[DESCRIPTION]FORM 10-QSB
<PAGE>
United States
Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
(MARK ONE)
[ X ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the Period Ended September 30, 1998
or
[ ] Transition Report Pursuant to Section 13 of 15(d) of the Securities
Exchange Act of 1934 For the Transition Period
From ____________ to ______________
Commission File number
============================================================================
SOUTHERN VENTURES, INC.
(Exact name of Registrant as specified in its charter)
NEVADA 63-1185800
(State of Incorporation) (I.R.S. Employer
Identification No.)
1322 Maron Spillway Rd.
Elmore, AL 36025
(Address of principal executive offices)
(702) 341-7211
(Registrant's telephone number)
============================================================================
Check whether the Registrant (1) has filed all reports required to be filed by
Section 13 of 15(d) of the Securities Exchange Act of 1934 during the preceding
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 No X
As of September 30, 1998 there were 18,937,000 shares of Common Stock
outstanding.
<PAGE>
INDEX
-----
PART I. FINANCIAL INFORMATION (unaudited)
Item 1. Balance Sheet as of September 30, 1998
Statements of Operations for the three-month
periods ended September 30, 1998 and 1997
Statements of Cash Flows for the three-month period
ended September 30, 1998 and 1997
Notes to the Financial Statements
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
PART II. OTHER INFORMATION
Item 1 - Item 6.
<PAGE>
PART I. FINANCIAL INFORMATION (unaudited)
Item 1. Financial Statements:
Southern Ventures and Subsidiaries
CONSOLIDATED BALANCE SHEET
September 30,
1998
-----------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 170,790
Accounts receivable 400,488
Inventories 862,392
-----------
Total current assets 1,433,670
Intangible assets 97,167
Property and equipment, net 10,410,177
Other assets 433,314
-----------
Total assets $12,374,328
===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 580,211
Accrued compensation and liabilities 1,042,277
Current portion of notes payable 2,693,181
-----------
Total current liabilities 4,315,670
Long-term liabilities excluding current portion 6,176,889
-----------
Total liabilities 10,492,559
Shareholders' equity:
Common stock 18,937
Preferred stock 10,000
Additional paid-in capital 540,501
Retained earnings 1,412,331
Shareholder receivable (100,000)
-----------
Total shareholders' equity 1,981,948
-----------
Total liabilities and shareholders' equity $ 12,374,328
===========
See accompanying notes to unaudited financial statements
<PAGE>
Southern Ventures and Subsidiaries
STATEMENTS OF OPERATIONS
Three-Month Periods
Ended September 30,
1998 1997
------------------- ------------------
(Unaudited) (Unaudited)
Product sales $1,138,862 $ 1,069,917
Cost of sales 713,730 530,169
---------------- ------------------
Gross profit 425,132 539,748
Operating expenses:
Selling, general and administrative 525,568 443,510
Interest Expense, net 72,779 61,637
Other Loss 81,675
Provision for income tax -- 13,840
---------------- ------------------
Net income (254,889) 20,761
================= ==================
Basic and diluted net per share $(0.01) $(0.00)
================= ==================
Shares outstanding 18,937,000 18,937,000
================= ==================
See accompanying notes to unaudited financial statements
<PAGE>
Southern Ventures and Subsidiaries
Consolidated Statement of Cash Flows
Three-Month Periods
September 30,
1998 1997
----------- ----------
Net income (254,889) 20,761
Income charges (credit) not affecting cash:
Depreciation & Depletion 161,795 101,145
Amortization 1,833 5,546
Changes in certain working capital components:
Decrease (increase) in inventory (299,892) -
Decrease (increase) in accounts receivable 148,936 46,257
Decrease (increase) in prepaid interest 205,820
Decrease (increase) in other current assets (61,996) (47,338)
Increase (decrease) in accounts payable - -
notes payable and accrued liabilities 505,019 115,349
------------ ------------
Cash provided by operations 312,981 447,539
Cash Provided (Used) by Investing Activities
Additions to property, plant and equipment (807,991) (259,358)
Disposals of property, plant and equipment 46,386 8,314
------------ ------------
Cash used by investing activities (761,605) (251,043)
Cash Provided by Financing Activities
Additions in long-term debt 628,995 569,878
Reductions in long-term debt (302,658) (420,849)
Proceeds from issuance of stock - 400,000
Distributions to shareholders - (361,091)
------------ ------------
Cash provided by financing activities (326,337) 187,938
Net increase (decrease) in cash (122,286) 384,433
Cash at beginning of period 295,492 121,192
Cash at end of period 173,206 505,626
See accompanying notes to unaudited financial statements
<PAGE>
Southern Ventures,Inc.
NOTES TO THE FINANCIAL STATEMENTS, (UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited financial statements of Southern Ventures, Inc.
(the "Company"), have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the instruction
for Form 10-QSB Item 310b and Article 10 of regulation S-X. The balance sheet
as of September 30, 1998, and the statements of operations for the three month
periods ended September 30, 1998 and 1997 and the statements of cash flows for
the three-month periods ended September 30, 1998 and 1997 are unaudited but
include all adjustments (consisting only of normal recurring adjustments) which
the Company considers necessary for a fair presentation of the financial
position at such date and the operating results and cash flows for those
periods. Although the Company believes that the disclosures in these financial
statements are adequate to make the information presented not misleading,
certain information normally included in financial statements and related
footnotes prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to the rules and regulations of the
Securities and Exchange Commission
Results for any interim period are not necessarily indicative of results
for any other interim period or for the entire year.
2. USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions. These assumptions affect the reported amounts of assets and
liabilities, the 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 these estimates.
3. INVENTORIES
Inventories are stated at the lower of cost or market, determined by using
the last-in, first-out (LIFO) method.
4. INCOME TAXES
Pro forma income tax provision gives effect to income tax considerations
assuming that each of the subsidiary entities had been a "C" Corp. for the
reported period. No income is reflected on a pro forma basis for the Starch and
Gluten Plant for prior reported years since the acquired plant was closed from
8/15/96 to allow management to make substantial improvements to the assets. This
facility commenced operations during the current quarter.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS:
The following discussion should be read in conjunction with the unaudited
financial statements and notes thereto included in Part I - Item 1 of this
Quarterly Report and the audited financial statements and notes thereto and
Management's Discussion and Analysis of Financial Condition and Results of
Operations contained in the Company's prospectus.
RESULTS OF OPERATIONS
The following table sets forth, as a percentage of net sales, certain
items included in the Company's Income Statements for the periods indicated:
Quarter ended September 30,
1998 1997
---- ----
Statements of Income Data:
Net sales......................... 100.0% 100.0%
Cost of sales..................... 62.7 49.6
Gross profit...................... 37.3 50.4
Operating expenses................ 46.1 41.5
Income from operations............ (8.8) 9.0
Interest Expense.................. 6.4 5.8
Other income (expense)............ (7.2) 0
Income before income taxes........ (22.4) 3.2
Provision for income taxes........ 0 1.3
Net Income........................ (22.4) 1.9
Quarter Ended September 30, 1998 Compared to Quarter Ended September 30, 1997
Revenue consists of gross revenue less product returns. Riverside Grain
Products, Inc., a wholly owned subsidiary, commissioned a manufacturing plant
and marketed a new starch and gluten product line which contributed to 10% of
the total revenues during the three months ended September 30, 1998. The
remaining 90% of revenue was derived from the silica rock and sand sales of the
Company's subsidiary, Elmore Sand & Gravel, Inc. Total revenue for the three
months ended September 30, 1998 increased to $1,138,862 from $1,069,917 for the
three months ended September 30, 1997. Revenue was up from the previous year
due to the Company's sales of the new starch and gluten product line.
Cost of sales consists primarily of the cost to manufacture the Company's
products. Cost of sales for the Company silica mining subsidiary increased to
$631,604 in the three months ended September 30, 1998 from $530,169 for the
three months ended September 30, 1997. These increases were the result of
higher than normal maintenance costs. Sales of the Company's new starch and
gluten products contributed to the remaining portion of the cost of sales. These
costs, as a percentage of sales, are high than normal due to the inherent
inefficiencies incurred during start-up of the new starch and gluten plant.
General and administrative expense consists of general management and finance
personnel costs, occupancy expense, accounting expense and legal expense.
General and administrative expenses increased to $525,568 for the three months
ended September 30, 1998 from $443,510 for the three months ended September 30,
1997. The increases were primarily the result of property taxes, accounting and
sales expenses and increases in administrative and sales staff for the Company's
starch and gluten subsidiary.
Other Income / Loss:
The Company received $500,000(Cdn) in the form of a grant from the Human
Resource and Development Corporation. This grant is to be used to pay the
initial costs of hiring and training employees for the recently commissioned
starch and gluten plant in Thunder Bay, Canada. Other Income consists of the
earned portion $141,226(Cdn) of the Human Resource and Development grant. The
grant is earned as wages are paid to the employees of the Company's starch and
gluten plant. Other Loss consists primarily of $178,098 in non-reoccurring
plant commissioning expenses.
Liquidity and Capital Resources:
The company's anticipates satisfying $2,000,000 of its outstanding current
liabilities through the issuance of common stock. The company is currently
satisfying its working capital needs from its mining subsidiary, Elmore Sand &
Gravel. The company anticipates meeting future working capital needs by
operating its starch and gluten facility in Thunder Bay, Canada.
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 Shareholders
None
ITEM 5. Other Information
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
None
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.
Southern Ventures, Inc.
/s/ Chester Wright III
Chief Financial Officer
(Principal Financial and Accounting Officer)
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-30-1998
<PERIOD-START> Jul-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 170,790
<SECURITIES> 0
<RECEIVABLES> 400,488
<ALLOWANCES> 0
<INVENTORY> 862,392
<CURRENT-ASSETS> 1,433,670
<PP&E> 10,410,177
<DEPRECIATION> 161,795
<TOTAL-ASSETS> 12,374,328
<CURRENT-LIABILITIES> 4,315,670
<BONDS> 0
0
10,000
<COMMON> 18,937
<OTHER-SE> 1,852,832
<TOTAL-LIABILITY-AND-EQUITY> 12,374,328
<SALES> 1,138,862
<TOTAL-REVENUES> 1,138,862
<CGS> 713,730
<TOTAL-COSTS> 713,730
<OTHER-EXPENSES> 81,675
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 72,779
<INCOME-PRETAX> (254,889)
<INCOME-TAX> 0
<INCOME-CONTINUING> (254,889)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (254,889)
<EPS-PRIMARY> (0.01)
<EPS-DILUTED> (0.01)
</TABLE>
