U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended January 31, 1998
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.)
1750 Yankee Doodle Road, Suite 202
Eagan, MN 55121
(612) 405-9247
(Address and telephone number, including area code,
of Issuer's executive offices)
-----------------------------
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 March 4, 1998 - 10,354,337
Transitional Small Business Disclosure Format (Alternative 2):
Yes __X__ No ____
<PAGE>
Part I - Financial Information
Item 1. - Financial Statements
MAGNUM RESOURCES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
January 31, July 31,
ASSETS 1998 1997
----------- -----------
<S> <C> <C>
CURRENT ASSETS
Cash $ 29,000 $ 7,000
Accounts receivable, net 2,062,000 1,455,000
Inventories 2,101,000 1,845,000
Prepaid expenses and other 96,000 66,000
----------- -----------
Total current assets 4,492,000 3,373,000
PROPERTY, PLANT AND EQUIPMENT, net 2,263,000 2,009,000
OTHER ASSETS 43,000 41,000
----------- -----------
$ 6,798,000 $ 5,423,000
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Revolving note payable to bank $ 1,563,000 $ 1,190,000
Current maturities of long-term obligations 245,000 144,000
Accounts payable 1,857,000 1,187,000
Accrued liabilities 496,000 489,000
----------- -----------
Total current liabilities 4,161,000 3,010,000
LONG-TERM OBLIGATIONS, less current maturities 568,000 434,000
DEFERRED INCOME TAXES 78,000 84,000
COMMITMENTS AND CONTINGENCIES -- --
STOCKHOLDERS' EQUITY
Preferred stock, par value $.01 per share; 5,000,000
shares authorized; no shares issued or outstanding -- --
Common stock, par value $.01 per share; 50,000,000
shares authorized; shares issued and outstanding,
10,354,337 in 1998 and 1997 104,000 104,000
Additional paid-in capital 7,872,000 7,872,000
Accumulated deficit (5,946,000) (6,081,000)
----------- -----------
2,030,000 1,895,000
----------- -----------
$ 6,798,000 $ 5,423,000
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
MAGNUM RESOURCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended Six months ended
January 31, January 31,
----------------------------- -----------------------------
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales $ 4,292,000 $ 2,402,000 $ 8,036,000 $ 4,649,000
Cost of goods sold 3,470,000 1,849,000 6,516,000 3,563,000
------------ ------------ ------------ ------------
Gross profit 822,000 553,000 1,520,000 1,086,000
Operating expenses
Selling, general and administrative 617,000 554,000 1,1135,000 985,000
Research, development and engineering 45,000 55,000 96,000 97,000
------------ ------------ ------------ ------------
662,000 609,000 1,231,000 1,082,000
------------ ------------ ------------ ------------
Operating income (loss) 160,000 (56,000) 289,000 4,000
Other income (expense)
Interest expense (105,000) (38,000) (201,000) (59,000)
Other (1,000) 3,000 2,000 8,000
------------ ------------ ------------ ------------
(106,000) (35,000) (199,000) (51,000)
------------ ------------ ------------ ------------
Earnings (loss) before income taxes 54,000 (91,000) 90,000 (47,000)
Income tax benefit 3,000 3,000 6,000 6,000
------------ ------------ ------------ ------------
NET EARNINGS (LOSS) $ 57,000 $ (88,000) $ 96,000 $ (41,000)
============ ============ ============ ============
Basic and diluted net earnings (loss) per
common share $ .01 $ (.01) $ .01 $ .00
============ ============ ============ ============
Basic and diluted weighted average common
shares outstanding 10,354,337 10,252,337 10,354,337 10,252,337
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
MAGNUM RESOURCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six months ended January 31,
----------------------------
1998 1997
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $ 96,000 $ (41,000)
Adjustments to reconcile net earnings (loss) to
net cash from operating activities:
Depreciation and amortization 182,000 128,000
Deferred income taxes (6,000) (6,000)
Changes in operating assets and liabilities:
Accounts receivable (850,000) (433,000)
Inventories (256,000) (245,000)
Prepaid expenses and other (30,000) 34,000
Accounts payable 774,000 604,000
Accrued liabilities 7,000 21,000
--------- ---------
Net cash provided by (used in) operating activities (83,000) 62,000
Cash flows from investing activities:
Purchase of property, plant and equipment (326,000) (376,000)
Other assets (2,000) 1,000
--------- ---------
Net cash used in investing activities (328,000) (375,000)
Cash flows from financing activities:
Cash overdraft (65,000) (127,000)
Net borrowings on revolving note payable to bank 373,000 550,000
Proceeds from issuance of long-term obligations 237,000 --
Payments on long-term obligations (112,000) (116,000)
--------- ---------
Net cash provided by financing activities 433,000 307,000
--------- ---------
Net increase (decrease) in cash 22,000 (6,000)
Cash at beginning of period 7,000 12,000
--------- ---------
Cash at end of period $ 29,000 $ 6,000
========= =========
Supplemental disclosures of cash flow information:
Cash paid during the period for interest $ 188,000 $ 41,000
Supplemental schedule of noncash investing and
financing activities:
Capital lease obligations incurred for machinery
and equipment $ 110,000 $ --
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
MAGNUM RESOURCES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE A - BASIS OF PRESENTATION
The unaudited condensed consolidated financial statements include the
accounts of Magnum Resources, Inc. and its wholly-owned subsidiaries
(`Company'). 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, 1997. 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 the estimates used by management.
NOTE B - NET EARNINGS (LOSS) PER SHARE
On January 31, 1998, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 128 - "Earnings per Share." The effect of adopting
SFAS No. 128 did not change the previously reported net earnings (loss) per
common share and weighted average common shares outstanding.
The Company's basic net earnings (loss) per share is computed by dividing net
earnings (loss) by the weighted average number of outstanding common shares.
The Company's diluted net earnings (loss) per share is computed by dividing
net earnings (loss) by the weighted average number of outstanding common
shares and common share equivalents relating to stock options, when dilutive.
An option to purchase 63,000 shares of common stock at $.32 per share was
outstanding during the three and six months ended January 31, 1998 but was
excluded from the computation of common share equivalents because it was
anti-dilutive.
<PAGE>
MAGNUM RESOURCES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -
CONTINUED
(UNAUDITED)
NOTE C - NEW ACCOUNTING PRONOUNCEMENT
The Financial Accounting Standards Board has issued SFAS No. 131 "Disclosures
about Segments of an Enterprise and Related Information", which is effective
for fiscal years beginning after December 15, 1997. SFAS 131 requires a
company to disclose financial and other information, as defined by the
statement, about its business segments, their products and services,
geographic areas, major customers, revenues, profits, assets and other
information. The Company has not yet determined what impact this statement
will have on the Company's consolidated financial statements.
NOTE D - REVOLVING NOTE PAYABLE TO BANK
In November 1997, the Company renegotiated its revolving note payable credit
agreement. The new revolving credit agreements are due on demand, bear
interest at 4.5% over the bank's prime rate and are collateralized by
substantially all the Company's assets. Total availability under the new
agreements is the lesser of $1,800,000 or a defined borrowing base of
eligible receivables and inventory.
NOTE E - RECLASSIFICATIONS
Certain fiscal 1997 amounts have been reclassified to conform with the fiscal
1998 presentation.
<PAGE>
MAGNUM RESOURCES, INC.
PART II - OTHER INFORMATION
ITEM 4. - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. - OTHER MATTERS
During the quarter ended January 31, 1998, the Company utilized its line of
credit and other financing instruments primarily to finance inventory and
accounts receivable. The line of credit bears interest at Norwest Bank's prime
rate plus 4.5%. In addition to the interest cost on the Company's funded debt,
many of the Company's dealers purchased equipment utilizing Company supported
finance options (floorplans). The combined interest cost associated with the
funded debt and the dealer participation in the floorplan financing, caused
interest expense to increase from $38,000 in the second quarter of 1997 to
$105,000 in the second quarter of 1998. The Company expects interest expense to
remain high in periods of revenue growth.
In March 1998, Mr. Dave Eichers ceased serving as secretary and chief financial
officer of the Company. Mr. Eichers' corporate responsibilities have been
transferred to Mr. John Luoma, chief executive officer of the Company.
ITEM 6. - EXHIBITS AND REPORTS ON FORM 8-K
(A) Exhibits
27.1 Financial Data Schedule
(B) Reports on Form 8-K
None
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
MAGNUM RESOURCES, INC.
(Registrant)
Date: April 15, 1998 BY: /s/ John F. Luoma
-----------------------
John F. Luoma
Chief Executive and Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MAGNUM
RESOURCES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-END> JAN-31-1998
<CASH> 29,000
<SECURITIES> 0
<RECEIVABLES> 2,335,000
<ALLOWANCES> 30,000
<INVENTORY> 2,062,000
<CURRENT-ASSETS> 4,492,000
<PP&E> 4,351,000
<DEPRECIATION> 2,088,000
<TOTAL-ASSETS> 6,798,000
<CURRENT-LIABILITIES> 4,161,000
<BONDS> 568,000
0
0
<COMMON> 104,000
<OTHER-SE> 1,926,000
<TOTAL-LIABILITY-AND-EQUITY> 6,837,000
<SALES> 8,036,000
<TOTAL-REVENUES> 8,036,000
<CGS> 6,516,000
<TOTAL-COSTS> 6,516,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 6,000
<INTEREST-EXPENSE> 201,000
<INCOME-PRETAX> 90,000
<INCOME-TAX> (6,000)
<INCOME-CONTINUING> 96,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 96,000
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
</TABLE>
