U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-QSB
(Mark One)
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended July 31, 2001
( ) TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from to
Commission file number 0-1394
SEVEN J STOCK FARM, INC.
(Name of small business issuer as specified in its charter)
Texas 74-1110910
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(State of incorporation) (I.R.S. Employer Identification No.)
16945 Northchase Dr., Ste 1800, Houston, TX 77060-2151
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(Address of principal executive offices)
281-874-2101
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(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes (X) No ( )
As of September 14, 2001 there were 1,451,000 shares of Seven J Stock Farm,
Inc. common stock $1.00 par value outstanding.
SEVEN J STOCK FARM, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS EXCEPT FOR SHARES AND PER SHARE DATA)
(UNAUDITED)
FOR THE THREE FOR THE NINE
MONTHS ENDED MONTHS ENDED
JULY 31, JULY 31,
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2001 2000 2001 2000
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REVENUES
Pipeline operations $ 147 $ 129 $ 518 $ 505
Net oil and gas royalties 99 98 231 224
Ranch lease rentals 29 38 89 89
Farm produce sales 23 - 37 71
Contract and irrigation service
revenues - - 22 -
Other revenues 18 - 60 27
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TOTAL REVENUES 316 265 957 916
COSTS AND EXPENSES
Operating expenses 211 169 646 578
General and administrative expenses 77 90 193 248
Depreciation and amortization 32 28 96 92
Equity in loss of 50% owned affiliate 46 47 46 63
Interest expense 3 3 13 9
Taxes - other than income taxes 21 31 50 51
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TOTAL COSTS AND EXPENSES 390 368 1,044 1,041
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LOSS BEFORE PROVISION (BENEFIT)
FOR INCOME TAXES (74) (103) (87) (125)
Provision (benefit) for
income taxes 9 - 14 -
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NET LOSS $ (83) $ (103) $ (101) $ (125)
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NET LOSS PER SHARE - BASIC AND
DILUTED
(1,451,000 weighted average shares
outstanding) $ (.06) $ (.07) $ (.07) $ (.09)
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DIVIDENDS PER SHARE None None None None
See notes to the condensed consolidated financial statements.
SEVEN J STOCK FARM, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEET
JULY 31, 2001
(IN THOUSANDS EXCEPT FOR SHARE DATA)
(UNAUDITED)
JULY 31,
ASSETS 2001
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CURRENT ASSETS
Cash and cash equivalents $ 22
Accounts receivable 21
Accounts receivable - related parties 182
Refundable income taxes 2
Deferred income taxes 52
Other current assets 15
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TOTAL CURRENT ASSETS 294
PROPERTY AND EQUIPMENT, net 1,751
OTHER ASSETS 1
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TOTAL ASSETS $ 2,046
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LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 111
Accounts payable - related parties 197
Accrued expenses 41
Notes payable 1
Current maturities of long-term debt 88
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TOTAL CURRENT LIABILITIES 438
LONG-TERM DEBT 119
DEFERRED INCOME TAXES 111
OTHER LIABILITIES 149
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TOTAL LIABILITIES 817
SHAREHOLDERS' EQUITY
Common stock, par value $1 per share:
authorized 1,500,000 shares; issued and
outstanding 1,451,000 shares 1,451
Accumulated deficit (222)
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TOTAL SHAREHOLDERS' EQUITY 1,229
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 2,046
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See notes to the condensed consolidated financial statements.
SEVEN J STOCK FARM, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
FOR THE NINE
MONTHS ENDED
JULY 31,
------------------
2001 2000
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CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (101) $ (125)
Adjustments to reconcile net loss
to net cash provided by (used in) operating
activities:
Depreciation and amortization 96 92
Deferred income taxes 14 -
Equity in loss of 50% owned affiliate 46 63
Provision for bad debts 45 16
Changes in operating assets and liabilities:
Accounts receivable (6) 1
Other current assets (2) (9)
Accounts payable 92 (91)
Other liabilities 5 -
Accrued expenses (38) -
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NET CASH PROVIDED BY (USED IN)OPERATING
ACTIVITIES 151 (53)
CASH FLOWS FROM INVESTING ACTIVITIES
Investments in and advances to 50% owned affiliate (46) -
Capital expenditures for property and equipment (18) (132)
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NET CASH USED IN INVESTING ACTIVITIES (64) (132)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term debt and notes payable 71 240
Payment on long-term debt and notes payable (182) (112)
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NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (111) 128
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NET DECREASE IN CASH AND CASH EQUIVALENTS (24) (57)
CASH AND CASH EQUIVALENTS - beginning of period 46 60
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CASH AND CASH EQUIVALENTS - end of period $ 22 $ 3
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SUPPLEMENTAL CASH FLOW DATA:
Cash paid during the period for:
Interest $ 13 $ 11
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Income taxes $ - $ -
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Capital expenditures for property and equipment
financed by debt $ 54 $ -
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Refinancing of existing debt $ 85 $ -
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See notes to the condensed consolidated financial statements.
SEVEN J STOCK FARM, INC. AND SUBSIDIARY
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The accompanying interim condensed consolidated financial statements are
unaudited and include the accounts of Seven J Stock Farm, Inc. and its
wholly owned subsidiary, Madison Pipe Line Company, collectively referred to as
the "Company".
The unaudited interim condensed consolidated financial statements and
related notes have been prepared pursuant to the rules and regulations of the
Securities and Exchange Commission. Accordingly, certain information and
footnote disclosures normally included in financial statements prepared in
accordance with accounting principles generally accepted in the United States
have been omitted pursuant to such rules and regulations. The accompanying
unaudited interim condensed consolidated financial statements and related notes
should be read in conjunction with the financial statements and related notes
included in the Company's 2000 Annual Report to Shareholders.
In the opinion of management, the accompanying unaudited condensed
consolidated financial statements contain all adjustments necessary to
present fairly the Company's financial position as of July 31, 2001 and the
results of its operations and its cash flows for the periods ended July 31,
2001 and 2000. Such adjustments consisted only of normal recurring items.
The results of operations for the periods ending July 31, 2001 and 2000 are
not necessarily indicative of the results to be expected for the full year.
Certain items and amounts for the prior period have been reclassified. The
reclassifications have no effect on net income.
NOTE 2 - LONG-TERM DEBT AND NOTES PAYABLE
During May 2001, the Company increased its available credit to approximately
$210,000 under its loan agreement with Frost Bank to pay off an existing loan
with a balance of approximately $85,000 from The First National Bank of Crockett
Additionally, the remaining loan proceeds were used to acquire a conservation
easement for flood prevention. The refinanced debt to Frost Bank bears interest
at prime plus 1%, with monthly principal and interest payments of $8,049 and
matures October 2003. At July 31, 2001, the following are the future maturities
of long-term debt for the years ended July 31: 2002 - $88,000, 2003 - $96,000,
2004 - $23,000.
SEVEN J STOCK FARM, INC. AND SUBSIDIARY
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
Pipeline Operations - Revenue for the three months ended July 31, 2001
increased $18,000 or 14% as compared to the three months ended July 31,
2000. This is primarily the result of an increase in gas production.
Operating expense for the three months ended July 31, 2001 increased $42,000
or 25% as compared to the three months ended July 31, 2000. This is
attributable to an increase in production, cost of fuel to run the compressor,
and an increase in compressor rentals.
Farm Produce Sales - Revenue for the nine months ended July 31, 2001 decreased
$34,000 or 48% as compared to the nine months ended July 31, 2000. This
was the result of drought conditions. The increase in revenue for the three
months ended July 31, 2001 was due to the hay bailing and hay sales
operations.
General and Administrative Expenses - Expense for the three months ended July
31, 2001, decreased $13,000 or 14%. This increase is primarily the result
of a reduction in salary.
Liquidity and Capital Resources
The Company had a positive cash flow from operations of $151,000 for the nine
months ended July 31, 2001 as compared to a negative cash flow from operations
of $53,000 for the nine months ended July 31, 2000. The improvement in
operating cash flows from the prior period is due to an increase in accounts
payable as a result of an increase in operating expenses and the timing of the
payment of operating expenses.
The Company's liquidity could be adversely affected due to losses from and loan
guarantees for Trinity Valley Pecan Company, a 50% owned affiliate. A portion
of Trinity Valley Pecan Company's debt ($775,000 at July 31, 2001) is guaranteed
jointly and severally by both the Company and another related party. An
additional provision of $48,000 was recorded in 2000 relating to guarantees of
such debt of Trinity Valley Pecan Company. Additionally, provisions of $46,000
and $45,000 were recorded in 2001 relating to advances made to Trinity Valley
Pecan Company used for debt payments and operations, respectively.
As of July 31, 2001, the Company's working capital deficit was $144,000.
Payments of approximately $22,000 attributable to notes payable and long-term
debt are required during the fiscal year ending October 31, 2001. It is not
anticipated that dividends will be paid in the near future.
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(A) Annual meeting of shareholders was held March 20, 2001.
(B) Seven J Stock Farm, Inc. did not solicit proxies and the following
directors were elected
1. John R. Parten
2. R. F. Pratka
3. Patrick J. Moran
4. William C. Bennett
Shareholders approved the appointment of the firm Mann Frankfort Stein &
Lipp, CPAs, L.L.P. as the Company's Independent Auditors.
ITEM 5. OTHER INFORMATION
(A) During June 2001, the Company began hay bailing and hay sales operations.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) Exhibits - none
(B) Reports on Form 8-K - there were no reports on Form 8-K filed for
the quarter ended July 31, 2001.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: September 14, 2001 SEVEN J STOCK FARM, INC.
(Registrant)
R. F. PRATKA
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R.F. Pratka, Vice-President and Treasurer
(Principal Financial Officer)