Item 1. Business
(a) General Development of Business
Rocky Mountain Minerals, Inc. (the "Registrant") was incorporated under the laws of the State of Wyoming on February 21, 1974, and commenced operations on May 19, 1978. The Registrant has been engaged primarily in the acquisition, development, exploration and operation of natural resource properties. The Registrant has no proven mineral or petroleum reserves.
Since the beginning of the 2003 fiscal year, the Registrant was not involved in any bankruptcy, receivership or similar proceedings, nor did it engage in any material reclassification, merger or consolidation, nor did it acquire or dispose of any material amount of assets otherwise than in the ordinary course of business, except as set forth below.
During fiscal year 2003 the Registrant acquired a 25% farm in interest in two oil and gas leases in the NW Shelf, offshore Australia. During 2003 the Registrant actively pursued the evaluation of oil and gas prospects in both the Western U.S. and Australia. The Registrant sold thirteen patented mining claims, together with the dumps and tailings, in the Rochester Mining District during 2002 and 2003. The Registrant is actively pursuing the sale of its remaining property located in Madison County, Montana (see Item 1 (c)(1)(i) Mining Operations Segment).
(a)(2) Not applicable.
(b) Financial Information About Industry Segments
Not applicable.
(c) Narrative Description of Business
Glossary of Terms
Carried Working Interest: A working interest which is not required to pay its share of costs of operations when incurred, but which does not participate in production until its share of the costs advanced by another party has been recovered by such party out of the carried party's share, subject to its proportionate burden of royalties.
Farm in: An agreement whereby a third party agrees to provide a certain level of funding for the exploration or development of an oil and gas property and in return receives or earns a working interest in the property from the owner(s)of the property.
Joint Venture: A business activity entered into and carried on by two or more parties who participate and share in costs and profits on a negotiated basis.
Overriding Royalty: An interest in the gross production from a property allocable to the working interest, which is paid out of such production. An override does not bear expenses of operation, development or maintenance and is a burden on the working interest in addition to the landowner's royalty.
Patented Mining Claim: A claim, lode or placer, for which the federal government has given deed or passed its title to the claimant. No assessment work is required on patented claims. It is not necessary to have a patent to mine and remove minerals from a valid mining claim, but a patent will give claimant exclusive title to the locatable minerals and, in most cases, the use of the surface and all other resources.
Proven Reserves: Proven reserves represent those reserves that, under presently anticipated conditions, will be commercially recoverable from known mineral deposits with a high degree of certainty.
Royalty: The landowner's or mineral owner's share of production, free of any costs of development or operation, reserved in connection with the creation or transfer of a mineral interest.
Unpatented Mining Claim: A claim or possessory title to which is maintained by payment of a $100 fee for assessment labor on each claim by August 31 of each year.
Working Interest: An interest in a claim (or oil and gas lease) which entitles its holder to conduct exploratory and mining (or drilling) operations; to bear the costs of such operations, including its proportionate share of the burden of royalties; and to share any production to the extent of the interest.
(c)(1)(i) Oil and Gas Operations Segment
In 2003 the Registrant acquired a 25% interest in two offshore oil and gas leases offshore Western Australia. The Registrant also owns various overriding royalty interests in oil and gas properties in Campbell County, Wyoming. See Item 2
Item 2 - "Properties" of this report.
The Registrant has no plans to engage in any exploratory oil or gas drilling on acreage for its own account. However, if additional financing can be obtained, it may engage in well drilling, depending upon the cost of the well drilling, the terms of any participation, future farm out, joint venture or similar arrangements, which may be entered into.
The acquisition of oil and gas interests, is competitive. The Registrant anticipates that it will continue to encounter strong competition from many established companies with greater financial, personnel and informational resources. Competition from such companies, together with rising prices of oil and gas, may escalate the cost of acquiring properties from others beyond the range of prices the Registrant can afford. If valuable oil and gas deposits are discovered on the Registrant's properties, their marketability will depend on numerous factors, including available equipment for which there is strong demand and other supplies of oil and gas.
Mining Operations Segment
The Registrant's previous business activities in its mining operations segment have been the construction and operation of an ore mill facility in Madison County, Montana. The Registrant has produced both gold and silver, which were sold by the Registrant to a refiner for "spot" market gold and silver prices. However, the Registrant has not operated the mill facility since 1984. In 2002 and 2003 the Registrant sold all its interest in the thirteen patented mining claims, together with the dump and tailings material and equipment that it purchased from Rochester Enterprises, Ltd., and is pursuing the sale of the additional eighteen patented claims in the district.
See Item 2 - "Properties" of this report for more information concerning the Registrant's mining claims.
Since the Registrant is engaged in the natural resources industry, environmental regulation may have a significant impact upon the Registrant's operations and may necessitate significant capital outlays, which, in turn, may materially affect the earning power of the Registrant. Certain operations in the exploratory and production phase of mining and oil and gas exploration are potentially hazardous to the environment. The clearance of trails and exploratory drilling and mining in natural areas, as well as full-scale mining, are sources of environmental regulation; and reclamation requirements, including back grading, reseeding and fertilizing, must be satisfied. Groundwater pollution is also a potential problem. Further, if any secondary recovery methods are utilized which involve the construction of a plant or similar hardware to implement the recovery system, the environmental impact of such a system must be disclosed in an Environmental Impact Statement under the National Environmental Policy Act; and compliance with such Act could adversely affect future operations and revenues. Although the Registrant does not anticipate that it will be the operator on any oil and gas leases, others who may drill and operate such properties will face possible environmental regulations, which could affect the Registrant's liabilities.
The Registrant holds no patents, trademarks, licenses, franchises or concessions and does not consider such to be important to either of its business segments.
The Registrant has made no expenditures on, nor has it been connected with, either company-sponsored or customer-sponsored research and development.
As of October 31, 2003, the Registrant employed two persons, each on a part time, as needed basis.
(d) Financial Information About Foreign and Domestic Operations and Export Sales.
The Registrant is a participant in the Exmouth Joint Venture, (see Item 2 - Properties, Oil and Gas Properties).
Item 2. Properties
Oil and Gas Properties
North West Shelf, Western Australia. The Registrant acquired a 25% interest in two petroleum exploration permits in the North West Shelf area of the Carnarvon Basin, offshore Western Australia. The area represents approximately 356,000 acres, and the project is known as the Exmouth Joint Venture Project. The Registrant issued 19,091,550 shares of Restricted $.015 Cumulative Convertible Preferred Stock and 15,000,000 shares of Restricted Common Stock to earn a 25% interest and to meet a $969,550 funding requirement associated with the interest. Subsequent costs above $969,550 relating to the Joint Venture shall be shared by the participants in accordance with their interests in the project. In addition, the Company recorded an estimate of $40,000 for the costs to register the restricted stock.
Campbell County, Wyoming. The Registrant owns minor overriding royalty interests in three oil and gas properties located in the Powder River Basin of Campbell County, Wyoming. The Registrant owns a .0160% overriding royalty in the Muddy "B" area (4,626.48 acres) of the Sandbar Unit, a .0261% overriding royalty in the Muddy Sand Unit (8,100.13 acres) and a one percent overriding royalty in 160 acres in the Kitty Field. In the past, the Registrant has received nominal royalties from these properties, which are now principally nonproducing.
Mining Properties
Madison County, Montana
In 1980 and 1981 the Registrant acquired a total of 31-patented lode-mining claims, comprising approximately 470 acres, in Madison County, Montana, including the Watseca Mine. There are no proven reserves on any of these properties. The claims are located in the Rochester Mining district, which is accessible by a county highway one and a half miles from Twin Bridges, Montana, and ten miles by a county-maintained road. In addition to the patented mining claims, the Registrant has in the past held possessory title to unpatented lode-mining claims under the mining laws of the United States and the State of Montana. The Registrant does not currently hold any unpatented mining claims. In 2002 and 2003 the Registrant sold its interest in and to the thirteen mining claims purchased from Rochester in 1981.
Since fiscal year 2000 the Registrant has actively pursued the sale of all of its patented mining claims in the Rochester Mining District. During fiscal year 2002 and 2003 the Registrant sold the thirteen patented mining claims, together with all dump and tailings material, and is pursuing the sale of the remaining eighteen patented claims in the District.
Titles
The Registrant has the right to enter on and to use the surface of all properties in which it holds exploration and mining rights subject to the claims of the surface owners for any damages caused by or resulting from exploration or mining operations. None of the Registrant's mining claims are within a designated wilderness area.
Item 3.
Item 3. Legal Proceedings - None.
Item 4.
Item 4. Submission of Matters to a Vote of Security Holders.
During the fourth quarter of the fiscal year covered by this report, no matters were submitted to a vote of security holders of the Registrant.
PART II
Item 5.
Item 5. Market Price of and Dividends on the Registrant's Common Equity and Related Stockholder Matters
(a) Market Information
The principal market on which the Registrant's Common Stock is traded is the OTC Bulletin Board (OTCBB). The stock was initially listed on the National Association of Securities Dealers Automated Quotation System. These over-the-counter market quotations reflect inter- dealer prices without retail markup, markdown or commissions and may not necessarily represent actual transactions.
* The above bid and ask prices are estimated by the Registrant based on the limited trading of the Company's securities.
(b) Holders
The number of record holders of the Registrant's common stock on October 31, 2003 was approximately 3,720.
(c) Preferred Stock
The Company has authorized the issue of 50,000,000 shares of preferred stock of which the relative rights with respect to 44,000,000 of such preferred stock ("Preferred Stock") have been established.
44,000,000 shares of Preferred Stock were offered and 30,000,000 shares of Preferred Stock were sold in 1981 pursuant to a Registration Statement on Form S-3, registration number 2-70876. In 2003 19,091,550 restricted shares of Preferred Stock were issued as partial consideration for a 25% interest in two oil and gas leases in the North West Shelf area, offshore Western Australia.
The designation, relative rights and preferences of such preferred stock are as follows:
Designation. The 44,000,000 million shares of Preferred Stock are designated as $0.015 of Cumulative Convertible Preferred Stock, $0.05 Par Value ("Preferred Stock")
Dividends. The $.015 Cumulative Convertible Preferred Stock, bears dividends at the rate of $.015 per share per annum, to accrue from September 21, 1981. Such dividends shall have full priority over any dividends that may be declared upon the common stock of the Registrant. Dividends shall be cumulative and are payable annually in cash, in shares of the Registrant's common stock or in kind, at the election of the Board of Directors by resolution duly adopted, if and when declared by such Board of Directors pursuant to Wyoming law, but only from unrestricted and unreserved earned surplus.
Any dividends declared may be payable in shares of the Corporation's common stock (but only from unrestricted and unreserved surplus), or may be paid in gold bullion, but only to the extent that the Registrant has gold bullion.
The number of shares of common stock of the Registrant to be issued as dividends with respect to the Preferred Stock shall be determined with reference to the average bid price of the common stock.
Redemption. The Preferred Stock is redeemable at the option of the Registrant in amounts of at least $100,000 at any time subsequent to September 21, 1983, at a redemption price of $.15 per such share, together with accrued or unpaid dividends, payable either in cash, shares of common stock, or one-quarter ounce increments of gold bullion (based on the gold price). If the Registrant does not have gold bullion, such redemption price shall be paid in cash or shares of common stock, at the election of the Board of Directors.
The holders of Preferred Stock called for redemption by the Registrant shall have no rights with respect to their shares except the right to receive the redemption price without interest, and the shares so called shall no longer be deemed outstanding shares of the Registrant's capital stock.
Liquidation. In the event of any liquidation, dissolution or winding-up of the Registrant, the holders of the Preferred Stock shall be entitled to receive an amount equal to $.10 per such share plus accrued dividends, prior to any distributions of assets to be made to holders of common stock.
Conversion Right. Holders of the Preferred Stock shall be entitled at any time after September 21, 1981 (except in the case of such shares called for redemption by the Registrant) to convert each share of Preferred Stock into four-tenths (.4) of one (1) share of common stock, subject to adjustment.
Assessment. All shares of common stock issued upon conversion, upon redemption and in payment of dividends with respect to the Preferred Stock, shall be issued fully paid and nonassessable.
Adjustment upon Conversion. The number of shares of common stock to be issued upon conversion of shares of Preferred Stock shall be increased if the Corporation should issue to an officer, director or other affiliate of the
Corporation any additional common stock after September 21, 1981, for consideration per such share of common stock less than the then current market price of such common stock. However, that no increase shall be made upon the issuance of common stock in connection with the payment of dividends on or the redemption of Preferred Stock, or in connection with the acquisition of property or assets other than cash (except cash acquired as part of a going concern) or other than property or assets acquired from a principal shareholder of the Registrant or an affiliate of such principal shareholder, or in connection with the issuance of up to 1,000,000 shares of common stock if issued pursuant to the Corporation's existing stock option plan, or in connection with the conversion of shares of Preferred Stock.
No increase in the number of shares of common stock to be issued upon conversion of shares of Preferred Stock shall be made unless and until such increase as provided in the foregoing resolutions shall equal at least one-tenth (.1) share of common stock, for each of the then outstanding shares of Preferred Stock if then converted.
Rights and Preferences of Authorized but Unissued Preferred. The remaining 6,000,000 shares of authorized but unissued preferred stock shall have such relative rights and preferences as shall be established by the Board of Directors pursuant to Wyoming law.
(d) Dividends
The Registrant has paid no dividends with respect to its common stock. There are no contractual restrictions on the Registrant's present or future ability to pay dividends. The Registrant's Preferred Stock, subject to the terms of issue (see (c) above), has the right to dividends (if declared) at a rate of $.015 per share per annum (an annual aggregate of $660,000 as of October 31, 2003) and has full priority over dividends on the common stock. These dividends, if declared, are cumulative and payable annually in cash, in shares of common stock or in kind, at the Registrant's option. Dividends of $.0l5 on the Preferred Stock were due on July 1, 1982, through 2003. The Registrant has not declared payment of these dividends ($8,506,163) and will not do so until such time as profitability permits payment thereof. It is uncertain when, if ever, the Registrant will attain sufficient profitability, which will enable it to begin to declare and pay the dividends in respect to the Preferred Stock.
Item 6.
Item 6. Selected Financial Data (1)
Years Ended October 31,
* Less than $.01 per share.
(1) The selected financial data should be read in conjunction with the related financial statements and notes thereto included under Items 8,14(a)(1) and (2), and 14(d).
(2) Loss per share is based on the weighted average number of shares of common stock and equivalents (stockholders rights of conversion of Convertible Preferred Stock) outstanding during each year: (85,712,000 in 1999, 2000, 2001 and 2002 and 88,212,000 in 2003).
Item 7.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Forward Looking Information
Statements of the Company's or management's intentions, beliefs, anticipations, expectations and similar expressions concerning future events contained in this document constitute forward looking statements as defined in the Private Securities Litigation Reform Act of 1995. As with any future event, there can be no assurance that the events described in the forward looking statements made in this report will occur or that the results of future events will not vary materially from those described in the forward looking statements in this document.
Critical Accounting Policies
The Company has identified the accounting policies described below as critical to its business operations and the understanding of the Company's results of operations. The impact and any associated risks related to these policies on the Company's business operations is discussed throughout this section where such policies affect the Company's reported and expected financial results. The preparation of this Annual Report requires the Company to make estimates and assumptions that affect the reported amount of assets and liabilities of the Company, revenues and expenses of the Company during the reporting period and contingent assets and liabilities as of the date of the Company's financial statements. There can be no assurance that the actual results will not differ from those estimates.
Undeveloped mineral interests and oil and gas properties:
The Company utilized the "successful efforts" method of accounting for undeveloped mineral interests and oil and gas properties. Capitalized costs were charged to operations at the time the Company determined that no economic reserves existed. Costs of carrying and retaining undeveloped properties were charged to expense when incurred. Proceeds from the sale of undeveloped properties were treated as a recovery of cost. Proceeds in excess of the capitalized cost realized in the sale of any such properties, if any, were to be recognized as gain to the extent of the excess.
Impairment of long-lived assets:
The Company evaluates the potential impairment of long-lived assets in accordance with Statement of Financial Accounting Standards No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. The Company annually reviews the amount of recorded long-lived assets for impairment. If the carrying amount of a long-lived asset is not recoverable from its undiscounted cash flows, the Company will recognize an impairment loss in such period.
Investment in joint venture:
The Company's investment in joint venture reflects its 25% interest in two petroleum exploration permits, offshore Western Australia. The capitalized cost includes the preferred and common stock at the market price at the date of stock issuance. In addition, the Company recorded an estimate of $40,000 for the costs to register the restricted stock.
Results of Operations
The Registrant began operations on May 19, 1978 and is considered to be a mining company in the exploratory stage and has had no significant revenues. In 1984 the Company ceased gold extraction operations at Rochester, Montana. During 1988, with the receipt of funding from a stock purchase agreement, it resumed mineral and oil and gas exploration both at Rochester and elsewhere in North America and Australia. Despite detailed geologic investigations at Rochester both by the Company and by leading gold mining companies, there was insufficient encouragement from exploration results to warrant further investigations or activity at Rochester. In 2002 and 2003 the Registrant sold thirteen patented mining claims in the Rochester Mining district for $82,192 and is pursuing the sale of the additional eighteen claims in the district. The Registrant anticipates receiving approximately $150,000 from the remaining property and recorded an impairment loss in the carrying amount of Assets held for sale of $268,000 during the third quarter of 2003.
In 2003 the Registrant acquired a 25% interest in two petroleum exploration permits in the North West Shelf area of the Carnarvon Basin, offshore Western Australia. The interest was acquired from two public companies, Octanex NL and Strata Resources NL, of which Mr. E.G. Albers, a member of the Registrant's board, is a major shareholder and director. The Registrant acquired the 25% interest by issuing a total of 15,000,000 shares of Restricted Common Stock and 19,091,550 shares of Restricted $.015 Cumulative Convertible Preferred Stock to meet a $969,550 funding requirement associated with the interest. The initial exploration program has consisted of acquiring and interpreting existing open-file seismic data including 2D and 3D seismic data sets and the shooting of 2,250 kilometers of new 2D seismic surveying. All costs above $969,550 to be expended on the Exmouth Joint Venture Project shall be shared by the participants in accordance with their interests. The Registrant has received approval from the Western Australia Offshore Petroleum Authority for the Farm In interest in the petroleum exploration permits, WA-322-P and WA-329-P, which comprise the Exmouth Joint Venture Project.
General and administrative expenses decreased during fiscal year 2003 as compared to fiscal year 2002 primarily due to the Registrant's lower level of activity in evaluating various opportunities during 2003.
The Registrant plans to continue its oil and gas exploration activities. To advance these plans, the Company has established a representative office in Melbourne, Australia and in Prescott, Arizona.
Liquidity and Capital Resources
The following table reflects the Registrant's working capital positions at October 2003 and 2002:
Since ceasing milling operations at its Rochester, Montana property in 1984, the Registrant has evaluated this property and other mineral properties, as well as having pursued waste management activities. The waste management assets have been sold and the Registrant has placed its remaining Rochester property on the market for sale.
Management believes it is reasonably likely that it will be able to generate cash to support its operations during the next twelve months through the sale of the Rochester property or its interest in the Australian permits or through the sale of the Company's common or preferred stock.
Item 8.
Item 8. Financial Statements and Supplementary Data
Financial statements and supporting schedules reporting supplementary financial information are listed in the Index to Financial Statements filed as a part of this Form 10-K.
Item 9.
Item 9. Disagreements on Accounting and Financial Disclosure
Not applicable.
PART III
Item 10.
Item 10. Directors, Executive Officers, Promoters and Control Persons of the Registrant
(a, b, e) Identification of Directors and Executive Officers and Their Business Experience
NAME: Ernest Geoffrey Albers AGE: 59
POSITION, TENURE AND BUSINESS EXPERIENCE:
Mr Albers is a company director with over 30 years experience as a lawyer and administrator in corporate law, petroleum exploration and resource sector investment. During this period Mr Albers has sponsored the formation of companies that have made the original Maari (Moki) oilfield discovery in New Zealand, the Yolla Gas/Condensate discovery in Bass Strait, the Evans Shoal gasfield discovery/appraisal in the Timor Sea and the SE Gobe oilfield development in Papua New Guinea.
Mr Albers is Chairman of Methanol Australia Limited, Octanex NL, Strata Resources NL and various other private and unlisted public companies. He is a member of the Petroleum Exploration Society of Australia and a member of the APPEA Exploration Committee.
NAME: William Ray Hill AGE: 52
POSITION, TENURE AND BUSINESS EXPERIENCE:
President, Treasurer and Director since August 2001. Mr. Hill founded Rocky Mountain Minerals, Inc. in 1978 and was President and director from 1978 to 1995. Mr. Hill is President and Director of The Zonia Company, an Arizona real estate development company. Mr. Hill is the founder and President of Geowest Corporation, which is involved in the development of a solid waste construction and demolition landfill. In 1988 Mr. Hill founded Citizens Recycle & Collection, a solid waste hauling and Transfer Company, which was acquired by Waste Management, Inc. in 1996.
NAME: Peter Sterling AGE: 55
POSITION, TENURE AND BUSINESS EXPERIENCE:
Director of the Registrant since December 2002, Mr. Sterling resigned as a director in October 2003. He has extensive Internet financial and operational management experience with technology and telecommunications companies. Mr. Sterling began his career as an engineer with New Zealand Telecom and was the owner of Sterling Electronics, which manufactured and distributed metal detectors for airport security and mining operations. Mr. Sterling's company Kaomin NL discovered a $200 million dollar kaolin ore body near Ballarat, Victoria Australia and subsequently built a multi-million dollar computer controlled kaolin-processing plant. Mr. Sterling has experience in the oil and gas industry in both Western Australia and the United States.
NAME: John B. Rubel AGE: 52
POSITION, TENURE AND BUSINESS EXPERIENCE:
Director of the Registrant since December 2002, Mr. Rubel has extensive operational and management experience in ranching, farming and heavy equipment and trucking operations in Arizona. Mr. Rubel was a principal and chief operational officer with Zonia Landfill, Inc. from 1991 to 1998 and was responsible for its solid waste transfer station and waste collection operations. Mr. Rubel was employed by Waste Management of Northern Arizona from 1998 to 2000 and coordinated special projects and environmental and safety programs for the company. Since 2000 Mr. Rubel has been employed by Hanson Aggregates of Arizona, which operates concrete processing facilities and rock quarries.
NAME: David Bruce Hill AGE: 61
Mr. DB Hill was appointed a director of the Registrant in October 2003 and is a Chartered Accountant and holds office as director or company secretary in a number of public companies.
(c) Identification of Certain Significant Employees
None
(d) Family Relationships
None
(f) Involvement in Certain Legal Proceedings
None
(g) Promoters and Control Persons
Not applicable.
Item 11.
Item 11. Executive Compensation
(a)(1) Cash Compensation
Cash compensation for the each of the three fiscal years in the period ended October 31, 2003 was as follows:
Name of individual or number Capacities in Cash of persons in group which served compensation
All executive Officers and/or 2003 $52,750 officers as a group directors 2002 $45,150 (two persons) 2001 $22,900
(a)(2) Bonuses and Deferred Compensation
None
(b)(1) Compensation Pursuant to Plans
The registrant has no annuity, pension, retirement or profit sharing plan in effect and none is presently contemplated.
(b)(2) Pension Table Not applicable.
(b)(3) Alternative Pension Plan Disclosure Not applicable.
(b)(4) Stock Option and Stock Appreciation Right Plans Not applicable.
(c) Other Compensation None.
(d) Compensation of Directors None.
(e) Termination of Employment and Change of Control Arrangement None.
Item l2. Security Ownership of Certain Beneficial Owners and Management
(a), (b) Security Ownership of Certain Beneficial Owners and Management
The following table shows the security ownership of those persons known by the Registrant to be the beneficial owners of more than five percent of the Registrant's common stock and of the directors, and the officers and directors as a group as of October 31, 2003:
1) Unless indicated otherwise, the beneficial owners exercise sole voting and investment power.
2) Mr. Geoffrey Albers shares of common and preferred stock are owned indirectly by Mr. Albers through companies he is affiliated with, and includes 19,091,500 shares of preferred stock, which is convertible at the election of the holder into 7,636,620 shares of common stock.
3) Includes Mr. Hill's 2,118,890 shares of Preferred Stock, which is convertible at the election of the holder into 847,556 shares of Common Stock.
4) Percent of class is computed by dividing the sum of the shares of common stock actually owned and the shares of common stock issuable upon conversion at the election of the holder of the Convertible Preferred Stock by the sum of the number of shares of common stock actually outstanding and the number of shares of common stock issuable upon conversion. The Convertible Preferred Stock is convertible into shares of common stock at the rate of .40 share of common stock for each share of Convertible Preferred Stock.
(c) Changes in Control
Not Applicable
Item 13.
Item 13. Certain Relationships and Related Transactions
(a) Transactions with Management and Others
In 2003 the Registrant entered into a Farm in Agreement with Octanex N. L. and Strata Resources N.L. whereby the Registrant acquired a 25% interest in two petroleum exploration permits by the issuance of 15,000,000 shares of Restricted Common Stock and 19,091,550 shares of Restricted $.015 Cumulative Convertible Preferred Stock. The issuance of the stock meets a $969,550 funding requirement associated with the exploration permits. Mr. Albers is a shareholder and director of both Octanex and Strata.
(b) Certain Business Relationships
None other than disclosed in Item 13(a)
(c) Indebtedness of Management
None
(d) Transactions with Promoters
Not applicable.
PART IV
Item l4. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) The following documents are filed as a part of this Report immediately following the signature page.
Page Number 1. Financial Statements
Report of Independent Certified Public Accountants
Balance Sheet - October 31, 2002 and 2003
Statement of Operations - Years Ended October 31, 2001, 2002 and 2003 and Cumulative Amounts from Inception (May 19, 1978) to October 31, 2003
Statements of Stockholders' Equity - For the Period from Inception (May 19, 1978) to October 31, 2003.
Statement of Cash Flows - Years ended October 31, 2001, 2002 and 2003 and Cumulative Amounts from Inception (May 19, 1978) to October 31, 2003.
Notes to Financial Statements
ROCKY MOUNTAIN MINERALS, INC. (A Development Stage Company)
FINANCIAL STATEMENTS
FOR THE YEARS ENDED OCTOBER 31, 2001, 2002 AND 2003
WITH
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of Rocky Mountain Minerals, Inc.
We have audited the accompanying balance sheet of Rocky Mountain Minerals, Inc. as of October 31, 2003 and 2002, and the related statements of operations, stockholders' equity and cash flows for each of the three years in the period ended October 31, 2003. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Rocky Mountain Minerals, Inc. as of October 31, 2003 and 2002, and the results of its operations and its cash flows for each of the three years in the period ended October 31, 2003 , in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has suffered recurring losses and has a working capital deficit. These conditions raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Denver, Colorado January 13, 2004 CAUSEY DEMGEN & MOORE INC.
See accompanying notes.
(Continued on following page)
See accompanying notes.
*Less than $.01 per share
See accompanying notes.
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See accompanying notes.
ROCKY MOUNTAIN MINERALS, INC. (A Development Stage Company) STATEMENT OF CASH FLOWS
For the years ended October 31, 2001, 2002 and 2003 and Cumulative Amounts from Inception (May 19, 1978) to October 31, 2003
(Continued from preceding page)
(Dollar amounts in thousands)
Supplemental disclosure of non-cash investing and financing activities (Note 3):
During 2003, the Company acquired a 25% interest in two Australian petroleum exploration permits ($358) by issuing Restricted common stock and Restricted $.015 Cumulative convertible preferred stock (Totaling $318), and recognized an estimated liability for stock registration of $40.
See accompanying notes.
ROCKY MOUNTAIN MINERALS, INC. (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS October 31, 2001, 2002 and 2003
1. Organization and summary of significant accounting policies
Organization:
Rocky Mountain Minerals, Inc. (the Company) was incorporated on February 21,1974, and began operations on May 19, 1978 (inception) and is considered to be a mining company in the exploratory stage and a development stage company as defined by SFAS No. 7, and since inception, has been engaged in the acquisition of mineral interests, oil and gas properties and leases, financing activities, and initiated milling of the Company's mine tailings in 1983. During the year ended October 31, 1982, the Company disposed of the majority of its then oil and gas properties. In January 1984, the Company discontinued milling. Subsequent to October 31, 1991, the Company was inactive and had limited receipts and expenditures until the current year when the Company issued stock for an investment in a joint venture.
Basis of presentation:
The financial statements have been prepared on a going concern basis which contemplates the realization of assets and liquidation of liabilities in the ordinary course of business. As shown in the accompanying financial statements, the Company has incurred significant losses and at October 31, 2003 had minimal cash. As a development stage company, the Company relies on infusions of cash through the sale of assets held for sale, the performance of its investment in joint venture and the issuance of equity capital. As a result, substantial doubt exists about the Company's ability to continue to fund future operations using its existing resources.
Management plans to use the funds from the sale of the Rochester property to fund the Company's evaluation of oil and gas exploration opportunities. Plans for additional funding of these activities include the sale of its interest in the Australian permits or the sale of the Company's common or preferred stock.
Use of estimates:
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and footnotes thereto. Significant items subject to such estimates and assumptions include the carrying value of assets held for sale and long-lived assets. Actual results could differ from those estimates.
Depreciation, depletion and amortization:
Depreciation was provided by the Company on the straight-line and declining balance methods.
ROCKY MOUNTAIN MINERALS, INC. (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS October 31, 2001, 2002 and 2003
1. Organization and summary of significant accounting policies (continued)
Depletion of developed mineral interests (mine dumps and tailings) was computed by the unit-of-production method based on estimated recoverable quantities of gold and silver.
Undeveloped mineral interests and oil and gas properties:
The Company utilized the "successful efforts" method of accounting for undeveloped mineral interests and oil and gas properties. Capitalized costs were charged to operations at the time the Company determined that no economic reserves existed.
Costs of carrying and retaining undeveloped properties were charged to expense when incurred.
Proceeds from the sale of undeveloped properties were treated as a recovery of cost. Proceeds in excess of the capitalized cost realized in the sale of any such properties, if any, were to be recognized as gain to the extent of the excess.
Income taxes:
The Company provides for income taxes utilizing the liability approach under which deferred income taxes are provided based upon enacted tax laws and rates applicable to the periods in which the taxes became payable.
Cash equivalents:
For purposes of the statement of cash flows, the Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents.
Impairment of long-lived assets:
The Company evaluates the potential impairment of long-lived assets in accordance with Statement of Financial Accounting Standards No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. The Company annually reviews the amount of recorded long-lived assets for impairment. If the carrying amount of a long-lived asset is not recoverable from its undiscounted cash flows, the Company will recognize an impairment loss in such period.
ROCKY MOUNTAIN MINERALS, INC. (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS October 31, 2001, 2002 and 2003
1. Organization and summary of significant accounting policies (continued)
Investment in joint venture:
The Company's investment in joint venture reflects its 25% interest in two petroleum exploration permits, offshore Western Australia. The capitalized cost includes the preferred and common stock at the market price at the date of stock issuance. In addition, the Company recorded an estimate of $40,000 for the costs to register the restricted stock.
Concentrations of credit risk:
Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents. The Company places its cash with high quality financial institutions.
Unaudited financial statements:
In the opinion of management, the accompanying unaudited financial statements contain all adjustments necessary for a fair presentation of the results of operations and cash flows for the period from inception (May 19, 1978) to October 31, 2003.
2. Purchase of Rochester mining properties
In October 1980, the Company entered into an agreement with certain individuals, including officers and directors of the Company, whereby the Company sold each of them a certain number of shares of its common stock (1,400,000 in the aggregate); a percentage of the net profits, if any, on an accumulated basis (10.5% in the aggregate) from the operations of the mill being acquired from Rochester; and a perpetual non-participating royalty interest in the patented mining claims being acquired from Rochester (10.5% aggregate). The Company valued the shares issued under the agreements at $.28225 per share that represented approximately 60% of the quoted market "bid" price on October 28, 1980. The balance of the amount received from the "private placement" ($348,400) was deferred until closing of the agreement with Rochester, at which time, the amount deferred was credited to the total purchase price of the properties.
On November 30, 1981, the Company closed the agreement with Rochester Enterprises, a Montana limited partnership, acquiring 11 patented lode mining claims, certain improvements, buildings and machinery, and certain mill tailings and mine dumps located in Montana for a purchase price totaling $3,029,765 and 2,530,000 shares of the Company's common stock. Pursuant to the agreement, the Company agreed, on a one-time basis only, to prepare and file a registration statement under the Securities Act of 1933, as amended,
ROCKY MOUNTAIN MINERALS, INC. (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS October 31, 2001, 2002 and 2003
2. Purchase of Rochester mining properties (continued)
or a notification of exemption pursuant to Regulation A, if available, from such act at its expense to sell or otherwise dispose of any of the shares issued to Rochester under the agreement, upon the request of any one or more of the partners of Rochester.
During 1987 and 1988, the Company repurchased 7.125% (aggregate) of both of the net profits and royalty interests for a total of $47,500 in cash and the issuance of 2,425,000 shares of its common stock ($.01 per share).
During 1997, the Company decided to sell its remaining undeveloped mineral interests at Rochester Montana including the mine dumps and tailings. The assets have been reclassified to net assets held for sale and stated at their net realizable value resulting in a loss of $1,749,000.
During 2002 and 2003 the Company sold all its interest in the thirteen patented claims, together with the dump and tailings material and equipment, that it purchased from Rochester Enterprises, Ltd. for a total of $82,000. The Company is pursuing the sale of the additional eighteen claims in the district and anticipates receiving approximately $150,000 from the remaining property.
3. Investment in joint venture
In April 2003 the Registrant acquired a 25% interest in two petroleum exploration permits in the North West Shelf area of the Carnarvon Basin, offshore Western Australia, from two unlisted public companies. Mr. E.G. Albers, a member of the Registrant's board, is a shareholder and director of these two public companies. The area represented by the permits is approximately 356,000 acres, and the project is known as the Exmouth Joint Venture Project. In agreeing to earn a 25% interest in the project, the Registrant issued 5,000,000 shares of Restricted Common Stock ($.0316 per share) and 19,091,550 shares of Restricted $0.015 Cumulative Convertible Preferred Stock. The Company estimates registration costs to be $40,000. In October 2003, the Registrant issued an additional 10,000,000 shares of Restricted Common Stock ($.02 per share), when taken with the previous issue aforesaid, to meet a $969,550 funding requirement associated with the interest.
The initial exploration program will consist of acquiring the interpreting existing open-file seismic data including 2D and 3D seismic data sets, and the shooting of 2,250 kilometers of new 2D seismic surveying. All subsequent costs above $969,550 relating to the Joint Venture shall be shared by the Participants in accordance with their interests and governed by the Joint Venture Operation Agreement. The Registrant has received approval from the Western Australian Offshore Petroleum Authority for the farmin to an 25% interest in the petroleum exploration permits, WA-322-P and WA-329-P, which presently comprise the Exmouth Joint Venture Project.
ROCKY MOUNTAIN MINERALS, INC. (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS October 31, 2001, 2002 and 2003
4. Investment in affiliated companies
During 1992, the Company acquired a 38% interest in Zonia Landfill, a waste management company which owned and operated a solid waste transfer and recycle facility and a solid waste and collection company. The equity interest acquired by the Company represented net cash advances to Zonia of $198,000. Significant shareholders, officers and directors of the Company were affiliated with Zonia. Zonia sold its operations in 1996 for common stock in USA Waste Services, Inc. The Company sold its shares of USA Waste Services, Inc. during 1997 and 1998 for an aggregate of $368,000.
5. Preferred stock
During fiscal 1981, the stockholders voted to amend the Articles of Incorporation to authorize the issuance of preferred stock having a par value of $.05. The Board of Directors designated 44,000,000 shares of the preferred stock as $.015 cumulative convertible preferred stock (hereinafter referred to as "preferred stock"). The holders of the preferred stock are, subject to declaration, entitled to receive $.015 per share annual dividends, and $.10 per share, plus accrued but unpaid dividends, upon liquidation, dissolution or winding up of the Company. The dividends, which may be paid in cash, common stock or gold, are payable annually, if and when declared by the Board of Directors only from earned surplus. Cumulative dividends in arrears as of October 31, 2003 amount to $8,506,163 ($.19 per share). Each share of the preferred stock is convertible by the holder, at his option, into .4 shares of common stock. The preferred stock may be called for redemption at $.15 per share, plus accrued but unpaid dividends, either in cash, in common stock or gold. As no profit has been achieved and as no dividends have been declared, no provision has been made for unpaid dividends.
6. Common stock
In connection with a stock purchase agreement consummated on April 22, 1988, with Quillium Nominees Pty., Ltd. (Quillium) pursuant to which 33,333,000 shares of the Company's restricted common stock were issued, the Company agreed to prepare and file a registration statement under the Securities Act of 1933, as amended, for the 33,333,000 shares issued under the agreement. This has not been performed as of October 31, 2003.
7. Income taxes
At October 31, 2003, the Company had net operating loss carryforwards for tax purposes of approximately $1,756,000. If not used to offset future taxable income, the carryforwards will expire as follows:
ROCKY MOUNTAIN MINERALS, INC. (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS October 31, 2001, 2002 and 2003
7. Income taxes (continued)
At October 31, 2002 and 2003, total deferred tax assets and valuation allowances are as follows:
Deferred tax assets resulting 2002 2003 ---- ---- Net operating loss $ 484,000 $615,000 Write-down of assets held 612,000 612,000 ----------- ----------- Total 1,096,000 1,227,000 Less valuation allowance (1,096,000) (1,227,000) ----------- ----------- $ - $ - =========== ===========
A 100% valuation allowance has been established against the deferred tax assets, as utilization of the loss carryforwards and realization of other deferred tax assets cannot be reasonably assured.
8. Basic loss per common share
Basic loss per common share is based on the weighted average number of shares of common stock outstanding during each year, 85,712,000 shares in 2001 and 2002, and 88,212,000 in 2003, and 61,956,000 shares for the period from May 19, 1978 through October 31, 2003.
ROCKY MOUNTAIN MINERALS, INC. (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS October 31, 2001, 2002 and 2003
9. Commitments and contingencies
Insurance:
The Company is, to a significant degree, without insurance pertaining to Various potential risks with respect to its properties, including general liability, because it is presently not able to obtain insurance for such Risks at rates and on terms, which it considers reasonable. The financial position of the Company in future periods could be adversely affected if uninsured losses were to be incurred.
10. Related party transactions
In 1994, the Company entered into an agreement to reimburse its President for office space and overhead. Total amounts paid and payable to the President for office usage during the three years ended October 31, 2003 were $5,400 in 2001, and $24,000 in 2002 and 2003.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf of the undersigned, thereunto duly authorized.
ROCKY MOUNTAIN MINERALS, INC.
BY: /s/ W. Ray Hill ---------------------- W. Ray Hill, President
DATED: January 27, 2004
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 date indicated.
DATED: January 27, 2004 BY: /s/ W. Ray Hill ----------------------------------- W. Ray Hill, Treasurer and Director (Principal Executive, Financial and Accounting Officer)
DATED: January 27, 2004 BY: /s/ E. Geoffrey Albers ----------------------------------- E. Geoffrey Albers, Director
DATED: January 27, 2004 BY: /s/ David B. Hill ----------------------------------- David B. Hill, Director
DATED: January 27, 2004 BY: /s/ John B. Rubel ----------------------------------- John B. Rubel, Director