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 MARCH 31, 2002
[ ] 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, Dallas, Texas 75204
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (214) 754-9160
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 42,678,699 shares of common stock, No Par Value,
outstanding as of March 31, 2002.
Transitional Small Business Disclosure Format (check one); Yes [ ] No [X]
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GOLDEN CHIEF RESOURCES, INC.
(A Development Stage Enterprise)
BALANCE SHEETS
<Table>
<Caption>
March 31, September 30,
2002 2001
----------- -------------
(Unaudited)
ASSETS
Current Assets:
Cash $ 461 $ 142
Accounts receivable-related party 11,067 22,617
----------- -----------
Total Current Assets 11,528 22,759
Property and Equipment
Oil and gas properties 338,604 288,020
Less Accumulated depletion (27,901) (22,342)
----------- -----------
Total Property and Equipment 310,703 265,678
----------- -----------
Other Assets:
Investment in nonmarketable security 20,000 20,000
----------- -----------
TOTAL ASSETS $ 342,231 $ 308,437
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Current Liabilities
Accounts payable $ 339,264 $ 156,880
Accrued expenses -- 73,369
Accrued expense due to related parties 626,225 493,726
Net profits interest payable 72,202 72,202
----------- -----------
Total Current Liabilities 1,037,691 796,177
----------- -----------
Stockholders' Equity:
Common stock, no par value (500,000,000 shares
authorized, 42,678,699 and 27,878,699 outstanding) 2,692,232 1,596,232
Additional Paid-in Capital 15,000 15,000
Accumulated deficit (994,640) (994,640)
Deficit accumulated during the development stage (2,408,051) (1,104,332)
----------- -----------
Total Stockholders' Equity (695,459) (487,740)
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 342,231 $ 308,437
=========== ===========
</Table>
See accompanying selected information.
2
GOLDEN CHIEF RESOURCES, INC.
(A Development Stage Enterprise)
STATEMENT OF OPERATIONS
For Three and Six Months Ended March 31, 2002 and 2001
(Unaudited)
<Table>
<Caption>
Cumulative
During the Three Months Six Months
Development ----------------------------- -----------------------------
Stage 2002 2001 2002 2001
------------ ------------ ------------ ------------ ------------
Revenues
Oil and gas $ 194,919 $ 10,338 $ 64,328 $ 26,675 $ 85,519
Other 1,938 -- -- -- --
------------ ------------ ------------ ------------ ------------
Total Revenues 196,857 10,338 64,328 26,675 85,519
------------ ------------ ------------ ------------ ------------
Costs of Revenues
Lease operating expenses 209,097 22,507 20,266 54,141 75,567
Depletion 27,900 1,861 8,020 5,558 11,733
------------ ------------ ------------ ------------ ------------
Total Costs of Revenues 236,997 24,368 28,286 59,699 87,300
------------ ------------ ------------ ------------ ------------
Gross Profit (40,140) (14,030) 36,042 (33,025) (1,781)
------------ ------------ ------------ ------------ ------------
Operating Expenses:
Director and officer compensation 740,982 60,000 64,167 132,500 124,168
Consulting fees 913,200 658,200 -- 903,200 --
Professional fees 400,137 38,930 40,984 109,080 79,157
Public relations 170,000 95,000 12,500 95,000 25,000
Rent 16,290 -- 1,800 1,800 3,600
Travel 80,781 7,243 11,501 17,255 22,449
Other 88,483 3,514 8,489 11,860 19,533
------------ ------------ ------------ ------------ ------------
Total Operating Expenses 2,409,873 862,887 139,441 1,270,695 273,907
------------ ------------ ------------ ------------ ------------
(Loss) from Operations (2,450,013) (876,917) (103,399) (1,303,720) (275,688)
Other Income/(Expense)
Gain/(loss) on sale of investments 41,331 -- -- -- --
Unrealized gain on investments -- -- -- -- --
Interest income 631 -- -- -- --
------------ ------------ ------------ ------------ ------------
(Loss) before income taxes (2,408,051) (876,917) (103,399) (1,303,720) (275,688)
Income taxes -- -- -- -- --
------------ ------------ ------------ ------------ ------------
Net (Loss) $ (2,408,051) $ (876,917) $ (103,399) $ (1,303,720) $ (275,688)
============ ============ ============ ============ ============
(Loss) per Share $ (0.10) $ (0.02) $ (0.00) $ (0.04) $ (0.00)
============ ============ ============ ============ ============
Weighted Average Shares Outstanding 23,081,430 39,878,699 16,308,614 34,628,699 15,650,793
============ ============ ============ ============ ============
</Table>
See accompanying selected information.
3
GOLDEN CHIEF RESOURCES, INC.
(A Development Stage Enterprise)
STATEMENT OF STOCKHOLDERS' EQUITY
From the Period from August 1998 to March 31, 2002
(Unaudited)
<Table>
<Caption>
Deficit
Accumulated
Common Stock Additional During the
-------------------------- Paid In Accumulated Development
Date Shares Amount Capital Deficit Stage
---- ----------- ----------- ----------- ----------- ------------
Balances, October 1, 1996 3,221,715 $ 994,640 $ -- $ (994,640) $ --
Net income for the year -- -- -- -- --
----------- ----------- ----------- ----------- -----------
Balances, September 30, 1997 3,221,715 994,640 -- (994,640) --
Shares issued for services and
expenses 09/98 1,594,100 1,594 -- -- --
Net (loss) for the year -- -- -- -- (1,594)
----------- ----------- ----------- ----------- -----------
Balances, September 30, 1998 4,815,815 996,234 -- (994,640) (1,594)
Shares issued for:
Expenses 10/98 568,892 2,477 -- -- --
Marketable securities 12/98 721,932 7,219 -- -- --
Cash 01/99 33,000 3,300 -- -- --
Marketable securities 02/99 89,460 8,946 -- -- --
Consulting 03/99 50,000 10,000 -- -- --
Cash 04/99 20,000 2,000 -- -- --
Expenses 04/99 20,000 4,000 -- -- --
Cash 07/99 45,000 9,000 -- -- --
Marketable securities 07/99 137,500 27,500 -- -- --
Net (loss) for the year -- -- -- -- (74,342)
----------- ----------- ----------- ----------- -----------
Balances, September 30, 1999 6,501,599 1,070,676 -- (994,640) (75,936)
Shares issued for:
Oil and gas properties 10/99 9,750,000 -- -- -- --
Cash 10/99 25,000 25,000 -- -- --
Cash 11/99 5,000 5,000 -- -- --
Cash and subscription 12/99 10,000 10,000 -- -- --
Cash 01/00 5,100 5,100 -- -- --
Cash 02/00 26,000 26,000 -- -- --
Cash 03/00 14,500 14,500 -- -- --
Cash 06/00 27,000 27,000 -- -- --
Public relations services 06/00 50,000 50,000 -- -- --
Professional services 07/00 150,000 135,000 -- -- --
Cash 08/00 10,000 10,000 -- -- --
Nonmarketable securities 09/00 400,000 20,000 -- -- --
Net (loss) for the year -- -- -- -- (455,230)
----------- ----------- ----------- ----------- -----------
Balances, September 30, 2000 16,974,199 1,398,276 -- (994,640) (531,166)
</Table>
See accompanying selected information.
4
GOLDEN CHIEF RESOURCES, INC.
(A Development Stage Enterprise)
STATEMENT OF STOCKHOLDERS' EQUITY
From the Period from August 1998 to March 31, 2002
(Unaudited)
(Continued)
<Table>
<Caption>
Deficit
Accumulated
Common Stock Additional During the
-------------------------- Paid In Accumulated Development
Date Shares Amount Capital Deficit Stage
---- ----------- ----------- ----------- ----------- ------------
Shares issued for:
Oil and gas properties 10/00 4,924,500 92,956 -- -- --
Professional services 10/00 200,000 65,000 -- -- --
Options granted 03/01 -- -- 15,000 -- --
Oil and gas properties 04/01 5,380,000 -- -- -- --
Professional services 04/01 400,000 40,000 -- -- --
Net (loss) for the year -- -- -- -- (573,166)
----------- ----------- ----------- ----------- -----------
Balances, September 30, 2001 27,878,699 1,596,232 15,000 (994,640) (1,104,332)
Shares issued for:
Consulting services 12/01 3,500,000 245,000 -- -- --
Legal services 12/01 1,000,000 70,000 -- -- --
Consulting services 01/02 2,900,000 225,000
Legal services 01/02 200,000 28,000
Consulting services 02/02 6,000,000 420,000
Consulting services 03/02 1,200,000 108,000
Net (loss) for the year -- -- -- -- (1,303,720)
----------- ----------- ----------- ----------- -----------
Balances, March 31, 2002 42,678,699 $ 2,692,232 $ 15,000 $ (994,640) $(2,408,051)
</Table>
See accompanying selected information.
5
GOLDEN CHIEF RESOURCES, INC.
(A Development Stage Enterprise)
STATEMENT OF CASH FLOWS
(Increases/(Decreases) in Cash
For Six Months Ended March 31, 2002 and 2001
(Unaudited)
<Table>
<Caption>
Cumulative
During the
Development
Stage 2002 2001
------------ ------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) $ (2,408,051) $ (1,303,720) $ (275,688)
============
Adjustments to reconcile net (loss) to
net cash provided by operations:
Depletion 27,900 5,558 11,733
Loss/(gain) on sale of securities (41,331) -- --
Unrealized (gain) on securities -- -- --
Stock issued for services and expenses 1,318,721 1,096,000 12,500
Changes in operating assets and liabilities:
Accounts receivable (11,069) 11,552 3,300
Prepaid expenses 80,000 -- 80,000
Accounts and accrued payables 265,895 109,015 98,023
Accrued expenses 699,594 132,499 119,467
------------ ------------ ------------
NET CASH PROVIDED/(USED) BY OPERATING ACTIVITIES (68,340) 50,904 49,335
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Costs of developing oil and gas properties (93,892) -- (31,921)
Proceeds from sale of securities 96,027 -- --
Purchase of marketable securities (11,031) -- --
------------ ------------ ------------
NET CASH USED IN INVESTING ACTIVITIES (8,896) -- (31,921)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds stock sales 136,900 -- --
Repayment of production debt (22,036) -- (22,306)
Proceeds from short term notes 10,000 -- --
Repayment of short term notes (10,000) -- --
------------ ------------ ------------
NET CASH PROVIDED/(USED) BY FINANCING ACTIVITIES 114,864 -- (22,306)
------------ ------------ ------------
Increase/(decrease) in cash for period 215 (319) (4,622)
Cash, Beginning of period -- 142 5,156
------------ ------------ ------------
Cash, End of period $ 461 $ 461 $ 534
============ ============ ============
</Table>
See accompanying selected information.
6
GOLDEN CHIEF RESOURCES, INC.
(A Development Stage Enterprise)
STATEMENT OF CASH FLOWS
(Increases/(Decreases) in Cash
For Three and Six Months Ended March 31, 2002 and 2001
(Unaudited)
(Continued)
<Table>
<Caption>
Cumulative
During the
Development
Stage 2002 2001
----------- --------- ---------
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 -- --
Fixed assets acquired with:
Stock issuance 92,956 -- 92,956
Net profits production payable 99,000 -- 99,000
</Table>
See accompanying selected information.
7
GOLDEN CHIEF RESOURCES, INC.
(A Development Stage Enterprise)
SELECTED INFORMATION FOR FINANCIAL STATEMENTS
Three and Six Months Ended March 31, 2002 and 2001
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, 2001. In the opinion of Management,
all adjustments (consisting of normal recurring accruals) considered necessary
for a fair presentation have been included. Operating results for the six-month
period ended March 31, 2002, are not necessarily indicative of the results that
may be expected for the year ending September 30, 2002.
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. In January 2000, activities begun in November 1999 started generating
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. Efforts to raise capital met with little success during the
year ended September 30, 2001. There is no guarantee that sufficient capital can
be raised 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 cash 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
On December 17, 2001 a special meeting of shareholders was held in Dallas, Texas
at which the Company agreed to effect a reverse split of its common stock at a 1
for 10 ratio. This action was effective as soon as practical and was effected in
the trading of the Company's shares on January 2, 2002. All share and per-share
amounts have been presented as though the reverse split had occurred before any
period presented.
The meeting also approved the filing of an S-8 registration statement with the
Securities and Exchange Commission to allow the issuance of shares to
consultants, advisors and attorneys. The S-8 statement was filed on December 21,
2001 to register 25,000,000 post-reverse-split common shares for the above
stated purpose. The meeting also approved the change of corporate name to be
determined at a later date by management.
See accompanying selected information.
8
In December 2001 the Company issued common shares pursuant to the S-8 filing to
Steve Owen in the amount of 2,500,000 shares valued at $175,000; Gene Maloney in
the amount of 1,000,000 shares valued at $70,000; and 1,000,000 shares to Aden
L. Vickers valued at $70,000. The shares to Mr. Owen were issued pursuant to his
agreement to provide specific consulting and advisory services in the area of
petroleum engineering, identification of possible asset acquisitions, and
petroleum geology services. The shares to Mr. Maloney were issued pursuant to
his financial consulting agreement with the Company. The shares to Mr. Vickers
were issued as payment for legal fees relative to the filing of the S-8
registration statement.
During the quarter ended March 31, 2002 the Company has issued an additional
9,100,000 shares pursuant to the S-8 registration statement as follows. Gene
Maloney was issued 1,900,000 shares (valued at $95,000) pursuant to his
consulting agreement. Steve Owen was issued 6,000,000 shares (valued at
$420,000) pursuant to his consulting and advisory agreement. William Andrew
Stack was issued 200,000 shares (valued at $28,000) pursuant to his agreement to
provide certain legal services to the Company. 2,200,000 shares (valued at
$238,000) were issued to Dr. Sarvotham Chary who has agreed to provide advisory
services in overseas markets.
Also see the discussion regarding subsequent events at Note 5 below.
NOTE 3: CONTINGENCY
Under the terms of the farm-out agreement with MJM Oil and Gas, Inc. on the JFS
Field, MJM is providing development funds for this property. Consistent with
this arrangement, MJM has a lien against the Company's interest in this field
until such time as the Company has repaid its share of all of the development
costs incurred by MJM in returning this field to production.
NOTE 4: STOCK OPTIONS
At March 31, 2002, the Company had outstanding options for the purchase of its
common stock as presented below. These options are related to employment
agreements and services rendered to the Company.
<Table>
<Caption>
Exercise Price Exercise Period # of Shares
-------------- --------------- -----------
$0.10 per share Through 12/31/02 50,000
$0.20 per share Through 12/31/04 50,000
$0.10 per share Through 12/31/05 400,000
$0.10 per share Through 12/31/10 1,000,000
$0.20 per share Through 12/31/10 1,000,000
$0.10 per share Through 12/31/11 1,500,000
$0.20 per share Through 12/31/11 1,500,000
------------
5,500,000
============
</Table>
Changes in outstanding options during the year were as follows:
<Table>
Options outstanding at September 30, 2001 5,500,000
Expirations --
Grants --
------------
Options outstanding at March 31, 2002 5,500,000
============
</Table>
NOTE 5: SUBSEQUENT EVENTS
Subsequent to the quarter ended March 31, 2002 the Company has issued an
additional 4,000,000 shares pursuant to the S-8 registration statement as
follows. William Andrew Stack was issued 4,000,000 shares (valued at $80,000)
pursuant to his agreement to provide certain legal services to the Company.
See accompanying selected information.
9
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.) 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.
On December 17, 2001 a special meeting of shareholders was held in Dallas, Texas
at which the Company agreed to effect a reverse split of its common stock at a 1
for 10 ratio. This action was effective as soon as practical and was effected in
the trading of the Company's shares on January 2, 2002. The meeting also
approved the filing of an S-8 registration statement with the Securities and
Exchange Commission to allow the issuance of shares to consultants, advisors and
attorneys. The S-8 statement was filed on December 21, 2001. The meeting also
approved the change of corporate name to be determined at a later date by
management.
The quarter ended March 31, 2001 was highlighted by the engagement of the
Hartsfield Capital Group discussed more fully above. Company operations
continued as per previous quarters with production continuing on the JFS
property and the Company's management continuing to seek the financing to
consummate the transaction with MJM Oil and Gas.
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 that 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, the net
profits interest should be satisfied sometime in the distant future.
LIQUIDITY AND CAPITAL RESOURCES:
The Company continues to seek sufficient capital to finalize certain
transactions. Management has met with several parties who could potentially
assist in the above financing. While the overall energy industry is enjoying
continued positive results, the financing of small companies in the energy
sector is still difficult.
During the current quarter the Company's capital resources were extremely
limited. Company management expected that the one for ten reverse split of the
Company's common stock would result in improved marketability of the stock which
could allow for the Company to make limited private placements to bring in
capital for acquisitions and operations. To date only limited success has been
evident, but management continues to seek effective results in this area.
At March 31, 2002 the Company was actively engaged in reviewing acquisitions,
and seeking sufficient capital to close these transactions. The Company is
hopeful that these efforts will be fruitful during this fiscal year.
The assets as of March 31, 2001 were $369,179 consisting primarily of the JFS
property. The Company acquired this interest through the change of control
transaction on October 12, 1999 and the transaction of October 2000 whereby an
additional 15% working interest in the JFS property was acquired. The Company
had assets of $207,457 on September 30, 2000 and assets of $227,739 on December
31, 2000. 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 $10,338 during the quarter ending March 31,
2002. The increased expenses incurred reflect the efforts to bring in
consultants and advisors to effectively attract capital. The Company expects
both revenues and expenses to increase as the Company becomes more active.
The Company reported revenues of $64,328 during the quarter ending March 31,
2001, all of which arose from the JFS property. The expenses incurred reflect
the increased activity of the period due mainly to the acquisition of the
10
additional 15% working interest in the JFS property. The Company expects both
revenues and expenses to increase as the Company becomes more active.
The Company reported a loss of $103,399 for the three months ended March 31,
2001 as compared to a net loss of $142,427 for the previous year's quarter.
These results reflect the increased activity of the Company. The Company
reported a loss of $275,688 for the six months ending March 31, 2001 as compared
to a loss of $196,350 for the same period a year ago. These results also are
reflective of the increased level of activity.
No filings were made during the quarter on Form 8K.
SUBSEQUENT EVENTS:
See footnotes to the financial statements.
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: May 10, 2002 /s/ JAMES W. LANDRUM
--------------------------
By: James W. Landrum, President
/s/ M. H. MCILVAIN
--------------------------
By: M. H. McIlvain, Executive Vice President
Chief Financial Officer
11