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 June 30, 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 84-1407365
(State or other jurisdiction (IRS Employer Identification No.)
of incorporationor organization)
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 June 30, 2002: 11,395,000 shares of common stock.
Transitional Small Business Format: Yes [ ] No [ X ]
FORM 10-QSB
WOODLAND HATCHERY, INC.
INDEX
Page
PART I.. Financial Information
Item I. Financial Statements (unaudited) 3
Unaudited Condensed Balance Sheet, June 30, 2002 4
Unaudited Statements of Operations for the Six Months Ended
June 30, 2002 and June 30, 2001 and Cumulative Amounts Since
Inception 5
Unaudited Statements of Operations for the Three Months Ended
June 30, 2002 and June 30, 2001 6
Unaudited Statements of Cash Flows for the Six Months Ended
June 30, 2002 and June 30, 2001 and Cumulative Amounts Since
Inception 7
Notes to Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial
Condition or Plan of Operation 9
PART II. Other Information
Item 2. Use of Proceeds From Sale of Registered Securities 13
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 14
(Inapplicable items have been omitted)
2
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.
3
WOODLAND HATCHERY, INC.
-----------------------
(A Development Stage Company)
UNAUDITED BALANCE SHEET
-----------------------
June 30, 2002
-------------
ASSETS
-------------
Current assets:
Cash . . . . . . . . . . . . . . . . . . . . . . . . . $ 18,596
Inventories. . . . . . . . . . . . . . . . . . . . . . 770
----------
Total current assets . . . . . . . . . . . . . . . . 19,366
Property and equipment, net. . . . . . . . . . . . . . . . 23,503
----------
Total assets . . . . . . . . . . . . . . . . . . $ 42,869
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
--------------------------------------
Current liabilities - accounts payable . . . . . . . . . . $ 4,411
----------
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 shares issued and outstanding 11,395
Additional paid-in capital . . . . . . . . . . . . . . 54,605
Deficit accumulated during the development stage . . . (27,542)
----------
Total stockholders' equity . . . . . . . . . . . 38,458
----------
Total liabilities and stockholders' equity . . . $ 42,869
==========
See Accompanying Notes to Financial Statements
4
WOODLAND HATCHERY, INC.
-----------------------
(A Development Stage Company)
UNAUDITED STATEMENTS OF OPERATIONS
----------------------------------
Six Months Ended
June 30, Cumulative
-----------------------
2002 2001 Amounts
------------ ---------- ---------
Revenue . . . . . . . . . . . . . . . . . $ - - -
General and administrative costs. . . . . 10,594 9,910 26,148
Interest expense. . . . . . . . . . . . . - - 1,394
------------ ---------- ---------
Loss before income taxes. . . . (10,594) (9,910) (27,542)
Provision for income taxes. . . . . . . . - - -
------------ ---------- ---------
Net Loss. . . . . . . . . . . . $ (10,594) (9,910) (27,542)
============= ========== =========
Loss per common share - basic and diluted $ - -
============= ==========
Weighted average common shares -
basic and diluted . . . . . . . . . . . 11,395,000 9,020,000
============= ==========
See Accompanying Notes to Financial Statements
5
WOODLAND HATCHERY, INC.
-----------------------
(A Development Stage Company)
UNAUDITED STATEMENTS OF OPERATIONS
----------------------------------
Three Months Ended
June 30,
-------------------------
2002 2001
------------ -----------
Revenue . . . . . . . . . . . . . . . . . $ - -
General and administrative costs. . . . . 5,973 5,823
Interest expense. . . . . . . . . . . . . - -
------------ -----------
Loss before income taxes. . . . (5,973) (5,823)
Provision for income taxes. . . . . . . . - -
------------ -----------
Net Loss. . . . . . . . . . . . $ (5,973) (5,823)
============ ===========
Loss per common share - basic and diluted $ - -
============ ===========
Weighted average common shares -
basic and diluted . . . . . . . . . . . 11,395,000 11,020,000
============ ===========
See Accompanying Notes to Financial Statements
6
WOODLAND HATCHERY, INC.
-----------------------
(A Development Stage Company)
UNAUDITED STATEMENTS OF CASH FLOWS
----------------------------------
June 30, Cumulative
-----------------
2002 2001 Amounts
--------- ------- ----------
Cash flows from operating activities:
- ---------------------------------------------------
Net loss. . . . . . . . . . . . . . . . . . . . . . $(10,594) (9,910) (27,542)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation . . . . . . . . . . . . . . . . 646 94 1,861
Loss on disposal of assets . . . . . . . . . - 361 361
Increase in inventories. . . . . . . . . . . (24) - (770)
Increase (decrease) in accounts payable. . . (16,200) - 4,411
--------- ------- --------
Net cash used in operating activities . . (26,172) (9,455) (21,679)
--------- ------- --------
Cash flows from investing activities:
- ---------------------------------------------------
Purchase of fixed assets. . . . . . . . . . . . . . (9,206) (9,752) (25,725)
--------- ------- --------
Net cash used in investing activities . . (9,206) (9,752) (25,725)
--------- ------- --------
Cash flows from financing activities:
- ---------------------------------------------------
Increase in note payable. . . . . . . . . . . . . . - 20,000 -
Proceeds from issuance of common stock, net . . . . - 10,000 66,000
--------- ------- --------
Net cash provided by financing activities - 30,000 66,000
--------- ------- --------
Net increase (decrease) in cash . . . . . (35,378) 10,793 18,596
Cash, beginning of period . . . . . . . . . . . . . 53,974 2,929 -
--------- ------- --------
Cash, end of period . . . . . . . . . . . . . . . . $ 18,596 13,722 18,596
========== ======= ========
See Accompanying Notes to Financial Statements
7
WOODLAND HATCHERY, INC.
(A Development Stage Company)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
JUNE 30, 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.
8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL 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. The state
program is expected to be complete by Janaury 2002 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.
9
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 riverbed. Total cost for construction was $21,500. 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.
Our breeding operations commenced with the purchase of 2,000 pounds of six
inch trout, weighing eight ounces per fish. The initial purchase consisted 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 hope to have fish ready to sell in
the fall of 2002.
In addition to purchasing fingerling trout, we will breed our own fish.
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 the summer or fall of 2002. At the time of sale,
the fish will have increased in size to approximately 14 to 18 inches and will
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.
10
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
11
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 AND SIX MONTH PERIODS ENDED JUNE 30 2002 AND JUNE 30, 2001
The Company generated no revenue during the three months and six months
ended June 30, 2002 and June 30, 2001. General and administrative costs during
the three months ended June 30 2002 and June 30, 2001 resulted in net losses of
$5,973 and $5,823, respectively. General and administrative costs during the six
months ended June 30 2002 and June 30, 2001 resulted in net losses of $10,594
and $9,910, respectively. The lack of revenue is due to the Company beginning
operations in 2001. It is anticipated that the Company will begin generating
revenue when its initial purchase of fingerling trout matures during the summer
of 2002.
LIQUIDITY AND CAPITAL RESOURCES
For the period ended June 30, 2002 the Company had total assets of $42,869
consisting of $18,596 cash in hand, $770 in inventory and $23,503 in property
and equipment. For the period ended June 30, 2001, the Company had total assets
of $23,381 consisting of $13,722 in cash and $9,650 in property and equipment.
The Company believes that its current cash needs can be met with cash on
hand and continuing operations. However, should the Company find it necessary
to raise additional capital, the Company may sell common stock or enter into
debt financing arrangements.
12
PART II. OTHER INFORMATION
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 June 30, 2002 is as
follows:
TOTAL PROCEEDS OF OFFERING 75,000
USE OF PROCEEDS: Total at Additions Total at
3/31/02 Q2 6/30/02
-----------------------------
Attorney fees & filing costs 20,000 20,000
Accounting and Audits. . . . 8,000 2,200 10,200
Misc operating costs . . . . 8,500 295 8,795
Repayment of debt. . . . . . 20,000 20,000
Hatchey equipment. . . . . . 3,646 5,937 9,583
G&A. . . . . . . . . . . . . 3,758 1,342 5,100
TOTAL EXPENDITURES
FROM PROCEEDS 73,678
------
REMAINING PROCEEDS 1,322
======
It is anticipated that 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 June 30, 2002.
Exhibits:
Exhibit Number Title Location
99.1 Certification of Chief Executive Officer Attached
99.2 Certification of Chief Financial Officer Attached
13
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: August 9, 2002 /s/ Cody Winterton
------------------------------------------
Cody Winterton
President and Chief Financial Officer
14