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 April 30, 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 June 6, 1998 - 10,354,337
Transitional Small Business Disclosure Format (Alternative 2):
Yes X No
<PAGE>
MAGNUM RESOURCES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
April 30, July 31,
ASSETS 1998 1997
------------- -----------
<S> <C> <C>
CURRENT ASSETS
Cash $ 65,964 $ 7,000
Accounts receivable, net 3,343,593 1,455,000
Inventories 2,192,593 1,845,000
Prepaid expenses and other 93,516 66,000
----------- -----------
Total current assets 5,695,666 3,373,000
PROPERTY, PLANT AND EQUIPMENT, net 2,269,666 2,009,000
OTHER ASSETS 147,712 41,000
----------- -----------
$ 8,113,259 $ 5,423,000
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Revolving note payable to bank $ 2,490,759 $ 1,190,000
Current maturities of long-term obligations -- 144,000
Accounts payable 2,215,813 1,187,000
Accrued liabilities 564,291 489,000
----------- -----------
Total current liabilities 5,270,863 3,010,000
LONG-TERM OBLIGATIONS, less current maturities 947,433 434,000
DEFERRED INCOME TAXES 75,000 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 (6,080,912) (6,081,000)
----------- -----------
1,819,963 1,895,000
----------- -----------
$ 8,113,259 $ 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 Nine months ended
April 30, April 30,
---------------------------- ----------------------
1998 1997 1998 1997
------ ------ ------ -----
<S> <C> <C> <C> <C>
Net sales $ 4,637,880 $ 3,183,914 $ 12,673,880 $ 7,832,959
Cost of goods sold 3,396,262 2476,224 9,912,262 6,038,845
------------ ------------ ------------ ------------
Gross profit 1,241,618 707,690 2,761,618 1,794,114
Operating expenses
Selling, general and administrative 1,245,391 514,311 2,380,391 1,498,906
Research, development and engineering 45,683 57,981 141,683 154,934
------------ ------------ ------------ ------------
1,291,074 572,292 2,522,074 1,653,840
------------ ------------ ------------ ------------
Operating income (loss) (49,456) 135,398 239,575 140,274
Other income (expense)
Interest expense (114,575) (53,580) (313,575) (112,099)
Other -- 7,750 -- 15,250
------------ ------------ ------------ ------------
(114,575) (45,830) (313,575) (97,849)
------------ ------------ ------------ ------------
Earnings (loss) before income taxes (164,031) 89,568 (74,031) 43,425
Income tax benefit 3,000 3,000 9,000 9,000
------------ ------------ ------------ ------------
NET EARNINGS (LOSS) $ (161,031) $ 92,568 $ (65,031) $ 52,425
============ ============ ============ ============
Basic and diluted net earnings (loss) per common
share $ .01 $ 0.01 $ .00 $..011
============ ============ ============ ============
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>
Nine months ended April 30,
---------------------------
1998 1997
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $ (74,031) $ 52,425
Adjustments to reconcile net earnings (loss) to
net cash from operating activities
Depreciation and amortization 282,844 210,002
Deferred income taxes (9,000) (9,000)
Changes in operating assets and liabilities:
Accounts receivable (1,888,593) (690,218)
Inventories (347,593) (553,750)
Prepaid expenses and other (27,516) 54,218
Accounts payable 1,028,813 788,197
Accrued liabilities 75,291 (20,941)
----------- -----------
Net cash provided by (used in) operating activities (960,791) (169,067)
Cash flows from investing activities:
Purchase of property, plant and equipment (543,725) (685,820)
Other assets (106,712) 2,158
----------- -----------
Net cash used in investing activities (650,437) (685,662)
Cash flows from financing activities:
Cash overdraft -- (52,586)
Net borrowings on revolving note payable to bank 1,300,759 694,395
Proceeds from issuance of long-term obligations --
Payments on long-term obligations 369,433 (185,052)
----------- -----------
Net cash provided by financing activities 1,670,192 848,747
----------- -----------
Net increase (decrease) in cash 58,964 (5,982)
Cash at beginning of period 7,000 12,011
----------- -----------
Cash at end of period $ 65,964 $ 6,029
=========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the period for interest $ 313,575 $ 89,885
Supplemental schedule of noncash investing and financing activities:
Capital lease obligations incurred for machinery
and equipment $ 159,331 $ --
</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.
<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 March 1998, The Company received notice of late reporting on its revolving
note payable credit agreement. The notice informed the Company that in the
event the Company failed to forward the reports in a timely manner as
required by the revolving credit agreement, the lender would be forced to
impose its default rate of interest which is approximately 3.5% above the
Company's current interest rate.
NOTE E - RECLASSIFICATIONS
Certain fiscal 1997 amounts have been reclassified to conform with the fiscal
1998 presentation.
<PAGE>
MAGNUM RESOURCES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -
CONTINUED
(UNAUDITED)
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 April 30, 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 $53,580 in the third quarter of 1997 to $114,575 in the third
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>
MAGNUM RESOURCES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -
CONTINUED
(UNAUDITED)
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: September 19, 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> APR-30-1998
<CASH> 65,694
<SECURITIES> 0
<RECEIVABLES> 3,408,961
<ALLOWANCES> 65,368
<INVENTORY> 2,302,230
<CURRENT-ASSETS> 5,695,666
<PP&E> 4,458,725
<DEPRECIATION> 2,188,844
<TOTAL-ASSETS> 8,113,259
<CURRENT-LIABILITIES> 5,270,863
<BONDS> 947,483
0
0
<COMMON> 104,000
<OTHER-SE> 1,819,963
<TOTAL-LIABILITY-AND-EQUITY> 8,113,259
<SALES> 12,673,880
<TOTAL-REVENUES> 12,673,880
<CGS> 9,912,262
<TOTAL-COSTS> 9,912,262
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 9,000
<INTEREST-EXPENSE> 313,575
<INCOME-PRETAX> (74,031)
<INCOME-TAX> 0
<INCOME-CONTINUING> (74,031)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (74,031)
<EPS-PRIMARY> .00
<EPS-DILUTED> .00
</TABLE>
