UNITED STATES
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: October 31, 2004
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from To
Commission file number 333-119978
SOUTHWEST OLIVE GROWERS, INC.
-----------------------------
(Exact name of small business issuer as specified in its charter)
Arizona 20-1394991
- ------------------------------- ----------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or organization)
11053 Lopez Ridge Way, San Diego, CA 92121
------------------------------------------
(Address of principal executive offices)
(858) 663-8391 (Issuer's
telephone number)
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practical date: 200,000 as of December 20,
2004
Transitional Small Business Disclosure Format (check one). Yes ; No X
PART I
ITEM 1. FINANCIAL STATEMENTS
SOUTHWEST OLIVE GROWERS, INC.
(A Development Stage Company)
BALANCE SHEET
(Unaudited)
October 31,
2004
-----------------
Assets:
Cash $ 2,545
-----------------
Total Current Assets 2,545
-----------------
Total Assets $ 2,545
=================
Liabilities:
Accounts Payable $ 2,400
Shareholder Payable 700
-----------------
Total Liabilities 3,100
-----------------
Stockholders' Equity:
Preferred Stock, par value $.001, authorized
10,000,000 shares, issued 0 at October 31, 2004 -
Common Stock, par value $.001, authorized
100,000,000 shares, issued 200,000 at October 31, 2004 200
Paid-In Capital 1,800
Deficit accumulated during the development stage (2,555)
-----------------
Total Stockholders' Equity (555)
-----------------
Total Liabilities and Stockholders' Equity $ 2,545
=================
The accompanying notes are an integral part of these financial statements.
SOUTHWEST OLIVE GROWERS, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
(Unaudited)
Cumulative
Since
For the Period May 10,
For the Three May 10, 2004 2004
Months Ended to Inception of
October 31, October 31, Development
2004 2004 Stage
----------------- ------------------ ------------------
Revenues: $ - $ - $ -
----------------- ------------------ ------------------
Expenses:
General and administrative 355 2,555 2,555
----------------- ------------------ ------------------
Total expenses 355 2,555 2,555
----------------- ------------------ ------------------
Net Loss $ (355) $ (2,555)$ (2,555)
================= ================== ==================
Earnings per Share, Basic & Diluted
Loss Per Share $ - $ (0.01)
================= ==================
Weighted Average Shares Outstanding 200,000 200,000
================= ==================
The accompanying notes are an integral part of these financial statements.
SOUTHWEST OLIVE GROWERS, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
(Unaudited)
Cumulative
Since
For the Period May 10,
May 10, 2004 2004
to Inception of
October 31, Development
2004 Stage
------------------ ------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $ (2,555) $ (2,555)
Changes in Operating Assets and Liabilities
Increase (Decrease) in accounts payable 2,400 2,400
------------------ ------------------
Net Cash Used in operating activities (155) (155)
------------------ ------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net cash provided by investing activities - -
------------------ ------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Shareholder 700 700
Purchase of Common Stock 2,000 2,000
------------------ ------------------
Net Cash Provided by Financing Activities 2,700 2,700
------------------ ------------------
Net (Decrease) Increase in cash 2,545 2,545
Cash at Beginning of Period - -
------------------ ------------------
Cash at End of Period $ 2,545 $ 2,545
================== ==================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
================== ==================
Cash paid during the year for:
Interest $ - $ -
Franchise and income taxes $ - $ -
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING
ACTIVITIES: None
The accompanying notes are an integral part of these financial statements.
SOUTHWEST OLIVE GROWERS, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - NATURE OF OPERATIONS AND GOING CONCERN
The accompanying financial statements have been prepared on the basis
of accounting principles applicable to a "going concern", which assume that the
Company will continue in operation for at least one year and will be able to
realize its assets and discharge its liabilities in the normal course of
operations.
Several conditions and events cast doubt about the Company's ability to
continue as a "going concern". The Company has incurred net losses of $2,555 for
the period from May 10, 2004 (inception) to October 31, 2004, has a liquidity
problem, and requires additional financing in order to finance its business
activities on an ongoing basis. The Company is actively pursuing alternative
financing and has had discussions with various third parties, although no firm
commitments have been obtained.
The Company's ability to survive will depend on numerous factors
including, but not limited to, the Company's receiving continued financial
support, completing public equity financing, or generating profitable operations
in the future.
These financial statements do not reflect adjustments that would be
necessary if the Company were unable to continue as a "going concern". While
management believes that the actions already taken or planned, will mitigate the
adverse conditions and events which raise doubt about the validity of the "going
concern" assumption used in preparing these financial statements, there can be
no assurance that these actions will be successful.
If the Company were unable to continue as a "going concern", then
substantial adjustments would be necessary to the carrying values of assets, the
reported amounts of its liabilities, the reported revenues and expenses, and the
balance sheet classifications used.
NOTE 2 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of accounting policies for Southwest Olive Growers, Inc.
is presented to assist in understanding the Company's financial statements. The
accounting policies conform to generally accepted accounting principles and have
been consistently applied in the preparation of the financial statements.
The unaudited financial statements as of October 31, 2004 and for the
three months then ended reflect, in the opinion of management, all adjustments
(which include only normal recurring adjustments) necessary to fairly state the
financial position and results of operations for the three months. Operating
results for interim periods are not necessarily indicative of the results which
can be expected for full years.
SOUTHWEST OLIVE GROWERS, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(Continued)
NOTE 2 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Organization and Basis of Presentation
The Company was incorporated under the laws of the State of Arizona on
May 10, 2004. The Company's year end is April 30.
Nature of Business
The Company is in the business of site selection and development of
olive groves, and in milling olives to produce gourmet oils for wholesale and
retail sales. As of October 31, 2004, the Company is still in the planning
stages.
Cash and 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 to the extent the funds are not being held for investment
purposes.
Pervasiveness of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles required management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Loss per Share
Basic loss per share has been computed by dividing the loss for the
year applicable to the common stockholders by the weighted average number of
common shares outstanding during the years. There were no common equivalent
shares outstanding at October 31, 2004.
Income Taxes
The Company has a net operating loss for income taxes. Due to the
regulatory limitations in utilizing the loss, it is uncertain whether the
Company will be able to realize a benefit from these losses. Therefore, a
deferred tax asset has not been recorded. There are no significant tax
differences requiring deferral.
SOUTHWEST OLIVE GROWERS, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(Continued)
NOTE 2 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Concentrations of Credit Risk
The Company has no significant off-balance-sheet concentrations of
credit risk such as foreign exchange contracts, options contracts or other
foreign hedging arrangements.
NOTE 3 - DEVELOPMENT STAGE COMPANY/ GOING CONCERN
The Company has not begun principal operations and as is common with a
development stage company, the Company has had recurring losses during its
development stage. Continuation of the Company as a going concern is dependent
upon obtaining the additional working capital necessary to be successful in its
planned activity, and the management of the Company has developed a strategy,
which it believes will accomplish this objective through additional equity
funding and long term financing, which will enable the Company to operate for
the coming year.
NOTE 4 - INCOME TAXES
As of October 31, 2004, the Company had a net operating loss
carryforward for income tax reporting purposes of approximately $2,555 that may
be offset against future taxable income through 2024. Current tax laws limit the
amount of loss available to be offset against future taxable income when a
substantial change in ownership occurs. Therefore, the amount available to
offset future taxable income may be limited. No tax benefit has been reported in
the financial statements, because the Company believes there is a 50% or greater
chance the carryforwards will expire unused. Accordingly, the potential tax
benefits of the loss carryforwards are offset by a valuation allowance of the
same amount.
NOTE 5 - COMMITMENTS
As of October 31, 2004, all activities of the Company have been
conducted by corporate officers from either their homes or business offices.
Currently, there are no outstanding debts owed by the company for the use of
these facilities and there are no commitments for future use of the facilities.
NOTE 6 - COMMON STOCK TRANSACTIONS
On May 10, 2004, the Company issued 200,000 shares of common stock for
$0.01 per share for cash.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
This discussion should be read in conjunction with Management's Discussion and
Analysis of Financial Condition and Results of Operations in the Company's SB-2
filed on October 26, 2004. The following discussions and other parts of this
report may contain forward-looking statements that involve risks and
uncertainties. Our actual results may differ significantly from the results
discussed in those forward-looking statements.
Plan of Operation
Southwest Olive Growers plans to initially purchase and develop 80
acres of raw land using 78 acres to plant olive trees and 2 acres to construct
facilities which will house the offices and pressing mill required for the
processing of the olive fruit and operation of the business. Follow up stages of
business development include plans to (a) secure a secondary financing to
provide adequate funding for two years of operating expenses estimated at
$140,000 per year, and (b) for the purchase and planting to olive trees of an
additional 325 acres of suitable land which will require additional funding
contemplated but not yet secured by the Company.
LAND ACQUISITION
Olive trees grow in a variety of climatic conditions but are especially
suited to dryer climates with adequate soil drainage and warm, sunny days
throughout the growing season. Accordingly, the Company has determined that the
land in the lower latitudes, specifically below the 40th parallel in the
southern United States is best suited for olive growth. With the higher
populations of Southern California and Southern and Central Arizona, the Company
believes that the initial market for our products will have the highest chance
for success if targeted therein.
The principals of the Company have, after independent research,
determined that the Company will initially seek to acquire property in Cochise
County or Santa Cruz County in Southern Arizona. The per-acre land costs, water
availabilities, climate and soil compositions in these areas provide the best
value to the Company.
More specifically, the Company's first choice will be to acquire
property in Elgin, Arizona which is located in the northeast part of Santa Cruz
County approximately 9 miles to the west of the town of Sierra Vista. The
Company has located parcels that appear to be suitable and is performing
detailed due diligence prior to entering into contract with any Seller.
The range of per-acre land asking price that the Company has
encountered is from $2,500 to $6,000.
The independent research for Olive Orchard suitability includes a
confidential consultants report to the Company from Dr. Alexander Tereschenko of
Turlock, California who specializes in Olive Orchards and has provided
consulting services to locations and producers worldwide. Dr. Tereschenko
traveled to Southern Arizona and using site survey techniques to include soil
and water samples, historical climate data and personal observations, has
concluded that the area surrounding
Elgin, Arizona should provide an "excellent" growing condition for the planned
orchards.
MARKET
Southwest Grower's target market will ultimately be the gourmet and
health food consumers throughout North America but initially focused in the
Southern California and Southern & Central Arizona cities.
Southwest Olive Growers intends to market its olive oils and table olives to:
o Restaurants
o Annual food and beverage festivals
o Warehouse outlets such as Costco, Sam's Club, Price Club, etc
o Retail grocery store chains, and
o On site at the mill and pressing building.
We intend to sell a line of oils consisting of flavored, blended oils
and two pure varietal oils in our product line. We also plan to press oil at
different times of the year to produce an "early" and "late" oil with different
characteristics. While blended oils have traditionally gotten the highest
ratings and appeal to the broadest market, single varietals are interesting and
can increase sales out of curiosity and appeal to individual tastes. In late
2005 we also intend to include pickled olives and olive tapenades in our product
line. We will market the products in different types of packaging, including
standard and custom blown glass containers as well as in stainless fustis and
gift baskets. Our products will be marketed as condiments, staples and as gifts
and souvenirs.
Additionally, the Company intends to construct and distribute to
supermarkets, deli's and gourmet food suppliers, unique point of sale displays
to highlight the origin and high-quality processing of our oils and olive
products.
CUSTOMERS
Our primary customers are expected to be those who already consume
olive oils on a regular basis and those who will exhibit a certain faithfulness
to any local product and are willing to try the product simply because of its
packaging and marketing slogans.
Buyers in Italy were asked what characteristics they were looking for
in an olive oil. Results of the survey are below. This provides additional
support for our belief that a quality local product, competitively priced should
garner repeat sales from our customers in Arizona, California and other Western
States. (from Olivae no 90, Feb 2002)
Reason for buying % responding
- -----------------------------------------------------------
Geographical Origin 39
- -----------------------------------------------------------
Delicate Taste 36.9
- -----------------------------------------------------------
Brand name on pack 33.4
- -----------------------------------------------------------
Right price 33.4
- -----------------------------------------------------------
- -----------------------------------------------------------
Intense Taste 29.1
- -----------------------------------------------------------
Deep Color 26.2
- -----------------------------------------------------------
Promotion or Discount 23.2
- -----------------------------------------------------------
Certified Organic 16.2
- -----------------------------------------------------------
Pack type (color of glass, tin) 11.1
- -----------------------------------------------------------
Pack size 8.8
- -----------------------------------------------------------
Advice of family 8.2
- -----------------------------------------------------------
Pack date 6.7
- -----------------------------------------------------------
Low acidity .5
- -----------------------------------------------------------
COMPETITION
Competition in the olive oil market is strong with many domestic and
foreign producers and bottlers vying for market share. Most olive growers in the
States of Arizona and California are simply farmers which grow the olives and
sell them as a commodity rather than press and bottle their own fruit. The
Company believes that the production and marketing success of the Company will
be greatest if done with a "boutique" representation, garnering support from
local buyers with a quality, fairly priced product.
INTELLECTUAL PROPERTY
We intend to apply for a federal trademark for "Southwest Olive
Growers." We do not own any other intellectual property.
EMPLOYEES
We have 1 full time employee, and one part time employee which also
serve as Officers and Directors. Our employees are not represented by a union.
We considers our relations with our employees to be satisfactory.
The Company plans to hire an additional 2 employees when required to
aid in processing, bottling, marketing, accounting and orchard maintenance.
Until that time the current officers have committed to provide the time
necessary to operate the Company.
REGULATION
Our business relating to the fertilization and processing of olive is
regulated by the EPA and the Clean Water Act as well as several State
regulations. The packaging and sale of the oils and table olives is regulated by
the Food and Drug Administration.
Although we believe that the systems and procedures we intend to
implement to ensure compliance in all material respects with applicable federal,
state and local laws, rules, regulations, there can be no assurance of full
compliance with current laws, regulations and rules, that more restrictive laws,
regulations and rules will not be adopted in the future, or that existing laws,
regulations and rules. The occurrence of any such event could make compliance
substantially more
difficult or expensive, expose us to claims and administrative enforcement
actions, or otherwise materially and adversely affect our business, financial
condition and prospects.
INDEMNIFICATION
The Arizona Revised Statutes (Title 10, Chapter 8, Article 5) permits
the inclusion in the articles of incorporation, provisions limiting or
eliminating the personal monetary liability of directors to a corporation or its
shareholders by reason of their conduct as directors. The Articles of
Incorporation of Southwest Olive Growers, Inc, contain the provision that
require mandatory indemnification in all circumstances where it is permit by
Arizona law. Our bylaws allow for the elimination of personal monetary liability
on the part of a director to the fullest extent permitted by Arizona law. A
shareholder is able to prosecute an action against a director for monetary
damages for any action taken, or any failure to take any action, as a director,
for the amount of financial benefit received by a director for which he is not
entitled, an intentional infliction of harm on the corporation or shareholders,
a violation of the Arizona corporation law or an intentional violation of
criminal law.
Results of Operations
REVENUES
The Company is in the development stage and as such has had no revenues
as of the date of this 10Q. We anticipate no revenues to be derived from
operations nor investment until the fourth quarter of fiscal year 2004. The
anticipated revenues are expected to consist primarily of wholesale olive oil
sales from fruit that the Company intends to buy, press and bottle in the latter
half of the fourth quarter of 2004.
COSTS AND EXPENSES
Southwest Olive Growers had general and administrative expenses of $355
and $2,555 for the three and six months ended October 31, 2004. Our costs are
anticipated to significantly increase in the third and fourth quarters of 2004
due to the costs of the offering memorandum and registration expenses, travel,
purchase of real property and equipment and for general and administrative
expenses.
LIQUIDITY AND CAPITAL RESOURCES
For the six months ended October 31, 2004, the Company used $155 from
operating activities.
As of October 31, 2004, the Company had total current assets of $ 2,545
and a net working capital deficit of $555.
Net stockholders' deficit in the Company was $555 as at October 31,
2004.
The Company will not have sufficient funds (unless it is able to raise
funds in a private placement) to undertake any further significant acquisitions
or developments, other than contemplated herein, and there are no assurances
that such financing will be available on terms acceptable or favorable to the
Company. There are no known material trends, events or uncertainties that have
or are reasonably likely to have a material impact on our short-term or
long-term liquidity.
ITEM 3. CONTROLS AND PROCEDURES
The Company's Chief Executive Officer have concluded, based on an
evaluation conducted within 90 days prior to the filing date of this Quarterly
Report on Form 10-QSB, that the Company's disclosure controls and procedures
have functioned effectively so as to provide those officers the information
necessary whether:
(i) this Quarterly Report on Form 10-QSB contains any untrue statement
of a material fact or omits to state a material fact necessary to make
the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered
by this Quarterly Report on Form 10-QSB, and
(ii) the financial statements, and other financial information included
in this Quarterly Report on Form 10-QSB, fairly present in all material
respects the financial condition, results of operations and cash flows
of the Company as of, and for, the periods presented in this Quarterly
Report on Form 10-QSB.
There have been no significant changes in the Company's internal
controls or in other factors since the date of the Chief Executive Officer's
evaluation that could significantly affect these internal controls, including
any corrective actions with regards to significant deficiencies and material
weaknesses.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
EXHIBIT
NUMBER Description Reference
- ------------------ ------------------------------------------------------------------------------- ---------------
2.1 Articles of Incorporation of Registrant, dated May 6, 2004 (1)
3.1 By-laws of Registrant (1)
4.1 Form of Common Stock Certificate (1)
31.1 Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
31.2 Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
32.1 Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
32.2 Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
(1) Incorporated by reference to the Registrant's registration statement on
Form SB-2 filed on October 26, 2004.
(b) Reports on Form 8-K filed.
No reports on Form 8-K were filed during the prior quarter.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereto duly
authorized.
SOUTHWEST OLIVE GROWERS, INC.
Date: December 20, 2004 By: /s/ Robert Feneziani
-------------------------------------
Robert Feneziani
President and Chairman of the Board
(Principal Executive Officer)
Date: December 20, 2004 By: /s/ Marla Martins
-------------------------------------
Marla Martins
Secretary/Treasurer and Director
(Principal Financial and Accounting
Officer)