U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-QSB
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarter Ended October 31, 1997
Commission File Number: 0-22990
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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, including zip code, and telephone number including area code,
of Issuer's executive offices)
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Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
None None
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $.01 PAR VALUE
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 December 12, 1997 - 10,354,337.
Transitional Small Business Disclosure Format (Alternative 2):
Yes __X__ No___
PART I - FINANCIAL INFORMATION
ITEM 1. - Financial Statements
MAGNUM RESOURCES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
October 31, July 31,
Assets 1997 1997
- ------ ----------- -----------
Current assets:
Cash $ 2,000 $ 7,000
Accounts receivable, net 1,835,000 1,455,000
Inventories 1,962,000 1,845,000
Prepaid expenses 84,000 66,000
----------- -----------
Total current assets 3,883,000 3,373,000
Property, plant & equipment, net 2,268,000 2,009,000
Other assets 97,000 41,000
----------- -----------
Total assets $ 6,248,000 $ 5,423,000
=========== ===========
Liabilities & Stockholders' Equity
Current liabilities:
Current maturities of
long-term obligations $ 150,000 $ 144,000
Accounts payable 1,444,000 1,187,000
Revolving note payable to bank 1,451,000 1,190,000
Accrued liabilities 481,000 489,000
----------- -----------
Total current liabilities 3,526,000 3,010,000
Long-term obligations, less current
maturities 707,000 434,000
Deferred income taxes 81,000 84,000
----------- -----------
Total liabilities 4,314,000 3,528,000
Stockholders' Equity:
Preferred stock, par value $.01 per
share; 5,000,000 shares authorized,
no shares issued or outstanding -0- -0-
Common stock, par value $.01 per
share, 50,000,000 shares authorized;
10,354,337 shares issued and
outstanding at October 31, 1997
and at July 31, 1997 104,000 104,000
Additional paid in capital 7,872,000 7,872,000
Accumulated deficit (6,042,000) (6,081,000)
----------- -----------
Total stockholders' equity 1,934,000 1,895,000
----------- -----------
Total Liabilities & Stockholders' Equity $ 6,248,000 $ 5,423,000
=========== ===========
See Accompanying Notes to Condensed Consolidated Financial Statements
MAGNUM RESOURCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended
October 31,
1997 1996
------------ ------------
Net sales $ 3,744,000 $ 2,247,000
Cost of goods sold 3,046,000 1,714,000
------------ ------------
Gross profit 698,000 533,000
Operating expenses:
Selling, general
and administration 518,000 431,000
Research, development
and engineering 51,000 42,000
------------ ------------
Operating profit 129,000 60,000
Other income (expense):
Interest expense, net (96,000) (20,000)
Other 3,000 4,000
------------ ------------
Income before
income taxes 36,000 44,000
Income tax benefit 3,000 3,000
------------ ------------
Net Income $ 39,000 $ 47,000
============ ============
Net income per share $ 0.00 $ 0.00
============ ============
Weighted average number of
common shares outstanding 10,354,337 10,252,337
============ ============
See Accompanying Notes to Condensed Consolidated Financial Statements
MAGNUM RESOURCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended
October 31,
1997 1996
--------- ---------
Cash flows from operating activities:
Net income $ 39,000 $ 47,000
Adjustments to reconcile net income
to net cash from operations:
Depreciation & amortization 87,000 59,000
Deferred income taxes (3,000) (3,000)
Changes in operating assets and liabilities:
Accounts receivable (380,000) (407,000)
Inventories (117,000) (79,000)
Prepaid expenses (18,000) 6,000
Accounts payable 257,000 281,000
Accrued liabilities (8,000) (6,000)
--------- ---------
Net cash used in operating activities (143,000) (102,000)
Cash flows from investing activities:
Purchase of property, plant & equipment (346,000) (192,000)
Other assets (56,000) 0
--------- ---------
Net cash used in investing activities (402,000) (192,000)
Cash flows from financing activities:
Proceeds from long-term financing 311,000 16,000
Proceeds from revolving note payable
to bank, net of repayments 261,000 360,000
Payments on long-term obligations (32,000) (88,000)
--------- ---------
Net cash provided by investing activities 540,000 288,000
--------- ---------
Net decrease in cash (5,000) (6,000)
Cash at beginning of period 7,000 12,000
--------- ---------
Cash at end of period $ 2,000 $ 6,000
========= =========
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 73,000 $ 15,000
========= =========
See Accompanying Notes to Condensed Consolidated Financial Statements
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. (`the Company') and its wholly-owned subsidiaries.
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 estimates
used by management.
EARNINGS PER SHARE
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 128, Earnings Per Share, which is effective for
financial statements issued after December 15, 1997. Early adoption of the new
standard is not permitted. The new standard eliminates primary and fully diluted
earnings per share and requires presentation of basic and diluted earnings per
share together with disclosure of how the per share amounts were computed. The
Company has not yet determined what impact this statement will have on the
Company's financial statements.
RECLASSIFICATIONS
Certain 1996 amounts have been reclassified to conform with 1997 presentation.
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, 1997, the Company utilized its line of
credit extensively to finance its growth. The line of credit bears interest at
Norwest Bank's prime rate + 6 1/2%. In addition to the interest cost with the
line of credit, many of the Company's dealers purchased equipment utilizing
company supported finance options (floorplans). The combined interest cost
associated with the borrowings under the line of credit and the dealer
participation in the floorplan financing, caused interest expense to increase
from $20,000 in the first quarter of 1996 to $96,000 in the first quarter of
1997. The Company expects interest expense to remain high in periods of revenue
growth.
In November 1997, the Company established a series of credit facilities for each
of its principal operating subsidiaries. Each line of credit is separately
maintained and is subject to separate security agreements covering most of the
assets of each corporation. The aggregate amount available under these lines is
$1,800,000.
ITEM 6. - EXHIBITS AND REPORTS ON FORM 8-K
(A) Exhibits
6.1 Revolving Credit facility for Magnum Resources and
subsidiaries dated November 25, 1997.
27.2 Financial Data Schedule
(B) Reports on Form 8-K
None
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: January 6, 1998 BY: /s/ John F. Luoma
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John F. Luoma
Chief Executive Officer
BY: /s/ David M. Eichers
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David M. Eichers
Secretary and Chief Accounting Officer