FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 2004
Commission File Number: 0-9500
MOUNTAINS WEST EXPLORATION, INC.
(Exact name of small business issuer as specified in its charter)
New Mexico 85-0280415
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P.O. Box 754, Trinidad, Colorado 81802
- -------------------------------- --------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: 719-846-2623
Indicate by check mark whether the issuer (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 issuer was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes [ ] No [X]
The number of shares outstanding of the issuer's common stock, par value $.001
per share, at September 30, 2004, was 37,019,271 shares.
MOUNTAINS WEST EXPLORATION, INC.
FINANCIAL STATEMENTS FOR THE
NINE-MONTHS ENDED SEPTEMBER 30, 2004
(UNAUDITED)
MICHAEL JOHNSON & CO., LLC
Certified Public Accountants
9175 East Kenyon Ave., Suite 100
Denver, Colorado 80237
Michael B. Johnson C.P.A. Telephone: (303) 796-0099
Member: A.I.C.P.A. Fax: (303) 796-0137
Colorado Society of C.P.A.s
ACCOUNTANTS REVIEW REPORT
Board of Directors
Mountains West Exploration, Inc.
Trinidad, CO
We have reviewed the accompanying balance sheet for Mountains West Exploration,
Inc. for September 30, 2004 and the related statements of operations for the
three and nine-months ended September 30, 2004 and 2003, and cash flows for the
nine-months ended September 30, 2004 and 2003, included in the accompanying
Securities and Exchange Commission 10-QSB for the period ended September 30,
2004. 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. The review of interim financial
information consists principally of applying analytical 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 auditing standards generally accepted in the United States and PCAOB, 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 accounting principles generally accepted in the United States.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2, conditions
exist which raise substantial doubt about the Company's ability to continue as a
going concern unless it is able to generate sufficient cash flows to meet its
obligations and sustain its operations. Management's plans in regard to these
matters are described in Note 2. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
We have previously audited, in accordance with auditing standards generally
accepted in the United States, the balance sheet as of December 31, 2003, and
the related statements of operations, stockholders' equity (deficit) and cash
flows for the year then ended (not presented herein). In our report dated
February 23, 2004, we expressed an unqualified opinion on those financial
statements. In our opinion, the information set forth in the accompanying
balance sheet as of September 30, 2004, is fairly stated in all material
respects in relation to the balance sheet from which it has been derived.
Michael Johnson & Co, LLC
November 4, 2004
/s/Michael Johnson & Co., LLC
MOUNTAINS WEST EXPLORATION, INC.
Balance Sheets
(Unaudited)
September 30, December 31,
2004 2003
----------------- --------------
ASSETS
Current Assets:
Cash $ 34,765 $ 11,711
----------------- --------------
Total Current Assets 34,765 11,711
----------------- --------------
Fixed Assets:
Office Equipment 15,819 15,819
Leases & Well Equipment 1,236 1,236
----------------- --------------
17,055 17,055
Less: Accumulated Depreciation (14,577) (14,253)
----------------- --------------
Total Fixed Assets 2,478 2,802
----------------- --------------
Other Assets:
Undeveloped Property 1,540 1,540
Well Leases 9,624 -
Mineral Interest 12,740 12,740
----------------- --------------
Total Other Assets 23,904 14,280
----------------- --------------
TOTAL ASSETS $ 61,147 $ 28,793
================= ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable 2,500 -
Notes Payable - Wells Fargo 27,669 -
Current Portion - Long-Term Debt 7,029 18,744
----------------- --------------
Total Current Liabilities 37,198 18,744
----------------- --------------
Long-Term Debt:
Long-Term Debt 25,142 49,516
----------------- --------------
Total Long-Term Debt 25,142 49,516
----------------- --------------
Stockholders' Equity:
Common stock, no par value, 50,000,000 shares 1,554,786 1,554,786
authorized, 37,019,271 shares issued and outstanding
Retained Earnings (Deficit) (1,555,979) (1,594,253)
----------------- --------------
Total Stockholders' Equity (Deficit0 (1,193) (39,467)
----------------- --------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 61,147 $ 28,793
================= ==============
See Accountants Review Report
MOUNTAINS WEST EXPLORATION, INC.
Statements of operations
(Unaudited)
Three-Months Ended Nine-Months Ended
September 30, September 30,
2004 2003 2004 2003
---- ---- ---- ----
Revenue:
Oil & Gas Income $ 57,320 $ 38,926 $ 120,019 $ 63,675
Cost of Goods Sold - - (1,000) (271)
---------- ---------- ---------- ---------
Total Income 57,320 38,926 119,019 63,404
---------- ---------- ---------- ---------
Costs and Expenses:
Operating Expense 29,381 21,742 52,456 77,099
Administrative Expense 7,550 5,627 24,643 11,195
---------- ---------- ---------- ----------
Total Operating Expenses 36,931 27,369 77,099 88,294
---------- ---------- ---------- ----------
Other Income and Expenses:
Interest Expense (1,156) - (3,646) -
Interest Income - 3 - 15
---------- ---------- ---------- ----------
Total Other Expenses (1,156) 3 (3,646) 15
---------- ---------- ---------- ----------
Net Profit (Loss) $ 19,233 $ 11,560 $ 38,274 $ (24,875)
========== ========== ========== ==========
Per Share Information:
Weighted average number
of common shares outstanding 37,019,271 37,019,271 37,019,271 37,019,271
---------- --------- --------- ----------
Net Loss per common share * * * *
========== ========== ========== ==========
* Less than $.01
See Accountants Review Report
MOUNTAINS WEST EXPLORATION, INC.
Stockholders' Equity (Deficit)
September 30, 2004
(Unaudited)
Deficit
COMMON STOCKS Accum. During Total
Development Stockholders'
# of Shares Amount Stage Equity
----------- ------ ----- ------
Balance - December 31, 2000 38,010,000 $1,555,777 $(1,546,201) $ 9,576
Cancellation of Stock (990,279) (991) - (991)
Net Loss for Year - - (27,475) (27,475)
---------- ---------- ----------- --------
Balance - December 31, 2001 37,019,721 1,554,786 (1,573,676) (18,890)
---------- ---------- ----------- --------
Net Loss for Year - - (4,094) (4,094)
---------- ---------- ----------- --------
Balance - December 31, 2002 37,019,721 1,554,786 (1,577,770) (22,984)
---------- ---------- ----------- --------
Net Loss for Year - - (16,483) (16,483)
---------- ---------- ----------- --------
Balance - December 31, 2003 37,019,721 1,554,786 (1,594,253) (39,467)
---------- ---------- ----------- --------
Net Profit for Period - - 38,274 38,274
---------- ---------- ----------- --------
Balance - September 30, 2004 37,019,721 $1,554,786 $(1,555,979) $ (1,193)
========== ========== =========== ========
See Accountants Review Report
MOUNTAINS WEST EXPLORATION, INC.
Statements of Cash Flow
(Unaudited)
Indirect Method
Nine-Months Ended
September 30,
2004 2003
---- ----
Cash Flows from Operating Activities:
Net Profit (Loss) $ 38,274 $ (24,875)
Depreciation 324 -
Adjustments to reconcile net profit/loss to net cash
used by operating activities:
Increase in accounts payable 2,500 -
(Increase) in other assets (9,624) -
-------- ---------
Net Cash Used in Operating Activities 31,474 (24,875)
-------- ---------
Cash Flows from Investing Activities:
Purchase of Equipment - (1,380)
-------- ---------
Net Cash Used for Investing Activities - (1,380)
-------- ---------
Cash Flows from Financing Activities:
Payment on Notes Payable (36,089) (3,196)
Proceeds from Notes Payable 27,669 37,866
-------- ---------
Net Cash Provided by Financing Activities (8,420) 34,670
-------- ---------
Net Increase in Cash & Cash Equivalents 23,054 8,415
Beginning Cash & Cash Equivalents 11,711 1,613
-------- ---------
Ending Cash & Cash Equivalents $ 34,765 $ 10,028
======== =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest $ 3,646 $ 3,714
======== =========
Cash paid for Income Taxes $ - $ -
======== =========
See Accountants Review Report
MOUNTAINS WEST EXPLORATION, INC.
Notes to Financial Statements
September 30, 2004
Note 1 - Presentation of Interim Information:
In the opinion of the management of Mountains West Exploration, Inc., the
accompanying unaudited financial statements include all normal adjustments
considered necessary to present fairly the financial position as of September
30, 2004 and the results of operations for the three and nine-months ended
September 30, 2004 and 2003, and cash flows for the nine-months ended September
30, 2004 and 2003. Interim results are not necessarily indicative of results for
a full year.
The financial statements and notes are presented as permitted by Form 10-QSB,
and do not contain certain information included in the Company's audited
financial statements and notes for the fiscal year ended December 31, 2003.
Note 2 - Going Concern:
The Company's financial statements have been presented on the basis that it is a
going concern, which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business.
The Company's ability to continue as a going concern is dependent upon its
ability to develop additional sources of capital or locate a merger candidate
and ultimately, achieve profitable operations. The accompanying financial
statements do not include any adjustments that might result from the outcome of
these uncertainties. Management is seeking new capital to revitalize the
Company.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Cautionary and Forward Looking Statements
In addition to statements of historical fact, this Form 10-QSB contains
forward-looking statements. The presentation of future aspects of Mountains West
Exploration, Inc., ("Mountains West Exploration, Inc." the "Company" or
"issuer") found in these statements is subject to a number of risks and
uncertainties that could cause actual results to differ materially from those
reflected in such statements. Readers are cautioned not to place undue reliance
on these forward-looking statements, which reflect management's analysis only as
of the date hereof. Without limiting the generality of the foregoing, words such
as "may," "will," "expect," "believe," "anticipate," "intend," or "could" or the
negative variations thereof or comparable terminology are intended to identify
forward-looking statements.
These forward-looking statements are subject to numerous assumptions, risks
and uncertainties that may cause Mountains West Exploration, Inc. actual results
to be materially different from any future results expressed or implied by
Mountains West Exploration, Inc. in those statements. Important facts that could
prevent Mountains West Exploration, Inc. from achieving any stated goals
include, but are not limited to, the following:
Some of these risks might include, but are not limited to, the
following:
(a) volatility or decline of the Company's stock price;
(b) potential fluctuation in quarterly results;
(c) failure of the Company to earn revenues or profits;
(d) inadequate capital to continue or expand its busi-
ness, inability to raise additional capital or financ
-ing to implement its business plans;
(e) failure to make sales;
(f) rapid and significant changes in markets;
(g) litigation with or legal claims and allegations by
outside parties;
(h) insufficient revenues to cover operating costs.
There is no assurance that the Company will be profitable, the Company
may not be able to successfully develop, manage or market its products and
services, the Company may not be able to attract or retain qualified executives
and technology personnel, the Company's products and services may become
obsolete, government regulation may hinder the Company's business, additional
dilution in outstanding stock ownership may be incurred due to the issuance of
more shares, warrants and stock options, or the exercise of warrants and stock
options, and other risks inherent in the Company's businesses.
The Company undertakes no obligation to publicly revise these forward-looking
statements to reflect events or circumstances that arise after the date hereof.
Readers should carefully review the factors described in other documents the
Company files from time to time with the Securities and Exchange Commission,
including the Quarterly Reports on Form 10-QSB and Annual Report on Form 10-KSB
filed by the Company in 2004 and any Current Reports on Form 8-K filed by the
Company.
The Company owns over small ownership interests in coal bed methane wells in Las
Animas county, Colorado and has leases on 4,000 acres for coal bed methane in
northern New Mexico, none of which are explored or developed. The Company is
currently considering developing these minerals itself as funds become
available.
Results of Operations for the Quarter Ended September 30, 2004 Compared to the
Same Period in 2003.
During the quarter ended September 30, 2004, oil and gas sales were $37,320
compared to $38,929 for the same period in the prior year. The Company had other
operating income during the quarter in the form of approximately $20,000 in a
lawsuit settlement over royalty underpayments by an operator.
The company had operating expenses of $29,381 and $21,742 in the quarter in 2004
and 2003 respectively. The company incurred administrative expenses of $7,550
and $5,627 in 2004 and 2003 respectively in the quarter. Total operating
expenses were $36,931 in the quarter in 2004 compared to $27,369 in the quarter
in 2003. The net profit was $19,233 in the quarter in 2004 compared to a
($11,560) loss in the quarter in 2003. The profit per share was nominal in the
quarter in 2004 and there was a nominal loss in 2003.
The large expense increase is as a direct result of increased expenses of
production. Even though the company had a profitable quarter, investors should
view the results in light of longer term averages, which historically show
losses.
Results of Operations for the Nine Months Ended September 30, 2004 Compared to
Same Period in 2003.
The company had revenues of $100,019 in the period in 2004 compared to $63,675
in the period in 2003. The dramatic increase was due to increased production and
higher gas prices from production sales. The Company also had a $20,000 payment
from a lawsuit settlement over royalty underpayments by an operator. The cost of
goods sold was $1,000 and $271 in the nine month period in 2004 and 2003
respectively.
The company experienced $52,456 in operating expense in the nine month period in
2004 compared to $77,099 in such expense in the same period in 2003. There was
administrative expense incurred in the period of $24,643 in 2004 and $11,195 in
2003. The total operating expenses in the period were $77,099 in 2004 and
$88,294 in 2003. The net profit for the period was $38,274 in 2004 compared to a
loss of ($24,875) in 2003. The profit is due primarily to expanded revenue
generation from gas production. The profit per share was nominal in the period
in 2004 and the loss per share was nominal in 2003.
Changes in Financial Condition
Year to date the Company experienced an increase in cash position to $34,765 at
quarter end due to increased revenue of the Company. The Company's total debt is
$62,340 at the quarter end as a result of expense accruals. The Company's total
liabilities are approximately $62,340. The company expects the trend of profits
(year to date) not to continue at the same rate, in the future.
Liquidity and Capital Resources
Year to date, the company had increased revenue, and an increased cash position,
which is insufficient for any significant operations. The company had cash of
$38,765 and illiquid assets of $17,055 (less accumulated depreciation of
$14,577) approximately at quarter end.
The company's only capital resources are its assets which may be illiquid and
its common stock which might be sold to raise capital.
NEED FOR ADDITIONAL FINANCING
The Company does not have capital sufficient to meet the Company's cash needs,
to operate, and pay debt, including the costs of compliance with the continuing
reporting requirements of the Securities Exchange Act of 1934. The Company will
have to seek loans or equity placements to cover such cash needs. Lack of
capital may be a sufficient impediment to prevent it from accomplishing the goal
of expanding its operations. There is no assurance, that without funds it will
ultimately allow company to carry out its business. The Company will need to
raise additional funds to expand its business activities in the next twelve
months.
No commitments to provide additional funds have been made by management
or other stockholders. Accordingly, there can be no assurance that any
additional funds will be available to the Company to allow it to cover its
expenses as they may be incurred.
Irrespective of whether the Company's cash assets prove to be
inadequate to meet the Company's operational needs, the Company might seek to
compensate providers of services by issuances of stock in lieu of cash.
GOING CONCERN
The Company's auditor has issued a "going concern" qualification as part of
his opinion in the Audit Report. There is substantial doubt about the ability of
the Company to continue as a "going concern." The Company has no business,
limited capital, debt in excess of $62,340, $37,198 of which is current, $34,765
in cash, minimal other liquid assets, and no capital commitments. The effects of
such conditions could easily be to cause the Company's bankruptcy.
Management hopes to seek and obtain funding, via loans or private
placements of stock for operations, debt and to provide working capital.
Management has plans to seek capital in the form of loans or stock private
placements of approximately $250,000.
ITEM 3. CONTROLS AND PROCEDURES
a. Evaluation of Disclosure Controls and Procedures:
Disclosure controls and procedures are designed to ensure that information
required to be disclosed in the reports filed or submitted under the Exchange
Act is recorded, processed, summarized and reported, within the time period
specified in the SEC's rules and forms. Disclosure controls and procedures
include, without limitation, controls and procedures designed to ensure that
information required to be disclosed in the reports filed under the Exchange Act
is accumulated and communicated to management, including the Chief Executive
Officer and Chief Financial Officer, as appropriate, to allow timely decisions
regarding required disclosure. As of the end of the period covered by this
report, the Company carried out an evaluation, under the supervision and with
the participation of the Company's management, including the Company's Chief
Executive Officer and Chief Financial Officer, of the effectiveness of the
design and operation of the Company's disclosure controls and procedures. Based
upon and as of the date of that evaluation, the Chief Executive Officer and
Chief Financial Officer concluded that the Company's disclosure controls and
procedures are effective to ensure that information required to be disclosed in
the reports the Company files and submits under the Exchange Act is recorded,
processed, summarized and reported as and when required.
b. Changes in Internal Control over Financial Reporting:
There were no changes in the Company's internal control over financial reporting
identified in connection with the Company evaluation of these controls as of the
end of the period covered by this report that could have significantly affected
those controls subsequent to the date of the evaluation referred to in the
previous paragraph, including any correction action with regard to significant
deficiencies and material weakness.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
NONE
ITEM 2. CHANGES IN SECURITIES
NONE
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
NONE
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDER
NONE
ITEM 5. OTHER INFORMATION
NONE
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) 32 906 Sarbanes-Oxley Certification
31 302 Sarbanes-Oxley Certification
(b) Reports on Form 8-K.
NONE
SIGNATURES
In accordance with section 13 to 15 (d) of the Exchange Act, the registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
Denis Iler November 11, 2004
- - --------------------------------------------------------
Denis Iler President, Chief Executive Officer