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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2000
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _________ TO ___________
COMMISSION FILE NUMBER: 0-12185
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DAUGHERTY RESOURCES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
PROVINCE OF BRITISH COLUMBIA NOT APPLICABLE
(State or other jurisdiction of incorporation or (I.R.S. EMPLOYER
organization) IDENTIFICATION NO.)
120 PROSPEROUS PLACE, SUITE 201
LEXINGTON, KENTUCKY 40509-1844
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (859) 263-3948
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Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 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 [ ].
THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE REGISTRANT'S CLASSES OF
COMMON STOCK, AS OF SEPTEMBER 30, 2000, WAS 3,212,387.
Transitional Small Business Disclosure Format (check one):
Yes No X .
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PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
The information required by this Item 1 appears on pages i through vi
of this Report, and is incorporated herein by reference.
The accompanying unaudited consolidated financial statements have been
internally prepared by the management of Daugherty Resources, Inc. ("Daugherty
Resources") and in the opinion of management, represent a fair presentation of
the financial position of Daugherty Resources for the interim period. These
interim unaudited consolidated financial statements should be read in
conjunction with the Daugherty Resources' audited consolidated financial
statements and notes thereto filed on Form 10-KSB for the year ended
December 31, 1999, previously filed with the Securities and Exchange Commission.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The following is a discussion of the financial condition and results of
operations of Daugherty Resources. This discussion should be read in conjunction
with the Financial Statements of Daugherty Resources described in Item 1 of this
Report.
Statements contained in this "Management's Discussion and Analysis of
Financial Condition and Results of Operations," which are not historical facts
may be forward looking statements. Reliance upon such information involves risks
and uncertainties, including those created by general market conditions,
competition and the possibility that events may occur which could limit the
ability of Daugherty Resources to maintain or improve its operating results or
execute its primary growth strategy. Although management believes that the
assumptions underlying the forward-looking statements are reasonable, any of the
assumptions could be inaccurate, and there can be no assurances that the
forward-looking statements included herein will prove to be accurate. The
inclusion of such information should not be regarded as a representation by
management or any other person that the objectives and plans of Daugherty
Resources will be achieved. Moreover, such forward-looking statements are
subject to certain risks and uncertainties as more particularly set forth below,
that could cause actual results to differ materially from those projected.
Readers are cautioned not to place undue reliance on these forward-looking
statements.
Daugherty Resources, formerly Alaska Apollo Resources Inc., is a
diversified natural resources company with assets in oil and gas, and gold
prospects. Originally formed in 1979 to develop gold properties, Daugherty
Resources in the fourth quarter of 1993, acquired its wholly owned subsidiary,
Daugherty Petroleum, Inc. ("Daugherty Petroleum").
Since acquiring Daugherty Petroleum, Daugherty Resources has increased
its gas and oil reserves through the acquisition of oil and gas properties in
the Appalachian and Illinois Basins, and the drilling of wells in the
Appalachian Basin through joint ventures and drilling programs, where Daugherty
Petroleum, is the primary decision maker. Daugherty Resources continues to
aggressively seek acquisitions and drilling programs; however, there can be no
assurance that additional acquisitions or drilling will occur in 2000.
LIQUIDITY
Daugherty Resources primarily funds its operations through a
combination of cash flow from operations, capital raised through drilling
partnerships and the sale of stock. Operational cash flow is generated by sales
of natural gas and oil from interests owned in wells, operations of partnership
wells, and drilling and completions for Daugherty Resources sponsored
partnerships and joint ventures.
Daugherty Resources continues to review additional opportunities for
acquisitions of oil and gas properties. Previous acquisitions have been
completed using the stock of Daugherty Resources to pay for the acquisitions. If
the value of Daugherty Resources stock should decrease future acquisitions using
stock may not be possible.
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Working capital for the period ending September 30, 2000 was a negative
$3,017,802 compared to the same period in 1999, when working capital was a
negative $1,826,603. During the period ending September 30, 2000 and compared to
that same period in 1999, current assets decreased by $662,010 to $655,323. The
changes in the composition of Daugherty Resources' current assets were: cash
balances decreased $185,923 from $646,535 to $460,616; accounts receivable
balances increased $48,187 from $140,798 to $188,985; other current assets such
as prepaids and notes receivable decreased $524,274 from $530,000 to $5,726. The
majority of the decrease was due to the divestiture of Red River Hardwoods, Inc.
during 1999.
Current liabilities for the period ended September 30, 2000 were
$3,673,125 compared to $3,143,936 for the period ended September 30, 1999. The
increase was primarily due to an increase in accounts payable and accrued
expenses of $401,627 from $1,293,855 to $1,695,482 at September 30, 2000.
On August 26, 1998, Daugherty Petroleum obtained a $1,000,000 line of
credit from Compass Bank, Houston, Texas, secured by a first mortgage on
producing gas properties. Daugherty Petroleum makes interest only monthly
payments at a variable interest rate as published in the Wall Street Journal's
Money Rate Table plus one percent. Since the inception of the line of credit, it
has been periodically renewed. The maturity date of the current extension is
January 1, 2001. Daugherty Petroleum anticipates that the line of credit will be
renewed when it matures or that the line of credit will be replaced with a new
source of financing that will allow Daugherty Petroleum to pay off Compass Bank
and possibly increase the line of credit. There can be no assurance that
Daugherty Petroleum will obtain an extension from Compass Bank on favorable
terms or secure new financing from another source prior to January 1, 2001.
To obtain additional working capital, on September 14, 2000, Daugherty
Resources sold 159,194 shares of common stock for $ 2.31 per share pursuant to
three private placement agreements. While management believes that it can sell
additional shares of stock to provide additional liquidity, there can be no
assurance of the price that Daugherty Resources will receive for future sales.
Daugherty Resources has incurred losses over the past several years
both from operations and from write-down of its gold properties. While Daugherty
Resources believes its cash flow resulting from operating revenues will
contribute significantly to its short-term financial commitments, it has and
continues to take steps to reduce losses and increase cash flow from operations.
The following actions have been taken or are being pursued:
- INCREASING JOINT VENTURE DRILLING. Daugherty Petroleum drilled
five (5) wells during the third quarter that increased its
drilling revenue and will increase future revenue from
production. Up to nine (9) wells remain to be drilled on a
partnership agreement and drilling and operating agreement
dated August 3, 2000. These wells, to the extent funded by the
partnership, must be drilled and completed by March 31, 2001.
Daugherty Petroleum is sponsoring a limited partnership to
drill up to 10 well and is co-sponsor of an additional
partnership to drill up to 15 wells. Furthermore, Daugherty
Petroleum is in negotiations with several other parties
regarding partnerships or joint ventures to drill additional
wells. All of these wells if funded would be required to be
drilled and completed by March 31, 2001. While there can be no
assurance as to the number of wells that will be contracted
for, management is confident that at least 20 wells will be
drilled and completed and that the contract price for those
wells will result in increased drilling revenue during the
last quarter of 2000 and the first quarter of 2001 and in
increased revenue from natural gas and oil operations and
production revenue commencing in the first quarter of 2001.
- ACQUISITION OF REVENUE PRODUCING PROPERTIES. Daugherty
Resources continues to review producing oil and gas properties
for acquisition. In addition to reviewing new properties,
Daugherty Resources intends to finalize the Ken-Tex
acquisition in late 2000 or early 2001.
- INSTALLATION OF ADDITIONAL NATURAL GAS GATHERING SYSTEM.
Daugherty Petroleum's plan to expand its natural gas gathering
system by more than 50,000 feet during 2000 has been exceeded
with the addition of more than 84,000 feet in four-inch line.
On May 5, 2000, 14,000 feet of four-inch pipeline was
completed and gas flow commenced from wells located in
Daugherty Petroleum's Fonde Oil and Gas Field. On November 6,
2000, Daugherty Petroleum completed the construction of a
70,000 foot addition to its gathering line system consisting
of four-inch lines that run from its Kay Jay Field to its
Bryant Store compression station. In addition, Daugherty
Petroleum, on November 10, 2000
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upgraded compression at its Bryant Store station. These
changes will eliminate existing production constraints in the
Kay Jay Field. Management anticipates that the changes will
also permit Daugherty Petroleum to transport gas from wells it
expects to drill in the future. The increased sales resulting
from additional gas being moved to market will result in
increased cash flow.
- INCREASE IN NATURAL GAS PRICES. Daugherty Petroleum entered
into a natural gas sales contract effective November 1, 2000
for 1,000 decatherms (1000 British Thermal Units) per day with
Nami Resources Company, LLC of London, Kentucky for gas
deliveries through October 31, 2001. This contract will net
$5.13 per mcf (1000 cubic feet) and represents a more than
100% increase in the price contained in the previous agreement
with Nami Resources that expired October 31, 2000. The balance
of gas produced by Daugherty Petroleum is being sold pursuant
to agreements containing pricing provisions tied to monthly
indexes. Management anticipates that sales of natural gas
under these agreements will result in increased cash flow;
however, there can be no assurances that current natural gas
pricing will continue at the present levels.
- GOLD AND SILVER PROPERTIES. It is Daugherty Resources'
objective to realize the value of its gold and silver
properties by 1) obtaining a joint venture partner to provide
funds for additional exploration on its prospects or 2)
divesting its gold and silver properties. An engineering
review and an appraisal by qualified independent third parties
of its gold and silver properties were completed early in the
second quarter of 2000.
Should Daugherty Resources be unable to achieve its projected cash flow
from operations, additional financing or sale of oil and gas properties could be
necessary. Daugherty Resources believes that it could sell oil and gas
properties or obtain financing, although, there can be no assurance that such
financing would be available on a timely basis or acceptable terms.
RESULTS OF OPERATIONS
For the nine-month period ending September 30, 2000, Daugherty
Resources' gross revenues increased $4,485,823 to $5,458,972 from $973,149 for
the same period in 1999. The majority of the increase was attributable to
increased drilling operations, which increased by $4,252,822 from $618,495 for
the first nine months of 1999 to $4,871,317 for the first nine months of 2000.
Daugherty Resources experienced income from continuous operations of $135,761 in
this period compared to a net loss of $747,445 in the same period of 1999.
Daugherty Resources' gross revenues for the nine-month period ending
September 30, 2000 were derived from drilling revenues of $4,871,317 (89%), from
natural gas and oil production and operating revenues of $548,620 (10%) and
natural gas distribution of $39,035 (1%), while its gross revenues for the
comparable period in 1999 were derived from drilling revenues of $618,495 (64%)
and natural gas and oil production and operating revenues of $354,654 (36%).
There were no revenues from natural gas distribution during the comparable
period in 1999. Revenues from drilling operations for the nine-month period
ending September 30, 2000 were up 688% over the comparable period in 1999, while
revenues from natural gas and oil production and operating revenues increased
55%.
During the first nine months of 2000, total direct costs increased by
$2,851,101 to $3,592,620 compared to $741,519 in the first nine months of 1999.
These direct costs included drilling and related costs for 23 natural gas wells
and completion of 15 wells.
For the nine months ending September 30, 2000, Daugherty Petroleum
drilled a total of twenty-three wells (5.942 net wells) (twenty natural gas
wells, three wells capable of producing both oil and natural gas) completed
fifteen natural gas wells and extended its gathering system by 26,560 feet. By
comparison, for the same period of 1999, Daugherty Petroleum drilled six natural
gas wells (2.61 net wells), and completed five. Drilling operations for the
first nine months of 2000 were primarily related to joint ventures on farmout
acreage acquired from Equitable Production Company. The 23 wells that Daugherty
Petroleum has drilled represent approximately 77% of its announced goal of 30
wells for fiscal year 2000. While Daugherty Petroleum's working interest in the
wells that it drills varies from well to well, for the five (5) wells drilled in
the quarter ending September 30, 2000, its average
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working interest was 33.33%. Daugherty Petroleum expects that it will drill an
additional seven (7) wells during the last quarter of 2000 and maintain working
interests ranging from 25% to 33.33% in each well it drills.
Of the 23 wells drilled during as of September 30, 2000, 14 were
successful oil and gas wells located on Daugherty Petroleum's newly discovered
Fonde Oil and Gas Field. The wells are on acreage located in Bell County,
Kentucky, to which Daugherty Resources acquired drilling rights in April of 1998
from Equitable Production Company.
During the second quarter of 2000, Daugherty Petroleum completed the
acquisition of an oil and gas lease from J. M. Huber Corporation covering 12,300
acres, which is adjacent to the Fonde Oil and Gas Field.
On October 13, 1999 Daugherty Petroleum agreed to purchase from Ken-Tex
Oil & Gas, Inc. 50% interest in 24 natural gas wells located in Knox County,
Kentucky, together with gathering systems, easements and operating rights for
$425,000 payable in 191,519 shares of restricted common stock valued at $2.2191
per share. Because of the ownership structure of the well interests the
transaction was originally designed to be a three part closing. As of September
30, 2000 four closing have been conducted and a total of 165,588 shares of stock
had been issued in connection with the acquisition. Additional interests may be
acquired in subsequent closings for which Daugherty Resources is prepared to
issue up to an additional 25,931 shares of stock.
As of September 30, 2000, Sentra Corporation, Daugherty Resources'
natural gas utility subsidiary, completed its first full nine months of
operations with sales of $39,035. Sentra has installed approximately 83,800 feet
of distribution line and 19,345 feet of service line. As of November 10, 2000,
Sentra had 128 customers, 15 of which are commercial accounts. In addition,
Sentra has installed 20 risers that are awaiting the setting of meters and the
commencement of service, and has an additional 138 applications from customers
requesting service. Sentra expects high demand for natural gas service in its
service areas because of ease of usage, economy and reliability. As of November
10, 2000, Sentra had completed construction of the distribution lines to two
additional chicken broiler houses bringing the total of chicken broiler houses
connected to its system to 18. Each broiler house consumes the rough equivalent
of seven (7) average residences
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PART II
OTHER INFORMATION
ITEM 4. LEGAL PROCEEDINGS.
None.
ITEM 5. OTHER INFORMATION.
On September 19, 2000, Daugherty Resources filed an S-3 Registration
Statement to register a total of 747,812 shares of common stock issued pursuant
to several private placements and in regard to the December, 1999 divesture of
Red River Hardwoods, a wholly owned subsidiary. On October 27, 2000, the
Securities and Exchange Commission issued comments on the S-3 and various
documents incorporated by reference. Daugherty Resources is currently in the
process of preparing its response and amendment and believes all comments will
be satisfactorily addressed during December 2000.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) List of Documents Filed with this Report. PAGE
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(1) Balance Sheet for the Period Ended June 30, 2000 ...... i
Income Statement for the Period Ended June 30, 2000...... ii-iv
Segmented Information................................... v
Computation of Per Share Earnings........................ vi
All schedules have been omitted since the information required to be
submitted has been included in the financial statements or notes or has been
omitted as not applicable or not required.
(2) Exhibits--
The exhibits indicated by an asterisk (*) are incorporated by
reference.
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------ ----------------------
3(a)* Memorandum and Articles for Catalina Energy & Resources
Ltd., a British Columbia corporation, dated January 31,
1979, filed as an exhibit to Form 10 Registration
Statement filed May 25, 1984. File No. 0-12185.
3(b)* Certificate for Catalina Energy & Resources Ltd., a British
Columbia corporation, dated November 27, 1981, changing the
name of Catalina Energy & Resources Ltd. to Alaska Apollo
Gold Mines Ltd., and further changing the authorized capital
of Daugherty Resources from 5,000,000 shares of common
stock, without par value per share, to 20,000,000 shares of
common stock, without par value per share, filed as an
exhibit to Form 10 Registration Statement filed May 25,
1984. File No. 0-12185.
3(c)* Certificate of Change of Name for Alaska Apollo Gold Mines
Ltd., a British Columbia corporation, dated October 14,
1992, changing the name of Alaska Apollo Gold Mines Ltd. to
Alaska Apollo Resources Inc., and further changing the
authorized capital of Daugherty Resources from 20,000,000
shares of common stock, without par value per share, to
6,000,000 shares of common stock, without par value per
share.
3(d)* Altered Memorandum of Alaska Apollo Resources Inc., a
British Columbia corporation, dated September 9, 1994,
changing the authorized capital of Daugherty Resources from
6,000,000
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shares of common stock, without par value per share, to
20,000,000 shares of common stock, without par value per
share.
3(e)* Certificate of Change of Name for Alaska Apollo Resources
Inc., a British Columbia corporation, dated June 24, 1998,
changing the name of Alaska Apollo Resources Inc. to
Daugherty Resources, Inc. and further changing the
authorized capital of the Registrant from 20,000,000
shares of common stock, without par value per share, to
50,000,000 shares of common stock, without par value, and
authorizing the creation of 6,000,000 shares of preferred
stock, without par value per share. (File No.0-12185).
3(f)* Altered Memorandum of Daugherty Resources, Inc., a British
Columbia corporation, dated June 24, 1998, changing the
authorized common stock of the Registrant from 50,000,000
shares of common stock, without par value per share, to
10,000,000 shares of common stock, without par value.
(File No.0-12185).
3(g)* Altered Memorandum of Daugherty Resources, Inc., a British
Columbia corporation, dated June 25, 1998, changing the
authorized preferred stock of the Registrant from
6,000,000 shares of preferred stock, without par value per
share, to 1,200,000 shares of preferred stock, without par
value. Filed as an exhibit to Form 8-K, by Daugherty
Resources for reporting an event on June 29, 1998. (File
No.0-12185).
3 (h)* Special Resolution of Daugherty Resources, Inc., a British
Columbia corporation, dated June 30, 1999, changing the
authorized capital of the Registration from 10,000,000
shares of common stock, without par value per share, to
100,000,000 shares of common stock, without par value per
share, and from 1,200,000 shares of preferred stock,
without par value per share, to 5,000,000 shares of
preferred stock, without par value per share. Altered
Memorandum of Daugherty Resources, Inc., dated June 30,
1999, changing the authorized capital of Daugherty
Resources to 105,000,000 shares divided into 5,000,000
shares of preferred stock, without par value and
100,000,000 common shares without par value. Special
Resolution of Daugherty Resources, Inc., a British
Columbia corporation, dated June 30, 1999, altering
Article 23.1(b) of Daugherty Resources Articles by
substituting a new Article 23.1(b) that sets forth the
conditions and terms upon which the preferred shares can
be converted to common stock. Filed as an exhibit to Form
8-K, for Daugherty Resources for reporting an event on
October 25, 1999. (File No.0-12185)
4* See Exhibit No. 3(a), (b). (c), (d), (e), (f), (g) and (h)
10(a)* Alaska Apollo Resources Inc. 1997 Stock Option Plan, filed
as Exhibit 10(a) to Form 10-K for Daugherty Resources for
the fiscal year ended December 31, 1996. (File No.
0-12185).
10(b)* Incentive Stock Option Agreement by and between Alaska
Apollo Resources Inc. and William S. Daugherty dated March
7, 1997, filed as Exhibit 10(b) to Form 10-K for Daugherty
Resources for the fiscal year ended December 31, 1996.
(File No. 0-12185).
10(c)* Agreement of Purchase and Sale by and between
Environmental Energy Partners I, Ltd., Environmental
Energy Partners II, Ltd, Environmental Operating Partners,
Ltd., Environmental Holding, LLC, Environmental Processing
Partners, Ltd., Environmental Energy, Inc., and
Environmental Operating, Inc., as Sellers and Daugherty
Petroleum, Inc., as Buyer, and Daugherty Resources, Inc.
as Accommodating Party, dated as of January 26, 1999,
filed as an Exhibit to Form 8-K by Daugherty Resources for
reporting an event on May 25, 1999 (File No. 0-12185).
10(d)* Agreement for the Purchase and Sale by and between H&S
Lumber, Inc., Buyer, and Daugherty Petroleum, Inc.,
Seller, for the sale of Red River Hardwoods, Inc., an 80%
subsidiary of
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Daugherty Petroleum, Inc., which was effective June 30,
1999, and closed December 1, 1999, filed as Exhibit 10.1
to Form 8-K by Daugherty Resources for reporting an event
on December 9, 1999 (File No. 0-12185).
11 Computation of Per Share Earnings.
24 Powers of Attorney.
27 Financial Data Schedule.
(b)* Reports on Form 8-K.
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None
(c) Financial Statement Schedules.
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No schedules are required, as all information required has
been presented in the unaudited financial statements.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf of the
undersigned hereunto duly authorized.
DAUGHERTY RESOURCES, INC.
By: /s/ William S. Daugherty
------------------------
William S. Daugherty, President
Dated: November 13, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ William S. Daugherty Chairman of the Board, President,
- ------------------------ Director of the Registrant November 13, 2000
William S. Daugherty
/s/ James K. Klyman * Director of the Registrant November 13, 2000
- -------------------
James K. Klyman
/s/ Charles L. Cotterell * Director of the Registrant November 13, 2000
- ------------------------
Charles L. Cotterell
*By /s/ William S. Daugherty
- ------------------------------
William S. Daugherty
Attorney-in-Fact
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DAUGHERTY RESOURCES, INC.
SUMMARY CONSOLIDATED BALANCE SHEET
(United States Dollars)
Unaudited
09/30/00 09/30/99
------------ ------------
ASSETS
--------
CURRENT ASSETS
- --------------
Cash $ 460,612 646,535
Accounts receivable 188,985 140,798
Inventory -- --
Other current assets 5,726 530,000
------------ ------------
TOTAL CURRENT ASSETS 655,323 1,317,333
OIL & GAS PROPERTIES (NET) 7,263,178 4,582,621
- --------------------------
MINING PROPERTY (NET) 4,450,000 11,232,229
- --------------------
PROPERTY & EQUIPMENT (NET) 253,662 93,127
- --------------------------
OTHER ASSETS
- ------------
Related party loans 367,495 95,706
Bonds & deposits 41,000 41,000
Other assets 98,586 317,450
Goodwill, net of amortization of $1,163,215 536,871 715,828
------------ ------------
1,043,952 1,169,984
------------ ------------
TOTAL ASSETS $ 13,666,115 18,395,294
============ ============
LIABILITIES & STOCKHOLDER'S EQUITY
----------------------------------
CURRENT LIABILITIES
- -------------------
Short-term loans & notes $ 1,136,594 1,029,165
Current portion of LT debt 225,958 138,656
Accounts payable 544,425 424,702
Accrued liabilities 1,151,057 869,153
Drilling Prepayments 615,091 682,260
------------ ------------
TOTAL CURRENT LIABILITIES 3,673,125 3,143,936
LONG-TERM LIABILITIES 1,746,199 2,450,938
- ---------------------
PAYABLE TO RELATED PARTIES 43,745 17,571
- -------------------------- ------------ ------------
5,463,069 5,612,445
MINORITY INTEREST
- ----------------- -- --
STOCKHOLDER'S EQUITY
- --------------------
Common stock 22,726,199 21,352,915
Preferred stock 646,500 --
Common stock subscribed 420,495 --
Additional paid in capital -- --
Retained earnings (deficit) (15,725,909) (8,504,989)
Current income (loss) 135,761 (65,077)
------------ ------------
8,203,046 12,782,849
------------ ------------
TOTAL LIABILITIES &
STOCKHOLDER'S EQUITY $ 13,666,115 $ 18,395,294
============ ============
Unaudited - Internally prepared by Company management
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DAUGHERTY RESOURCES, INC.
SUMMARY CONSOLIDATED STATEMENTS OF INCOME
(United States Dollars)
Unaudited
For the three month period ended
09/30/2000 09/30/1999
------------------------------------ ----------------------------------
GROSS REVENUE $ 1,521,717 100.00% $ 433,538 100.00%
- -------------
DIRECT EXPENSES 972,786 63.93% 338,113 77.99%
- --------------- ------------ ------------- ------------ -------------
GROSS PROFIT 548,931 36.07% 95,425 22.01%
GENERAL & ADMINISTRATIVE EXPENSES
- ---------------------------------
Salaries & Wages 210,872 13.86% 58,253 13.44%
Accounting & audit 24,470 1.61% 7,000 1.61%
Advertising & promotion 1,467 0.10% -- 0.00%
Amortization 44,739 2.94% 44,739 10.32%
Bad debts -- 0.00% -- 0.00%
Depreciation 14,572 0.96% 10,200 2.35%
General consulting 344,563 22.64% 3,850 0.89%
Insurance 12,001 0.79% 10,118 2.33%
Legal 52,329 3.44% 16,765 3.87%
Office & general 52,557 3.45% 51,433 11.86%
Payroll & property tax 8,308 0.55% 4,751 1.10%
Rent 13,720 0.90% 13,719 3.16%
Repairs & maintenance 4,507 0.30% 3,704 0.85%
Shareholder & investor information 48,765 3.20% 6,002 1.38%
Travel & entertainment 18,786 1.23% 22,726 5.24%
------------ ------------- ------------ -------------
TOTAL G & A EXPENSES 851,656 55.97% 253,260 58.42%
OTHER INCOME (EXPENSE)
- ----------------------
Interest & dividend income 11,157 0.73% 8,309 1.92%
Miscellaneous (36,838) -2.42% -- 0.00%
Gain (loss) on sale of equipment -- 0.00% -- 0.00%
Interest expense (64,324) -4.23% (81,060) -18.70%
------------ ------------- ------------ -------------
INCOME BEFORE INCOME TAX & OTHER (392,730) -25.81% (230,586) -53.19%
- --------------------------------
Income tax expense (benefit) -- 0.00% -- 0.00%
DISCONTINUED OPERATIONS
Income (loss) from discontinued operations -- 0.00% -- 0.00%
Gain (loss) on disposal -- 0.00% (12,000) -2.77%
------------ ------------- ------------ -------------
NET INCOME (LOSS) (392,730) -25.81% (242,586) -55.95%
============ ============= ============ =============
DEFICIT, beginning of period $(15,197,418) $ (8,327,480)
DEFICIT, end of period $(15,590,148) $ (8,570,066)
Average shares outstanding 3,001,053 2,293,310
EARNINGS PER SHARE $ (0.13) $ (0.11)
============ =============
Unaudited-Internally prepared by Company management
ii
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DAUGHERTY RESOURCES, INC.
SUMMARY CONSOLIDATED STATEMENTS OF INCOME
(United States Dollars)
Unaudited
For the nine month period ended
09/30/2000 09/30/1999
------------------------------- -------------------------------
GROSS REVENUE $ 5,458,972 100.00% $ 973,149 100.00%
- -------------
DIRECT EXPENSES 3,592,620 65.81% 741,519 76.20%
- --------------- ------------ ------------- ------------ -------------
GROSS PROFIT 1,866,352 34.19% 231,630 23.80%
GENERAL & ADMINISTRATIVE EXPENSES
- ---------------------------------
Salaries & Wages 440,527 8.07% 242,341 24.90%
Accounting & audit 69,679 1.28% 51,969 5.34%
Advertising & promotion 1,467 0.03% -- 0.00%
Amortization 161,738 2.96% 134,217 13.79%
Bad debts -- 0.00% -- 0.00%
Depreciation 44,116 0.81% 30,600 3.14%
General consulting 552,123 10.11% 34,380 3.53%
Insurance 25,500 0.47% 24,706 2.54%
Legal 103,853 1.90% 96,263 9.89%
Office & general 79,150 1.45% 110,542 11.36%
Payroll & property tax 17,193 0.31% 14,590 1.50%
Rent 36,160 0.66% 42,163 4.33%
Repairs & maintenance 10,607 0.19% 6,326 0.65%
Shareholder & investor information 67,401 1.23% 14,342 1.47%
Travel & entertainment 65,507 1.20% 44,218 4.54%
------------ ------------- ----------- -------------
TOTAL G & A EXPENSES 1,675,021 30.68% 846,657 87.00%
OTHER INCOME (EXPENSE)
- ----------------------
Interest & dividend income 42,020 0.77% 35,586 3.66%
Miscellaneous 90,057 1.65% -- 0.00%
Gain (loss) on sale of equipment 8,354 0.15% -- 0.00%
Interest expense (196,001) -3.59% (168,004) -17.26%
------------ ------------- ------------ -------------
INCOME BEFORE INCOME TAX & OTHER 135,761 2.49% (747,445) -76.81%
- --------------------------------
Income tax expense (benefit) -- 0.00% -- 0.00%
DISCONTINUED OPERATIONS
- -----------------------
Income (loss) from discontinued operations -- 0.00% (238,904) -24.55%
Gain (loss) on disposal -- 0.00% 921,272 94.67%
------------ ------------- ------------ -------------
NET INCOME (LOSS) $ 135,761 2.49% $ (65,077) -6.69%
============ ============= ============ =============
DEFICIT, beginning of period $(15,725,909) $ (8,504,989)
DEFICIT, end of period $(15,590,148) $ (8,570,066)
Shares outstanding 2,695,723 2,222,172
EARNINGS PER SHARE $ 0.05 $ (0.03)
============ =============
Unaudited-Internally prepared by Company management
iii
13
DAUGHERTY RESOURCES, INC.
SUMMARY CONSOLIDATED STATEMENTS OF CASH FLOWS
(United States Dollars)
Unaudited
For the nine month period ended
09/30/00 09/30/99
------------------ ------------------
CASH FLOWS FROM OPERATING ACTIVITIES
- ------------------------------------
Net income (loss) $135,761 $(65,077)
Adjustments to reconcile net income (loss) to net cash provided by
operating activities
Depreciation, depletion & amortization 445,855 308,817
Gain on sale of subsidiary -- (963,731)
Changes in current assets & liabilities
(Increase) decrease in:
Accounts receivable 28,883 (1,311)
Inventory -- --
Other current assets (5,726) (487,795)
Increase (decrease) in:
Short-term loans & notes (19,843) 887,336
Accounts payable (145,732) (145,120)
Accrued liabilities 499,902 108,878
Drilling prepayments (1,921,373) (243,250)
------------------ ------------------
Net cash provided by (used in) operating activities (982,273) (601,253)
CASH FLOW FROM INVESTING ACTIVITIES
- -----------------------------------
Change in oil & gas properties (1,617,353) (110,835)
Change in mining properties -- --
Change in property & equipment (187,717) (1,322)
Change in other assets 17,842 (62,044)
------------------ ------------------
Net cash provided by (used in) investing activities (1,787,228) (174,201)
CASH FLOWS FROM FINANCING ACTIVITIES
- ------------------------------------
Issuance of common stock 1,062,466 143,094
Change in long-term liabilities 32,072 340,219
Change in payable to related party (141,532) 442,920
------------------ ------------------
Net cash provided by (used in) financing activities 953,006 926,233
------------------ ------------------
NET INCREASE (DECREASE) IN CASH (1,816,495) 150,779
- -------------------------------
CASH AT BEGINNING OF PERIOD 2,277,107 495,756
- --------------------------- ------------------ ------------------
CASH AT END OF PERIOD $460,612 $646,535
- --------------------- =================== ==================
Unaudited-Internally prepared by Company management
iv
14
DAUGHERTY RESOURCES, INC.
SEGMENTED INFORMATION
For the three month period ended June 30, 2000
(United States Dollars)
Unaudited
WOOD
OIL & GAS MINING PRODUCTS* CORPORATE TOTAL
-------------- ------------ --------------- --------------- -------------
GROSS EXTERNAL REVENUE $ 5,458,972 -- -- -- $ 5,458,972
INTERSEGMENT REVENUES -- -- -- -- --
INTEREST REVENUE 26,806 -- -- 15,214 42,020
INTEREST EXPENSES 132,466 -- -- 63,535 196,001
DEPRECIATION 44,116 -- -- -- 44,116
DEPLETION 240,000 -- -- -- 240,000
AMORTIZATION OF GOODWILL -- -- -- 134,218 134,218
SEGMENT PROFIT (LOSS) $ 1,052,204 -- -- (916,443) $ 135,761
=========== ========== =========== =========== ===========
SEGMENT ASSETS $ 7,263,178 $4,450,000 -- 1,952,9374 $13,666,115
=========== ========== =========== =========== ===========
EXPENDITURES FOR SEGMENT ASSETS
$ 1,617,353 -- -- 187,717 $ 1,805,070
=========== ========== =========== =========== ===========
* Discontinued operation
Unaudited-Internally prepared by Company management
v