U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarter Ended April 30, 1997
Commission File Number: 0-22990
MAGNUM RESOURCES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 87-0368628
(State of incorporation) (I.R.S. Employer Identification No.)
2850 METRO DRIVE SUITE 509
Bloomington, MN 55425
(612) 854-1625
(Address, including zip code, and telephone number including area code,
of Issuer's executive offices)
Securities registered pursuant to Section 12(b)of the Act:
Title of each class Name of each exchange on which registered
None None
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK; 10% CONVERTIBLE PREFERRED STOCK; WARRANTS TO PURCHASE COMMON STOCK
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 shorter period
that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. Yes_X_ No___
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: As of June 6, 1997 - 10,252,337.
Transitional Small Business Disclosure Format (Alternative 2):
Yes_X_ No___
PART I - FINANCIAL INFORMATION
ITEM 1. - Financial Statements
MAGNUM RESOURCES, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
April 30, July 31,
Assets 1997 1996
----------- -----------
Current assets:
Cash $ 6,029 $ 12,011
Accounts receivable 1,190,867 500,649
Inventories 1,852,653 1,298,903
Prepaid expenses 50,282 104,500
----------- -----------
Total current assets 3,099,831 1,916,063
Property, plant & equipment, net 2,001,401 1,523,583
Other assets 36,230 38,388
----------- -----------
Total assets $ 5,137,462 $ 3,478,034
=========== ===========
Liabilities & Stockholders' Equity
Current liabilities:
Current maturities of
long-term obligations $ 146,070 $ 242,535
Book overdraft 163,378 215,964
Accounts payable 1,202,774 414,577
Revolving note payable to bank 811,681 117,286
Accrued liabilities 547,556 568,497
----------- -----------
Total current liabilities 2,871,459 1,558,859
Long-term obligations, less current
maturities 366,024 62,621
Deferred income taxes 87,000 96,000
----------- -----------
Total liabilities 3,324,483 1,717,480
Stockholders' Equity:
Preferred stock, par value $.01 per
share; 5,000,000 shares authorized,
no shares issued or outstanding -0- -0-
Common stock, par value $.01 per
share, 50,000,000 shares authorized;
10,252,337 shares issued and
outstanding at April 30, 1997
and July 31, 1996 102,523 102,523
Additional paid in capital 7,830,602 7,830,602
Accumulated deficit (6,120,146) (6,172,571)
----------- -----------
Total stockholders' equity 1,812,979 1,760,554
----------- -----------
Total Liabilities & Stockholders' Equity $ 5,137,462 $ 3,478,034
=========== ===========
See Accompanying Notes to Financial Statements
MAGNUM RESOURCES, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
April 30, April 30
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales $ 3,183,914 $ 1,796,829 $ 7,832,959 $ 5,061,777
Cost of goods sold 2,476,224 1,333,344 6,038,845 3,892,966
------------ ------------ ------------ ------------
Gross profit 707,690 463,485 1,794,114 1,168,811
Operating expenses:
Selling, general
and administration 514,311 362,034 1,498,906 982.624
Research, development
and engineering 57,981 37,989 154,934 110,247
------------ ------------ ------------ ------------
Operating profit 135,398 63,462 140,274 75,940
Other income (expense):
Interest expense, net (53,580) (14,182) (112,099) (31,138)
Other 7,750 (3,140) 15,250 (283)
------------ ------------ ------------ ------------
Income before
income taxes 89,568 46,140 43,425 44,519
Income tax benefit 3,000 -0- 9,000 0
------------ ------------ ------------ ------------
Net Income $ 92,568 $ 46,140 $ 52,425 $ 44,519
============ ============ ============ ============
Net income per share $ 0.01 $ 0.00 $ 0.01 $ 0.00
============ ============ ============ ============
Weighted average number of
common shares outstanding 10,252,337 10,252,337 10,252,337 10,252,337
============ ============ ============ ============
See Accompanying Notes to Financial Statements
</TABLE>
MAGNUM RESOURCES, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Ended
April 30,
1997 1996
--------- ---------
Cash flows from operating activities:
Net income $ 52,425 $ 44,519
Adjustments to reconcile net income
to net cash from operations:
Depreciation & amortization 210,002 202,620
Loss on sale of property, plant and equipment 0 146,112
Deferred income taxes (9,000) 0
Changes in assets and liabilities:
Accounts receivable (690,218) (87,865)
Inventories (553,750) 60,059
Prepaid expenses 54,218 (42,748)
Accounts payable 788,197 (344,781)
Accrued liabilities (20,941) 15,666
--------- ---------
Net cash used in operating activities (169,067) (6,418)
Cash flows from investing activities:
Purchase of property, plant & equipment (685,820) (87,104)
Proceeds from sale of property, plant & equipment 61,172
Other assets 2,158 2,567
--------- ---------
Net cash used in investing activities (685,662) (23,365)
Cash flows from financing activities:
Proceeds from long-term financing 391,990 0
Proceeds from revolving note payable
to bank, net of repayments 694,395 0
Decrease in book overdraft (52,586) 0
Payments on long-term obligations (185,052) (16,271)
--------- ---------
Net cash provided by investing activities 848,747 (16,271)
--------- ---------
Net decrease in cash (5,982) (46,054)
Cash at beginning of period 12,011 69,203
--------- ---------
Cash at end of period $ 6,029 $ 23,149
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 89,885 $ 16,956
========= =========
Issuance of long-term debt for accounts
payable balance due $ 0 $ 104,281
========= =========
See Accompanying Notes to Financial Statements
MAGNUM RESOURCES, INC.
AND SUBSIDIARIES
(UNAUDITED)
NOTE A: BASIS OF PRESENTATION
The unaudited condensed consolidated financial statements include the accounts
of Magnum Resources, Inc. (`the Company') and its wholly-owned subsidiaries.
These statements and related notes have been prepared pursuant to the rules and
regulations of the U.S. Securities and Exchange Commission. Accordingly, certain
information and footnote disclosures normally included in the financial
statements prepared in accordance with generally accepted accounting principles
have been omitted pursuant to such rules and regulations. The accompanying
condensed consolidated financial statements and related notes should be read in
conjunction with the audited financial statements of the Company, and notes
thereto, for the fiscal year ended July 31, 1996. The following information
reflects, in the opinion of management, all adjustments, consisting of normal
recurring accruals, necessary for a fair presentation of the interim period
results. Operating results for interim periods are not necessarily indicative of
results which may be expected for the year as a whole.
USE OF ESTIMATES
Preparation of the Company's financial statements requires management to make
estimates and assumptions that affect reported amounts of assets and liabilities
and related revenues and expenses. Actual results could differ from estimates
used by management.
LITIGATION
The Company was named as an additional defendant in a matter regarding the death
of an individual using a skidsteer loader allegedly built by Hydra-Mac Inc., a
former subsidiary. Management believes it's too early in the litigation process
to express an opinion as to the outcome of the legal action.
EARNINGS PER SHARE
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 128, Earnings Per Share, which is effective for
financial statements issued after December 15, 1997. Early adoption of the new
standard is not permitted. The new standard eliminates primary and fully diluted
earnings per share and requires presentation of basic and diluted earnings per
share together with disclosure of how the per share amounts were computed. The
Company has not yet determined what impact this statement will have on the
Company's financial statements.
RECLASSIFICATIONS
Certain 1996 amounts have been reclassified to conform with 1997 presentation.
PART II - OTHER INFORMATION
ITEM 1. - LEGAL PROCEEDINGS
On or about April 17, 1997, the Company brought a Motion for Summary Judgment
which is scheduled to be heard by the Court on May 6, 1997 in the matter of the
Estate of Timothy Peterson v. Heinen Mercantile Company, et al., Hennepin County
District Court, State of Minnesota, Case No. 96-001660 (the Peterson
Litigation"). The purpose of this Motion is to have the Court dismiss all claims
against the Company. The Peterson Litigation was commenced in January of 1996
when the Estate of Timothy Peterson (the Estate) brought a wrongful death action
against Heinen Mercantile Company ("Heinen"), the dealer of the skid steer
loader (the "Loader") alleged to have caused the death of Mr. Peterson. The
Estate is seeking damages in the Peterson Litigation in an unspecified amount in
excess of $50,000. Heinen had allegedly sold the Loader to Mr. Peterson and
subsequently serviced it. Heinen, in March 1996, brought a claim for
contribution and indemnity against Gehl Company ("Gehl") claiming that Gehl
negligently developed, manufactured and marketed the Loader. In June and July of
1996, respectively, Gehl and Heinen asserted a claim for contribution and
indemnity against the Company and the Company's former subsidiary Hydra-Mac,
Inc., claiming such corporations were liable for designing a defective Loader.
The Company asked for summary judgment because it no longer owns Hydra-Mac, Inc.
and Magnum Resources, Inc. is a holding corporation which simply acquired
Hydra-Mac, Inc. stock and never designed or manufactured anything.
In May of 1997, the Estate brought direct claims for negligence against all
Third and Fourth party Defendants, including the Company. The trial court
initially dismissed the Company's motion as premature, but allowed the Company
the opportunity to reassert its Motion for Summary Judgment. The Company again
moved the court for Summary Judgment as to all claims asserted against it and
this Motion is currently pending. In May of 1997, Gehl also served the Company's
subsidiary, Hydra-Mac International, Inc. with a Third Party Complaint, and
Hydra-Mac International, Inc. has also brought a motion to dismiss this Third
Party Complaint which is currently pending. The Peterson Litigation is scheduled
to go to trial in July of 1997. As is almost always the case with litigation,
the Company cannot predict the outcome should this case go to trial.
Furthermore, because Magnum Resources, Inc. does not manufacture products, it
does not have product liability insurance coverage for the Peterson Litigation.
ITEM 4. - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 6. - EXHIBITS AND REPORTS ON FORM 8-K
(A) Exhibits
27.4 Financial Data Schedule
(B) Reports on Form 8-K
None
SIGNATURE
Pursuant to the registration requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereto duly authorized.
MAGNUM RESOURCES, INC.
(Registrant)
Date: June 13, 1997 BY: /s/John Luoma
----------------------------------
John Luoma
Chief Executive Officer
BY: /s/ David M. Eichers
----------------------------------
David M. Eichers
Secretary and Chief Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MAGNUM
RESOURCES, INC. AND SUBSIDIARIES CONSOLIDATED FINANCIAL STAEMENTS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUL-31-1997
<PERIOD-END> APR-30-1997
<CASH> 6,029
<SECURITIES> 0
<RECEIVABLES> 1,211,719
<ALLOWANCES> (20,852)
<INVENTORY> 1,852,653
<CURRENT-ASSETS> 3,099,831
<PP&E> 3,812,519
<DEPRECIATION> (1,811,118)
<TOTAL-ASSETS> 5,137,462
<CURRENT-LIABILITIES> 2,871,459
<BONDS> 366,024
0
0
<COMMON> 102,523
<OTHER-SE> 1,710,456
<TOTAL-LIABILITY-AND-EQUITY> 5,137,462
<SALES> 7,832,959
<TOTAL-REVENUES> 7,832,959
<CGS> 6,038,845
<TOTAL-COSTS> 6,038,845
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 9,000
<INTEREST-EXPENSE> 112,099
<INCOME-PRETAX> 43,425
<INCOME-TAX> (9,000)
<INCOME-CONTINUING> 52,425
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 52,425
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
</TABLE>
