FORM 10QSB FOR MAGNUM RESOURCES INC /DE/ FILED ON FEB 15 2000
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 October 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.)
1110 Pennington Ave S
Thief River Falls, MN 56701
(218) 681-7130
(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 February 15, 2000 - 10,354,337
Transitional Small Business Disclosure Format (Alternative 2):
Yes X No
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MAGNUM RESOURCES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
October 31, July 31,
ASSETS 1998 1998
----------- -----------
<S> <C> <C>
CURRENT ASSETS
Cash $ 73,000 $ 41,000
Accounts receivable, net 3,015,000 3,012,000
Inventories 2,364,000 2,780,000
Prepaid expenses and other 137,000 100,000
----------- -----------
Total current assets 5,589,000 5,933,000
PROPERTY, PLANT AND EQUIPMENT, net 2,193,000 2,271,000
OTHER ASSETS 29,000 30,000
----------- -----------
$ 7,811,000 $ 8,234,000
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Revolving note payable to bank $ 491,000 $ 2,800,000
Current maturities of long-term obligations 336,000 390,000
Accounts payable 1,809,000 1,802,000
Accrued liabilities 655,000 694,000
----------- -----------
Total current liabilities 3,291,000 5,686,000
LONG-TERM OBLIGATIONS, less current maturities 3,287,000 593,000
DEFERRED INCOME TAXES 60,000 60,000
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 (6,803,000) (6,081,000)
----------- -----------
1,173,000 1,895,000
----------- -----------
$ 7,811,000 $ 8,234,000
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
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MAGNUM RESOURCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended
October 31,
-----------------------------
1998 1997
------------ ------------
<S> <C> <C>
Net sales $ 2,713,000 $ 3,744,000
Cost of goods sold 2,512,000 3,046,000
------------ ------------
Gross profit 201,000 698,000
Operating expenses
Selling, general and administrative 705,000 518,000
Research, development and engineering 50,000 51,000
------------ ------------
755,000 569,000
------------ ------------
Operating income (loss) (554,000) 129,000
Other income (expense)
Interest expense (206,000) (96,000)
Other 38,000 3,000
------------ ------------
(168,000) (93,000)
------------ ------------
Earnings (loss) before income taxes (722,000) 36,000
Income tax benefit -- 3,000
------------ ------------
NET EARNINGS (LOSS) $ (722,000) $ 39,000
============ ============
Basic and diluted net earnings (loss) per common
share $ (0.07) $ 0.00
============ ============
Basic and diluted weighted average common shares
outstanding 10,354,337 10,354,337
============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
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<PAGE>
MAGNUM RESOURCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended October 31,
------------------------------
1998 1997
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $ (722,000) $ 39,000
Adjustments to reconcile net earnings (loss) to
net cash from operating activities
Depreciation and amortization 113,000 87,000
Deferred income taxes 0 (3,000)
Changes in operating assets and liabilities:
Accounts receivable (3,000) (380,000)
Inventories 416,000 (117,000)
Prepaid expenses and other (37,000) (18,000)
Accounts payable (34,000) 257,000
Accrued liabilities (39,000) (8,000)
----------- -----------
Net cash provided by (used in) operating activities (306,000) (143,000)
Cash flows from investing activities:
Purchase of property, plant and equipment (33,000) (346,000)
Other assets 0 (56,000)
----------- -----------
Net cash used in investing activities (33,000) (402,000)
Cash flows from financing activities:
Cash overdraft 41,000 39,000
Net borrowings on revolving note payable to bank (2,309,000) 261,000
Proceeds from issuance of long-term obligations 2,750,000 311,000
Payments on long-term obligations (111,000) (32,000)
----------- -----------
Net cash provided by financing activities 371,000 579,000
----------- -----------
Net increase (decrease) in cash 32,000 34,000
Cash at beginning of period 41,000 7,000
----------- -----------
Cash at end of period $ 73,000 $ 41,000
=========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the period for interest $ 205,000 $ 73,000
Supplemental schedule of noncash investing and financing activities:
Capital lease obligations incurred for machinery
and equipment $ -- $ --
</TABLE>
The accompanying notes are an integral part of these statements.
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<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, 1998. 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.
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<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.
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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 October 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 Case Credit
Corporation's prime rate plus 0.75%. 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 $73,000 in the
first quarter of 1998 to $206,000 in the first quarter of 1999. The Company
expects interest expense to remain high in periods of revenue growth.
ITEM 6. - EXHIBITS AND REPORTS ON FORM 8-K
(A) Exhibits
27.1 Financial Data Schedule
(B) Reports on Form 8-K
None
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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: February 15, 2000 BY: /s/ Jerome W. Kutil
---------------------
Jerome W. Kutil
Chief Executive and Accounting Officer
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<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> 3-MOS
<FISCAL-YEAR-END> JUL-31-1999
<PERIOD-START> AUG-01-1998
<PERIOD-END> OCT-31-1998
<CASH> 73,000
<SECURITIES> 0
<RECEIVABLES> 3,062,000
<ALLOWANCES> 47,000
<INVENTORY> 2,364,000
<CURRENT-ASSETS> 5,589,000
<PP&E> 4,541,000
<DEPRECIATION> 2,348,000
<TOTAL-ASSETS> 7,811,000
<CURRENT-LIABILITIES> 3,291,000
<BONDS> 3,287,000
0
0
<COMMON> 104,000
<OTHER-SE> 1,069,000
<TOTAL-LIABILITY-AND-EQUITY> 7,811,000
<SALES> 2,713,000
<TOTAL-REVENUES> 2,713,000
<CGS> 2,512,000
<TOTAL-COSTS> 2,512,000
<OTHER-EXPENSES> 755,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 206,000
<INCOME-PRETAX> (722,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (722,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (722,000)
<EPS-BASIC> (.07)
<EPS-DILUTED> (.07)
</TABLE>
