inc. ("MRO"), a wholly owned subsidiary, is
in the business of oil and gas property operations. Summit Petroleum
Corporation ("Summit") is a wholly owned subsidiary engaged in oil and gas
acquisition, exploration, development, production and property operations.
Summit was acquired in 1996 in a transaction accounted for as a purchase and has
been included in the Company's consolidated financial statements since October
1, 1996.
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated balance sheets include the accounts of the
Company and its wholly owned subsidiaries. All significant inter-company
accounts and transactions have been eliminated in consolidation.
In the opinion of management, the accompanying unaudited consolidated
financial statements contain all adjustments necessary to present fairly the
financial position of the Company and its wholly owned subsidiaries as of
June 30, 1997, the results of operations and cash flows for the three month
and six month periods ended June 30, 1997 and 1996. The results of
operations for the periods presented are not necessarily indicative of the
results to be expected for a full year. The accounting policies followed by
the Company are set forth in more detail in Note A of the "Notes to
Consolidated Financial Statements" in the Company's annual report on Form
10-KSB filed with the Securities and Exchange Commission. Certain information
and footnote disclosures normally included in financial statements prepared
in accordance with generally accepted accounting principles have been
condensed or omitted in this Form 10-QSB pursuant to the rules and
regulations of the Securities and Exchange Commission. However, the
disclosures herein are adequate to make the information presented not
misleading. It is suggested that these financial statements be read in
conjunction with the financial statements and notes thereto included in the
Form 10-KSB.
LOSS PER COMMON SHARE
Net loss per common share is based on the weighted average number of shares
outstanding during the periods presented. Common stock equivalents (options and
warrants) are excluded since their inclusion would have an antidilutive effect
on loss per share.
The Financial Accounting Standards Board (FASB) has issued Statement of
Financial Accounting Standards No. 128 (SFAS 128), "Earnings Per Share" which
requires changes in the computation and reporting of earnings per share. This
pronouncement, which becomes effective for periods ending after December 15,
1997, provides for the presentation of basic earnings per share, computed
without regard to options, warrants, and other stock equivalents, and diluted
earnings per share, which gives effect to common stock equivalents. The Company
has not fully determined the effects of these new rules on its reported loss
per share.
Page 9
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MIDLAND RESOURCES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
PLAN OF OPERATION
The Company's initial capitalization was through the acquisition of the
interests of seven public oil and gas income limited partnerships in exchange
for common stock and warrants of the Company. There were 2,264,522 shares of
common stock issued and, for each share of common stock issued, two warrants
were issued entitling the holder to purchase one share of common stock at $2.50
and one share at $4.00 during the period November 1990 to November 2002. In
October 1995, the Company called for redemption of its $2.50 warrants. Holders
received a redemption payment of $0.05 per warrant for aggregate payments of
$63,373, which was charged to additional paid in capital. 997,009 of the $2.50
warrants were exercised, resulting in net proceeds of approximately $1,831,000.
During the first six months of 1997, 7,841 of the $4.00 warrants were exercised.
On December 20, 1996, the Company completed the acquisition of Summit, an
affiliated entity engaged in oil and gas acquisition, development and
exploration activities which owned interests in many of the same properties as
the Company. The Company's total investment in acquiring Summit was
approximately $2,011,000.
The Company has increased its proved reserves by more than 50% since 1993
through acquisitions with ascertainable additional reserve potential and a
selective program of drilling, workovers, recompletions and re-entries.
Historically, the Company's growth has been primarily through the acquisition
and subsequent development of proved oil and gas properties. In 1995 the
Company changed its focus from an acquisition strategy to exploration and
exploitation, based on the advanced technology application of 3D seismic.
Projects were generated and acquired in 1995 and 1996, with exploration
drilling commencing in mid 1996. During 1996, the Company drilled three
successful development wells and three exploratory wells, one of which was
completed as a discovery well. During the first six months of 1997, the
Company completed three additional successful exploratory wells, one of which
is held by a limited partnership in which the Company serves as managing
general partner. During this period, only one unsuccessful exploratory well
was drilled. Currently, three additional wells are being completed, and
the drilling of a development well has begun. The majority of these wells
were drilled on recent 3D seismic discovery locations. The Company intends
to continue increasing production and reserves through exploration and
further development of existing oil and gas properties and future
acquisitions. The Company currently estimates that it will drill one or two
additional wells in 1997. Future drilling will depend on the Company's
ability to raise necessary financing.
The cost of the Company's exploration and development programs have been
funded from debt financing, as well as from operations.
CAPITAL RESOURCES AND LIQUIDITY
In the first half of 1997, cash flow was a negative $286,297, primarily due
to expenditures for the Company's exploration program as discussed below.
In the first half of 1997, cash flows from operating activities were
$1,468,656, which includes the effects of a net increase in accounts payable
of $711,451 and net decreases in accounts receivable and other current assets
totaling $131,579, but also includes exploratory dry hole costs of $360,284.
Investing activities required the use of $862,750 in cash due to drilling and
development activities which required $2,791,419, including the Company's
share of expenditures through an oil and gas limited partnership. This was
partially offset by the sales of oil and gas properties of $1,672,982,
including $1,647,407 from the sale of the Redfish Bay properties. These
properties were sold in order for the Company to devote additional resources
to its exploration program in west Texas. Other investing activities resulted
in net cash of $255,687 to the Company. Financing activities resulted in a
net decrease in cash of $892,203, primarily due to the repayment of bank debt
of $1,647,407 from proceeds of the Redfish Bay sale. Also, drilling advances
were reduced by a net of $393,254. These decreases were offset, in part, by
proceeds from bank borrowings of $1,056,250, used in the Company's
exploration and development program, as well as from $114,927 received from
warrant and option conversions and $6,909 from other activities.
Page 10
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At June 30, 1997, the Company had negative working capital of approximately
$1,426,000 compared to positive working capital of approximately $376,000 at
December 31, 1996, for a net decrease of $1,802,000. This is due primarily to
the funding of the Company's oil and gas exploration and development program
from both operations and bank borrowings during the first half of 1997. The
Company has recently curtailed its drilling program pending its ability to raise
the necessary funding.
In October 1996, the borrowing base under the Company's credit facility
with its bank was increased from $7,000,000 to $9,500,000, and in March 1997
was reduced to $8,200,000 as a result of the sale of the Company's interest
in the Redfish Bay properties. Currently, the borrowing base is $9,250,000.
Amounts outstanding under this loan agreement currently bear interest at a
rate which, at the Company's option, either fluctuates with the bank's prime
rate, or with the London Interbank Offered Rate. Interest is payable monthly
as it accrues. The credit facility also provides for the payment of a
commitment fee equal to 1/2 of 1% of the unused balance of the borrowing
base; payable quarterly. The borrowing base is reduced by $125,000 per month
beginning June 1997 with final maturity in October 2000. The balance of this
debt at June 30, 1997, was $8,215,554, and in July 1997, an additional
$325,000 was borrowed. This note is secured by substantially all of the
Company's assets.
The prices of crude oil have fluctuated significantly in recent years as well
as in recent months. As of June 30, 1997, the Company was receiving $18.60 per
bbl as compared to $25.00 at January 1, 1997. Fluctuations in price have a
significant impact on the Company's financial condition and liquidity.
The Company is currently considering various alternatives both to secure
adequate capital to complete drilling commitments and opportunities as well
as strategic transactions involving the whole Company. To assist and advise
the Company it engaged First Union Capital Markets Corp. on August 11, 1997.
Although the Company has, as noted above, completed a number of the wells
it has drilled, many of these wells were completed in secondary zones with
resulting production being less than originally targeted. The significant
expenditures for geologic and drilling activities, coupled with achieved
results being less than originally targeted, has adversely impacted the
Company's liquidity. Without achieving targeted success in the Company's
current drilling of a development well or the raising of or access to
additional capital, the Company must significantly curtail operations and
drilling activities.
RESULTS OF OPERATIONS - THREE MONTHS ENDED JUNE 30, 1997 AND 1996
Net loss increased from a loss of $68,694 for the three months ended June 30,
1996, to a net loss of $488,221 for the same period in 1997, an increase of
$379,527. Individual categories of income and expense are discussed below.
Oil and gas sales decreased from $1,612,185 in the second quarter of 1996
to $1,518,560 in the same period of 1997. This decrease of $93,625 or 6%
resulted from decreased oil and gas prices, offset in part by increased gas
production. Oil and gas production quantities were 47,366 bbls and 264,909
mcf for the second quarter of 1997 and 50,908 bbls and 231,028 mcf in 1996, a
decrease of 3,542 bbls or 5% and an increase of 33,881 mcf, or 15%. Average
gas prices decreased from $2.33 per mcf in 1996 to $2.25 per mcf in 1997,
while average oil prices decreased from $21.07 per bbl in 1996 to $19.38 per
bbl in 1997.
In the second quarter of 1997, the Company's share of net income from a
limited partnership was $99,007, including $115,875 oil revenue from 6,195
bbls of production. There was no similar item in 1996.
Production costs decreased from $740,504 in the second quarter of 1996 to
$712,040 for the same period of 1997, a decrease of $28,464 or 4%. This
decrease was primarily attributable to the sale in February 1997 of the
Company's Redfish Bay property.
In the second quarter of 1996, the Company incurred exploration costs of
$342,122, including exploratory dry hole costs of $208,950 and 3D seismic
costs of $133,172 under a program which is substantially completed.
Exploration costs for the second quarter of 1997 were $351,729, which
included $332,194 in exploratory dry hole costs.
General and administrative expenses ("G&A") were $483,334 in the second
quarter of 1997, an increase of $162,352 over the second quarter of 1996. This
is due primarily to non-cash stock based compensation of $73,969, and increased
legal and accounting fees.
Depreciation, depletion and amortization ("DD&A") based on production and
other methods increased from $239,059 in the second quarter of 1996 to $319,452
in the same period of 1997, an increase of $80,393 or 34%, due primarily to the
addition of Summit properties and normal reserve declines on some properties.
Page 11
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In the second quarter of 1997, the Company provided for property impairment
losses of $356,000 on two of its wells. There was no similar item in the
second quarter of 1996.
SIX MONTHS ENDED JUNE 30, 1997 AND 1996
Net loss increased from $71,771 in the first half of 1996 to $82,483 in the
first half of 1997. Individual categories of income and expenses are discussed
below.
Oil and gas sales increased from $3,105,326 in the first six months of 1996
to $3,346,815 in the same period of 1997. This increase of $241,489 or 8%
resulted from increased oil and gas prices and increased gas production. Oil
and gas sales included a $25,860 loss in 1996 from gas swap contracts. Oil and
gas production quantities were 103,784 bbls and 481,261 mcf in 1996 and 94,791
bbls and 515,982 mcf in 1997, a decrease of 8,993 bbls or 9% and an increase of
34,721 mcf or 7%. Average gas prices increased from $2.24 per mcf in 1996 to
$2.62 per mcf in 1997, while average oil prices increased from $19.75 per bbl in
1996 to $20.91 per bbl in 1997.
In the first six months of 1997, the Company's share of net income from an
oil and gas limited partnership was $99,007 which included oil revenue of
$115,875 from 6,195 bbls of production. There was no similar item in 1996.
Production costs increased from $1,422,289 in the first six months of 1996 to
$1,449,529 for the same period of 1997, an increase of $27,240 or 2%.
In the first half of 1996, exploration costs were $518,778 which included
3D seismic costs of $309,828 and exploratory dry hole costs of $208,950. In
the first half of 1997, exploration costs were $360,284 which included
$332,194 in exploratory dry hole costs.
G&A increased from $626,828 in the first six months of 1996 to $817,183 in
the same period of 1997, an increase of $190,355 or 30%. This was due primarily
to non-cash stock based compensation charges of $117,047 in 1997 and increased
legal and accounting fees.
DD&A based on production and other methods increased from $473,161 in the
first six months of 1996 to 634,233 in the same period of 1997, an increase of
$161,072 or 34%, due primarily to the addition of Summit's properties and normal
production declines.
Interest expense increased from $312,582 for the first six months of 1996 to
$410,832 for the same period of 1997, an increase of $98,250 or 31% due to
increased long-term borrowings used to finance property acquisitions and
development and the Summit acquisition in 1996.
At June 30, 1997, the Company provided for impairment losses on its oil and
gas properties of $356,000. There was no similar item in 1996.
Page 12
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PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
None.
Item 2. CHANGES IN SECURITIES
None.
Item 3. DEFAULTS UPON SENIOR SECURITIES
None.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The annual stockholders meeting was held on May 29, 1997. Deas H.
Warley III was elected director with an affirmative vote of
3,487,168 with 138,199 votes withheld. Robert R. Donnelly was
elected director with an affirmative vote of 3,599,168 and 26,199
votes withheld. Darrell M. Dillard was elected director with an
affirmative vote of 3,485,768 with 139,599 votes withheld. Sam R.
Brock was elected director with an affirmative vote of 3,485,768
with 139,599 votes withheld. Wayne M. Whitaker was elected director
with an affirmative vote of 3,485,768 with 139,599 votes withheld.
The Midland Resources, Inc. 1997 Board of Directors' Stock Incentive
Plan was approved by an affirmative vote of 3,522,991 with 55,096
votes against and 47,280 votes abstaining. Grant Thornton LLP was
appointed as independent auditors for the ensuing fiscal year by an
affirmative vote of 3,587,787 with 8,951 votes against and 28,629
votes abstaining.
Item 5. OTHER INFORMATION
None.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits:
27 Article 5 Financial Data Schedule for second quarter
10-QSB (only filed electronically)
b. None
Page 13
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SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, hereunto duly
authorized.
MIDLAND RESOURCES, INC.
(Registrant)
Date: August 14, 1997 By: /s/ DEAS H. WARLEY III
-------------------------------
Deas H. Warley III, President
Pursuant to the requirements of the Securities and Exchange Act of 1934,
this report has been signed below by the following person on behalf of the
Registrant and in the capacity and on the date indicated.
Date: August 14, 1997 By: /s/ HOWARD E. EHLER
-------------------------------
Howard E. Ehler, Chief
Financial Officer
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<RESTATED>
<CIK> 0000868424
<NAME> MIDLAND RESOURCES INC.
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1
<CASH> 80,380
<SECURITIES> 0
<RECEIVABLES> 1,082,567
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<CURRENT-ASSETS> 1,739,197
<PP&E> 28,891,906
<DEPRECIATION> 14,950,908
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<CURRENT-LIABILITIES> 3,165,528
<BONDS> 7,012,488
0
0
<COMMON> 4,435
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<TOTAL-LIABILITY-AND-EQUITY> 18,719,221
<SALES> 3,346,815
<TOTAL-REVENUES> 3,900,287
<CGS> 1,449,529
<TOTAL-COSTS> 3,617,229
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 410,832
<INCOME-PRETAX> (127,774)
<INCOME-TAX> (45,291)
<INCOME-CONTINUING> (82,483)
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<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (82,483)
<EPS-PRIMARY> (.02)
<EPS-DILUTED> (.02)
</TABLE>
