<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended March 31, 1998, or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from _______________ to
__________________
Commission file number: 000-23689
GRIFFIN INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
MARYLAND 91-1869317
(State or other jurisdiction of) (I.R.S. Employer
Incorporation or Organization) Identification No.)
1111 THIRD AVENUE, 25TH FLOOR, SEATTLE, WA 98101
(Address of principal executive offices with zip code)
Registrant's telephone number, including area code: 206-326-8090
N/A
(Former name, former address and former fiscal year,
if changed since last report)
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 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 [X] No [ ]
10Q-1
<PAGE>
APPLICABLE ONLY TO ISSUERS INVOLVED IN
BANKRUPTCY PROCEEDING DURING THE
PRECEDING FIVE YEARS
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
CLASS OUTSTANDING AT APRIL 30, 1998
Common stock - $.001 par value 1,700,000
Exhibit Index on Page 10Q-12
INDEX
PAGE
Cover Page
Index
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements................................ 10Q-3
Condensed Balance Sheets............................ 10Q-3
Condensed Statements of Operations.................. 10Q-4
Condensed Statements of Cash Flows.................. 10Q-5
Notes to Condensed Financial Statements............. 10Q-6
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations....... 10Q-8
PART II - OTHER INFORMATION....................................... 10Q-11
Item 2 - Changes in Securities and Use of Proceeds........... 10Q-11
Item 6 - Exhibits and Report on Form 8-K..................... 10Q-12
SIGNATURES........................................................ 10Q-12
EXHIBIT INDEX..................................................... 10Q-12
10Q-2
<PAGE>
PART 1
FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
GRIFFIN INDUSTRIES, INC.
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
$ $
[unaudited]
- ------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents [NOTE 2] 481,978 53,563
Prepaid expenses 47,500 15,000
- ------------------------------------------------------------------------------------------
Total assets 529,478 68,563
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
Current liabilities:
Accounts payable 155,370 91,323
Accrued expenses 33,765 10,000
- ------------------------------------------------------------------------------------------
Total current liabilities 189,135 101,323
- ------------------------------------------------------------------------------------------
Due to a company controlled by a director [NOTE 3] 9,755 --
- ------------------------------------------------------------------------------------------
Total liabilities 198,890 101,323
- ------------------------------------------------------------------------------------------
Stockholders' equity (deficiency):
Convertible Preferred stock, $.001 par value,
5,000,000 shares authorized,
2,500,000 shares issued and outstanding 2,500 2,500
Common stock, $.001 par value,
50,000,000 shares authorized,
1,700,000 shares issued and outstanding [NOTE 4] 1,700 700
Common stock to be issued -- 139
Additional paid-in capital 999,000 138,861
Accumulated deficit (672,612) (174,960)
- ------------------------------------------------------------------------------------------
Total stockholders' equity (deficiency) 330,588 (32,760)
- ------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity (deficiency) 529,478 68,563
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
</TABLE>
[SEE ACCOMPANYING NOTES]
10Q-3
<PAGE>
GRIFFIN INDUSTRIES, INC.
CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
October 14, 1997
January 1, 1998 to (date of incorporation)
March 31, 1998 to December 31, 1997
$ $
[unaudited]
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
EXPENSES
Directors' fees [NOTE 3] 10,500 --
Administrative services [NOTE 3] 60,150 --
Office and miscellaneous 27,610 6,848
Professional fees [NOTE 3] 146,022 20,887
Travel 69,821 5,902
- --------------------------------------------------------------------------------------------------------
Total expenses 314,103 33,637
- --------------------------------------------------------------------------------------------------------
Loss before provision for income taxes (314,103) (33,637)
Provision for income taxes -- --
- --------------------------------------------------------------------------------------------------------
Net loss for the period (314,103) (33,637)
Accumulated deficit, beginning of period (174,960) --
Share issue costs [NOTES 3 AND 4] (183,549) (141,323)
- --------------------------------------------------------------------------------------------------------
Accumulated deficit, end of period (672,612) (174,960)
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
Basic loss per share [NOTE 5] (0.26) (0.05)
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
Shares used in computation of basic loss per share [NOTE 5] 1,200,000 700,000
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
</TABLE>
[SEE ACCOMPANYING NOTES]
10Q-4
<PAGE>
GRIFFIN INDUSTRIES, INC.
CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
October 14, 1997
January 1, 1998 to (date of incorporation)
March 31, 1998 to December 31, 1997
$ $
[unaudited]
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss for the period (314,103) (33,637)
Changes in operating assets and liabilities:
Prepaid expenses (32,500) (15,000)
Accrued expenses 23,765 10,000
- ------------------------------------------------------------------------------------------------------------
Net cash used in operating activities (322,838) (38,637)
- ------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Proceeds from Common and Preferred Stock,
net of issuance costs [NOTES 3 AND 4] 677,451 877
Change in accounts payable related to issue costs 64,047 91,323
Advances from a company controlled by a director [NOTE 3] 9,755 --
- ------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 751,253 92,200
- ------------------------------------------------------------------------------------------------------------
Net increase in cash and cash equivalents during the period 428,415 53,563
Cash and cash equivalents, beginning of period 53,563 --
- ------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of period 481,978 53,563
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
</TABLE>
[SEE ACCOMPANYING NOTES]
10Q-5
<PAGE>
GRIFFIN INDUSTRIES, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
1. UNAUDITED INTERIM FINANCIAL STATEMENTS
The financial statements as of March 31, 1998 have been prepared by the Company
pursuant to the rules and regulations of the Securities and Exchange Commission
(SEC). These statements are unaudited and, in the opinion of management, include
all adjustments (consisting of normal recurring adjustments and accruals)
necessary to present fairly the results for the periods presented. The balance
sheet at December 31, 1997 has been derived from the audited financial
statements at that date. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such SEC rules
and regulations. Operating results for the quarter ended March 31, 1998 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1998. These financial statements should be read in conjunction with
the Company's audited financial statements for the period ended December 31,
1997.
2. CASH AND CASH EQUIVALENTS
The Company invests certain of its excess cash in money market instruments of
high-quality mutual funds. The Company considers all highly liquid instruments
with an original maturity of three months or less to be cash equivalents. Cash
and cash equivalents are carried at cost, which approximates market.
3. RELATED PARTY TRANSACTIONS
During the period, the Company paid $10,500 to directors for services rendered
$60,150 to a company controlled by a director for administrative services
rendered, and $113,747 in legal fees and share issue costs to a law firm
controlled by an officer. Effective March 20, 1998 that attorney was no
longer an officer of the Company.
The amount due to a company controlled by a director is without interest or
stated terms of repayment.
4. SALES OF UNREGISTERED SECURITIES
The Company commenced a self underwritten direct public offering on November
6, 1997 for 1,000,000 shares of common stock at an offering price of $1.00
per share. The Company is relying on the exemption from the registration
requirements of the Securities Act of 1933 pursuant to Regulation E
thereunder.
Pursuant to this offering, the Company sold 1,000,000 shares of common stock
between the period November 6, 1997 to March 6, 1998 (the offering
termination date) for cash consideration of $675,128 net of share issue costs
of $324,872, of which $141,323 were incurred during the period ending
December 31, 1997 and the remaining $183,549 were incurred during the quarter
ending March 31, 1998. For the period November 6, 1997 to December 31, 1997
subscriptions were received for 139,000 shares and $139,000 cash
consideration. The remaining subscriptions for 861,000 shares and $861,000
cash consideration were received during the period January 1, 1998 to March
6, 1998. The full 1,000,000 shares were issued and allotted during the
quarter ending March 31, 1998.
10Q-6
<PAGE>
5. LOSS PER SHARE
SFAS No. 128, "Earnings per Share", has been issued and is effective for fiscal
periods ending after December 15, 1997. SFAS No. 128 establishes standards for
computing and presenting earnings(loss) per share. The Company adopted the
provisions of SFAS No. 128 in the first quarter of 1998. Under the standards
established by SFAS No. 128, earnings(net loss) per share is measured at two
levels: basic earnings(loss) per share and diluted earnings(loss) per share.
Basic earnings(loss) per share is computed by dividing net income(loss) by the
weighted average number of common shares outstanding during the year. Diluted
earnings(loss) per share is computed by dividing net income(loss) by the
weighted average number of common shares outstanding after considering the
additional dilution related to convertible stock. All loss per share amounts in
the accompanying financial statements have been stated to reflect the
application of the provisions of SFAS No. 128. The diluted loss per share is
equivalent to the basic loss per share because the convertible stock is
considered antidilutive.
10Q-7
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following Management's Discussion and Analysis of Financial Condition and
Results of Operations contains forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995. These
forward-looking statements are based on management's current expectations,
estimates and projections about the Company and the industries in which it
intends to invest, management's beliefs and certain assumptions made by
management. These forward-looking statements involve risks and
uncertainties, and actual results may differ materially from those
anticipated or expressed in such statements. Potential risks and
uncertainties include, among others, those set forth under "Overview" and
"Liquidity and Capital Resources" included in this Management's Discussion
and Analysis of Financial Condition and Results of Operations and in the
"Risk Factors" section of the Company's final offering circular dated
December 8, 1997. Particular attention should be paid to the cautionary
statements involving the Company's lack of any operating history, the
unpredictability of its future revenues, and the start-up nature of its
business.
OVERVIEW
The Company is a non-diversified closed-end management investment company
which has filed a notice of election to be regulated as a business
development company ("BDC") under the Investment Company Act of 1940. The
Company was organized to provide investors with a modest amount of capital
the opportunity to participate in venture capital-type investments that are
generally not available to the public and that typically require
substantially larger financial commitments. The Company initially intends to
focus its investments in the equipment distribution/rental industry,
especially companies distributing and renting heavy construction and
industrial machinery and equipment used in land excavating. The Company
anticipates that it will purchase all or substantially all of the stock or
assets of the companies in which it initially invests. These acquisitions
will be financed through additional sales of Company securities and/or loans.
The Company was incorporated in October 1997. Its only activities to date
have been to raise capital and to locate, research, negotiate with, audit,
and otherwise prepare to invest in one or more companies in the heavy
equipment distribution/rental industry. Accordingly, the Company has no
history on which to base an evaluation of its business and prospects. The
10Q-8
<PAGE>
Company's prospects must be considered in light of the risks, expenses and
difficulties of companies in the extremely competitive business of investing
in other companies. To address these risks, the Company must, among other
things, implement and successfully execute its business strategy, refine its
ability to locate, research, and successfully negotiate with high quality
potential investee businesses, manage its growth, respond to competitive
developments, and attract, retain and motivate qualified personnel. There
can be no assurance that the Company will be successful in addressing such
risks, and the failure to do so could have a material adverse effect on the
Company's business, prospects, financial condition and results of operations.
Since inception, the Company has incurred losses, as its activities have been
limited to raising capital and locating, researching, negotiating with, and
auditing potential investee businesses. The Company believes that its
success will depend on its ability to close the acquisition of several
businesses whose revenues will provide an attractive return on the Company's
investment. Accordingly, the Company intends to continue to invest heavily in
locating, researching, negotiating with, and auditing potential investees.
In addition, the Company believes that until it closes its first acquisition
it will continue to incur operating losses, and that the rate at which such
losses will be incurred may increase significantly from current levels.
As a result of the Company's lack of any operating history and the nature of
its business, the Company is unable to accurately forecast its revenues. The
Company's current and future expense levels are uncertain, as they are based
largely on the requirements of its intended investment efforts, which are
unknown.
The Company expects to experience significant fluctuations in its future
quarterly operating results, due to a variety of factors, many of which are
outside of the Company's control. Factors that may adversely affect the
Company's quarterly operating results include (i) the timing of any potential
acquisition, and the integration of the financial results of the investee
into those of the Company; (ii) general economic conditions and economic
conditions specific to the heavy equipment distribution and rental industry;
and (iii) intense competition to invest in attractive businesses in the heavy
equipment distribution and rental industry. Due to the foregoing factors, in
one or more quarters the Company's operating results may fall below the
expectations of investors.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1998, the Company's cash and cash equivalents were $481,978,
compared to $53,563 at December 31, 1997. On March 6, 1998, the Company
completed an initial public offering of 1,000,000 shares of common stock at a
price of $1.00 per share. The net proceeds to the Company from the offering
were approximately $675,128. Prior to that date, the Company sold an
aggregate of 700,000 common shares to Landon Barretto, Chairman and Chief
Execution Officer of the Company and Greg Zeitler, Executive Vice President
and Chief Operating Officer of the Company, and 2,500,000 preferred shares to
10Q-9
<PAGE>
Mr. Barretto at $.001 per share, for a total consideration of $3,200. The
Company had no other source of cash during the period.
The amount due to a company controlled by a director represents costs
incurred on behalf of the Company that are to be reimbursed to Barretto
Pacific Corporation which is wholly owned by Mr. Barretto.
Net cash used in operating activities of $322,838 for the three months ended
March 31, 1998, was primarily attributable to the expenses incurred in
raising capital and searching for and investigating appropriate investee
businesses during that quarter.
As of March 31, 1998, the Company's principal sources of liquidity consisted
of $481,978 in cash and cash equivalents. As of that date, the Company had
no material commitments. However, the Company anticipates significant
capital expenditures to purchase one or more companies, all of which it
intends to finance through additional sales of Company securities and/or
loans.
The Company believes that current cash and cash equivalents will be
sufficient to meet its anticipated cash needs to be incurred in continuing
its investigations for, research into, and negotiation with potential
investee businesses for at least 12 months. However, the Company does not
have the funds necessary to complete any investment in, or purchase of, an
investee business. All such funds will be obtained, if at all, through the
completion of one or more additional offerings of the Company's securities or
through obtaining credit. The sale of additional equity or convertible debt
securities could result in additional dilution of the Company's stockholders.
There can be no assurance that financing will be available in amounts or on
terms acceptable to the Company, if at all.
RESULTS OF OPERATIONS
NET LOSSES
The Company has not yet received any revenues from operations. During the
quarter ended March 31, 1998, the Company incurred approximately $314,103 in
fees for administrative services, directors fees, and in professional fees,
office and miscellaneous expenses and travel expenses related to its efforts
to identify, investigate and negotiate with potential investee businesses.
INCOME TAXES
The Company has not generated any net income to date and therefore has not
paid any federal income taxes since inception.
FUTURE OPERATING RESULTS
10Q-10
<PAGE>
The Company's future operating results will be wholly dependent upon the
success of the investment decisions that the Company will make. As such, no
assurance or accurate estimation can be given regarding such operating
results.
PART II
OTHER INFORMATION
ITEM 2 - CHANGES IN SECURITIES AND USE OF PROCEEDS
USE OF PROCEEDS
The Company's offering circular under Regulation E under the Securities Act
of 1933, as amended (the "Offering Circular"), became effective on November
6, 1997, and the offering commenced on that day. The offering terminated on
March 6, 1998, after sale of all of the securities that were offered under
the Offering Circular. The Company acted as its own underwriter and sold
1,000,000 shares of common stock, par value $0.001 per share, with an
aggregate price of $1,000,000. The Company incurred a total of approximately
$324,872 of expenses in connection with the issuance and distribution of
those common shares, including finders' fees of approximately $77,100 paid to
third parties, and approximately $247,772 paid to a law firm controlled by an
officer for legal fees. Effective March 20, 1998, that attorney was no longer
an officer of the Company. Offering proceeds, net of aggregate expenses of
approximately $324,872, were $675,128. The Company has used approximately
$481,978 of the net offering proceeds for the purchase of temporary
investments consisting of cash and cash equivalents, and approximately
$193,150 of the net offering proceeds for locating, researching, and auditing
potential investee businesses. The Company has not used any of the net
offering proceeds for construction of plant, building or facilities; purchase
or installation of machinery and equipment; purchase of real estate; or
repayment of indebtedness. None of the expenses paid in connection with the
offering and distribution of the common stock in the offering, and none of
the net offering proceeds, other than directors' fees of $10,500 paid during
the quarter, administrative service fees of $60,150 paid during the quarter
to a Company controlled by a director, and legal fees and share issue costs
of $113,747 paid during the quarter to a law firm controlled by an officer
were paid directly or indirectly to directors, officers, or general partners
of the Company or their associates, persons owning 10% or more of any class
of the Company's securities, or affiliates of the Company.
The offering circular stated that the offering proceeds would be used to
invest in emerging companies that are in the growth stage of development.
The Company is now intending to invest in more mature businesses, in most
cases that are already showing a substantial history of operating profits.
10Q-11
<PAGE>
ITEM 6 - EXHIBITS AND REPORT ON FORM 8-K
(a) EXHIBITS [FROM ERNST & YOUNG]
11 Statement Regarding Computation of Net Loss Per Share
27 Financial data for the period ended March 31, 1998
(b) REPORTS ON FORM 8-K
No reports of Form 8-K were filed during the quarter ended March 31,
1998.
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.
GRIFFIN INDUSTRIES, INC.
By:
---------------------------
Landon Barretto
Chief Executive Officer
Dated: May 15, 1998
EXHIBIT INDEX
GRIFFIN INDUSTRIES, INC.
EXHIBIT EXHIBIT TITLE
NUMBER
11 Statement Regarding Computation of Net Loss Per Share
27 Financial data for the period ended March 31, 1998
10Q-12
<PAGE>
EXHIBIT 11
GRIFFIN INDUSTRIES, INC.
COMPUTATION OF BASIC LOSS PER SHARE
The basic loss per share reported in Form 10-Q for the quarter ended March 31,
1998 and the period ended December 31, 1997 are based on the following:
<TABLE>
<CAPTION>
Quarter Ended Period Ended
March 31, 1998 December 31, 1997
------------------------------------
<S> <C> <C>
Net loss for the period $ (314,103) $ (33,637)
Weighted average number of common shares used
in computation 1,200,000 700,000
------------------------------------
Basic loss per share $ (0.26) $ (0.05)
------------------------------------
------------------------------------
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 481,978
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 529,478
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 529,478
<CURRENT-LIABILITIES> 189,135
<BONDS> 0
0
2,500
<COMMON> 1,700
<OTHER-SE> 326,388
<TOTAL-LIABILITY-AND-EQUITY> 529,478
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 314,103
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> (314,103)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (314,103)
<EPS-PRIMARY> (0.26)
<EPS-DILUTED> (0.26)
</TABLE>
