U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended DECEMBER 31, 2000
[ ] 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.
(Exact name of small business issuer as specified in its charter)
State of Kansas 48-0846635
State or other jurisdiction of (IRS Employer
incorporation or organization) I. D. Number)
3109 Carlisle, Suite 100, Dallas, Texas 75204
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (214) 754-9161
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 [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
There were 219,986,890 shares of common stock, No Par Value,
outstanding as of December 31, 2000.
Transitional Small Business Disclosure Format (check one); Yes [ ] No [X]
1
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
REPORT ON REVIEW BY INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Golden Chief Resources, Inc.
Dallas, Texas
We have reviewed the accompanying balance sheet of Golden Chief Resources,
Inc. (a development stage enterprise) (the "Company") as of December 31,
2000, and the related statements of operations, stockholders equity, and
cash flows for the three months ended December 31, 2000 and 1999. 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, 2000, 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,
2001, 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, 2000 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 currently in the process of establishing
business activity. At the date of these financial statements, the Company
has acquired assets and is in the process of raising capital. However,
significant revenues have not been generated and the Company has a
significant deficit in stockholders' equity. 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 2, 2001
2
Golden Chief Resources, Inc.
(A Development Stage Enterprise)
Balance Sheets
December 31, September 30,
2000 2000
---------- ---------
(Unaudited)
ASSETS
Current Assets:
Cash $ - $ 5,156
Accounts receivable-related party 23,700 24,500
Prepaid expenses 105,000 101,250
---------- ---------
Total Current Assets 128,700 130,906
---------- ---------
Property and Equipment
Oil and gas properties (non-producing) 87,971 61,971
Less Accumulated depletion (8,932) (5,420)
---------- ---------
Total Property and Equipment 79,039 56,551
---------- ---------
Other Assets:
Investment in nonmarketable security 20,000 20,000
---------- ---------
TOTAL ASSETS $ 227,739 $ 207,457
========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Current Liabilities
Accounts payable $ 160,536 $ 96,831
Accrued expenses - 1,150
Accrued expense due to related parties 312,171 237,006
---------- ---------
Total Current Liabilities 472,707 334,987
---------- ---------
Stockholders' Equity:
Common stock, no par value (500,000,000
shares authorized, 219,986,890 and
162,915,890 outstanding) 1,448,276 1,398,276
Accumulated deficit (994,640) (994,640)
Deficit accumulated during the development
stage (698,604) (531,166)
---------- ---------
Total Stockholders' Equity (244,968) (127,530)
---------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 227,739 $ 207,457
========== =========
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, 2000 and 1999
(Unaudited)
Cumulative
During the
Development
Stage 2000 1999
---------- --------- ---------
Revenues:
Gas sales $ 26,895 $ 8,476 $ -
Other income 1,938 - -
---------- ---------- ----------
Total Revenues 28,833 8,476 -
Cost of Revenues:
Lease operating expenses 79,706 37,934 -
Depletion 8,932 3,512 -
---------- ---------- ----------
Total Cost of Revenues 88,638 41,446 -
---------- ---------- ----------
Gross Profit (59,805) (32,970) -
---------- ---------- ----------
Operating Expenses:
Personnel costs 384,315 60,000 8,000
Consulting fees 10,000 - -
Professional fees 128,363 38,173 31,302
Public relations 62,500 12,500 -
Travel 34,047 10,947 6,909
Rent 9,090 1,800 -
Other 52,446 11,048 4,751
---------- ---------- ----------
Total Operating Expenses 680,761 134,468 50,962
---------- ---------- ----------
Income from Operations (740,566) (167,438) (50,962)
Other Income/(Expenses)
Gain/(loss) on sale of investments 41,331 - (5,015)
Unrealized gain on investments - - 4,941
Interest income 631 - 113
---------- ---------- ----------
Income before income taxes (698,604) (167,438) (50,923)
Income taxes - - -
---------- ---------- ----------
Net Income $ (698,604) $ (167,438) $ (50,923)
========== ========== ==========
Earnings per Share $ (0.01) $ (0.00) $ (0.00)
========== ========== ==========
Weighted Average Shares Outstanding 119,799,240 219,440,749 150,001,216
=========== =========== ===========
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, 2000 and 1999
(Unaudited)
Deficit
Accumulated
During the
Common Stock Accumulated Development
Date Shares Amount Deficit Stage
----- ----------- ---------- --------- ---------
Balances, 10/01/96 32,217,050 $ 994,640 $(994,640) $ -
Net income for the year - - - -
----------- ---------- --------- ---------
Balances, 09/30/97 32,217,050 994,640 (994,640) -
Shares issued for ser-
vices and expenses 09/98 15,941,000 1,594 - -
Net (loss) for the year - - - (1,594)
----------- ---------- --------- ---------
Balances, 09/30/98 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 (loss) for the year - - - (74,342)
----------- ---------- --------- ---------
Balances, 09/30/99 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 - -
Cash 01/00 51,000 5,100 - -
Cash 02/00 260,000 26,000 - -
Cash 03/00 145,000 14,500 - -
Cash 06/00 270,000 27,000 - -
Public relations
services 06/00 500,000 50,000 - -
Professional services 07/00 1,500,000 135,000 - -
Cash 08/00 100,000 10,000 - -
Nonmarketable
securities 09/00 4,000,000 20,000 - -
Net (loss) for the year - - - (455,230)
----------- ---------- --------- ---------
Balances, 09/30/00 169,741,890 1,398,276 (994,640) (531,166)
See accompanying selected information and accountants' report.
5
Golden Chief Resources, Inc.
(A Development Stage Enterprise)
Statement of Stockholders' Equity
For Three Months Ended December 31, 2000 and 1999
(Unaudited)
Deficit
Accumulated
During the
Common Stock Accumulated Development
Date Shares Amount Deficit Stage
----- ----------- ---------- --------- ---------
Shares issued for:
Oil and gas properties 10/00 49,245,000 $ - $ - $ -
Public relations
services 10/00 1,000,000 50,000 - -
Net (loss) for period - - - (167,438)
----------- ---------- --------- ---------
Balances, December 31, 2000 219,986,890 $1,448,276 $(994,640) $(698,604)
=========== ========== ========= =========
See accompanying selected information and accountants' report.
6
Golden Chief Resources, Inc.
(A Development Stage Enterprise)
Statement of Cash Flows
(Increases/(Decreases) in Cash
For Three Months Ended December 31, 2000 and 1999
(Unaudited)
Cumulative
During the
Development
Stage 2000 1999
---------- ---------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) $ (698,604) $ (167,438) $ (50,923)
Adjustments to reconcile net (loss) to
net cash provided by operations:
Loss/(gain) on sale of securities (41,331) - 5,015
Unrealized loss/(gain) on securities - - (4,941)
Depletion 8,932 3,512
Stock issued for services and expenses 114,321 12,500 -
Changes in:
Accounts receivable (23,700) 800 -
Prepaid expenses 33,750 33,750 -
Accounts payables 160,536 63,705 (33,834)
Accrued expenses 312,171 74,015 -
---------- ---------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES (133,925) 20,844 (84,683)
---------- ---------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Costs of developing oil and gas properties (87,971) (26,000) (42,812)
Proceeds from sale of securities 96,027 - 6,016
Purchase of marketable securities (11,031) - -
---------- ---------- ---------
NET CASH USED IN INVESTING ACTIVITIES (2,975) (26,000) (36,796)
---------- ---------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds stock sales 136,900 - 34,868
Proceeds from short term notes 10,000 - 10,000
Repayment of short term notes (10,000) - (8,000)
---------- ---------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 136,900 - 36,868
---------- ---------- ---------
Increase/(decrease) in cash for period - (5,156) (84,611)
Cash, Beginning of period - 5,156 84,767
---------- ---------- ---------
Cash, End of period $ - $ - $ 156
========== ========== =========
See accompanying selected information and accountants' report.
7
Golden Chief Resources, Inc.
(A Development Stage Enterprise)
Statement of Cash Flows
(Increases/(Decreases) in Cash
For Three Months Ended December 31, 2000 and 1999
(Unaudited)
(Continued) Cumulative
During the
Development
Stage 2000 1999
---------- ---------- ---------
Supplemental Disclosures:
Cash payments for:
Interest $ - $ - $ -
Income taxes - - -
Stock issued for:
Various expenses 3,771 - -
Consulting 10,300 - -
Professional services 54,000 - -
Marketable securities 43,665 - -
Prepaid professional services 135,000 - -
Prepaid public relations services 37,500 37,500 -
Nonmarketable security 20,000 - -
See accompanying selected information and accountants' report.
8
Golden Chief Resources, Inc.
(A Development Stage Enterprise)
Selected Information for Financial Statements
Three Months Ended December 31, 2000 and 1999
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, 2000. 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, 2000, are not necessarily indicative of the results that
may be expected for the year ending September 30, 2001.
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 be deemed to have exited
the development stage once it has generated operations and revenues of
significance.
Going Concern Issues -- The Company had no operations from 1986 until
November 1999 and has not generated sufficient revenues from its operations
started then to approach its operating costs. In January 2000, activities
begun in November 1999 started generated revenues. However, such revenues
have not been significant enough to overcome expenses. Additional
development of the properties acquired by the Company and the rest of
Management's plan of operations requires significant additional capital
generation. Although efforts to raise capital met with some success during
the year ended September 30, 2000, there is no guarantee that sufficient
capital will be available to accomplish the property development and plan of
operations. 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.
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: STOCK TRANSACTIONS
During the first quarter, the Company issued 49,245,000 common shares to Red
River Properties, Inc. (an entity controlled by the President of the
Company) in exchange for an additional 15% of the JFS field. The Company
now owns a 25% working interest in this field.
The Company also issued 1,000,000 common shares to an unrelated entity in
exchange for promotional and stock monitoring services valued at $50,000.
NOTE 3: OIL AND GAS PROPERTIES
As discussed above, the Company acquired an additional 15% working interest
in the JFS field, a producing property, in October 2000. During November
and December, the Company incurred $26,000 for its share of costs of
reentering and reworking wells on this property and reworking production
equipment. During January 2000, this property was placed into production
and the Company began earning revenues.
NOTE 4: CONTINGENCY
In August 2000, the Company entered into an agreement to acquire all of the
outstanding shares of MJM Oil and Gas, Inc. in exchange for 215,000,000
common shares issued by the Company. This transaction is contingent upon
the Company raising a minimum of $10,000,000 in funding to be available as
working capital for the development of properties owned by MJM and for
acquisition of other properties known of or identified by MJM. As of the
date these financial statements are issued, the Company has not raised any
of this funding and the agreement has not been consummated.
Item 2: Management's Discussion and Analysis of Financial Condition
and Results of Operations.
General:
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. (See Liquidity and Capital
Resources below) During the quarter the Company's management actively
sought capital to close the MJM transaction described in the next paragraph.
The operation of the JFS property continued with efforts to synchronize the
operation of the various components of the JFS field to enhance production
of natural gas since spot prices for natural gas were near record levels
during the quarter.
On August 31, 2000, the Company entered into an agreement to acquire 100% of
the issued and outstanding common stock of MJM Oil and Gas, Inc. ("MJM").
MJM is a privately held oil and gas operating company located in Richardson,
Texas. MJM operates approximately 150 oil and gas wells in the State of
Texas. The Agreement calls for the Company to issue up to 215,000,000
common shares, or so many thereof as required to equal thirty percent (30%)
of the then issued and outstanding shares to MJM shareholders in exchange
for all of the outstanding shares of MJM. The proposed transaction is
contingent upon the Company's completion of a proposed offering of common
stock (or other equity transaction) resulting in gross proceeds to the
Company of a minimum of $10,000,000 for use in the exploitation, enhancement
and development of the MJM properties. MJM currently operates the JFS Field
in which Registrant owns a 25% working interest. The Company is reviewing
various avenues of acquiring the necessary capital to complete the proposed
transaction.
The Company acquired an additional 15% working interest in the JFS field, a
producing property, in October 2000. This additional interest is burdened
by a net profits interest to an unrelated third-party which precludes the
Company from receiving the revenues from this interest until the net profits
interest is satisfied. The Company expects that with current prices and
production that the net profits interest should be satisfied sometime in the
Summer of 2001. During November and December, the Company incurred $26,000
for its share of costs of reentering and reworking wells on this property
and reworking production equipment.
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 on production. After significant
efforts the operator was able to place the property back on production in
January of 2000.
Liquidity and Capital Resources:
With the Company's stock price at extremely low levels the Company elected
to temporarily suspend the private placement of the Company's stock. If the
Company's share price returns to more advantageous levels the Company
expects to resume limited placements of shares. The Company also is
exploring possible transactions whereby the Company will earn consulting
fees for arranging acquisitions. This process can also provide cash for
operations and investment. The Company is also actively pursuing the
capital necessary to close the MJM transaction discussed above.
During the year ago quarter the Company began a limited private placement of
the Company's common stock in order to raise working capital. The Company
continued the private placement until late in the previous fiscal year.
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.
The assets as of December 31, 2000 totaled $227,739 and consisted primarily
of prepaid expenses and the JFS Property. 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:
The Company reported revenues of $8,476 during the quarter. There were no
revenues reported during the year ago 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 $167,438 for the three months ended December
31, 2000 as compared with a loss of $50,923 in the same quarter of the
previous year. The increase reflects increased activity during the current
quarter.
The Company issued a total of 50,245,000 shares during the quarter
increasing the shares outstanding from 169,741,890 on September 30, 2000 to
219,986,890 on December 31, 2000. Of these shares, 49,245,000 were issued
in connection with the acquisition of the additional 15% working interest in
the JFS Field discussed above.
No filings were made during the quarter on Form 8-K.
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.
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 7, 2001 /s/ JAMES W. LANDRUM
By: James W. Landrum, President
/s/ M. H. MCILVAIN
By: M. H. McIlvain, Executive
Vice President and Chief Financial
Officer