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 September 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 of (IRS Employer Identification No.)
incorporation or 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 September 30, 2002: 11,470,000 shares of common stock.
Transitional Small Business Format: Yes [ ] No [ X ]
FORM 10-QSB
SEPTEMBER 30, 2002
WOODLAND HATCHERY, INC.
INDEX
Page
PART I. Financial Information
Item I. Financial Statements (unaudited) 3
Unaudited Condensed Balance Sheet, September 30, 2002 4
Unaudited Statements of Operations for the Nine Months Ended
September 30, 2002 and September 30, 2001 and Cumulative
Amounts Since Inception 5
Unaudited Statements of Operations for the Three Months Ended
September 30, 2002 and September 30, 2001 6
Unaudited Statements of Cash Flows for the Nine Months Ended
September 30, 2002 and September 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
Item 3. Controls and Procedures 12
PART II. Other Information
Item 2. Use of Proceeds From Sale of Registered Securities 12
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 13
(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
-----------------------
September 30, 2002
------------------
ASSETS
------
Current assets:
Cash . . . . . . . . . . . . . . . . . . . . . . . . . $ 9,752
Prepaid expense. . . . . . . . . . . . . . . . . . . . 10,000
Inventories. . . . . . . . . . . . . . . . . . . . . . 974
---------
Total current assets . . . . . . . . . . . . . . . . 20,726
Property and equipment, net. . . . . . . . . . . . . . . . 25,283
---------
Total assets . . . . . . . . . . . . . . . . . . $ 46,009
=========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ----------------------------------------------------------
Current liabilities - accounts payable . . . . . . . . . . $ 1,471
---------
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, 11,470,000 shares issued and outstanding 11,470
Additional paid-in capital . . . . . . . . . . . . . . 73,280
Deficit accumulated during the development stage . . . (40,212)
---------
Total stockholders' equity . . . . . . . . . . . 44,538
---------
Total liabilities and stockholders' equity . . . $ 46,009
=========
4
WOODLAND HATCHERY, INC.
-----------------------
(A Development Stage Company)
UNAUDITED STATEMENTS OF OPERATIONS
----------------------------------
Nine Months Ended
September 30, Cumulative
------------------------
2002 2001 Amounts
------------ ---------- ----------
Revenue . . . . . . . . . . . . . . . . . $ - - -
General and administrative costs. . . . . 23,264 9,520 38,818
Interest expense. . . . . . . . . . . . . - - 1,394
------------ ---------- ----------
Loss before income taxes. . . . (23,264) (9,520) (40,212)
Provision for income taxes. . . . . . . . - - -
------------ ---------- ----------
Net Loss. . . . . . . . . . . . $ (23,264) (9,520) (40,212)
============ ========== ==========
Loss per common share - basic and diluted $ - -
============ ==========
Weighted average common shares -
basic and diluted . . . . . . . . . . . 11,401,000 9,696,000
============ ==========
5
WOODLAND HATCHERY, INC.
-----------------------
(A Development Stage Company)
UNAUDITED STATEMENTS OF OPERATIONS
----------------------------------
Three Months Ended
September 30,
-------------------------
2002 2001
------------ -----------
Revenue . . . . . . . . . . . . . . . . . $ - -
General and administrative costs. . . . . 12,670 1,885
Interest expense. . . . . . . . . . . . . - -
------------ -----------
Loss before income taxes. . . . (12,670) (1,885)
Provision for income taxes. . . . . . . . - -
------------ -----------
Net Loss. . . . . . . . . . . . $ (12,670) (1,885)
============ ===========
Loss per common share - basic and diluted $ - -
============ ===========
Weighted average common shares -
basic and diluted . . . . . . . . . . . 11,412,000 11,020,000
============ ===========
6
WOODLAND HATCHERY, INC.
-----------------------
(A Development Stage Company)
UNAUDITED STATEMENTS OF CASH FLOWS
----------------------------------
September 30, Cumulative
-------------------
2002 2001 Amounts
--------- -------- --------
Cash flows from operating activities:
- ---------------------------------------------------
Net loss. . . . . . . . . . . . . . . . . . . . . . $(23,264) (9,520) (40,212)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation . . . . . . . . . . . . . . . . 1,093 305 2,308
Loss on disposal of assets . . . . . . . . . - - 361
Common stock issued for services . . . . . . 18,750 - 18,750
Increase in prepaid expense. . . . . . . . . (10,000) - (10,000)
Increase in inventories. . . . . . . . . . . (228) (701) (974)
Increase (decrease) in accounts payable. . . (19,140) 2,390 1,471
Increase in accrued expenses . . . . . . . . - 739 -
--------- -------- --------
Net cash used in operating activities . . (32,789) (6,787) (28,296)
--------- -------- --------
Cash flows from investing activities:
- ---------------------------------------------------
Purchase of fixed assets. . . . . . . . . . . . . . (11,433) (15,510) (27,952)
--------- -------- --------
Net cash used in investing activities . . (11,433) (15,510) (27,952)
--------- -------- --------
Cash flows from financing activities:
- ---------------------------------------------------
Increase in note payable. . . . . . . . . . . . . . - 20,000 -
Proceeds from issuance of common stock, net . . . . - 10,000 66,000
Deferred offering costs . . . . . . . . . . . . . . - (10,090) -
--------- -------- --------
Net cash provided by financing activities - 19,910 66,000
--------- -------- --------
Net increase (decrease) in cash . . . . . (44,222) (2,387) 9,752
Cash, beginning of period . . . . . . . . . . . . . 53,974 2,929 -
--------- -------- --------
Cash, end of period . . . . . . . . . . . . . . . . $ 9,752 542 9,752
========= ======== ========
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WOODLAND HATCHERY, INC.
----------------------
(A Development Stage Company)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
---------------------------------------
September 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.
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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 $23,500. 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. 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.
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
10
Because our first generation of trout have not reached maturity, the
initial order has not been delivered at the date of this report. When the fish
are mature, Winterton Ranches will purchase all the fish we can raise over the
next three years. Consequently, 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 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 also place ads in local outdoor
magazines and publications.
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.
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
To prevent the spread of disease and the destruction of habitat by
non-native species, the State of Utah strictly regulates live fish sales. 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.
11
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 SEPTEMBER 30, 2002 AND SEPTEMBER 30, 2001
The Company did not generate any revenue during the three months ended
September 30, 2002 and 2001. The Company anticipates that it will begin
generating revenue as soon as its initial generation of fish reaches maturity
and a breeding stock is established. General and administrative costs during
the three months ended September 30, 2002 and 2001 were $12,670 and $1,885
respectively. Higher administrative costs in 2002 were largely due to expenses
associated with public reporting requirements. As a result of these factors,
the Company realized net loss of $12,670 for the three months ended September
30, 2002 and $1,885 for the comparable period in 2001.
NINE MONTH PERIODS ENDED SEPTEMBER 30, 2002 AND SEPTEMBER 30, 2001
The Company did not have any revenue during the nine month periods ended
September 30, 2002 and 2001. General and administrative costs during the nine
months ended September 30, 2002 were $23,264 compared to general and
administrative expenses of $9,520 for the nine months ended September 30, 2001.
Higher administrative costs for the first nine months of 2002 were mainly due to
expenses associated with the Company's initial public offering in January of
2002 and with the Company's ongoing reporting requirements. As a result of the
foregoing, the Company had a net loss of $23,264 during the first nine months of
2002 and $9,520 during the comparable period in 2001.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 2002 the Company had total assets of $46,009 consisting of
$9,752 cash in hand, $10,000 in prepaid expenses, $974 in inventory and $25,283
in property and equipment. Total current liabilities at September 30, 2002
consisted of $1,471 in accounts payable.
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.
ITEM 3. CONTROLS AND PROCEDURES
Within the 90-day period prior to the date of this report, we evaluated the
effectiveness and operation of our disclosure controls and procedures pursuant
to Rule 13a-14 of the Securities Exchange Act of 1934. Based on that
evaluation, our Chief Executive Officer and Chief Financial Officer have
concluded that our disclosure controls and procedures are effective. There have
been no significant changes in internal controls or other factors that could
significantly affect internal controls subsequent to the date we carried out our
evaluation.
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. At September 30, 2002 all proceeds have been used. Total use of
proceeds at that date are as follows:
12
Total at Total at Total at
3/31/02 6/30/02 9/30/02
-------- -------- --------
TOTAL PROCEEDS . . . . . . . . . . 75,000 75,000 75,000
-------- -------- --------
Attorney Fees & Filing Costs . . . 20,000 20,000 20,000
Repayment of Debt. . . . . . . . . 20,000 20,000 20,000
Accounting and Auditing Costs. . . 8,000 10,200 10,200
Operating Costs. . . . . . . . . . 8,500 8,795 8,795
Hatchery Equipment and Maintenance 3,646 9,583 10,905
General and Administrative Costs . 3,758 5,100 5,100
Funds Available. . . . . . . . . . 11,096 1,322 - 0 -
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 September 30, 2002.
Exhibits:
EXHIBIT NUMBER TITLE LOCATION
99.1 Certification of Chief Executive Officer Attached
99.2 Certification of Chief Financial Officer Attached
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: November 12, 2002 /s/ Cody Winterton
---------------------
Cody Winterton
President and Chief Financial Officer
13