Item 1. Business
General - -------
Rocky Mountain Minerals, Inc. was incorporated under the laws of the State of Wyoming on February 21, 1974, and commenced operations On May 19, 1978. We have been engaged primarily in the acquisition, development, exploration and operation of natural resource properties. The Company has no proven mineral or petroleum reserves.
Since the beginning of the 2006 fiscal year, the Company 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 we acquired a 25% farm in interest in two oil and gas permits in the NW Shelf, offshore Australia. During 2004 and 2005 we actively pursued the evaluation of oil and gas prospects in both the Western U.S. and Australia, and subsequently sold both of the Australian oil and gas permits, retaining royalty and contingent interests. The Company sold thirteen patented mining claims, together with the dumps and tailings, in the Rochester Mining District during 2002 and 2003. We are actively pursuing the sale of its remaining property located in Madison County, Montana (see Item 1 (c)(1)(i) Mining Operations Segment).
Since the period of this report, on December 6, 2006, RMMI Australia Pty Ltd, our wholly-owned subsidiary ("RMMI"), and Eagle Bay Resources, N.L., an Australian Stock Exchange listed company ("EBR"), entered into a Joint Venture Heads of Agreement in respect of an unincorporated joint venture (the "Australian Nickel Joint Venture"), effective as of November 1, 2006, for purposes of exploring and, if warranted, developing and mining sulphide hosted nickel in Australia.
On December 6, 2006, RMMI, EBR and Audax Resources Ltd, an Australian Stock Exchange listed company ("Audax"), entered into a Carr Boyd Farmin and Joint Venture Heads of Agreement in respect of an unincorporated joint venture (the "Carr Boyd Joint Venture") for the purpose of exploring and, if warranted, developing and mining certain tenements near Carr Boyd, West Australia.
(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 Company acquired a 25% interest in two offshore oil and gas permits offshore Western Australia. The Registrant also owns various overriding royalty interests in oil and gas properties in Campbell County, Wyoming. See Item 2 - "Properties" of this report.
The Company 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. We anticipate 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 Company can afford. If valuable oil and gas deposits are discovered on our 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
Our previous business activities in its mining operations segment have been the construction and operation of an ore mill facility in Madison County, Montana. We have produced both gold and silver, which were sold by the Company to a refiner for "spot" market gold and silver prices. However, we have not operated the mill facility since 1984. In 2002 and 2003 we sold all our interest in the thirteen patented mining claims, together with the dump and tailings material and equipment that was purchased from Rochester Enterprises, Ltd., and is pursuing the sale of the additional eighteen patented claims in the district.
In December 2006, we commenced mineral exploration activities in Western Australia.
See Item 2 - "Properties" of this report for more information concerning the Company's mining claims.
Since we are engaged in the natural resources industry, environmental regulation may have a significant impact upon our operations and may necessitate significant capital outlays, which, in turn, may materially affect the earning power of the Company. 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 equivalent Australian acts; and compliance with such Acts could adversely affect future operations and revenues. Drilling and other operations on such properties will require compliance with environmental regulations, which could affect the Company's liabilities.
We hold no patents, trademarks, licenses, franchises or concessions and does not consider such to be important to either of its business segments.
The Company has made no expenditures on, nor has it been connected with, either company-sponsored or customer-sponsored research and development.
As of October 31, 2006, we employed two persons, each on a part time, as needed basis.
(d) Financial Information About Foreign and Domestic Operations and Export Sales.
The Company is a participant in the Exmouth Joint Venture and, since the date of this report, is a participant in the Australian Nickel Joint Venture and the Carr Boyd Joint Venture (see Item 2 - Properties).
Item 1A.
Item 1A. Risk Factors
The business operations of the Company will be subject to risks, which may impact adversely on its future performance. These risks may adversely affect the value of our assets and this may affect the value of any Stock in the Company.
The following are some of the important factors that could affect our financial performance or could cause actual results to differ materially from estimates contained in our forward-looking statements. The important factors are not exclusive.
Exploring and Drilling for minerals and producing oil and natural gas are high risk activities with many uncertainties that could adversely affect our business, financial condition or results of operations.
Exploration activities are subject to numerous risks beyond our control, including the risk that drilling will not result in commercially viable mineral or oil or natural gas reserves. Our decisions to develop or otherwise exploit prospects or properties will depend in part on the evaluation of data obtained through geophysical and geological analyses, production data and engineering studies, the results of which are often inconclusive or subject to varying interpretations. Reserve estimates depend on many assumptions that may turn out to be inaccurate. Our cost of drilling, completing and operating wells will be uncertain before drilling commences. Overruns in budgeted expenditures are common risks that can make a particular project uneconomical. Further, many factors may curtail, delay or cancel drilling, including the following:
o delays imposed by or resulting from compliance with regulatory requirements; o pressure or irregularities in geological formations; o equipment failures or accidents; o adverse weather conditions; o reductions in commodity and oil and natural gas prices; o title problems; and o limitations in the market for minerals, oil and natural gas.
We may incur substantial losses and be subject to substantial liability claims as a result of any future operations.
We are not insured against risks. Losses and liabilities arising from uninsured and underinsured events could materially and adversely affect our business, financial condition or results of operations. When we commence these activities, our mineral and oil and natural gas exploration activities will be subject to all of the operating risks associated with drilling for and producing minerals and oil and natural gas, including the possibility of:
o environmental hazards, such as uncontrollable flows of oil, natural gas, brine, well fluids, toxic gas or other pollution into the environment, including groundwater and shoreline contamination; o abnormally pressured formations; o mechanical difficulties, such as stuck drilling and service tools and casing collapse; o fires and explosions; o personal injuries and death; and o natural disasters.
Any of these risks could adversely affect our ability to operate or result in substantial losses to our company. We may elect not to obtain insurance if we believe that the cost of available insurance is excessive relative to the risks presented. In addition, pollution and environmental risks generally are not fully insurable. If a significant accident or other event occurs and is not fully covered by insurance, then it could adversely affect us.
Market conditions or operational impediments may hinder our access to markets or delay our production.
Market conditions or the unavailability of satisfactory mineral product and oil and natural gas transportation arrangements may hinder our access to markets or delay our production. The availability of a ready market for any future production will depend on a number of factors, including the demand for and supply of minerals and or oil and natural gas and the proximity of reserves to pipelines and terminal facilities. Our ability to market our production (when and if we have production) will depend in substantial part on the availability and capacity of gathering systems, pipelines and processing facilities owned and operated by third parties. Our failure to obtain such services on acceptable terms could materially harm our business.
We are subject to complex laws that can affect the cost, manner or feasibility of doing business.
Exploration, production and sale of oil minerals and natural gas are subject to extensive Australian and international laws and regulations. We may be required to make large expenditures to comply with governmental regulations. Matters subject to regulation include:
o discharge permits for drilling operations; o drilling bonds; o the spacing of wells; o unitization and pooling of properties; and o taxation.
Under these laws, we could be liable for personal injuries, property damage and other damages. Failure to comply with these laws may also result in the suspension or termination of our operations and subject us to administrative, civil and criminal penalties. Moreover, these laws could change in ways that substantially increase our costs of doing business. Any such liabilities, penalties, suspensions, terminations or regulatory changes could materially and adversely affect our financial condition and results of operations.
Our operations may incur substantial liabilities to comply with the environmental laws and regulations.
Our oil and natural gas operations will be subject to stringent Australian and international laws and regulations relating to the release or disposal of materials into the environment or otherwise relating to environmental protection. These laws and regulations may require the acquisition of a permit before drilling commences, restrict the types, quantities, and concentration of substances that can be released into the environment in connection with drilling and production activities, limit or prohibit drilling activities on certain lands lying within wilderness, wetlands, and other protected areas, and impose substantial liabilities for pollution resulting from our operations. Failure to comply with these laws and regulations may result in the assessment of administrative, civil, and criminal penalties, incurrence of investigatory or remedial obligations, or the imposition of injunctive relief. Changes in environmental laws and regulations occur frequently, and any changes that result in more stringent or costly waste handling, storage, transport, disposal or cleanup requirements could require us to make significant expenditures to maintain compliance, and may otherwise have a material adverse effect on our results of operations, competitive position, or financial condition as well. Under these environmental laws and regulations, we could be held strictly liable for the removal or remediation of previously released materials or property contamination regardless of whether we were responsible for the release of such materials or if our operations were standard in the industry at the time they were performed.
Competition in the natural resources industry is intense, which may adversely affect our ability to compete.
We operate in a highly competitive environment for developing properties, marketing of oil and natural gas and securing trained personnel. Many of our competitors possess and employ financial, technical and personnel resources substantially greater than ours, which can be particularly important in the areas in which we operate. Those companies may be able to pay more for productive oil and natural gas properties and prospects and to evaluate, bid for and purchase a greater number of properties and prospects than our financial or personnel resources permit. Our ability to acquire additional prospects and to find and develop reserves in the future will depend on our ability to evaluate and select suitable properties and to consummate transactions in a highly competitive environment. In addition, there is substantial competition for capital available for investment in the oil and natural gas industry. We may not be able to compete successfully in the future in acquiring prospective reserves, developing reserves, marketing hydrocarbons, attracting and retaining quality personnel and raising additional capital.
We may depend on industry partners and could be seriously harmed if they do not perform satisfactorily, which is usually not within our control.
Because we have few employees and no revenues, we will continue to be largely dependent on industry partners for the success of our oil and gas exploration projects. We could be seriously harmed if our industry partners do not perform satisfactorily on projects that affect us. It is likely that we will have no control over factors that would influence the performance of our partners.
The market price of our common stock is highly volatile.
The market price of our Common Stock has been and is expected to continue to be highly volatile. Prices for our common stock will be influenced by many factors and may fluctuate widely as a result of factors beyond our control. General factors which will bear on the price of our common stock include the depth and liquidity of the market for the common stock, investor perception of us and our technologies and general economic and market conditions.
Our common stock is traded over the counter, which may deprive shareholders of the full value of their shares.
Our Common Stock is quoted via the Over The Counter Bulletin Board (OTCBB). As such, our Common Stock may have fewer market makers, lower trading volumes and larger spreads between bid and asked prices than securities listed on an exchange such as the New York Stock Exchange or the NASDAQ Market. These factors may result in higher price volatility and less market liquidity for the Common Stock.
A low market price may severely limit the potential market for our common stock.
Our Common Stock is currently trading at a price substantially below $5.00 per share, subjecting trading in the stock to certain SEC rules requiring additional disclosures by broker-dealers. These rules generally apply to any non-NASDAQ equity security that has a market price of less than $5.00 per share, subject to certain exceptions (a "penny stock"). Such rules require the delivery, prior to any penny stock transaction, of a disclosure schedule explaining the penny stock market and the risks associated therewith and impose various sales practice requirements on broker-dealers who sell penny stocks to persons other than established customers and institutional or wealthy investors. For these types of transactions, the broker-dealer must make a special suitability determination for the purchaser and have received the purchaser's written consent to the transaction prior to the sale. The broker-dealer also must disclose the commissions payable to the broker-dealer, current bid and offer quotations for the penny stock and, if the broker-dealer is the sole market maker, the broker-dealer must disclose this fact and the broker-dealer's presumed control over the market. Such information must be provided to the customer orally or in writing before or with the written confirmation of trade sent to the customer. Monthly statements must be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks. The additional burdens imposed upon broker-dealers by such requirements could discourage broker-dealers from effecting transactions in our Common Stock.
Potential conflicts of interest may cause us to enter into less favorable agreements than we might have obtained from third parties.
Some of our directors are also directors or executive officers of other exploration companies, which may from time to time compete with us for farm-ins, working interest partners, or property acquisitions. We also may seek to negotiate farm-in agreements or working interest agreements with companies whose boards of directors include individuals who are directors or executive officers of our company. Under Wyoming law, a director that has an interest in a contract or proposed contract or agreement shall disclose his interest in such contract or agreement and shall refrain from voting on any matter in respect of such contract or agreement. Nevertheless, we may enter into agreements with such other companies that are not as favorable as that which we might have obtained from unrelated third parties.
We will require additional capital in the future, which may not be available or may only be available on unfavorable terms.
Our future capital requirements depend on many factors, including the amount of property under development and our profitability. To the extent that the funds generated by future operations are insufficient to fund operating and capital requirements, we will need to raise additional funds through financings or curtail our growth and reduce our exploration activities. Any equity or debt financing, if available at all, may be on terms that are not favorable to us. In the case of equity financings, dilution to our stockholders could result, and in any case such securities may have rights, preferences and privileges that are senior to those of the shares offered hereby. If we cannot obtain adequate capital on favorable terms or at all, our business, operating results and financial condition could be adversely affected.
Estimates of future cash flows may prove to be inaccurate, resulting in a reduction of our working capital.
Estimates of future net cash flows from interests we may develop in mineral and oil and natural gas reserves, prepared by independent engineers, will be based upon estimates of mineral and oil and natural gas reserves and the percentage of those reserves which can be recovered and produced with current technology. These estimates will include assumptions as to the prices received for the sale of the minerals and oil and natural gas. Any one or all of those estimates may be inaccurate, which could materially affect resulting future net cash flows and working capital.
We depend on our executive officers for critical management decisions and industry contacts but have no employment agreements or key person insurance with these individuals.
We are dependent upon the continued services of our executive officers. We do not have employment agreements with any of these individuals and do not carry key person insurance on their lives. The loss of the services of any of our executive officers, through incapacity or otherwise, could have a material adverse effect on our business and would require us to seek and retain other qualified personnel.
Item 2.
Item 2. Properties
Oil and Gas Properties
North West Shelf, Western Australia
In 2003 we acquired a 25%interest in two petroleum exploration permits, WA-322-P and WA-329-P, 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 Company 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 were agreed to 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.
In May 2004 the Exmouth Joint Venture sold WA-322-P to BHP Billiton Petroleum Limited ("BHP"). In return BHP agreed to acquire and process 3D seismic for the adjoining exploration permit WA-329-P, as well as an initial cash payment of $600,000, a deferred cash payment of $1,100,000 contingent upon BHP drilling a well in WA-322-P, and the grant of an overriding royalty interest ranging from 2.75% to 3.75% should there be future production from WA-322-P. By agreement, in July 2004 our 25% share of the initial cash proceeds from the BHP sale, $150,000, were offset against existing Year 2 seismic acquisition obligations pursuant to the Farmin Agreement and in return, we reacquired 10,000,000 shares of its Common Stock previously issued to Octanex NL and Strata Resources NL, the Company's Joint Venture partners, for no further outlay. At October 31, 2005, the 10,000,000 shares had been reconveyed and the investment in joint venture was reduced with a corresponding reduction in common stock and capital in excess of par value.
BHP informed the Exmouth Joint Venture that they had completed 635 km(2) of 3D seismic work on permit WA-322-P and 107 km(2) of 3D seismic work on permit WA-329-P in October, 2005.
On April 18, 2005 the Exmouth Joint Venture entered into a Letter of Offer from BHP Billiton Petroleum and Apache Northwest, Pty, Ltd. to acquire 100% interest in Exploration Permit WA-329-P. A Sales & Purchase Agreement, Royalty Agreement and Transfer of Title was executed July 8, 2005. Pursuant to the sale the buyers became responsible for the terms and conditions of the permit, a $400,000 cash payment, which was paid August 9, 2005, a deferred cash payment of $1,000,000 contingent upon the drilling of a well in WA-329-P, and the grant of an overriding royalty interest ranging from 2.75% to 3.75% should there be any future production.
Campbell County, Wyoming. The Company owns minor overriding royalty interests in three oil and gas properties located in the Powder River Basin of Campbell County, Wyoming. The Company 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, we have received nominal royalties from these properties, which are now principally non-producing.
Mining Properties
Madison County, Montana
In 1980 and 1981 we 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 Company 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 Company does not currently hold any unpatented mining claims. Since fiscal year 2000 the Company has actively pursued the sale of all of its patented mining claims in the Rochester Mining District. During fiscal year 2002 and 2003 we sold thirteen of such patented mining claims, together with all dump and tailings material, and we are pursuing the sale of the remaining eighteen patented claims in the District.
Titles
The Company 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 our mining claims are within a designated wilderness area.
Carr-Boyd, Western Australia
On December 6, 2006, our wholly owned subsidiary RMMI, together with Eagle Bay Resources N.L. ("EBR') and Audax Resources Ltd ("Audax"), both Australian Stock Exchange listed companies, entered into a Carr Boyd Farmin and Joint Venture Heads of Agreement in respect of an unincorporated joint venture (the "Carr Boyd Joint Venture") for the purpose of exploring and, if warranted, developing and mining certain tenements near Carr Boyd, West Australia, being Exploration Licence 31/491 and Exploration Licence 31/492.
Each of the parties to the Carr Boyd Agreement has the right to take in kind and separately dispose of, in proportion to its interest in the Carr Boyd Joint Venture, all minerals produced by the Carr Boyd Joint Venture. RMMI may contribute AU$1 million (the "Contribution") to the joint venture expenditure prior to September 30, 2010 (the "Earning Period"), but agreed to spend at least AU$100,000 in the first six months following the execution of the Carr Boyd Agreement.
RMMI also agreed to contribute at least AU$48,000 towards the joint venture expenditure for each permit year, being each consecutive 12 months from the date on which the exploration permits in respect of the Tenements were granted.
If RMMI fails to make the Contribution during the Earning Period, both RMMI and EBR will be deemed to have withdrawn from the Carr Boyd Joint Venture, subject to certain exceptions.
Once RMMI has made the Contribution during the Earning Period, RMMI and EBR will be deemed to have earned the following interests in the Carr Boyd Joint Venture: (i) 51% by RMMI and (ii) 19% by EBR. Until the Contribution has been made, RMMI and EBR have no interest in the Carr Boyd Joint Venture.
If Audax has not paid its participating interest within 30 days of completion by RMMI and/or EBR of a positive feasibility study sufficient to obtain project financing, Audax will be deemed to have withdrawn from the Carr Boyd Joint Venture.
RMMI will be the manager of the Carr Boyd Joint Venture while it is the sole contributor to the expenditure and will have sole authority for determining and carrying out all programs and budgets. Upon receipt of the Contribution from RMMI, RMMI's management of the Carr Boyd Joint Venture will be subject to oversight by a three-person Operating Committee, composed of one appointee of each of RMMI, EBR and Audax. Each appointee will have voting rights proportionate to the appointing entity's percentage interest in the Carr Boyd Joint Venture. Decisions of the Operating Committee will require the affirmative vote of appointees representing a majority in interest, except that any decision to cease mining operations that are providing a positive return will require a vote of appointees representing 75% in interest.
Until the receipt of the Contribution, RMMI shall pay costs in connection with the Tenements.
Following the receipt of the Contribution or the Earning Period, whichever is the earlier, RMMI, EBR and Audax will contribute to the costs of the Carr Boyd Joint Venture in proportion to their interests therein. Where any of RMMI, EBR and Audax elect not to meet certain payments required of them under the Carr Boyd Agreement, the non-paying entity's interest in the Carr Boyd Joint Venture will be diluted according to a dilution formula. Subject to certain exceptions, each of RMMI, EBR and Audax may withdraw from the Carr Boyd Joint Venture on 12 months' written notice and is required to assign to the others, pro-rata, all its interest for no consideration, if it withdraws from the EBR Joint Venture.
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 Company.
PART II
Item 5.
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of
(a) Market Information
The principal market on which our 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.
*High bid *Low bid --------- -------- 11/01/04 - 01/31/05 $.025 $.020 02/01/05 - 04/30/05 $.045 $.025 05/01/05 - 07/31/05 $.060 $.035 08/01/05 - 10/31/05 $.060 $.035 11/01/05 - 01/31/06 $.055 $.020 02/01/06 - 04/30/06 $.045 $.020 05/01/06 - 07/31/06 $.030 $.020 08/01/06 - 10/31/06 $.040 $.020
* The above bid and ask prices are estimated by the Company based on the limited trading of the Company's securities.
(b) Holders
The number of record holders of our common stock on October 31, 2006 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 permits 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 when declared 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 Company. Dividends shall be cumulative and are payable annually in cash, in shares of the Company'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 Company has gold bullion.
The number of shares of common stock of the Company 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 Company in amounts of at least $100,000 at any time subsequent to September 21, 1983, at a redemption price of $.15 per such share, plus 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 Company 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 Company 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 Company's capital stock.
Liquidation. In the event of any liquidation, dissolution or winding-up of the Company, the holders of the Preferred Stock shall be entitled to receive an amount equal to $.10 per such share plus any 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 Company 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
We have paid no dividends with respect to its common stock. There are no contractual restrictions on the Company's present or future ability to pay dividends. Our 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, 2006) 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 Company's option. Dividends of $.0l5 on the Preferred Stock were due on July 1, 1982, through 2006. We have not declared payment of these dividends ($10,486,163) and will not do so until such time as profitability permits payment thereof. It is uncertain when, if ever, the Company 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,
2002 2003 2004 2005 2006 ----- ----- ----- ----- ----- Operating revenues $ -- -- -- -- -- Interest expense -- -- -- -- -- Net income (loss) (123) (366) (53) (399) (28) Net income (loss) per share (*) (*) (*) (*) (*) Total assets 519 512 510 329 306 Long-term debt -- -- -- -- -- * 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).
(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 2002 and 88,212,000 in 2003, 100,712,000 in 2004 and 100,049,025 in 2005 and 99,901,080 in 2006).
Item 7.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Forward Looking Information and Associated Risks
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 the Exmouth Joint Venture reflects its 25% residual interest in two petroleum exploration permits, offshore Western Australia following the transactions previously referred to with BHP Billiton and Apache, including the deferred consideration and the royalty interest. 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 Company 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 we 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. Management 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 we 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, each of which Mr. E.G. Albers, a former member of the Company's board, is a major shareholder and director. We 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 km of new 2D seismic surveying.
In May 2004 the Exmouth Joint Venturers entered into and subsequently settled an agreement with a subsidiary of BHP Billiton Petroleum Limited ("BHP") for the sale of Exploration Permit WA-322-P to BHP. In return BHP agreed to the acquisition and processing of 3D seismic in the Joint Venture's adjacent exploration permit, WA-329-P, as well as a $600,000 initial cash payment, a deferred cash payment of $1,100,000 contingent upon BHP drilling a well in WA-322-P, and the granting of an overriding royalty interest ranging from 2.75 to 3.75 percent.
The Exmouth Joint Venture had acquired an extensive body of existing geological data available in relation to WA-322-P and WA-329 P, including a large amount of seismic data, together with pertinent existing reports and basic data collected by previous operators in the area. In addition, BHP agreed to acquire and process new seismic on behalf of the Joint Venture in WA-329-P as part of the terms of their acquisition of WA-322-P.
In July 2004 the our 25% share of the initial cash proceeds from the BHP sale, $150,000, were by agreement offset against existing Year 2 seismic acquisition obligations pursuant to the Farmin Agreement and in return we entered into an agreement to reacquire 10,000,000 shares of its Common Stock previously issued to Octanex NL and Strata Resources NL, the Company's Joint Venture partners, for no further outlay. At October 31, 2005, the 10,000,000 shares had been reconveyed and the investment in joint venture has been reduced with a corresponding reduction in common stock and capital in excess of par value. All subsequent seismic commitment costs in WA-329-P were agreed to be shared pro rata between the Exmouth Joint Venture Parties.
On April 18, 2005 the Exmouth Joint venture entered into a second transaction for the sale of WA-329-P to BHP Billiton and Apache Northwest Pty. Ltd. A Sales and Purchase Agreement, Royalty Agreement and Transfer of Title were executed July 8, 2005. The sale consists of the buyers becoming responsible for the terms and conditions of the WA-329-P permit, the payment of $400,000, which was received on August 9, 2005, a deferred cash payment of $1,000,000 contingent upon the drilling of a well, and the grant of an overriding royalty interest.
General and administrative expenses decreased during fiscal year 2006 as compared to fiscal year 2005 primarily due to the Registrant's lower level of activity.
The Company plans to continue its resource exploration activities. To advance these plans, the Company maintains a representative office in Melbourne, Australia and in Prescott, Arizona.
Liquidity and Capital Resources
The following table reflects the Company's working capital positions at October 2006 and 2005:
October 31, 2005 October 31, 2006 ---------------- ---------------- Current assets $ 71 $ 48 Current liabilities 261 46 Working capital(deficit) (190) 2 Current ratio .27 1.04
Since ceasing milling operations at its Rochester, Montana property in 1984, we have evaluated this property and other mineral properties, as well as having pursued waste management activities. The waste management assets have been sold and the Company 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 through the sale of the Company's common or preferred stock.
When the Company requires further funds for its exploration programs, then it is the Company's intention that the additional funds would be raised in a manner deemed most expedient by the Board of directors at the time, taking into account budgets, share market conditions and the interest of industry in co-participation in the company's programs. When additional funds for exploration are required, it is the company's plan that they may be raised by any one of, or a combination of, the following manners: stock placements, pro-rata issue to stockholders, and/or a further issue of stock to the public. Should these methods not be viable, or in the best interests of the stockholders, then it would be the Company's intention to meet its obligations by either partial sale of the Company's interests. Should funds be required for appraisal or development purposes the Company would, in addition, look to project loan finance.
The Company relies upon certain of its directors to perform the day to day administrative functions of the Company as well as those actions and decisions taken by the Board of Directors. As the Company's capital resources are limited, the board plans to remunerate certain of its directors by the issue of common stock in lieu of cash payments.
Item 7a.
Item 7a. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
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 and are presented in a separate section of this report following Part 1V.
Item 9.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9a.
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: Mark Anthony Muzzin AGE: 44
POSITION, TENURE AND BUSINESS EXPERIENCE:
President, Chief Executive Officer and Director since July 2006. Mr. Muzzin has had over 20 years of commercial experience and holds a B.A. degree from Latrobe University, Melbourne, Australia. His career commenced in the mid eighties for a London stock broking firm and has consulted for two of the major banks in Australia in the share custodian area. He has been involved in many capital raising activities for resource companies in Australia and is a consultant for various oil and gas companies. He is a director of a OTCC Bulletin Board Oil & Gas company and is a director of a number of Australian public and private companies. He is Managing Director of Goldsborough Limited and is a member of the Petroleum Exploration Society of Australia.
NAME: William Ray Hill AGE: 55
POSITION, TENURE AND BUSINESS EXPERIENCE:
Director, Mr. Hill founded Rocky Mountain Minerals, Inc. in 1978 and was President and director from 1978 to1995. 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: John B. Rubel AGE: 55
POSITION, TENURE AND BUSINESS EXPERIENCE:
Director of the Company 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: 64
Mr. DB Hill was appointed a director of the Company in October 2003 and is a Chartered Accountant and holds office as director or company secretary in a number of public companies.
NAME: Ernest Geoffrey Albers (RETIRED) AGE: 62
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 Moby Oil & Gas Limited, Octanex NL, Strata Resources NL and is a director of Bass Strait Oil Company Ltd 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 and a member of the APPEA Exploration Committee.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act, requires the Company's executive officers and directors, and persons who beneficially own more than ten percent of the Company's common stock, to file initial reports of ownership and reports of changes in ownership with the SEC. Executive officers, directors and greater than ten percent beneficial shareholders are required by SEC regulations to furnish the Company with copies of all Section 16(a) forms they file. Based upon a review of the copies of such forms furnished to the Company, the Company believes that during fiscal 2005 Forms 3, 4, and 5 were filed on a timely basis for the Company's executive officers and directors.
(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, 2006 was as follows:
Name of individual or number Capacities in Cash of persons in group which served compensation - -------------------- --------------- -------------- All executive Officers and/or 2006 $ 0 officers as a group directors 2005 $ 0 (two persons) 2004 $18,000
(a)(2) Bonuses and Deferred Compensation
None
(b)(1) Compensation Pursuant to Plans
The Company 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
As the Company's capital resources are limited, the board will remunerated certain of its directors by the issue of restricted common stock in lieu of cash payments.
(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 Company to be the beneficial owners of more than five percent of the Company's common stock and of the directors, and the officers and directors as a group as of October 31, 2006:
Nature of Percent Title of Name and address beneficial of class of beneficial owner ownership (1) class (5) - ------------- ---------------------- ----------------- -------- $.001 par Mark Muzzin -- -- value common 1A Ryeburne Avenue stock Hawthorn East 3123 Victoria, Australia
$.001 par Ernest Geoffrey Albers 30,593,400 (2)(6) 25.86% value common "Great Missenden" stock Albers Road Tallarook 3659 Victoria, Australia
$.001 par David Bruce Hill 15,050,000 (3)(6) 12.72% value common 500 Collins Street stock Melbourne, Australia
$.001 par John Rubel -- -- value common 519 Mesa Drive stock Prescott, AZ 86303
$.001 par Richard Bain 6,260,334 5.29% value common 5801 Lumberdale #243 stock Houston, Texas 77092
$.001 par Don Knaute 6,360,000 5.38% value common 19505 FM #149 stock Houston, Texas 77070
$.001 par William Ray Hill 10,797,556 (4) 9.13% value common 2480 North Tolemac stock Prescott, AZ 86305
Officers and directors 41,440,956 (6) 35.03% (four persons)
1) Unless indicated otherwise, the beneficial owners exercise sole voting and investment power.
2) Mr. Geoffrey Albers shares of common stock are owned directly and indirectly by Mr. Albers through companies he is affiliated with.
3) Mr. David Hill's shares of common stock includes 15,000,000 shares of common stock in which he holds a remote beneficial interest and 50,000 shares of common stock in which he holds a beneficial interest.
4) 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.
5) Percent of class is computed by dividing the number 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.
6) Includes the same 15,000,000 shares of common in which indirect interests are held by both Mr. E. G. Albers and Mr. D. B. Hill.
(c) Changes in Control
Not Applicable
Item 13. Certain Relationships and Related Transactions
(a) Transactions with Management and Others
In 2003 we entered into a Farm in Agreement with Octanex N. L. and Strata Resources N.L. whereby the Company acquired a 25% interest in two petroleum exploration permits by agreeing to meet certain seismic acquisition costs and 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 met a $969,550 funding requirement associated with the exploration permits. 10,000,000 shares of Restricted Common Stock were subsequently reassigned to the Company. Mr. Albers is a shareholder and director of both Octanex and Strata. Mr D. Hill is a shareholder and director of Strata.
(b) Certain Business Relationships
None other than disclosed in Item 13(a)
(c) Indebtedness of Management
None
(d) Transactions with Promoters
Not applicable.
Item 14. Principal Accountants Fees and Services
The following is a summary of the fees billed to us by Causey Demgen & Moore, Inc. for professional services rendered for the years ended October 31, 2006 and 2005:
Service 2006 2005 ------- -------
Audit Fees $12,100 $11,365 ------- ------- Audit Related Services 0 0 ------- ------- Tax Fees $ 1,230 $ 1,300 ------- ------- All Other Fees 0 0 ------- ------- Total $13,330 $12,665 ------- -------
AUDIT FEES: Audit fees for 2006 and 2005, were $12,100 and 11,365 respectively. These fees relate to assurance and related services by the principal accountant for the audit of the Company's annual financial statement and review of financial statements included in the registrant's Form 10Q for the years then ended.
AUDIT RELATED FEES: There were no fees billed for the years ended 2006 and 2005 for the audit or review of our financial statement that are not reported under AUDIT FEES.
TAX FEES: Consists of fees billed for professional services for tax compliance, and tax advise. These services include assistance regarding federal, and state tax compliance and consultation.
ALL OTHER FEES: There were no other fees billed for the years ended October 31, 2006 and 2005.
AUDIT COMMITTEE PRE-APPROVAL POLICIES AND PROCEDURES Due to the small size of our Board of Directors, the whole board acts as the Audit Committee. The board of Directors has implemented pre-approval policies and procedures related to the provision of audit and non-audit services. Under these procedures, the board of Directors pre-approves both the type of services to be provided by Causey Demgen & Moore, Inc. and the estimated fees related to these services.
PART IV
Item 15. Exhibits, Financial Statement Schedules
(a) Document List
1. Financial Statements
See index to financial statements and supporting schedules on page of this annual report on Form 10K.
2. Financial Statement Schedules
All other schedules for which provision is made in the applicable accounting regulations of the SEC are not required under the related instructions or are inapplicable and therefore have been omitted.
3. Exhibits Required by Securities and Exchange Commission Regulation S-K
The following exhibits are filed as part of the report or are incorporated by reference:
EXHIBITS
10.1 Carr Boyd Farmin and Joint Venture Heads of Agreement
10.2 Joint Venture Heads of Agreement Australian Nickel J.V.
31.1 Certification of Chief Executive and Chief Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002
32.1 Certification of Chief Executive and Chief Financial Officer under Section 906 of the Sarbanes-Oxley Act (18 U.S.C. Section 1350)
(b) Reports on Form 8-K
On the 7th of December we filed a report on Form 8-K regarding the Joint Venture Heads of Agreement with Eagle Bay Resources N.L and the Carr Boyd Farmin and Joint Venture Heads of Agreement.
(c) Exhibits
See (a) above
1. Financial Statements
Report of Independent Registered Public Accounting Firm
Balance Sheet - October 31, 2005 and 2006
Statement of Operations - Years Ended October 31, 2004, 2005 and 2006 and Cumulative Amounts from Inception (May 19, 1978) to October 31, 2006
Statements of Stockholders' Equity - For the Period from Inception (May 19, 1978) to October 31, 2006.
Statement of Cash Flows - Years ended October 31, 2004, 2005 and 2006 and Cumulative Amounts from Inception (May 19, 1978) to October 31, 2006.
Notes to Financial Statements
ROCKY MOUNTAIN MINERALS, INC. (A Development Stage Company)
FINANCIAL STATEMENTS
FOR THE YEARS ENDED OCTOBER 31, 2004, 2005 AND 2006
WITH
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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, 2006 and 2005, and the related statements of operations, stockholders' equity and cash flows for each of the three years in the period ended October 31, 2006. 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 the standards of the Public Company Accounting Oversight Board (United States). 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, 2006 and 2005, and the results of its operations and its cash flows for each of the three years in the period ended October 31, 2006, 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. 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.
/s/ CAUSEY DEMGEN & MOORE INC. ------------------------------ CAUSEY DEMGEN & MOORE INC.
Denver, Colorado January 24, 2007
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ROCKY MOUNTAIN MINERALS, INC. (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS October 31, 2004, 2005 and 2006
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 2003 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, 2006 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, 2004, 2005 and 2006
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, 2004, 2005 and 2006
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, 2006.
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, 2004, 2005 and 2006
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, WA-329-P and WA-322-P, 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 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, when taken with the previous issue aforesaid, to meet a $969,550 funding requirement associated with the interest.
In May 2004 the Exmouth Joint Venture sold exploration permit WA-322-P to BHP Billiton Petroleum Limited ("BHP"). In return BHP agreed to the acquisition and processing of 3D seismic in the Joint Venture's adjacent exploration permit, WA- 329-P, as well as a $600,000 initial cash payment, a deferred cash payment of $1,100,000 contingent upon BHP drilling a well in WA-322-P, and granting an overriding royalty interest ranging from 2.75 to 3.75 percent on WA-322-P.
In July 2004 the Registrant's 25% share of the initial cash proceeds from the BHP sale, $150,000, were offset against existing Year 2 seismic acquisition obligations pursuant to the Farmin Agreement. As a term of this arrangement the Registrant entered into an agreement to reacquire 10,000,000 shares of its Common Stock previously issued to Octanex NL and Strata Resources NL, the Company's Joint Venture partners, for no further outlay.
ROCKY MOUNTAIN MINERALS, INC. (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS October 31, 2003, 2004 and 2005
In July 2005 the Exmouth Joint Venture finalized a second transaction for the sale of WA-329-P to BHP Billiton Petroleum and Apache Northwest Pty. Ltd. (Apache). The sale consists of the buyers becoming responsible for the terms and conditions of the WA-329-P permit, the payment of $400,000, which was received on August 9, 2005,a deferred cash payment of $1,000,000 contingent upon the drilling of a well, and the grant of an overriding royally interest ranging from 2.75 to 3.75 percent on WA-329-P.
The only remaining assets, as of October 31, 2006, of the Exmouth Joint Venture are the residual rights pursuant to the July 2004 sale of WA-322-P to BHP and pursuant to the July 2005 sale of WA-329-P to BHP and Apache.
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. Note payable-related party
In May 2004, the Company signed a Promissory Note Agreement with Great Missenden Holdings, a shareholder, whereby the Company borrowed $22,000 from Great Missenden Holdings. The note bears interest of 10% per annum and is payable on or before May 1, 2007. The note is convertible into shares of the Company's Common Stock at any time after 18 months on the basis of 5,000 shares of Common Stock for every $1,000. The Company has the right to repay in full at any time during the first 18 months.
6. 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, 2006 amount to $10,486,163 ($.240 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.
ROCKY MOUNTAIN MINERALS, INC. (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS October 31, 2004, 2005 and 2006
7. 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, 2006.
8. Income taxes
At October 31, 2006, the Company had net operating loss carryforwards for tax purposes of approximately $1,255,000. If not used to offset future taxable income, the carryforwards will expire as follows:
Fiscal Year of expiration Amount $ ------------------------- ----------
2007 98,000 2008 33,000 2010 108,000 2011 25,000 2017 125,000 2019 29,000 2020 35,000 2021 89,000 2022 135,000 2023 98,000 2024 53,000 2025 399,000 2026 28,000
At October 31, 2005 and 2006, total deferred tax assets and valuation allowances are as follows:
Deferred taxes resulting 2005 2006 ---------- ------------ Net operating loss $ 457,000 $ 439,000 Write-down of assets held 612,000 612,000 ---------- ------------
Total 1,069,000 1,051,000 ========== ============
Less: valuation allowance (1,069,000) (1,051,000) ---------- ------------
$ -- $ -- ========== ============
ROCKY MOUNTAIN MINERALS, INC. (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS October 31, 2004, 2005 and 2006
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.
9. 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, 100,712,000 shares in 2004, 100,049,025 in 2005 and 99,901,080 in 2006 and 66,300,941 shares for the period from May 19, 1978 through October 31, 2006.
10. 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.
11. 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, 2006 were $24,000 in 2004, and $0 in 2005 and 2006.
During 2005, the Company issued an aggregate of 6,000,000 shares of its common stock to two officers of the Company for prior services valued at $180,000. In 2006, the Company issued an aggregate of 4,000,000 shares of common stock to two officers of the Company for services during 2006 valued at $220,000.
ROCKY MOUNTAIN MINERALS, INC. (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS October 31, 2004, 2005 and 2006
12. Recently Issued Accounting Pronouncements
In December 2004, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standard ("SFAS") No. 153, "Exchanges of Nonmonetary Assets," ("SFAS No. 153") an amendment to Accounting Principles Board ("APB") Opinion No. 29 ("Opinion No. 29"), "Accounting for Nonmonetary Transactions". Statement No. 153 eliminates certain differences in the guidance in Opinion No. 29 as compared to the guidance contained in standards issued by the International Accounting Standards Board. The amendment to Opinion No. 29 eliminates the fair value exception for nonmonetary exchanges of similar productive assets and replaces it with a general exception for exchanges of nonmonetary assets that do not have commercial substance. Such an exchange has commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange. SFAS No. 153 is effective for nonmonetary asset exchanges occurring in periods beginning after June 15, 2005. Earlier application is permitted for nonmonetary asset exchanges occurring in periods beginning after December 16, 2004. The adoption of SFAS No. 153 did not have a material impact on the Company's financial statements.
In May 2005, the FASB issued SFAS No. 154, "Accounting Changes and Error Corrections - a replacement of APB Opinion No. 20 and FASB Statement No. 3." SFAS No. 154 replaces APB Opinion ("APB") No. 20, "Accounting Changes", and SFAS No. 3, "Reporting Accounting Changes in Interim Financial Statements," and changes the requirements for the accounting for and reporting of a change in accounting principle. SFAS No. 154 will apply to all voluntary changes in accounting principle as well as to changes required by an accounting pronouncement in the unusual instance that the pronouncement does not include specific transition provisions. APB No. 20 previously required that most voluntary changes in accounting principle be recognized by including in net income of the period of the change the cumulative effect of changing to the new accounting principle.
SFAS No. 154 requires retrospective application to prior periods' financial statements of changes in accounting principle, unless it is impracticable to determine either the period-specific effects or the cumulative effect of the change. When it is impracticable to determine the period-specific effects of an accounting change on one or more individual prior periods presented, SFAS No. 154 requires that the new accounting principle be applied to the balances of assets and liabilities as of the beginning of the earliest period for which retrospective application is practicable and that a corresponding adjustment be made to the opening balance of retained earnings (or other appropriate components of equity or net assets in the statement of financial position) for that period rather than being reported in an income statement. When it is impracticable to determine the cumulative effect of applying a change in accounting principle to all prior periods, SFAS No. 154 requires that the new accounting principle be applied as if it were adopted prospectively from the earliest date practicable. SFAS No. 154 carries forward without change the guidance contained in APB Opinion No. 20 for reporting the correction of an error in previously issued financial statements and a change in accounting estimate, and also the guidance in APB No. 20 requiring justification of a change in accounting principle on the basis of preferability. SFAS No. 154 is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. Early adoption is permitted for accounting changes and corrections of errors made in fiscal years beginning after the date SFAS No. 154 was issued. The Company presently does not believe that the adoption of the provisions of SFAS No. 154 will have a material affect on its financial statements.
In December 2004, the FASB issued SFAS No. 123 (Revised 2004), "Share Based Payment," ("SFAS No. 123 (R)") which eliminates the use of APB Opinion No. 25 and will require the Company to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. That cost will be recognized over the period during which an employee is required to provide service in exchange for the reward (the requisite service period). No compensation cost is recognized for equity instruments for which employees do not render the requisite service. The grant-date fair value of director/employee share options; share grants and similar instruments will be estimated using option-pricing models adjusted for the unique characteristics of those instruments. SFAS No. 123 (R) must be applied to all shares and options granted or modified after its effective date and also to recognize the cost associated with the portion of any share or option awards made before its effective date for with the associated service has not been rendered as of its effective date.
ROCKY MOUNTAIN MINERALS, INC. (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS October 31, 2004, 2005 and 2006
On April 14, 2005, the U.S. Securities and Exchange Commission announced that the effective date of SFAS No. 123(R) is deferred for calendar year companies until the beginning of 2006.
In March 2005, the FASB issued FASB Interpretation ("FIN") No. 47, "Accounting for Conditional Asset Retirement Obligations" ("FIN No. 47"). FIN No. 47 clarifies that the term conditional asset retirement obligation as used in FASB Statement No. 143, "Accounting for Asset Retirement Obligations," refers to a legal obligation to perform an asset retirement activity in which the timing and (or) method of settlement are conditional on a future event that may or may not be within the control of the entity. The obligation to perform the asset retirement activity is unconditional even though uncertainty exists about the timing and (or) method of settlement. Uncertainty about the timing and/or method of settlement of a conditional asset retirement obligation should be factored into the measurement of the liability when sufficient information exists. This interpretation also clarifies when an entity would have sufficient information to reasonably estimate the fair value of an asset retirement obligation. Fin No. 47 is effective no later than the end of fiscal years ending after December 15, 2005 (December 31, 2005 for calendar-year companies). Retrospective application of interim financial information is permitted but is not required. Management does not expect adoption of FIN No. 47 to have a material impact on the Company's financial statements.
SFAS 155, "Accounting for Certain Hybrid Financial Instruments--an amendment of FASB Statements No. 133 and 140" (`SFAS No. 155"). This Statement shall be effective for all financial instruments acquired, issued, or subject to a remeasurement (new basis) event occurring after the beginning of an entity's first fiscal year that begins after September 15, 2006. The fair value election provided for in paragraph 4(c) of this Statement may also be applied upon adoption of this Statement for hybrid financial instruments that had been bifurcated under paragraph 12 of Statement 133 prior to the adoption of this Statement. Earlier adoption is permitted as of the beginning of an entity's fiscal year, provided the entity has not yet issued financial statements, including financial statements for any interim period, for that fiscal year. Management does not expect adoption of SFAS No. 155 to have a material impact on the Company's financial statements.
SFAS 157, "Fair Value Measurements", defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. This Statement applies under other accounting pronouncements that require or permit fair value measurements, the Board having previously concluded in those accounting pronouncements that fair value is the relevant measurement attribute. Accordingly, this Statement does not require any new fair value measurements. However, for some entities, the application of this Statement will change current practice. Management has not evaluated the impact of this statement.
In June 2005, the Emerging Issues Task Force reached a consensus on Issue No. 05-6 ("EITF No. 05-6"), "Determining the Amortization Period for Leasehold Improvements Purchased after Lease Inception or Acquired in a Business Combination." EITF No. 05-6 clarifies that the amortization period for leasehold improvements acquired in a business combination or placed in service significantly after and not contemplated at or near the beginning of the lease term should be amortized over the shorter of the useful life of the assets or a term that includes the required lease periods and renewals that are reasonably assured of exercise at the time of the acquisition. EITF No. 05-6 is to be applied prospectively to leasehold improvements purchased or acquired in reporting periods beginning after June 29, 2005. The adoption of EITF No. 05-6 did not have a material impact on the Company's consolidated financial statements.
In June 2006, the FASB issued FASB Interpretation ("FIN") No. 48, "Accounting for Uncertainty in Income Taxes - an Interpretation of FASB Statement No. 109" ("FIN No. 48"). FIN No. 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise's financial statements in accordance with FASB Statement No. 109, "Accounting for Income Taxes". Fin No. 48 is effective for fiscal years beginning after December 15, 2005. Management does not expect adoption of FIN No. 48 to have a material impact on the Company's financial statements.
ROCKY MOUNTAIN MINERALS, INC. (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS October 31, 2004, 2005 and 2006
13. Subsequent Events
Since the period of this report, on December 6, 2006, RMMI Australia Pty Ltd, our wholly-owned subsidiary ("RMMI"), and Eagle Bay Resources, N.L., an Australian Stock Exchange listed company ("EBR"), entered into a Joint Venture Heads of Agreement in respect of an unincorporated joint venture (the "Australian Nickel Joint Venture"), effective as of November 1, 2006, for purposes of exploring and, if warranted, developing and mining sulphide hosted nickel in Australia.
On December 6, 2006, RMMI, EBR and Audax Resources Ltd, an Australian Stock Exchange listed company ("Audax"), entered into a Carr Boyd Farmin and Joint Venture Heads of Agreement in respect of an unincorporated joint venture (the "Carr Boyd Joint Venture") for the purpose of exploring and, if warranted, developing and mining certain tenements near Carr Boyd, West Australia.
Each of the parties to the Carr Boyd Agreement has the right to take in kind and separately dispose of, in proportion to its interest in the Carr Boyd Joint Venture, all minerals produced by the Carr Boyd Joint Venture. RMMI may contribute AU$1 million (the "Contribution") to the joint venture expenditure prior to September 30, 2010 (the "Earning Period"), but agreed to spend at least AU$100,000 in the first six months following the execution of the Carr Boyd Agreement.
RMMI also agreed to contribute at least AU$48,000 towards the joint venture expenditure for each permit year, being each consecutive 12 months from the date on which the exploration permits in respect of the Tenements were granted.
If RMMI fails to make the Contribution during the Earning Period, both RMMI and EBR will be deemed to have withdrawn from the Carr Boyd Joint Venture, subject to certain exceptions.
Signatures
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Rocky Mountain Minerals, Inc
By: /s/ Mark A. Muzzin ------------------------- Mark A. Muzzin, President
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.
Name Title Date
/s/ Mark A Muzzin President, Treasurer, Chief 25 January, 2007 - ----------------- Mark A. Muzzin Financial Officer and Director
/s/David B. Hill Director 25 January, 2007 - ------------------ David B. Hill
/s/ W. Ray Hill Director 25 January, 2007 - ------------------ W. Ray Hill
/s/ John B. Rubel Director 25 January, 2007 - ------------------ John B. Rubel
Item 13. Certain Relationships and Related Transactions
(a) Transactions with Management and Others
In 2003 we entered into a Farm in Agreement with Octanex N. L. and Strata Resources N.L. whereby the Company acquired a 25% interest in two petroleum exploration permits by agreeing to meet certain seismic acquisition costs and 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 met a $969,550 funding requirement associated with the exploration permits. 10,000,000 shares of Restricted Common Stock were subsequently reassigned to the Company. Mr. Albers is a shareholder and director of both Octanex and Strata. Mr D. Hill is a shareholder and director of Strata.
(b) Certain Business Relationships
None other than disclosed in Item 13(a)
(c) Indebtedness of Management
None
(d) Transactions with Promoters
Not applicable.
Item 14.
Item 14. Principal Accountants Fees and Services
The following is a summary of the fees billed to us by Causey Demgen & Moore, Inc. for professional services rendered for the years ended October 31, 2006 and 2005:
Service 2006 2005 ------- -------
Audit Fees $12,100 $11,365 ------- ------- Audit Related Services 0 0 ------- ------- Tax Fees $ 1,230 $ 1,300 ------- ------- All Other Fees 0 0 ------- ------- Total $13,330 $12,665 ------- -------
AUDIT FEES: Audit fees for 2006 and 2005, were $12,100 and 11,365 respectively. These fees relate to assurance and related services by the principal accountant for the audit of the Company's annual financial statement and review of financial statements included in the registrant's Form 10Q for the years then ended.
AUDIT RELATED FEES: There were no fees billed for the years ended 2006 and 2005 for the audit or review of our financial statement that are not reported under AUDIT FEES.
TAX FEES: Consists of fees billed for professional services for tax compliance, and tax advise. These services include assistance regarding federal, and state tax compliance and consultation.
ALL OTHER FEES: There were no other fees billed for the years ended October 31, 2006 and 2005.
AUDIT COMMITTEE PRE-APPROVAL POLICIES AND PROCEDURES Due to the small size of our Board of Directors, the whole board acts as the Audit Committee. The board of Directors has implemented pre-approval policies and procedures related to the provision of audit and non-audit services. Under these procedures, the board of Directors pre-approves both the type of services to be provided by Causey Demgen & Moore, Inc. and the estimated fees related to these services.
PART IV
Item 15.
Item 15. Exhibits, Financial Statement Schedules
(a) Document List
1. Financial Statements
See index to financial statements and supporting schedules on page of this annual report on Form 10K.
2. Financial Statement Schedules
All other schedules for which provision is made in the applicable accounting regulations of the SEC are not required under the related instructions or are inapplicable and therefore have been omitted.
3. Exhibits Required by Securities and Exchange Commission Regulation S-K
The following exhibits are filed as part of the report or are incorporated by reference:
EXHIBITS
10.1 Carr Boyd Farmin and Joint Venture Heads of Agreement
10.2 Joint Venture Heads of Agreement Australian Nickel J.V.
31.1 Certification of Chief Executive and Chief Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002
32.1 Certification of Chief Executive and Chief Financial Officer under Section 906 of the Sarbanes-Oxley Act (18 U.S.C. Section 1350)
(b) Reports on Form 8-K
On the 7th of December we filed a report on Form 8-K regarding the Joint Venture Heads of Agreement with Eagle Bay Resources N.L and the Carr Boyd Farmin and Joint Venture Heads of Agreement.
(c) Exhibits
See (a) above
1. Financial Statements
Report of Independent Registered Public Accounting Firm
Balance Sheet - October 31, 2005 and 2006
Statement of Operations - Years Ended October 31, 2004, 2005 and 2006 and Cumulative Amounts from Inception (May 19, 1978) to October 31, 2006
Statements of Stockholders' Equity - For the Period from Inception (May 19, 1978) to October 31, 2006.
Statement of Cash Flows - Years ended October 31, 2004, 2005 and 2006 and Cumulative Amounts from Inception (May 19, 1978) to October 31, 2006.
Notes to Financial Statements
ROCKY MOUNTAIN MINERALS, INC. (A Development Stage Company)
FINANCIAL STATEMENTS
FOR THE YEARS ENDED OCTOBER 31, 2004, 2005 AND 2006
WITH
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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, 2006 and 2005, and the related statements of operations, stockholders' equity and cash flows for each of the three years in the period ended October 31, 2006. 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 the standards of the Public Company Accounting Oversight Board (United States). 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, 2006 and 2005, and the results of its operations and its cash flows for each of the three years in the period ended October 31, 2006, 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. 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.
/s/ CAUSEY DEMGEN & MOORE INC. ------------------------------ CAUSEY DEMGEN & MOORE INC.
Denver, Colorado January 24, 2007
See accompanying notes
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ROCKY MOUNTAIN MINERALS, INC. (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS October 31, 2004, 2005 and 2006
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 2003 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, 2006 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, 2004, 2005 and 2006
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, 2004, 2005 and 2006
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, 2006.
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, 2004, 2005 and 2006
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, WA-329-P and WA-322-P, 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 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, when taken with the previous issue aforesaid, to meet a $969,550 funding requirement associated with the interest.
In May 2004 the Exmouth Joint Venture sold exploration permit WA-322-P to BHP Billiton Petroleum Limited ("BHP"). In return BHP agreed to the acquisition and processing of 3D seismic in the Joint Venture's adjacent exploration permit, WA- 329-P, as well as a $600,000 initial cash payment, a deferred cash payment of $1,100,000 contingent upon BHP drilling a well in WA-322-P, and granting an overriding royalty interest ranging from 2.75 to 3.75 percent on WA-322-P.
In July 2004 the Registrant's 25% share of the initial cash proceeds from the BHP sale, $150,000, were offset against existing Year 2 seismic acquisition obligations pursuant to the Farmin Agreement. As a term of this arrangement the Registrant entered into an agreement to reacquire 10,000,000 shares of its Common Stock previously issued to Octanex NL and Strata Resources NL, the Company's Joint Venture partners, for no further outlay.
ROCKY MOUNTAIN MINERALS, INC. (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS October 31, 2003, 2004 and 2005
In July 2005 the Exmouth Joint Venture finalized a second transaction for the sale of WA-329-P to BHP Billiton Petroleum and Apache Northwest Pty. Ltd. (Apache). The sale consists of the buyers becoming responsible for the terms and conditions of the WA-329-P permit, the payment of $400,000, which was received on August 9, 2005,a deferred cash payment of $1,000,000 contingent upon the drilling of a well, and the grant of an overriding royally interest ranging from 2.75 to 3.75 percent on WA-329-P.
The only remaining assets, as of October 31, 2006, of the Exmouth Joint Venture are the residual rights pursuant to the July 2004 sale of WA-322-P to BHP and pursuant to the July 2005 sale of WA-329-P to BHP and Apache.
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. Note payable-related party
In May 2004, the Company signed a Promissory Note Agreement with Great Missenden Holdings, a shareholder, whereby the Company borrowed $22,000 from Great Missenden Holdings. The note bears interest of 10% per annum and is payable on or before May 1, 2007. The note is convertible into shares of the Company's Common Stock at any time after 18 months on the basis of 5,000 shares of Common Stock for every $1,000. The Company has the right to repay in full at any time during the first 18 months.
6. 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, 2006 amount to $10,486,163 ($.240 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.
ROCKY MOUNTAIN MINERALS, INC. (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS October 31, 2004, 2005 and 2006
7. 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, 2006.
8. Income taxes
At October 31, 2006, the Company had net operating loss carryforwards for tax purposes of approximately $1,255,000. If not used to offset future taxable income, the carryforwards will expire as follows:
Fiscal Year of expiration Amount $ ------------------------- ----------
2007 98,000 2008 33,000 2010 108,000 2011 25,000 2017 125,000 2019 29,000 2020 35,000 2021 89,000 2022 135,000 2023 98,000 2024 53,000 2025 399,000 2026 28,000
At October 31, 2005 and 2006, total deferred tax assets and valuation allowances are as follows:
Deferred taxes resulting 2005 2006 ---------- ------------ Net operating loss $ 457,000 $ 439,000 Write-down of assets held 612,000 612,000 ---------- ------------
Total 1,069,000 1,051,000 ========== ============
Less: valuation allowance (1,069,000) (1,051,000) ---------- ------------
$ -- $ -- ========== ============
ROCKY MOUNTAIN MINERALS, INC. (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS October 31, 2004, 2005 and 2006
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.
9. 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, 100,712,000 shares in 2004, 100,049,025 in 2005 and 99,901,080 in 2006 and 66,300,941 shares for the period from May 19, 1978 through October 31, 2006.
10. 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.
11. 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, 2006 were $24,000 in 2004, and $0 in 2005 and 2006.
During 2005, the Company issued an aggregate of 6,000,000 shares of its common stock to two officers of the Company for prior services valued at $180,000. In 2006, the Company issued an aggregate of 4,000,000 shares of common stock to two officers of the Company for services during 2006 valued at $220,000.
ROCKY MOUNTAIN MINERALS, INC. (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS October 31, 2004, 2005 and 2006
12. Recently Issued Accounting Pronouncements
In December 2004, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standard ("SFAS") No. 153, "Exchanges of Nonmonetary Assets," ("SFAS No. 153") an amendment to Accounting Principles Board ("APB") Opinion No. 29 ("Opinion No. 29"), "Accounting for Nonmonetary Transactions". Statement No. 153 eliminates certain differences in the guidance in Opinion No. 29 as compared to the guidance contained in standards issued by the International Accounting Standards Board. The amendment to Opinion No. 29 eliminates the fair value exception for nonmonetary exchanges of similar productive assets and replaces it with a general exception for exchanges of nonmonetary assets that do not have commercial substance. Such an exchange has commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange. SFAS No. 153 is effective for nonmonetary asset exchanges occurring in periods beginning after June 15, 2005. Earlier application is permitted for nonmonetary asset exchanges occurring in periods beginning after December 16, 2004. The adoption of SFAS No. 153 did not have a material impact on the Company's financial statements.
In May 2005, the FASB issued SFAS No. 154, "Accounting Changes and Error Corrections - a replacement of APB Opinion No. 20 and FASB Statement No. 3." SFAS No. 154 replaces APB Opinion ("APB") No. 20, "Accounting Changes", and SFAS No. 3, "Reporting Accounting Changes in Interim Financial Statements," and changes the requirements for the accounting for and reporting of a change in accounting principle. SFAS No. 154 will apply to all voluntary changes in accounting principle as well as to changes required by an accounting pronouncement in the unusual instance that the pronouncement does not include specific transition provisions. APB No. 20 previously required that most voluntary changes in accounting principle be recognized by including in net income of the period of the change the cumulative effect of changing to the new accounting principle.
SFAS No. 154 requires retrospective application to prior periods' financial statements of changes in accounting principle, unless it is impracticable to determine either the period-specific effects or the cumulative effect of the change. When it is impracticable to determine the period-specific effects of an accounting change on one or more individual prior periods presented, SFAS No. 154 requires that the new accounting principle be applied to the balances of assets and liabilities as of the beginning of the earliest period for which retrospective application is practicable and that a corresponding adjustment be made to the opening balance of retained earnings (or other appropriate components of equity or net assets in the statement of financial position) for that period rather than being reported in an income statement. When it is impracticable to determine the cumulative effect of applying a change in accounting principle to all prior periods, SFAS No. 154 requires that the new accounting principle be applied as if it were adopted prospectively from the earliest date practicable. SFAS No. 154 carries forward without change the guidance contained in APB Opinion No. 20 for reporting the correction of an error in previously issued financial statements and a change in accounting estimate, and also the guidance in APB No. 20 requiring justification of a change in accounting principle on the basis of preferability. SFAS No. 154 is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. Early adoption is permitted for accounting changes and corrections of errors made in fiscal years beginning after the date SFAS No. 154 was issued. The Company presently does not believe that the adoption of the provisions of SFAS No. 154 will have a material affect on its financial statements.
In December 2004, the FASB issued SFAS No. 123 (Revised 2004), "Share Based Payment," ("SFAS No. 123 (R)") which eliminates the use of APB Opinion No. 25 and will require the Company to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. That cost will be recognized over the period during which an employee is required to provide service in exchange for the reward (the requisite service period). No compensation cost is recognized for equity instruments for which employees do not render the requisite service. The grant-date fair value of director/employee share options; share grants and similar instruments will be estimated using option-pricing models adjusted for the unique characteristics of those instruments. SFAS No. 123 (R) must be applied to all shares and options granted or modified after its effective date and also to recognize the cost associated with the portion of any share or option awards made before its effective date for with the associated service has not been rendered as of its effective date.
ROCKY MOUNTAIN MINERALS, INC. (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS October 31, 2004, 2005 and 2006
On April 14, 2005, the U.S. Securities and Exchange Commission announced that the effective date of SFAS No. 123(R) is deferred for calendar year companies until the beginning of 2006.
In March 2005, the FASB issued FASB Interpretation ("FIN") No. 47, "Accounting for Conditional Asset Retirement Obligations" ("FIN No. 47"). FIN No. 47 clarifies that the term conditional asset retirement obligation as used in FASB Statement No. 143, "Accounting for Asset Retirement Obligations," refers to a legal obligation to perform an asset retirement activity in which the timing and (or) method of settlement are conditional on a future event that may or may not be within the control of the entity. The obligation to perform the asset retirement activity is unconditional even though uncertainty exists about the timing and (or) method of settlement. Uncertainty about the timing and/or method of settlement of a conditional asset retirement obligation should be factored into the measurement of the liability when sufficient information exists. This interpretation also clarifies when an entity would have sufficient information to reasonably estimate the fair value of an asset retirement obligation. Fin No. 47 is effective no later than the end of fiscal years ending after December 15, 2005 (December 31, 2005 for calendar-year companies). Retrospective application of interim financial information is permitted but is not required. Management does not expect adoption of FIN No. 47 to have a material impact on the Company's financial statements.
SFAS 155, "Accounting for Certain Hybrid Financial Instruments--an amendment of FASB Statements No. 133 and 140" (`SFAS No. 155"). This Statement shall be effective for all financial instruments acquired, issued, or subject to a remeasurement (new basis) event occurring after the beginning of an entity's first fiscal year that begins after September 15, 2006. The fair value election provided for in paragraph 4(c) of this Statement may also be applied upon adoption of this Statement for hybrid financial instruments that had been bifurcated under paragraph 12 of Statement 133 prior to the adoption of this Statement. Earlier adoption is permitted as of the beginning of an entity's fiscal year, provided the entity has not yet issued financial statements, including financial statements for any interim period, for that fiscal year. Management does not expect adoption of SFAS No. 155 to have a material impact on the Company's financial statements.
SFAS 157, "Fair Value Measurements", defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. This Statement applies under other accounting pronouncements that require or permit fair value measurements, the Board having previously concluded in those accounting pronouncements that fair value is the relevant measurement attribute. Accordingly, this Statement does not require any new fair value measurements. However, for some entities, the application of this Statement will change current practice. Management has not evaluated the impact of this statement.
In June 2005, the Emerging Issues Task Force reached a consensus on Issue No. 05-6 ("EITF No. 05-6"), "Determining the Amortization Period for Leasehold Improvements Purchased after Lease Inception or Acquired in a Business Combination." EITF No. 05-6 clarifies that the amortization period for leasehold improvements acquired in a business combination or placed in service significantly after and not contemplated at or near the beginning of the lease term should be amortized over the shorter of the useful life of the assets or a term that includes the required lease periods and renewals that are reasonably assured of exercise at the time of the acquisition. EITF No. 05-6 is to be applied prospectively to leasehold improvements purchased or acquired in reporting periods beginning after June 29, 2005. The adoption of EITF No. 05-6 did not have a material impact on the Company's consolidated financial statements.
In June 2006, the FASB issued FASB Interpretation ("FIN") No. 48, "Accounting for Uncertainty in Income Taxes - an Interpretation of FASB Statement No. 109" ("FIN No. 48"). FIN No. 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise's financial statements in accordance with FASB Statement No. 109, "Accounting for Income Taxes". Fin No. 48 is effective for fiscal years beginning after December 15, 2005. Management does not expect adoption of FIN No. 48 to have a material impact on the Company's financial statements.
ROCKY MOUNTAIN MINERALS, INC. (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS October 31, 2004, 2005 and 2006
13. Subsequent Events
Since the period of this report, on December 6, 2006, RMMI Australia Pty Ltd, our wholly-owned subsidiary ("RMMI"), and Eagle Bay Resources, N.L., an Australian Stock Exchange listed company ("EBR"), entered into a Joint Venture Heads of Agreement in respect of an unincorporated joint venture (the "Australian Nickel Joint Venture"), effective as of November 1, 2006, for purposes of exploring and, if warranted, developing and mining sulphide hosted nickel in Australia.
On December 6, 2006, RMMI, EBR and Audax Resources Ltd, an Australian Stock Exchange listed company ("Audax"), entered into a Carr Boyd Farmin and Joint Venture Heads of Agreement in respect of an unincorporated joint venture (the "Carr Boyd Joint Venture") for the purpose of exploring and, if warranted, developing and mining certain tenements near Carr Boyd, West Australia.
Each of the parties to the Carr Boyd Agreement has the right to take in kind and separately dispose of, in proportion to its interest in the Carr Boyd Joint Venture, all minerals produced by the Carr Boyd Joint Venture. RMMI may contribute AU$1 million (the "Contribution") to the joint venture expenditure prior to September 30, 2010 (the "Earning Period"), but agreed to spend at least AU$100,000 in the first six months following the execution of the Carr Boyd Agreement.
RMMI also agreed to contribute at least AU$48,000 towards the joint venture expenditure for each permit year, being each consecutive 12 months from the date on which the exploration permits in respect of the Tenements were granted.
If RMMI fails to make the Contribution during the Earning Period, both RMMI and EBR will be deemed to have withdrawn from the Carr Boyd Joint Venture, subject to certain exceptions.
Signatures
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Rocky Mountain Minerals, Inc
By: /s/ Mark A. Muzzin ------------------------- Mark A. Muzzin, President
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.
Name Title Date
/s/ Mark A Muzzin President, Treasurer, Chief 25 January, 2007 - ----------------- Mark A. Muzzin Financial Officer and Director
/s/David B. Hill Director 25 January, 2007 - ------------------ David B. Hill
/s/ W. Ray Hill Director 25 January, 2007 - ------------------ W. Ray Hill
/s/ John B. Rubel Director 25 January, 2007 - ------------------ John B. Rubel