FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Quarter Ended Commission file
ended MARCH 31, 1996. No. 33-17679-D
PIERCE INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
COLORADO 84-1067694
(State or other jurisdiction of (I.R.S. Employer ID.)
incorporation or organization)
13275 E. FREEMONT PLACE #101A, ENGLEWOOD, CO 80112
(Address of principal executive offices) (Zip Code)
Registrants's telephone number, including area code (303)-792-0719
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the proceeding 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
--- ---
Class Outstanding at March 31, 1996
-------------------------- -----------------------------
Common Stock, no par value 5,980,703
1
INDEX
PART I - FINANCIAL INFORMATION *
ITEM 1. Unaudited Financial Statements
Balance Sheets - March 31, 1996 (unaudited)
and June 30, 1995 3
Statements of Operations - Three Months Ended
March 31, 1996 (unaudited) and Year To Date 4
With Last Year Comparisons
Consolidated Statement of Changes in Stockholders' Equity -
For The Nine Months March 31, 1996 (Unaudited) 5
and the Years Ended 1993,1994, and 1995.
Statement of Cash Flows - Nine Months Ended
March 31, 1996 (unaudited) and March 31, 1995 6
Notes to Financial Statements 7
ITEM 2. Management's Discussion and Analysis 11
PART II - OTHER INFORMATION
ITEMS 1 THROUGH 6 12
Signature 13
*The accompanying financial statements are not covered by an independent
certified public accountants' report.
2
PIERCE INTERNATIONAL, INC.
BALANCE SHEETS
UNAUDITED
ASSETS March 31, June 30,
CURRENT ASSETS: 1996 1995
---------- --------
Cash $ 1,188 $ 808
Investments and Stocks 21,039 5,084
Accounts Receivable 25,195 26,293
Other 367 367
-------- --------
Total current assets 47,789 32,552
PROPERTY AND EQUIPMENT: (Note 1)
Furniture and equipment 7,705 7,705
Leased equipment - -
Strawboard equipme(Note 4) 57,120 55,995
-------- --------
64,825 63,700
Less accumulated depreciation and
amortization (4,570) (3,908)
-------- --------
60,255 59,792
OTHER ASSETS
Long Term Investme(Note 5) 281,695 281,695
Related Party Receivable (Note 3) 75,144 62,002
-------- --------
$464,883 $436,041
-------- --------
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITES:
Accounts payable and accrued
liabilities 31,681 5,538
Advances from officers/directors/
stockholders (Note 6) 243,710 247,592
Note Payable - -
-------- --------
Total current liabilities 275,391 253,130
NOTE PAYABLE (Note 7) 200,000 200,000
DEFERRED REVENUE (Note 4) 35,144 -
STOCKHOLDERS' EQUITY (Notes 8 & 9)
Preferred stock, not par value;
400,000 shares authorized;
no shares issued
Common stock, no par value;
30,000,000 shares authorized;
5,980,703 and 5,980,703
shares issued and outstanding
as of March 31, 1996 and June 30,
1995, respectively 844,542 844,542
Accumulated deficit (890,194) (861,631)
-------- --------
(45,652) (17,089)
-------- --------
$464,883 $436,041
-------- --------
-------- --------
See notes to financial statements.
3
PIERCE INTERNATIONAL, INC.
STATEMENTS OF OPERATIONS
FOR THE THREE
MONTHS ENDED YEAR TO DATE
MARCH 31, MARCH 31,
(UNAUDITED) (UNAUDITED)
1996 1995 1996 1995
---------- --------- ---------- --------
REVENUE:
Commissions and fees $ 0 $ 0 $ 0 $ 86,100
Other 200 23 26,588 257
---------- --------- ---------- --------
200 23 26,588 86,357
EXPENSES:
Administrative 10,886 12,674 30,357 33,301
Outside services 11,299 16,070 26,556 64,684
Advertising and promotion 924 16 1,511 763
---------- --------- ---------- --------
Total expenses 23,109 28,760 58,424 98,748
NET OPERATING INCOME(LOSS) (22,909) (28,737) (31,836) (12,391)
Income (loss) from subsidiary - (6,726) - (6,726)
Gain (loss) on disposition of asset 2,936 (2,671) 3,273 (25,310)
Foreign exchange gain (loss) - 346 - 346
---------- --------- ---------- --------
NET INCOME(LOSS) BEFORE MINORITY INTEREST (19,973) (37,788) (28,563) (44,081)
MINORITY INTEREST - - - -
---------- --------- ---------- --------
NET INCOME (LOSS) $ (19,973) $ (37,788) $ (28,563) $(44,081)
---------- --------- ---------- --------
---------- --------- ---------- --------
NET INCOME(LOSS) PER COMMON SHARE $ (0.003) $ (0.006) $ (0.005) $ (0.007)
---------- --------- ---------- --------
---------- --------- ---------- --------
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 5,980,703 5,980,703 5,980,703 5,980,703
---------- --------- ---------- --------
---------- --------- ---------- --------
See notes to financial statements.
4
PIERCE INTERNATIONAL, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED JUNE 30, 1993, 1994 & 1995
AND THE NINE MONTHS ENDED MARCH 31, 1996 (UNAUDITED)
TOTAL
COMMON STOCK AMOUNT ACCUMULATED STOCKHOLDERS'
SHARES DEFECIT EQUITY
BALANCES, JUNE 30, 1992 136,317,572 $ 955,861 $ (1,421,210) $ (465,349)
Net income for the year - - 167,332 167,332
------------ ---------- ------------ ----------
BALANCES, JUNE 30, 1993 136,317,572 955,861 (1,253,878) (298,017)
Conversion of Wakefield Debt 10,000,000 94,027 - 94,027
Stock issued as compensation
$0.00 per share 3,000,000 - - -
Additional Paid in Capital to
Subsidiary - 2,574 (249) 2,325
Net income for the year - - 67,039 67,039
------------ ---------- ------------ ----------
BALANCES, JUNE 30, 1994 149,317,572 1,052,462 (1,187,088) (134,626)
Additional Paid in Capital to
Subsidiary - 34,719 - 34,719
Adj. for foreign sub. translation - - - 1,769
Chg. in minority interest - 15,000 - 15,000
Chg. in foreign sub. translation - - - (10,256)
Stock in lieu of compensation 200,000 - - -
(no market value)
PIDI investment to Equity Method
from Consolidated - (257,639) 420,992 171,840
Net loss for the year - (95,535) (95,535)
------------ ---------- ------------ ----------
BALANCES, JUNE 30, 1995 149,517,572 844,542 (861,631) (17,089)
Net loss for the quarter
ended September 30, 1995 - - (6,124) (6,124)
Net loss for the quarter
ended December 31, 1995 - - (2,466) (2,466)
Net loss for the quarter
ended March 31, 1996 - - (19,973) (19,973)
25 for 1 Reverse split
March 13, 1996 (143,536,869) - - -
------------ ---------- ------------ ----------
BALANCES, MARCH 31, 1996 5,980,703 $ 844,542 $ (890,194) $ (45,652)
------------ ---------- ------------ ----------
------------ ---------- ------------ ----------
See notes to financial statements.
5
PIERCE INTERNATIONAL, INC.
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED MARCH 31,
--------------------------------------
1996 1995
----------- ---------
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $(28,563) $ (44,081)
Adjustments to reconcile net loss to
cash used in operating activities:
Depreciation and amortization 662 397
Subsidiary loss - 6,726
Changes in operating assets
and liabilities:
Decrease (Increase) in
accounts receivable 1,098 (23,426)
Decrease (Increase) in
related party receivable (13,142) (136,207)
Decrease (Increase) in
trading investments (12,682) -
(Decrease) Increase in accounts
payable and accrued
expenses 26,143 (12,444)
Increase (Decrease) in deferred revenue 35,144 -
(Gain)Loss on sale of investments (3,273) 25,310
-------- --------
Net cash used in operating
activities 5,387 (183,725)
CASH FLOWS FROM INVESTING ACTIVITIES:
(Purchase) Disposal of land, property and equipment
Acquisition of equipment - (4,415)
(Increase) decrease in investments - 199,406
Investment in Strawboard (1,125) (46,995)
-------- --------
Net cash used in investing
activities (1,125) 147,996
CASH FLOWS FROM FINANCING ACTIVITIES:
Receipts/payments on advances from officers/
directors/stockholders (3,882) 38,338
Receipts (Payments) on notes payable - (5,059)
-------- --------
Net cash provided by
financing activities (3,882) 33,279
(DECREASE) INCREASE IN CASH 380 (2,450)
CASH, beginning of period 808 2,498
-------- --------
CASH, end of period $ 1,188 $ 48
-------- --------
-------- --------
See notes to the financial statements.
6
PIERCE INTERNATIONAL, INC.
UNAUDITED
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996
1. OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
OPERATIONS - Pierce International, Inc. (PI) was incorporated under the
laws of the State of Colorado on July 22, 1987, for the purpose of
obtaining capital to seek potentially profitable business opportunities.
Currently, PI has business interest in two industries, natural resources
and industrial development. PI's natural resource business is conducted
through its 17.24% owned subsidiary, Pierce International Discovery, Inc.
(PIDI).
EQUITY METHOD - The investment in PIDI is accounted for using the equity
method of accounting. Although the Company does not own 20% of PIDI's
common stock, it does exercise significant influence over PIDI's
operations. The portion of PIDI income/loss is added/deducted to the basis
in the investment account. All inter-company income/expenses have been
eliminated.
NET INCOME PER COMMON SHARE - Net income (loss) per common share is
computed based upon the weighted average number of shares outstanding
during the period. Common stock equivalents were not considered (for
losses only), as their effect would be anti-dilutive.
PROPERTY, EQUIPMENT, DEPRECIATION AND AMORTIZATION - Property and equipment
are stated at cost. Depreciation is being provided by the straight-line
method over estimated useful lives of three to five years. All costs
related to the acquisition (including associated legal and other costs),
exploration, evaluation, and development, of the mineral properties have
been capitalized. These costs will be amortized by the units-of-production
method of accounting based upon estimated recoverable reserves.
CONTINUING OPERATIONS - The accompanying financial statements have been
prepared on a going concern basis, which contemplates continuity of
operations and realization of assets and satisfaction of liabilities in the
normal course of business. The continuation of the Company as a going
concern is dependent upon the Company raising additional capital, and
attaining and maintaining profitable operations. The Company has suffered
recurring losses from operations that raise substantial doubt about its
ability to continue as a going concern.
7
PIERCE INTERNATIONAL, INC.
UNAUDITED
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996
2. UNAUDITED INFORMATION:
The information furnished herein was taken from the books and record of the
Company without audit. However, such information reflects all adjustments
(consisting only of normal recurring adjustments) which are, in the opinion
of management, necessary to reflect properly the results of the interim
periods presented. Results of operations for the periods presented are not
necessarily indicative of the results to be expected for the year. These
interim financial statements should be read in conjunction with the
Company's annual report and report on Form 10-K for the year ended June 30,
1995.
3. RELATED PARTY RECEIVABLE:
The Company has advanced $75,146 to PIDI for operations. This amount
excludes $54,000 of inter-company fees.
4. STRAWBOARD INVESTMENT:
The Company purchased strawboard equipment for $57,120. This
equipment is seen as an investment and the Company intends to resale
the equipment. The Company has received $35,144 as a deposit against
this equipment, which is stated in Deferred Revenue. Should the
potential purchaser fail to complete the transaction within 90 days,
it will forfeit the deposit.
5. LONG TERM INVESTMENTS:
The balance of $281,695 is the original basis of the Company's investment
in PIDI. Deductions for PIDI's prior period losses have been made as
required by the equity method of accounting. PIDI's operating statement
for March 31, 1996, was unavailable, however, the adjustment is expected to
be immaterial.
6. RELATED PARTY PAYABLE AND RELATED PARTY TRANSACTIONS:
Advances include $192,710 due Piece D. Parker, officer and director, or his
company, Parker Consulting Services, and $51,000 is accrued consulting
fees due Pierce D. Parker.
On May 6, 1994, the Company sold all outstanding shares of Como, Inc., a
wholly owned subsidiary, to PIDI. Como, Inc. holds the leases to the Como
property. Under the terms and conditions of the Stock Purchase Agreement,
PIDI agreed to pay $4 million
8
PIERCE INTERNATIONAL, INC.
UNAUDITED
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996
6. RELATED PARTY PAYABLE AND RELATED PARTY TRANSACTIONS (continued):
for the shares. PIDI paid 3 million shares of convertible preferred stock
at execution, and a payment of $100,000 was due by December, 1994. On
January 10, 1995, the Company agreed to accept 2 million shares in lieu of
the $100,000 payment.
PIDI executed a promissory note in the principal amount of $3,600,000,
bearing interest at 3% per annum, requiring quarterly interest payments and
quarterly principal reduction payments equal to 50% of the PIDI's net
profits for such quarter (after deduction of management fees) attributable
to operation of the two existing mining leases owned by Como, Inc. The
outstanding balance of the $3.6 million promissory note is due on May 6,
1999. As a result of the related party nature of this transaction, PIDI
recorded as the original basis, $268,990, which is PI's recorded basis.
7. COMMITMENTS:
As of March 31, 1996, PI had the following long term note payable:
PCS Profit Sharing Plan $200,000
PI is obligated to pay $200,000 to Parker Consulting Services Profit
Sharing Plan, owned by Pierce D. Parker, for funds it pledged for the
purpose of funding the Como project. This debt is to be paid from net
profits generated by the Como property (see note #6).
8. STOCKHOLDERS' EQUITY:
As of March 31, 1996, PI had 5,980,703 common shares issued and
outstanding. There are 30,000,000 shares authorized. A reverse split of 1
for 25 shares was approved on March 13, 1996.
Of the total shares outstanding, 1,600,000 shares were issued as part of
PI's initial public offering and are free trading stock. All other shares
have been held a minimum of 2 years and could be sold under Rule 144.
The preferred stock may be issued by the Board of Directors in one or more
series. The Board shall determine the distinguishing features of each,
including preferences, rights and restrictions, upon the establishment of
such series.
9
PIERCE INTERNATIONAL, INC.
UNAUDITED
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996
9. INCENTIVE STOCK OPTION PLAN:
On August 10, 1987, the Company adopted an Incentive Stock Option Plan (the
"Plan") under which options granted are intended to qualify as "incentive
stock options" under Section 422A of the Internal Revenue code of 1954, as
amended (the "Code"). Pursuant to the Plan, options to purchase up to
10,000,000 shares of the Company's Common Stock may be granted to
employees of the Company. The Plan is administered by the Board of
Directors which is empowered to determine the terms and conditions of each
option, subject to the limitation that the exercise price cannot be less
than the market value of the Common Stock on date of the grant (110% of the
market value in the case of options granted to an employee who owns 10% or
more of the Company's outstanding Common Stock) and no option can have a
term in excess of 10 years (5 years in the case of options granted to
employees who own 10% or more of the company's Common Stock).
As of the date of this report, no options have been granted under this
Plan.
10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS FOR THE QUARTER ENDED MARCH 31, 1996.
INTRODUCTION
The Company is concentrating on its two major industries, natural resources
and industrial development. The Company is making a concentrated effort to
sell strawboard equipment, and to presell strawboard.
LIQUIDITY
Working capital at March 31, 1996 was a negative $227,602. A significant
portion of current liabilities are advances from stockholders. Cash flow
continues to be irregular and the Company will continue to rely heavily on
its current investments to produce future cash flow.
RESULTS OF OPERATIONS
During the quarter ended March 31, 1996, the Company had net loss of
$19,973. As the Company develops its two primary business operations, costs
have increased in the areas of legal, accounting, travel, and outside consulting
fees.
11
PART II - OTHER INFORMATION
ITEMS #1 THROUGH #6(a) - No response required.
ITEM 6(b) - No reports were filed on the Form 8-K during the quarter ended
March 31, 1996.
12
SIGNATURES
Pursuant to the requirements of the Section 13 or 15(d) of the Securities
Act of 1934, the Registrant has duly caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized.
PIERCE INTERNATIONAL, INC.
Dated: June 28, 1996 BY:
----------------------
Pierce D. Parker,
President (Chief Financial and
Accounting Officer)
13