U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2002
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to
Commission File No. 333-69006
Woodland Hatchery, Inc.
(Exact name of small business issuer as specified in its charter)
| Nevada |
(State or other jurisdiction of incorporation or organization)
(IRS Employer Identification No.)
1442 Lower River Road, Woodland, UT 84036
(Address of principal executive offices)
(801) 367-7197
(Issuer's telephone number)
Not Applicable
(Former name, address and fiscal year, if changed since last report)
Check whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [ X] No [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Check whether the registrant has filed all documents and reports required to be filed by Sections 12, 13, or 15(d) of the Exchange Act subsequent to the distribution of securities under a plan confirmed by a court. Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
State the number of shares outstanding of each of the issuer's classes of common equity, as of March 31, 2002: 11,395,000 shares of common stock.
Transitional Small Business Format: Yes [ ] No [ X ]
FORM 10-QSB
WOODLAND HATCHERY, INC.
(A Development Stage Company)
INDEX
| PART I. | Financial Information | Page |
| Item 1. Financial Statements (unaudited) | 3 | |
| Unaudited Condensed Balance Sheet - March 31, 2002 | 4 | |
| Unaudited Statements of Operations for the Three Months Ended March 31, 2002 and 2001 | 5 | |
| Unaudited Statements of Cash Flows for the Three Months Ended March 31, 2002 and 2001 | 6 | |
| Notes to Unaudited Financial Statements | 7 | |
| Item 2. Management's Discussion and Analysis of Financial Condition or Plan of Operation | 8 | |
| PART II. | Other Information | |
| Item 2. Use of Proceeds | 11 | |
| Item 6. Exhibits and Reports on Form 8-K | 12 | |
| Signatures | 12 |
(Inapplicable items have been omitted)
PART I.
Financial Information
Item 1. Financial Statements (unaudited)
In the opinion of management, the accompanying unaudited financial statements included in this Form 10-QSB reflect all adjustments (consisting only of normal recurring accruals) necessary for a fair presentation of the results of operations for the periods presented. The results of operations for the periods presented are not necessarily indicative of the results to be expected for the full year.
| WOODLAND HATCHERY, INC. |
| (A Development Stage Company) |
| UNAUDITED BALANCE SHEET |
| March 31, 2002 |
| ASSETS | |
| Current assets: | |
| Cash | $28,370 |
| Inventories | 746 |
| __________ | |
| Total current assets | 29,116 |
| Property and equipment, net | 17,895 |
| __________ | |
| Total assets | $47,011 |
| ========= | |
| LIABILITIES AND STOCKHOLDERS' EQUITY | |
| Current liabilities - accounts payable | $ 2,580 |
| Commitments | - |
| Stockholders' equity: | |
| Preferred stock, $.001 par value, 5,000,000 shares authorized, no shares issued and outstanding | - |
| Common stock, $.001 par value, 50,000,000 shares authorized, 11,395,000 and 1,020,000 shares issued and outstanding, respectively | 11,395 |
| Additional paid-in capital | 54,605 |
| Deficit accumulated during the development stage | (21,569) |
| __________ | |
| Total stockholders' equity | 44,431 |
| __________ | |
| Total liabilities and stockholders' equity | $47,011 |
| ========= |
See Accompanying Notes to Financial Statements
| WOODLAND HATCHERY, INC. |
| (A Development Stage Company) |
| UNAUDITED STATEMENTS OF OPERATIONS |
| Three Months Ended March 31, | Three Months Ended March 31, | Cumulative Amounts | |
| 2002 | 2001 | ||
| Revenue | $ - | $ - | $ - |
| General and administrative costs | 4,621 | 4,087 | 20,175 |
| Interest expense | - | - | 1,394 |
| __________ | __________ | __________ | |
| Loss before income taxes | (4,621) | (4,087) | (21,569) |
| Provision for income taxes | - | - | - |
| __________ | __________ | __________ | |
| Net Loss | $(4,621) | $(4,087) | $(21,569) |
| ========= | ========= | ========= | |
| Loss per common share - basic and diluted | $ - | $ - | |
| ========= | ========= | ||
| Weighted average common shares - | |||
| basic and diluted | 11,395,000 | 6,975,000 | |
| ========= | ========= |
See Accompanying Notes to Financial Statements
| WOODLAND HATCHERY, INC. |
| (A Development Stage Company) |
| UNAUDITED STATEMENTS OF CASH FLOWS |
| Three Months Ended March 31, | Three Months Ended March 31, | Cumulative Amounts | |
| 2002 | 2001 | ||
| Cash flows from operating activities: | |||
| Net loss | $(4,621) | $(4,087) | $(21,569) |
| Adjustments to reconcile net loss to net cash used in operating activities: | |||
| Depreciation | 317 | 28 | 1,532 |
| Loss on disposal of assets | - | 361 | 361 |
| Increase in inventories | - | - | (746) |
| Increase (decrease) in accounts payable | (18,031) | - | 2,580 |
| __________ | __________ | __________ | |
| Net cash used in operating activities | (22,335) | (3,698) | (17,842) |
| Cash flows from investing activities: | |||
| Purchase of fixed assets | (3,269) | (2,206) | (19,788) |
| __________ | __________ | __________ | |
| Net cash used in investing activities | (3,269) | (2,206) | (19,788) |
| Cash flows from financing activities: | |||
| Proceeds from issuance of common stock, net | - | 10,000 | 66,000 |
| __________ | __________ | __________ | |
| Net cash provided by financing activities | - | 10,000 | 66,000 |
| __________ | __________ | __________ | |
| Net increase (decrease) in cash | (25,604) | 4,096 | 28,370 |
| Cash, beginning of period | 53,974 | 2,929 | - |
| __________ | __________ | __________ | |
| Cash, end of period | $28,370 | $7,025 | $28,370 |
| ========= | ========= | ========= |
See Accompanying Notes to Financial Statements
WOODLAND HATCHERY, INC.
(A Development Stage Company)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
March 31, 2002
Note 1 - Basis of Presentation
The accompanying unaudited condensed financial statements have been prepared by management in accordance with the instructions in Form 10-QSB and, therefore, do not include all information and footnotes required by generally accepted accounting principles and should, therefore, be read in conjunction with the Company's Form 10-KSB for the year ended December 31, 2001, filed with the Securities and Exchange Commission. These statements do include all normal recurring adjustments which the Company believes necessary for a fair presentation of the statements. The interim operations results are not necessarily indicative of the results for the full year ended December 31, 2002.
Note 2 - Additional footnotes included by reference
Except as indicated in Notes above, there have been no other material changes in the information disclosed in the notes to the financial statements included in the Company's Form 10-KSB for the year ended December 31, 2001, filed with the Securities and Exchange Commission. Therefore, those footnotes are included herein by reference.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OFFINANCIAL CONDITION OR PLAN OF OPERATION
Forward-Looking Statement Notice
When used in this report, the words "may," "will," "expect," "anticipate," "continue," "estimate," "project," "intend," and similar expressions are intended to identify forward-looking statements within the meaning of Section 27a of the Securities Act of 1933 and Section 21e of the Securities Exchange Act of 1934 regarding events, conditions, and financial trends that may affect the Company's future plans of operations, business strategy, operating results, and financial position. Persons reviewing this report are cautioned that any forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties and that actual results may differ materially from those included within the forward-looking statements as a result of various factors. Such factors are discussed under the "Item 2. Management's Discussion and Analysis of Financial Condition or Plan of Operations," and also include general economic factors and conditions that may directly or indirectly impact the Company's financial condition or results of operations.
Description of Business.
General
We were formed as a Nevada corporation on May 5, 1997 as Kafco Corp. On April 11, 2001 we changed our name to Woodland Hatchery, Inc. We are in the business of developing a fish hatchery to provide fish for private fly-fishing enterprises and the wholesale and retail sales of organic fish. The Utah Department of Agriculture is implementing an organic agriculture program. The program will include guidelines and rules to raising organic fish and we intend to comply with the requirements to have our fish certified as organic. We intend to focus our business primarily in the state of Utah. Our hatchery is located in Utah and we will market and sell our fish initially in Utah. We may consider marketing and selling fish in the nearby states of Wyoming, Idaho and Colorado once we have proven operations.
Our business
Our hatchery is located in Woodland, Utah, a location approximately twenty minutes east of Park City in the Upper Provo River Valley. The address is 1442 Lower River Road, Woodland, Utah. It is our intent to provide rainbow and brown trout for private fly-fishing enterprises and also to provide organically grown fish for wholesale and retail customers.
We are leasing ground and water rights from Seth Winterton, father of Cody Winterton, our president, on which we have constructed our hatchery and will initiate our operations. Our lease payments are $1,200 per year. The lease allows us unrestricted use of approximately one acre of land through which the hatchery waterways run. We are also granted unrestricted access rights to the property. The lease is for an initial period of twenty years as of June 2001 and is renewable annually after expiration unless either party gives notice to terminate the lease. All improvements to the land will belong to the owner of the property upon termination of the lease. We have selected the Woodland, Utah site because rainbow trout requires large amounts of high quality water with a minimum dissolved oxygen concentration of 5 mg/L. The selected site is ideal for a fish hatchery because of the quality natural water, volume and temperature of the water.
We have chosen to raise trout species including German brown and Kamaloop rainbow trout. These species were chosen based on our environment including water temperature, seasons and water flows.
Trout production facilities usually consist of indoor rearing facilities and outdoor raceways and ponds. The rearing facilities are usually used for producing trout from the fertilized eggs to fingerlings. Trout farmers who have brood stock can produce their own fertilized eggs or purchase them from commercial trout egg producers. After trout eggs are fertilized, they are placed in a flow through incubator and not disturbed until the eye spot appears in the eggs. After hatching, the sac fry are raised in shallow troughs and they contain a large yolk sac, which provides nutrition for three to six weeks. When most of the yolk sac is absorbed, they begin to swim to the water surface to begin feeding. It is at this time that the fry are fed an artificial starter diet. They are moved to production raceways and ponds when they reach the fingerling stage which is about 3 inches. As trout grow they are fed various sizes of food with specific protein percentages.
We have completed construction of the hatchery which consists of two concrete raceways with free flowing water, including two small incubators. A flowing stream has been diverted to run through the raceways to simulate a natural stream or river bed. Total cost for construction was $16,500. The concrete design of the raceways aids in the quality of the fish hatchery making the walls and floors easy to clean. At times water may be diverted away from the raceways to allow them to sun dry and kill diseases that may potentially exist.
We have purchased 2,000 pounds of six inch trout, eight ounces per fish. The trout consist of 1,000 pounds of German Browns purchased from The Wyoming Trout Ranch and 1,000 pounds of Kamaloop Rainbow Trout purchased from Black Canyon Trout Farm in Idaho. By starting with six inch trout we will have an advance start to meet our commitment to have fish ready to sell in the summer of 2002.
In 2002 we will have an earlier start on the growing season and will be able to purchase smaller fingerling trout, three inches, of each species at a much lower price. The amount in pounds of fingerlings purchased to meet out commitments will be based upon water temperatures we record during the fall and winter of 2001. In addition to purchasing fingerling trout, we will breed our own. Twenty or so of the largest and strongest of each species will be kept for breeding. These brood fish will provide the eggs for the 2003 season. We do not anticipate having to purchase fish thereafter. We intend to stock sufficient fingerlings to have 17,000 pounds of six inch marketable trout ready to sell in 2003.
We have contracted to sell the initial 2,000 pounds of fish purchased this year to Winterton Ranches in July 2002. At the time of sale, the fish will have increased in size to approximately 14 to 18 inches and have doubled in weight. Winterton Ranches will use the fish to stock ponds already existing on their property. We currently lease our property from Winterton Ranches who has adjoining property with ours. Winterton Ranches has an existing fish permit from the State of Utah which will allow us to transfer fish to their facilities without restriction.
Our goal is to increase our fish production to 30,000 pounds in 2004 and at that time to further expand the hatchery facilities.
Fish Purchase Agreement
Winterton Ranches, an entity controlled by Seth Winterton who is our president's father, has entered into a purchase agreement with us on July 1, 2001. The agreement states that Winterton Ranches will purchase trout from us at the then market price as follows:
2,000 pounds at or about July 1, 2002
4,000 pounds at or about July 1, 2003
4,000 pounds at or about July 1, 2004
Because Winterton Ranches will purchase all the fish we can raise over the next three years, we do not anticipate seeking other customers until 2003 or later. However, should Winterton Ranches fail to purchase our entire inventory of fish, we have other outlets for our fish. Should we sell to parties other than Winterton Ranches, we will apply for the appropriate transportation permit.
Marketing and advertising
We intend to associate the Woodland name with quality fish that will be made available to existing fly fishing facilities. We will also list our facility with the State of Utah who provides a list of facilities to people seeking to purchase fish for private stocking of fish. This method will comprise most of the marketing relating to transporting fish off our facility since there is a demand for certified State fish.
We will be able to advertise our fish as certified State fish once we have the appropriate tests conducted by the State of Utah and they certify our fish are disease free. We intend to be certified by 2003.
We will also place ads in local outdoor magazines and publications.
Competition
Our main competition will come from Wyoming Trout Ranch, Black Canyon in Idaho, Gary Stringham in Utah, Trout Lodge in Washington, Mt. View Trout Ranch in Utah, and Spring Lake in Utah. Though there are other facilities in Utah, the hatcheries identified hold current permits with the state of Utah for transporting fish.
We believe we can be competitive because of the demand for fish in Utah, our location, and our limited overhead costs. Specifically, we have free flowing water without a need to pump water, thus reducing our costs and eliminating risks from electrical power failure.
Governmental Regulation
Live fish sales are strictly regulated in the state of Utah who is concerned about the spread of whirling disease. Utah requires two types of permits. The first allows us to receive fish into our facility and raise them. The second permit allows us to transport fish away from our facility to another property. We have been issued the first permit. The second permit, that allows us to transport fish away from our facility is more complex and will be filed for in 2003, unless we have customers other than Winterton Ranches. This permit requires that 60 randomly chosen live fish be transported to the state laboratory where they conduct several tests, checking for disease that would be harmful to other facilities. Approval for a permit can take up to a week while the tests are being conducted. We will not require a transport permit to transport fish to Winterton Ranches. Our hatchery is on leased land owned by Winterton Ranches who currently has a permit to receive fish. The permit applies to the entire 100 acres of Winterton Ranches. We will require a transport permit to transport fish to locations outside of Winterton Ranches. We do not anticipate any problems in obtaining the permit.
If the State of Utah finds disease during an inspection, all fish infected by the disease are destroyed and the hatchery raceways drained, cleaned and sanitized. The hatchery raceways would be inspected again by the state before more fish could be raised.
Should our operations reach 50,000 pounds, we will then have to obtain permits from the Environmental Protection Agency for our hatchery. At the current time, we are not subject to any EPA regulations and do not anticipate reaching production of 50,000 pounds in the near future. We are not aware of any other governmental regulation with which we must comply in order to operate our hatchery.
Three Month Periods Ended March 31, 2002 and March 31, 2001
The Company generated no revenue during the periods ended March 31, 2002 and March 31, 2001. This is due to the Company beginning operations. General and administrative costs during the periods ended March 31, 2002 and March 31, 2001 resulted in net losses of $4,621 and $4,087, respectively.
Liquidity and Capital Resources
For the period ended March 31, 2002 the Company had total assets of $47,011 consisting of $28,370 in cash, $746 in inventory and $17,895 in property and equipment. For the period ended March 31, 2001, assets consisted of $7,025 in cash. Increased assets in 2002 resulted from a public offering of common stock in November of 2001.
The Company believes that its current cash needs can be met with the cash on hand and continuing operations. However, should the Company find it necessary to raise additional capital, the Company may sell common stock of the Company or enter into debt financing agreements.
Item 2. Use of Proceeds From Sale of Registered Securities
The Company initiated a public offering of common stock on November 9, 2001. The offering closed on or around January 1, 2002, generating a total of $75,000. The use of proceeds from the offering as of March 31, 2002 is as follows:
| Total proceeds | $75,000 | |
| Use of Proceeds: | ||
| Attorney fees and filing costs | $20,000 | |
| Accounting and Audits | $8,000 | |
| Miscellaneous operating expenses | $8,500 | |
| Repayment of Debt | $20,000 | |
| Hatchery equipment | $3,646 | |
| General & Administrative expenses | $3,758 | |
| Total Expenditures from Proceeds | $63,904 | |
| __________ | ||
| Remaining Proceeds | $11,096 |
The remaining proceeds will be used as working capital for purchasing and maintaining inventory and facilities.
Item 6. Exhibits and Reports on Form 8-K.
Reports on Form 8-K: No reports on Form 8-K were filed by the Company during the quarter ended March 31, 2002.
Exhibits:None
SIGNATURES
In accordance with the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
WOODLAND HATCHERY, INC.
Date: May 14, 2002 By: /s/ Cody Winterton
Cody Winterton
President and Treasurer
