U.S. 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 DECEMBER 31, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 0-12809
GOLDEN CHIEF RESOURCES, INC.
State of Kansas 48-0846635
(State or other jurisdiction of (IRS Employer
incorporation or organization) I. D. Number)
406 Griffith, Terrell, Texas 75160
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (972) 524-8215
Check whether the issuer (1) filed all reports required to be filed by
Sections 13 or 15(d) of the Securities Exchange Act 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 [ ]
There were 162,915,890 shares of common stock, No Par Value,
outstanding as of December 31, 1999.
Transitional Small Business Disclosure Format; Yes [ ] No [X]
1
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
REPORT ON REVIEW BY INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Golden Chief Resources, Inc.
Terrell, Texas
We have reviewed the accompanying balance sheet of Golden Chief Resources,
Inc. (a development stage enterprise) (the "Company") as of December 31, 1999,
and the related statements of operations, stockholders equity, and cash flows
for the three months ended December 31, 1999 and 1998. These financial
statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical review
procedures to financial data and making inquiries of persons responsible for
financial and accounting matters. It is substantially less in scope than an
audit conducted in accordance with generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the accompanying financial statements for them to be in
conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the balance sheet as of September 30, 1999, and the related
statements of operations, stockholders' equity and cash flows for the year
then ended (not presented herein); and in our report dated February 10, 2000,
we expressed an opinion on those financial statements which was qualified
based on the Company's ability to continue as a going concern. In our
opinion, the information set forth in the accompanying balance sheet as of
September 30, 1999 is fairly stated in all material respects in relation to
the balance sheet from which it has been derived.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 of the
selected information for financial statements, the Company discontinued
previous operations in 1986 and is in the process of re-emerging from
dormancy. At the date of these financial statements, the Company had acquired
assets and is in the process of raising capital. However, revenues have not
been generated. These facts raise substantial doubt about the Company's
ability to continue as a going concern. Management's plans in regard to these
matters are also discussed in Note 1. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
/s/ Robert Early & Company
ROBERT EARLY & COMPANY, P.C.
Abilene, Texas
March 11, 2000
2
Golden Chief Resources, Inc.
(A Development Stage Enterprise)
Balance Sheets
December 31, September 30,
1999 1999
---------- ----------
(Unaudited)
ASSETS
Current Assets:
Cash $ 156 $ 84,767
Marketable securities - 6,090
---------- ----------
Total Current Assets 156 90,857
Property and Equipment
Oil and gas properties (non-producing) 42,812 -
---------- ----------
TOTAL ASSETS $ 42,968 $ 90,857
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Current Liabilities
Accounts payable $ 43,114 $ -
Accrued expense due to related parties 13,809 90,757
Note payable 2,000 -
---------- ----------
Total Current Liabilities 58,923 90,757
---------- ----------
Stockholders' Equity:
Common stock, no par value (500,000,000
shares authorized, 162,915,890 and
65,015,890 outstanding) 1,110,676 1,070,676
Stock subscriptions receivable (5,132) -
Accumulated deficit (994,640) (994,640)
Deficit accumulated during the
development stage (126,859) (75,936)
---------- ----------
Total Stockholders' Equity (15,955) 100
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 42,968 $ 90,857
========== ==========
See accompanying selected information and accountants' report.
3
Golden Chief Resources, Inc.
(A Development Stage Enterprise)
Statement of Operations
For Three Months Ended December 31, 1999 and 1998
(Unaudited)
Cumulative
During the
Development
Stage 1999 1998
---------- ---------- ----------
Revenues $ 938 $ - $ -
Operating Expenses:
Directors and officers
compensation 100,057 8,000 300
Consulting fees 40,000 30,000 -
Professional fees 16,508 1,302 2,174
Travel 6,909 6,909 -
Other 6,286 4,751 21
---------- ---------- ----------
Total Operating Expenses 169,760 50,962 2,495
---------- ---------- ----------
Income from Operations (168,822) (50,962) (2,495)
Other Income/(Expenses)
Gain/(loss) on sale of investments 41,332 (5,015) -
Unrealized gain on investments - 4,941 -
Interest income 631 113 -
---------- ---------- ----------
Income before income taxes (126,859) (50,923) (2,495)
Income taxes - - -
---------- ---------- ----------
Net Income $ (126,859) $ (50,923) $ (2,495)
========== ========== ==========
Earnings per Share $ (0.00) $ (0.00) $ (0.00)
========== ========== ==========
Weighted Average Shares Outstanding 76,042,933 150,001,216 51,728,757
========== =========== ==========
See accompanying selected information and accountants' report.
4
Golden Chief Resources, Inc.
(A Development Stage Enterprise)
Statement of Stockholders' Equity
For Three Months Ended December 31, 1999 and 1998
(Unaudited)
Deficit
Accumulated
During the
Common Stock Accumulated Development
Date Shares Amount Deficit Stage
----- ----------- ---------- ---------- ----------
Balances, September 30, 1997 32,217,050 $ 994,640 $ (994,640) $ -
Shares authorized for issu-
ance for services & expenses 09/98 15,941,000 1,594 - -
Net income/(loss) for year - - - (1,594)
----------- ---------- ---------- ----------
Balances, September 30, 1998 48,158,050 996,234 (994,640) (1,594)
Shares issued for:
Expenses 10/98 5,688,920 2,477 - -
Marketable securities 12/98 7,219,320 7,219 - -
Cash 01/99 330,000 3,300 - -
Marketable securities 02/99 894,600 8,946 - -
Consulting 03/99 500,000 10,000 - -
Cash 04/99 200,000 2,000 - -
Expenses 04/99 200,000 4,000 - -
Cash 07/99 450,000 9,000 - -
Marketable securities 07/99 1,375,000 27,500 - -
Net income/(loss) for year - - - (74,342)
----------- ---------- ---------- ----------
Balances, September 30, 1999 65,015,890 1,070,676 (994,640) (75,936)
Shares issued for:
Oil and gas properties 10/99 97,500,000 - - -
Cash 10/99 250,000 25,000 - -
Cash 11/99 50,000 5,000 - -
Cash and subscription 12/99 100,000 10,000 - -
Net income/(loss) for period - - - (50,923)
----------- ---------- ---------- ----------
Balances, December 31, 1999 162,915,890 $1,110,676 $ (994,640) $ (126,859)
=========== ========== ========== ==========
See accompanying selected information and accountants' report.
5
Golden Chief Resources, Inc.
(A Development Stage Enterprise)
Statement of Cash Flows
(Increases/(Decreases) in Cash
For Three Months Ended December 31, 1999 and 1998
(Unaudited)
Cumulative
During the
Development
Stage 1999 1998
---------- ---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) $ (126,859) $ (50,923) $ (2,495)
Adjustments to reconcile net
income/(loss) to net cash provided
by operations:
Loss/(gain) on sale of securities (41,332) 5,015 -
Unrealized loss/(gain) on securities - (4,941) -
Services and expenses purchased with
stock 18,071 - 2,495
Increase in accounts and accrued payables 56,923 (33,834) -
---------- ---------- ----------
NET CASH PROVIDED BY OPERATING ACTIVITIES (93,197) (84,683) -
---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Costs of developing oil and gas
properties (42,812) (42,812) -
Proceeds from sale of securities 96,028 6,016 -
Purchase of marketable securities (11,031) - -
---------- ---------- ----------
NET CASH USED IN INVESTING ACTIVITIES 42,185 (36,796) -
---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds stock sales 49,168 34,868 -
Proceeds from short term notes 10,000 10,000 -
Repayment of short term notes (8,000) (8,000) -
---------- ---------- ----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 51,168 36,868 -
---------- ---------- ----------
Increase/(decrease) in cash for period 156 (84,611) -
Cash, Beginning of period - 84,767 -
---------- ---------- ----------
Cash, End of period $ 156 $ 156 $ -
========== ========== ==========
Supplemental Disclosures:
Cash payments for:
Interest $ - $ - $ -
Income taxes - - -
Stock issued for:
Various expenses 3,771 - -
Consulting 10,300 - -
Professional services 4,000 - -
Marketable securities 43,665 - -
See accompanying selected information and accountants' report.
6
Golden Chief Resources, Inc.
(A Development Stage Enterprise)
Selected Information for Financial Statements
Three Months Ended December 31, 1999 and 1998
NOTE 1: BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions of Regulation S-B. They do not include
all information and footnotes required by generally accepted accounting
principles for complete financial statements. However, except as disclosed
herein, there has been no material change in the information included in the
Company's Annual Report on Form 10-KSB for the year ended September 30, 1999.
In the opinion of Management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included. The
report of Robert Early & Company, P.C. commenting on their review accompanies
the condensed financial statements included in Item 1 of Part 1. Operating
results for the three month period ended December 31, 1999, are not
necessarily indicative of the results that may be expected for the year ending
September 30, 2000.
Development Stage Enterprise -- The Company returned to the development stage
in August 1998 when its President began the process of reinitializing the
Company from its dormant state. This process has included identifying,
evaluating, structuring, and completing an agreement with a group with a
business plan, as discussed below. The Company will exit the development
stage once it has generated operations and revenues of a significance.
Going Concern Issues -- The Company has had no operations since 1986 until
November 1999 and had not generated any revenues from its operations started
then. In January 2000, activities begun in November 1999 have generated
revenues. However, such revenues have not been significant enough to overcome
expenses. Additional development of the properties acquired by the Company
and Management's plan of operations require significant additional capital
generation. Although efforts to raise capital has met with some success
during the first quarter, there is no guarantee that sufficient capital will
be available. Management is continuing its efforts to raise capital to be
able to exploit the potentials indicated by its oil and gas properties and to
follow its plan of additional oil and gas acquisitions. The Company is not in
significant danger of dissolution as long as the Management controls the costs
being incurred. However, without the infusion of additional capital, the
Company is not currently in a position to initialize significant portions of
its plan of operations.
Oil and Gas Properties -- The Company records its oil and gas producing
activities under the full cost method of accounting, and accordingly,
capitalizes all costs incurred in the acquisition, exploration, and
development of proved oil and gas properties, including the costs of abandoned
properties, dry holes, geophysical costs, and annual lease rentals. In
general, sales or other dispositions of oil and gas properties are accounted
for as adjustments to capitalized costs, with no gain or loss recorded until
the proceeds from dispositions exceed the Company's basis in the full cost
pool.
7
Depletion and amortization are computed on a composite units-of-production
method based on estimated proved reserves. All leasehold, equipment, and
intangible costs associated with oil and gas properties are currently included
in the base for computation and amortization unless the property has not been
evaluated and no estimated reserves have been included for the property in the
Company's total reserves. All of the Company's reserves are located within
the United States.
NOTE 2: CHANGE IN CONTROL
On October 12, 1999, the Company issued 97,500,000 shares of restricted common
stock to Red River Properties, Inc. (RRPI) in exchange for the assignment of
a 10% working interest in the JFS Field in Dimmit County, Texas. This field
has not produced oil or gas during the last three years. RRPI had contracted
with a third party to reenter wells on the property with the purpose of
reestablishing production. The Company will pay its share of such costs of
reentering and reworking the wells as well as any ongoing operating expenses.
As a result of this stock issuance, RRPI and its owners, have taken control of
the Company due to their 60% ownership interest after the fact.
The shares issued to RRPI have been recorded as outstanding on the books of
the Company without any issuance consideration being recorded.
Correspondingly, the oil and gas properties acquired with these shares are
being carried on the books with a zero basis. Accounting rules limit the
amount that can be recorded on the books of the transferee entity to the basis
of the asset in the hands of the transferor in related party transactions.
RRPI had no basis in the properties transferred to the Company and is a
related party due to its significant ownership after the transaction.
As part of the change in control, the Company's former management was allowed
to pay out the Company's accumulated assets at October 12 as compensation for
efforts put forth to restart the Company. This compensation was accrued at
September 30, 1999 with minimal impact on the operations being reported for
the Company during the current fiscal year.
NOTE 3: STOCK TRANSACTIONS
During the first quarter, the Company issued the shares described above and
issued an additional 400,000 restricted shares pursuant to Management's
fund-raising efforts. Shares are being offered at $.10 per share. One
investor had subscribed 100,000 of these shares at December 31, 1999 but paid
$5,132 of his amount due after that date. The full 100,000 shares were
included in outstanding shares at December 31, 1999 and the $5,132 was
reported as a subscription receivable on the face of the balance sheet.
As indicated in the Statement of Stockholders' Equity, during the year ended
September 30, 1999, the Company has issued shares in payment of various
expenses and for the acquisition of a stock investment. The consulting fees
were paid for services rendered in locating possible merger candidates and
assistance in negotiating a merger agreement. The investment, as presented
below, was the acquisition of 30,000 shares of Ness Energy International, Inc.
8
NOTE 4: INVESTMENTS
During the year ended September 30, 1999, the Company acquired shares of Ness
Energy International, Inc. from its president of the time in exchange for
newly issued restricted shares of the Company. Ness is a bulletin board
stock that has traded in the $.20 to $2.00 price range during the year. The
Company had planned to hold or sell the stock as needed in order to pay costs
of restarting the Company. These shares were transferred to the past president
at fair value on October 12, 1999 as compensation under the agreement with new
management.
NOTE 5: OIL AND GAS PROPERTIES
As discussed above, the Company acquired a 10% working interest in
non-producing properties in October 1999. During November and December, the
Company incurred $42,812 for its share of costs of reentering and reworking
wells on these properties and getting production equipment set up. During
January 2000, these properties were placed into production and the Company
began earning revenues.
NOTE 6: SUBSEQUENT EVENTS
As mentioned above, the Company's oil and gas properties have begun revenue
generation in January 2000 while work continues on other wells. The Company
has incurred an additional $6,647 in costs on this property during January.
Since December 31, 1999, the Company has raised $6,100 in additional capital
through its stock offering and collected the $5,132 shown as stock subscription
receivable at December 31, 1999.
9
Item 2: Management's Discussion and Analysis of Financial Condition
and Results of Operations.
General:
The quarter ended December 31, 1999 was the first quarter of activity
following the change in control of the corporation on October 12, 1999. The
Company initiated a limited private placement of the Company's common stock in
order to raise working capital. The Company also began work to bring the JFS
property in Dimmit County, Texas back into production. After significant
efforts the operator was able to place the property back in production in
January, 2000. The Company is actively engaged in reviewing acquisitions of
producing properties in the oil and gas sector, and as soon as funds are
available, the Company expects to close certain transactions. The Company is
also attempting to return the Company's common shares to a trading status by
arranging with a market maker to sponsor the Company's stock with the National
Association of Securities Dealers. The Company expects trading to resume
either late in the second quarter or early in the third quarter of the current
fiscal year.
In the same quarter of the previous year the Company initiated a funding
campaign to cause the Company to become current in its state filings and
engaged compliance and accounting personnel to bring the Company back into a
full reporting status with the SEC as well as with other regulatory agencies.
The first issuance of stock was on September 1, 1998 for expenses incurred in
bringing the Company current with the state filings in Kansas. On August 25,
1998 the Company was in good standing and authorized to engage in business as
a Kansas corporation.
Liquidity and Capital Resources:
During the current quarter the Company began a limited private placement of
the Company's common stock in order to raise working capital. When revenues
begin on the JFS property, sometime in the Company's second quarter, the
Company expects to see modest revenues. The Company also intends to continue
the private placement mentioned previously and raise sufficient working
capital. The Company also is exploring the possibility of obtaining bank loans
to further enhance production and revenues from the JFS property. At this
time there is no assurance that this effort will succeed, but the Company is
also pursuing acquisitions of oil and gas properties using the Company's
common stock. The Company also is exploring possible transactions whereby the
Company will earn consulting fees for arranging acquisition. This process may
provide cash for operations and investment.
Prior to September, 1998 several proposals were received to bring the Company
back into a viable operating status. These attempts included contacting
several companies or being contacted, all of which did not materialize for
various reasons.
During September, 1998, the management of the Company began the process of
bringing the Company back into compliance. The fiscal year end is September
30; therefore, the first quarter was primarily getting corporate documents and
bookkeeping records together for the audit of 1998 and 1997.
10
The assets as of December 31, 1999 were $42,968 consisting primarily of the
JFS property. The Company acquired this interest through the change of
control transaction on October 12, 1999. The Company did not have any assets
or liabilities on September 30, 1998 or on December 31, 1997.
Revenues and Expenses:
There were no revenues reported during the current quarter. The expenses
incurred reflect the increased activity of the period relative to the
inactivity of the year earlier quarter. The Company expects both revenues and
expenses to increase as the Company becomes more active.
The Company reported a loss of $50,923 for the three months ended December 31,
1999.
The Company issued a total of 97,900,000 shares during the quarter increasing
the shares outstanding from 65,015,890 on September 30, 1999 to 162,915,890 on
December 31, 1999. These shares (97,500,000) were primarily issued in
connection with the change of control transaction on October 12, 1999.
A filing was made during the quarter on Form 8-K dated October 29, 1999,
disclosing the change in control of the Company.
Disclosure Regarding Forward-Looking Statements:
Where this Form 10-QSB includes "forward-looking" statements within the
meaning of Section 27A of the Securities Act, the Company desires to take
advantage of the "safe harbor" provisions thereof. Therefore, the Company is
including this statement for the express purpose of availing itself of the
protections of such safe harbor provisions with respect to all of such
forward-looking statements. The forward-looking statements in this Form 10-QSB
reflect the Company's current views with respect to future events and
financial performance. These forward-looking statements are subject to certain
risks and uncertainties that could cause actual results to differ from those
anticipated. In this Form 10-QSB, the words "anticipates," "believes,
"expects," "intends," "future" and similar expressions identify
forward-looking statements. The Company undertakes no obligation to publicly
revise these forward-looking statements to reflect events or circumstances
that may arise after the date hereof. All subsequent written and oral
forward-looking statements attributable to the Company or persons acting on
its behalf are expressly qualified in their entirety by this section.
Recent Accounting Pronouncements:
In June 1997, the Financial Accounting Standards Board (FASB) issued SFAS No.
130, "Reporting Comprehensive Income" which establishes standards for
reporting and display of comprehensive income, its components and accumulated
balances. Among other disclosures, SFAS 130 requires that all items that are
required to be recognized under current accounting standards as components of
comprehensive income be reported in a financial statement that is displayed
with the same prominence as other financial statements.
11
Also, in June 1997, FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information." SFAS 131 establishes standards for the
way that public companies report information about operating segments in
annual financial statements and requires reporting of selected information
about operating segments in interim financial statements issued to the public.
It also establishes standards for disclosure regarding products and services,
geographic areas and major customers.
Both SFAS 130 and 131 are effective for financial statements for periods
beginning after December 15, 1997 and require comparative information for
earlier years to be restated. Adoption of these standards will have no effect
on the Company's financial statements.
SIGNATURES
In accordance with Section 13 or 15 (d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
GOLDEN CHIEF RESOURCES, INC.
Date: March 24, 2000 /s/ JAMES W. LANDRUM
By: James W. Landrum, President
/s/ M. H. MCILVAIN
By: M. H. McIlvain, Executive Vice
President and Chief Financial Officer
12